Standing Committee on Appropriations Standing Committee on Appropriation

Standing Committee on Appropriations Standing Committee on Appropriation Support Team 27 August 2014

Outline p Mandate of SCo. A p Why the Operational Plan p Priority Issue 1 and Action Plan p Priority Issue 2 and Action Plan p Priority Issue 3 and Action Plan p Priority Issue 4 and Action Plan

Quick Reflection p ‘Transformation’ has risen up the policy agenda in recent years. It requires bold initiatives and creativity, rather than business as usual. After 20 years of democracy, it may be time to encourage new thinking and new solutions to deep-seated problems. –HSRC – SCo. A Planning Session 2014 p ‘We need to challenge whether programmes are delivering and be prepared to take tough decisions’ – DPME – SCo. A Planning Session 2014

Mandate of the Standing Committee on Appropriations p The Standing Committee on Appropriations (the Committee) was established in terms of the Money Bills Act n n n Spending issues; Amendments to the Division of Revenue Bill, the Appropriation Bill, Supplementary Appropriation Bill and the Adjusted Appropriation Bill; Recommendations of the Financial and Fiscal Commission (FFC), including those referred to in the Intergovernmental Fiscal Relations Act, 1997 (Act No. 97 of 1997); Reports on actual expenditure published by the National Treasury (section 32 reports); and Any other related matters.

2014 MTEF Division of Revenue 2010/11 2011/12 2012/13 Outcome 2014/15 Revised estimate R million Division of available funds National departments 2013/14 2015/16 2016/17 Medium-term estimates 356 027 382 712 412 706 449 251 489 424 522 257 552 983 – 76 860 2 693 5 413 5 044 4 127 2 939 2 770 4 956 5 697 7 726 9 467 10 221 Provinces 322 822 362 488 388 238 414 932 444 423 477 639 508 254 Equitable share 265 139 291 736 313 016 338 937 362 468 387 967 412 039 Conditional grants 57 682 70 753 75 222 75 995 81 955 89 672 96 215 Local government 60 904 68 251 76 430 83 670 90 815 100 047 105 187 Equitable share 30 541 33 173 37 139 39 789 44 490 50 208 52 869 Conditional grants 22 821 26 505 30 251 34 268 36 135 39 181 41 094 7 542 8 573 9 040 9 613 10 190 10 659 11 224 813 451 877 374 947 853 1 024 662 1 099 943 1 166 424 of which: Indirect transfers to provinces Indirect transfers to local government General fuel levy sharing with metropolitan municipalities Non-interest allocations 739 752 Percentage increase Debt-service costs Contingency reserve Main budget expenditure Percentage increase 7. 2% 66 227 10. 0% 76 460 7. 9% 88 121 8. 0% 101 256 8. 1% 114 901 7. 3% 126 647 6. 0% 139 201 – – 3 000 6 000 18 000 805 979 889 911 965 496 1 049 109 1 142 562 1 232 590 1 323 624 7. 9% 10. 4% 8. 5% 8. 7% 8. 9% 7. 4% National departments 48. 1% 47. 0% 47. 4% 47. 8% 47. 5% 47. 4% Provinces 43. 6% 44. 3% 43. 8% 43. 4% 43. 6% 8. 2% 8. 4% 8. 7% 8. 8% 8. 9% 9. 1% 9. 0% Percentage shares Local government

Function groups in the 2015 MTEF Function group MTSF OUTCOME NDP CHAPTER [1] Quality basic education Chapter 9 1. Basic education [2] A long and healthy 2. p. Health Spending issues - lifestyle There is a need Chapter for 10 an people in South Africa are and feel safe 12 and 14 3. Defence, public order [3] All overarching operational plan to guide the. Chapters actions and safety ofschool the Appropriations Committee in relation [5] A skilled and capable workforce Chapter 9 to 4. Post education fiscal issues as these cut across and training [4] Decent employment through inclusive economic growth Chapters 3, 4 and 5 5. Economic affairs departmental/sphere boundaries. [10] Protect and enhance our environmental assets and natural resources [6] An efficient, competitive and responsive economic infrastructure It will help network the Committee establish priorities on [8] Sustainable human settlements and in improved quality of Chapter 8 6. Local economic what it needs to accomplish the future p Chapter 13 development and social household life [9] Responsive, accountable, effective and efficient local government Chapter 6 infrastructure Chapter 15 p Vibrant, equitable, sustainable rural communities contributing It will force[7] the Committee to make choices on towards food security for all what you will do building andandwhat you will not do [14] Nation social cohesion 7. General public services [12] An efficient, effective and development oriented public service Chapter 13 8. Social protection [11] Create a better South Africa, a better Africa and a better world [13] Social protection Chapter 7 Chapter 11

