Chairperson, hon Deputy Ministers, hon members, it is once again an honour for me to present to this august House the committee report on the Division of Revenue Bill of 2012. My role in this debate today is to outline the process followed and skim over some of our observations and concerns raised during our engagements with other stakeholders and provinces. On 22 February 2012, the Minister of Finance tabled the national Budget together with the Division of Revenue Bill as required by the Money Bills Amendment Procedure and Related Matters Act in the National Assembly. On 9 March the Bill was transmitted to the NCOP and referred to the committee for consideration and reporting.
Following the briefing by the National Treasury, permanent delegates were allowed to brief their provinces. The committee further held public hearings in accordance with section 9(5)(b) of the Money Bills Act and received written and/or oral submissions from the Financial and Fiscal Commission, National Union of Metalworkers of South Africa, People's Budget Coalition, Department of Water Affairs and Mr D van den Heever. All these processes culminated in the consideration of provincial mandates in terms of the Mandating Procedures of Provinces Act, Act 52 of 2008.
The purpose of the Division of Revenue Bill is to provide for the equitable division of revenue raised nationally among the national, provincial and local spheres of government for the current financial year. It is further to determine each province's equitable share of the provincial share of that revenue and any other allocations to provinces, local government or municipalities from national government's share of that revenue and any conditions on which those allocations may be made.
In the context of this purpose we should understand and appreciate the fact that a great many processes of consultation are engaged in before the National Treasury, and the Minister in particular tables this Budget before Parliament. Such processes are done precisely to make sure that there is fairness and equity in how each sphere is allocated. However, given our needs and wants, such allocations will always fall short of satisfying all of us, given our different sets of conditions, challenges and needs. Therefore, we should allow no space for mediocrity and irregular, wasteful, fruitless and unauthorised expenditure. The current situation, where the wasteful and fruitless expenditure book runs into billions of rand, is just unacceptable and should be fought with everything we have. Otherwise it becomes pointless to ask for more money when the rot is allowed to eat into what is legitimately there for servicing the nation.
This year's Budget is commendable and has received huge support. It places greater emphasis on massive infrastructure investment, job creation, economic stimulation, and the eradication of poverty, unemployment and inequality. It further places a responsibility on our shoulders, as collective members of different committees representing the views of our different provinces, to make sure that plans tabled as firm conditions and on which allocations are made are implemented and that those responsible for such implementation are accountable. Accountability entails making sure that every rand allocated is spent wisely and on things that were agreed upon in a transparent and democratic process. It requires the implementers to make sure that there is due care and diligence in the execution and rolling out of services, that such services are of good quality and that they address the needs of the people. It means taking full responsibility and owning up to failures and weaknesses in the same way as smiling when you get positive feedback about good work. It requires space for constructive criticism and for empowering songs of praise.
Those of us who are charged with the responsibility to play an oversight role should do so without fear or favour; those who criticise should do so putting forward better alternatives; and those who praise should do so because there is improved quality in the roll-out of services, rather than for patronage. This would improve and enhance our work because we would be working together to achieve more instead of working against each other to achieve less.
In the context of our oversight responsibility, allow me to raise further our concerns about the failure of our provinces to force compliance and adherence to monitoring systems and the lack of follow-through on infrastructure projects and delivery of basic services. I raise this with a full appreciation of the work done by our counterparts in the provinces and with a full understanding of the related limitations they are faced with. We raised all this for the attention and correction by the executive at all levels and we shall continue to do so until we achieve the change we all require.
We are concerned that some provinces and departments continue to allow deviations from plans with no due regard for following the right channels and procedures set out for that purpose. We are even more concerned that in some provinces municipalities are left to fend for themselves with very little support, to the detriment of service delivery.
As members of the committees of Parliament, we continue to be bombarded with volumes of distorted and misleading reports about nonexisting but completed projects. This is something that is increasingly becoming the norm, yet those in charge of producing such reports continue to go unpunished, even after we have exposed them. Without getting into detail but as a way of supporting my facts, note the fact that millions of rand meant for libraries in Ipelegeng, Khuma, Utlwanang and Boikhutso and the revitalisation of Bophelong Psychiatric Hospital and General De La Rey Memorial Hospital in the North West were diverted to some unknown activity when reports recorded that such projects had been completed.
Hon Mokgoro, the fact that a mental hospital in the Northern Cape, which was meant to be built in three years, remains incomplete after 10 years is a worrying factor. The fact that school books were not delivered in time in Limpopo and specific bridges not built - which means that people continue to risk their lives through the use of what they call a segwaigwai [makeshift cable car] to cross rivers - when records show such bridges as having been built and completed is even more worrying.
In the Free State, while government, on the one hand, is doing its level best to address the toilet saga in Viljoenskroon in the Moqhaka Local Municipality, it is mind-boggling that the Matjhabeng Local Municipality in Welkom, on the other hand, continues to allocate sites that are unserviced. Those sites are without toilets. You begin to ask yourself what exactly we are doing.
These are some of the concerns that we want to raise strongly for the executive to give attention to. The list of such examples cuts across all provinces and the reality is there to be seen. Just last week, as members of this House, we traversed the length and breadth of this country and saw how some of the projects have collapsed. As a finance committee we are raising this to make sure that there is no repeat of these things.
I'm raising these points to emphasise the fact that we all have a duty to care and to act. Let us all take full responsibility and commit to do our bit in making sure that our country rids itself of malpractices. We should do everything in our power to increase the number of those who are currently doing well and move our country forward. This we can achieve through improved positive communication and an active citizenry. There is a lot we have achieved so far and together we can achieve even more. I wish to present the report to this Council and encourage the adoption of the Division of Revenue Bill, Bill 4 of 2012. [Applause.]
Deputy Chairperson, hon Deputy Ministers and members of the provincial legislatures, hon colleagues and guests, before I start I would like to congratulate my chairperson on the way he put the problems in this meeting. I thank you and I think it is a great breakthrough.
