Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698139266852.pdf (South Africa)
Wednesday, 27 May 2020] No 61—2020] SECOND SESSION, SIXTH PARLIAMENT PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA _____________________ ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS _____________________ WEDNESDAY, 27 MAY 2020 _____________________ TABLE OF CONTENTS ANNOUNCEMENTS National Assembly 1.

Resignation of Icasa Councillor ....................................................................................... 2 COMMITTEE REPORTS National Council of Provinces 1.
Appropriations .................................................................................................................. 3 ANNOUNCEMENTS National Assembly The Speaker 1 1.
Resignation of Icasa councillor (a) A letter, dated 12 May 2020, has been received from the Acting Minister of Communications and Digital Technologies Mr. J M Mthembu, MP, informing the Assembly about the resignation of Ms Nomonde Gongxeka-Seopa, a councillor on the Independent Communications Authority of South Africa (Icasa) Council, with effect from 11 July 2020, and requesting the National Assembly to initiate a process of filling the vacancy in terms of the Independent Communications Authority of South Africa Act, 2000 (Act No 13 of 2000).
Referred to the Portfolio Committee on Communications for consideration and report.

COMMITTEE REPORTS National Council of Provinces 2 1.

REPORT OF THE SELECT COMMITTEE ON APPROPRIATIONS ON THE DIVISION OF REVENUE BILL [B3-2020], DATED 27 MAY 2020 The Select Committee on Appropriations, having considered the Division of Revenue Bill [B3 – 2020] (National Assembly-Section 76(1)), referred to it and classified by the JTM as a Section 76(1) bill, reports as follows: 1.
Introduction and background Section 214(1) of the Constitution of the Republic of South Africa requires that every year a Division of Revenue Act should determine the equitable division of nationally raised revenue between national, provincial and local government.
In line with Section 7(1) (3) of the Money Bills and Related Matters Act (Act No 9 of 2009), as amended by Act No 13 of 2018 (the Money Bills Act); Section 27(1) of the Public Finance Management Act (Act No 1 of 1999), as amended by Act 29 of 1999, and Section 10(1) of the Intergovernmental Fiscal Relations Act (Act No.
97 of 1997), the Minister of Finance, Mr T Mboweni, tabled the 2020 annual national Budget, including the Division of Revenue Bill (the Bill) in the National Assembly (NA) on 26 February 2020.
The purpose of the Bill is to provide for – (a) the share of each sphere of government of the revenue raised nationally for the relevant financial year; (b) each province’s share of the provincial share of that revenue; and (c) any other allocations to the provinces, local government or municipalities from the national government’s share of that revenue, and any conditions on which those allocations are or must be made.

2.
2.

Legislative frameworks guiding the Division of Revenue Bill process, consultations and public participation According to the above-mentioned legislative frameworks, the Bill must be processed following the procedure established by Section 76(1) of the Constitution.

On 18 March 2020, the Bill was passed by the National Assembly and referred to the NCOP and the Committee for consideration and report as required by Section 9 (2) of the Money Bills Act of 2009.
Due to the COVID-19 global pandemic, the Committee decided that all provincial portfolio 3 committees on Finance and/or Treasury should be part of the meeting wherein the Committee was briefed by National Treasury on 22 April 2020.
On the same day, the Committee was also briefed by the Parliamentary Budget Office (PBO) and, in compliance with section 214(2) of the Constitution and Section 10(4) of the Intergovernmental Fiscal Relations Act No.97 of 1997, the Committee consulted the Financial and Fiscal Commission (FFC).

After that, during a virtual meeting on 13 May 2020, the Committee consulted with the South African Local Government Association (Salga) on the Bill.
Furthermore, in line with Section 72 (1)(2) of the Constitution and 9 (5)(b) of the Money Bills Act, the Committee has a responsibility to facilitate public participation when processing the Bill.

To this end, advertisements calling for public submissions were published in the national and regional print media in all eleven official languages.
Since the COVID-19 pandemic disrupted the initial programme of processing the Bill, on 15 April 2020, the Chairperson further issued a media statement advising the public to make written submissions.

The Committee also approached and reminded some stakeholders who normally make submissions to do the same.
The Committee received and considered written submissions from ten individuals (Mr. MG Buthelezi; Mr. E Boraine; Ms. J van Wyk; Ms. K Telo; Ms. L Prigge; Mr. R Malcolm; Mr. W Pletschke; Ms. V Kruger; Ms. L Parker and Ms. S Goodwin); as well as from the Congress of South African Trade Unions (COSATU) and Equal Education.

COSATU also made an oral presentation to the Committee during the meeting of 13 May 2020.
The National Council of Provinces, through the Permanent Delegates – Committee Members - briefed some provinces between 29 April and 19 May 2020.

As indicated earlier, some provinces did not ask to be briefed after taking part in the meeting of 22 April 2020.
The Committee received and considered the submitted provincial negotiating mandates on 20 May 2020 and final mandates on 27 May 2020, which was an indication that provinces had fully participated in the processing of the Bill, as envisaged in Section 214(2) of the Constitution.

3.
3.

Overview of the Division of Revenue Bill 2020 Medium Term Expenditure Framework (MTEF) This section provides an overview of the Bill, such as net share allocations across government, some of the 2020 division of revenue priority focus areas as well as some aggregate budget cuts between the provincial and local government allocations.
The 2020 division of revenue reprioritises existing funds to make sure that the growth of debt as a share of the Gross 4 Domestic Product (GDP) is stabilised and to strictly adhere to the expenditure ceiling.

Of note is that most of the strategic public spending programmes that help poor South Africans, contribute to economic growth and create jobs, have been protected from major reductions.
Excluding debt-service costs and the contingency reserve, the allocated expenditure share across government amounts to R1.53 trillion in 2020/21, R1.59 trillion in 2021/22, and R1.65 trillion in 2022/23.

The division of these funds between the three spheres of government takes into account government’s spending priorities, each sphere’s revenue-raising capacity and responsibilities as well as inputs from various inter-governmental forums.
After budgeting for debt-service costs, the contingency reserve, and provisional allocations, 48.2 percent of nationally raised revenue is allocated to the national government, 43 percent to provincial government, and 8.8 percent to local government over the MTEF period.

Of note is that the proposed changes to the public sector wage bill are not yet reflected in the allocations to the national and provincial government departments.
Once these changes have been agreed on in the Public Service Co-ordinating Bargaining Council (PSCBC), these will be implemented in the 2020/21 adjustment budget.
(a) Some priorities for 2020 MTEF The Bill prioritises the following areas over the MTEF: • Increasing the per-child subsidy for early childhood development services from R15 per day to R17 per day in 2020/21, rising to R18.57 per day by 2022/23; • Addressing shortfalls in the funding of community outreach services in the health sector; • Supporting the continued roll-out of free sanitary products to learners from low- income households; and • Repairing wastewater treatment infrastructure in the Vaal River System.
The Government’s fiscal consolidation efforts over the 2020 MTEF, continues to target expenditure, intending to reduce expenditure as a share of the GDP, as well as improving the composition of expenditure (i.e.

reduce non-interest spending).

