1 FINANCIAL AND FISCAL COMMISSION Submission for the Division of Revenue 2008/09 Presentation to the Portfolio Committee on Housing 10 October 2007

2 Introduction: Submission 2008/09 Submission made in terms of Chapter 13 of the Constitution and Chapter 9 of the IGFR Act. Submission comprises FFC observations and recommendations for the 2008 DoR Incorporating supplementary submissions made during the course of 2006/2007; and Research currently in progress.

3 Budget Performance of Government Departments Fiscal performance and capacity were measured on the basis of the evaluative criteria in Section 214(2) a-j of Constitution e.g. national interest, developmental needs, stable and predictable revenue shares. RECOMMENDATION 2: Policy Prioritized Programmes indicated by Above Average Growth of Budgets To ensure alignment between policy objectives and budgets /spending, identified priority areas should grow by a higher than average growth rate. Examples  In accordance with AsgiSA and JipSA, most provinces have prioritized infrastructure and skills training. Exceptions include FET, ABET and conditional grants for health professional training.

4 Budget Performance of Government Departments RECOMMENDATION 1: Stable & Predictable Growth Paths To ensure stable and predictable allocations of revenue shares between different programs/categories of spend, national/provincial treasuries should aim for stable budget growth paths over a 7 yr period - from the recent past 3 yrs through to the forthcoming medium term budgeting and planning cycle. Rationale and Examples  Often with newly established and smaller programmes, there is a trend of policy prioritization, over-budgeting, under-spending, followed by cut-backs in the following year’s budget (or vice versa).  This is especially true of budgeting for infrastructure and skills training which are priorities established by AsgiSA and JipSA. Particular examples include ABET, FET, ECD, welfare, farmer support and road construction.

5 Budget Performance of Government Departments RECOMMENDATION 3: Entrenchment of Best Practice Project Planning The further institutionalization of best practice project planning & budgeting methods (which separate planning from implementation and align them to the fiscal year) should be encouraged. Rationale  Under-spending caused by excessive adjustments, late disbursements and end-of-year fiscal dumping is more pronounced when different spheres or departments are responsible for budgeting and delivery.  Treasuries are strengthening the technical ability of provinces to undertake infrastructure capital planning and budgeting (through I.D.I.P.).

6 Budget Performance of Government Departments RECOMMENDATION 4: Reporting on Service Delivery Outputs Every departmental service delivery programme should be defined by and reported in the P.B.E.R, according to: - actual and targeted beneficiaries; - personnel numbers and budgets by occupational skills level; - current items & capital assets used in service delivery. Provincial departments should report on these non-financial indicators on behalf of their service delivery agents. Rationale:  This non-financial data is required to enable an assessment of progressive realization, efficiency and effectiveness.

7 Budget Performance of Government Departments RECOMMENDATION 5: Measuring Socio-Economic Impact A methodology to measure socio-economic impact of government capital and current spending should be standardized across government departments and programmes. Rationale:  These measures of impact have been pioneered through the E.P.W.P. and should require reporting on employment generation, poverty reduction, redistribution of income and wealth and contribution to economic growth.

8 Budget Performance of Provincial Housing Departments

9 Delivery Performance of Provincial Housing Departments Delivery rate has halved over the past to 10 years to an average dwellings completed in FY Presidential targets unlikely to be met at this rate. Recent increases in capital subsidy (from the B.N.G. policy) may not have counteracted the declining real value of subsidy over the previous 5 to 10 years. Municipalities resistant to accreditation because of top-ups required to ensure adequate servicing and quality of top structure. M.I.G. may be split into reticulated and bulk components. This could release the housing subsidy for top-structure purposes. There is limited reporting of non-financial data by Housing departments.

10 Financing of Housing  FFC submission for 2007/08 DoR  Recommended that the Conditional grant for housing should use homelessness as an indicator of housing need  Revised formula dropped the variable due to lack of data  (Stats SA do not collect this data)  Rapid urbanisation results in homelessness  Unofficial statistics were being used to estimate the number of the homeless  Homelessness as an important indicator  Requires good data to be collected  Internationally countries such as US, Australia and UK have designed and carry out surveys that are also combined with the census  Such surveys and the census are utilized to inform the allocation of resources for addressing housing need

11 Recommendation on Financing of Housing  The FFC reiterates the recommendation that:  Government should initiate a process for the collection of data on homelessness. The data be included in the housing formula as part of the indicators of housing need in the future.