The Division of Revenue Bill provides for the division of revenue raised nationally to be distributed among the three spheres of government. I believe we all wish the amount was significantly larger and that there was enough for houses for all, free medical care and grants for the deserving indigents so that every citizen could lead a respectable life. This division of revenue will change when gross income increases. The division of revenue will change once the recent census results become available in November this year. Furthermore, it will be affected as citizens move from one province to another in search of a job or a better life. Migration for a better life from our neighbouring African countries also places stress on our limited resources, as was discussed today.
Ons het nie 'n probleem met die verdeling of die formule van die verdeling nie. Dit moet net gereeld aangepas word. Ons het 'n probleem met die grootte van die koek wat verdeel moet word en wie plunder daaraan. Ons het gister 'n voorlegging van die Nasionale Ontwikkelingsplan deur minister Trevor Manuel aangehoor. Dit is uitstekend en ons ondersteun dit. Die probleem is egter die uitvoering of toepassing daarvan. Dit blyk ietwat onmoontlik as ons kyk na die huidige onwilligheid om bo lippediens uit te styg en die plan uit te voer. Gistermiddag is dit bevestig tydens ons gesprek met die Ouditeur-generaal, Terence Nontembane. Ek bedoel Nombembe. Jammer as ek sy naam verkeerd uitgespreek het.
Nie een van die drie vlakke van regering beskik oor die nodige kennis, vermo en politieke begeerte of wil om die geld doeltreffend aan te wend nie. Amptenare wat nie opgelei is nie of nie oor die nodige vaardighede beskik nie, word vertrou met groot projekte en dus groot bedrae. Ons kommer is dat die geld toegedeel word, maar dit word nie doeltreffend aangewend nie. Dit lei tot ewe groot bedrae wat in die niet verdwyn. Amptenare word aangestel weens hul politieke verbintenisse, ongeag vaardighede en kwalifikasies. Hulle faal gevolglik, maar word dan net in 'n ander posisie herontplooi.
Die President, sowel as die Minister van Finansies, het baie klem gel op infrastruktuurontwikkeling en werkskepping, maar daar is geen oorsig oor die implementering van die planne nie.
Die ekonomie moet groei om te voorsien in ons land se behoeftes. Werkskepping is 'n duidelike gevolg van groei in die ekonomie. Groei in die ekonomie beteken 'n styging in die fisiese lewering van dienste en produkte. Die DA se beleid van 8% groei in die bruto binnelandse produk is juis noodsaaklik om werkskepping te verseker.
Ons markte is beperk en daarom moet uitvoer gestimuleer word om 'n styging in die totale bruto binnelandse inkomste van die land te veroorsaak. Om dit suksesvol te kan doen, moet ons kompeterend wees. Dit beteken ons moet goedkoper produseer. Dit word verkry deur 'n effektiewe verbetering in produktiwiteit wat die arbeidskomponent verlaag en produkte en dienste meer bekostigbaar maak.
Om ons ekonomie te laat groei saam met uitvoer, moet ons intense opleiding verskaf en spesialiste oplewer wat uitstaande diens kan lewer. Ons sal moet kers opsteek by ons vennote in die Brics-lande, waar daar goeie groei is. Gister het minister Manuel dit duidelik aan die Nasionale Raad van Provinsies gestel dat ons nie moet toelaat dat die vakbonde die Suid- Afrikaanse ekonomie regeer nie.
Tydens die Internasionale Monetre Fonds se besoek aan die Vaste Komitee oor Finansies in 2010 was die oorheersende vraag ook hoe loonverhoging die koers van inflasie kon oorskry, veral met die onaanvaarbaar ho werkloosheid syfer in Suid-Afrika. Die Nasionale Beplanningskommissie beveel selfs aan dat arbeidswetgewing ernstig heroorweeg moet word om werkskepping en die kompeterende aspekte aan te spreek. Geen wonder die Minister van Finansies het sy ernstige kommer uitspreek oor die ho salaris- en loonkomponente van die Begroting nie. Die grootste probleem wat doetreffendheid benadeel is die onwettige of korrupte besteding van geld. Daar is te veel bewyse van die onrelmatige besteding en ook misbruik van geld deur politici en amptenare op alle vlakke van regering. Ja, ons wil tog so graag "uithang" en spoggerig wees - kyk na ons agb Minister van Sport en Ontspanning! Net gister het minister Manuel 'n agb lid van die Nasionale Raad van Provinsies gevra waarom die NRVP die dag se vergaderings in 'n spoghotel moes aanbied. Waarom nie binne die perseel van die Parlement nie? Wat 'n beredeneerde vraag!
Ek is oortuig dat ons as politici in die spiel moet kyk. Dis waar ons moet begin. Ons moet professionele politici wees. Ons wonder waar die politieke oortuiging is om toestande te verander. Ons verteenwoordig ryk en arm. As politici moet ons, soos ons hier sit, politieke verantwoordelikheid aanvaar en eties korrek en met respek optree - dis ons plig. Op die oomblik het mislukkings en korrupsie nie ? baas nie, maar kom ons sit hulle in die tronk nog voordat hulle kan verskuif na die volgende ontplooiing. (Translation of Afrikaans paragraphs follows.)
[We have no objection to the division or to the formula of the division. It should just be adjusted regularly. We do have a problem with the size of the cake that has to be divided as well as with those who are raiding it.
Yesterday we attended a presentation of the National Development Plan by Minister Trevor Manuel. It was excellent and we support it. The difficulty lies with its execution or implementation. It appears to be somewhat impossible when we consider the current unwillingness to rise above mere lip service and to execute the plan.
This was confirmed yesterday afternoon during our conversation with the Auditor-General, Terence Nontembane. I mean Nombembe. I am sorry if I have pronounced his name incorrectly.
Not one of the three tiers of government has the necessary knowledge, capacity and political will at its disposal to utilise the funds effectively. Officials who have not been trained or who lack the required skills are entrusted with large projects and therefore large sums of money. Our concern is that the money is allocated, but is not utilised effectively. This gives rise to equally large sums of money vanishing into thin air. Officials are being appointed because of their political connections, irrespective of skills and qualifications. Consequently, they fail, but are then simply redeployed in another position.