In 2020/21, overall transfers to provinces amount to R649.3 billion of which the equitable share amounts to R538.5 billion, and conditional grants amount to R110.8 billion.
For local government, a total of R132.5 billion is earmarked of which the equitable share amounts to 5 R74.7 billion as well as R43.3 billion for conditional grants, and R14.0 billion for general fuel levy sharing with metros.

(b) Some aggregate reduction in provincial and local government transfers Following the 2019 Medium Term Budget Policy Statement (MTBPS), further changes have been made in the Bill.
• Aggregate reductions in provincial allocations: With regard to provinces, the provincial equitable share (PES) has been reduced by R7.3 billion through a 2 percent reduction in all non-compensation spending per year as well as a R5.2 billion reduction in compensation of employees.

Direct conditional grants to provinces have been reduced by R13.3 billion, as the reduction of R16.2 billion is offset by R2.9 billion.
• Aggregate reductions in local government allocations: With regard to local government, a reduction of R3.2 billion has been made from the local government equitable share (LGES) as well as R16.8 billion reductions in direct conditional grants.

Most importantly, the Bill has reduced all conditional grants, except for the Early Childhood Development Grant and the Learners with Profound Intellectual Disabilities Grant.
According to the Bill, three factors were taken into account during the reduction process, namely past spending and performance, whether the grant funds salaries, medicine and food, and whether there has been any real growth for the allocation in recent years.

4.

The 2020 Division of Revenue allocations This section provides the breakdown of the allocations contained in the Bill for the three spheres of government.
The 2020 Budget amounts to R1.77 trillion, which is an increase of R83.7 billion, or 5 percent, from the 2019/20 adjusted allocation of R1.66 trillion.

The budget is expected to increase to R1.94 trillion over the MTEF period, at an average rate of 4.98 percent.

Table 1 below shows the MTEF allocations for all three spheres of government.
Table 1: 2020 Medium Term Expenditure Framework (MTEF) Division of Revenue Sphere of 2020/21 Annual Share of 2021/22 2022/23 Government Allocation Nominal Revenue Allocation Allocation 6 Growth Rate % % (R million) (R million) (R million) National* 1 152 834 Provincial 538 472 Local 74 683 TOTAL *National share includes conditional grants to provincial and local spheres, general fuel levy, debt service costs, the contingency reserve and provisional allocations.
As depicted in the table above, the national government receives R1.2 trillion in 2020/21, which is an increase of R44 billion or 4 percent from the 2019/20 adjusted allocation.

The provinces receive R538.5 billion and local government R74.7 billion in 2020/21.

Proportionally the national share of revenue equals 65.3 percent; the provincial share 30.5 percent and the local government share, 4.2 percent.
However, when the contingency reserve, debt-service costs and conditional transfers to provinces and local government are excluded, the actual provincial share grows to 42.2 percent and that of local government to 8.6 percent.

4.1 Provincial government equitable share allocation The provincial equitable share (PES) amounts to R538.5 billion in 2020/21, which is R4.4.

billion less than estimated in the 2019 Budget.


Fiscal pressures have increased since the 2019 Budget and expenditure cuts had to be revised upwards to alleviate fiscal constraints.

Provinces have had to identify several cost-saving measures, including maintaining compensation limits; reducing costs by merging provincial public entities; improved integrated planning to avoid duplication of services, and enhanced project management to ensure the correct pricing of projects.
Table 2: Provincial equitable share allocations 7 Province Equitable Share Conditional Grants R’million R’million Total transfers for 2020/21 R’million Equitable Share 2021/22 estimate Equitable Share 2022/23 estimate R’million R’million Average growth rate of PES over 2020 MTEF Eastern Cape 71 415 12 488 83 903 75 306 78 841 Free State 30 017 8 239 38 256 31 897 33 657 Gauteng 112 118 23 935 136 053 121 121 129 908 KwaZulu- 111 442 22 011 133 453 117 755 123 544 Natal Limpopo 62 329 9 890 72 219 66 256 69 935 Mpumalanga 44 105 8 312 52 417 46 996 49 724 Northern 14 290 4 542 18 832 15 207 16 068 Cape North West 37 548 7 743 45 291 40 174 42 682 Western Cape 55 208 13 191 68 399 59 276 63 194 Unallocated 433 433 TOTAL 538 472 110 785 649 256 573 990* 607 544* % 5.1 5.9 7.6 5.3 5.9 6.2 6.0 6.6 7.0 n/a 6.2 * Total estimated PES allocations for 2021/22 and 2022/23, excluding unallocated amounts Table 2 shows that total transfers to provinces in 2020/21 amount to R649.3 billion, of which R538.5 billion is the equitable share and R110.8 billion is conditional grant funding.
Included in the conditional grant funding is an unallocated amount of R433 million, which is R138.5 million for Provincial Disaster Relief and R294.9 million for Provincial Emergency Housing.

These funds will only be released once an emergency is declared.

The PES allocations grow on average by 6.2 percent, which is above the projected average inflation rate of 4.5 percent for the 2020 MTEF period.
4.2 Provincial conditional grants 8 Major changes to the provincial conditional grant frameworks are as follows: 4.2.1 New grant The new Statutory Human Resources, Training and Development Grant was created by merging the Human Resources Capacitation Grant and the Health Professions Training and Development Grant.
The Grant has two components, of which – • The Health Professions Training and Development component funds the training of health science professionals, specialists, registrars, and their supervisors; and • The Statutory Human Resources component funds intern and community services posts, including some posts previously funded from the equitable share.

4.2.2 Addition to grant funds An amount of R1.4 billion was added to the Early Childhood Development Grant over the 2020 MTEF period.
The additional allocation has been used to increase the subsidy per-child from R15 per day to R17 per day in 2020/21, which will increase to R18.57 per day by 2022/23.

4.2.3 Scope of grants expanded (a) Two new components for mental health and oncology have been added to the HIV, TB, Malaria and Community Outreach Grant in 2020/21.
A separate component will be created within this Grant to continue funding Human Papillomavirus vaccinations, as the Human Papillomavirus Vaccine Grant has been merged with this Grant as of the 2020 MTEF.

(b) The Non-Personal Services component of the National Health Insurance Indirect Grant will pilot new initiatives in 2020/21, aimed at improving the quality of health in preparation for accreditation to deliver National Health Insurance (NHI) services.
4.2.4 Reprioritisation of grant funding (a) An amount of R255.1 million has been reprioritised from the Comprehensive Agricultural Support Programme Grant to the Department of Agriculture, Land Reform, and Rural Development over the 2020 medium term, to fund improved laboratory capacity, border control and inspections.
9 (b) An amount of R800 million has been reprioritised from the HIV and AIDS component of the HIV, TB, Malaria and Community Outreach Grant to the Community Outreach Services component of the Grant in 2020/21, to cover a shortfall in the salaries of community health workers in the 2020/21 financial year.
(c) An amount of R90 million has been reprioritised within the Mass Participation and Sport Development Grant over the 2020 MTEF, to support the Netball World Cup that will be hosted in the Western Cape in 2023.

