Archive | Finance, economic

Madonsela: state capture and corruption…

says, Zuma involved in state capture.. 

editorial.. To those who know, the silence after a bomb goes off is quite uncanny. Like the state capture bomb. Even birdsongthuli-madonsela-2 ceases and the world seems to halt for a few seconds.  Then as things start up again, people seem to gabble. Everybody is rushing about. Life starts up but the noise seems incredible, if you can hear at all that is.   Following this comes the sickening realization that there might be a second bomb.   One seems helpless.

So it was when the Public Protector’s Report on State Capture was released.   Most had the feeling that to see in writing upon the frontispiece the words “state capture” was quite surreal.   Up until then it was rumour; an “alleged” idea; something that was always “strongly denied”; certainly, shady but in any case, difficult to prove… but it certainly shouldn’t happen in our backyard anyway.

Truth must out

thuli-encaThen the bombshell report was released.  The world seemed to halt in silence whilst its 355 pages were digested. Then came the voices, mostly loud and some quite vociferous.  Some demanded more proof; some demanded immediate retribution. Many asked for the President to step down, following which was a festival of interviews on e-NCA.    Meanwhile, in Parliament the corridors went quiet.   Like a phoney war.

Rewind

Whether there is a second bomb in the form of the Hawks and the NPA again charging Minister Pravin Gordhan is purely conjecture at this stage.   It is part of a process that Parliament is not privy to.   Parliamentarians must just watch these parties go about their business, unfortunately at the expense of a jittery investment market.

What we do know is that all judicial and parliamentary processes are painfully slow and this iscropped-sa-parliament-2.jpg as it must be.   Witness the complaints if a Bill is rushed or “hammered” through Parliament.  It rarely works when carried out at speed and the process is exposed for its faults.

The law may be an ass at times and very laborious but it is there to fight corruption.  To eventually win a case against such a difficult-to-prove crime may take time but it is devastatingly successful when achieved.

However, the name Gupta is not responsible for everything.   Some of unpleasant exposures, especially in the energy field, are the result of massive incompetence rather than a temptation of financial gain.

Taking time

In ParlyReportSA, now with clients, we detail four painfully long processes which eventually will result in what may not be liked by some but have been correctly subjected to the slow but democratic procedure of Parliament – the MPRDA Bill; the investigation into the tina-joemattIkwhezi R14.5bn loss; the sale of South Africa’s strategic oil reserves; and how the mini-budget of Minister Pravin Gordhan has evaded the claws of state capture.

Our constitutional, and therefore our parliamentary system which is integrated into it, is subject to a clause which states that the president of the country is the person who is elected as the president of the ruling party’s National Executive.    This outcome only changes if that person is found guilty of breaking the law or his and her oath of office. For this outcome to be proven can take much time.

Patience a virtue

Gratifyingly also, amongst many outstanding court procedures underway, the arduous parliamentary and legislative process to ensure a recalcitrant President gets around to signing the FICA Bill, is underway.

His signature is needed in order that the countrzuma1y can meet international banking obligations and comply with money-laundering disclosure requirements. The fact that the President has not signed it, as was put before him by Parliament and has provided no reason for the apparent lack of inertia to do so, speaks volumes.  Probably a case for personal privacy will be tabled by his defence team, if he gets to need one.

Delaying tactics

Either the President in this instance will waste taxpayer’s money with a long drawn out case or be advised to withdraw, as has been his practice up until now, by acceding at the last minute and will have signed or be told to.

zwaneHe and his associates know that this Bill is a critical tool in the fight against illegal transfers of funds by “prominent persons”.  Minister Zwane’s fight with the banking sector is an unnecessary sideshow connected to this process. More becomes evident in the media , day by day, of this gentleman’s shady dealings.

Dark forces

Another fight calling for patience and now being unearthed is the level of corruption within intelligence services, Hawks and the NPA.  Hopefully, this is not as deep as the relationship that Robert Mugabe had with Nicolae Ceaușescu of Hungary, based on which he built his CIO and followed the advice gained from his training with Nangking Military Academy.

hawks logoHopefully also, with the NPA, Hawks and other major undercover government departments, only such matters as  graft involving as rhino trade and state capture bribes are the tools of trade involved and the aim remains simply self-enrichment.

Hope springs

The “goodies” in South Africa have much to undertake in order to beat the “baddies”, not helped by senior ANC officials not getting off the fence for fear of being demoted on the party list and losing their pensions.    All the same, there are so many good men and women speaking out at the moment from all spheres of political and business life,  the ANC in particular,  that “the force” would appear unstoppable.

Getting Parliament back into control and equal to the Cabinet will be a long process andparliament mandela statue calling for extreme patience, as manifested by our greatest President who demonstrated such incredible patience over many years in his long walk to freedom.

Previous articles on category subject

FIC Bill hold up goes to roots of corruption – ParlyReportSA

Parliament: National Assembly traffic jam – ParlyReportSA

Red tape worries with FIC Bill – ParlyReportSA

Anti-Corruption Unit overwhelmed – ParlyReportSA

 

Posted in Cabinet,Presidential, earlier editorials, Earlier Stories, Energy, Finance, economic, Fuel,oil,renewables, Justice, constitutional, LinkedIn, Public utilities, Trade & Industry0 Comments

Foreign assets amnesty Bill underway

Timing of window period resolved as 30 June

…..sent to clients 15 Sept…  The Standing Committee on Finance has now behind it the call for comment on a revised draft Rates and Monetaryfinancial-darwin Amounts and Amendment of Revenue Laws Bill which proposes a Special Voluntary Disclosure Programme (SVDP) for financial amnesty  in respect of offshore assets and income.     The process is therefore well underway for the introduction or tabling of the final Bill from Treasury.

The draft Bill was coupled with a second draft for comment, the Draft Rates and Monetary Amounts and Amendment of Revenue Laws (Administration) Bill, which handles implementation of the amnesty. 

gordhan2The original proposals were made by Treasury in June of this year following the statement made by Minister Pravin Gordhan in the 2016 National Budget. The idea is to again encourage non-compliant tax-payers to voluntarily disclose offshore assets and income, with a window period of opportunity to do this bearing in mind that the global standard for automatic exchange of information between tax payers is coming into force in 2017.

Alterations made

Changes to the original proposals are a re-definition of trusts to include those located externally; tax relief will apply to tax assessments going further back in date and undeclared amounts derived from foreign assets will apply for the financial years from March 1 2010 to Feb 28 2015, the common date for tax assessments.

Foreign assets

In the case of foreign assets, the tax applied was to be applied at 50% of the highest value of all assets offshore, the foreign currency conversion rate forsars-logo valuation being the highest Rand spot rate of the years applied for and declared.    A request to reduce this to 40% has been accepted by Minister Gordhan.       Treasury feels that anything less will cause discomfort those who have declared foreign assets correctly and have paid normal tax rates in the meanwhile.

Taxpayers who disposed of any foreign held assets prior to 1 March 2010 will also be able to apply for relief under the SVDP window, any tax to be payable in South Africa.    The application form is called the Voluntary Disclosure Application Form (VDP01) and can only be accessed via the SARS e-filing system if the current system is to be used for this particular SVDP.

More time

Financial advisors and banks have also pointed to the lengthy processes involved in filing applications, particularly where foreign asset valuations are involved and Treasury have indicated that the window period will run now from 1 October to 30 June 2017 to accommodate this.

The gazette states, “The SVDP (and the acceptance of electronic SVDP applications using the SARS e-filing platform) will commence on 1 October 2016 and will continue until 30 June 2017.    South African residents (individuals, sole proprietor, partnerships, deceased estates, insolvent estates, South African trusts, close corporations and companies) and former South African residents will be allowed to disclose their foreign assets held in contravention of the Exchange Control Regulations, 1961 (Regulations) as at 29 February 2016. Exchange control applications to the SVDP Unit are to be made pursuant to the provisions of Exchange Control Regulation 24 (Regulation 24).”

Particularly relevant is the addenda, “Please note that any party involved in a foreign exchange transaction that is currently under investigation by FinSurvmoney may not apply for administrative relief.”

From the proposals, it can be seen that R10m plus R1m a year is the maximum size of legal offshore investments that can be made by SA residents currently under the Act. This cannot be used to “offset” against any levy rendered against a disclosure, says SARS.       Corporates can still invest up to R1bn without informing the Reserve Bank.

Safe with SARS

SARS has said the average turnaround time is currently about 16 working days per case submitted.

Nothing has yet discussed in any way before the Standing Finance Committee on the issue of the Panama Papers, nor probably will it be, but the 1,700 South African names purported to be on record now with SARS from the Papers has been cited by some as a possible reason the Bill had not been tabled.

It is quite clear from the gazetted statement that no claims for amnesty are possible in general terms whilst an ongoing SARS investigation is in process.  ThisAfrica Money might disbar certain high profile cases therefore.

A final Bill is therefore now anticipated in Parliament for hearings, debate, concurrence by the NCOP and passage to the National Assembly for a vote since, presumably, nothing will happen until the Act is amended by both Bills.
Previous articles on category subject

Parliament debates three financial market and tax Bills
Budget 2016: more on amnesty – ParlyReportSA

Posted in Finance, economic, Trade & Industry0 Comments

FIC Bill hold up goes to roots of corruption

Bill originally approved by Cabinet

.….. sent to clients 20 Aug…..Going to the heart of the issues facing National Treasury on money launderingzuma9 and financial crime, or in this specific case the Financial Intelligence Centre Amendment Bill (FIC Bill), is the failure of President Zuma to give assent to the Bill and to sign it into law.

The delay in adding his signature gives yet another signal that there is lack of interface in constitutional terms between the Presidency, the Cabinet, National Treasury and Parliament and all of this adds more uncertainty in the economic sphere.

fic-logo-2The main objective of the FIC Bill is to conform with international pressure placed upon South Africa to update its governance ability to monitor international financial crime. During the passage of the Bill, however, it became quite evident to interested parties that the Bill could expose a lot more about South Africa’s own internal money laundering, inflows and outflows, than simply making a contribution to the global money laundering problem.

This, of course, was the original point made by international agencies when calling upon countries to agree to such legislation.    Countries have to clean up their own affairs in the process.

Crime busting

Africa MoneyThe Bill intends enhancing South Africa’s anti-money laundering (AML) processes to combat more effectively the crime of financing of terrorism to be achieved by amending the anchor Financial Intelligence Centre Act “so as to define certain expressions”.

However, in exposing monies destined for terrorism, a lot more than just terrorism could become evident in the category to be classed as “prominent persons”, a fact which has been endlessly debated in Parliament and why the Bill has come to the fore in the media.

More entrants

The fact that some in the Cabinet may not like the preamble to the Bill is evident, particularly expressed byzwane Minister Zwane in his ridiculous call for a judicial investigation to investigate the motives for calling the banking sector to report to Treasury on individual groupings and persons and for an investigation into the banks themselves for closing the accounts of certain “prominent persons”.

The target of Minister Zwane’s diatribe, the major banks, are a grouping simply preparing for the FIC Bill to become law since they know it was tabled by the Minister of Finance, having been approved by the Cabinet in the first place and having made considerable input to the parliamentary process. Also they must realize that the Bill in turn will make considerable demands upon them in terms of time and money and will be a test of integrity for all.

