Tuesday, 21 July 2020] 151

No 52 - 2020] SECOND SESSION, SIXTH PARLIAMENT

PARLIAMENT OF THE PROVINCE OF THE

WESTERN CAPE

==========================

ANNOUNCEMENTS, TABLINGS AND

COMMITTEE REPORTS

==========================

TUESDAY, 21 JULY 2020

COMMITTEE REPORT

(Negotiating Mandate stage) Report of the Budget Committee on the Division of Revenue

Amendment Bill [B 9–2020], dated 16 July 2020, as follows:

The Budget Committee, having considered the subject of the Division of Revenue Amendment

Bill [B 9–2020] (NCOP) referred to it in accordance with Standing Rule 217, confers on the

Western Cape’s delegation in the NCOP the authority to not support the Bill for the following

reasons:

The Division of Revenue Amendment Bill [B 9–2020] (NCOP) and Adjustments Appropriation

Bill [B 10–2020] was tabled on 24 June 2020 by Minister Tito Mboweni, which modified much

of the 2020 budget. R130 billion was cut, R30 billion of which will be cut within respective

provincial budgets (excluding conditional grants). There are currently no changes to the provincial

equitable share in the Bill – thus the previous equitable share remains.1 The cuts will come from

within the respective provincial budgets. Thus, each province will have to fund their own COVID-

19 response.

Reprioritisations for COVID-19 expected within provincial budgets2

R Thousand Equitable

Share

Funds reprioritised to: Total

Health Other Sectors

Western Cape 10.3% 1 538 426 512 809 2 051 234

National Total 100% 15 000 000 5 000 000 20 000 000

1 08 July 2020. National Treasury Briefing to NA Standing Committee on Appropriations and NCOP Select Committee on Appropriations. COVID-19 Response: Division of Revenue Amendment Bill, 2020. 5 24 http://pmg-assets.s3-website-eu-west-1.amazonaws.com/200708UPDATED_NT_presentation.pdf (Accessed 14 July 2020). 2 Ibid.

152

Thus, the Western Cape province will need to cut R2 051 234 000/> R2 billion within its own

budget.

Local Government will receive an addition of R11 billion to its equitable share (See Table below)3.

Every District and Local Municipality in the Western Cape will see an increase in their

equitable share, amounting to a total of R721,7 million. Thus, out of the R11 billion increase

for all local governments in South Africa, Western Cape province municipalities will receive

a total of 6.56%.

Provincial grants are adjusted down by R7.2 billion and local government conditional grants

by R3.6 billion.4

R138,5 million from the Provincial Disaster Relief Grant for drought relief has been

approved. The National Treasury claims that the amounts allocated reflect the severity of

3 Republic of South Africa. Division of Revenue Amendment Bill [B9 – 2020]. 14 64. http://pmg-assets.s3-website-eu-west-1.amazonaws.com/B09-2020_Division_of_Revenue_Amendment_Bill.pdf (Accessed 14 July 2020). 4 08 July 2020. National Treasury Briefing to NA Standing Committee on Appropriations and NCOP Select Committee on Appropriations. COVID-19 Response: Division of Revenue Amendment Bill, 2020. 10 24 http://pmg-assets.s3-website-eu-west-1.amazonaws.com/200708UPDATED_NT_presentation.pdf (Accessed 14 July 2020).

153

drought in the different provinces.5 Thus, the Western Cape will receive R25 million for drought

relief (See Table below).

Provincial Disaster Relief Grant Allocations 2020/216

R’000 2020/21 Allocations

Western Cape 25 000

National Total 138 489

Adjustments to Western Cape provincial Grant Allocations:

National Dept

(Vote)