(d) An amount of R500 million has been reprioritised within the Provincial Roads Maintenance Grant in 2020/21, to fund disaster recovery projects in the 2020/21 financial year.
4.2.5 Ring-fencing of grant funds (a) An amount of R176 million has been reprioritised and ring-fenced within the National Tertiary Services Grant over the 2020 medium term, to develop and expand tertiary services in the Eastern Cape, Limpopo, Mpumalanga and the North West Provinces.
(b) Similarly, R65 million has been ring-fenced within the Health Professions Training and Development component of the Statutory Human Resources, Training and Development Grant over the 2020 medium term, to develop and expand tertiary services in the Eastern Cape, Limpopo, Mpumalanga and the North West Provinces.

(c) An amount of R544 million has been ring-fenced within the Human Settlements Development Grant in 2020/21, to upgrade human settlements in mining towns in six provinces.
4.2.6 Change from direct to indirect transfer A total of R199 million in 2020/21, and R5.7 million in 2021/22, has been shifted from the National Health Insurance Indirect Grant: Health Facility Revitalisation component to the Health Facility Revitalisation Direct Grant to upgrade Pietersburg Hospital in Limpopo.

The province will now receive a direct transfer to undertake the upgrades.
4.2.7 Reductions to baselines (a) The baselines of the following agricultural grants have been reduced for each year of the 2020 MTEF: • Comprehensive Agriculture Support Programme Grant, by 5, 6 and 7 percent respectively; 10 • Land Care Programme Grant, by 5, 6 and 7.1 percent respectively; and • Ilima/Letsema Projects Grant, by 5, 6 and 7 percent respectively.

(b) The Education Infrastructure Grant’s baseline has been reduced by 4, 5, and 5.9 percent, respectively, for each year of the 2020 MTEF period.
(c) The National School Nutrition Programme Grant’s baseline has been reduced by 0.4, 0.5, and 0.6 percent, respectively, for each year of the 2020 MTEF.

The reductions in total amount to R123.1 million over the medium term.

(d) The baseline of the Maths, Science and Technology Grant has been reduced by 3 percent for each year of the 2020 MTEF.

The reductions in total amount to R39.2 million over the medium term.
(e) The HIV and AIDS (Life Skills and Education) Grant’s baseline has been reduced by 8.8, 9.5, and 11.5 percent, respectively, for each year of the 2020 MTEF.

The reductions in total amount to R85 million over the medium term.

(f) The baseline of the National Tertiary Services Grant has been reduced by 1 percent in 2021/22 and 2022/23.

The reductions in total amount to R304 million over the medium term.
(g) The baseline of the Health Facility Revitalisation Grant has been reduced by 3 percent for each year of the 2020 MTEF.

The reductions in total amount to R612.1 million over the medium term.

(h) The baseline of the HIV, TB, Malaria, and Community Outreach Grant has been reduced by 1 percent for each year of the 2020 MTEF.

The reductions in total amount to R812.5 million over the medium term.
(i) The National Health Insurance Indirect Grant’s baseline has been reduced by 9.8, 4, and 4.7 percent, respectively, for each year of the 2020 MTEF.

The reductions in total amount to R611 million over the medium term.

(j) The Human Settlements Development Grant’s baseline has been reduced by 13.1, 12.9, and 14.8 percent, respectively, for each year of the MTEF.

The reductions amount to R6.7 billion over the medium term.
(k) The baseline of the Expanded Public Works Programme (EPWP) Integrated Grant for Provinces and the Social Sector EPWP Grant for Provinces has been reduced by 9, 10, and 10.1 percent, respectively, for each year of the 2020 MTEF.

The reductions in total amount to R142 million and R139.1 million, respectively, over the medium term.

11 (l) The Community Library Services Grant’s baseline has been reduced by 6.6, 5.7, and 4.7 percent, respectively, for each year of the 2020 MTEF.
The reductions in total amount to R283.1 million over the medium term.

(m) The Mass Participation and Sport Development Grant’s baseline has been reduced by 8.8, 10, and 10.5 percent, respectively, for each year of the 2020 MTEF.

The reductions in total amount to R201.5 million over the medium term.

(n) The baseline of the Public Transport Operations Grant has been reduced by 4percent in 2022/23.

The reductions in total amount to R295 million over the medium term.
(o) The baseline of the Provincial Roads Maintenance Grant has been reduced by 4.1 percent in 2020/21, 8.3 percent in 2021/22 and 9.1 percent in 2022/23.

The reductions in total amount to R2.8 billion over the medium term.

4.3 Local government equitable share allocation The local government equitable share (LGES) allocation amounts to R74.7 billion in 2020/21, which is R1 billion less than estimated in the 2019 Budget.
However, it still constitutes an increase of R5.7 billion or 8.3 percent from the 2019/20 allocation.

The LGES is expected to grow at an average nominal rate of 8.1 percent over the MTEF, to R87.2 billion by 2022/23, as can be seen in Table 3 below.
Table 3: Local government equitable share allocation per province Local Government Equitable Share per Province 2020/21 allocation R’000 2020/21 Percentage share 2021/22 Allocation estimate 2022/23 Allocation estimate R’000 R’000 Average Growth Rate over MTEF % Eastern Cape 10 297 924 13.8 11 031 830 11 696 306 Free State 4 469 699 Gauteng 14 534 739 KwaZulu- 14 652 931 6.0 19.5 19.6 4 814 234 5 140 723 16 029 714 17 546 236 15 880 841 17 048 662 Natal Limpopo 10 174 669 13.6 11 014 789 11 798 628 Mpumalanga 6 425 932 8.6 6 961 722 7 477 830 6.4 7.2 9.9 7.9 7.7 7.9 12 Northern Cape 1 966 968 North West 6 471 181 Western Cape 5 689 283 2.1 8.7 7.6 2 109 756 2 244 473 7 027 623 7 564 773 6 191 310 6 695 086 Total 74 683 326 100 81 061 819 87 212 717 6.8 8.1 8.5 8.1 The expenditure cuts underpinning government’s fiscal consolidation efforts have implications for local government, particularly rural municipalities.
To support local government in improving revenue collection, National Treasury will work with several municipalities on a pilot project to retrofit smart meters and test whether revenue collection improves.

Funds have been provided to the Department of Cooperative Governance for a Payment Culture Campaign to further support municipalities in their revenue-raising efforts.

4.4.
4.4.

Local government conditional grants Direct and indirect conditional grant transfers to local government amount to R51.4 billion in 2020/21 and increases to R53.4 billion and R56.3 billion in the two outer years, respectively.

