In its second virtual plenary, the National Council of Provinces (NCOP) considered the Division of Revenue Bill which provides an equitable division of revenue among various state departments and provinces. The Bill, which was passed by the National Assembly early this year, had to follow its due process of coming before the NCOP for consideration before it’s passed, because it would be unconstitutional for the state to spend public funds if the NCOP has not interrogated its (the state’s) legal and legislative framework.

Speaking during the NCOP’s consideration of the Bill, the Chairperson of the Select Committee on Appropriation, Ms Dikeledi Mahlangu, stated that the report of her committee “has been enriched by provincial negotiating mandates. The briefings by the Parliamentary Budget Office and the South African Local Government Association (Salga) were valuable inputs.” 

She pointed out that the values of our Constitution are founded on “the principles of Ubuntu and the Bill seeks to achieve that through its bias towards social justice despite slow economic growth”.

She decried, though, the reduction of municipalities’ budgets due to that and called for the “reprioritisation of funds for early childhood subsidies, community outreach in the health sector, sanitary products and the repairing of water infrastructure as per the committee’s recommendations.  

There is also a need for the National Treasury “to review its baseline reduction of the education infrastructure grants because of the importance of education in addressing youth unemployment”.  

In this Bill the most teething issue is the equitable share formula for provinces. The Chairperson is of the view that its formula is not based on scientific evidence and it needs to be relooked. “Of concern also is the continued lack of expenditure for maths, science and agricultural support grants in many provinces remains,” she said. 

In the light of that, she called for stringent oversight and accountability mechanisms to monitor the expenditure of the R20 billion that will be allocated to provinces to respond to Covid-19 challenges to avoid any wasteful and fruitless expenditure.

She thanked members of the public for their inputs that have enriched the Bill. And she declared that the committee recommends that the House should adopt the Bill without amendments.

According to a Western Cape Delegate at the NCOP, Ms Catherine Labuschagne, “by the time the Bill is passed, it would be irrelevant. By the time the Bill is passed, the government would be hard pressed by the current situation of the pandemic to rethink its funding and its sources of revenue dealt a blow by the pandemic”.

Not only that, she pointed out: “The government would have to rethink how it ensures there is an improved level of financial accountability by municipalities while ensuring that they deal with a maze of challenges of lack of revenue streams, drought and good governance.”

Her province, the Western Cape, did not support the Bill for, in her view, it did not address all these concerns.

Other Members of the Executive Councils for Finance from other provinces weighed in on the Bill. A representative of the Gauteng Province sated that as a province they think the Bill is a strategic response to the current fiscal environment of shrinking revenue and increasing service delivery needs. “As such we have, in line with these economic challenges reflected in the Bill, adopted a ‘do more with less’ principle to fund our Growing Gauteng Together strategy that seeks to prioritise job creation, infrastructure development, sustainable human settlements, new cities, food security and sustainable future mandates that are in keeping with the National Development Plan.

“In response to the pandemic, the province has repurposed its various grants to rally resources to redirect them to the fight against the pandemic,” said the Gauteng representative.

The North West representative decried the challenges brought to bear by the current formula used to determine the equitable share to provinces from the national budget. “We need to reflect on the current formula and its impact on rural provinces such as ours, which still have a huge backlog on the distribution of basic services such as water and sanitation,” she complained.

These lacks have, according to her, made it difficult for her province to comply with the health regulations dictated upon by the pandemic. The impending budget cuts contained in the Bill will have serious implications on their service delivery mandate. 

The Mpumalanga Premier, Ms Refilwe Mtshweni-Tsipane, is of the view that the Bill gives expression to the commitment of a sustainable development to all communities while addressing the challenges of poverty, inequality and unemployment. She declared that this Bill will allow her province to invest resources in key programmes that would invigorate the upstream and down streams of value chains of key economic activities.

And during this month the province has resolved to invest R50 million in the Mpumalanga Youth Fund to expedite the advancement of the entrepreneurial spirit of its (the province’s) youth, said the Premier.

The representative from KwaZulu-Natal said: “Despite the series of budget cuts we have experienced over time, we have as a province ensured that our service delivery mandates are protected. We achieved this by cutting out the unnecessary frills.”

According to him, “we scrutinised the Bill and engaged the National Treasury, other relevant stakeholders, and academics”, and we concur with its prescripts”.

The Financial and Fiscal Commission should speed up the process of reviewing the equitable share formula. The current formula is contentious and it adversely affects the rural provinces such as ours that don’t have sustainable revenue sources. In most cases we are forced to do more with less – and that will not be sustainable going forward, these were the views expressed by Members of the Executive Councils for Finance, especially from rural provinces such as Free State, Eastern Cape, North West and Limpopo.

They also emphasised that their provinces have a historical backlog of lack of water, sanitation and poor road infrastructure, and how are they now “expected to deal with budget cuts introduced in the Bill while there are huge infrastructure backlogs”?

“There is a growing chorus for a need to have a relook at the mechanisms that govern the equitable share formula,” said a North West Province representative dealing with the Financial and Fiscal Commission on this matter. “The current formula that prioritises population does not deal with developmental and historical fiscal gaps inherent in individual provinces. This model needs to be changed so that provinces can be responsive to the needs of their people, and more urgently, of the challenges posed to them by the Covid-19 pandemic,” he said.

Despite these concerns, eight provinces supported the passing of the Bill, while the Western Cape objected to it. Their support paves way for the introduction of the much-awaited adjusted budget by the Minister of Finance to respond to the health, social and economic challenges posed by Covid-19.  

By Abel Mputing

 3 June 2020