What is the FFC?
The Financial and Fiscal Commission (FFC) is a permanent expert commission mandated to make recommendations and to provide advice to organs of state in the national, provincial, and local spheres of government. It was initially established in terms of Section 198 of the Constitution of the Republic of South Africa, Act 200 of 1993. Its existence was confirmed in Section 220 of the Republic of South Africa Constitution Act No 108 of 1996 as amended.
Why was the FFC established?
Given that most of the government revenue in South Africa is collected by national government, it was considered important that this revenue be divided equitably amongst the three spheres of government (the “vertical division” or revenue). Once this (vertical) division has been made, it is equally important that the local and provincial shares are equitably distributed amongst municipalities and provinces (the “horizontal division” of revenue).
The Constitution seeks to ensure that the element of subjectivity in this resource allocation process is mediated by the inputs of an impartial and non-partisan agency like the FFC. It is thus the mandate of the FFC to provide advice on the division of revenue between and across the spheres of government.
Is the FFC part of government?
The FFC is not part of the Government of the Republic of South Africa. It is an organ of state purposely established by the Constitution as separate and independent of Government.
The FFC does however and in the spirit of Chapter 3 of the Constitution, frequently interact with government stakeholders as part of its overall consultation process and in order to obtain data and information that is necessary for it to fulfil its constitutional obligations.
What does the FFC do?
The FFC submits recommendations and advice to all spheres of government based on research and consultations on a range of intergovernmental fiscal issues. The research includes:
- development of principles for intergovernmental fiscal relations, which are based upon analysis of international best practice;
- analysis of local, provincial, and national government budgets, with a view to understanding revenue and expenditure trends;
- identification and measurement of factors influencing provincial and local revenues and expenditures; and
- assessment of fiscal policy instruments, such as conditional grants, equitable share transfers, and taxes.
Government is required by the Constitution and other legislation to consult with the FFC on issues such as:
- Provincial and local government revenue sources;
- Provincial and municipal loans; and
- The fiscal implications of the assignment of functions from one sphere of government to another.
What reports does the FFC submit?
In accordance with the Intergovernmental Fiscal Relations Act of 1997, the Commission submits its recommendations on the division of revenue before the Minister of Finance tables the budget in Parliament in February. The FFC’s Annual Submission addresses issues that relate to the next budget year and to the Medium Term Expenditure Cycle.
Shortly after the tabling of the budget, the FFC responds to the budget in its Division of Revenue Bill Submission (March). This outlines Government’s response to the FFC’s previous recommendations and provides an analysis of Government budget inputs, outputs, and outcomes.
In addition, the FFC makes occasional submissions in response to requests from organs of state.
How does Government respond to the FFC’s annual recommendations?
Government, through the agency of the Minister of Finance, is required to respond to the proposals of the FFC indicating the extent to which it has taken account of the Commission’s recommendations. This response is typically contained in an Annexure to the annual Division of Revenue Act.
Who is eligible to make requests of the FFC?
Section 3 of the Intergovernmental Fiscal Relations Act states that national, provincial, and local organs of state can request the advice of the Commission. However, such request should relate to the mandate of the FFC.
Who are the FFC’s stakeholders?
The FFC reports to Parliament, the provincial Legislatures, and organised local government (through the South African Local Government Association). The FFC also consults and interacts with organs of state (e.g. national and provincial government departments and municipalities). The FFC has on-going contact with other government institutions such as Statistics South Africa and the South African Reserve Bank.
How many FFC Commissioners are there and how are they appointed?
The FFC consists of nine commissioners. They are appointed as follows:
- The Chairperson and Deputy Chairperson, who serve in an executive capacity, are appointed by the President.
- Two additional commissioners are appointed directly by the President.
- Three commissioners are appointed by the President from a list of nominations compiled by the Premiers of the nine provinces.
- Two commissioners are appointed by the President from a list of nominations compiled by the South African Local Government Association (SALGA).
Do the commissioners nominated by provincial and local government represent the interests of their respective spheres of government?
Once appointed, all commissioners are expected to act independently and impartially at all times. Provincial and local nominees may bring their regional perspectives to bear on the deliberations of the Commission. At the same time, commissioners are expected to be aware of the broader imperatives that inform the further development of the intergovernmental fiscal system.
Where does the FFC’s budget come from?
The FFC receives a budget appropriation, which is channelled through National Treasury’s budget vote. It may receive donor assistance from other countries or grant-making institutions, which may be in cash or in kind (e.g. technical assistance).
Where does the FFC obtain the information and data upon which it bases its analysis?
The FFC relies in the first instance upon the data that is collected by government. Much of this comes from Statistics South Africa, but the Commission is also able to obtain information from national departments, provinces, and municipalities. This is supplemented by primary and secondary data and information from other sources, such as tertiary institutions and research institutes.
What are the FFC’s structure and staffing arrangements?
Supporting the Commission in its work is a Secretariat, which is structured as follows:
- the Executive;
- Research and Recommendations Programme; and
- Finance and Administration.
Staff is based in Midrand, Gauteng (headerquarters) and in the Parliamentary Office in Cape Town.
What are some of the issues that the FFC explores in its research programme?
The FFC actively participates in the on-going review of the provincial and local government equitable share formulae. This involves research into and analysis of the factors that influence costs in the delivery of constitutionally mandated basic services and other constitutional obligations of government. This also includes the assessment of revenue sources and revenue-raising capacity of provinces and municipalities.
The effectiveness of fiscal decentralisation forms an important theme in the FFC’s research and recommendations programme. A key task is to assess the optimal assignment of expenditure functions and revenue sources in South Africa’s intergovernmental fiscal system.
For further information, please contact: