ECD Grant Expenditure in Q4 2021/22 Hearing with National Treasury & Department of Social Development; with Minister

Meeting report

The Chairperson opened the virtual meeting, welcoming Members and support staff to the meeting. She also welcomed the delegations from National Treasury and the Department of Social Development. The agenda was that the Committee would be briefed on the performance of the Early Childhood Development (ECD) grant during the 2021/22 financial year, as well as the status of the migration of ECD from the Department of Social Development (DSD) to the Department of Basic Education (DBE).

Minister’s Overview

Ms Lindiwe Zulu, Minister of Social Development, addressed the Committee, and highlighted the importance the Department attaches to meetings with the Select Committee on Appropriations. She said the presentation will provide an overview of the 2021/22 financial year grant expenditure. The Minister of Basic Education and the Social Development Department have been working together to ensure that the ECD programme is smoothly transferred to the Department of Basic Education (DBE). She premised the purpose of the programme on section 28(2) of the Constitution, stating that a child's best interest is of paramount importance in every matter concerning the child. This section drives the Department and government to ensure that a conducive environment is created for children to improve their lives and give them assurance of a better future.

During the 2021/22 financial year, a total of R1.235 billion was allocated towards the ECD conditional grant, as per the approved payment schedules. The funds were transferred to each of the provinces. The conditional grant aims to increase the covenant of children, especially impoverished children accessing ECD services. It also aims to improve the conditionally-registered ECD facilities to fulfil the basic requirements for them to be fully registered. It will also contribute to the Department's efforts in enabling the functioning of the fund, especially after the hardship of COVID-19, particularly as provinces have experienced challenges with spending the funds as allocated.

The Department has continuously availed its support towards ensuring that, per the provisions of the law, the sector benefits from the identified three funded streams. The Department emphasised the need to pay the money to the right people, and the duty to protect the state's funds. The challenge faced with ECDs is that someone with care and passion for children started a centre without meeting the prerequisite requirements for properly stimulating the children. In April 2022, the fund was officially migrated to the Department of Basic Education (DBE) with Minister Angie Motshekga. Once the political decision was taken, implementation occurred. Since the migration to DBE, the DSD continues to support the DBE, with the view that ECD is not only in the purview of DBE but of DSD too. The DSD is still responsible for children, under the Social Development Act. Therefore, the Department is still working with DBE to finalise a few transitional matters. The ECD, under DBE, is placed on the same value chain where other programmes are placed – in terms of design, resources, and implementation.

She assured the Committee that South Africa, its children, parents, and caregivers would be prioritised. The programme will be strengthened with the child's best interest in mind. Doing so will rightfully articulate the long-term value of the ECD sector concerning the national economic recovery structure, sustained growth, and future economic productivity. The Department is committed to children, parents, and ECD practitioners who aid in ECD growth.

Briefing by National Treasury

Mr Emmanuel Pillay, Director: Provincial Budget Analysis, National Treasury, conducted the presentation for National Treasury. The grant aims to increase the number of poor children accessing subsidised ECD services through centre and non-centre-based programmes; support ECD providers delivering an ECD programme to meet basic health and safety requirements for registration; pilot the construction of new low-cost ECD centres. The overall goal is to increase access to quality ECD services for poor children. A list was provided of the grant outputs. The grant has two components with detailed outputs, conditions, and responsibilities for each component specified in separate frameworks. The two components are infrastructure and subsidy. The grant allocation is split up as follows: 70% Subsidy, 23% PEI, two percent administration, and five percent maintenance.

A graph was presented, showing the spending of each province for 2021/22 spending. All provinces underperformed except Western Cape. A graph was also presented for the rollovers and surrenders for 2021/22. The total amount to be surrendered back was R214 689, for all provinces. A graph was also presented for subsidy components of the full subsidy, top-up to equitable share, and a non-centre-based component. Free State and KwaZulu Natal did not use the top-up to equitable share. Only four provinces required the non-centre-based component, namely Eastern Cape, Free State, Northern Cape, and Western Cape. A graph for the maintenance component was also presented, showing that all provinces underperformed except Eastern Cape, Limpopo, and Western Cape.

The challenges faced were:

-Verification of beneficiaries for the Presidential Employment Initiative was not completed. Many were not finalised because of outstanding information not provided by the end of the financial year.

-Maintenance faced delays in the procurement process, slow delivery by implementing agents, and municipal delays in securing land to construct new centres.

-Late submission of claims by Non-Profit Organisations (NPOs) causing a delay in transfers.