Name of

Allocation

Type of

Allocation

2020/21

Main

Allocation

Adjustment 2020/21

Adjustment

Allocation

R’000 R’000 R’000

Basic

Education

(Vote 16)7

Education

Infrastructure

Grant

General

conditional

allocation to

Provinces

1 091 162 (159 441) 931 721

Transport (Vote

40)8

Provincial

Roads

Maintenance

Grant

General

conditional

allocation to

provinces

1 067 344 (161 654) 905 690

Agriculture,

Land Reform

and Rural

Development

(Vote 29)9

Comprehensive

Agricultural

Support

Programme

Grant

Conditional

allocation

111 555 (21 212) 90 343

Agriculture,

Land Reform

and Rural

Development

(Vote 29)10

Ilima/Letsema

Projects Grant

Conditional

allocation

50 464 (9 084) 41 380

Basic

Education

(Vote 16)11

HIV and Aids

(Life Skills

Education

Grant)

Conditional

allocation

19 878 (4 802) 15 076

Basic

Education

(Vote 16)12

Maths, Science

and

Technology

Grant

Conditional

allocation

35 479 (5 069) 30 410

5 Ibid. 16 24. 6 Ibid. 7 Republic of South Africa. Division of Revenue Amendment Bill [B9 – 2020]. 15 64. http://pmg-assets.s3-website-eu-west-1.amazonaws.com/B09-2020_Division_of_Revenue_Amendment_Bill.pdf (Accessed 14 July 2020). 8 Ibid. 9 Ibid. 17 64. 10 Ibid. 11 Ibid. 18 64. 12 Ibid.

Health (Vote

18)13

HIV, TB,

Malaria and

Community

Outreach

Grant14

Conditional

allocation

1 867 472 552 220 2 419 692

Human

Settlements

(Vote 33)15

Human

Settlements

Development

Grant

Conditional

allocation

1 907 551 (202 265) 1 705 286

Human

Settlements

(Vote 33)16

Title Deeds

Restoration

Grant

Conditional

allocation

67 952 (44 432) 23 520

Sports, Arts and

Culture (Vote

37)17

Community

Library

Services Grant

Conditional

allocation

186 126 (34 700) 151 426

Sports, Arts and

Culture (Vote

37)18

Mass

Participation

and Sport

Development

Grant

Conditional

allocation

83 491 (22 684) 60 807

The total grant increases to the province amount to R577,22 million (of which the majority of the

amount is for the ‘COVID-19’ component of the ‘HIV, TB Malaria and Community Outreach

Grant’)19 and the total grant decreases to the province amount to R634,113 million. Thus, there is

a net decrease of R56,893 million in grants to the Western Cape province.

The following tables highlight adjustments to allocations in Western Cape municipalities.

Allocations to Municipalities to supplement the funding of functions funded from Municipal

Budgets20:

National

Dept (Vote)

Name of

Allocation

City 2020/21

Main

Allocation

Adjustment 2020/21

Adjustment

Allocation

R’000 R’000 R’000

Human

Settlements

(Vote 33)

Urban

Settlements

Development

Grant

City of Cape

Town

1 481 604 (144 459) 1 337 145

Supplementary and Specific Purpose Allocations to Municipalities:

13 Ibid. 19 64. 14 Note that this grant may seemingly not be used for infrastructure; appointment of permanent staff; ventilators or oxygen, based on the conditions of the grant. 15 Ibid. 20 64. 16 Ibid. 20 64. 17 Ibid. 22 64. 18 Ibid. 19 Ibid. 60 64. 20 Ibid. 16 64.

Name of Grant Category Municipality 2020/21

Main

Allocation

Adjustment 2020/21

Adjustment

Allocation

R’000 R’000 R’000

Energy

Efficiency and

Demand Side

Management

Grant21

A City of Cape

Town

10 000 (1 000) 9 000

B Swartland 4 000 (400) 3 600

B Theewaterskloof 4 000 (400) 3 600

B Hessequa 4 000 (400) 3 600

B George 5 000 (500) 4 500

Integrated

National

Electrification

Programme

(Municipal)