The President, as well as the Minister of Finance, placed a lot of emphasis on infrastructure development and job creation, but there is no oversight with regard to the implementation of these plans.
The economy has to grow in order to provide for our country's needs. Job creation is a clear result of growth in the economy. Growth in the economy means an increase in the physical delivery of services and products. The DA's policy of 8% growth in the gross domestic product is, in fact, essential in order to guarantee job creation.
Our markets are limited and exports should therefore be encouraged in order to generate an increase in the gross domestic revenue of the country. In order to be able to do that, we must be competitive. This means that we must produce more cheaply. This is achieved by way of an effective improvement in productivity that reduces the labour component and makes products and services more affordable.
In order to grow our economy, we have to provide intensive training and produce specialists who are able to render outstanding service. We will have to seek information from our partners in the Brics countries, where good growth is taking place. Yesterday Minister Manuel clearly stated to the National Council of Provinces that we should not allow the trade unions to rule the South African economy.
During the 2010 visit by the International Monetary Fund to the Standing Committee on Finance the main issue was also how salary increases were allowed to exceed the inflation rate, especially given South Africa's unacceptably high unemployment figure. The National Planning Commission has even recommended that labour legislation be seriously reconsidered in order to address job creation and the competitive aspects. No wonder the Minister of Finance has expressed his deep concern regarding the high salary and wage components of the Budget.
The biggest problem hampering efficiency is the illegal or corrupt spending of money. There is too much proof of irregular expenditure as well as abuse of money by politicians and officials at all levels of government. Yes, we dearly love to hang out and brag - take a look at our hon Minister of Sport and Recreation! Just yesterday Minister Manuel asked an hon member of the National Council of Provinces why the NCOP had to hold the day's meetings at a posh hotel. Why not within the parliamentary premises? What a well- considered question!
I am convinced that we, as politicians, should take a look in the mirror. That is where we should start. We should be professional politicians. We wonder where the political will is to change the state of affairs. We represent the rich and the poor. As we sit here as politicians we should accept political responsibility and act ethically correctly and with respect - that is our duty. Currently failure and corruption are out of control, but let's put them in jail even before they can move to the next deployment.]
Let us join hands across political divisions and execute our oversight responsibilities, as affirmed on the day we were sworn in as members of the NCOP. [Applause.]
Deputy Chairperson, hon Deputy Minister, hon members, we are in support of the report of the committee, welcome the current Budget presented by the Minister of Finance and applaud the allocations made to the provinces. Section 214 and section 217 of the Constitution of the Republic of South Africa require that an equitable share of the nationally raised revenue be allocated to provincial governments, to enable them to provide basic services and to perform their allocated functions and responsibilities.
The national transfers to provinces increased from R362,6 billion in 2011- 12 to R384,5 billion in 2012-13. Over a three-year period, provincial transfers will grow at an average annual rate of 6,4% to R437 billion in 2014-15. Despite the harsh economic conditions, the Ministry has been able to keep its head above water and to soldier on in providing for all South Africans.
The equitable share formula attempts to ensure that service delivery and a good quality of life are enjoyed by all South Africans, irrespective of provincial contributions to the fiscus. The formula takes into consideration the following six components: Firstly, under education, it considers the age of the school-going population, with specific focus on ages 5 and 17 and from Grade R up to Grade 12. Secondly, under health, it considers the risks associated with the demographic profile of populations and the relative load imposed on hospitals and health institutions generally. Component three deals with the basic share, which is the size of the population at the provincial level. Fourth is the institutional component, which is divided equally among provinces at 11% each. Number five is the poverty component, which is the question of the extent of poverty in terms of statistics that are provided at the provincial level. The last component deals with economic output. This refers to the individual province's contribution to the national Budget. In this instance, it is the question of the extent to which the province contributes to the fiscus.
It is, therefore, our humble submission, Deputy Minister, that the Gauteng province contributes 33,9% to the national Budget. We say this with all humility and respect, even to provinces that contribute 2,5% to the fiscus. All contributions are valuable and essential to building a better future for all of us and our children. Let us further submit to you, Deputy Minister, that South Africa is a unitary state, not a balkanised federal state with individual provincial policies.
Having said that, we hereby inform you, sir, that the 20,5% health allocation for the province will fall short in meeting the current challenges we face. To give you an example, the largest hospital in the southern hemisphere, Chris Hani Baragwanath Hospital, as well as other medical facilities in the province, treats patients from four surrounding provinces. Every Wednesday, Deputy Minister, there are buses from across the provinces with patients suffering from various illnesses who come for treatment. They are not refugees. They are South Africans and have every right to receive medical attention in this particular province. To complicate the challenge, our neighbouring relatives from Botswana, Swaziland, Lesotho, Mozambique and further north also cross the border to seek medical assistance. This is the context in which we should appreciate the overload and excess faced by the province. The overload is not only among unemployed Gauteng residents but it represents this dual challenge which we put before you.
The education component, with its allocation of 15,7%, faces more or less the same circumstances. This is not the presentation of an argument, Deputy Minister. We are merely making information available so that the Ministry could intervene decisively. If anything, this is a genuine cry for help.
Let me hasten to assure the hon Minister that in view of the workshop conducted by the NCOP and the Office of the Auditor-General yesterday, public representatives are geared toward protecting each and every cent that it allocated for service delivery. The Auditor-General, Mr Terence Nombembe, left us with a very instructive challenge: "What do you do with those who do not want to comply with the law? What do you do?" [Applause.]
Chairperson, hon Deputy Minister and hon members, as is required by the Constitution, the Free State standing committee on public accounts, finance, office of the premier and the legislature held public hearings in Bloemfontein on 14 March on the Division of Revenue Bill, Bill 4 of 2012. Once again, I must raise my concern in this House that the SA Local Government Association, Salga, did not attend the public hearing even though they were invited to attend and make submissions. However, the fact that more municipal managers, chief financial officers, CFOs, and mayors attended the hearings is very encouraging. This year we also invited provincial departments to attend the public hearings but I am sad to report here that no provincial department attended.
