South African Human Rights Commission Report on Public Finance: briefing

Meeting report

JOINT BUDGET COMMITTEE
19 September 2003
SOUTH AFRICAN HUMAN RIGHTS COMMISSION REPORT ON PUBLIC FINANCE: BRIEFING

Chairperson: Mr Nene (ANC)

Documents handed out:
Chapter 13 of SAHRC 4th Economic and Social Rights Report

SUMMARY
The South African Human Rights Commission appeared before the committee to discuss public finance with the members. Most of the meeting focused on the lack of co-operation between government departments and the SAHRC and the lack of resources.

The Committee and the Commission discussed how they could be of mutual benefit to each other in their oversight roles.

MINUTES
SOUTH AFRICAN HUMAN RIGHTS COMMISSION REPORT: REPORTING PERIOD: APRIL 2000-MARCH 2002
CHAPTER 13- PUBLIC FINANCE

Please refer to attached document

The chapter analysed responses received from Provincial and National Treasury. It reported on and assessed various policy and programmatic measures instituted and legislative measures enacted during the reporting period, in order to determine whether the departments referred to in this chapter had achieved the progressive realisation of economic and social rights.

None of the provincial treasuries, including National Treasury instituted policy measures that directly sought to advance the economic and social rights during the reporting period. The National Treasury cited a number of legislative measures, but none had a direct bearing on the realisation of the economic and social rights.

The chapter looked at Budgetary Measures, the Division of Revenue and Budget Analysis. A number of graphs were depicted showing the budget allocations to various provinces.

Constitutional obligations were noted, of both national and provincial treasuries, as well as Provincial influence on Budget Allocation.

MONITORING
The Report highlighted the difficulties with monitoring funds at departmental level, and noted that the In-Year Monthly (IYM) reporting system as required by the PFMA did not necessarily monitor the effectiveness of expenditure in terms of the realisation of economic and social rights. Rather, the system monitored deviations of actual expenditure by programme on a monthly basis, and departments were required to explain deviations that occur.

The provincial sphere, cited the following as problems in the monitoring and utilisation of funds:

· Bottlenecks in the area of infrastructure investment
· Difficulties regarding the utilisation of funds on poverty alleviation programmes and projects. The lack of clearly identifying some of the sub-programmes made it difficult for people charged with the responsibility of implementing these, as they could not be ring-fenced. Consequently, reporting and monitoring progress on this area became problematic.

The following were cited as the causes of the said difficulties:

· Absence of measurable objectives, clearly defined targets, performance targets and performance measures;
· Poor reporting, monitoring and evaluation standards and protocols in some instances;
· The absence of accurate, consolidated data on poverty relief projects and results;
· The lack of project management capacity in departments
· Late awarding of tenders delaying the rolling out of conditional grants projects
· Too much emphasis placed on quantitative monitoring and less on qualitative monitoring
· Lack of capacity with the emphasis on analytical and interpretative skills within the provincial treasury
· The prescribed tight reporting time frames that did not allow for qualitative analysis of expenditure
Key measurable objectives which were only a requirement in strategic plans/budgets with effect from 20003/04
· Service delivery indicators, more especially in the social sector require further development.

CRITIQUE
The Free State Treasury's response that it was not in a position to determine whether the funds allocated for the realisation of the economic and social rights were sufficient was inappropriate. Departments were expected to respond to the questions relating their responses to the MTEF giving an idea of their achievements as well as financial and other challenges.

There are constitutional structures such as the FFC, Budget Council and Budget Forum, which were established to deal with budgetary and financial-related matters. All the departments were represented in the processes that led to the final stage of the budget allocation process. For any department to say that it was not in a position to determine whether it was allocated sufficient financial resources was inappropriate. Each department should be in a position to point out where it felt it was lacking as well as where it had made some headway.

Amongst other things, the PFMA provided for departments to have strategic planning as part of an informed distribution of public finance to help them achieve the progressive realisation of economic and social rights. However, strategic planning could not be developed in isolation but should rather be the result of thorough consultation with all relevant stakeholders such as Provincial Legislatures since they assess the provincial departments' proposed programmes and funding which in turn assist departments in prioritising policy objectives.