Grant22

B Cederberg 22 754 (5 754) 17 000

B Bergrivier 3 000 (1 000) 2 000

B Saldanha Bay 5 000 (2 000) 3 000

B Swartland 7 652 (2 000) 5 652

B Drakenstein 27 000 (10 000) 17 000

B Stellenbosch 16 200 (4 200) 12 000

B Breede Valley 22 097 (5 097) 17 000

B Langeberg 3 000 (1 000) 2 000

B Theewaterskloof 6 737 (1 737) 5 000

B Overstrand 8 000 (2 000) 6 000

B Mossel Bay 12 000 (2 000) 10 000

B George 7 000 (1 000) 6 000

B Bitou 5 000 (1 000) 4 000

B Knysna 5 000 (5 000) -

B Beaufort West 6 400 (1 186) 5 214

Public Transport

Network Grant23

B George 153 645 (24 388) 129 257

Allocations-in-Kind to Municipalities:

Name of Grant Category Municipality 2020/21

Main

Allocation

Adjustment 2020/21

Adjustment

Allocation

R’000 R’000 R’000

Municipal

Systems

Improvement

Grant24

B Kannaland 1 900 (265) 1 635

Integrated

National

Electrification

Programme

(Eskom) Grant25

A City of Cape

Town

76 547 (27 411) 49 136

B Saldanha Bay 3 892 (3 892) -

B Swartland 885 (2) 883

B Stellenbosch 2 548 (6) 2 542

B Breede Valley 15 203 (5 410) 9 793

B Theewaterskloof 8 073 780 8 853

B George 2 852 (707) 2 145

B Cederberg 36 587 15 000 51 587

21 Ibid. 45 64. 22 Ibid. 23 Ibid. 24 Ibid. 52 64. 25 Ibid.

Regional Bulk

Infrastructure

Grant26

B Kannaland 30 000 (30 000) -

Regional Bulk Infrastructure Grant Allocations to Municipalities (per project)27:

Project Name

Cat

ego

ry

Municipality

2020/21 Main Allocation

Adjustment 2020/21 Adjustment Allocation

R’000 R’000 R’000

Citrusdal Waste

Water Treatment

Works

B Cederberg Local

Municipality

- 15 000 15 000

Calitzdorp and

Ladismith Waste

Water Treatment

Works

B Kannaland Local

Municipality

30 000 (30 000) -

The total grant increases to Western Cape municipalities amount to R30.78 million and the total

grant decreases to Western Cape municipalities amount to R314.214 million. Thus, there is a net

decrease of R283.434 million in grants to Western Cape municipalities.

In summary, the reasons for non-support for the Bill:

1. Despite the increase in the equitable share of Western Cape local governments (R721,7

million); President Ramaphosa promised R20 billion to Local Government across South

Africa.

a) According to the FFC presentation to the NA and NCOP, “[t]he Adjusted Budget

provides for only R11 billion additional funds, while the remaining amount is

secured through repurposing funds within various LG grants.”28

b) Essentially, R9 billion will come from cuts to local government budgets nationally.

2. The Western Cape is receiving an increase in HIV, TB, Malaria and Community Outreach

Grant for the COVID-19 component (R552,22 million); however, this grant seemingly

does not allow the provincial Health department to use the funding for infrastructure;

appointment of permanent staff; procuring ventilators or oxygen, based on the conditions

of the grant.

3. The Western Cape welcomes the Drought Relief Funding amounting to R25 million from

the Provincial Disaster Relief Grant; however this amount is wholly inadequate to address

the drought in the Western Cape.

4. Despite receiving grant increases to the following three Western Cape municipalities; the

increases are but a drop in the ocean based on the cuts to local government grants in the

Western Cape as a whole – cuts which will critically affect infrastructure and economic

growth.

26 Ibid. 27 Ibid. 58 64. 28 09 July 2020. Financial and Fiscal Commission. Briefing to the Standing and Select Committees on Appropriations on the Division of Revenue Amendment Bill and Adjustments Appropriation Bill. Slide 33 43. https://pmg.org.za/committee-meeting/30630/ (Accessed 15 July 2020).

157

a) Increase in Integrated National Electrification Programme (Eskom) Grant to

Theewaterskloof Local Municipality amounting to R780 000.

b) Increase in Regional Bulk Infrastructure Grant to Cederberg Local Municipality

amounting to R15 million. c) Increase in Citrusdal Waste Water Treatment Works to Cederberg Local

Municipality amounting to R15 million.

