Transcript Presentation to the Western Cape Provincial Legislature

FINANCIAL AND FISCAL
COMMISSION BRIEFING
Standing Committee on Finance
30 July 2014
For an Equitable Sharing of National Revenue
Presentation Outline
1. Role and mandate of the FFC
2. Role played in the economy
3. Contribution to National
Development Plan
4. Other issues
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1. Role and Mandate of the Financial and Fiscal Commission
CONSTITUTIONAL AND LEGISLATIVE
MANDATE
• Financial and Fiscal Commission (FFC)
– Permanent statutory body established in terms of Section
220 of Constitution
– Independent and subject only to Constitution and the law
– Must function in terms of an act of Parliament
• Mandate of FFC
– Makes recommendations, envisaged in Chapter 13 of the
Constitution or in national legislation to Parliament,
Provincial Legislatures, and any other organ of state
determined by national legislation
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STRUCTURE OF THE COMMISSION
• Commission comprises 9 persons:
– A Chairperson and Deputy Chairperson
– Three persons, appointed after consultation with the provincial
premiers, from a list compiled in accordance with a process
prescribed by national legislation
– Two persons, appointed after consultation with organised local
government, from a list compiled in accordance with a process
prescribed by national legislation
– Two other persons
• All appointments made by the President
• Appointments may not exceed 5 years, but Commissioners
are eligible for reappointment
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GENERAL PRINCIPLES
• FFC is concerned primarily with intergovernmental fiscal
relations (IGFR)
– Legislative provisions or executive decisions that affect either
provincial or local government from a financial and/or fiscal
perspective
– Includes regulations associated with legislation that may
amend or extend such legislation
– Commission must be consulted in terms of the FFC Act
• Important stakeholders for consultation in IGFR
– Parliament, Provinces, Ministry of Finance, The Presidency,
Organised Local Government, Ministry of Cooperative
Governance and Traditional Affairs, National Planning
Commission, Intergovernmental Fiscal Forums
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2. Role Played in the Economy
ROLE PLAYED IN THE ECONOMY: 3
PILLARS
Providing advice to
government on
division of revenue,
developmental
impact and
sustainable IGFR
system
Extending to look at
developmental
impact: to
encompass poverty,
income distribution
outcomes of
allocations
Imparting
knowledge through
training to core staff
working on IGFR
and budgetary
framework issues
I. Role Played in Economy: Division of Revenue
• Regular, annual engagement with the Division of Revenue Bill takes three forms:
– Commission produces recommendations on the equitable division of revenue among
the three spheres of government (S 9(1) of IGFR Act). This is accompanied by a
technical report and simpler policy briefs.
– Minister of Finance must consult the Commission 14 days prior to the introduction of
the Bill in Parliament and indicate in a memorandum accompanying the Bill what
account was taken of the Commission’s recommendations (Sections 10(3) and (4) of
FFC Act)
– The Commission then produces its third document, a response to the Bill
• Another important advisory task relates to assignments among spheres of
government.
– Before tabling a proposal for a national or provincial assignment to local government
in general, the national or provincial Minister must consult the Commission
– An assignment of functions or fiscal powers has no legal force until the organ of state
making such assignment has indicated the extent to which it gave consideration to the
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Commission’s views
Role Played in Economy: MBAPRMA
• Money Bills Amendment Procedures and Related Matters Act
(MBAPRMA) enacted in 2009. Sections making reference to FFC
Section 4(4C) requires
that when committees on
appropriations consider
any money bill, the
recommendations of the
FFC must be
considered/reported on
Section 9(7A) requires
that in passing the
annual division of
revenue bill, the
appropriations
committees must
consult with the FFC
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FFC and MBAPRMA [Cont.]
• MBAPRMA formalises a four stage budget process consisting of
the
– Medium Term Budget Policy Statement (MTBPS),
– Fiscal framework which delineates revenue and expenditure
aggregates
– Division of Revenue Act
– Departmental appropriations considered by the various portfolio
committees
• Makes provision for FFC input to:
– Finance committee cluster on the MTBPS and the fiscal framework
– Portfolio committees drafting of Budget Review and
Recommendations (BRR) reports
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FFC’s Primary Outputs
• Annual Submission on the Division of Revenue (DoR)
– Submitted 10 months prior to tabling of the DoR by the Minister
– Contains recommendations/proposals for the following fiscal year and medium
terms expenditure framework (MTEF)
• Submission on the Fiscal Framework and Revenue Proposals
– Contains FFC’s response to the fiscal framework and revenue proposals
contained in the budget tabled by the Minister
• Submission on the MTBPS
– Contains the FFC’s response to the MTBPS and adjustments to the division of
revenue
• Submission on the DoR Bill
