MTBPS, Adjustments Appropriation Bill & Eskom Debt Relief Amendment Bill: public hearings

Meeting report

Mr Buthelezi remarked that the Minister of Finance presented the Adjustment Appropriation Bill during the MTBPS. The Constitution enjoined the Committee to engage the public therefore various stakeholders have been given the opportunity to present their submissions.

Equal Education (EE)
Ms Elizabeth Biney, Head of Research, EE, highlighted the socio-economic implications of budget cuts in the basic education sector. She focused on the poor infrastructure conditions at public schools to emphasise this point. Ten years after the norms and standards were signed into law, more than 3 900 public schools were still making use of pit latrines because the government keeps missing the targets to upgrade the sanitation facilities. The continuous use of mud and asbestos school structures remained a great concern. The 2023 Education Facility Management System (EFMS) report indicated that 10 408 schools across the country were relying on harvesting rainwater for water supply, which is a known unreliable water source. Substantial investment is needed to address the infrastructure backlog because, without adequate and proper facilities, schools will not be conducive learning environments. Equal Education found it therefore alarming that adjustments to the education infrastructure budget were made amidst severe backlogs in the sector and despite claims by National Treasury to protect critical services from budget cuts. The MTBPS promised targeted spending revisions while directing resources to core functions yet the school infrastructure allocations were reduced by over R1.7 billion. Learners in under-resourced public schools across the country who rely on government funding are most affected and feel that they are being punished for the non-performance of the Department to provide basic services. The conditions are exacerbated by the renewed austerity measures that National Treasury was implementing through the budget cuts. Together with the reductions to part of the Early Childhood Development (ECD) grant, it was not surprising that children at the age of 10 years cannot read for meaning. Inadequate school infrastructure is one of the major contributing factors in perpetuating the Education Blackout. Equal Education rejected the Bill in principle because the austerity measures were defeating the prioritisation of realisable human rights.

(See Presentation)

Property Point (PP)
Ms Nokwanda Motsitsi, Researcher, PP, focused on the implications of the MTBPS on small businesses. Low economic growth caused a reduction in consumer spending. A sluggish economy is therefore harmful to most businesses because it reduces the likelihood of spending on goods and services. Reduced consumer spending creates the risk of higher competition because small businesses have to compete with a smaller pool of customers. The intensified competition and price wars are leading to the closure of small businesses. The low growth also leads to a continued rise in unemployment rates. Labour markets become less willing to hire more staff during economically difficult times. The energy crisis has impeded economic growth. The uncertainty and unpredictability of load shedding were making it challenging for small businesses to plan effectively which is affecting the ability to meet customer demands. Property Point noted with concern that no specific mention was made in the 2023 MTBPS about support for the youth and women in the country. The President, in his address on National Women’s Day in 2022, announced that the government had resolved to set aside 40% of public procurement for women-owned businesses. But no mention was made of the progress made during the 2023 Budget Speech and the 2023 MTBPS. Similarly, no update was provided on the progress regarding the Home Affairs digitisation project which was supposed to employ 10 000 young people over three years. Property Point emphasised the critical role of small businesses and advocates for inclusive policies that prioritises their growth and sustainability.

(See Presentation)

Budget Justice Coalition (BJC)
Mr Andile Zulu, representing the BJC, stated that the significant budget cuts, to accommodate the financial demands of the wage agreement, will have far-reaching implications for the delivery of public services and capital investment projects on a national government level. The impact is similarly noticeable in the substantial reductions in the conditional grants at the provincial level. Budget cuts are being made to redirect funds to address wage pressures through the equitable share. The redistribution of resources will significantly impact the ability of provincial governments to finance capital projects for long-term economic development and service delivery.