5. Zero Change to Western Cape equitable share in the Division of Revenue Amendment Bill

(DORA) 2020 budget. Thus, previous concerns have not been addressed.

6. R2 051 234 000/> R2 billion will need to be cut from within the Western Cape provincial

budget – of which R1 538 426 000/> R1.538 billion will be allocated to the provincial

Health portfolio. “Reprioritised funds is actually a “cut” in the budget. These cuts will

directly impact on frontline service delivery.

7. Western Cape province fundamentally disagrees with the current equitable share formula.

a) The Provincial Equitable Share (PES) formula does not adequately make provision

for learners moving across provinces for better education each year. Further, the

PES formula does not adequately provide for learners who require special

education.

b) The FFC has noted with concern the quality and reliability of data used in the

calculation of different components of Human Settlements grant (drawn from 2010

Household Survey and 2011 Census) and in transport sector grants.29

c) In the review of the Provincial Equitable Share formula, the above factors need to

be considered.

8. Net decrease in grant allocations to the Western Cape province (R56.893 million). This

will critically affect the building of new infrastructure (such as schools and roads) and will

impact economic growth. There also seems to be no criteria to determine which grant

allocations will be cut.

a) The FFC indicated that, “[t]he criteria for 7reprioritizing the R20 billion is not

clearly determined and this may result in unevenness in the services delivered by

provinces. In the absence of a uniform criteria it is important for provinces to report

to Parliament on the 7reprioritization criteria used.”30

b) There are no impact indicators that exist for measuring the success of grants.

9. Uncertainty regarding the Unallocated amounts in provincial grants (Total: R1

042 280 000 / > R1 billion)

a) School Infrastructure Backlogs Grant31 (Total: 185.445 million)

b) National Health Insurance Grant32 (Total: R856.835 million)

i. Health Facility Revitalisation Component: R4.583 million

ii. Personal Services Component: R175.32 million

iii. Non-Personal Services Component: R676.932 million

10. Net decrease in grant allocations to the Western Cape local governments (R283.434

million).

29 Ibid. 37 43. 30 Ibid. 27 43. 31 Ibid. 62 64. 32 Ibid. 64 64.

158

11. Local Government in South Africa (Incapable State, Corruption, Maladministration and

Cadre Deployment).

a) Only 20 of 257 municipalities in South Africa have received a clean audit, and the

bulk of clean audits come from the Western Cape;

b) 28 municipalities in South Africa could not be audited because they didn’t even

have financial statements to submit;

c) Across 200 municipalities, R2 billion was lost to corruption and unaccounted for

expenditure;

d) R32 billion was classified as irregular expenditure at local government level;

e) Municipalities are spending over R1-billion a year in consultants, which is only

made necessary as a result of appointing politically connected staff who cannot do

their jobs; and

f) Provincial and Municipal debt in South Africa to Eskom amounts to 37-billion

Rands.

12. What is the purpose for the Air Defense budget receiving an adjustment increase of R239

million in the Adjustments Appropriation Bill [B10 – 2020]? 33

13. SAA Business Rescue / Bailout

a) It has been reported that the creditors of SAA have approved its business rescue

plan. The airline last made a profit in 2011. SAA indicated that it required R26.7

billion (of which 10.3 billion will be a new request to National Treasury) in

order to restructure – to settle the airline’s debt, to fund the restart of its

operations, and pay retrenchment packages to workers and creditors. SAA has

previously received R36.9 billion in bailouts already spent over the years.

b) National Treasury is requested to indicate where the R10 billion for the SAA

restructure will be sourced from?

14. Eskom loadshedding – “For the economy to work, Eskom must work!”

a) The President promised during his SONA 2020 that Bid Window 5 of the renewable

energy Independent Power Producers (IPPs) would open up. This is yet to occur.

b) The President promised during his SONA 2020 that measures will be put in place

to enable municipalities in good financial standing to procure their own power from

IPPs. Despite new regulations being gazetted regarding municipalities procuring

energy directly from independent power providers, the regulations are vague and

do not provide clarity.