– Submitted to Parliament in February and outlines the FFC’s response to DoR Bill
and relevant annexures
• Submission on the Appropriation Bill
– Submission made to the Standing/Select Committee on Appropriations
• Any other special reports made at own initiative or request by organs of
state
II. ROLE PLAYED IN ECONOMY:
DEVELOPMENTAL IMPACT
Improving
sustainability
Closer look at
impact, value
for money and
particularly
pro-poor
 Allocative efficiency and
value for money
 Focus on Inclusive Growth
 Adding more modules
(gender, environment, and
energy etc.)
 Poverty and inequality
impact
III. Role in Economy: Support and
Interventions
DIRECT SUPPORT AND
INTERVENTION
Training of members of
parliamentary committees and
councillors – On request
Advice to municipalities (e.g.
Tshwane merger)
INDIRECT SUPPORT AND
INTERVENTION
Member of review committees
(LES, Infrastructure Grants,
Metro’s Own Revenue)
Public hearings (local government
fiscal framework, housing and
child welfare services)
Inputs in benchmarking exercises
Inputs in various fora (e.g.
SALGA)
Recommendations through
Annual Submission on DoR
Introduction to the Financial and Fiscal Commission 2014
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III. Role Played in the Economy: Support and Interventions [Cont.]
• Participation on request in various Ministerial
Task Teams and Steering Groups (HDACC, MDB
etc.)
• Website and Media
• Other initiatives taken only on request
– Meetings, Conferences and Events (Public Hearings
etc.)
– Partnerships and Coordination Secretariat (Memoranda
of Understanding etc.)
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3. Contribution To NDP
2014-19 Theme: IGFR in support of national
development
Dynamics of
economy & social
issues (equity)
(1)
Balance between
Accumulation &
Breakthrough:
Managing past
recommendations
(2)
Capable state
issues:
Efficiency
Effectiveness
Collective goods
(3)
• Elimination of poverty and reduction of inequality to 0.6
• Need for “Institutional transformation”
• Toward a new model?
IGFR IN THE NDP
• Within the NDP, FFC assessment is that Chapter 13
does deal most explicitly with state concerns but there
are other Chapters that have a strong relationship
– for example, Policy (Chapter 1), Demography
(Chapter 2), Economy and Employment (Chapter 3),
Economic Infrastructure (Chapter 4), Rural Economy
(Chapter 6), Environmental Sustainability (Chapter 5),
Housing (Chapter 8), Education (Chapter 9), Health
(Chapter 10), Social (Chapter 11), Corruption (Chapter
14), and Transforming Society (Chapter 15)
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IGFR IN THE NDP [CONT.]
• Interface between development planning tradition and
traditional budget planning
• Unevenness in capacity that leads to uneven performance in
local, provincial and national government identified as being
among the key factors exacerbating poverty and inequality
• NPC diagnostic referred to the ‘Intergovernmental relations
among the three spheres that are poor’ as contributing to
increase costs for the poor, confining many to poverty traps
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KEY IGFR ISSUES AND NDP
• Understanding the context of fiscal decentralisation
versus centralisation
• Assigning expenditure responsibilities
• Instruments for financing subnational Government
• intergovernmental transfers
• local taxation and user fees
• investment capital
• Budget implementation
• Harmonisation and alignment of support
EXPENDITURE SIDE
• The role of the public sector is to:
– Provide a stable economic environment
– Promote a more equitable distribution of
income/resources
– Assure a more efficient allocation of resources (when
markets fail)
But, no-one says that these can all be done best by the
central government!
KEY ISSUES IN IGFR FOR NDP:
DECENTRALISATION OR CENTRAL
• Decentralisation is critical for delivery
– National dept is at times too far to deliver basic services
• How far down do we decentralise?
– Education, Hospitals at provincial level
– Water, sanitation, electricity at municipal level
– How do you deal with concurrent functions (between
and within spheres)
• Timing is important
– When is it appropriate to shift functions?
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KEY ISSUES IN IGFR FOR NDP:
REDISTRIBUTION
• How do we pay for redistribution to poor households?
– Best done through tax system through intergovernmental
grants?
• Redistribution must be funded by national grants?
– Make the rich in metros also pay for redistribution
– Limited use of cross-subsidisation to be competitive
• Redistribution
– Rich to poor
– Urban to rural
– Intra-city: suburbs to townships
• Issues of economy and competitiveness?
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AREAS OF FFC INTERVENTION IN
NDP: 2014-2019
• Main Areas of Intervention
– Knowledge production and sharing
– Policy-level interventions through recommendations
– Direct interventions, institutional capacity building
– Focus work on inclusive growth
• Organisational Issues
– MoUs and Protocols of Engagement: The partners will
formalize the partnership by signing an MOU and agreeing
protocols
– Active engagement of the private sector and NGOs should be
ensured
Desired
NDP Impact
Provide
stable
economic
environment
and promote
a more
equitable
distribution
of resources
Medium Term
Outcome
Economy is
stable
(Trajectory :
degree of
covergence)
Priority Area