Why a Committee Operational Plan p Spending issues - There is a need for an overarching operational plan to guide the actions of the Appropriations Committee in relation to fiscal issues as these cut across departmental/sphere boundaries. p It will help the Committee establish priorities on what it needs to accomplish for 2014 and serve as learning input in final Strategic Plan p Possibly not desirable for the Committee to interrogate every issue and an effective oversight strategy may entail that the Committee prioritise certain issues and pursue these over the course of the year.

Priority Issue 1 p Improve collaboration between Committees of both Houses and ensure proactive oversight and public participation p Chapter 3 of the Constitution… provide effective, transparent, accountable and coherent government; and co-operate with one another in mutual trust and good faith. Furthermore Parliament should establish or provide for structures and institutions to promote and facilitate intergovernmental relations………this will be difficult to achieve unless such collaboration finds expression within the legislative sector p Need to broaden participation…. broaden communication channels…. educate stakeholders on participation processes and its relevance…. . stakeholder survey…. new civil society initiatives in SA: Budget and Expenditure Monitoring Forum (BEMF) and International Budget Partnership (IBP) – PBO SCo. A Planning session 2014 p ‘Need to create sustainable working relations with the Appropriations Committee” – SCOPA Meeting 19 August 2014 – Cited as key challenge in SCOPA Legacy Report in 4 th Parliament p “All parties interested in legislation should feel that they have been given a real opportunity to have their say, that they are taken seriously as citizens and that their views matter and will receive due consideration at the moments when they could possibly influence decisions in a meaningful fashion” – Judge Sachs in Doctors for Life

Action Plan Operational Objectives Outputs Activities Targets Areas Collaborative Oversight Joint Reports and/or recommendations Ministry Briefings Education Infrastructure Joint oversight visits Research Analysis by support Joint Hearings on major risk areas team Water services Infrastructure Joint meetings with Portfolio Committees and NCOP committees (Education Infrastructure, Health, Industrial Policy) SCOPA Reports and programme NCOP reports and programmes Quarterly Reports/MTBPS Proactive Oversight Disseminate Committee Reports to the House and other stakeholders Quarterly Expenditure reports (DCOG, Human Settlements, DPW, DTI, Transport) Weak expenditure performance FFC briefings and other constitutional and research bodies Ministry Briefings on topical issues (Any other issues arising) Higher education funding for tertiary Students NSFAS and student funding Oversight Visits to stakeholders (possibly in September) Briefing by AG on risk areas emanating from audit findings Quarterly Reports/MTBPS Public Participation Inclusion of public inputs into reports on the Committee Conduct public hearings in areas outside Cape Town --- possibly Appropriation Bill in 2015. Appropriation Bill 2015 Possibly conduct milestone hearings outside Parliament premises ( Medupi, school halls, etc)

Priority Issue 2 p Strengthen the relationship between the Committee and its stakeholders, increase collaboration and capacity of the Committee p “Stakeholders are those institutes; experts; NGOs; and CBOs in the committee’s database that represent the appropriate expertise upon which the committee will draw during every budget” – 2012 Oversight Model n p SCo. A will need to thoroughly understand its stakeholders - interim database and positive relations established from planning session already – strengthen these furtherhow? Eg. Expeditious timing and flow of information “Even when the legislature has legal powers and space to shape budgets, analytical capacity is necessary to make sound budgetary choices. The ability to understand the budget and to make informed changes depends on sound analysis. ” – World Bank 2013