15. Western Cape provincial government already previously committed the following

adjustments within its own budget:

a) Vote 6 – Health: An additional R1 billion required by the Department of Health to

be spent on COVID-19 activities related to staff and facilities.34

b) Vote 10 - Transport and Public Works: An additional R400 million required for

the hiring of venues and facilities and the purchasing of associated services for

quarantine and isolation purposes as a key component of the Health strategy to

combat and deal with Covid-19.35

33 Republic of South Africa. Adjustments Appropriations Bill [B10 – 2020]. 9 20. http://pmg-assets.s3-website-eu-west-1.amazonaws.com/B10-2020_Adjustments_Appropriation.pdf (Accessed 14 July 2020). 34 06 July 2020. Parliament of the Western Cape. Announcements, Tablings and Committee Reports. No 46 – 2020. Second session, Sixth parliament. Tabling in terms of section 25(1) of the Public Finance Management Act, 1999 (Act 1 of 1999) (PFMA). 133 133. 35 Ibid.

159

16. Education

a) Previous concerns were not addressed in DORA 2020 Budget (Money does not

follow learners and infrastructure).

b) In fact, in the DORA 2020 Budget, the following provincial Education grants will

be cut:

i. Education Infrastructure Grant – R159.441 million cut

ii. HIV and Aids (Life Skills Education Grant) - R4.802 million cut

iii. Maths, Science and Technology Grant - R5.069 million cut

c) Further, the cuts will cripple the provincial Education portfolio as the provincial

Education Department is already using the existing infrastructure grant for COVID

19 relief, amounting to approximately R650 million.

17. Health

a) Previous concerns not addressed in the Adjustment Budget (Money does not follow

patients and infrastructure).

b) President Ramaphosa promised extra funds for Western Cape for COVID 19 health

response, indicating “cost no issue”. The President indicated that the government

would direct R20 billion towards fighting the pandemic. However, the R20 billion

would come directly from cuts from programmes within respective provincial

budgets. Further, the President promised that the Department of Defense and

Military Veterans will bring in defense personnel who will be able to come to the

Western Cape province immediately to assist.

c) The funding for the Western Cape shortfall for the COVID-19 relief response was

not received as mentioned by the President at the extended Cabinet meeting that

took place at the CTICC.

18. Transport

a) In the DORA 2020 Budget, the following provincial Transport grant will be cut:

i. Provincial Roads Infrastructure Grant - R161.654 million cut.

19. Agriculture

a) In the DORA 2020 Budget, the following provincial Agriculture grants will be cut:

i. Comprehensive Agricultural Support Programme Grant - R21.212 million

cut; and

ii. Ilima/Letsema Projects Grant - R9.084 million cut.

20. Human Settlements

a) In the DORA 2020 Budget, the following provincial Human Settlements grants will

be cut:

i. Human Settlements Development Grant - R202.265 million cut; and

ii. Title Deeds Restoration Grant - R44.432 million cut.

21. Sports, Arts and Culture

a) In the DORA 2020 Budget, the following provincial Sports, Arts and Culture grants

will be cut:

i. Community Library Services Grant - R34.7 million cut; and

ii. Mass Participation and Sport Development Grant - R22.684 million cut.

22. Police & Safety

Previous concerns were not addressed in the Adjustment Budget (the Western Cape is

160

23. District Command Councils

National government is attempting to deploy Ministers and Deputy Ministers to local and

provincial governments as part of the Command Council system. It is further unclear what

powers and responsibilities the deployed District Champions will have; may duplicate and

/ or supersede current constitutional structures; and is likely unconstitutional.

24. International Loan Term Agreements

National Treasury must publish the details of the South African-IMF, World Bank and

BRICS Bank loan term agreements for COVID-19 relief; including whether any racial

criteria is being used for the disbursement of the relief.

Minority View

In terms of Standing Rule 90, the African National Congress expressed its minority view that it

supports the Bill.