Tag: parliamentary budget office

Submission to Parliament on Money Bills Act amendments

The Money Bills Act is the legislation that guides Parliament’s oversight of South Africa’s budget and related legislation. I have written previously on that process. The Act has been up for review for some time, and the finance and appropriations committees have had a number of meetings recently to finalise that process. The result is a draft amendment Bill, which I have attempted to explain in an accessible way.

Further to that article, I submitted written comments and made a presentation based on those this week. The audio, relevant documents and meeting report will appear on the relevant Parliamentary Monitoring Group (PMG) website in due course. Access is restricted though, so here are the slides and written submission.

Unfortunately the very limited time available between the call for comments and the deadline for submission (two weeks) also placed some limits on the depth of the analysis. One issue I neglected to address, which was raised by the opposition in the meeting, is that the current Act emphasises – in clause 15(2) – that the PBO should take its work from committees. That is potentially problematic where committee decisions are ultimately determined by a majority party.

Unfortunately, this point became politicised due to disagreements about whether the current committees had allowed partisan considerations to determine what work requests were sent to the PBO. My view is that regardless of what one thinks about the current situation, it is certainly not hard to envisage a situation in which a hypothetical majority party uses its weight on committees to ensure that potentially inconvenient work is not sent the PBO’s way. That could significantly reduce the usefulness of the Office. The broad point I made in my presentation is that our institutions should be designed to be robust to such scenarios. It is for that reason that I agreed with the suggestion that this clause should be amended, or that the clause allowing work to be taken from individual MPs “subject to capacity” – clause 15(3) – be amended to allow the Director discretion based on importance of the request.

It will be interesting to see the final conclusions reached by MPs in relation to these issues and proposals. Given the calibre of MPs on both the majority party and opposition benches on these committees, I am cautiously optimistic that decisions will be taken in the long-term national interest.

Statement regarding the Parliamentary Budget Office and recent CCMA award

The Parliamentary Budget Office (PBO) was established to provide Parliament with independent technical advice to support it in exercising oversight of public finances. The importance of this role should be evident given the recent Cabinet reshuffle and ratings agency downgrades, which have raised concerns about public debt, public service pension funds, a prospective nuclear deal and the finances of state-owned enterprises amongst others. These are all matters about which a functioning PBO would be expected to provide credible insight and guidance to Parliamentarians.

There are, however, serious concerns regarding the functioning of the Office. These relate to the content and objectivity of its advice. This became apparent to me shortly after I joined the PBO in 2014. The resulting dynamics in the office led me to resign in 2016, and were also the basis for an unfair labour practice complaint brought against the PBO at the CCMA.

On the 26th of April 2017 the CCMA issued the commissioner’s award, which did not find in my favour on the narrow labour issues raised. While I am disappointed with this outcome, it is important to place the case in the broader context of the need for a competent, functional and credible PBO that is beyond reproach. In this regard, the Commissioner held that – as I had testified – the Director of the PBO had indeed offered to provide me with the interview questions for the position, I had declined the offer, and he had lied about this in his testimony (i.e. under oath). This example was only one of a number of issues raised in the process, but on its own raises very serious questions about the functioning and management of the office.

The Act governing the PBO is expected to be reviewed and amended later this year. In that process, the end goal must remain paramount: to build an independent, technically and ethically credible institution that the public and Members of Parliament can rely on for non-partisan analysis of public finance issues that is conducted without fear or favour.

Internationally, similar institutions are expected to maintain the highest standards of objectivity and political neutrality; standards that the South African PBO has failed to demonstrate. Perhaps the most famous international example is the Canadian PBO, which in 2011 produced a costing for parliamentarians of the government’s fighter jet procurement plan that was significantly higher than the estimates the government had published. The Office was attacked by the Prime Minister at the time, but supported by society at large and subsequently vindicated: government eventually acknowledged that the costs were higher than originally stated and the procurement remains on hold. The Canadian example is in marked contrast to the South African PBO’s analysis of the desirability and feasibility of the proposed nuclear energy procurement. The PBO’s report failed to cost the project, or assess its implications for public finances. In a more recent example from Kenya, the country’s PBO raised concerns about omission of a large increase in debt repayments from budget documents.

Since some of the issues raised at the CCMA go to the heart of these expectations, and it is my view that the basis for its finding is deeply and materially flawed, I am considering taking the award on review to the Labour Court. This is an expensive option – the estimated cost is R500,000 or more, and is prohibitive for an individual. However, the basis on which staff are appointed to, and promoted in, PBOs is one of the most critical factors in their success. Combined with the importance of the PBO and the upcoming amendment of its governing legislation, public interest organisations may find this case to be an appropriate mechanism through which to contribute to the establishment of the kind of PBO the country deserves.

Parliament has the final say on the Budget

Ahead of the Minister of Finance’s Budget Speech tomorrow, I’ve just published a piece in The Conversation, explaining the core components of South Africa’s annual Budget and the fact that Parliament ultimately has the final say on each of these – subject to a public consultation process. The full process is guided by the Money Bills Amendment Procedure and Related Matters Act (2009), which I worked with extensively when I was at the Parliamentary Budget Office.

The conclusion of the article, that Parliament’s oversight may provide some reassurance in the current political context, is less comforting in light of an article published today which reveals that a vacancy has suddenly been created on the standing committee of finance. The last time that happened was when the then ANC whip of the committee, Des Van Rooyen, was notoriously made Minister of Finance for a weekend. It appears likely that Brian Molefe, former CEO of Eskom who is named dozens of times in the Public Protector’s ‘State of Capture’ Report, will be appointed to this vacancy – having been surreptitiously added to the ANC’s list of MPs. And this in turn may be a stepping stone to his appointment to cabinet in a last ditch attempt, by a faction close to the president, to take control of public finances for nefarious ends.