Ms Clotilde Angelucci focused on the impact of budget cuts on youth unemployment. The labour force increased by 7.8 million from the fourth quarter of 2008 to the third quarter of 2023 but the economy only created 2 million jobs. The number of unemployed people increased by 5.8 million to 11.7 million. Urgent solutions were needed to arrest the widening unemployment gap. However, reprioritising spending on public employment programmes (PEPs) to pay for the extension of the Presidential Employment Stimulus (PES) is not recommended. Instead, overall spending on PEPs should be substantially increased and must provide for the monitoring and evaluation of these programmes to measure the impact thereof. The PES budget must be ring-fenced for at least three years to build the relevant skills and transition support for participants.

(See Presentation)

COSATU
Mr Matthew Parks, Parliamentary Coordinator, COSATU, expressed disappointment on behalf of workers and the entire country that National Treasury delivered an underwhelming accounting note with reductions to budget allocations and below inflation increases instead of tabling a bold MTBPS to stimulate the economy and provide relief to the poor. COSATU welcomed the R17.6 billion of the Division of Revenue Amendment (DoRA) Bill adjustments that catered for the 2022/24 wage agreement. Although workers are being blamed for negotiating the increases, they have the right to a living wage and to protect their wages from inflation erosion. The Eskom Debt Relief Bill is welcomed but concerns were raised about the clauses on restrictions on investment in new generation capacity and requiring Eskom to pay interest for as part of the debt relief package. COSATU advocated for additional support to Eskom which was making progress to end loadshedding and ensure reliable and affordable electricity supply. Eskom also needed support to tackle wasteful expenditure, corruption and criminality. Urgent intervention at Transnet and Metrorail was needed to secure and rebuild freight and passenger railway networks and modernise the ports.

(See Presentation)

The Ilifa Labantwana organisation opted for a written submission only.

Discussion
Mr Buthelezi said the presenters all made a good case from their different viewpoints. Their positions were clear and well-researched. He called on Ms Moss to take over the proceeding as acting Chairperson.

Ms Moss thanked the presenters for their submissions. She invited Members to ask questions and raise concerns.

Mr D Ryder (DA, Gauteng) shared the concerns of Equal Education and the Budget Justice Coalition about the reduction in the allocation to eradicate the school infrastructure backlogs. He agreed that committed teachers should be well remunerated but argued that the public service was filled with unproductive people. He replied to Mr Parks that people who add value should be taken into account and not merely the head count. Of the R57 million allocated for school infrastructure in the DoRA, R32 million was reprioritised to fund the compensation of employees (COE) and R25 million for technology upgrades. While some increases might be needed, it was alarming that the ANC was celebrating taking money away from replacing pit latrines to pay salaries. The cost of living was raised in all presentations, but it was not addressed in the budget speech. He appreciated the tone of the Budget Justice Coalition presentation. It was constructive and less combative compared to the past where the tone overshadowed the content of the presentation. He responded to Mr Parks that the reported progress at Eskom came at massive diesel costs to keep the lights on. He was aware of debt relief for municipalities and bulk users and questioned the write-off of consumer debt. He sought clarity from National Treasury about the comment made by the Gauteng Premier that consumer debt in his province would all be written off.

Mr O Mothafa (ANC) said the issues raised by civil society would be taken into account to change the work of the legislature. He differed with Equal Education’s notion of an Education Blackout. The percentage increase in spending on basic education and training, and arts and culture did not justify the label. He drew attention to the allocation of R23.6 billion of the wage bill to labour-intensive departments. Fiscal consolidation was addressing the need for financial discipline. The wage bill contestation should be viewed in light of the population increase to 60 million and the corresponding economic growth. He questioned whether the population growth was in line with service delivery expected from civil servants. He referred to the use of terminology by stakeholders and stated his preference for reprioritisation instead of budget cuts. Money is moved from a vote that is unlikely to happen to a vote that will assist a department with implementation. For example, when the Department of Water and Sanitation is unable to implement sanitation facilities at schools, due to the lack of bulk infrastructure, the money is shifted to another department where it could be utilised. Mitigating measures have been implemented to prevent leakage and wastage. The Department of Basic Education must improve its approach to spending to ensure the effective use of learning material. There would be no need for overruns if projects are managed tightly.