The recovery from the financial and economic crisis that started in 2008 is slow and uneven. This resulted in weaker growth prospects for this financial year, not only on a national level but also on a provincial and municipal level. What we now need is a government that works better but costs less. We dare not disappoint and fail those who are in need of the benefits of the allocation made in the Division of Revenue Bill. We are all aware of the fact that the needs of our province far outweigh the available resources and each available rand will have to be stretched to its maximum. This can only be done if we all work together. Together we can do more.
This will, among other things, require communities in the Free State to participate actively in the protection of state assets in their own communities. Over and above this, it will require public servants in the Free State to display high standards of work and of ethics. We still see too many public servants involved in corrupt activities, abusing state resources, coming late for work, doing shopping during working hours and not performing their duties. Who can blame the public for having the perception that public servants are lazy, corrupt and without morals and ethics if we ourselves see these things on a daily basis. We cannot afford this. We now need a government that works better and costs less.
Because of the limited resources available, budget leakages must be stopped or there will not be sufficient resources to carry out our promises to the people for a better life and to eradicate poverty. The budget leakages I am referring to are, among others, corruption at all levels and wastage, which include the underutilisation of purchasing power and economy of scale; fruitless and irregular expenditure; maladministration; bad financial decisions; noncompliance with laws and regulations; and unethical business practices. It takes two to tango, therefore the public sector needs to come to the party too. There is no such thing as a free lunch.
Rooting out these leakages will enable us to obtain value for money and stretch the rand to its maximum. Value for money in this case also means that salaries paid to public servants must produce the required outcomes. Productivity within the Public Service needs to increase drastically. Chairperson, provincial budgets must create new and innovative ways to better respond to service needs and backlogs in provinces.
There is also a need for the distribution of financial resources in the country to go beyond the current equitable share formula and grants. This is because of the unique realities that exist in different provinces, but more so because of the inequalities that have been created by these very same instruments of the division of revenue. A province as small as the Free State, for instance, is faced with the following realities: a small, undiversified local economy, mainly based on mining and agriculture, with a low growth rate and an inability to create great wealth on its own; a relatively small private sector; a large, possibly overextended public sector and the fact that, under the current conditions, the public sector remains the main source of hope for a better life and for economic growth for the people of the province.
These realities require that our provincial budget must also be used to stimulate the provincial economy through direct interventions, unlike more industrialised provinces, where the economy has created its own critical mass. This implies that the responsibility placed on the provincial budgets of smaller provinces has a bigger and more critical role to play in making a meaningful impact and is an important tool to effect socioeconomic transformation. It is therefore important for National Treasury to revisit the formulas, especially those of the equitable share to provinces and municipalities.
I'm sure you will agree that the distribution of resources regarding infrastructure has been favouring the bigger provinces for decades, to the disadvantage of smaller provinces like ours. For a province like the Free State, the road budget received did not reflect the level of responsibility that the Free State carries in terms of the total road network in South Africa. It is important that I remind the House that the Free State is basically at the heart of the road network in South Africa. It has been badly pressurised by all major freight and transport movement in the country, without adequate national funding.
A further important aspect that needs urgent attention is the unfunded mandates from national departments to provincial governments. Currently, the unfunded mandate negatively contributes to the tight fiscal framework of provinces and should be reconsidered. In fact, this practice should be abolished or at least discouraged, since it places undue pressure on provincial budgets and is not sustainable.
A further issue that is of great concern to our committee is the current local government equitable share formula, which, in our opinion, needs urgent attention. Firstly, the fact that the development component of the formula is dormant disadvantages small municipalities. These smaller municipalities will therefore never be able to catch up with the larger municipalities in terms of economic growth and development.
Secondly, as a committee, we are not convinced that the revenue-raising capacity correction component of the formula is realistic and financially sound. In this regard, the committee will commission research to establish whether the current subtraction of 7% of the value of the equitable share from wealthier municipalities to make those funds available to poorer municipalities is sufficient and will have the required impact.
In conclusion, I suggest that in the wake of the recent ANC centenary celebrations, where we were all reminded of the great debt this nation owes to those who fought and suffered for this democracy, it is only proper that this Bill be dedicated to them. It should be our goal to ensure a better life for all. We will have to accomplish more with less. Therefore, we will have to work smarter. We need a government that works better but costs less. [Applause.]
House Chair, I don't know how to manage my time because I don't have a timer here.
I have one.
Yes, but I always check my time when I speak. House Chair, Deputy Minister of Finance, fellow select committee chairpersons who are here, fellow members of other provincial legislatures who are here and NCOP permanent delegates, it gives our province pleasure to address this august House on the occasion of the debate and adoption of the Division of Revenue Bill for the 2012-13 financial year. We do so fully aware that the 2012-13 Budget was tabled under unfavourable global economic conditions.
I wish to take members back to the sitting of the National Assembly on 22 February, when the Minister had this to say when he presented the 2012-13 Budget:
This Budget ... reflects the collective determination of the government to address with energy the challenges of creating jobs, reducing poverty, building infrastructure and expanding our economy.
The Budget sets out a financial framework for implementing this vision, a framework that is sound and sustainable. It recognises that building South Africa is a multidecade project that must invigorate our capacity to grow, and must include all South Africans in that growth.
This Budget sets us on a path ... that will be neither easy nor uncontested - hard work and difficult choices lie ahead. But the journey is under way. We have embarked on the long walk to economic freedom. All South Africans aspire to these freedoms: freedom from poverty; freedom from need; freedom to exercise our talents and thrive as individuals; freedom to work together as communities, as organised social formations, as business enterprises and as a proud and forward-looking nation.
This Budget is about making South Africa work smarter, harder and differently.