Split in the ranks

ramaphosaThe delay, even if for a moment, is one of many factors giving rise to the belief that the Cabinet is “at war with itself”, a fact which Deputy President Cyril Ramaphosa admits. President Zuma attempted dismally at first to distance himself from Minister Zwane’s attack on the banks, then seemingly relented but suspiciously will not let the banks proceed with the FIC Bill by making it law to set up the paper trails.

Commentators say the President is effectively involved in a web of issues involving alleged “state capture” and perhaps therefore instructions to hold up the Bill maybe upon advice from elsewhere from parties involved in the bigger picture.

No stroke of the pen

However, the very act of signing or not will eventually show if it is the President is alone in this matter since a cabinet statement in 2015 stated that the Cabinet had approved for the Bill for tabling.Parliament awaits, holding its breath, for clarification from the Presidency.  President Zuma is now, of course, embroiled on issues over the Public Protector’s report on “stature capture” by the Gupta family and, like so many other important state issues, the FIC Bill has gone on to the back burner.

In the meanwhile others, including actors who would definitely be defined as “prominent persons” as defined by the new Bill, are now crowding the stage and expressing their views, so the FIC Bill must be touching a raw nerve somewhere.

The old argument

jimmy-manyiDespite the Bill being passed by State Law Advisors, now one Jimmy Manyi, previously a corporate public affairs head, a DG in the Department of Labour and previously a Cabinet spokesperson and recently President of the Progressive Professionals Forum – all in a short period of time – has lodged a constitutional challenge to the Bill, presumably on the basis of invasion of rights regarding pr1vacy. 

MPs have complained that the Bill in question has been debated at length over one year at portfolio committee level; hearings were conducted with public expression therefore being accounted for and finally the Bill was passed by a unanimous vote in the National Assembly.  Whether nefarious or not, one must assume that any delay by the President is for good financial reason and bearing in mind the call is in fact an international call to upgrade the SA money laundering watch, the stakes are high.

At this stage nothing is stated as fact and rumours abound.     An exasperated Minister of Finance Gordon Pravin stated in an interview run by E-NCA, “Well if I can’t get the Bill through then we must just try something else.” He added, “They had just better come and arrest me. What have I done?”, he asked.

The aim

pravingordhanIndeed, the parliamentary record shows quite clearly what Minister Pravin has done.    By introducing this Bill and having had it agreed to in the National Assembly, a paper trail  is to be established in conjunction with banks on any suspicious movement of money involving “prominent persons”.   Locked cupboards will be looked into therefore and it seems as if someone or a section in the Cabinet  has had second thoughts about the Bill.

Hopefully, the stall is only temporary and the Public Protector’s report is released

Aims of Bill

Treasury originally said in their briefing to Parliament that the four principal objects of the Bill were to align the country with international standards on AML and to counter terrorist bodies; to enhance customer due diligence within financial institutions; to provide for the implementation of the UN security council resolutions relating tomoney laundering the freezing of assets of persons suspected of financial crimes; and for the FIC to introduce a risk-based approach by financial entities to the current aspects international financial crime.

Treasury countered any argument that dis-investment would be encouraged by the Bill with the answer that a lack of compliance with international rules by South would be worse but now the silence on the FIC Bill seems to have taken a back seat in National Assembly questioning in the face of rows over state funding, “state capture” and individual financial investigative probes.

Prominent persons

yunus carrimMuch debate, took place at the time within the Standing Committee on Finance when the Bill was originally debated over the definition of “prominent persons both domestic and foreign”. These were the persons who were to be monitored as part of the Treasury’s appeal to banks “to know their clients better”. The meetings were chaired by the obdurate, diligent and politically respected Yunus Carrim (SACP) and finally recommended to the House.

Treasury’s Ismail Momoniat was at pains to state to Parliament at the time that “there was no implication or presumption that prominent persons being investigated were presumed to be involved in any financial crime.”

Getting to know you

Probably the provisions most likely to affect entities operating in South Africa are the clauses affecting due diligence. Those that are accountable in terms of the Act will be required to undertake ongoing customer due diligence overviews in order to establish the identity of “the beneficial owner” and a customer’s full identity and whereabouts.

This might be where the problem lies for Cabinet, not necessarily just about the “G people”, as referred to indavid maynier Parliament by David Maynier, Shadow Finance Minister (DA), but which might involve issues of party funding – the sources of which at the moment do not have to be declared to Parliament.

Objective views

As put by Roger Southall, Professor of Sociology, University of Johannesburg and quoted in précis form by Creamer Polity, “The ANC is appropriately anti-corruption in its official stance, and indeed has put in place important legislation and mechanisms to control malfeasance. Equally, however, it has proved reluctant to undertake enquiries which could prove embarrassing.” Parastatals still account for around 15% of GDP, Southhall notes.

Whilst Minister Lynne Brown said she was determined to overhaul all state entities, nobody its seems was ready for President Zuma to assume the chair of the new idea of a State Owned Enterprises Council, meaning that he is in charge of para-state strategy – the policy of which was announced many months ago in that government wants a greater slice of the R500m spend on goods and services to go to emergent suppliers.

President Zuma said in Parliament on that issue that the reason for the consolidation was to bring about cross-cutting coordination as a policy within state utilities.

Getting control

Southall continues in his article in similar vein, “The ANC continues to regard the parastatals as ‘sites of transformation’ with certain corporations distributing financial largesse to secure contracts and favour from government. However, their success in so doing is hard to prove given the secrecy of party funding. Secondly, ANC politicians at all levels of government have sought to influence the tender process in their favour.”

On the good side, the Department of Public Service and Administration has, for instance, a draft a Bill underway for Parliament that will require all government departments to put in place measures to prohibit employees and those in special consultancy positions from “directly or indirectly” doing business with government.

Furthermore, the Public Finance Management Act, signed by President Zuma, has proven to be a well-tuned tool to control misdirected state expenditure. The FIC Bill will be the anchor legislation needed to dig deeper into AML money movements.

Who blinks first

fic-bookWith the FIC Bill, the next move then must come from the Presidency, if he remains in  office, to give good reason to send the Bill back to the Parliament despite the agreement of the South African banking system to comply with Treasury requirements to report. This is a day-to-day developing issue.

Quite clearly, some banks have forestalled their problems by refusing to handle certain business banking accounts of “prominent persons”, perhaps pre-empting that the Bill would receive Presidential assent and thus earning the ire of Minister Zwane “in his personal capacity”.

Whether the FIC Bill might get further to the very roots of the party funding system is another matter but for the moment the focus was on “prominent persons” and the necessity to get the banks into action in terms of the law.

Meanwhile, the Portfolio Committee on Trade and Industry will continue to debate the “Twin Peaks” legislation which will again tighten up on banking and financial procedures on both regulatory and prudential aspects. But here again, there might be delays.

Previous articles on category subject
Red tape worries with FIC Bill – ParlyReportSA
Parliament, ConCourt and Business – ParlyReportSA
PIC comes under pressure to disclose – ParlyReportSA

Posted in cabinet, earlier editorials, Earlier Stories, Finance, economic, LinkedIn, Security,police,defence, Trade & Industry0 Comments

Anti Corruption Unit overwhelmed

Focus on top down elements of patronage 

….editorial….As Parliament went into short recess, the Anti-Corruptionhawks-2
Unit, the combined team made up of SARS, Hawks, the National Prosecuting Authority and Justice Department, divulged that some 400 cases of public service corruption have been “successfully prosecuted since 2014”.

Out of hand

To have that number of public service thieves arrested is no small number but there is a worrying afterthought.   One wonders how many Anti Corruption Unit cases have been dropped or unsuccessfully prosecuted, given the fact such icebergcases are difficult to prove and there is often poor performance of by investigation teams. Like an iceberg, probably only one seventh of corruption in the public service is apparent.

sars logoCases currently under investigation in both the public and private sectors were given as 77, now 78 since Tom Moyane, head of SARS and member of the Anti Corruption Unit itself, at the time admitted to the Committee that he had not spoken to the Hawks about his second in command, Jonas Makwakwa.

Laundry list

The question by MPs was about the mysterious R1,2m deposited into Makwakwa’s private banking account.  According to reports it appears Moyane has subsequently rectified the situation and reported the event.  So yet another enquiry must start, which will only exacerbate the relationship problem between Moyane and the Minister of Finance, Gordhan Pravin.

Added to these national events in Parliament is the fact that corruption investigation remains particularly problematic at provincial and local government levels where it can go on undetected. The story emerging from the Tshwane Municipality is a case in point. The National Council of Provinces has no part to play in such matters.

Top down problem

Over the last few weeks, events in the parliamentary precinct have dominated the domestic media and consequently there is no need to repeat what is patently obvious.  South Africa clearly faces a leadership problem as far as financial governance and policy initiatives are concerned.

hawks logo
Doubt has placed, in the media in main, on the leadership integrity of the Hawks, NPA and, to some extent, with the Anti Corruption Unit inasmuch as their relationship with the President is concerned. A weary public waits for the next story of public service patronage.

Public service heads appear at times uncomfortable when they are reporting to Parliament and seem to be looking over their shoulder at times to see if what they have done or said is politically correct. Troubling is the fact that regulatory bodies are at odds with the ministries that founded them.

Bottomless pits

Although progress has been made on the national level in developing legalmoyane frameworks with provisions and regulations to address theft of public funds, such as the Prevention and Combating of Corrupt Activities Act and the Public Finance Management Act (PMFA), the good guys are still behind in the race to catch the bad guys.   A sad conviction rate of 28% on cases brought before the court by the Assets Forfeiture Unit overall was quoted to the Standing Committee.

Poor leadership

On the same subject, the surprising failure by the President to sign into law the Financial Intelligence Centre Bill to fight money laundering in terms of international prudential agreements has represented a further setback. Hopefully this is only temporary since the country needs to join up the dots to encircle organised corrupt financial activity.

Worse, some government SOEs appear to conducting their own affairs without approval by Treasury. Cabinet members are involved. Witness the extraordinary offer made by the Central Energy Fund, reported in the media, to Chevron for its refinery in Cape Town and downstream activities in the form of 850 fuel outlets, presumably backed by the funds emanating from the sale of the Strategic Fuel Fund (SFF) reserves unauthorised by Treasury.

Upstream mayhem

Tesliso MaqubelaDDG Tseliso Maqubela of Department of Energy has now told the media that SFF sold the 10 million barrels of crude in storage in December at rock bottom price of $28 a barrel to a unit of Glencore, Vitol and a company called Taleveras. The condition of the sale was apparently, Maqubela said, “that the oil (will) not be exported and so the government considered it remaining as part of its strategic reserve stockpile.”