Strategic planning cannot be developed in isolation but should rather be the result of thorough consultation with all relevant stakeholders. The reporting cycle begins with the strategic plan of the department. During the strategic planning process, strategic objectives must be determined which must be in line with the vision of the department.

These objectives were reflected in the annual budgets and the performance of the department would be measured against these set objectives.

CONSTITUTIONAL OBLIGATIONS
Provincial Departments of Finance made efforts to demonstrate their observance of the constitutional obligations to respect, protect, promote and fulfil the economic and social rights, however their responses fell short of a clear demonstration.

PROVINCIAL INFLUENCE ON BUDGET ALLOCATION
It appeared that each provincial Department of Finance had a certain degree of influence on the budget allocation process, through structures such as the Provincial Executive Committee (PEC), Budget Council and others. However, it is important that independent research agencies were created either in provincial parliaments or in the national parliament to strengthen the work of the national Treasury and the FFC.

The FFC's recommendations on the costed norms approach give a clear indication that such agencies are desirable. The FFC recommended that the budget system be based on a costed norms approach to determine the cost of basic services in education, health and welfare based on each sector's norms and standards. The government has not been able to implement this approach for two reasons. Firstly, the government lackedhe precise information to determine the cost of basic services for each sector. Secondly, the government still had o come up with a clear definition of constitutionally mandated basic services.

DEPARTMENTS' UNDERSTANDING OF AVAILABLE FINANCIAL RESOURCES REQUIRED FOR THIE REALIZATION OF ECONOMIC AND SOCIAL RIGHTS THAT INFORMS THE DIVISION OF REVENUE
The Report referred to the Maastricht Guidelines on the implementation of the International Covenant on Economics, Social and Cultural rights as well as the Grootboom judgement to explain "available resources".

The Report states that it is clear from these references that the Provincial Departments of Finance should ensure that they did not under spend and that they made use of the budgetary tool, the MTEF, which spanned over a three year period. It is equally important to realise that economic and social rights should be progressively realised.

One of the crucial points raised by the Western Cape Treasury related to the lack of capacity within their Finance Department. The Department reported that its reports on the monitoring of funds put more emphasis on the quantitative aspect and nothing on the qualitative aspect of it. This is not sufficient, the qualitative side of financial management should also be reported on.

MONITORING OF GOVERNMENT DEPARTMENTS' FINANCIAL RESOURCES
The Provincial Treasury used the monthly expenditure reports as a monitoring tool to help guide spending in provincial departments. These reports were also tabled in the PEC and distributed to all members of the Provincial Legislature to enable them to measure expenditures against outputs delivered. Notwithstanding the monthly expenditure reports that helped guide departments' spending, and quarterly budget credibility exercises that were used to delivery-tracking methods; there were still cases of over-/under spending and other problems in some of the departments.

The Free State Treasury raised some concerns around the area of infrastructure development. It cites a slow delivery on infrastructure development as a result of the slow pace of spending by both national and provincial infrastructure grants as well as the incidents of roll-overs. This automatically impacts on economic growth and job creation which also impacts on the realisation of economic and social rights. It also means deprivation of the basic services of some population segments, which meant that the progressive realisation of the economic and social rights was not achieved.

According to the Report of the Auditor-General (on Audit Outcomes for the year ended 31 March 2001), only four of the nine provinces complied with the legal requirements of having Internal Audit Committees in their departments. Some provinces overspent by a large amount, even though there was a system in place to address issues pertaining to the utilisation of funds, the IYM. It is important that government departments respect the provisions of the PFMA.

RECOMMENDATIONS
It is accepted that it is only ideal in an economy that the real value of the financial resources allocated to the departments should always exceed the nominal value. By the same token, it is important that the financial resources allocated to government departments charged with delivering on the economic and social rights have a buying power to enable the government departments to discharge their duties. It is important that government departments spend the financial resources allocated to them meaningfully and account for the management of such resources appropriately.

The area of public infrastructure investment was an important one as it was one of the highlights of the budget framework reflected in the 2001 Medium Term Budget Policy Statement. Public infrastructure investment (PU) was an instrument for creating jobs and it had a bearing on the acquisition of foreign direct investment (FDI's) as well as local investment, which South Africa needed for economic growth. PU is also important, as it is where delivery on economic and social rights starkly comes to be tested. One province noted that this was an area where their departments need capacity. The other problems cited range from roll-overs to slow pace of spending both national and Provincial Infrastructure Grants.