The allocations to the three spheres of government for the 2012-13 financial year Medium-Term Expenditure Framework are mainly informed by the outcomes-based planning and budgeting adopted by national government. Particular emphasis is on infrastructure development, job creation, better health care and promoting quality education and skills development across the three spheres of government.
We note that National Treasury, in developing the Division of Revenue Bill for the 2012-13 financial year, consulted and engaged the Financial and Fiscal Commission, which is mandated by section 220 of the Constitution to provide information to all organs of state in order to make informed decisions about complex fiscal matters. Section 214 of the Constitution requires that an Act of Parliament must provide for the equitable division of revenue raised nationally among the national, provincial and local spheres of government; the determination of each province's equitable share of the provincial share of that revenue; any other allocations to provinces, local government or municipalities from the national government's share of that revenue; and any conditions on which those allocations may be made.
We are aware that the Bill seeks to give effect to, among other things, the provisions of section 214 of the Constitution. The Bill is in sync with the Constitution and other relevant statutory frameworks. Before the Bill is tabled in Parliament, all provincial Treasuries are afforded an opportunity to comment. As such, our inputs are captured in the Bill.
Although we continue to face challenges of in-migration, which affect our education and health services, as the hon member Montsitsi said, we nevertheless concur with the Bill as tabled and we welcome the changes that have been effected in the Bill pertaining to the Expanded Public Works Programme, EPWP, and provincial infrastructure conditional grants.
We note that the structure of the provincial equitable share for the 2012 Budget remains unchanged, except for slight refinements to the health component. The following components determine the provincial equitable share: education, poverty, economic activity, and institutional as well as basic shares allocated per province. In this regard, we received the second- largest share of the Budget, after KwaZulu-Natal. However, it is important to note that we received the largest proportion, that is 33,9%, of the economic activity component. This is measured by the economic contribution of provinces to the gross domestic product. We acknowledge that the economic component is still a small component of the formula, but our province received a bigger share of that component.
Having taken into account the provincial equitable share as far as it relates to the betterment of basic standards of living, we are of the view that the 2012 allocations are in line with the government priorities of creating jobs through infrastructure development, better health care and quality education. Our province receives an amount of R54,5 billion from the equitable share in the 2012-13 financial year, increasing to R58,6 billion in the 2013-14 financial year. We know that a large part of the Bill remains the same annually.
Furthermore, the following significant changes are welcomed. On the EPWP grant, the grant has been reconfigured to ensure that incentive payments to provinces and municipalities are calculated on the basis of the number of jobs created during the previous year. On infrastructure conditional grants, in attempting to fast-track infrastructure delivery in provinces, section 13 has been added, which places additional responsibilities on department heads of provincial departments with infrastructure conditional grants.
Furthermore, to deal with corruption as it pertains to infrastructure delivery in the province, the following conditions have been added under section 13: All infrastructure expenditure partially or fully funded by condition allocations is reported through project and asset management segments in the standard chart of accounts; maintaining an up-to-date database of all contracts that are fully or partially funded by conditional allocations that are compliant with the register of projects and i-tender system; and lastly, ensuring that infrastructure projects comply with best- practice standards and guidelines contained in Practice Note 22, which was issued in terms of section 5 of the Construction Industry Development Board Act, Act 38 of 2000. The whole section 13, as added in the Division of Revenue Bill, is welcomed and it further entrenches our decision regarding how infrastructure should be delivered in the province.
On the conditional grants, we know that all Gauteng train-related provisions have been deleted from the Bill due to the phasing out of the grant, and I would encourage members who have not been on the Gautrain yet to get on it. It is a joy to travel on that train.
We agree with the concern about spending patterns on some conditional grants. It is therefore important for National Treasury, working with provinces, to strengthen monitoring and evaluation on conditional grants in order to avoid material underspending and the diversion of funds. Infrastructure development remains a critical catalyst for the alleviation of unemployment and poverty. It is for this reason that we support initiatives aimed at expediting and investing in infrastructure development. However, this cannot be totally attained without proper skills development, including efficient project management across the three spheres of government.
We also welcome National Treasury's efforts to further strengthen and regulate supply chain management policies. This will go a long way in preventing noncompliance with supply chain management requirements, thereby preventing fraudulent activities from occurring.
In its recommendation to National Treasury on the 2012-13 Budget, the Financial and Fiscal Commission, FFC, identified the ever-increasing personnel cost as a major concern or threat to future service delivery. Consequently, we should collectively address this potential threat. This should be done with the full appreciation of socioeconomic conditions affecting both the state and public servants.
We further note the interventions made by National Treasury in an attempt to remedy the problems occurring in our department of health and department of social development. However, we are of the opinion that an early warning system should be employed by National Treasury, in collaboration with provincial Treasuries, to avoid fiscal distress in key provincial departments. We note the increase of allocations to local government, as detailed in the Bill. It is our view that the increase will assist municipalities in dealing with service delivery demands.
We wish to reiterate the following: National Treasury should strengthen the framework regulating conditional grants to ensure proper monitoring and evaluation as a way of avoiding material underspending and diversion of funds. National Treasury, in collaboration with provincial Treasuries, should enhance early warning systems to avert fiscal distress in key provincial departments. National Treasury should work closely with all three spheres of government to strengthen human resource management in an effort to meaningfully address challenges of escalating personnel costs. Measures should be developed to avoid scenarios where employees are recruited to positions that are not funded in any given financial year. Our province is ready to implement all measures in the Division of Revenue Bill. [Applause.]
House Chairperson, hon Deputy Minister of Finance, hon members and special delegates, I have to comment on one of the previous speakers, hon Van Rooyen, who said that Salga did not attend certain meetings. Unfortunately, there are only nine of us on the Salga national executive council, and I am the closest one, in the most beautiful town in South Africa, George. That is 440 km from here. The others are all way off, so it is not always possible for us to attend all of the NCOP meetings, because members hold positions such as mayors, deputy mayors, Speakers, etc. That is a problem. But anyway ...
Maybe just to lay that to rest, he was making reference to the Free State.