The ECD function has shifted to DBE from 01 April 2022. Although provincial education departments have well-established infrastructure units, challenges experienced by Social Development, with maintenance and new construction, should be considered. Social Development departments experienced delays with claims submitted by NPOs. The DBE should look at training to capacitate staff at centres so that claims are filed on time with minimal errors.

Briefing by the Department of Social Development

Ms Isabella Sekwana, Acting Deputy Director-General, Department of Social Development, and Mr Linton Mchunu, Director-General, Department of Social Development, conducted the presentation on the implementation of the ECD conditional grant, with a specific focus on performance during the 2021/22 financial year, and the status of the migration of ECD from DSD to DBE.

To enhance the implementation of the ECD policy, National Treasury allocated an amount of R1.057 billion as a conditional grant for the 2021/22 financial year – to enable National DSD to better control and ring-fence the expansion of ECD in the country in line with the approved national Integrated ECD Policy. During the 2021/22 financial year, an additional R178 million was allocated to the Department to extend the ECD Employment Stimulus Relief Fund until 31 March 2022.

The total ECD conditional grant allocation of R1.235 billion was aimed at:

-Increasing the coverage of children accessing ECD services through the ECD subsidy to poor children;

-Assisting in improving the conditionally registered ECD centres to meet basic requirements to be fully registered; and

-Contributing to the Department of Social Development’s efforts to re-invigorate the ECD sector from the hardships emanating from the impacts of COVID-19.

The grant is divided into three components:

-Subsidy component (including the ECD Stimulus Relief Fund);

-ECD maintenance component; and

-Administration component.

Subsidy Grant:

The grant assists registered ECD centres that are not fully funded from the equitable share, fully and conditionally registered centres that are not funded, and registered non-centre-based ECD programmes that are not funded. The subsidy is targeted at qualifying children from birth to five years or until they enter Grade R. The value of the subsidy paid is R17 per child for a maximum period of 264 days. The value of the subsidy for non-centres-based programmes is R6 per child for the number of sessions conducted.

Infrastructure Grant:

Partial care facilities offering ECD programmes that are registered conditionally or unregistered are eligible for the maintenance grant. Minor building and maintenance improvements aim to ensure ECD centres comply with the health and safety norms and standards as identified by the National Department of Social Development. Provinces must conduct assessments of conditionally registered centres and cost them to qualify for maintenance grant funding in 2022/23. All maintenance projects must be recorded on the National Treasury Infrastructure Reporting Model (IRM).

The conditions for eligibility comprise of two factors.

-ECD services that are fully or conditionally registered to provide ECD services with the Provincial Department of Social Development.

-Unregistered ECD services that provide early learning are eligible to benefit from the ECD-ESRF.

An ECD servicer does not need to be registered as an NPO to receive this benefit. Organisations that run, manage or oversee multiple centres and/or non-centre-based ECD services may apply for more than one ECD programme and more than one type of ECD programme. If the organisation does not directly employ the staff in the centre and non-centre-based ECD service and provides an oversight and support role, then a written and signed agreement must have been in place before 01 March 2020, with each programme applied for – which governs the relationship with that programme, and sets out respective roles and responsibilities. Capacity building was made available through the conditional grant to employ technical staff qualified in the built environment to implement the programme. All provinces appointed staff except Gauteng. Capacity building was done with provinces on 22-23 January 2020, 14-15 October 2020, and 28 September 2021 and 05 October 2021. The Department worked with ECD partners, e.g., Ilifa Labantwana and PPT, to provide advisory services to provinces.

The Department developed a procurement strategy to address procurement challenges and improve the way in which provinces appointed contractors to manage the projects, but only the Limpopo Province implemented it – as evidenced by its progress. Low-cost ECD centre designs were developed for uniformity in the construction of the ECD, and to reduce the time taken by provinces to develop their own designs. Monitoring visits were undertaken quarterly to check progress on site. Quarterly meetings were held with provinces to track progress and provide advice on corrective actions.

The presentation provided graphic representations of the allocations to each province, the completed roles and responsibilities of the National Department, along with the expenditure of each province on each of the components. Detailed reasons were provided for the non-expenditure of each province.

The figures for the presidential stimulus package were provided as at 31 March 2022. National Treasury has already made “Roll over funds” recommendations to the Provincial Treasuries. Once allocation letters have been issued, DSD will assist DBE in processing the payment to all eligible. Payments to all eligible ECD practitioners are to be finalised by 31 March 2023, by the Department of Basic Education.