Growth is
inclusive





Debt levels,
revenues and
interest
payments
Distinctions and
tilting between
national public
good and
services
Interplay of
growth oriented
national
economic policy
over
redistributive
spatial policy
Employment
Social wage
Social policy
competency
distribution
Critical
Infrastructures
Coordination
mode (govt and
non govt actors)
FFC
Project
Concern/Mandate
DoR : Growing
 Domestic Resource
revenue for
Mobilisation
distribution
 Place based
policies – People,
Debt
Places and Public
management :
Policies
(incl. Top slice in
DORA)
MBAPRMA
DoR:
Sustainability of
Grants/Social
Wage



DORA :
Provision of
social services by
provinces and
municipalities
Resolving Youth
Unemployment
Comprehensive SS
Reforms
Performance and
funding of
sanitation services
Desired NDP
Medium Term
Impact
Outcome
Capable State –
Developmental
Efficient &
 Human
effective
development
allocation/utilisation
 Healthy
of resources
population
 Nourished
pop
Priority Area
FFC Mandate/Issue
Priority areas
 Health reform
and NHI
 Promotion of
nutrition
 Education Outcomes
DORA : Adequate
allocation to provinces
and municipalities
Conditional Grants

LG provision of FBS
(clinics and schools etc)

Developmental
Priority areas
 Critical
 Improving
Infrastructure
basic
infrastructure
 Very large
equipments



Efficient and effective


Improving
productivity
of public
workers
SNG
coordination
Infrastructure
Development
Bill
DoRA :
Adequate
allocation of
resources to LG
Conditional
Grants
DORA : Cost of
professionalisation – who
bears ?
Municipal Systems Act
Conditional Grants
Project







Resourcing of
ECD to fulfil
NDP Expectations
Municipal service
charges
Foundation for
NHI
Nuitrition security
Indirect grants
review,
Competition
between
paradigms to
infrastructure
delivery
Municipal public
investment and
growth
Coordination in
municipalities
LG wages and
labor productivity
and efficiency
Remuneration, OP
and Wage Bill
FFC LENS THROUGHOUT
• Unpacking some of the factors that make a difference in
whether and how goals of NDP are achievable?
• Interestingly, how should delivery of NDP evolve in the
medium term and towards 2030?
– Should the emphasis be on promoting decentralization
through capacity building, or should the national
government assume the major responsibility for meeting
constitutional mandates, despite the fact that these
mandates are shared responsibilities
• Advising on the fiscal and financial dimensions to many
of these developments
4. OTHER ISSUES
ONGOING IGFR BUDGET AND POLICY
ISSUES RELEVANT FOR COMMITTEE
• Maintaining overall fiscal discipline/Macro Issues
• Adequacy of transfers to sub-national governments
– Concurrency and lack of norms and standards
• Continuous refinement/update of transfer formulas
– Demographic vs. Other factors
• Spending performance (conditional grants)
– Efficiency vs. Capacity challenges
• Striking balance between national and provincial interests,
increasing indirect grants
• Supply Chain Management/Procurement
– issues and compliance/enforcement of laws
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ANNOUNCEMENTS AND ONGOING
COLLABORATIONS
• Economics of Corruption
– In collaboration with Public Service Commission under MoU
• Public Sector Wage Efficiency and Productivity
– In collaboration with Public Service Commission under MoU
• Food Security and Rights Project
– In collaboration with Human Rights Commission
• FFC Intergovernmental Fiscal Relations Conference
– Invitation extended to all Committee Members
– Taking place 11-13th August 2014
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FFC’S WEBSITE: WWW.FFC.CO.ZA
Presentation to FISD, North West
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