Shadow Minister of Energy, Pieter Van Dalen MP, citing Business Day, said the sale has been connected with Thebe Investment Corporation – “the ANC linked investment arm”, he added.   Vitol is the company that has allegedly bought the fuel stock and which owns Burgan Cape Terminals next to Chevron, the deal being linked by Van Dalen with Thebe for the building of its new storage tanks. Burger had just been awarded a 20-year lease by Transnet for land needed.

cape-town-harbourChevron brought to Parliament its case against Burger saying it was improper to build a new tank terminal next to its refinery for Burger to store oil for trading whilst they had no Transnet pipeline to Gauteng as did others from Durban but the chair of the portfolio committee accused Chevron of monopolistic behaviour. Subsequently the complaint was rejected. It was shortly after that Chevron announced its intention to sell its refinery.

Twisting path

Whether the Minister of Energy, Tina Joemat-Pettersson knew all of this when she appeared before the Portfolio Committee of Committee on Energy,tina-joematt her attendance covered in this report, is a moot point.   If she did know something, she is culpable in that she withheld the information, both from Parliament and possibly Treasury.

Alternatively, if she didn’t know that an offer was made to buy Chevron and that SFF had sold the state’s oil fund’s reserves to Swiss giant Vitol, possibly involving Thebe Investments, she should resign immediately as an incompetent.  Where the R4.4bn odd involved in the sale by SFF has landed up is not clear and when the oil will leave SFF’s Saldanha terminal and move to Burger in Cape Town is also not clear.

Clearly, in our view, this has been a major transaction known about at Cabinet level and the DA has called for an urgent enquiry. This will presumably bring the Asset Forfeitures Unit’s number of cases under investigation up to 79.   And so it goes on.  Tegeta and Eskom included.

Nothing but the truth

One senses a continuing cover up by government departments in reporting to Parliament for fear of upsetting any Minister’s apple cart, whereas Parliament should be a refuge of openness, accountability and public oversight on state activities and act as an arbiter to represent the people of South Africa.

vincent-smithIn the darkness, we saw a flash of light and a refreshing change when ANC MP, Vincent Smith, in grilling the Hawks as part of the Anti Corruption Unit interview, reminded them fiercely “This Is Parliament. If you cannot speak the truth, then do not speak at all.”  Whilst that remark may encapsulate the current problem, it may be also the cause of some Ministers and government officials choosing not to speak at all.

Legal jungles

Concurrent with the number of judicial enquiries into strange contracts, bad senior appointments, misuse of privileges and a litany of unaccountable expenditure without proper approval, what also has increased is the statement used by many when speaking to Parliament, including ministers, that the full facts cannot be given “because the matter is sub-judice”.

The number of matters that are sub-judice would not be so great if powers were given back the Treasury to re-assume its proper place in the parliamentary process.  Expenditure, if not approved by Treasury, would never see the light of day.

In conclusion

parliament 6Bad governance and corruption is the fodder that feeds the right wing anger sweeping the world and creates the spectacle that we see almost daily in our National Assembly, the creation of which institution is supposed to be one of the three pillars supporting the Constitution.

Previous articles on category subject

 Parliament, ConCourt and Business – ParlyReportSA

Parliament and the investment climate – ParlyReportSA

Anti-corruption law is watered down, say critics – ParlyReportSA

Nkandla vs NDP: the argument rages – ParlyReportSA

Parliament closes on sour note – ParlyReportSA

 

 

 

Posted in cabinet, Earlier Stories, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, Justice, constitutional, LinkedIn, Public utilities, Trade & Industry0 Comments

Carbon tax offsets on the way

Tax offsets plan almost ready for Parliament

sent to clients 12 Aug     Only a little reminding is needed that 29 July 2016 was the deadline for comments to carbontax1Treasury on the forthcoming carbon tax offsets plan which Minister of Finance, Pravin Gordhan, has promised will come into effect 1 April 2017 with some saying it might even be as early as 1 Jan 2017.

It was in 2014 that National Treasury published the first carbon tax discussion paper for public comment. It was agreed the that such a tax would be phased in over a period of time, the first phase running up to 2020. The marginal rate was the envisaged at R120 per tonne of CO2 and during phase-one, a basic percentage based threshold of 60% will apply for tax offsets below which tax is not payable in order to assist with transition into the new scheme.

SARS as usual

Everything has been based on South Africa’s commitment to the Copenhagen agreement signed in 2009 to reduce greenhouse gas emissions by 34% by 2020 and 42% by 2025 – below the “business as usual” scenario.   The motivation provided for the tax remains as “so the cost of climate change an be reflected in the price of goods and services”.

sanedi carbon capIt was agreed that the tax would be administered by SARS.    Since that date, whilst the pro and cons of such a tax caused heated debate in some circles as to whether an introduction of a price mechanism could influence consumer and producer behaviour, the inclusion of Eskom in the tax net left many feeling somewhat helpless due to the utility’s enormity.

Eskom maybe dictates

OUTA complained that “Eskom’s various electricity tariff increases of almost three times the rate of consumer price inflation over the past eight years has become a tax of its own on society.”

They added that the electricity increase impact had resulted in fact to a reduction in electricity and energy as a result and this, which coupled with reduced production and consumption, had inadvertently caused a reduction of greenhouses gases having already taken place, OUTA said.   Of course, this remains totally unproven.

Neither Cabinet nor Treasury/SARS have replied to OUTA’s call to note “unintended consequences”.  No Treasury official it appears has felt that the Copenhagen Agreement can be dis-respected and have presumably felt that OUTA’s platform that a drop in national growth, due to global events and construction problems, has had little to do with the actual design of an overall process to cut carbon emissions over the next period of fifty years or so. The argument continues.

Quantifiable is the word

Now the first phase of the tax offsets are being set in concrete with Treasury having called for comment on theemissions final formula for the first phase of tax proposals, proposing, as before in the draft, that companies can reduce their liability for carbon tax by up to 5% or 10% of their total greenhouse gas emissions, depending on their sector, by investing in qualifying projects that result in quantifiable greenhouse-gas reductions.

Treasury says that the qualifying investments and offsets are likely to be in sectors such as agriculture, public transport, forestry or waste management and the accompanying documents note…“The proposal to use carbon offsets in conjunction with the carbon tax has been widely supported by stakeholders as a cost-effective measure to incentivise GHG emission reductions.”

How not to pay tax….offsets

“Carbon offsets involve specific projects or activities that reduce, avoid, or sequester emissions, and are developed and evaluated under specific methodologies and standards, which enable the issuance of carbon credits”, SARS concludes.

It is worth noting that tax legislation usually comes in the form of a “money” Bill which Parliament can debate butgreen scorpion not amend. Should the debate raise issues, then Parliament can address Treasury who will, according to their dictates, reconsider and change if they alone see fit.  

The general feeling seemed to be from hearings was that this event had to happen in line with other established economies, although OUTA has remained strong on its views that Eskom as a major player in the energy mix is distorting the situation.

The Treasury website has all the details of rules on which tax regulations will be based.
Previous articles on category subject
Treasury’s plan for carbon tax – ParlyReportSA
Carbon offsets paper still open – ParlyReportSA
Carbon Tax under attack from Eskom, Sasol, EIUG – ParlyReportSA
Treasury sticks to its guns on carbon tax – ParlyReportSA

Posted in Energy, Enviro,Water, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Special Recent Posts, Trade & Industry0 Comments

Parliament awaits to hear from Cabinet

Same Parliament, same Cabinet, different mood

..editorial……Parliament has now resumed with the same Cabinet, the same 400 MPs, the same ANC Allianceparliament 6 majority instructed whips and the same names in the party benches but the ambiance is very different.     This subtle fact, however, matters little in the immediate future.   Legislation before the National Assembly (NA) will still be subject to a simple numbers game when it comes to voting. Well, almost.

In the case of a Section 76 Bill, that is a Bill that needs not merely the concurrence of that portion of the 400 MPs that sit in the NCOP but subject to full debate by all nine provinces and a mandate returned in favour or not, there might be the beginnings of healthier opposition. Power at local level has been emboldened since Parliament last met.

So far, matters of consequence have been that the Department of Energy has presented its REIPPP plan with support from most other than Eskom with no Minister present and the Mineral Resources Portfolio Committee has re-endorsed a revised Minerals and Petroleum  Resources Development Amendment Bill for process by the NCOP using its ANC majority. Again no Minister was present. Eskom will be presenting on this and matters regarding coal any day.

Old tricks

jacob zumaHowever, presuming the picture in Parliament stays as it is until the 2019 national election with Jacob Gedleyihlekisa Zuma at the helm as President, it will be interesting to see what type and how much legislation is hammered through the NA by the ANC using the same old tactic of deploying party whips with threats of being moved down on the party list system for a total majority, timed last year in a rush just before a recess.

Notably, now in the case of three Bills sent for assent after being voted through, the three were not signed by President Zuma into law acting on legal advice.

With this trio now back with Parliament on the grounds of either suspected unconstitutionality and/or incorrect parliamentary procedure, the issue is now whether the coterie of Cabinet Ministers that surround the President, with Director Generals appointed by and who report to those Ministers, will take Parliament more seriously.

Not hearing

Good advice is not good advice when it comes in the form of a last minute warning not to put signature to any Bill thereby turning it into an Act of law. Plenty of such advice not do this in respect of a number of Bills was previously given during parliamentary portfolio committee debate, at parliamentary public hearings from affected institutions, business and industry and even earlier in public comment when the Bills were first published by gazette in draft form.

Similarly, the lesson seems not to be learnt in higher echelons that the independent regulatory entities are also not to be ignored – institutions from the Office of the Public Prosecutor to ICASA, from NERSA through to the board of the Central Energy Fund and from National Treasury to international courts, the UN and international bodies protecting human rights. Parliament is due to hear from ICASA any moment.

Most worrying, however, are the attempts to by-pass Treasury when presenting policy to Parliament. Ideological bullying can bankrupt a country in no time.

Such issues as Minister Aaron Motsoaledi’s National Health Insurance dream and Minister Joemat-Pettersson/President Jacob’s Zuma’s dream of six nuclear energy reactors – plans that the country should not possibly not countenance from a financial aspect – have neither been presented to Parliament in the proper national budget planning form or officially and financially endorsed.

Missing money details

Minister of Health, Aaron Motsoaledi, has gone as far as a White Paper to Parliament on the NHI and Minister Joemat-Pettersson has briefed Parliament on nuclear tendering. Treasury have said nothing about a financial plan in each case. Money is short, as evidenced by Treasury stepping in on the provisions for BEE preferential procurement. Somewhere there is a disconnect.

As for President Zuma’s continued pressure to bring traditional leaders into the equation with what amounts to two separate judicial systems and has even talked of the equivalent of four tiers of government – one therefore not even reporting to Parliament and certainly no idea of local government and nor subject to the PMFA  has its problems. President Zuma has used his ally, the Minister of Justice, to table the Traditional Courts Bill before Parliament. Opposition parties will walk out on that one, we are sure.

The Speaker of the House, Baleka Mbete, as part of the same coterie, has made a mild signal that the days of Cabinet maverick behaviour, even arrogance, towards Parliament and no respect for the separation of powers may be coming to an end. The SACP is clearly not happy. That is where the new ambiance felt in an unchanged Parliament may play an unofficial part and pressure may start building.