On 01 April 2022, Minister Lindiwe Zulu officially handed over the ECD function to the Minister of Basic Education, Ms Angie Motshekga. The handover marked the achievement of the commitments of the NDP, ANC’s 54th National Conference and the National Integrated ECD Policy in terms of policy and programme shift. This also means that the Department of Basic Education is now managing and implementing the conditional grant.

The presentation closed off by recommending that the Committee:

-Note the presentation in respect of the performance of the ECD conditional grant in 2022/23;

-Note that projects that were not completed in 2021/22 will be completed in 2022/23; and

-Note that the ECD function has moved from DSD to DBE with effect from the 01 April 2022.

Discussion

The Chairperson said that the Committee should bear in mind that the issues and questions raised should be relevant to the year the Social Development Department was still responsible for the grant. Any resolutions and recommendations from the meeting will assist DBE with dealing with the challenges in the future. She asked what steps were taken to address procurement delays and secure land for new centres, and whether the Department of Social Development has used any consequence management. She noted that slide five indicated that registered and unregistered centres qualify for the maintenance grant, and asked why the ECD grant is given to unregistered ECD centres. She said she does not want to send a message that she does not support unregistered centres but wants to understand the conditions attached to the grant. Her final concern was what problems led to the under-expenditure in North West, Eastern Cape, Gauteng, and Mpumalanga – how they will be resolved, and what impact they had on service delivery.

Mr D Ryder (DA, Gauteng) was disappointed that eight out of nine provinces had to sacrifice funds back to the Treasury. North West and Gauteng were particularly disappointing. He said that the need in North West is stark and harsh, and Gauteng is highly populated with a high unemployment rate. Therefore, it is necessary to get ECD centres to function well. The hope is that improvement would occur, as the programme has now been transferred. He suggested that the Committee should monitor the programme very closely, and that the Chairperson should diarise a date for discussion at the same time next year. He asked if Mr Pillay could clarify what is meant by the top-up to the equitable share.

His next concern was about how the non-centred-based grant component works. He faulted Treasury for placing the verification, of beneficiaries for the presidential employment initiative, with the IDT because they are historically bad at fulfilling the function of verification. He asked whether it had been assigned by the Presidency or by Treasury and the Department. Unregistered ECD centres struggle with funding and with various registration processes. There are different levels of compliance required for different centres, because they have different needs and different resources. He asked what assistance is given to ECDS to become compliant, as this grant is only one component of government to support ECDS. What is being done to ensure the safety of the children and ensure the grant is being spent in a way that benefits the children?

Mr M Moletsane (EFF, Free State) noted that the migration of the ECD programme started on 01 April 2022. How far is the migration process? When is it expected to be completed, because it impacts the smooth operation of the programme?

Mr Y Carrim (ANC, KZN) expressed that the problem is very close to the hearts of the Committee. More and more studies have shown that the first 100 days determine a person’s life chances. Overall, life chances of success are dim if someone comes from difficult circumstances, given the increase in polarisation. Therefore, the issue is far more important than it has ever been. He asked about the extent to which the officials and politicians were internalising the importance of this matter, because it is a long-term one. He added that if the matter is not addressed, the aims and objectives of the parties will not be achieved. To what extent are officials in DBE sufficiently clued up on the gravity of this project and its importance to the National Development Plan of reducing poverty and inequality? He said the transition should have joint engagement among the incoming and outgoing officials. The DBE should have been present in the meeting for the Committee to gain a better sense of what the issues are. The Department should not wait another year to meet but should consider meeting every six months or three times a year. While it is true that this function belongs to DBE, it is not solely the Department’s function, because the children are still under the care of their parents. The handover needs to be done with value such as an engagement of three to five years, between the Departments – so that the implications faced by Social Development can be communicated to the DBE.

He said that the suggestions made by Treasury were very vague – such as the challenges of social development being considered, and the DBE having to look at training. He asked if the Treasury could suggest what action must follow. Lastly, he said it is not appropriate for a department to recommend to a Committee of Parliament; it should be the other way around.

Responses

National Treasury

Mr Pillay said that the top-up to equitable share occurs in cases where a province subsidises a child at less than R17. It could be that a province is subsidising a child at R13 a day, and the top-up will bring it up to R17 by adding another R4. He clarified that the verification of beneficiaries is done by the Department of Social Development, not IDT (Independent Development Trust). The IDT deals with maintenance, and not verification.

He said that the recommendation raised that DBE should consider and refer to the challenges that have already been faced by Social Development, which would not be peculiar to Social Development. Specific challenges include procurement challenges, delays, and implementing agents. One of the key areas to look at is contract management in terms of what the contract says – stipulated timelines, and milestones in terms of the project plans. He said that DBE is well placed for infrastructure delivery, from their experience with things such as the education infrastructure grant. DBE has well-capacitated units and should therefore consider the delays that Social Development encountered when running the programme from their side.

