Mboweni want his powers to approve contingency reserve expenditure reinstated

Finance Minister Tito Mboweni has asked Parliament to amend a section of the Appropriation Bill that will allow him to approve urgent expenditure from the contingency reserve account. 

In a letter sent to the chairperson of the Standing Committee on Appropriations (Scoa) Sfiso Buthelezi, Mboweni explains that Section 6 of the Appropriation Act allows him to approve expenditure which “cannot reasonably be delayed without negatively affecting service delivery.”

According to the Act this expenditure needs to meet three criteria in that it should be unforeseen and unavoidable, announced by the minister during the tabling of the budget in February 2020 or approved in the 2019/2020 financial year and has been rolled over into the 2020/2021 financial year to finalise expenditure that did not take place as originally planned. 

It’s in the wording 

The problem, says Mboweni, is that the current wording of Section 6 only allows him to approve this expenditure before an Adjustments Appropriation Bill is introduced. 

This is normally tabled in October, but due to the emergency allocations that had to be made because of the Covid-19 pandemic, Treasury had to push the introduction of an Adjustments Appropriation Bill forward, subsequently tabling it before National Assembly on June 24.

Read: Read the Supplementary Budget speech and Budget Review in full

This meant “section 6 of the Appropriation Act could not be used”. 

“The inability to use section 6 of the Appropriation Act, 2020, i.e. approving the use of contingencies’ funding, will impact negatively on affected institutions where they qualify for such funding,” said Mboweni. 

“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,” he added. 

Mboweni said it’s important to enable the use of the section before the introduction of a second Adjustment Bill in October and has requested that the introductory paragraph of the section be amended to make provision for this.  

SAA

These are powers that the finance minister would normally have, and an amendment allowing for the authorisation is not unusual.

However, the letter coincides with the government’s commitment to “mobilise” over R10 billion in funding for South African Airway’s (SAA’s) restructure. 

Shortly thereafter, the Democratic Alliance (DA) filed an urgent interdict to stop Mboweni from using his “emergency” powers to fund the airline’s rescue plan using state money.

Acknowledging that the finance minister is entitled to have the option of authorising urgent expenditure under Section 6 of the Appropriation Act, the DA’s Finance spokesperson Geordin Hill-Lewis said the letter to SCOA does raise a suspicion that it may relate to SAA. 

“It is odd that he has written to the committee specifically about it, because it suggests that he might have an intention in mind for using that money,” said Hill-Lewis.

According to the supplementary budget, the government has R5 billion in the contingency reserve account.

“Ordinarily the government would not use that every year, that’s not the point of a contingency,” said Lewis.

In response to questions sent by Moneyweb, National Treasury said government has no intention to use money from the contingency reserve for SAA’s restructure.

In his responding affidavit to the DA’s interdict, Mboweni stated that the government has not made any “definitive decision” when it comes to the funding the new airline and that it’s exploring various funding options for SAA that are not limited to the state possibly retaining shareholding in the new airline. Other options include approaching institutional investors, private equity partners or strategic partners. 

Read:
Mboweni: Government exploring various funding sources for SAA
DA files urgent court bid to interdict ‘unlawful’ SAA bailout

He also made it clear that he has not used section 16 of the Public Finance Management Act to authorise an emergency bailout for the implementation of the business rescue plan. 

“No such decision has been taken. Neither is such a decision imminent,” said Mboweni.