Quick Note on Capacity q “legislative strengthening efforts should be seen as complements to related governance improvements……. . treating legislatures as self-contained entities that can be fixed by repairing internal mechanisms is unlikely to get very far. Rather, . . . it is more useful to think in terms of helping a society…. . working with many people and groups outside the legislature, including citizens groups, the media, officials from the executive branch, jurists and others……. In the case of money committees, this means dovetailing reform activities with broader efforts to enhance government accountability and strengthen public financial oversight…. ” – World Bank 2013 q For example - Budget Review 2014 announced reforms for State Owned Entities reporting, Chief procurement Office reforms, new reporting and planning requirements for infrastructure – These are included in training calendar to be sent to FFC and NT for training

Action Plan Operational Objectives Outputs Activities Targets Areas Stakeholder Partnership Enhancement Improved content and quality of Committee reports and Committee engagements Disseminate stakeholder invitations early ---Priority issues identified for FFC (transitional grants), PSC (EEE in the 2014 MTBPS) Public Sector Spending efficiencies, economy and effectiveness HSRC(EEE in 2014 MTBPS) Strategic Capacity Building for Committee and Support Enhanced and informed analysis of documents Staff and submission made to the Committee Regular Briefings from DPME on 14 Outcomes Progress once a quarter (To include in MTBPS) Targeted training and capacity building 2014 MTBPS before key budget milestones i. e. In the 4 th term of 2014 before MTBPS/Budget Adjustments, the NT, FFC & legal Services to conduct workshop on tools of analysis for information to be tabled Budget Adjustments/MTBPS (what are virements? , reading the MTBPS effectively, etc) 3 rd Term – Just before MTBPS Training on Enhancing oversight over State Entities (NT, PBO) Training on Effective Infrastructure Oversight (when should tenders be issued, key milestones in the infrastructure cycle. . ) (NT, PBO, FFC) State Owned Entities Infrastructure After MTBPS or January Enhacining Oversight Strategies Enhanced analysis of Quarterly Expenditure reports To request additional inputs and analysis on the 1 st quarter expenditure report--PBO 2 nd Term Areas of poor expenditure performance

Priority Issue 3 p p Strengthen Budget framework reform proposals with the assistance of the PBO. “with regard to the implementation of this Act the Committees on Appropriations have raised a number of concerns in relation to the time frames prescribed by the Act– House Chair- SCo. A Planning Session 2014 p “The Committee emphasised that given the current macro economic outlook, state funding and thus appropriations needed to respond to the economic challenge and ensure spending supports economic growth and development so as to improve the growth trajectory of the country” – Committee minutes 19 August FFC meeting p “The monitoring and evaluation of municipal capital planning and spending needs to be improved. National and provincial treasuries should improve this assessment during municipal benchmarking exercises by ensuring that capital budgets are realistic and financed, based on capacity to deliver” – FFC 2015/16 Recommendations p “sector-specific policy decisions by national sector departments which have had a cumulative effect of “hollowing out” the role and sphere of influence of provincial…FET function, housing functions, public transport and land use planning, Centralised procurement at national level, increase in indirect grants…” – Paper from FFC Conference

Action Plan Operational Objectives Outputs Activities Targets Areas Reforms on the Money Bill Strategy Plan on reviewing implementation effectiveness and challenges on Money Bills Act Meetings and deliberations between the four committees Money Bills Act In 2015 Liaison with PBO and Legal Services Budgeting for economic growth and development Committee Reports and outputs to include emphasis and recommendations on funding for growth Ministry Briefings on key state programmes aimed at growth and development – Infrastructure investment PICC already scheduled EPWP also scheduled Employment Update Jobs Fund 2 rd Term Govts Support for Industrial Policy – R 10. 6 bn in 2014/15. State funded industrial policy programmes To schedule DTI and others MTBPS Enhancing Oversight Strategies Committee reports and engagements To request further briefings on the conditional grant system (those performing well and those not performing well) Possibly support and/or request further clarity on FFC’s recommendation on new vs refurbishment infrastructure funding 3 rd Term – just before MTBPS The IGFR system in South Africa

