Amanda Jitsing
The Medium Term Budget Policy Statement contains a wealth of information on government expenditure. We should all give thanks to the Minister of Finance and his team at the National Treasury for compiling such a comprehensive and transparent document. In the absence of the MTBPS, little known facts might not emerge in the public domain.
One such piece of information is the payment of a gratuity of R266.3 million to non-returning local government councillors. This is reported under the Department of Cooperative Governance and Traditional Affair’s vote as unforeseeable and unavoidable expenditure and constitutes the single largest item of unforeseen and unavoidable expenditure in the MTBPS.
Three questions are worth asking in relation to this payment.
Firstly, was this expenditure really unforeseeable? The concept of unforeseeable expenditure was introduced in the Public Finance Management Act (1999) to allow national government to adjust expenditure in mid-year to cater for expenditure on any events and circumstances that could not have been foreseen in February when the Estimates of National Expenditure were tabled. In general, unforeseen expenditure arises from expenditure incurred in dealing with unpredictable events such as adverse weather conditions or higher than anticipated increases in public sector wages. The Act does not condone after-the fact approval of ad hoc expenditures.
We have known for at least five years that the local government elections would be held in 2011; and we should certainly know how many local councillors have received their pension benefits, or not. Therefore, the only unknown variable in determining the potential size of this pension overhang was the number of councillors that would not be re-elected. But this could have been estimated using a mix of common sense and data from past elections – and a reasonable provision should have been included in the Estimates of National Expenditure published in February 2011. Parliament and the public would then have had ample time to ask questions about these gratuities before they were paid out!
Secondly, can this expenditure be seen as unavoidable? In this case, we are told that the gratuity is paid to non returning councillors in the absence of a pension system . However, the remuneration of Public Office Bearers Act (1998) requires the relevant municipal council to make pension contributions for the duration of a councillor’s term. As such, all municipalities are expected to establish a pension fund for municipal councillors and the Minister of Cooperative Governance sets annual limits for contributions by municipal councils to such funds. The upper limit is currently set at 15% of the councillor’s basic salary (which in turn is set at R353,647 to R643,695 for a full time councillor and R195,500 to R354,032 for a part time councillor).
Despite these provisions, many municipalities do not make pension payments to councillors, because the guiding legislation, the Pension Benefits for Councillors of Local Authorities Act 105 of 1987, is outdated and inoperable: it continues to distinguish between persons belonging to different races. Although the Statutory Law Review proposed that the offending act be repealed, no new legislation has been proposed by Government. But this in itself does not give municipalities sufficient reason to renege on their obligations – in our view, the current legislative framework governing Public Officer Bearers Remuneration provides adequate legal mandate for municipalities to establish and make pension contributions to councillors. We also know that most municipalities do make such contributions. Requiring national government to step in and make up the short-fall on behalf of errant municipalities was certainly avoidable.
Finally, was such a payment justifiable? In a time of economic uncertainty, the Minister of Finance has instructed that ‘we must do more with less’. Given the growing budget deficit, spending a quarter of a billion rand on gratuity payments for outgoing councillors does seem costly (or does at least demand a clear and detailed explanation of how this amount was calculated and to whom it has been disbursed).
We do not propose stripping municipal councillors of their rightful benefits; but we worry about the increasing amount of money being thrown at our political representatives in local government, regardless of their performance. In a previous blog, we estimated that the salary of ward councillors will cost the fiscus approximately R1.5 billion in this financial year. This excludes the salaries of proportional councillors elected to municipal council. Handing-over another R266.3 million to municipal councillors who have already left office will not contribute to service delivery in any possible way.