The majority of the allocations grow in line with the average projected inflation rate of 4.5 percent over the medium term.
However, the allocations of the following three grants grow at a nominal rate of above 10 percent: • The indirect Neighbourhood Development Partnership Grant grows at an average rate of 29.9 percent from R63 million in 2020/21 to R106 million in 2022/23; • The indirect Water Services Infrastructure Grant grows at an average rate of 15.4percent from R579 million in 2020/21 to R771 million in 2022/23; and • The indirect Integrated National Electrification Programme Grant grows at an average rate of 10.9 percent from R3.0 billion in 2020/21 to R3.7 billion in 2022/23.
The following two grants register negative growth over the 2020 MTEF: • The Urban Settlements Development Grant allocation declines by 19.3 percent from R11.3 billion in 2020/21 to R7.4 billion in 2022/23; and • The indirect Regional Bulk Infrastructure Grant allocation declines by 5.4 percent from R3.9 billion in 2020/21 to R3.5 billion in 2022/23.
Major changes to the local government conditional grant framework are as follows: 13 4.4.1 Additions to grant funds (a) An amount of R4 billion was added to the City of Cape Town’s Public Transport Network Grant allocation over the medium term, as approved by the Budget Facility for Infrastructure.

The funds are in support of the MyCiti public transport network expansion.
(b) An amount of R650 million was added to the indirect component of the Regional Bulk Infrastructure Grant to accelerate repairs to the sewerage system in Emfuleni Local Municipality, which is leaking raw sewage into the Vaal River.
(c) An amount of R166 million (R56 million in 2020/21, R52 million in 2021/22, and R57 million in 2022/23) was added to the Integrated Urban Development Grant over the medium term, following the addition of Steve Tshwete Local Municipality to the pool of municipalities participating in the Grant.
4.4.2 Scope of grants expanded (a) As part of the continued reform of the local government transfer system, the scope of the Municipal Infrastructure Grant will be expanded to allow for the purchase of specialised waste management vehicles in order to broaden waste management services to poor households.

(b) Cities will be allowed to use half of their Integrated City Development Grant allocations for programme and project preparation activities in 2020/21, as agreed in the City Budget Forum.
The remaining half of the grant allocations are to be used to complete planned investments funded from the Grant.

4.4.3 Reprioritisation of grant funding (a) An amount of R150 million has been reprioritised from the Municipal Infrastructure Grant to the indirect component of the Regional Bulk Infrastructure Grant in 2020/21, for the Vaal River System intervention.
(b) An amount of R150 million has also been reprioritised from the Urban Settlements Development Grant to the indirect component of the Regional Bulk Infrastructure Grant in 2020/21, for the Vaal River System intervention.

(c) In addition, R100 million was reprioritised within the indirect component of the Regional Bulk Infrastructure Grant for the Vaal River System intervention.
4.4.4 Grant funding earmarked (a) An amount of R106 million of the indirect component of the Water Services Infrastructure Grant was allocated to municipalities in the Free State and Northern 14 Cape over the medium term to complete outstanding bucket eradication projects.

In addition, R181 million of this indirect grant funding is set aside over the medium term for drought relief projects.
(b) An amount of R241 million of the indirect component of Regional Bulk Infrastructure Grant has been set aside over the medium term for the completion of bucket eradication projects.

4.4.5 Ring-fencing of grant funds An amount of R15 million of the Integrated Urban Development Grant allocation is ring- fenced for sport infrastructure projects in 2020/21.
4.4.6 Grant funding suspended The Public Transport Network Grant allocation for three cities (Buffalo City, Mbombela and Msunduzi) has been suspended over the 2020 MTEF, as they have failed to progress from the planning phase since the introduction of the Grant in 2006.
4.4.7 Grant funding shifted (a) An amount of R166 million has been shifted from the Municipal Infrastructure Grant to the Integrated Urban Development Grant over the medium term, following the addition of Steve Tshwete Local Municipality to the pool of municipalities participating in the grant.

(b) An amount of R160 million has been shifted from the direct component to the indirect component of the Neighbourhood Development Partnership Grant over the medium term.
4.4.8 Reductions to baselines (a) The Municipal Infrastructure Grant has been reduced by R783 million in 2020/21, R842 million in 2021/22 and R882 million in 2022/23, which is equivalent to R2.5 billion over the 2020 MTEF.

(b) The Integrated Urban Development Grant has been reduced by 5 percent, respectively, for each year of the 2020 MTEF.
(c) The Urban Settlements Development Grant has been reduced by R1.3 billion in 2020/21, R2 billion in 2021/22 and R2.6 billion in 2022/23, to fund other government priorities.

This is equivalent to R6 billion over the 2020 MTEF.

15 (d) The Informal Settlement Upgrading Partnership Grant has been reduced by 10 percent in 2021/22 and 9.9 percent in 2022/23.

(e) The Integrated City Development Grant has been reduced by 3 percent, respectively, for each year of the 2020 MTEF.
(f) The Public Transport Network Grant has been reduced by R1 billion in 2020/21, R1.6 billion in 2021/22 and R1.7 billion in 2022/23, which is equivalent to R4.3 billion over the 2020 MTEF.

(g) The Neighbourhood Development Partnership Grant (both direct and indirect components) has been reduced by 10, 11, and 10.9 percent, respectively, for each year of the 2020 MTEF.
(h) The baseline of the direct component of the Water Services Infrastructure Grant is reduced by R426 million in 2020/21, R541 million in 2021/22, and R698 million in 2022/23, which is equivalent to R1.7 billion over the 2020 MTEF.

The baseline of the indirect component of the Grant will be reduced by R100 million in 2020/21.
(i) The baseline of the direct component of the Regional Bulk Infrastructure Grant has been reduced by R174 million in 2020/21, R187 million in 2021/22, and R196 million in 2022/23, which is equivalent to R558 million over the 2020 MTEF.

(j) The Integrated National Electrification Programme (Municipal) Grant has been reduced by R119 million in 2020/21, R128 million in 2021/22, and R134 million in 2022/23, which is equivalent to R380.5 million over the 2020 MTEF.
(k) The Integrated National Electrification Programme (Eskom) Grant has been reduced by R61.3 million in 2020/21, R826.4 million in 2021/22, and R279.4 million in 2022/23, which is equivalent to R1.2 billion over the 2020 MTEF.

(l) The Energy Efficiency and Demand-Side Management Grant has been reduced by 9 percent in 2020/21 and 2021/22, respectively, and by 8.9 percent in 2022/23.
(m) The Rural Roads Asset Management Systems Grant is reduced by R12 million in 2020/21 and R13.3 million in the two outer years, to fund other government priorities.

This is equivalent to R38 million over the 2020 MTEF.

(n) The Local Government Financial Management Grant has been reduced by R17 million in 2020/21, R18 million in 2021/22 and R19 million in 2022/23, to fund other government priorities.