Mr Z Mlenzana (ANC) sought an explanation for the term Education Blackout. The performance in the education system and the quality of the matriculation results had been improving in a majority of the provinces. In his view, austerity is being used as a generic term. Adopting an austerity budget meant that the government needed to focus on priorities based on the cash flow projection compared to the actual spent. Reprioritisation requires the justification to move funds around from one department to another. He asked Ms Motsisi to elaborate on her view of centralisation versus decentralisation of procurement.

Mr X Qayiso (ANC) appreciated the ideas that the organisations had presented to the Committee, specifically the interesting issues raised by Property Point about small businesses. He was disappointed that none of the organisations mentioned the manipulation of the rand. He asked whether they had analysed the impact of rand manipulation on the economy. In his view, it had serious consequences in the attempt to unseat the government. It was the biggest offence against the democratic government and had resulted in interest rate increases, and consequently, borrowing and importing became more expensive. The manipulation of the rand was attributed to the challenges that the country was now facing. He asked what informed the assertion of redundancy and the constant attack on teachers. He agreed with COSATU that the PEPs should prioritise young people given the high unemployment rate amongst young people. He was concerned that the total economy could collapse if Transnet was not taken care. The R46 billion injection granted to Transnet would assist the economy.

Mr W Aucamp (DA, Northern Cape) welcomed the presentations and encouraged more people to come and present their case to Parliament. He noted that Mr Parks has frequently been linking the population in 1994 and the number of civil servants at that stage. But when people refer to the bloated public service, it relates to the large number of service managers. He argued that percentage-wise, the public service is bloated compared to more than 20 years ago. A large number of directors in the public service sector had been cadre deployment appointments which had led to poor services and more borrowing. The government can save money if better management is instituted.

Mr Buthelezi drew attention to some schools where teaching was taking place and infrastructure was maintained even though there were only a few learners. He asked Equal Education for advice on how this problem could be solved. Reference was made to provision for significant and unforeseeable events in the MTBPS. He requested Equal Education to explain how the economic impact of external shocks, such as the war in the Middle East, should be dealt with. He asked Property Point to explain their experience of red tape at the local government level. Loadshedding created problems but also possibilities for new industries. He enquired about the involvement of small businesses in creating solutions for the energy crisis. He noted that the Budget Justice Coalition was calling for more resources. He questioned where the money should come from, given the growing debt costs. He asked about the conversion rate of temporary interventions such as the Presidential Employment Stimulus (PES). He agreed with COSATU that the low level of economic growth is a problem. He asked what should be done to stimulate the economy given the Israel-Palestine and Russia-Ukraine wars, and the lingering effects of the Covid-19 pandemic. He sought clarity about COSATU’s call for more money for Eskom considering that R250 million had recently been approved. He suggested that the instability at the executive level at Transnet and Eskom was contributing to the challenges and that the problem was not only about money.

Ms Moss granted Mr Mlenzana another opportunity to comment.

Mr Mlenzana asked Property Point for their view on the government’s handling of the increasing debt, underspending, and on the StatsSA census report.