 
Previous articles on category subject
Parliament to open Aug 16 – ParlyReportSA
Parliament under siege – ParlyReportSA
Radical White Paper on NHI published – ParlyReportSA
Zuma’s nuclear energy call awaits Treasury – ParlyReportSA
Here it comes again…. the Traditional Courts Bill – ParlyReportSA

Posted in cabinet, earlier editorials, Electricity, Energy, Finance, economic, Fuel,oil,renewables, Health, Justice, constitutional, Trade & Industry0 Comments

Parliament to open Aug 16

Parliament .. in a galaxy far, far away

 

……editorial….There’s nothing  more like an election to disrupt Parliament and the business of running a country thanparliament 6 an election.    Probably, and to a lesser extent, the same is going on in the USA but nevertheless few politicians in SA at present seem to have their eye on the ball when it comes to important decisions on matters of state.     Parliament is, of course, in recess.

A good many of the Cabinet seem to be on a different planet. Some appear to be focusing on putting out political fires in the lead up to what is, after all, only a local election. A disproportionate amount of time seems to be spent in a parallel world of infighting, all of it totally unrelated to business and industry. Our Cabinet seem more concerned with issues such as the SABC, for example.

Short on crew

Indeed, one could be forgiven for thinking that the only people at their desks at the moment are Mark Barnes at the Post Office, Minister Lynne Brown with her fight to reform public utilities and control Eskom’s statements; members of the Competition Commission; and Minister of Finance Gordhan Pravin and his Treasury crew.

On communications matters outstanding, Minister Faith Muthambi seems to have left the planet altogether.  Minister Cwele is fighting with his own colleagues on broadband allocation,putting the brakes on a desperately late decision. tina-joematt

Minister Joemat-Pettersson seems lost as to whether to go ahead with nuclear or not; now having to decide it seems whether to have more independent power providers or not and possibly reverse her promises to the private sector; trying fruitlessly to buy Chevron with SFF money and whether or not to renew the contracts of highly experienced personnel at NERSA. This Minister seems badly off radar.

Hands off

Eskom’s unexpected statement that the private sector REIPPP clean energy programme “makes no economic sense” must have wounded DTI’s investment programme and Minister of Trade and Industry, Rob Davies, also seems missing from the control deck in the light of  Zimbabwe trade inconsistencies. Again, living in another world far, far away, not having a plan “B”.

Meanwhile, the Presidency has a whole in-tray of unresolved legislative issues to make decisions upon and, sadly,Rob-Davies decision-making appears not to be the President’s forté.     Parliament re-opens for business on 16 August and it won’t be a moment too soon.

From now until the Christmas recess, matters before Parliament will vitally affect business and industry. It would seem doubly important therefore to get this election over and hope for some coherent policy statements from Cabinet.
Previous articles on category subject
Parliament and the investment climate – ParlyReportSA
Parliament closes on sour note – ParlyReportSA
Parliament, ConCourt and Business – ParlyReportSA

Posted in Cabinet,Presidential, earlier editorials, Finance, economic, LinkedIn0 Comments

PIC comes under pressure to disclose

Unlisted investments of PIC queried….

matjilaWhen asked for information on how the Public Investment Corporation (PIC) had invested its funds, Dr  Daniel Matjila, Chief Executive Officer, told parliamentarians that the most he could do, even with ‘listed’ investments, was to give only names. Any terms and condition of any investment agreement could not be made public. On ‘unlisted’ investments, he held back completely.

He was then formally asked by David Maynier (DA) if the PIC had invested, directly or indirectly, any funds in any Gupta-owned enterprise. He was also asked for details of any financial implications upon the Government Employee Pension Fund (GEPF) and other pension fund assets resulting from the dismissal by the President of former Finance Minister Nene.

Confidentiality

Dr Matjila responded that the fund “could not cross the line of disclosing private information” and the members ofPIC logo.2 the Standing Committee on Finance, before whom he was appearing “should not read into his statements any insinuation that the PIC was protecting information.” He noted that he was totally aware of the fact that the PIC was under investigation for passing funds to the ANC and any such idea “was totally false”.

As far as funds to any Gupta owned business was concerned, Dr Matjila replied that the organisation stood by its earlier answers to the media that it had not invested directly in any Gupta owned enterprise. Following this remark, ANC MPs stood by Dr Matjila and told Opposition members that the PIC could not become “entangled” in such questions which were veiled with gossip and insinuation. It was the word “directly” used by Dr Matjila that caused the question.

Sub-judice

yunus carrimThis point was emphasised by Yunus Carrim, Chairman of the Committee, that most of the questions that were concerning Mr David Maynier should only be dealt with after the investigation of the possibility of ANC funding by the PIC had completed its course. He said that Dr Matjila was bound by circumstances to say nothing.

Present at the standing committee meeting was Deputy Minister of Finance, Mcebisi Jonas, who said the reporting process of h a pension fund to the committee should not get side-tracked with politically motivated questions. Maynier had asked this time about the possibility of “indirect” investments by PIC of any Gupta businesses.

On the issue of the effect of the ‘9/12 issue’, as referred to by Dr Matjila when Nhlanhla Nene was fired, he reported that the impact of this event had caused “significant losses” to the PIC portfolio. The GEPF lost R95bn, the Unemployment Insurance Fund lost R7bn and the Compensation Fund had lost R3bn – all managed by PIC and the event had been most worrying.

However, he said that the performance of all the funds had been subsequently excellent in the sense that recovery was achieved quite quickly – in fact “the recovery represented more than all the PIC funds lost within those two days of crisis.”

Information withheld

David Maynier (DA) remarked that funding was still shrouded in mystery and that he was “extremelydavid maynier uncomfortable” that the PIC would give no information at all on the “unlisted” investments of PIC.

Reporting generally, Dr Matjila said the fund had benchmarked itself and its operations compared favourably with “top private sector investment companies”. The GEP Fund “had shown over five years a 14.3% interest factor compared, he said, to a global median of 9.9% and a local investor median of 10.1%.” It had invested approximately R33.9bn in numerous portfolios aimed to drive transformation and create jobs, he said.

He told parliamentarians that the PIC “had invested approximately R33.9bn in numerous portfolios aimed to drive transformation and create jobs.” He said any risk taking was carefully managed and remained on the conservative side. Furthermore, he assured MPs that PIC did not take any risk that could not be “managed”.

Listed investments growing

Dr Matjila said that for all investments, the total allocation was now R400bn and “partners were always sought that would make positive returns”. ‘Listed’ investments in the last five years had grown from R495bn to R892bn recording a growth factor of 12.5% per annum.

vodacom logoThe PIC always held to principle, he said, that there was always a need for BEE compliant businesses to be considered so that it attracted a portion of government expenditure. ‘Unlisted’ investments, nevertheless, had large share of the market holdings, he said, with roughly R55 billion allocated to this form of investment. The total allocation for PIC investments, including GEPF and UIF, was approximately R400bn.

On investment policy, Dr Matjila said that his team liked to look at partnering with other stakeholders that added value and knowledge to make sure that maximum benefits and input from any arrangement were received.

Downstream SMME outlets

On SMME development, Dr Matjila said that PIC was “in discussion with groups such as Spar and Woolworths to ensure that small business was represented in their current growth patterns.” He said it would seem important for PIC to participate further in the Barclays Africa “sell down”. PIC, he noted, had invested in many international and local companies with assets within South Africa “in order to drive economic growth and increase job creation.”

Dr Matjila turned finally to ‘unlisted’ investments and said PIC had a slate of roughly R55bn to work from. Such investments were usually international, he said, and were not necessarily BEE compliant. David Maynier (DA) asked whether the GEP Fund management was “comfortable with the fact that a confidentiality clause existed on so many investments and the fact that disclosure to Parliament was denied.” Some ANC members also mentioned disquiet on this issue. Maynier said he intended to pursue the issue of non-disclosure of “unlisted” investments further.

Previous articles on category subject
Retirement savings subject of treasury probe – ParlyReport
Treasury calls for “Twin Peak System” with two financial bills – ParlyReportSA

 

Posted in Earlier Stories, Finance, economic, LinkedIn, Public utilities, Special Recent Posts, Trade & Industry0 Comments

Immigrant visa problems dominate debate

sam mototabaNorthern agriculture seen as visa defaulter…….

sent to clients 15 June…..Sam Morotoba, DDG of Public Employment Services, Department of Labour (DOL), told parliamentarians that it was DOL’s view that visa immigration policies for South Africa must involve cutting down on the flow of unskilled immigrants into the country.

From the nature of the debate, it was evident that DOL was more concerned on the creation of jobs for South Africans and not the issue of visa granting to specialist cases, a fact which gained the support of most  MPs.

Sam Morotaba said that amongst the massive inflow of undocumented persons crossing what is some 4,000kms of border there were those that did find work, had no entry visa and were totally exploited in the process. Most of the border was totally “porous”, he said.

More facts emerged during the particular Labour Portfolio Committee meeting when both DOL and the Department of Home Affairs (DOHA) jointly made presentations on immigration policy.   The practical aspects of the issue of work permits to foreigners, normally called “temporary visas” were discussed.

Not asylum seekers

Over 70% of the non-documented labour problem occurred in Limpopo Province, according to DOL figures.    It was also shown that there were approximately 300,000 illegal immigrants in the country at present, whether they were working or not.   Refugees from war and refugees seeking asylum were a completely different issue, Morotaba said, and they represented a much smaller number, .

sa border beit bridgeSpecially conducted “raids” on farms and businesses in the Northern areas and which were carried out by the few inspectorate staff that were available to DOL were frustrated by the advent of the cell-phone.    Messages were simply sent ahead by immigrant employees advising that a “raid” was in progress and workers who had no documentation but wanted the work simply went into hiding.

Some employers told their employees not to come to work when appointments with DOL inspectors were made. “Raids”, in conjunction with South African Police Services,were extremely difficult to undertake unless the matter was serious enough to consider that a possible breach of the law had taken place.

Traffickers

The problem was exacerbated, said Morotaba, by traffickers that postured as labour “sellers” and went from farm to farm offering cheap labour in the form of immigrants without documentation looking for work.    Inspectors had resorted to “raids” on Friday “paydays” and also at night.  Employers were generally unhelpful; gaining access to farms was difficult; and the success rate in finding illegal immigrants was therefore low, said DOL.

Farmers remained the major culprits, it became apparent – an issue which has been the main theme of chairperson Lumka Yengeni of the Portfolio Committee on Labour for a number of years.

DOL said that there were more than five million legal immigrants in the country and the laws of South Africa demanded that all workers be protected, whether illegal or not, in terms of the Constitution. This had to be borne in mind, they said.

Desperate people

However, underpaying desperate people who had no temporary visa and housing them in filthy conditions, was farm labourersquite a different matter and was a contravention of all international principles. This was the issue facing DOL.

Also, some companies and employers simply did not want to test the local market for labour suitability or could not be bothered to try, DOL said, and also probably also wanted to avoid UIF participation, collection and payment and few farmers got involved in the cost of skills training.

Home Affairs briefing

The main agenda of the portfolio committee meeting in question was the subject of the nature of relationships between DOHA and DOL. Also their observations were requested on the current position with regard to delays in issuing visas and DOHA was asked to give a technical explanation of where the visa issuance process was headed.