This is equivalent to R53.3 million over the 2020 MTEF.
16 (o) The Infrastructure Skills Development Grant has been reduced by R5 million in each year of the 2020 MTEF.

(p) The EPWP Integrated Grant for Municipalities has been reduced by R23.1 million in 2020/21, R24.4 million in 2021/22, and R26 million in 2022/23, which is equivalent to R73.2 million over the 2020 MTEF.

5.
5.

Response to COVID-19 disaster On 22 April 2020 National Treasury reported to the Committee that several disaster provisions in the 2019 Division of Revenue Act had already been activated to respond to the COVID-19 disaster.

These included disaster relief funds for provincial health departments to purchase personal protective equipment and the reallocation of Indirect Regional Bulk Infrastructure Grant funds for interim water supply measures.
National Treasury further indicated that the enactment of the Bill would enable government to make use of similar allocations, which were contained in the 2020 Bill, to provide further assistance.
National Treasury reported that it was engaging with sector departments, provinces and the South African Local Government Association (Salga) on how conditional grants could best be used to assist the response to the pandemic; in addition to the funds provinces and municipalities were already reprioritising from their own budgets.

In cases where grants already fund activities that assist, those activities would be prioritised within the grants.
National Treasury proposed to make small changes to certain conditional grant frameworks before they were gazetted, in order to better respond to the scale of this unprecedented situation.

At the time, details of these changes were still being finalised with departments, and National Treasury undertook to inform Parliament of the proposed changes before the Committee finalised this Report.
During a meeting on 20 May 2020, National Treasury presented to the Committee the proposed changes to provincial and local government conditional grant frameworks to support the COVID-19 response and the Committee had the opportunity to engage Treasury on the proposed changes.

6.

Submissions by stakeholders Several submissions made by the public were not relevant to the Bill.

Therefore, the Committee noted these submissions, but did not include them in this Report.
However, this remains a 17 challenge and requires Parliament, provincial legislatures and municipal councils to further educate the general public about the significance of such legislation as well as other critical fiscal legislations.
(a) Financial and Fiscal Commission (FFC) The submission from the Financial and Fiscal Commission (FFC) included an overview of the baseline adjustments in the Bill compared to the 2019 Budget; the division of revenue between the three spheres of government; trends of funds available to provinces and local government; specific changes to provincial and local government conditional grants; government’s responses to previous FFC recommendations; and the implications of regulations relating to the COVID-19 disaster on the division of revenue.
The FFC submitted that, compared to the 2019 Budget, an additional amount of R24.6 billion is allocated to national departments in 2020/21 for financial assistance to state-owned entities (SOEs).

At the same time, provincial and local government baseline allocations have been reduced by R7.8 billion and R5.3 billion, respectively.
The FFC was of the opinion that, despite these reductions in baselines, substantial funds still remained available to provinces and local government and key budget lines remained somewhat protected against the effects of inflation.

The FFC emphasised the need for urgency in turning around the current economic growth and governance trends that lead to unproductive use of resources; and for more effective support to turn around struggling municipalities and provinces.
(i) Provincial conditional grant allocations With regard to provincial conditional grant allocations over the 2020 MTEF, the FFC expressed concern over the baseline reductions to the Education Infrastructure Grant and the School Infrastructure Backlogs Grant, given the importance of addressing education sector infrastructure backlogs.

It recommended that the status quo of the infrastructure delivery value chain needed to be reviewed in line with the Commission’s previous findings and recommendations.
The FFC welcomed the additional funds to the Early Childhood Development (ECD) Grant, as this would increase access for children to ECD services.

The FFC supported the ring-fencing of R544 million in the Human Settlements Development Grant to upgrade settlements in mining towns in six provinces.

The FFC also noted the termination of the Title Deeds Restoration Grant in 2020/21, but reiterated the need for a review of the grant to determine whether its goals and targets had been achieved.
18 The FFC welcomed the shifting of R199 million in 2020/21 and R5.7 million in 2021/22 from the National Health Insurance Indirect Grant: Health Facility Revitalisation component to the Health Facility Revitalisation Direct Grant for the Pietersburg Hospital Project in Limpopo.

This change was in line with the FFC’s previous recommendation about the need to streamline conditional grants with the same purpose in order to avoid duplication.
The FFC also supported the merger of the Human Resources Capacitation Grant and the Health Professions Training and Development Grant to create the new Statutory Human Resources, Training, and Development Grant; as it would minimise inefficiencies associated with overlaps and duplication.
The FFC noted with concern the proposed reprioritisation of R800 million in 2020/21 from the HIV and AIDS component of the HIV, TB, Malaria and Community Outreach Grant to the Community Outreach Services component to cover a shortfall in the salaries of community health workers.
It further expressed concern over the proposed merger of the Human Papillomavirus Vaccine (HPV) Grant with the aforementioned grant as it had too many objectives which could hamper the realisation of its targets and intended outcomes.

The FFC reiterated its previous submission with regard to the HPV Grant that proper financial planning and infrastructure was needed in relation to the roll-out of such a vaccine grant.
The FFC welcomed the shift of R36 million from the Direct Ilima/Letsema Grant to the newly created Indirect Ilima/Letsema Grant to fund a survey that would improve targeting of poverty relief programmes.

The FFC cautioned against the extension of the scope of the Land Care Programme Grant, other than for its intended objectives, and also to guard against duplication.
According to the 2020 Budget Review provinces were encouraged to use this grant to create jobs through the Expanded Public Works Programme (EPWP).

(ii) Local government conditional grant allocations Concerning baseline reductions in local government grants, the FFC expressed concern over the proposed cuts in infrastructure grants and submitted that, with the current struggling economy, it was important that government pursued the infrastructure-led growth strategy more vigorously.
The FFC further noted that reductions were mainly targeted at poorly performing grants in terms of expenditure, however the FFC’s initial analysis had only found 19 the Integrated National Electrification Programme (Eskom) Grant to be a suitable candidate for reductions due to its under-expenditure between 2015/16 and 2018/19.
(iii) Impact of COVID-19 The FFC pointed out that the situation in the country had dramatically worsened since the tabling of the Budget, as the COVID-19 pandemic had intensified the challenges faced by the government in February.

From continuing but steady growth slowdown and upward shift of unemployment, the country now faced a sudden downward adjustment in production and a large spike in unemployment.
In order to deal with additional expenditure needs (health, essential services and supporting households, workers and firms) expenditure would have to increase while revenue declined, leading to an increase in the deficit and debt.
The FFC felt that the Bill had been a sound response to the situation in February, although stabilisation of the deficit and debt had required downward baseline adjustments to key infrastructure grants and further slowed key expenditure lines in social services and other priority areas.
While the FFC therefore supported the overall thrust of the 2020 Budget and the Bill, it raised the following issues: • A mechanism was needed to effect stabilisation that was more fair and less polarising than through wage restraint for the workers that we most rely on to secure our future, like teachers, nurses, police, prosecutors, social workers.
• While tax increases had not been considered in the February Budget to help balance the books, COVID-19 had strongly highlighted the inequality in our society and prompted proposals around a solidarity tax.