Priority Issue 4 p Strengthen the Leadership and Management Capacity of the Departments and Entities, in particular performance of the Heads of Department (Ho. Ds) and Accounting Officers p “Oversight, most importantly, it entails overseeing the effective management of government departments by individual members of the relevant executive authority in pursuit of improved service delivery for the achievement of a better quality of life for all people………. Accountability refers to institutionalised practices of giving account of how assigned responsibilities are carried out” – Oversight Model 2011 p ‘ 80% of the departments of education, health and public works had material findings on their APPs compared to 45% of the other departments… APPs containing information that is not useful or reliable is a sign of weaknesses in the ability of auditees to adequately plan, manage and report on their performance. If addressed, it will improve the transparency and accountability ……contribute to improving the service delivery experience of citizens’ – PFMA 2012/13 Audit Outcomes pg. 33 p ‘Quality of HR management is very important for achieving results…achieving at least 80% of targets in the APP. . this supports the analysis in the NDP that main challenge to building a capable and developmental state has been unevenness in capacity that leads to uneven performance – DPME in SCo. A Planning Session 2014

Combined Assurance Management assurance First level of assurance Senior management Accounting officers/ authority Executive authority Required assurance levels Extensive Oversight assurance Second level of assurance Coordinating / Monitoring institutions Internal audit Audit committee Independent assurance Third level of assurance Oversight (portfolio committees / councils) Required assurance levels Extensive Management’s assurance role Oversight’s assurance role Public accounts committee External audit Required assurance levels Extensive Role of independent assurance • Senior management – take • National Treasury/ DPSA – monitor • Oversight (portfolio committees /councils) – immediate action to address compliance with laws and review strategic and performance plans as well as specific recommendations and regulations and enforce appropriate the accounting officer’s quarterly adhere to financial management action reports on performance and control systems • Internal audit – follow up on • Standing Committee on Appropriations/SCOPA • Accounting officers/ authority – management’s actions to address – exercise specific oversight on a regular basis hold officials accountable specific recommendations and • External audit – provide independent assurance implementation of plan and report conduct own audits on the Strategic on the usefulness of plans and the quarterly and annually progress Plans & APP and quarterly progress reliability and credibility of reported performance • Executive authority – monitor the • Audit committee – monitor the information and progress of performance and implementation of commitments on identify instances non-compliance enforce accountability and corrective action made by consequences management as well as quarterly progress on the plans 17

Some findings from AG 2012/13 Audit Report p Context -- ‘Committee cannot, itself, directly assess value for money…. have to rely on NT, DPME, FFC and departmental reports……often assess delivery at project/department level but what about government (strategic and operational) integration” – PBO in SCo. A Planning session 2014 p ‘needed to strengthen the first level of assurance…. SMS has to implement basic financial and performance management controls…… 68% of auditees internal controls were a cause for concern…. . SMS at 68% of the auditees provided only some, limited or no assurance…The accounting officers at only 30% of departments provided the required level of assurance…. . , it is apparent that almost half of the executive authorities do not yet have a direct impact…… those ministers and MECs we met with three or more times contributed to the significant improvements in the audit outcomes – PFMA AG 2012/13 Report p ‘Internal audit units of only 28% of departments provided the required level of assurance, compared to those of 40% of public entities - PFMA AG 2012/13 Report p ‘the national portfolio committees provided only some level of assurance……. Will have to Institutionalisation of joint committee hearings……. . frequent monitoring of the adequacy of responses from departments…. there is a need for centralised planning of committee activities at house chairperson level in order to enhance collaboration’ -- PFMA AG 2012/13 Report