DOHA was represented Acting Chief Director for Visas, Home Affairs, Modiri Matthews, supported by Ronnie Marhule. Modiri Matthews said his department was mandated by the Immigration Act to deport those unlawfully in the country.

visa stampHe made it clear that the Immigration Act stated that a temporary residence visa could be granted only for the categories of Study, Treaty, Business, Crew, Medical Treatment, Relatives, Work, Retired Persons, Exchange and Asylum.

It was only when a permanent resident permit was issued that the holder was entitled to live in South Africa on a permanent basis, with all the rights and obligations of a citizen except the right to vote and use an SA passport. This was standard in most countries, he said.

Visa classification

There were three kinds of visas – Corporate, General Work Visa and a Business Visa.   Most farming entities and general business fell under the category of corporate visas, where a requested number of foreigners was needed by an employer.

Proof had to be supplied that despite a diligent search, the applicant could not find suitable SA citizens or permanent residents to occupy the positions; the job description had to be given; and it had to be conditional that salary and benefits paid would not be less than standard agreed emoluments.

Home Affairs confirmed that feedback indicated that the current system is too cumbersome due to DHA’s lack of capacity to handle the volume of applications; the fact that “standard operating procedures” within the department were ambiguous; that many officials were insufficiently trained and turnaround around times were too slow.

Speeding things up

Modiri Matthews promised parliamentarians that new electronic systems were in place to ensure a more secure system of interaction between DHA, DOL and Department of Trade and Industry (DTI) – the latter being responsible for issuing the quota or number of visas issued, all of which had expiry dates. The plan envisaged is that once the permission is issued by DTI, for DHA to take 30 days and DOL no more than 8 weeks to process a visa request andvisa with hand DHA to issue or decline.

When asked by MPs whether or not Home Affairs had a tracking system on visas granted but which had expired, whether working or not, Modiri Matthews responded that they had and the number of expired visas currently stood in the area of 30,000, which were on the tracking system.

Waiting period

Present at the meeting were also Ronnie Marhule, Acting Chief Director of Permits and Visas and Phindiwe Mbhele, Director for Corporate Permits and in question time, Angie Loliwe of the ANC complained to them that if the application were with DTI for even only 2 weeks, then the DOL process was added for thirty days and with Home Affairs adding about 8 weeks, there was not really any possibility of waiting less than three months for any one application to be processed at the very best. This was too long, she said.

Both Directors stated that there were “pressure points” mainly related to capacity to deal with the volumes of applications and this mainly affected “corporate” visas to farm workers. They told members of the Labour Committee that they were trying to deal with this, especially where urgent business applications were concerned.

They reminded MPs that with nearly 300,000 illegal immigrants, systems such as an “expired document” process was a time consuming business and DOL “had their work already cut out with the farming situation and inspections.”

One track discussion

Ninety per cent of the meeting time was spent discussing farm labour problems in the light of ANC problems with illegal labour entry to the North. Modiri Matthews said that there were only 11 centres in South Africa handling visa applications. There was a new office in Sandton, Johannesburg, he said, specifically geared to business needs.

To the irritation of some of the ANC members it was confirmed that the offices in East London and Port Elizabeth had been closed.   There was only one office for the whole of KwaZulu-Natal.   However, Matthews said there was was a specific plan to open two new business offices -presumed to be Cape Town and Durban.

Previous articles on category subject
Home Affairs gets tough on expired visas – ParlyReportSA
Home Affairs gives reasons for visa changes – ParlyReportSA
Agri-SA gives views on minimum wage – ParlyReportSA

Posted in Finance, economic, Labour, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Central Energy Fund hatches fuel plan

A lot going on at Central Energy Fund…..

Central Energy Fund (CEF), the state utility which controls the Strategic Fuel Fund (SFF) and fosters PetroSA, cef logohas again been outside of a plan that has Parliamentary approval or, it appears, Treasury knowledge.    CEF falls under the aegis of the Department of Energy (DOE) and is therefore responsible to Minister of Energy, Tina Joemat-Pettersson.  Clearly there is much going on of which Parliament knows nothing – in recess as it is.

The history of CEF’s  problems go way back before the period during which  previous Minister of Energy, Ben Martins, held office and even before Ben Martins, as an MP was chairperson of the Parliament Portfolio on Energy. Most of CEF’s troubles appear to involve the fuel storage facilities  at Saldanha Bay on the West coast and PetroSA’s operation on the East coast, causing considerable negative comment from the portfolio committee and Ben Martins himself at the time. Sadly, Minister Martins was not chosen to remain by President Zuma.

tina-joemattQuite clearly a plan has been hatched to meet Cabinet ambitions.

Glaring omission

It was only after  Minister Joemat-Pettersson’s current budget vote speech did the investigative journalism of the newspaper media discover the sale of almost completely the entire SA reserve oil stock of the Strategic Fuel Fund (SFF) held at Saldanha Bay.

Not only was the sale concluded without any mention but the quantity of fuel involved appears to have been a major financial  decision  undisclosed in any cabinet statement.    It appeared that CEF had allowed SSF to sell 10 million barrels of crude — close to the entire stockpile — in a closed tender at the point that the oil price had bottomed at somewhere around R34 Brent.

It also appears that this was without the agreement of Finance Minister Pravin Gordhan and Treasury whosepravingordhan concurrence is needed under the Central Energy Fund Act.  How this will play with Treasury and the Auditor General is not clear, nor whether when and how CEF intends to replace this. The Democratic Alliance will no doubt be asking for answers in parliamentary question papers.

What the Minister said

It is interesting to note exactly what the Minister had to say to Parliament about SFF in holding back, it appears, on such major financial move. She told MPs that in line with the Presidential Review Commission on State Owned Entities (SOEs) that her Ministry had been working towards “a review of the composition of the CEF Group of companies.”

She went on to say, “Our work in this area includes the strengthening of the entities in the oil and gas sector and the stated policy objective of the creation of a stand-alone national oil company, using PetroSA as a nucleus.”
SFF had a good revenue base, she said.

saldanah bay 2“We shall finalise this work by October 2016”, Minister Joemat-Pettersson said and she would revert to Parliament on Cabinet views and strategies for a revised energy sector framework. “Accordingly, in 2015, the Ministry of Energy issued a ministerial directive for the rotation of strategic stocks in the SFF and this has resulted in an increased revenue base for SFF whilst at the same time maintaining stocks within our storage tanks for security of supply.”

Long term view

“This as a result, the Minister continued, “of a long term lease and contractual agreements with the buyers. The estimated revenue to accrue from this process is around R 170 million per annum, significantly boosting the balance sheet of the SFF.”

The Minister concluded that through the rotation of strategic stocks and trading initiatives the SFF had further consolidated its ability to be self-sustainable. “This has also allowed us to replace the unsuitable stock that we have been storing in our tanks which has been both uneconomical and did not contribute to security of supply.”

“The SFF will continue to ensure that it is able to respond to any shock in the market, whilst optimally making use of the opportunities presented in an evolving oil sector”, she concluded regarding West coast activities.No figures were given nor a clear indication mentioned that a sale had been concluded.

  SASAL LOGOHowever she was particular in supplying numbers regarding the joint venture between Sasol and Total when she said, ” Effective from 1 July 2006, Sasol Oil sold 25% of its shares to Tshwarisano LFB (Pty) Ltd, a broad based black economic empowerment consortium comprising of 150,000 direct shareholders and 2,8 million beneficiaries. The value of this transaction amounted to nearly R1.5 Billion, making it a significant BEE transaction in the liquid fuels industry.”

Trading nightmare

Therefore, the sale of nearly the entire reserve held by SFF, whether it is kept in the same tanks at Saldanha or not, at an oil price when at it’s very lowest, “suitable” or not, and being obliged by the Act to eventually replace it some later point should get an explanation.   However, it seems that there was an incentive to sell.

Also, to have to buy back at an oil price which is currently already well over double would appear to be completely against the tenets of the Public Finance Management Act; what the Auditor General is bound to call “fruitless and wasteful expenditure”; and contradictory terms of the Minister’s statement to Parliament that the SFF “has the jacob zumaability to be self-sustainable”. Unless, of course it is bolstered by external funds. 

Gas nightmare.

Parliament is of course closed for the election recess but no doubt there will be a parliamentary uproar on the subject – if not an investigation, which will come on top of the further current investigation of CEF’s activities as far as PetroSA is concerned.Once again the question will arise on how it was possible for PetroSA to continue with Project Ikhwezi when drilling for gas for two years in an area already defined by experts as impractical in lieu of fault lines in the projected gas field.

Central Energy Fund seen as politically driven

R11.7bn was the total “impairment” of PetroSA, the result of underperformance of Project Ikhwezi in its efforts to supply gas onshore to Mossgas. The total PetroSA loss for 2014/5 was in reality R14.6bn after tax. Currently a team comprising of industry experts is now defining a new strategy to save the PetroSA in its offshore struggle on the East coast, according to DOE reports to Parliament.

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordThe experts were not named but the exercise is entitled Project Apollo and reports were also given to Parliament that the team has progressed well so far, said controlling body Central Energy Fund during 2015.

PetroSA was originally flagged by Cabinet some twelve years ago as “South Africa’s new state oil company”.     Last year, CEF described at the time PetroSA’s performance in their annual report to Parliament as “disappointing”, resulting in harsh criticism last year from the Portfolio Committee on Energy. The subject was not raised this year by the Minister in her Budget vote speech.

Failed deal

What, however, was raised in opposition questioning in the National Assembly by Pieter van Dalen, DA Shadow Deputy Minister of Energy, was Central Enegy Funds venture into the proposed purchase of Engen’s downstream activities from Malaysian company Petronas, known as “Project Irene”. This was understood to be the Cabinets secret plan to own the promised state oil company.

fuel tanker engenThe purchase from Petronas, who own 80% of Engen, was an attempt through Central Energy Fund to gain a foothold in the fuel retail and forecourt space by acquiring a stake in Engen, South Africa’s largest fuel retailer. The remaining stake is held by the Pembani Group.

First try

The board of PetroSA was repeatedly advised by both transaction advisers and the Treasury, according to Deputy Shadow Minister van Dalen, “that the proposal to buy the Engen stake did not make good business sense.”
“However,” van Dalen said to MPs, “the project was strongly championed by Minister Joemat-Pettersson and President Jacob Zuma. In the end, the deal fell through due to lack of financing.’These sort of things cannot go on”, he said.

The last word

This particular meeting in the National Assembly was completed by Shadow Minister of Energy, Gordon Mackay,gordon mackay DA attacking the Minister for “misleading the country on nuclear energy deals.”

He concluded after a long speech on the subject of the proposed nuclear build programme and what he referred to as “anomalies”, with the remark “We must ask ourselves Chair – why is our government doggedly pursuing this nuclear deal. It is clearly not a deal in the interests of the poor. It is clearly not a deal in the interests of business. It is clearly not a deal in the interest of the nation.”

Gordon Mackay did not know about the Chevron approach, or at least he did not indicate that he did.