A more general strategy around incomes, prices and access to social services might also be necessary.

• The complexity and comprehensiveness of the initiatives around the structural changes in the economy pointed to the need for a more focused, credible and implementable approach.
The FFC recommended that the Committee approve the Bill and consider and note that the emergency interventions and measures may have implications for the fiscal position of national, provincial and local government public spending and revenue.
(b) South African Local Government Associations (Salga) 20 The South African Local Government Association (Salga) submitted that the Bill perpetuated the continued financial incapacitation of local government; while the outbreak of the COVID- 19 pandemic had further exposed the flaws in the local government fiscal framework.
For years the financial resources available to municipalities had fallen short of the demands on municipalities for services and infrastructure delivery needs and this was further complicated by the current state of the economy, especially limited tax revenues, retracted economic growth and rising debt levels.

Salga was concerned that, although local government was responsible for 46 percent of the constitutional functions, it received the lowest allocation of the revenue raised nationally, at 9 percent.
In addition to several issues previously raised, including municipal audit outcomes; cost of basic services and unfunded mandates; Salga reported on the additional burden being placed on municipalities by the COVID-19 pandemic.

The various directives to local government in terms of the Disaster Management Act have induced significant additional responsibilities and costs in responding to the pandemic.
These included more frequent levels of service in informal settlements and water constrained communities; extra-ordinary cleansing of public facilities and taxi ranks; identifying quarantine sites and implementing support interventions for quarantine; identifying hotspots and implementing mitigation measures; monitoring social gatherings; more frequent environmental health inspections; identifying and availing existing facilities for the homeless and in many instances erecting facilities to accommodate the homeless; and identifying and availing existing facilities for processing of SASSA grant payments.
Salga further reported that the pandemic negatively affected revenue collection and operating balances.

With the economy likely to go into further recession as a result of the pandemic, local government would be affected by customers struggling to pay property rates and service charges as unemployment rates continued to increase.
The number of indigent households would increase, as a significant proportion of the labour force was employed in the informal economy, which was severely affected by the lockdown.

Delays in revising the intergovernmental transfers would further result in liquidity risks for the sector.

Because credit control and debt collection practices were discouraged during the pandemic, the number of customers in default would increase, exacerbating lower collection rates.
Municipalities with conference centres and community halls would experience loss of rental income.

With the revenue erosion, municipalities were likely to default on bulk supply accounts and even municipalities with clean sheets on their bulk accounts could fall into the Eskom debt trap.

21 Eskom was reportedly still doing business as usual during the COVID-19 lockdown and continued to send disconnection threats.
Salga made recommendations related to both the short and medium term, as follows: Short term: • Whereas municipalities must introduce measures to collect as much revenue as possible, the disconnection of water and electricity should be suspended for the duration of the lockdown period.
• Eskom should be engaged to, similar to municipalities, suspend all electricity disconnections for the duration of the lockdown and to review the interest payable on arrears caused by and linked to the national state of disaster and the lockdown.

• Where functions are delegated/assigned to municipalities, funding for those functions must be appropriated directly to the municipalities in the Division of Revenue Bill.
• The local government equitable share (LGES) formula should portray realistic cost differences in municipalities and eliminate single subsidy costing.

• The distribution of the additional R20 billion to local government should be equitable and agile in responding to the urgency of the COVID-19 crisis.

• The impact of COVID-19 must be addressed beyond the R20 billion through the LGES and other grants.

• Consideration must be given to make the grant framework more flexible to respond to emergencies.
Medium term: • The division of revenue between the three spheres of government should be reviewed.

• Salga appreciated the opportunity to participate in the Budget Forum Lekgotla, as mentioned by the Minister of Finance, and recommended that the policy changes to be discussed there should leave all stakeholders in a better position to come up with a more equitable division of revenue from 2021 onwards.
(c) Congress of South African Trade Unions (COSATU) The submission from the Congress of South African Trade Unions (COSATU) addressed the 2020 Budget as a whole.
22 The aspects that COSATU welcomed and supported, included the following: • The commitment to increase infrastructure expenditure; • The efforts of the Department of Trade, Industry and Competition to revitalise industries; • The commitment to table various legislation to grow the petroleum, gas, minerals and transport sectors and the state-owned entities (SOEs); • The release of the Public Procurement Bill; • That Value added Tax (VAT) and income tax upon working and middle class families had not been increased; • That government provided inflation-linked tax relief for working and middle class families; • The initial steps taken by the new CEO of Eskom to begin cleaning up the mess and the initial green shoots in Denel; • The steps made by the South African Revenue Service (SARS) to rebuild its capacity and to tackle tax evasion; • The progressive pronouncements on the Sovereign Wealth Fund in the Budget; • The allocations to ensure all schools have sanitation, however the rising teacher learner ratios are not addressed; • The planned water infrastructure investments are welcomed, but the lack of attention to investing in water recycling and conservation is reckless; and • Whilst appreciating the President’s freeze of salaries for the Executive, COSATU believes this is too little.
The concerns raised by COSATU, included the following: • The lack of a detailed economic stimulus package to reduce unemployment; • The lack of urgency in implementing various legislative interventions to grow sectors; • The lack of concrete plans to stabilise SOEs; • The lack of commitment in the Budget to progressively reform taxes; • The need for massive interventions to improve customs enforcement; • The government’s seeming continuous attack on public servants; • The failure to deal with corruption and wasteful expenditure; • There is no indication of how government will intervene to halt the collapse of two dozen municipalities; 23 • The land restitution allocations and targets are inadequate; and • The commitments made by the President in the 2020 State of the Nation Address are not reflected in the Budget.
Specifically, the building of universities and colleges; implementation of the National Health Insurance (NHI); and the reduction of South African Police Service members.

(d) Equal Education In previous submissions to Parliament, Equal Education (EE) had raised the issue of the slow growth in the education budget as a concern.

EE now submitted that, due to reductions in the 2020 Budget, there is an actual real decrease in the total basic education allocation.
EE indicated that the COVID-19 pandemic emphasised the backlogs that still existed in schools, and that the shrinking budget would make it more difficult to ensure that learners and teachers could safely return to school.

EE further indicated that the reduced budget affected various education priorities, including school infrastructure; the school nutrition programme and scholar transport.
EE pointed out that, while the 2020 Budget presented plans to bolster the delivery of infrastructure and sanitation to schools over the next three years, the 2020/21 allocation for the School Infrastructure Backlogs Grant would be less than the amount allocated to the programme three years ago.