Some of the skills needed in these government departments comprised project planning, project finance and project management. Organisations such as the Municipal Infrastructure Investment Unit (MIIU) should be made use of to expedite infrastructure investment in the country

It would be advisable for provincial departments experiencing problems in infrastructure delivery to work hand in hand with the National Treasury and it was recommended that municipalities make use of institutions such as the MUU to help them improve capacity.

Government needed to do research, in conjunction with the Budget Council and Budget Forum, in order to come up with a definition of "constitutionally-mandated obligations including the basic services." Initiatives such as the Municipal Infrastructure Investment Framework (MIIF) of 2000/2001 could be very useful in assisting the various tiers to determine the number of backlogs in infrastructure as well as the costs involved. It would be good if the MIIF could be revised to take into account the latest census delivery on basic services. This would make the implementation of the costed norms approach possible.

CONCLUSION
Public finance-related processes should not be regarded as the preserve of the few, as was currently the case. The budget allocation process in particular, should be a transparent process that took public opinion into account. Currently, the process was dominated by political structures. However, there was a need for civil movements to influence the budget process. The national parliament had the power to amend the budget and should use it more. The constitution empowered parliament to amend any money bill put before it. The exercising of such powers by parliament should at least advocate the channelling of more financial resources into economic and social rights-related programmes.

The actors involved in the budget allocation process must be well informed about issues affecting their constituencies if these structures are to play a meaningful role in the process. The co-operative forums, the Budget Council and the Budget Forum need to engage in research to influence policymaking and the budget process. These structures should be helping government in establishing what constitutes constitutionally-mandated basic services, for instance.

Discussion
The South African Human Rights Commission (HRC) was represented by Adv. Thipanyane, (Head: Research and Documentation), Mr Watkinson (Deputy Head: Research and Documentation) and Mr Shabalala (Researcher).

Dr Rabie (NNP) asked for examples of other countries that set the tone for human rights budgeting.

The chair emphasised this committee's monitoring responsibility on budgeting. He stressed that they should work on a structured relationship with the HRC. This should also be included in their report to the national assembly. He also lamented the lack of response from government departments to the HRC.

Mr Hanekom (ANC) commented that the Joint Budget Committee had its own constraints. Therefore it would be of advantage if the committee and the HRC could compliment each other. Their concern should not so much be compliance with the Public Finance Management Act or over and under expenditure but outcomes. He expressed his concern on the commission's reliance on donor funds. The Joint Budget Committee was concerned with government allocations and could be an advocate for the HRC. The quality of the HRC research would reflect the esteem they were held in and that would translate into respect. He added that the Joint Budget Committee could put pressure on departments who were not responding to the HRC. For this to happen, frequent interaction was needed between the committee and the HRC. It dod not help to read about problems one year later in a report. They had to be addressed immediately.

Mr Thipanyane reiterated that it was a historic moment for the HRC to appear before this committee. The Human Rights Commission's mandate was clear. They were to assist parliament in its oversight role. Since 1997 their reports sent to parliament had met with no response. No one engaged the HRC on anything. They did not even receive any criticism although the HRC knew there were mistakes in their reports. The HRC suffered from a lack of experienced researchers due to financial constraints. They were working very hard on the quality of their research and therefore they would welcome any critique and comment. On the timing of reports he said that ideally they would like to deal with issues as they happen. Therefore they had stopped using questionnaires and started to focus on annual reports of the government departments.

Mr Shabalala added that Poland was a good example of a country rated high in terms of transparency and human rights budgeting.

Mr Thipanyane explained that the concept of human rights budgeting was not quite new to South Africa. IDASA had done some research on this issue.

Dr Conroy (NNP) enquired about the reaction of academics to their report. He asked what their opinions were.

Mr Schneeman (ANC) pointed out that in their conclusion they mentioned the amending of budgets.How do they propose to do that? What research has been done? He proposed they appear again before this committee to discuss this subject.

Mr Thipanyane replied that they received very little feedback from academics. The little response they had was positive, but they wanted more response and critique.

The Chair remarked that due to time constraints they could not delve deeper into the report. They looked forward to meeting with the HRC again.

The meeting was adjourned.