Yes, but even so.
So, Salga in the Free State.
Yes, Salga in the Free State - that is the Mayor of Mangaung. So, you know, the chances that he could be available are quite remote. In any case, we will see what we can do about that. Thank you, Mr Chair.
Chairperson, the Division of Revenue Bill should, in terms of our Constitution, seek to strengthen the ability of provinces and municipalities to provide basic services and perform the functions allocated to them. It should thereby seek to progressively improve the living conditions and standards of all our constituents by means of providing for their developmental and other needs. The 2012 Division of Revenue Bill and local government allocations present a further opportunity to accelerate the attainment of universal access to municipal services.
The Minister of Finance reported on the slowdown in economic growth of about 2,7% in the last fiscal year and expressed the anticipation of a recovery to about 3% in the 2012-13 financial year. Salga is appreciative of the difficult economic situation that the country finds itself in and the impact that has on the revenue streams of government. In fact, local government revenue is also directly affected by the downturn in the economic cycle. We therefore welcome the overall sentiment of the 2012 Budget, which seeks to protect allocations to local government but also calls for fiscal restraint and efficient and effective spending in the three spheres of government.
With regard to the Division of Revenue Bill, it is noted that the Expanded Public Works Programme incentive grant to municipalities has been reviewed and Salga supports this, because the grant's focus areas are aligned to the mandate of local government. We do, however, call on national government to simplify the reporting system for this and other conditional grants to local government. Local government has to continuously bear the cost of compliance with national policies, which erodes already limited revenue sources for basic service delivery.
We note the funding through in-kind transfers for municipal projects where local capacity is lacking. While this funding is indeed welcomed, there is a need for improved co-operation with receiving municipalities on the size of allocations and how this money will be spent by national departments and implementing agents. It is envisaged that the consultation processes should involve Salga.
This Budget sets out a tight fiscal framework within which national revenue is divided between national, provincial and local government. It is noted that in the vertical division of revenue process, local government is allocated R77 billion or 8,8% of nationally raised revenue in 2012-13.
We are aware of the huge challenges that some municipalities face in spending their annual allocations, especially infrastructure grants. However, we are confident that in working together with national government on interventions such as the Municipal Infrastructure Support Agency of the Department for Co-operative Governance and Traditional Affairs positive impacts can be made.
Regarding equity share allocations, local government receives R37,9 billion in 2012-13, R40,6 billion in 2013-14 and R43,6 billion in 2014-15 of equitable share, which is an upwards revision to the baselines by R2,2 billion over the next three years. It is noted that the equitable share makes provision to sustain basic service delivery and further revisions towards strengthening governance and administration in smaller municipalities.
Government also provided R9 billion in 2012-13 as the metros' share of the general fuel levy that has now been fully phased in. Salga has been processing a national conference resolution to apply for a local business tax for economic infrastructure and services, and a process of engagement with key stakeholders has already commenced. Further consultation will be held with National Treasury ahead of our application.
Salga is of the view that local government allocations in this Budget do not fully consider some fundamental issues affecting local government at the moment. Firstly, the steep increases in the prices of bulk services such as electricity and water impact on the sustainability of basic service provision by local government. If this trend continues, more and more residents will fall outside the affordability net, further compromising revenue management in local government. National allocations to local government should take this into consideration and increases should be in excess of annual inflation.
Secondly, many municipalities continue to carry the burden of unfunded or underfunded mandates for services rendered on behalf of provincial government. In addition, the fiscal impact on local government of national legislation as well as demarcation processes is not always fully comprehended. The Administrative Adjudication of Road Traffic Offences, Aarto, and the incorporation of the former Metsweding District Municipality into the City of Tshwane are cases in point.
Finally, in this regard, we are involved in a task team with National Treasury on reviewing the local government equitable share based on the new census data. We have stated for some time now that such a review will require proper costing of basic services and sustainable funding for smaller and rural municipalities that have limited rates and service income. We are therefore of the opinion that Parliament will need to consider a baseline revision of the vertical division of revenue, which is currently at about 8%.
With regard to the conditional grants, Salga notes the conditional grant allocations to local government amounting to R30,4 billion in 2012-13, R33,7 billion in 2013-14 and R36,9 billion in 2014-15. It is duly noted that additional funding of R5,4 billion has been allocated to fast-track the upgrading of informal settlements in large cities; provision of bulk infrastructure; solid waste management in rural municipalities; and electricity demand-side management.
A number of changes were made to local government conditional grants, such as the creation of the infrastructure skills development grant, which we support. There are, however, a number of changes made to the baseline allocations of existing conditional grants that are not adequately explained in the Budget documentation.
Salga is of the view that instead of cutting certain grants due to underspending, like the neighbourhood development and partnership grant for township renewal, national government should rather amend its implementation policies and raise awareness of the existence of the different grants available to municipalities. Another example is the policy decision to incorporate the rural household infrastructure grant into the municipal infrastructure grant, which is going to change the flow of funding. [Time expired.]
Chairperson, hon Deputy Minister and colleagues, today I want to speak about patriotism. A sensible man once said: "You are a real patriot if you protect your country against your government." [Laughter.] What I heard today, from all corners of this House, was exactly that. When I listened to the hon Chaane, I heard words like "mind-boggling", "concerns", provinces, local government and projects "collapsing". I can continue with all the speakers who followed that golden thread, saying that in terms of the Division of Revenue Bill everything is not right in our country. We need to address the provinces and local government sphere specifically. I want to raise three very important issues in terms of my understanding of the issues.
The first one is the role of the NCOP vis--vis the National Assembly. My great concern is that we confuse our constitutional obligations. I hear words and concepts such as "oversight" and "accountability". My understanding is that in the final instance the National Assembly is responsible for accountability. With due respect, I am a bit concerned that the NCOP continuously engages the Auditor-General in terms of a different mandate. Our responsibility is oversight, which brings me to the point of this oversight. There is a stampede of oversight. Everybody - from the National Assembly, to the NCOP, to the districts and to the legislatures - wants to do oversight. After such oversight is performed, there are a lot of reports, which are accepted by various spheres. Unfortunately, the critical issue in this country is that very little happens once these reports have been accepted - and I am speaking as a patriot, protecting the country from the government. [Interjections.]