EE urged government to not reduce the allocations for school infrastructure, as it would negatively impact on learners and teachers in under-resourced public schools across the country.
EE further made the following recommendations to the Committee: • That the Committee ensures that the allocations to the education sectoral budget and the Department of Basic Education keep up with inflation; • That the reductions in the Education Infrastructure Grant and the School Infrastructure Backlogs Grant (R1.9 billion and R123 million, respectively, over the MTEF) be reversed; and • That support be provided to the national and provincial departments of education to ensure that conditional grants are spent effectively and efficiently.
7.

Provincial mandates 24 The Committee met on 20 and 27 May 2020, respectively, to consider negotiating and final mandates from provinces.

7.1.

Negotiating mandates 7.1.1.

Eastern Cape supported the Bill and raised concerns.

7.1.2.

Free State supported the Bill and raised concerns.

7.1.3.

Gauteng supported the Bill and made recommendations.

7.1.4.

KwaZulu-Natal supported the Bill.

7.1.5.

Limpopo supported the Bill and made recommendations.

7.1.6.
7.1.6.

Mpumalanga supported the Bill and made recommendations.

7.1.7.

Northern Cape supported the Bill and made inputs.

7.1.8.

North West supported the Bill and proposed amendments.

7.1.9.

Western Cape abstained from negotiating on the Bill.

During the meeting of 20 May 2020, National Treasury provided a summarised response to the issues raised by provinces, which was forwarded to the provinces on the same day.
A detailed, written response was received from National Treasury on 21 May 2020 and forwarded to provinces.

7.2.

Final mandates 7.2.1.

Eastern Cape supported the Bill.

7.2.2.

Free State supported the Bill.

7.2.3.

Gauteng supported the Bill.

7.2.4.

KwaZulu-Natal supported the Bill.

7.2.5.

Limpopo supported the Bill.

25 7.2.6.

Mpumalanga supported the Bill.

7.2.7.

Northern Cape supported the Bill.

7.2.8.

North West supported the Bill.

7.2.9.

Western Cape did not support the Bill.

8.
Committee findings and observations 8.1 Whilst the Committee welcomes the overall Bill, which allocates R1.77 trillion including national, provincial and local government share; debt-service costs; general fuel levy shared with metros; contingency reserve and provisional allocations; the Committee notes with concern the service delivery implications of the reduction in the provincial equitable share allocation amounting to R7.3 billion and the reduction to the direct conditional grants to provinces amounting to R13.3 billion.
8.2 The Committee welcomes the following reprioritisations set out in the Bill to meet the government policy objectives while remaining within the expenditure ceiling: Increasing the per-child subsidy for early childhood development services from R15 per day to R17per day in 2020/21, rising to R18.57 per day by 2022/23; addressing shortfalls in the funding of community outreach services in the health sector; supporting the continued roll-out of free sanitary products to learners from low-income households; and repairing wastewater treatment infrastructure in the Vaal River System, as a response to the previous Committee’s recommendation.
8.3 Whilst the Committee is concerned about the economic and social impact of COVID-19 on the whole country, it has noted the fact that several disaster provisions in the 2019 Division of Revenue Act have already been activated to respond to the pandemic, including disaster relief funds for provincial health departments to purchase personal protective equipment and the reallocation of indirect Regional Bulk Infrastructure Grant funds for interim water supply measures; as well as National Treasury’s intention to make adjustments to some conditional grant frameworks before it is gazetted as part of the additional response to the COVID-19 pandemic.
26 8.4 The Committee welcomes the merger of the Human Resources Capacitation Grant and the Health Professions Training and Development Grant to create the new Statutory Human Resources, Training and Development Grant; as it would minimise inefficiencies associated with overlaps and duplications, which previously characterised the two grants.
8.5 The Committee has noted with concern the service delivery impact of under-expenditure and under-performance of certain specific sector conditional grants in some provinces, as reported during the 2019/20 in-year monitoring oversight work.

These included the Human Papillomavirus (HPV) Grant, the Maths Science and Technology Grant, the Title Deeds Restoration Grant and the Comprehensive Agricultural Support Programme Grant (CASP).
8.6 Whilst the Committee welcomes the conditional grants reprioritisation process, it remains concerned about the implications of the baseline reductions to the Education Infrastructure Grant and the School Infrastructure Backlogs Grant, given the importance of education in our country to fight unemployment, inequality and poverty, as well as the need to address education infrastructure backlogs; especially in schools where the state of infrastructure poses a danger to pupils.
8.7 Whilst the Committee supports the reprioritisation of budgets over the MTEF period, given the status of road maintenance challenges in some provinces which also leads to road carnage and loss of lives, the Committee is concerned about the baseline reduction in the Provincial Roads Maintenance Grant, which has been reduced by 4.1 percent in 2020/21, 8.3 percent in 2021/22, and 9.1 percent in 2022/23, with the total reductions amounting to R2.8 billion over the medium term.
However, the Committee notes the ring- fenced R544 million within the Human Settlements Development Grant to upgrade human settlements in mining towns in six provinces.
8.8 The Committee notes the additional R4 billion for the City of Cape Town’s Public Transport Network Grant allocation over the medium term; however, it is mainly concerned with the suspension of the same grant allocation for three cities (Buffalo City, Mbombela, and Msunduzi) as these are mostly rural cities where public transport for commuters remains the biggest challenge.
This move may continue to perpetuate inequalities between the urban and rural cities and their failure to progress from the 27 planning stages, is an indication that certain cities still require more support and stronger intergovernmental engagements to level the playing field.
8.9 Whilst the Committee welcomes the total transfer to local government amounting to R132.5 billion, of which the equitable share accounts for R74.7 billion, conditional grants for R43.8 billion and general fuel levy sharing with metros for R14.0 billion; the Committee is concerned about the service delivery implication of the reduction of R3.2 billion in the local government equitable share and further reductions in the baseline of certain specific conditional grants, such as the Municipal Infrastructure Grant (MIG), the Urban Settlements Development Grant (USDG), the Informal Settlements Upgrading Partnership Grant (ISUPG) and the Water Services Infrastructure Grant (WSG).
Some of these grants are vital in enhancing and strengthening COVID-19 interventions and much needed infrastructure and later, boosting local economic growth.
8.10 The Committee welcomes the undertaking made by National Treasury to support local government to improve revenue collection, where it will work together with several municipalities on a pilot project to retrofit smart meters and test whether revenue collection improves; as well as the funds being provided to the Department of Cooperative Governance for a Payment Culture Campaign to further support municipalities in their revenue-raising efforts.
8.11 The Committee is further concerned about the COVID-19 pandemic, which will negatively affect the entire economy, government revenue, and municipal revenue collection, with local government consumers struggling to pay property rates and service charges due to increasing unemployment rates.
Salga also indicated that the number of indigent households would increase as a result of the inactive informal economy due to lockdown; while implementation of the lockdown regulations is putting additional responsibilities and burdens on municipalities, some of whom are struggling financially.
8.12 The Committee notes the fact that the local government equitable share is not cost- reflective, and that a 9 percent allocation of the nationally raised revenue does not cover all of the municipal operational expenses.

