Division of Revenue Second Amendment Bill: Negotiating Mandates

NCOP Appropriations

24 November 2020
Chairperson: Ms D Mahlangu (ANC, Mpumalanga)
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Meeting Summary

Video: https://www.youtube.com/watch?v=kAU-SiQZCOw

The Committee met to discuss the provincial negotiating mandates on the 2020 Division of Revenue Second Amendment Bill. The provinces supported the Bill with recommendations apart from the Western Cape. Limpopo and North West did not provide their mandates because they were unable to meet due to not meeting the quorum.

Treasury provided a brief response to some of the key concerns and matters raised in the negotiating mandates such as the reduction of the provincial equitable share, wage freezes, draught funding, reductions in the infrastructure conditional grants and the Presidential employment initiative.  

 

Meeting report

Division of Revenue Second Amendment Bill: Negotiating Mandates

Eastern Cape

Mr Z Mkhiva (ANC, Eastern Cape) said the province voted in favour of the Bill. The province, however, had certain concerns on the drawn out review of the equitable share formula and review of the equitable share formula. The province would appreciate if the rural nature of provinces is taken into consideration in the new formula as conditional grants have not addressed the post 1994 infrastructure backlog and differences between provinces. The province made a quantified submission to the Financial and Fiscal Commission (FFC) in the 2016/17 financial year. Treasury has promised to engage with the FFC on these matters raised but to date, there has been no response. There is concern of the state of the Nelson Mandela metro and it is draught-stricken – the Eastern Cape would like the matter to be considered in terms of draught relief.

The Committee discussed whether it should have a discourse on the Bill at this time or schedule it for later because this was the negotiating stage and not final mandates.  

Free State

Mr M Moletsane (EFF, Free State) indicated that the province did not meet the quorum and he therefore did not have a mandate.

Gauteng

Mr D Ryder (DA, Gauteng) said that during stakeholder submissions, one of the concerns raised was the Treasury predicted growth of 3,3%. Treasury has an unrealistic view of the world and is optimistic. District municipalities in Gauteng do not have sufficient funding and will not be able to form part of the district model in its current form.

The province had recommendations around South African Airways (SAA) and its bailout or business recapitalisation plan. The province wanted to ensure there is real value for money because money is being taken away from service delivery. Treasury needs to ensure that its ratings are not further negatively impacted. Treasury should ensure that the rate of money lending is moderated to address pertinent service delivery issues.

National Treasury needs to reconsider the local government funding model and should meet with all stakeholders. National Treasury should assist the SA Broadcasting Corporation (SABC) to avert retrenchments as it has been assisting others such as SAA.

National Treasury should provide clarity on the wage bill and how it will be dealt with should the judicial outcome not be favourable to government. National Treasury should revise the equitable share formula in terms of demographics so that provinces receive what is due to them.   Gauteng is experiencing migration due to the pandemic with many people looking for new opportunities. NT should consider not reducing local government grants as local government is at the core of service delivery.

KwaZulu-Natal

Mr Y Carrim (ANC, KZN) said the province supports the Bill with no recommendations.

Limpopo

Ms M Mamaregane (ANC, Limpopo) said the province did not meet as it did not form a quorum.

Mpumalanga

Ms D Mahlangu (ANC) said the province met with Treasury to clarify certain matter. There was also an opportunity for public participation where the media, Congress of SA Trade Unions (COSATU), the SA Local Government Association (SALGA), SA Human Rights Commission, South African Council of Churches, etc were invited. Several matters were raised such as the shortage of water, where NT said it would refer the matter to the Department of Water and Sanitation.

The recommendations of the province are reflected in the negotiating mandate report and Treasury is familiar with the report. Mpumalanga supported the Bill.

Northern Cape

Mr W Aucamp (DA, Northern Cape) said he was not invited by the province as a permanent Member. He was not invited again by the chairperson of the committee in the provincial legislature. He has tried to contact the chairperson and was told that it is not necessary to address the legislature as NT had addressed them. The chairperson in the legislature has not been returning his phone calls. He urged the chairperson to take the matter up further. Mr Aucamp received an email of the mandate that he should bring forth but he was not in attendance when the mandate was actually discussed.

The committee in the legislature did sit and there was public participation which was advertised on its social media. There are complaints on the reduction in the agricultural sector. There are concerns the NC provincial equitable share has decreased. The committee in the province agreed to it.