Civil Society Responses

Equal Education
Ms Biney explained that similar to the Eskom blackout, the lights in the education sector were increasingly getting dimmer. It is not one problem but a series of events that will culminate in creating a dire situation. The matter has been unpacked in their written submission. Money was only one aspect of the challenges. The upward adjustment was an increase in nominal terms but there had been no increase in real terms. The intensity of interventions at Eskom should apply to the schooling sector. She replied to the issue of terminology and said the effects of a budget cut or reprioritisation are the same because it does not create a conducive environment for learning. Although progress is being made, the quality of learning was not on par with the investment and this was jeopardising the future of children. It is important for the labour market to have competent people to fix Eskom. She replied to the Chairperson about investing in schools with low learner numbers. This contradiction is predominantly found in rural and township schools. Communities transfer their children to better-quality schools if they feel the quality of schooling in their areas is not good enough. Provincial education departments were advised to ensure that quality teaching takes place in all schools. The complexity of the matter and other challenges that the education sector is facing, will not be solved easily but the Basic Education Department is supposed to interrogate the situation and develop workable solutions. Learners should receive the services that they deserve. She responded to the question of unforeseeable events and said National Treasury should apply better spending and judicious financial management. The matter had consistently been raised at this Committee and with other oversight bodies. Moving money cannot be justified only because National Treasury foresees that it would not be spent. The reprioritisation of funds was having a huge impact on infrastructure spending. Learners who depend on these resources for quality service delivery are being punished for the non-performance of the department. She recognised that the 2023/24 salary adjustment was made in good faith but said it was very little to celebrate considering the remuneration challenges that the sector had been complaining about. She noted the issue of rand manipulation but was not in a position to make an educated contribution on the matter and would do further research for a better understanding.

Property Point
Ms Motsitsi replied to Mr Mlenzana that centralisation involved a streamlined process which provides greater control over procurement activities and ensures consistency and compliance with rules. Decentralisation allows entities to control their own processes. She proposed a hybrid approach with elements of both centralisation and decentralisation to strike a balance between efficiency and flexibility for small businesses. The small businesses that Property Point is supporting through their programmes, have been complaining about late payment by the public sector because it affects their cashflow and causes businesses to close down or delay the completion of projects. This angers small business owners and leads to strikes. It is hoped that with the tabling of the National Small Business Enterprise Amendment Bill, which aims to address the issue of late payments, an Ombudsman Office would be created. Small businesses are encountering corruption when dealing with local government officials. Property Point recently completed a study that would inform the strategy on renewable energy and support for small businesses within the renewable energy sector. The study showed that small businesses have been involved in the renewable energy sector either through wind energy, bioenergy, or hydropower. However, their participation usually comes at the end of the value chain as suppliers, distributors, or maintenance service providers. Property Point would want to small businesses to enter at the beginning of the value chain as manufacturers or system developers. In response to serving government debt, she said the decision to increase borrowing was not an attractive option and would have significant negative consequences for small businesses. It could lead to a worsening credit rating and higher interest rates if South Africa is unable to service its debt. The lack of investor confidence would lead to a more difficult environment for small businesses to thrive.

Budget Justice Coalition
Mr Zulu explained austerity from his organisation’s viewpoint as a set of economic practises that aim to reduce government deficit and stimulate economic growth. Historically, austerity has been unfolding through cuts in government spending, progressive tax hikes, and interest rate increases or a combination of these strategies. In other countries where austerity measures were implemented, most of government expenditure is towards public services. But in South Africa, where violence and crime are pervasive, and with massive job losses and malnutrition, decreasing spending on public goods and public services is not only a risk to the economy but would create a political and social crisis. A repetition of the 2021 events in Durban would occur if socioeconomic challenges were not factored into the budget. This was not reprioritisation of the budget but the economic definition of austerity. He agreed that managers in the public sector are overpaid and in addition, the public sector was not properly managed to suit the needs of most South Africans who require healthcare, education and a free supply of basic services. As a result of budget cuts, 20 000 police officer jobs were lost in the past two years, and vacancies of nurses and teachers across the country are massive. Considering the number of poor and unemployed South Africans, the capacity of the state must be increased with the appropriate number of skilled people with the incentive to do a proper job. To pursue a developmental agenda requires a transparent and democratic state. In response to the question on currency manipulation, he suggested that the regulation of the private sector should be discussed but the more systemic issue was the problem of policy reorientation that National Treasury had adopted over the years. What the banks are accused of doing must be dealt with but pursuing high interest rates, progressive policies, and expenditure cuts in a country with so many poor people would be more of an issue in the long term.

