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The Financial and Fiscal Commission (FFC) is an independent juristic entity subject only to the Constitution, Financial and Fiscal Commission Act, 1997 (Act No 99 of 1997), and relevant legislative prescripts. The Commission acts as a consultative body, makes recommendations and gives advice to the three spheres of Government and other organs of State on the equitable division of revenue and any other financial and fiscal matters.

The Submission for the 2023/24 Division of Revenue tabled in Parliament in terms of Section 214(1) of the Constitution of the Republic of South Africa, 1996, Section 9 of the Intergovernmental Fiscal Relations Act, 1997, and Section 4(4c) of the Money Bills Amendment Procedure and Related Matters Act, 2009 as amended will be considered according to the parliamentary, provincial and local governmental processes.  

The FFC Submission for the 2023/24 Division of Revenue, under the theme of “Addressing socio-economic vulnerabilities through fiscal transparency and strategy,” emphasises the importance of good governance and coherent, goal-oriented long-term planning across the intergovernmental fiscal relations system in key sectors to buoy growth and development. The Submission is comprised of chapters on combatting corruption and unemployment; evidence-informed policy research on debt, income inequality, consumption behaviour of social grants and public sector wage trends; and Subnational foci on reviewing and refining division of revenue instruments.

The Financial and Fiscal Commission, in its Submission for the 2023/24 Division of Revenue, makes some of the following recommendations:

1.  Preventing corruption in the public sector and funding for anti-corruption agencies:

The Presidency, in line with political commitment at the top, needs to renew the governance structure of the anti-corruption agencies, through the National Anti-corruption Strategy, on the need for reconfiguration and coordination among the existing institutional arrangements to repel duplication in these anti-corruption institutions for optimum results, including a reconfigured or dedicated funding framework for the anti-corruption agencies or institutions as a sign of commitment towards the support of anti-corruption agencies.

2.  Youth unemployment and intergovernmental fiscal relations:

The Commission welcomes the expansion of the Employment Tax Incentive (ETI). To better target and increase the impact of the incentive, the Commission recommends revising the employee eligibility age from 18 to 29 years old. The age group 24−34 years has a relatively high rate of individuals not in employment, education or training (NEET) compared to 15- to 24-year-olds.

3.  Debt sustainability in South Africa:

The Minister of Finance must exercise and maintain fiscal discipline, via active debt management and regular reporting regarding debt accumulation, costs and sustainability under the current strained debt conditions. Such discipline should be exercised throughout all spheres of government. Weak productivity in expenditure should be addressed in order to create job-enhancing, income- generating growth (i.e. inclusive growth) through quality expenditure and investment-enticing reforms.

4. Regarding inequality in South Africa's labour market:

Policies aimed at reducing inequality should, as a point of departure, be targeted at reducing inequality in the labour market. This requires policies that enable large-scale job creation and more equitable wage growth across different sectors of the economy, which, in turn, may require greater investment into labour-intensive industries that are able to absorb low-skilled workers into the labour market.

5. Recalculation of the amount of the Child Support Grant Social:

Commission recommends that the method calculation of the Child Support Grant Social (CSG) be reconsidered to accommodate the basneeds of children. An example of this is to increase the CSG of R480 to the food poverty line of R624. This would meet at least the monthly caloric needs of children.

6. Public sector wage bill:

The Department of Public Service and Administration, through the bargaining council, should consider balancing notch progression and cost-of-living adjustments and pressures to the fiscus during wage negotiation. The Commission highlights that the growth of the wage bill has largely been driven by wage increases relative to the increase in the number of employees.

7.  Provincial equitable share formula:

In line with the Commission's recommendation on a costed norms approach, full costing exercises should be undertaken by all provinces, particularly for the provision of education and health. The costing results will be used to determine allocations by provinces to these key functional areas. This will ensure consistency and fully informed resource allocation.

8. System of provincial conditional grants

Government must invest the capacity to improve overall grant design, taking account of all good grant design imperatives, such as types of grants and their implications, pre- grant introductory due diligence, sunset clauses, conditioning schemes and allocation methodologies.

9. Constitutional right to basic education:

The Commission reiterates its previous recommendations that a proper costing of the delivery of education services be undertaken to address the cost drivers of education and differences in spending pressures across provinces to assess the adequacy of basic education spending.

10.  Effectiveness of independent fiscal institutions:

Fiscal governance, particularly independent fiscal institutions, can play a central role in improving fiscal performance. In this regard, the Commission recommends the government improve the mandate, independence, functions and compliance of independent fiscal institutions.

11.  Powers, functions and funding framework of district municipalities:

The Department of Cooperative Governance and Traditional Affairs should speedily review and repeal section 84 of the Municipal Structures Act to streamline the powers and functions of district municipalities to correspond with those of local municipalities.

Issued by the Financial and Fiscal Commission