Previous articles on category subject
Central Energy Fund slowly gets its house in order – ParlyReport
PetroSA on the rocks for R14.5bn – ParlyReportSA
Chevron loses with Nersa on oil storage – ParlyReportSA

Posted in Energy, Facebook and Twitter, Finance, economic, LinkedIn0 Comments

International Arbitration Bill to replace BITs

Arbitration Bill gets SA in line with UNCTRAL …..

global trade graphicThe tabling of the International Arbitration Bill in Parliament will see ‘normalisation’ on a number of issues regarding arbitration between foreign companies operating in South Africa. This is if the Department of Trade and Industry (DTI) policy recently expressed in Parliament by Minister of Trade and Industry, Rob Davies, is to be understood.

The Bill, as is the case with all international legal matters, will  be tabled by the Minister of Justice and Constitutional Development according to a government notice recently published.      Not all investors are necessarily impressed however, some preferring state-to-state bilateral trade treaties (BITs).   South Africa is now adopting the broader approach adopted by some international countries, including China.

Allowing arbitration outside of local courts

As far as is understood, as non-legal observers, formal agreement on the allowance on arbitration proceduresarbitration according to agreed procedures between trading parties will be instituted and local court procedures can be avoided if so wished.  The fact that South Africa has also very recently announced the launch of the China Africa Joint Arbitration Centre (CAJAC), “symbolising the deepening economic relationship between China and African economies”, seems to provide a background to the proposed Bill.

The route now to be followed by South Africa, it appears, is one of a number of limited ways that can improve access to justice services for companies doing business outside the country and foreign companies operating in South Africa and this seems to be the basis of DTI thought on the matter.

Down the track

Legal advice is better followed but a draft Bill it would now appear is being concluded in parliamentary terms.

unictral 1Such arbitration methods have terms which are non-country-specific.  In terms of adoption, the standards of ethical conduct devised by the UN trade body, the UN Commission on International Trade Law (UNCTRAL) and its manifesto, according to the background of the draft Bill, have been included.

BITs on way out

International arbitration can then be operated,it is proposed, between companies or individuals in different states usually by including a provision for future disputes in a contract with UNCTRAL. This is the next stage of the DTI’s moves to finalize the policy of discontinuation of bi-lateral trade agreements (BITs) with individual countries. The whole issue is based upon disputes that may arise and the new Bill now before Parliament follows the new route, which may mollify those parties complaining of BITs discontinuation.

More importantly DTI states, it lines South Africa up with the Model Law on International Commercial Arbitration, which has been adopted by UNCTRAL.   This model law is not binding but individual states may adopt such legislation by incorporating it into their own domestic law, which is now proposed.

It is understood that the current legislation could bind South Africa as a UN member of UNCTRAL but the rules to be adopted are a separate issue at the moment and will govern individual companies in any dispute that may arise under the new circumstances.

Again, specialist advice should be sought on this whole subject.

Previous articles on category subject

Protection of Investment Bill finally passed – ParlyReportSA

Changes to Protection of Investment Bill – ParlyReportSA

Promotion and Protection of Investment Bill re-tabled

Promotion and Protection of Investment Bill opens up major row – ParlyReportSA

Posted in Earlier Stories, Facebook and Twitter, Finance, economic, Justice, constitutional, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Red Tape Impact Assessment Bill welcomed

hendrik krugerLegislation to be sifted for red tape….

In what appears to be a carbon copy of what has been achieved notably in Australia and to a lesser extent in some ten other countries, DA MP Hendrik Kruger has introduced a refreshing draft private member’s bill, simply called the Red Tape Impact Assessment Bill.

Hon. Kruger serves on both Parliament’s Portfolio Committee on Small Business Development and the Agriculture, Fisheries and Forestry Committee and his service therefore as a member of Parliament would indicate that he knows what he is talking about.

Regulatory Impact Assessments have been considered and skirted around for years in South Africa but the terminology “red tape” indicates a more direct approach that has been adopted towards this crippling issue for small business and the farming community.    It should go a long way towards assisting business and investment if applied in a generalised manner.

Magic words

lawyerbriefsThe preamble to Bill states its aim as legislation “to provide, inter alia, for the assessment of regulatory measures developed by the executive, legislatures and self-regulatory bodies, in order to determine and reduce red tape and the cost of red tape for businesses.”

A copy of the draft Red Tape Impact Assessment Bill and a memorandum setting out its intentions are obtainable by simply going into the Internet where a copy in Word is available. Comment is now called for in terms of the rules of the National Assembly since it is a private member’s bill.

Such is introduced with the permission of the Speaker of the House resulting in submissions to Parliament itself. Probably hearings will also be called after the Bill is properly tabled.

The detail

The description of the Bill is summarized as follows: – “To provide for the assessment of regulatory measures developed by the executive, the legislatures and self-regulatory bodies in all three spheres of government, in order for them to detect and reduce red tape and the cost of red tape for businesses.”

Also, the promoters say, it is to provide for the establishment of administrative units to assist in the red tape impact assessment process and to prepare red tape impact statements. This unit should provide assistance to businesses in overcoming red tape challenges and carry out “mapping exercises” for the preparation of red tape impact statements for a regulator to pronounce upon.

fin 24In an interview with Fin24, Hendrik Kruger gave an example of how the Bill would work. “Take the Small Business Act” he said, “They are going to have to unpack it, assess it and see what the actual impact is of red tape on small business.” Mapping as a process involves going through the whole Bill and stating the red tape impact of each requirement or clause with one aim.…the cost of the Bill to business, he said.

He quoted an example. “If they say you must go twice a year to SARS office to get a tax clearance certificate, then they will cost that action. Then they will say, alright it cost let’s say R1000. But there’s about 100 000 small businesses in South Africa, so just to get a tax certificate once a year costs business 100 million bucks.”

“Tax certificates are important”, he acknowledged, “but if we do it every second year, then we save R50m from the GDP that’s previously been wasted. Can you see the enormous cost nationally, something we don’t know at the moment?,” he asked the interviewer on Fin24.   “Government just says, go get a tax certificate. Bu

parliamentary library

parliamentary library

t to tell all of that national cost to an individual official is a bit of a problem, so we must legislate for it.”

Red tape in Oz

Christian Porter, the MP who introduced a similar private member’s Bill to the Australian Parliament in Canberra claimed that “the bulk repeal of regulations introduced by the Attorney-General, was likely to repeal over 10,000 legislative instruments and over 1,800 Acts of Parliament”.

In Australia it appears that the legislation was more over-arching, with a rule claiming that regulation should not be the default option for policy makers but rather the policy option offering the greatest net benefit.

red tapeThe Australian Bill also referred to the cost burden in that every substantive regulatory policy change must be the subject of a Regulation Impact Statement; that regulators must consult in a genuine and timely way with affected businesses, community organisations and individuals; policy makers must consult with each other to avoid creating cumulative or overlapping regulatory burdens.

Also the Australian version stated that the information upon which policy makers base their decisions must be published at the earliest opportunity; regulators must implement regulation with common sense, empathy and respect and all regulation must be periodically reviewed to test its continuing relevance.   The Australian government claims that in fact some A$2,5bn has been saved through these measures since September 2013.

Outcomes

Western Australian Mines and Petroleum Minister Bill Marmion put it well when he remarked that when introducing the same sort of state Bill in mining regulations, that whilst “cutting red tape” has strong political appeal, the broader, more significant objective is to ensure laws and regulations respond to economic, social and environmental demands and that regulations operate as effectively and efficiently as possible.

South Africa named

Insofar as SA is concerned, both the IMF and World Bank have both stated the “cost of doing business in South law south africaAfrica is unnecessarily high” but the relation between the necessity for a regulation and business cost of such a move has never been formulated, records show.

In his interview with Fin 24, Kruger said that the average government staff member has never really heard of the expression ‘cost of doing business’ and has little perception of what this means “to the outside world.”

Commentators at this stage have indicated that across party lines reaction to this Bill might be favourable and have said it might be the time for business and industry to rather relate the term ‘cost of doing business’ to more straight forward terminology such as cost in terms of loss of jobs.

Previous articles on category
Licensing of Businesses Bill re-emerges – ParlyReportSA

Business Interests Bill to expose government corruption – ParlyReportSA

Minister Davies withdraws Licensing of Businesses Bill

Licensing of Businesses Bill to set norms – ParlyReportSA

 

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Budget 2016: more on amnesty

 sent to clients 8 April….

Deadline extended for amnesty…..

In the 2016 Budget presentation, which included an amnesty offer on undeclared overseas funds, it was claimedpravingordhan by the main opposition party that that this year’s financial plan may not have been bold enough to avert a downgrade, top of the mind remaining possible future tax hikes, particularly VAT – on which the jury is still out – and the ballooning public service wage bill.

Among the many other points raised in this year’s budget was the remark by Minister of Finance, Pravin Gordhan, that “The principles of honesty and fairness needed to be embraced by all South Africans in order to overcome the challenges.”

The amnesty plan

To follow this up with action, Treasury have made a second offer for all those with undeclared assets abroad to get on the right side of the law without penalties and now have extended even that deadline because more time is often needed for applicants to prepare submissions.

“In acting together”, the Minister said, “we can address declining confidence, the retreat of capital and we can combat emerging patterns of predatory behaviour and corruption.” On this issue, he offered amnesty on undeclared offshore income and assets and another chance of the regularisation of offshore affairs.

Very little reaction occurred in parliamentary benches, possibly because the implications meant little personally but in having had to sweep the floor for further tax revenue inputs, any idea that works is a good one and a “voluntary disclosure programme” (to give it it’s technical name) could raise between R2bn to R4bn, once applied. Clearly also the Minister is looking for more reaction to increase funds resulting in the deadline being moved along the calendar.

Budget papers

budget 2016This offer was included with the usual raft of Bills the Minister tabled before he commenced his Budget speech and a few days later debated by the Standing Committee on Finance. They are “money” Bills and cannot be altered by Parliament, only commented upon.

Gordhan warned in his speech that “in terms of the new global disciplines on exchange of information between countries time was running out for tax dodgers who still have undeclared assets outside South Africa.”

Details

There are a number of conditions of course.

SARS will only include 50% of the total amount used to fund the declared acquisition assets before March 2015 in the taxable income column, as it were, and this will subject to normal tax. All refers to items from March 2010 onwards as taxable income at normal rates. Investment returns prior to March 1 will be exempt. Interest arising from tax debts as a result of the voluntary disclosure will only commence from March 2010.

Bearing in mind that relief is also granted from the appropriate penalties that would have applied and any criminal action not taken, this say experts, is a pretty fair offer. Levies will be applied of between 5% and 10% according to whether the funds from proceeds are repatriated or not, which levy must be paid from outside external funds. On levies generally, there are a number of special conditions according to circumstances.

Not just business

Minister Gordhan made it quite clear that the offer was coming from both the Treasury and the Reserve Bank. He said that deceased estates and beneficiaries of discretionary trusts can participate in the programme if they deem and if they admit that the funds were destined for them. Resident South Africans are included in the amnesty.