At the same time, municipalities are responsible for about 46 percent of the Constitutional functions, and therefore some demands have continued to be under-budgeted in municipalities.
28 8.13 Whilst the Committee welcomes the proposed additional R20 billion to local government for the COVID-19 response, it is concerned about the state of planning and preparedness by municipalities to effectively and efficiently administer such additional funding, given the amount of challenges in local government related to a lack of capacity, negative audit outcomes, questionable budgets (unfunded), questionable Integrated Development Plans (IDPs) and some municipalities being put under administration.
8.14 The Committee notes with concern that there is an average of about 59 percent of municipal debt which is reportedly not recoverable, because some of these debts are historical, while some are related to rising unemployment.

This continues to be a contributing factor to a lack of resources in the sphere of local government.

Hence, stronger debt collection mechanisms are required.
8.15 The Committee notes with concern the lack, or slow response, in supporting rural communities; where people are still spending a lot of money travelling to the nearest towns to buy household essentials and also to access government service centres.
9 Committee Recommendations 9.1 When the Minister of Finance gazettes the conditional grant frameworks in terms of section 16 of the 2020 Division of Revenue Act, the adjustments of certain grant frameworks proposed to the Committee, to expedite the release of the much needed funds for expenditure to strengthen the implementation of the lockdown regulations and rapid response to the COVID-19 pandemic, should be included.
This will be in addition to the provisions which have already been activated to respond to the pandemic in terms of the 2019 Division of Revenue Act.
9.2 Whilst the Committee welcomes the expansion of access to early childhood development services which will reach almost 700 000 children under the age of four years in 2022/23, and the additional R1.4 billion for the Early Childhood Development Grant to increase the subsidy per-child from R15 per day to R17 per day in 2020/21, increasing to R18.57 per day by 2022/23, the Committee is of the view that this is a crucial conditional grant for early childhood development and therefore recommends that the Minister of Finance, together with the Minister of Social Development and 29 provincial treasuries, ensure that proper mechanisms are developed and put in place to comply with the grant framework, improve the grant expenditure and grant performance, given the 2019/20 grant performance picture demonstrated by some provinces.
9.3 Due to the importance of education in our country which aims to empower citizens to fight unemployment, inequalities and poverty as well as the need to address education infrastructure backlogs in certain areas, especially in schools where the state of infrastructure poses a danger to pupils; the National Treasury should review the baseline reduction of the Education Infrastructure Grant and the School Infrastructure Backlogs Grant for the MTEF period and, furthermore, the National Electrification Programme Grants should also be considered based on their evidence and merits.
9.4 Both the National Treasury and the Department of Cooperative Governance, together with provincial treasuries and Salga, should intensify efforts to support local government interventions to improve revenue collection, such as the pilot project to retrofit smart meters, and report the progress to Parliament in the next budget cycle; as this requires sector committees also to play their policy oversight role.
Furthermore, sound debt recovery strategies and mechanisms are required to improve revenue collection.
9.5 The National Treasury, together with the Department of Cooperative Governance, provincial treasuries and Salga, should ensure that municipalities develop and provide proper plans and mechanisms in line with the COVID-19 interventions for the additional R20 billion allocation proposed by government for municipalities, to avoid wasteful and fruitless expenditure, and such mechanisms should ensure that consequence management prevails wherever there is corruption and mismanagement of funds.
The Committee believes that this will go a long way in addressing issues such as additional responsibilities posed by COVID-19 regulations, unemployment, irrecoverable debts and budget shortfalls.
9.6 With regard to the suspension of the Public Transport Network Grant for the Buffalo City Metropolitan Municipality, Mbombela and Msunduzi Local Municipalities, and given the fact that this is a much needed programme to improve public transport networks, address commuter inequalities and reduce road fatalities, the Minister of Finance, together with the Minister of Cooperative Governance and Traditional Affairs and the Minister of Transport, relevant provincial treasuries and Salga, should take drastic measures to ensure 30 that adequate support and capacity development interventions are tailored to resolve the matter speedily and ensure that, once restored, the conditional grant achieves its intended outcomes.
The Committee will continue to monitor progress in this regard.

9.7 With regard to the baseline reduction of the Provincial Roads Maintenance Grant, the Minister of Finance and the Minister of Transport should thoroughly assess and consider the service delivery implications, given the poor status of road maintenance in some provinces and the level of road carnage which ultimately cost the state a lot of money, before the baseline reduction of R2.8 billion over the medium term is effected.
9.8 The Department of Transport should expedite the finalisation of the transport subsidy policy which will include improving public transport for rural commuters and address inequalities.

On the other hand, National Treasury should support government efforts to intensify rural development intervention programmes to ensure that public service centres are geared towards local people, particularly townships and poor rural communities.
The sector committees should monitor progress on the policy development front, while the Select Committee on Appropriations will monitor budget implementation once such a policy is concluded.

9.9 The Committee notes the views suggesting that the local government equitable share of 9 percent of the nationally raised revenue is not cost-reflective and therefore, not adequate to fund local government functions.
The Committee is of the view that Salga together with the National Treasury, the Department of Cooperative Governance and the Financial and Fiscal Commission (FFC), should work together to consider scientific evidence available to help review the local government equitable share formula in a fair and equitable manner.

The Committee will continue to monitor progress in this regard.
9.10 Whilst the Committee understands the need for budget reprioritisation over the 2020 MTEF, due to the current economic outlook, the Committee is of the firm view that these budget cuts should not compromise provincial and local government frontline service delivery points, especially where more human capital is required, and personnel at lower levels should continue to be protected.
9.11 Given the under-expenditure and under-performance of certain conditional grants such as the Human Papillomavirus (HPV) Grant, the Maths Science and Technology Grant, 31 the Learners with Profound Intellectual Disabilities Grant, the Title Deeds Restoration Grant and the Comprehensive Agricultural Support Programme Grant (CASP), as reported during the in-year monitoring for 2019/20, and the Committee’s firm view that these are very important grants to improve the socio-economic situations of the vulnerable and the poor; the Ministers of Finance, Health, Basic Education, Human Settlements and Agriculture should ensure that concrete steps are taken to address challenges which impact grant expenditures and performance intending to improve service delivery and ensure that there is full compliance with each conditional grant framework.
9.12 The Minister of Finance should ensure that additional allocations for drought relief for all provinces are considered during the 2020 adjustment budget, in light of the fact that the Minister of Cooperative Governance and Traditional Affairs declared South Africa a Disaster-Drought area on 26 February 2020.

10.
10.

Committee decision The Select Committee on Appropriations, having considered the Division of Revenue Bill [B3 – 2020] (National Assembly-Section 76(1)) referred to it and classified by the Joint Tagging Mechanism as a section 76 Bill, reports that it has agreed to the Bill without amendments.

The Democratic Alliance and the Freedom Front Plus reserved their positions on the Report and the Economic Freedom Fighters abstained from voting.

Report to be considered.

32