The Chairperson and Members condemned the behaviour of the provincial committee and the Chairperson reassured the Committee that she would address the matter.

Mr Carrim suggested the Chairperson write a letter condemning the behaviour of the Northern Cape legislature and requesting answers for its actions.

Mr Du Toit felt that a letter was not sufficient to address the issue. He suggested that the provincial chairperson should be brought to Parliament and account as to why they had not invited him to the meeting on the mandate.

North West

Mr S Du Toit (FF+, North West) said the province questioned the amount of R7 billion that has been added for schools and what criteria was used for this amount. How will the equitable work to strike such imbalances? Is the budget for the provincial roads maintenance grant sufficient to fix and maintain national roads? The Provincial Treasury must transfer grants directly to National Treasury in order for identified projects to be completed. The budget allocated to social development is not sufficient especially for people with disabilities. The province proposed the amount for social relief fund sshould be increased to cater for the needs of people living with disabilities. On the early childhood development grant, children were struggling as a result of not attending schools as a result of not paying fees. The Provincial Treasury should monitor that those budgets are transmitted to the appropriate people. Those beneficiaries have never received any assistance even though an amount of R96 million was allocated. The disaster relief fund is too small and should be increased by 5%. The province does not support the reduction of service delivery allocations in order to fund the R10 billion rescue plan for SAA.

The NW votes in favour of the Bill with proposed amendments.

Western Cape

Mr E Njandu (ANC, Western Cape) said the provincial committee was not given adequate time to conduct public participation on the Bill. The WC does not support the Bill and the reasons are outlined in its negotiating mandate report.

Input by National Treasury

Ms Wendy Fanoe , Chief Director: Intergovernmental Policy and Planning, National Treasury, gave a brief summary on the key concerns raised by Members. Treasury’s written response would be provided to the Committee.

She said the provincial equitable share reduction was done to deal with the wage decrease in 2020/21 and MTEF. It is based on employment numbers in provinces and national department as at 2019. In 2020, certain provinces made appointments and therefore their reductions are higher than just the wage freeze i.e. due to the additional appointments.

If the court rules against the state in terms of the wage bill, National Treasury will relook at the fiscal framework and appropriate remedial actions but at this stage, they cannot assess the financial implications.

In terms of draught funding, it is raised at every meeting with regard to funding the grants. It is important to follow the correct procedures in order to access the money. A municipality or province needs to put in their application through the Disaster Management Centres that will follow through to the National Disaster Management Centre. Thereafter, either immediate funding can be available for immediate release of disaster funding or if it is more long term, it forms part of the national budget process.

On the concerns on the reductions of infrastructure conditional grants and its potential impact on service delivery, these reductions were in the 2020/21 financial year and were needed to fund the SAA rescue plan. With regard to the 2020/21 MTEF, efforts were made to protect these grants as far as possible and lessen the reduction on them. Infrastructure is vital for supporting economic growth.   

Further, regarding the provincial equitable share and local government equitable share, both in terms of the horizontal and vertical divisions - the provincial equitable share formula is underway and the changes are indicated in each year’s February division of revenue folder annexure. With regard to the local government equitable share lekgotal, this was scheduled for 11 December and SALGA is part of that structure along with the Minister and MECs of COGTA.

With regard to the Presidential Employment Initiative, it is not a long term job creation initiative but a short term intervention to deal with the COVID-19 response. Funding has only been made available until the 2020/21 financial year; it does not negate the importance of job creation.  

Discussion

Mr Ryder found the response by Treasury, that it would deal with the wage bill court case when it happens, unfair on the provinces as it effectively created a substantial contingent liability for each province which they will have to declare and would affect many other matters such as ratios and calculations done regarding the provincial budget sheets. This contingent liability on the balance sheets will cause havoc in most provinces as it will make the balance sheets look a lot worse than they currently do. This is a massive concern. The court is more likely to judge in favour of the employees – for Treasury to say “it will deal with that when it gets there” will result in provinces being in contempt of court if they do not pay that money out. He felt that the response was very superficial. He hoped there would be a better response in the written reply.

The Chairperson gave Treasury a deadline by which to its written response on the Bill.

Members agreed.

The Committee adopted the mandate on the Bill.

The meeting was adjourned.

 

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