My analysis is that there are about three reasons for this "collapse" of many spheres of government - after all, that is what we heard today from various role-players. The first one is the confusion regarding the constitutional roles and responsibilities, as I indicated. I think as the NCOP we must honestly and objectively look at this issue.
The second issue has more to do with a political context - specifically leadership. The unfortunate reality is that in many spheres of our society, governments - provincial, local and municipal - are collapsing because of weak leadership. [Interjections.] The unfortunate reality is that the majority of these weak leaders come from the ANC. [Interjections.] If we want to address this, the ANC in particular but also all of us as political parties have a strong responsibility not to appoint as mayor the one who shouts "Amandla!" [Power!] or "Viva!" [Long live!] the loudest, but the one who can act and be accountable. [Time expired.]
House Chairperson, hon Deputy Minister, special delegates and hon members in the House, I just want to say that the preamble to our Constitution indicates that the nation adopted the Constitution through its freely elected representatives as the supreme law of the Republic to improve the quality of life of all citizens. The same Constitution also obligates the state to take reasonable legislative and other measures within its available resources to achieve the progressive realisation of the rights that are in the Bill of Rights. Now, the Division of Revenue Bill 2012 is actually informed by this obligation to the state.
There are only three main changes when comparing the Division of Revenue Bill 2012 with the Division of Revenue Act of 2011. These changes are in relation to the Expanded Public Works Programme, EPWP, grant, which has been reconfigured because of the slow uptake. The in-year calculations for incentive purposes will fall away. A new subsection is added to section 15 to provide for consultation with Parliament and a new section 13 is added to deal with anticorruption conditions, which are placed on HODs where there are conditional grants that pertain to infrastructure.
In total, conditional grant allocations amounting to R105,859 billion have been made available in the Division of Revenue Bill for the 2012-13 Financial year. Remember that this amount is over and above the equitable share allocations to the order of R346,930 billion for the same year and is, of course, exclusive of fuel levy sharing.
We should note that these conditional grant allocations also include an amount of some R4,4 billion, which was added for policy priorities to provinces for the financial year 2012-13. In that amount there is a new grant to fund the piloting of the National Health Insurance in 10 district health authorities. Some R450 million is allocated over the Medium-Term Expenditure Framework, MTEF, for the refurbishment and upgrading of nursing colleges; R1,2 billion for the repair of flood damage to infrastructure; R1,1 billion for a comprehensive HIV/Aids programme to expand the provision of treatment and prevention programmes; R718 million for hospital revitalisation; R900 million for national tertiary services; R166 million for FET colleges; and R1,1 billion to upgrade informal settlements. An amount of R3,1 billion was added to local government conditional grants and R2,4 billion was added in the form of indirect transfers.
I have just raised matters relating to the financial resources that are made available for the purpose of improving the lives of our citizens within available financial resources. Indications are clear that there is a progressive increase in these allocations. The state is doing its best to ensure that activities aimed at improving the lives of our people are funded. However, through the oversight activities that we carry out in the form of public hearings on expenditure on these grants as well as oversight visits in provinces and local municipalities, certain experiences are encountered, which we need to raise sharply.
Provinces and municipalities in general are crying out for more resources to be made available for them to fulfil their functions and mandates. As much as we agree that we will never have enough for the work that lies before provincial departments and municipalities, there are certain tendencies that point in the direction that says we have adequate financial resources in circulation. However, departments and municipalities are failing in their numbers to spend monies allocated to them annually. Their audit outcomes reflect significant wasteful and fruitless expenditure and record significant amounts of unaccounted-for financial resources lost through fraud and corruption.
With this in mind it is difficult to understand any argument claiming a shortage of funds. Yes, there are exceptional departments and municipalities who genuinely require more help but they are in the minority. The issue here is that all of us charged with oversight responsibilities - from the executives, legislatures, audit committees, internal auditors, Scopa and its versions at subnational level, to the Auditor-General - should try by all means to ensure that administrations really use the resources provided for their intended purposes. These abuse of state resources without accountability should come to an end. Those who cry for more money should prove their prudent utilisation and financial discipline of the current resources made available to them.
We should know that conditional grants are there to enforce the attainment of national objectives, which will not be achieved if there are no forceful measures. Therefore the violations of these conditions amount to undermining the national priorities. We therefore call upon receiving departments and municipalities to ensure compliance without fail. Provincial Treasuries and municipal chief financial officers should take their rightful positions to curb noncompliance and abuse. All officials involved in fraud and corruption should be taken to task by security agencies. Managers and political heads who have responsibility and accountability in terms of the Municipal Finance Management Act, MFMA, Public Finance Management Act, PFMA, and relevant legislation should be called to account for nonaction where there is a blatant violation of or noncompliance with legislation and conditions specific to the myriad grants that are made available. Maybe we should declare 2012 the year of the Hawks, Special Investigating Unit, SIU, the Public Protector, police and Asset Forfeiture Unit on all who have defrauded the state to date.
In the name of Operation Clean Audit 2014, we should commit ourselves from today, saying, "Let us account for all the monies made available to us. Let us use all the monies for their intended purposes. There shall be no wasteful or fruitless expenditure. We shall be transparent in dealing with public funds and exercise financial management discipline. Relevant heads shall deal decisively with corrupt and fraudulent elements in the value chain." I thank you. [Applause.]
House Chair, thanks to permanent delegates and members of this House for your contributions and unanimous support for the Division of Revenue Bill 2012. Members indicated that this was a constitutional requirement also required by our Intergovernmental Fiscal Relations Act.