The grace period was given originally in the Budget for the period October 1 to March 31 of the current government financial year but in hearings before Parliament later, the Standing Committee on Finance listened to business submissions on the Budget and “recommended” to Treasury that this is impractical given the amount of time it takes to come up with all the necessary information and submit, bearing in mind, as we say, Parliament cannot touch a money Bill. Treasury obviously heard this

Public submissions worked

It was chairperson of the Finance Standing Committee, Yunus Carrim, who pointed this out to Treasury after listening to public submissions, so at least he will find that more applicants will probably be encouraged to submit.
Previous articles on category subject
Budget vote speeches: Out of touch with each other – ParlyReportSA
Minister Nene maps survival route – ParlyReportSA
Parliament votes on 2014 budget – ParlyReportSA

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Broadband allocation on its way

Minister wants BEE ownership in broadband…..

sent to clients 20 March….As if nobody knew already, the Minister of Telecommunications and Postal Services,cwele Dr Siyabonga Cwele, told Parliament that broadband allocation is perhaps the biggest regulatory bottleneck in the South African deployment of wireless technologies.     He said, at the same time, he wants to see Black owned companies have their fair share of allocation.

However, both he or his department (DTPS) and the regulatory body ICASA seem to be at odds on the system needed to allocate the spectrum, particularly in the area of setting aside sufficient spectrum to support Black broadband development and ownership specifically.    The fight to deliver urgently more high-speed bandwidth to South Africans generally is being slowed down it seems by this difference in opinion expressed.

global broad bandPresumably, the delay is all about whose satellites we use – Chinese, Russians or the US accompanied by an intelligence risk – or do we go via the masts owned by the private sector. Minister Cwele probably suspects any such deal with the private sector will not serve black interests in the proper manner. Digging trenches and laying down optic line cannot be any kind of answer.  In telecommunications all is political, rather like the nuclear issue and the similar problems faced by department of energy – the political structure overlays the practical answer.

Dr Cwele has now said the final policy paper is on its way to Cabinet.

One on one

In an extraordinary meeting with the Portfolio Committee on Telecommunications and Postal Services, both parties explained their views with the views of MPs to be added to what has become a national debate dominated to an extent by Minister Cwele’s views.

The background to the impasse is that the Electronic Communications Act empowers the Minister to issue policy directives but ICASA does not necessarily have to accept such. To distill the views of each into a few words is difficult but clearly the driving principle behind Dr. Cwele’s approach is an allocation which favours black transformation in control of spectrum whereas ICASA prefers an allocation more on an “auction” basis, whereby bidders not only name their price but then add their additional contributions to Black upliftment and general social development.

cell phone mast graphicVodacom, MTN, Telkom, Cell C and Neotel have in the past sunk enormous sums into the development of communications structures but the current delays in allocation are, according to reports, hurting the industry but their BEE structures are shallow, say insiders.

Dedicated view

Industry sources said before the meeting “Minister Cwele is seized with the need to transform the sector to ensure meaningful Black participation but spectrum allocation cannot be granted in the same way as the granting of concessionary mining licences, for example, if Black empowerment is the goal.”

The principles of the allocation process as stated by DTPS are indeed noble, as quoted in the relevant draft Policy Paper before Parliament, which state that the aims of the allocation policy are to:

• Promote the effective and efficient management of spectrum to ensure
  agility, flexibility and adaptability in spectrum administration
• Reduce bureaucracy and streamline processes for spectrum assignment
• Support the attainment of the national broadband targets set out in the
  South Africa Connect programme at speeds and in the time frame outlined
• Provide clarity on the treatment of spectrum in instances where demand exceeds supply
• Set aside spectrum for use on an open access basis with joint private sector investment
• Support the provision of, emergency services, safety and security and sector-specific operations

Milder

In the parliamentary debate, Sipho Mjwara, Acting DG, DTPS, was more conciliatory and said the spectrum was a public resource belonging to all people and DTPS had to apply itself on how to deal with this for the benefit of all. Currently the spectrum was operating on a first come, first serve basis but this principle certainly did not benefit all. He said there were “barriers to entry for small companies and artificial monopolies helped little.”

This was followed by comment from the Deputy Minister, Prof Hlengiwe Mkhize, who said it was “more logical” not to shrink away from exercising the mandate of DTPS to follow the NDP on broadband roll out. “The pillars that need to be in place must include those that had previously been excluded”.

Money must talk

Pakamile Pongwana, CEO of ICASA, responded that from an international perspective it was no longer the policy,icasa ceo as had been the case in the past, of getting maximum fees into the fiscus but the needs of complete coverage of the country. It was a combination of coverage and fees, Pongwana said.

Germany had raised money from the spectrum divide, he said, but they had included a proviso that bandwidth would only be released when rural areas had been covered. He added that other countries were already looking at 5G networks while South Africa was still looking at LTE use. “We have to stop playing catch-up”, he said.

War of words

From the debate between all groups, DTPS, ICASA and parliamentarians, it became obvious that there is an ideological battle going on. The industry sees the independence of ICASA as regulator at stake, industry sources say. The Minister said he had looked at the idea of the allocation of “set asides” for high demand spectrum but added “the Department wants the whole pie to be available for all South Africans. We are in a situation where a duopoly owns 80% of the spectrum.”

However Pongwana concluded, “The allocation of spectrum was the country’s policy choice and the assignment would be by the Regulator and be in line with procedures. While there was long term licensee allocation there was short term spectrum allocation and the Department wanted to give certainty to licensees.”

Money, money, money

moneyOn the question of infrastructure spend, DDG for ICT Infrastructure in the DTPS, summarised government views in the meeting when he said that in a country like South Africa with infrastructure and access gaps, the question had to be asked whether the country wanted to raise money as its main goal. He said it was more about service and reaching all South Africans as part of the NDP but in an equitable manner.”

Whether it would be for free or go to the highest bidder were questions the DTPS was considering as it looked at all approaches. It would probably not be for free, he said, but there had to be a compromise where small companies are not at the mercy of big companies “because of market power relations.”

The Minister concluded that all in DTPS were listening to the views of the public and industry.

Ministerial clusters.

The next step before submission of the new Spectrum Policy to Cabinet during March was to consult with the particular clusters as part of the ICT Policy White Paper procedure. Once the Spectrum Policy had been approved by Cabinet and gazetted as part of the ICT White Paper, ICASA could proceed with the licensing process on the agreed basis.
Previous articles on category subject
Lack of skills hampering broadband rollout – ParlyReportSA
Overhaul of broadband policy underway – ParlyReportSA

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Tax legislation for parliamentary debate

Treasury pushing for tax legislation changes…..

Sent to clients 8 Dec…..With the latest call by National Treasury on tax legislation for technical tax proposals to improve existing tax law and regulations, comment was to be lodged by 30 November 2015 for possible inclusion on particular issues in the Parliamentary 2016 Budget statement. This will no doubt be a post Christmas issue for discussion within Treasury before Parliament re-opens.

There will be considerable parliamentary focus on financial and tax legislation in the coming first sessionpravin gordhan of 2016 in the light of the March budget.

In the case of budgetary issues, the call by Treasury is particularly for comments regarding Annexure C of the annual Budget terms of taxation amendment legislation.   This section of the Budget covers the annual regular “catch up” of minor or miscellaneous proposals dealing with issues such as unintended anomalies, loopholes and technical matters requiring correction to existing tax legislation. It is an annual “freshening up” of tax legislation.

The results of public comment will be considered seriously, hopefully, as there are known to be a number of issues worrying industry.

Twin Peaks also

twin peaksThe Standing Committee on Finance in Parliament has now listened to public submissions on the Financial Sector Regulation Bill – the so-called “Twin Peaks” Bill – which was tabled at the end of October 2015.

This new legislation sees the Financial Services Board overseeing market conduct whilst the Reserve Bank will take responsibility for prudential regulation.    Again, there are a number of detractors to the Bill on the wording but nevertheless, from briefings, it is generally felt that as a broad reaction the proposed legislation is what is needed to meet outstanding matters as far as SA is concerned of meeting new global governance trends.

The public hearings started 18 November but the NEHAWU strike of parliamentary complicated issues and the outcome is therefore unclear on a number of matters as meetings were not finalised. This is another example of NEHAWU illegally interrupting the business of Parliament.

In the last meeting strikers said they would “allow” Parliament to conclude its business before they finalise the balance of pay issues surrounding “target bonuses”.

Retirement funds

The same committee did manage to meet under the chair of Yunus Carrim for a meeting onyunus carrimNational Treasury’s proposals on tax and retirement reforms, particularly regarding proposed changes to the tax treatment of retirement fund contributions. The percentage limit, it is proposed, be increased to 27.5% for all funds but capped at R350 000.

Previously, in October this year, past Minister of Finance Nene had briefed Cabinet on the principle of annuitisation for all retirement funds, whereby those benefiting from the tax deduction also have to annuitise part of their savings on retirement.

Harmony

He told Cabinet at the time that National Treasury’s aim, in implementing these reforms through the 2016 Budget, was “aimed at harmonizing and simplifying the taxation of retirement contributions and benefits”.    He told the Cabinet that by extending the tax benefit to cover members’ provident funds, this would enable some one million workers “to enjoy a higher take-home salary and better treatment in later life”.

Treasury said it was also relaxing certain limits with a limit of 27.5 % on taxable income up to R350 000.

In a further and later Standing Finance Committee meeting, National Treasury have now presented these tax and retirement reforms and said that two annuitisation options had been discussed with industry players and labour.

Firstly, the proposal had been to continue with the implementation of the annuitisation requirement for all provident funds on 1 March 2016, as already laid out with the industry or, secondly, to delay same for one year and for that year to allow a limited deduction for provident fund members of between 10 – 15%.

At odds

parliament 6It was reported that industry in general had preferred Option One by a considerable majority of stakeholders but labour federations the second choice. National Treasury has proposed to the Standing Committee on Finance that Option One should be adopted.

They confirmed the extensive consultations with all stakeholders within the industry, labour federations and bodies outside of NEDLAC had been consulted with. They added that “at least 33 meetings had been held with labour and industry since 2012.”

During the debate, DG Momoniat said National Treasury was very concerned on the subject of national savings. He said that in the discussions beforehand most administrators of funds had said that delay in promulgation of new regulations as proposed was the worst option and could cause “fragmentation” of the principle sums held by pension holders during a long waiting period.

No “nanny state” laws

He said that “on the whole” members of retirement funds, especially in lower income brackets, did not know how to handle lump sums and were often left with an extraordinary number of options, some of them provided by unprincipled or ignorant persons who “wanted to sell policies to them” or worse, dubious and even unlawful schemes.momoniat

He added that the choice lay in how paternalistic government was to be.

National Treasury could not run people’s lives, Momoniat said, but it could be made more difficult to withdraw pension money when changing jobs, for example, or with options and enticements in the final period before retirement.

Where to help or not

Treasury concluded that there was a need for better communication and financial education amongst lower income scheme members on their options but the question was where to draw the line as far as savings regulations were concerned. Currently there was no ruling on the subject so he advised that annuitisation be proceeded with in broad principle. Benefits to fund members would then be a “more powerful tool” in later years, he concluded.

asisaThe Association for Savings and Investment South Africa (ASISA) was present in Parliament and the unusual step of calling upon them to speak as visitors attending was taken. ASISA represents a great number of administrators and payroll administrators, it was stated.

