Debate on Division of Revenue Amendment Bill 2019 by Comrade Sfiso Buthelezi

20 November 2019

Honourable Speaker / Deputy Speaker;
Honourable Ministers and Deputy Ministers;
Honourable Members;
Fellow South Africans;
Ladies and gentlemen;

The ANC supports the 2019 Division of Revenue Amendment Bill (hereinafter referred to as Bill) because it continues to be redistributive and pro-poor.

Honourable Deputy Speaker, this is a short Bill, which does not drastically change the 2019 Division of Revenue Act. The net effect of the adjustment to the 2019/20 budget is an increase of about R24, 645 billion. The biggest contributor to this increase is the recapitalization of Eskom. You will remember Honourable Members a special appropriation bill recently passed by Parliament to assist Eskom to pay its debt and interest.

Honourable members the Money Bills enjoins parliament to consult citizenry as it considers the Bill. This is in line with what the ANC believes, that people should be the architects of their destiny. During this process the Committee engaged South African Local Government Association (SALGA), Organisation Undoing Tax Abuse (OUTA) and received submissions from Equal Education. The input proffered by the Financial and Fiscal Commission (FFC) is valued. The Committee urges the Minister to engage with SALGA meaningfully before the next Budget. We are aware that they are part of the Budget Forum, but it was clear from our interaction that there are things which need more time between and among them. The biggest complaint is that the equitable share formula is loaded against local government. Thus, Honourable Minister it is imperative that that you engage SALGA.

Honourable Deputy Speaker, what has always been missing in these engagements is the voice of provincial governments. Although we had a few representatives from legislatures, unlike in SALGA, there is no united voice representative of that sphere of government, yet provinces are 95 percent grant funded.

Largely, what informs the Bill is the lack of spending, or underspending of the budget items and reprioritization. Obviously, Honourable members, the broader economic environment and Fiscal Framework have a bearing on the Bill. The downward revision of GDP growth from 1,5 percent to 0,5 percent and unemployment rate of 29,1 percent in the country are critical factors in this Bill. The Bill will continue to try and help with stimulating economic growth, assisting with job creation opportunities and providing the much needed safety net, for those who are most vulnerable in our country.

The division of revenue ensures that there is redistribution of resources to the poor and rural areas. Although tax base is concentrated in urban areas, allocations through the division of revenue transfers higher per capita / per household amount to rural areas. Also, Honourable Members, provinces that are poorer, receive bigger share per capita. Rural municipalities receive more than twice allocations compared to the metros which have higher own revenue raising abilities. For instance, on average, rural municipalities receive R11 200 per household compared to R4 900 received by metros per household.

Honourable Members the committee is concerned about the inability to spend allocated money by certain departments and local governments as can be seen in some conditional grants. The usage of funds made available for capital projects as operational expenditure also denies our people of much needed services. This coupled with the deteriorating state of financial management at local government level contribute to lack of service delivery. Although SALGA calls for more resources, we are making the point that more money is not necessarily a panacea to local government challenges. As a Committee we were unequivocal in our demand for improved governance and financial accountability.

Local government's debtors book amounts to more than R165, 5 billion, while their creditors amount to R60,2 billion. This means if everyone were to pay what he/she owes, local government would be in a positive cash position of R105, 3 billion, and everyone would be happy.

What is worrying Honourable Speaker is that Parliament appropriates money to Departments to, among other things, pay municipalities. Some of them don't, as reflected by R10,3 billion that government and its institutions owe to municipalities. We are therefore calling on Honourable Ministers and Director-General's to settle their debts owed to municipalities.

Abanye abantu abangafuni ukukhokha izikweletu zaboMasipala osomabhizinisi. Osomabhizinisi bakweleta omasipala u R24,7 billion. This is more than two times the amount owed by government. Yet they continue consuming services from local government. Little has been said about this sorry state of affairs where business is making profits at the expense of struggling municipalities, and the poorest of the poor who depend on these municipalities for their livelihood. We are therefore calling on business organizations to call on their members to pay their debts owed to municipalities to assist our local governments to regain their feet. Sithi, KoMasipala hambani niyolanda imali osomabhizinisi abayikweletayo. Ilandeni njengomashonisa ekulinde esangweni uqeda ukuhola!!

Honourable Members, what is even more worrying, at least from our interaction with SALGA, is that we did not find a credible and clear strategy to collect what is owed to them.

In addition, the weak economy which has resulted in, among other things, under-collection by SARS, and climbing Debt to GDP ratio, has closed the fiscal space for financial maneuvering. Thus reprioritization and efficient use of the funds remain the only option. A situation where funds are allocated but not utilized can no longer be tolerated. We know there are funds which are banked, not used, and institutions budget on interest in their banks. This is sub-optimal because the cost of that money to National Treasury is higher than what they get from the banks, that is apart from the opportunity cost of that money.

Honourable Members the answer to all the challenges that we are facing in our economy is inclusive growth, inclusive growth and inclusive growth! Consolidation and reprioritisation are all temporary measures. This should be preoccupation of all and sundry, what is my contribution to this growth. Without this economic growth there will be no employment opportunities, there will be better SARS collections, and by definition no money for this parliament to progress National Democratic Revolution.

Honourable Members it is this understanding that made us also to challenge local government to also come up with viable and sustainable growth strategies for their municipalities. Also the role of SMMEs, black, women owned and youth companies cannot be over-emphasized. Growth shall not only come from big companies, but from these new players. It is thus critical that we as parliamentarians create an enabling environment through proper funding and legislation. More energy for SALGA should be spent on trying to identify growth opportunities.

As I conclude Honourable Members let me deal with the economics of small business being the source of economic growth and employment creation. If SMMEs makes a R1 million profit, the propensity to reinvest is higher because it still wants to grow. When a big company makes R1 million profit the probability of reinvesting is close to zero and will be kept in the bank. So, when we say support small businesses it is not just because it's a nice sounding slogan but it is based on sound economic principles. Honourable Deputy speaker, the ANC supports the 2019 Division of Revenue Amendment Bill.

Thank you.