Action Plan Operational Objectives Outputs Activities Targets Areas Improving government planning and policy alignment Committee outputs and reports to emphasise MTEF planning principles To source inputs from DPME, DPSA and NT on strategies for effective improve planning within government departments MTEF Planning Enhancing leadership capacity of Executive Authorities/Accounting Officers Committee Reports and outputs to include recommendations on ensuring performance agreements are signed and assurance levels of AOs is improved 2014 MTBPS (to recommend and follow up in 2015 MTEF) To source inputs from DPME, DPSA and PSC on ways to ensure Ho. Ds have performance agreements in place Highlight importance of leadership wrt attaining performance targets thus ensuring value for money 2014 MTBPS (to recommend and follow up in 2015 MTEF) MTBPS Quality of performance information Executive Authorities/Accounting Officers roles and responsibilities

What now? (1 of 2) p p On 7 August 2014, government released the Medium Term Strategic Framework (MTSF) for 2014 to 2019 The MTSF is the mechanism through which all 5 year strategic plans and annual plans of the three spheres of government are being aligned to the NDP and made to pull in the same direction. p Some of the targets in the MTSF for growing the economy and creating jobs are: n Increasing the investment rate to 25% of GDP n Increasing public sector investment to 10% of GDP n Adding 10 000 megawatts of electricity n Increasing employment and reducing unemployment to 14% n Increasing the share in household income of the poorest 60% of households to 10%. n Increasing research and development investment to 1. 5% of GDP – a 300% increase in the rand value of investment compared to 2013. p Parliament has begun its own institution-wide planning process and it is envisaged that its strategic plan will be tabled on 10 October 2014

What now? (2 of 2) p p p The Committee has now developed an Operational Plan For 2014 The engagements and interactions with stakeholders have led to the establishment of a stakeholder database to be maintained by the Committee Support Staff. The Draft Strategic Plan will now include the Planning Session Report and the Operational Plan – This guiding framework will guide the work of the Committee in the coming months Now that the Committee has identified its key stakeholders and an oversight framework that is underpinned by collaboration, partnerships, accountability and public participation – what next? Committee to implement Operational Plan and note key learnings and experiences The Standing Committee on Appropriations will finalise 5 year Strategic Plan in January and this will include: n n n p Medium Term Strategic Framework (MTSF) for 2014 to 2019 (based on NDP) Parliament’s Strategic Plan for 2014 to 2019 Key learnings from Committee Operational Plan 2014 It is envisaged the focus of the final strategic planning session will be on governments 14 outcomes and result in targets for the Committee in each outcome area which are to be tracked for the next five years

Conclusion p p Twenty years ago, President Nelson Mandela, speaking in the National Assembly stated: “The people of South Africa have chosen a profoundly legal path to their revolution, those who frame and enact the Constitution and law are in the vanguard of the fight for change. It is in the legislatures that the instruments have been fashioned to create a better life for all. It is here that oversight of government has been exercised. It is here that our society in all its formations had an opportunity to influence policy and its implementation. ”

Quick Notes p p Infrastructure Supporting industrial policy and employment

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Table 6. 3 Funding for employment programmes, 2010/11 – 2016/17 2010/11 2011/12 2012/13 2013/14 Outcome Revised estimate R million National 2014/15 2015/16 2016/17 Average annual Medium-term estimates MTEF growth Community Work Programme 449 624 1 290 1 731 2 258 2 505 3 710 28. 9% Expanded Public Works Programme management unit 206 210 237 275 262 268 291 1. 9% Non-state sector 180 154 283 438 477 485 600 11. 1% Tourism programmes 270 301 314 306 401 594 738 34. 1% 1 568 1 977 2 699 2 857 3 392 3 519 3 999 11. 9% – 272 590 1 258 1 900 1 318 1 388 3. 3% 3 96 414 509 528 543 573 4. 0% Environmental programmes Jobs Fund National Rural Youth Service Corps Provincial 0. 0% Incentive grant for provincial infrastructure Incentive grant for social sector Local government 182 225 293 357 349 357 412 4. 9% 57 200 217 258 268 375 13. 3% Incentive grant for municipal infrastructure Total 280 364 662 611 632 661 696 4. 5% 3 195 4 424 6 999 8 600 10 458 10 517 12 781 14. 1% 0. 0% 29

Why Public Participation