Sloppy last-minute Budget legislation on possible bailouts — and other legislative troubles

It’s clever. It’s creative. And if successful, it will open the door to the possible approval of unforeseen expenditure that for the past month or so has been firmly closed.

It’s somewhat complicated — but it revolves around Section 6(1) of February’s Appropriation Act, or the Budget. That section allows the finance minister to “approve expenditure, if it cannot reasonably be delayed without negatively affecting service delivery and such expenditure (a) is unforeseeable and unavoidable; (b) was announced during the tabling of the 2020/21 national annual budget…”

The use of Section 6(1) fell away — after just one day in June — because the Special Adjustment Appropriation Bill, effectively the Covid-19 emergency Budget, interrupted the traditional sequencing of Budget in February, followed by the Medium-Term Budget Policy Statement (MTBPS) in late October.

On 23 June 2020 the Appropriation Act, of the Budget, came into effect having been passed by Parliament and signed into law by the president. On 24 June 2020, Mboweni tabled the Covid-19 emergency Budget, to shift some R145-billion across government to fund pandemic responses as part of the R500-billion relief, including temporary rises in child social grants and tax deferments.

But this sequencing meant Section 6(1) was no longer available — unforeseen and unavoidable expenditure by law may only be approved before an adjustment appropriation. Also not available was access to a potential R5-billion in the 2020 Budget contingency reserve.

To undo this situation, the Budget laws require amending. It’s proposed to amend the Appropriation Act, or February’s Budget law, with an insertion in the Special Adjustment Appropriation Bill, the Covid-19 emergency Budget that comes to the House on Wednesday 29 July 2020.

It’s not clear why it took almost a month, but on 22 July 2020 Finance Minister Tito Mboweni wrote to Parliament’s appropriation committee chairperson Sifiso Buthelezi, motivating the legislative amendment

“The inability to use Section 6 of the Appropriation Act, 2020, ie approving the use of contingencies’ funding, will impact negatively on affected institutions where they qualify for such funding. In the 2019/20 financial year, the same provision in the Appropriation Act, 2019, was, for example, utilised for funding for SABC, Denel and public infrastructure projects.

“It is important to enable the use of section 6 of the Appropriation Act, 2020 up to the introduction of the second Adjustments Appropriation Bill in October 2020.”

In the letter Daily Maverick has seen, Mboweni proposes to the parliamentary appropriation committee a way to do this.

A new section in the Special Adjustment Appropriation Bill would, in the 2020 Appropriation Act, replace the “an” with “the second” before Adjustments Appropriation Bill so the new Section 6(1) would read:

“Despite any provision in any other legislation to the contrary, and before the second Adjustments Appropriation Bill is introduced in Parliament, the Minister may approve expenditure, if it cannot reasonably be delayed without negatively affecting service delivery…”

This would fix the conundrum until October’s MTBPS.

Without this Section 6(1) available, the only other way to release unbudgeted funding is through the emergency provision of Section 16 of the Public Finance Management Act (PFMA).

It allows the finance minister to authorise emergency funds of no more than 2% from the national revenue fund “to defray expenditure of an exceptional nature which is currently not provided for and which cannot, without serious prejudice to the public interest, be postponed to a future parliamentary appropriation of funds”.

Earlier in July, DA MP and finance spokesperson Geordin Hill-Lewis went head to head with Mboweni to ensure Section 16 of the PFMA would not again be used for an SAA bailout — and got this ministerial commitment to stay away from the Section 16 of the PFMA.

The 22 July letter from Mboweni said no ministerial consultations were needed as the parliamentary appropriation committee is asked to make the change.

But MPs must still agree to that. And then bring the amendment to the House on Wednesday 29 July 2020, when the Special Adjustment Appropriation Budget is processed.

Let’s be absolutely clear: no indication exists right now of any bailout to SAA in the making with — or without — the use of an amended Section 6(1). Even if that’s the first thought that comes to mind in this saga, given Friday’s creditors’ agreement to delay to Monday the deadline for confirmation of government guarantees for SAA debt.

Those draft laws, widely known as “GBV bills”, are nowhere near Parliament to start the legislative process — notwithstanding politicians’ words and presidential declarations of GBV as a “second pandemic”.