Judging by the debate we had earlier, this is a fitting date for this Bill to be considered and debated in this House. The progressive realisation of our people's aspiration of a better life is at the heart of the process of the equitable allocation of resources. The Division of Revenue Act is a primary vehicle driving the process of service delivery and makes a better life a reality. It is this engagement today and other intense processes that enrich the process and give elected representatives an opportunity to exercise their oversight and to express their views on the efficiency and efficacy of our fiscal framework. The freedom we celebrate tomorrow and the whole of this month, as we heard in the previous debate, finds expression in the extent to which our people have access to basic services.
Members made a number of observations on the division of revenue for this year. If I may just go through them, starting with the hon Chaane, the chairperson of the committee, whose committee I am truly indebted to for the work they have done - and this includes the select committee. He alluded to the intense process that unfolded for us to be where we are today. He also referred to scarce resources and unlimited needs - as we all know, that is the economic dilemma that we are facing. He stressed the point of accountability, which I think we are all in agreement on, in contrast to what another hon member referred to as a "collapse".
Comments on the failure of provinces to spend on infrastructure came from a number of members, particularly regarding capital expenditure, the diversion of funds and the inefficient allocation of resources to the detriment of the poor and those who need it most.
Hon Bekker referred to the implementation of the new development plan, saying the problem was with its implementation. He also alluded to the lack of capacity and skills. I want to assure hon Bekker, particularly on infrastructure, that one of the reasons for government introducing the Presidential Infrastructure Co-ordinating Commission is precisely to ensure that that delivery of infrastructure is done in a co-ordinated fashion and that we will get the maximum benefit out of the resources deployed. He also decried cadre deployment. He quoted the Minister's speech but forgot that the Minister went on to define what it was that we refer to as a "cadre". A "cadre" is a special type of a deployee. It is a special type of member of a particular organisation who is selfless, dedicated and works in the interests of others. The hon member must actually take that into account when he talks about cadre deployment. [Interjections.]
He also referred to the DA's 8% targeted growth. It's not about numbers; it's about the inclusive nature of such growth - how many people benefit from it and to what extent it addresses the triple challenge that we have as a country. He also says we must learn from our Brics partners. Our Brics partners are also learning from us, for your information. [Interjections.]
Comrade Dan referred to the problems that affect health in Gauteng. Comrade Papo also dealt with the matter. This matter is receiving attention and we are working with the provincial department in Gauteng to ensure that those problems are addressed. Let me hasten to add that this is not necessarily a funding challenge. There are many administrative challenges that will bring many cost savings into effect and we have begun to see them bear fruit. With the oversight of the committee, also in Gauteng, we have actually been assisted and are able to move in the right direction. The issue of the formula came up in a number of speeches. We accept that this is a matter that requires attention - and it is receiving attention. Salga, National Treasury and other stakeholders are working on this one.
Hon Van Rooyen talked about the issue of nonattendance, which was defended by the hon member from Salga. It is indeed sad that such an important workshop was not attended. Hon Van Rooyen also calls for the institutionalisation of a "smart state" - a state that is effective, efficient and actually deals with the issue of leakages; a state that ensures that we continue with our call of doing more with less. This is important because if we do not ensure that ever more scarce resources are spent efficiently, we are not likely to see results.
Regarding the issue of smaller provinces and the equitable share, attempts are being made to give an additional 11% to benefit smaller provinces. Regarding the issue of roads, you might now understand what we go through as National Treasury when everybody thinks we are not giving them enough. In Gauteng, we did not allocate enough to health, while in the Free State we did not allocate enough to roads. However, there is the "23 nonpriority roads" saga that we need to address, hence the intervention in the Free State. We are working very well with the department and it appreciates what we are doing in the Free State.
The issue of unfunded mandates is also an ongoing debate. These are some of the things we should also address among the departments when we talk about a state that really works. Regarding the issue of the revenue-raising capacity for municipalities, we should actually work very hard at making sure that municipalities are able to raise their own revenues so that they are able to augment the programmes.
Hon Papo spoke about the Budget and the consultation process being a long- term project.
The other thing I wish to draw the House's attention to is health, migration and the services provided by Chris Hani Baragwanath Hospital to people from other provinces too. We need to move with speed to make sure that we lay the foundation for the implementation of our NHI. If we do that, we will build this infrastructure and improve the level of health care and health services in all our areas. That would mean that people need not move to one province because that is where they find the level of service they require. Therefore we need to work together to make sure that our pilot projects for laying the foundation of the NHI are taken forward as expeditiously as possible.
Members also noted that there were three changes to the Division of Revenue Act - I do not want to go into that. I have also dealt with the issue of equitable share.
Hon Sinclair spoke about a very strange definition of patriotism. He says it is to protect the country from government. Mr Sinclair, government is the custodian of patriotism. We are a constitutional state. We gave it to you; it is there and we are here to protect you. It is government that will protect you, Mr Sinclair. You have a number of strange definitions. You even began to misinterpret the mandates of the Houses of Parliament. We have a Parliament with two Houses, Mr Sinclair. The Constitution talks about the mandate of Parliament, not of each House. The reason we have the NCOP is precisely because, as one of the members indicated, we are a unitary state that devolves powers to some of three spheres of government. We are one state. [Interjections.]
It will take time. In fact, I think you must organise a workshop, House Chair. Make sure you detain Mr Sinclair longer than the rest of the members, because you will need to start him on the basics of the Constitution before you come to the Rules of the House and other things. Thank you.
Hon Mashile also emphasised inefficiency in spending and that there was wastage. I am trying to recall which member actually went to the important workshop with the Auditor-General - and my apologies for not being able to attend that workshop. It was my fervent hope and wish to attend but unfortunately, because of matters beyond my control, I was not able to attend. The question he asked at the end of the day was: What do we do with these delinquents? What do we do with people who break the laws governing financial management? Hon Mashile answered the question. He said we should declare this year the year of law enforcement; the year when we ensure that those who break the law actually face the wrath of the law. Thank you very much. [Applause.]
Let me thank the Deputy Minister for concluding the debate.
Question put: That the Bill be agreed to.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Bill accordingly agreed to in accordance with section 65 of the Constitution.