Ms Ogalaletseng Gaarekwe, Chief Director: Provincial Budget Analysis, Intergovernmental Relations, National Treasury, said that DBE tends to do well with their projects. The department does not struggle with providing infrastructure reports to Treasury in terms of the infrastructure delivery programme, which is a programme run by DBE. DBE might struggle because they are not used to delivering at the ECD centres, but there is no doubt that the DBE will adjust.

Department of Social Development

Mr Fanie Esterhuizen, Chief Financial Officer, DSD, said that, when the programme started, strict guidelines were put in place to ensure that the right people were paid at the right time. The Department has not found anything misplaced from the audits conducted, since the implementation of the programme two years ago. He said that the equitable share concerns the allocations to provinces. The money is not returned to the National Department for rollovers; it is transferred to the different provinces.

He responded to the procurement and consequence management concerns, saying there has been no wrongdoing in procurement. Procurement has been done correctly, and payment to the stimulus project has been made. Physical evidence is also kept to ensure that the payments have been made to the correct ECDs.

Ms Sekwana said that top-up to equitable share falls in because not all provinces provide the same subsidy across the country. The top-up to equitable share balances all the subsidies to R17 per child. She said that the non-centre-based creches and buildings lack infrastructure; they only receive stimulus earnings that do not provide adequate ECD services. This challenge is mainly in rural areas. The verification team is not the IDT but DGMT, which stands for DG Murray Trust – a partner working with the Department to assist with ECD challenges. The partner provided volunteers and 2 000 Harambe Youth to ensure that the stimulus package was carried out well. The assistance provided by the Department aims to continuously assist with compliance and preparation of financial documents. There are several support systems applied in registration compliance. All ECD centres were called on to attend guidance workshops to assist with meeting the basic requirements. The Department has partnered with the ECD sector, and processes were made simple by providing step-by-step guidance on the registration process. The migration was completed and handed over by 01 April to Minister Motshekga. However, the Department realises that the function cannot be released automatically without continuous support from the Department of Social Development, to ensure that there is no interruption in service.

Ms Anita Samaad, Director: Business Process & Risk Management, DSD, said that a couple of audits were done, and studies found that there were more unregistered ECDs than registered ECDs. The ECD sector, by nature, is a very informal sector. It has evolved out of more childminding services, as opposed to ECD. Because of that, mothers and grandmothers had started informal creches, which remain largely within this context. The unregistered centres are predominately from rural areas and the most historically deprived areas. The centres struggle with funding, as they are not able to meet the registration requirements – given that there are normative standards set in terms of the Children’s Act.

The Department recognised that one size does not fit all in terms of the normative standard. It has therefore taken a very developmental approach towards looking at the norms and standards, if the Act allowed. A conditional registration framework was developed, and it was a more differentiated framework for looking at registration. There were different categories of standards, namely bronze, silver, and gold, as part of the conditional registration framework. The unregistered ECDs were not able to meet the conditional registration requirements. Therefore, a pre-registration support package was developed. The package supports unregistered centres and tries to bring them into the net of the conditionally registered ECDs. Unregistered ECDs were not able to access the subsidy, and poor children were not able to make use of the fund.

She said that the infrastructure programme function has been moved to DBE and is better placed to manage the infrastructure portfolio, given their capacity and skills. Social Development is assisting DBE by trying to mitigate the challenges previously faced, such as strengthening contract management and looking at a different procurement strategy. The Department wants to set up framework contracts previously done in Limpopo and showed significant improvements in their performance. The framework contracts from DBE will allow the provinces to perform better with the grant. The impact on service delivery of those projects that have not been completed in the 2021/22 financial year was carried into the current financial year. Those projects are prioritised to be first completed in the current financial year.

Mr Mchunu indicated that there had not been any shortfalls with the stimulus package since its inception. The Department went through two iterations, which speaks to how the stimulus package was managed. There needs to be a very delicate balance struck between paying quickly because of urgency and paying correctly. Paying quickly will cause the Department to be burned by the Auditor-General and National Treasury, regarding the rules and regulations. But this does not mean that the Department has no systems in place. A similar challenge is faced with the R350 grant. Paying correctly mostly means paying later, which the Department does not intend to do. At the same time, the Department wants to do the right thing by ensuring that the right person is paid at the right time. In many cases, the Department faces litigation and has to pay punitive costs. Therefore, it is important to draw a balance.

