COMMENTS ON THE APPROPRIATION BILL 2011 STANDING COMMITTEE OF APPROPRIATIONS 13 A PRIL 2011 For an Equitable Sharing of National Revenue

INTRODUCTION This submission is made in terms of Section 4 (4) (c) of the Money Bills Amendment Procedure and Related Matters Act 2009 which requires the Committee to consider any recommendations of the Commission when processing money bills in terms of the Act. – The Standing Committee on Appropriations specifically invited the Commission to comment on the 2011 Appropriations Bill with respect to the Constitutionally Mandated Services (CMS). The Commission has already made its submissions on the Division of Revenue Bill and the on the Fiscal Framework and Revenue Proposals for Presentation to the Standing Committees on Appropriations

APPROACH TO THIS SUBMISSION The submission focuses on the following – The Commission’s Interpretation of CMS in relation to the Appropriations Bill – Analysis of specific and special funding of priorities over the period 2007 to – Assessing the extent to which appropriations have addressed the issue of CMS among the three spheres of government over the past five years – Analysis of within-spheres’ financing of CMS 3 Presentation to the Standing Committees on Appropriations

C OMMISSIONS DEFINITION OF CMS Commission’s MTEF submission identifies selected services listed under the Bill of rights as Constitutionally Mandated Basic Services (CMBS) The identified CMBS represent the core of what key programmes should be targeted within the broader CMS. Another set of funded services within the CMS create an enabling environment for the achievement of the core CMBS. These include economic and infrastructure development The Categorisation of services into CMS and non CMS should in no way be interpreted to imply that the other functions assigned to all spheres are less important CMSs per sphere include National: Justice, Crime Prevention and Policing, Higher Education, Social Protection Provinces: basic school education, primary and secondary health care, housing, regional transportation Local Government: housing, potable water, electricity, public transport, sanitation and refuse removal 4 Presentation to the Standing Committees on Appropriations

R ELATIONSHIP BETWEEN THE A PPROPRIATIONS B ILL AND CMS R ELATIONSHIP BETWEEN THE A PPROPRIATIONS B ILL AND CMS The sharing of nationally raised revenue needs to be balanced against the assigned Constitutional roles – There is a link in the amount to be appropriated and the constitutional mandates of various spheres – A need to balance the share of additional funding across spheres in line with the identified outcomes and priorities through the Bill The need to ensure that funds are utilised for the purposes indicated – Complexity in identifying services by spheres – Setting norms and standards and – Ensuring a clear delineation between which roles are played by different spheres Spending programmes receiving special preferential funding from additional raised revenue are analysed 5

CMS TARGETING Of these funded priorities close to 70% of the appropriated amount for the period 2007 to 2011 went to CMS. – 46 percent of this CMSs spending was appropriated to CMBS. – 54 percent to other CMS that enable achievement of progressive realisation of CMBS in areas of Economic and Infrastructure Investment This has laid a foundation to some extent for government’s new growth path of accelerating growth and job creation 6 Presentation to the Standing Committees on Appropriations

CMS P RIORITISED OVER AND ABOVE BASELINES FOR THE MTEF 7 Presentation to the Standing Committees on Appropriations

CMS PRIORITISED OVER AND ABOVE BASELINES BETWEEN 2007 AND 2011 Priorities or Programme that receive additional funding over and above the general baselines adjustments include; – Economic infrastructure development (R48.8 billion) – Education (R8.9 billion) – Health (R6.1 billion) – Social development (R8.4) – Housing and built environment (R11.5 billion) The least prioritised include: – Rural development (R1 billion) – Productive capacity of the economy (R3.2 billion) and – Industrial development, science and technology (R1.6 billion). – The most substantial appropriation to a programme was for R30 billion to ESKOM in Presentation to the Standing Committees on Appropriations

A PPROPRIATIONS : 2007 TO

A PPROPRIATIONS S HARES : 2007 TO Presentation to the Standing Committees on Appropriations and Finance Workshop

N ATIONAL G OVERNMENT AND FUNDING OF CMS Additional funding to national functions are important to facilitating attainment of constitutional rights – Justice, Crime Prevention and Policing construction of courts, upgrading of information technology infrastructure and additional Police personnel – Higher Education Additional funding was appropriated to higher education subsidies to cater for increases in higher education costs and enrolments However concern remains the high number of unemployed graduates as results of a less than optimally functioning system in the sector – A need to increase student equity, graduation rates and enrollment rates in scarce skills – A need to improve the number of students who complete their studies and graduate. – Social Protection Has shown to be effective in reducing poverty However, extension of grants should be coordinated with developmental social welfare services aimed at rehabilitation and integration of persons back into social and economic life 11 Presentation to the Standing Committees on Appropriations

P ROVINCIAL G OVERNMENT AND F UNDING OF CMS Basic education and health are prioritised respectively contributing to human capital investment, improved life expectancy and healthy society Provinces also receive additional funding towards social infrastructure in the form of housing Economic infrastructure to provinces would lead to improvement and increment in both the efficiency and network of infrastructure. The challenge for provinces remains over expenditure in both personnel and under-spending in infrastructure without the parallel outcomes including within EPWP and housing 12

L OCAL GOVERNMENT AND F UNDING OF CMS CMS in the LG include potable water, electricity, public transport, sanitation and refuse removal Even though annually the share of allocations from the nationally raised revenue is low it must be noted that the LG generates its own revenues to fund the CMS to an extent Where there is targeted funding through LES, it needs to be sustained to avoid disruption in the eradication of backlogs – Funded priorities include municipal infrastructure, transport and water schemes, public transport roads and rail infrastructure and Regional bulk infrastructure grants – These funding windows have played a critical role in improving the provision of basic services and creation of jobs 13

CONCLUSION Having analysed the past 5 years inclusive of the 2011 Bill of appropriations, the Commission concludes that: – There has been some significant funding of Constitutionally Mandated Services from additional revenue collected by the state – There is a need to improve technical efficiency with which resources are utilized across and within the three spheres of government – National departments that own conditional grants should support the recipient governments where under-spending is due to capacity in order to reduce the increasing incidence of withheld resources 14