Ms Angelucci said a clear vision to stimulate economic growth was needed. At the moment growth is being sacrificed for fiscal consolidation. GDP growth on its own will not lead to the quality of economic growth that is required. The capacity of the state to drive economic growth and create jobs was ineffective. There is a need for infrastructure investment and the creation of a common good. The PES and the Basic Education Employment Initiative highlighted the areas that required focus in communities such as the acquisition of reading and writing competencies. The long-term funding requested for the PES can be allocated to monitoring and evaluation. It would be a great step forward for accountability and transparency. The correct environment must be created for these programmes to flourish. A reset in the public employment space was needed to create a framework for quality first-work experiences. The goal is for young people to pursue further education and training, find full-time jobs, or promote self-employment. Indicators are needed to start reflecting the level of development from these part-time jobs. The stipends being paid to young people for participating in the short-term employment opportunities kept them active in the labour market.

COSATU
Mr Parks said the public service was not bloated as often stated in Parliament. The population doubled since 1994 which has had an impact on the ability of the government to deliver public services. This was evident in the long queues at hospitals and the teacher-to-learner ratio at schools. He agreed that resources need to be shifted from managers to nurses, doctors, teachers, and police officers who are leaving the country. To ease the cost-of-living burden, he advocated for a fuel levy reduction, an extension of the SRD grant and food relief for the poor. The Eskom generation fleet is old and no longer sustainable therefore investment in renewable energy should be supported. He was in favour of a single procurement regime for the entire state.

National Treasury
Mr Marumo Maake, Chief Director: Budget Office and Public Sector Remuneration, NT, said the headcount had not kept pace with the population growth. A balance was needed between the headcount and the unit cost due to wage increases. Funds have been made available in the 2022/23 MTEF to keep pace with the service delivery demand. In response to the bloated public service comment, he said the number of senior management service (SMS) members equalled 1.8% of public servants. The comment about a bloating public service was open for interpretation.

Ms Julia de Bruyn, Chief Director: Public Finance, NT, indicated that none of the Asset Liability Management (ALM) colleagues were available to comment on the Eskom issue. The presentations raised sector-specific issues which National Treasury would consider. The decision to reduce budgets was not taken lightly. Revenue had decreased and more borrowing was not an option.

Ms Moss requested National Treasury to send the Eskom response to the Secretaries of both Committees. Loadshedding is a critical issue and Members need to know about the situation at Eskom. She thanked the representatives of the organisations for their contributions and National Treasury officials for their responses.

Announcement
Mr Muthelezi requested the Committee Secretaries to update Members on future meetings.

The Committee Secretary for the Standing Committee on Appropriations indicated that three reports are scheduled for adoption on Tuesday, 5 December 2023.

The Committee Secretary for the Select Committee on Appropriations indicated that three reports are scheduled for consideration on Thursday, 7 December 2023.

Members of the Select Committee and civil society representatives were dismissed. Standing Committee Members were requested to remain on the platform for further engagement.

Adoption of minutes
The Committee adopted the minutes of 24 November 2023 without amendments.

Eskom Debt Relief Bill
Mr Qayiso said the Adjustments Appropriation Bill and the Eskom Debt Relief Bill would be discussed next week. Some of the sentences in the Eskom Debt Relief Bill might lead to a debate. He proposed that the few sentences be dealt with in a declaration.

Mr Mlenzana proposed that the Bill be tabled for noting instead. The Committee had exhausted itself to discuss the Bill and the Bill was debated in the plenary. He was not opposed to the idea of a declaration but felt that noting would be a better option.

Mr Mmemezi supported the proposal to deal with the Bill by noting it.

Mr Buthelezi asked if the Members could be persuaded to opt for a declaration. An agreement on a declaration was subsequently reached. He then requested the Committee Secretary to communicate the decision of the Committee to the appropriate officials in Parliament.

The meeting was adjourned.