He responded to the concern that funds were not completely dispensed, explaining that a very detailed plan was put in place. Some things did not go according to plan, particularly because of the dependencies that were required. There was the risk of litigation attached to the plan and other issues that affected things going forward. The Department learned significant lessons through the disbursement of the stimulus package. He noted that it was the first time the Department had to dispense money in this quick format to recipients because of the need to respond to needs. The presidential stimulus package was rolled out but money was received very late.

In some cases, it was only received in November, but the end of the financial year was in March. The Department is working on the quick format. It assured the Committee that there would be better systems in place by next year at this time.

He said the migration was completed in April 2022, but the process started more than two years ago. The President’s address to the nation in 2019 gave the directive for the migration to take place. Some budgetary aspects took a while to conclude but other aspects were transferred earlier than others. He noted that the process is continuous, and the Department's foot is not off the pedal. Both Departments meet regularly. The last meeting was held last week on the progress of the migration and places where joint effort is required. The estimate for the complete handover is 12 to 24 months.

He said that ECD is everyone’s business in all three spheres of government – the private sector, civil society, parents, family, and teachers. Everybody should take an interest in ECD, particularly because it deals with the future and trajectory of the country. There is scientific evidence that the foundational phases of a child’s life are very important. ECDs deal with human development, which historically lacks funding. The Department works with NGOs and many partners to find and assist ECDs. The future of the country requires intervention at the most elementary level of ECD. He suggested that the Committee consider calling a joint meeting with various stakeholders, including National Treasury, Social Development, Basic Education, COGTA, Health, Home Affairs, and DPME to collaborate and discuss the ECD sector.

Follow-up discussion

The Chairperson said that the Department of Social Development has a large platform to initiate the meeting suggested with all the departments. Therefore, the Department should plan the joint meeting, not the Committee. She said that the Department and National Treasury had not clarified her concern on what conditions are attached to the grant.

Mr Ryder agreed that the joint meeting should be initiated and coordinated by the Department or DBE because a bigger plan and coordination are required. 

Mr E Njadu (ANC, Western Cape) lamented that rural areas and farms are not able to easily access ECD services. He asked whether there is any plan for provinces with rural areas to access the services available.

Department’s Response

Mr Esterhuizen said that National Treasury sets the grant framework. There is a committee between the Department and the National Treasury that deals with the principles and requirements for implementation. He said that the requirement is that there must be clear business plans. There are also conditions on how the grant should flow in terms of compliance and requirements.

There are roles and responsibilities carried out by the National Department and Provincial Department. Issues of monitoring and reporting are addressed by the framework. Numbers allocated in terms of this grant are given. The life expectancy for this conditional grant is also given and deals with the payment schedule. The payment schedule indicates both the receiving department and the National Treasury – on the amount to be transferred, and the specific stage of the financial year, provided that there is a monitoring report received on the progress of payment. This framework has been approved and enacted by the Conditional Revenue Act and Cabinet. Clear guidelines are provided for both the receiving department and the National Treasury on what needs to happen and at what stage.

Mr Mchunu said that national government officials are orientated to understand the guidelines and implementation of the framework. The guidelines are made available to the whole sector, and engagements are held on the guidelines. He agreed that the Department should lead the role in enhancing the roles and responsibilities across the sector, and engage with the different departments in preparing a consolidated plan as suggested.

National Treasury’s Responses

Ms Gaarekwe said that Treasury works with the sector to finalise the grant framework. The DBE has a programme related to ECD, but it does not concern the first 1 000 days. It is a grade-R programme. The programme has similarities to the ECD programme. There are responsibilities of the transferring officer, which is the national department, and there are responsibilities and roles of receiving officers – the provincial departments. The purpose and everything normally indicated form part of the conditions attached.

The Chairperson thanked the delegations for attending, before releasing them from the virtual meeting.

Committee Matters

The Committee considered and adopted meeting minutes of 31 August 2022.

Mr F Du Toit (FF+, North West) asked the Committee to consider meetings starting at 10:00 and ending at 13:00, instead of 09:00-12:00, due to meeting a time conflict.

Mr Carrim and Mr Ryder agreed that the meetings would be better suited to start at 10am.

The Chairperson said that the request should be forwarded to the relevant authorities.

Mr Carrim said that no permission should be sought.

Mr Njadu, as the programming whip, confirmed that the Committee should move forward with meeting at 10am, without seeking permission from anyone. 

The Chairperson thanked all the Members for attending the meeting.

The meeting was adjourned.