My case against the Parliamentary Budget Office: part II

As noted in a previous post, I am pursuing a case against the Parliamentary Budget Office at the CCMA.  And as also indicated in that post, I am not going to comment on any specific issues relating to the merits of the case, or the process, until the latter is completed. Nevertheless, given that the reporting of the matter has been intermittent and only partially informed, it is useful to recount some further, basic information here.

The most recent component of the hearing (day 5 and 6) took place on the 19th and 20th January, with the intention that the matter be completed on the 20th. Unfortunately that was not possible, for reasons which will become known in due course.

Media presence

More importantly, while the media were initially granted access, the two journalists present were requested to leave shortly after I started my cross-examination of the Director of the Office. The result is that the first two reports (News24 and Business Day) that did appear could effectively only report on 75% of the 5th day of the process and did not report any of the content of the Director’s cross-examination. One article reported the Director’s assertions, but not the testing of these assertions and more substantive issues; resulting in somewhat one-sided coverage.

While the media can only report what they observe, one might expect that the media’s (gentle) ejection from the process would be reported to at least provide readers with some context for the sudden cessation of coverage.

Meanwhile, in another case at the CCMA, the media have continued to be present despite the applicant (Mr Adrian Lackay) testifying to fairly sensitive matters, such as the alleged ‘rogue unit’ at the South African Revenue Services (SARS). Of course, every case is different and commissioners use their discretion to make such determinations. It is worth noting, though, that Lackay’s case led to the breaking of new ground on media access to CCMA arbitration thanks to work by Media24 and amaBhungane. Apparently the Commission has subsequently published rules and guidelines that formalised the position that public access, including media access, is the default. (Though many people, including legal practitioners, remain unaware of this).

Credibility

Naturally, when one raises matters like those that have emerged in this process, attacks on one’s credibility are par for the course. Exposing, directly or indirectly, the abuse of public resources and compromising of appointment processes to positions in public institutions is a sure way of engendering some hostility. In this instance, such attacks have come in blustered form within the process from Parliament’s representatives, statements by the Director (to the media and in testimony) and comments by one former colleague in testimony.

While such behaviour is to be expected, it remains very ill-advised to attack the credibility of someone who is, substantively, more credible than you are… In due course most of the truth about who acted professionally and ethically at the PBO, and who did not, will become known. It will then also become clear that serious action will be required to salvage some credibility for the institution.

A long road ahead

It is widely-accepted that independent fiscal institutions like parliamentary budget offices need to be beyond reproach:

the core values that IFIs both promote and operate under – independence, non-partisanship, transparency, and accountability – while demonstrating technical competence and producing relevant work of the highest quality that stands up to public scrutiny and informs the public debate (OECD Principles)

Unfortunately, it would appear that there is a long, difficult road ahead to achieve this in South Africa.

My work at the PBO

I have already written a couple of articles about the Parliamentary Budget Office, in which I worked for two years and one month, touching on what it should be doing (but isn’t, or isn’t doing well enough) and one rather significant failure. I suspect that I will write more in future on related matters.

For the moment, however, I thought it would be useful to lay out my own work while in that office. Despite difficult circumstances I am proud of the quality of the work that was produced and it seemed appropriate to put together a short catalogue here.

The Office has a website but, for reasons not in the public domain, does not consistently publish its outputs or requests received. Fortunately, if work is ever presented to committees of Parliament reports and slides almost automatically enter the public domain – both by law and the Rules of Parliament (committee meetings are open to the public except in exceptional cases) – and are usually published by virtue of the invaluable work of the Parliamentary Monitoring Group. Although at least 50% of my work was never reflected in this fashion, I catalogue here what I can.

In most instances, the work would have benefited from greater specialisation (as the very broad range of topics below attests!), more time and greater access to relevant information – all of which are characteristics of the most successful PBOs. For example, for the report on SOEs we did not get data that would have enabled (in the time available) an analysis of financial ratios across various SOEs. Nevertheless, what was produced mostly holds-up well in comparison to other institutions.

I was the team leader and/or main author of:

 

  • Advice on the Eskom Special Appropriation Bill and Eskom Subordinated Loan Special Appropriation Amendment Bill for the Standing, then Select, Committee on Appropriations  [slides; PMG source#1 and PMG source#2; we did not have time to produce a detailed analysis]

 

  • Report on the Fiscal Sustainability of Social Grants for the Standing Committee on Finance [slides 39-40; PMG source; the full report has never been presented or published but it is referred to in these slides on the 2016 Budget]

 

The report on Treasury’s fiscal forecasts was probably the technically most sophisticated piece of work the Office has done and is as sophisticated as anything I have seen from any PBO internationally. It is heavily informed by the work of Charles Manski on policy uncertainty and, more directly, insights from the literature on forecast accuracy (which I became aware of at Oxford, from being taught by Andrew Patton). I intend to publish at least two academic papers related to this work.

In other cases some substantive contributions are contained within annual presentations by the Office on the Budget or the Medium-Term Budget Policy Statement: [this list will be completed as/when I have time]

  • Advice on public debt and higher education funding after the 2015 MTBPS [slides 13-18 and 30-39; PMG source; the later ‘report’ on the MTBPS excluded the higher education analysis..]