The spokesperson said the tax amendments in 2013 had provided for such a Bill as the one before them to be introduced. It was known to be taking effect from March 2016 so, on the whole, the industry was ready or preparing for it.

She said that a “though consultation had taken place with stakeholders and Option One had been strongly recommended to Treasury by ASISA.   They said they had prepared a paper on the subject had been presented to Treasury.

Time needed for politics

In his conclusion of the meeting, chairperson Yunus Carrim pointed to the fact that if labour federations had objected to Option One and preferred the second option, whilst Parliament might agree with National Treasury, there had to be more time allowed “for political management” to get common agreement on the matter.

The Bill, being a section 76 Bill, has to go to all nine provinces and a mandate of approval obtained cropped-sa-parliament-2.jpgthrough the NCOP.    This is in addition to the fact that, most unusually, National Treasury has had NEDLAC approval to classify this as a “Money Bill”, meaning that neither the National Assembly nor the NCOP has the power to alter the Bill, only approve it or disapprove it with recommendations.

Clearly Yunus Carrim was pointing to the fact that the union federation movement had to be convinced on the issue. Once again a vote supporting the Bill is hoped for within the Standing Committee on Finance before the conclusion of the current parliamentary session.

Other articles in this category or as background

Financial Sector Regulation Bill heralds twin peaks – ParlyReportSA
SARS understaffed to deal with transfer pricing – ParlyReportSA
Banks Amendment Bill hearings shortly – ParlyReportSA

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Zuma’s nuclear energy call awaits Treasury

Nuclear energy awaits funding model…..

Sent to clients Dec 10 ….Cabinet’s approval of a financing model for the Nuclear New Build programme is all that is seriously holding up the nuclear energy procurement, the Department of Energy (DOE) has told Parliament’s Select Committee on Economic Development.

Z MbamboThis was said by Zizamele Mbambo, DDG, Nuclear, DOE, when giving the most recent update to parliamentarians on the background to the South Africa’s nuclear programme. In giving the history of SA nuclear development, he said that South Africa began its nuclear energy power plan in 1985 with Koeberg in Cape Town and the country should have its second plant up and running by 2023.

This much later programme was the culmination of a process which was re-started by Eskom in 2006 with the approval of the IAEA but then stopped by SA during the financial crisis in 2008, he said.

Start-up again

Later in 2013, much had changed on the nuclear energy supply situation because of technological advances in safety and the Russian and Japanese experiences. South Africa therefore requested in that year a specialised report from IAEA with their recommendations, the first country to do so where there was already a successful nuclear energy programme running.

IAEA supplied such a report with ten recommendations which South Africa will strictly adhere to, IAEA Mbambo said, these recommendations being in the public domain. The New Build programme would only be started upon a certification that all such recommendations had been met, a requirement of South Africa’s own nuclear energy regulator.

The National Nuclear Energy Executive Coordination Committee was earlier established by Cabinet in 2011 and the “2030” plan was endorsed by Cabinet the following year. In 2013, DOE was appointed as procuring agency. The Nuclear Energy Policy of 2008 still shapes South Africa’s vision for nuclear power, Zizamele Mbambo said.

Nuclear sellers

Inter-governmental agreements (IGAs) have so far been signed with five vendor countries and these IGAs lay the foundation for trade, exchange, nuclear technology and procurement with the particular vendor. It was conditional that all vendor nations must have signed nuclear non-proliferation agreements.

The principle behind South Africa’s Nuclear New Build programme was to replace the retiring coal fleet meeting additional demands and providing certainty to investors on energy, he said.

In answer to parliamentary questioning on the IGAs signed as a result of a “vendor parade”, Mbambo stated the following:-

The Russian Federation had agreed to assist in design, construction, operation and decommissioning of the nuclear units. Russia would also assist in the localisation of the manufacture of components for the nuclear units.
France would assist in applied research and development, and also with accounting and physical protection of nuclear waste.
China would assist with experience exchange, personnel training and enhancing infrastructure development.
The USA would assist in development design, construction, operational maintenance and use of reactors for reactor experiments. USA would also assist with health, safety and environmental considerations.
South Korea would assist in the use of nuclear energy for electricity generation, heating and desalination of salt water, and in dealing with radioactive waste.
Canada and Japan were in negotiation with SA, and these IGAs were in the final stages.

SA’s vision, Mbambo commented, was to become autonomous in nuclear energy from the beginning to end of the value chain.

Waste worries

He would not comment, however, on the court case to be heard with Earthlife on the issue of nuclear logoradioactive waste as this was sub-judice, he said.    He also said IAEA had been perfectly happy with previous Koeberg arrangements as far as waste was concerned but obviously plans had to be extended.

In answer to MPs questions on cost and the next stage of the programme, he agreed that nuclear option was indeed highly capital intensive. However within 20 years, Mbambo said, the capital investment would have been reduced to nil and in view of the long 80-year life of a plant, the following 60 years would come with nil capital cost, resulting in cheaper electricity relative to the time frame.

Future dreams

It was foreseen, he said, that with nuclear energy having lower maintenance and fuel costs the relative costs of electricity tariffs to industry and consumer could be reduced also in relative terms during the 60 year period and energy sales could become a “cash cow”.

When asked about hydro energy sources and gas development, Mbambo said this was outside of his brief to answer.
Other articles in this category or as background
National nuclear control centre now in place – ParlyReportSA
Minister Joemat-Pettersson clams up on nuclear – ParlyReportSA
Nuclear partner details awaited – ParlyReportSA

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Red tape worries with FIC Bill

FIC Bill : lengthy hearings expected….

Sent to clients 1 December….. Parliament has expressed strong doubts that there will be enough time left in the current parliamentary year to pass the FIC or Financial Intelligence Centre Amendment Bill despite Treasury’s call that international pressure was being placed upon South Africa to update its governance ability to monitor international financial crime.

The Bill intends enhancing South Africa’s anti-money laundering (AML) to combat better the financingmoney crime of terrorism by amending the anchor Financial Intelligence Centre Act “so as to define or further define certain expressions” in the basic Act in order to structure an entity to monitor counter-intelligence of financial crime and to penalise those in dereliction of the new rules.

Hearings from public sector

In that alone, there are many differences of opinion on terminology. This will no doubt emerge during hearings on the Bill from the public sector and many queries will also surround the establishment of a Financial Intelligence Centre in its envisaged form.

Also, the powers provided the Bill, it is feared by a number of Opposition members, may add the layers of “red tape” to current SA financial investment procedures, “thus contributing further to the belief that South Africa is an unfriendly business destination.”     Hearings are expected to re-emphasise this whilst the need for AML tightening.

yunus carrimYunus Carrim, chairperson of the Standing Committee on Finance, known for his commitment to detail and the meticulous observation of constitutional requirements, expressed his dismay to Mr. I Momoniat, Treasury Deputy Director-General for Tax and Financial Policy, that such a long and highly controversial Bill being was being introduced by National Treasury at this point of the parliamentary calendar under the general description of “a few minor amendments called for in terms of constitutional court decisions.”

This was echoed by MPs across party lines, to which must be added the obvious delays that might be caused by the current strike by NEHAWU and parliamentary committee working staff.

Criminalising comes up again

In response, Mr. O Makhubela, Chief Director; Treasury Financial Investments and Savings, said that there were serious consequences associated with non-compliance with international norms, such as the risk of heavy fines from overseas regulators and lack of multinational business confidence.

Ismael Momoniat of Treasury joined the debate to add that the new Financial Intelligence Centre (FIC) “had to have teeth in order to forestall international enquiries” and situations that might arise such as the large fines imposed on MTN by Nigerian regulators “which tended to undermine potential investor confidence” in the same manner that BNP Paribas was harmed by the $9bn fine imposed on by the USA for violating USA sanctions against Sudan, Iran and Cuba.

MPs complained that small companies in South Africa were not as big as Paribas or necessarily the same size as MTN and they were going to find the intrusions envisaged by the FIC impossible to give full compliance to.

Treasury responded with the assurance that it would be left to the discretion of the FIC whether to impose a fine or simply issue a warning and the nature of the transaction and its size.

Main purposes

Treasury said in their briefing document that the four principal objects of the Bill, which were to alignmoney laundering the country with international standards on money laundering and to counter terrorist bodies; to enhance customer due diligence within financial institutions; to provide for the implementation of the UN security council resolutions relating to the freezing of assets of persons suspected of financial crimes and for the FIC to introduce a risk-based approach by financial entities to the current aspects international financial crime.

Treasury countered the argument that dis-investment would being encouraged by the Bill with the argument that failure to implement the Bill would result in lower levels of investment going forward as a result of a lack of compliance with international rules by South Africa.

Prominent persons

momoniatMuch debate took place over the definition of “prominent persons, both domestic and foreign” who were to be the subject of investigation and Ismail Momoniat was at pains to state “there was no implication or presumption that prominent persons being investigated were presumed to be involved in any financial crime.”

Probably the provisions most likely to affect entities operating in South Africa are the clauses affecting due diligence. Those that are accountable in terms of the Act will be required to undertake ongoing customer due diligence overviews in order to establish the identity of “the beneficial owner” and the customer’s identity.

These classifications are intended to aid accountable institutions to “properly identify their clients” but do not entail a presumption that these prominent persons are more likely to be involved in any criminal activity.

Furthermore the FIC requires the entity to establish “the purpose and intended nature of the business relationship, and to keep information relating to the business relationship up to date and to scrutinise transactions in order to establish if the transactions are consistent with the accountable institution’s knowledge of the customer and the customer’s business, and to identify anomalies in transactions patterns”.

Obscurification

One of the main objectives, Momoniat said, was for Treasury to establish that entities did not “hide true identities behind trusts” or confuse transactions by moving money through “a corporate veil representing a spider’s web.”

A “beneficial owner” is defined in the proposals to be in respect of a judicial person, the natural person who, independently or together with a connected person, owns or controls the juristic person directly or indirectly, including through bearer share holding.

Risk Management

The concept of responsibility for risk management and industry compliance has been included in the Bill, Ismael Momoniat said.  It places this responsibility “on all accountable institutions to develop, document, maintain and implement” anti-money laundering anti criminal financial transaction programmes and to “ensure that employees are trained to comply with the new Act for which the board of directors or the senior management of the accountable institution are (also) responsible”.

Hearings will commence once Parliament is able to provide the necessary platform, not available at the time due to striking parliamentary workers and staff.
Other articles in this category or as background
Parliament steps up its financial oversight role – ParlyReportSA
Financial Sector Bill after Ponzi thieves – ParlyReportSA
Draft Cybercrime Bill drafts industry – ParlyReportSA
South Africa on international cybersecurity – ParlyReportSA

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Plenty in the way of AGOA agreement

Sorting out AGOA agreement by Jan….

Sent to clients 17 Dec…. During a briefing to Parliament, it became evident once again that the SA Cabinet perceives the renewal of the AGOA agreement in the overall context of trade being attached in the future to a development price. The briefing was by DDG Kgabo Mahoai of the Department of International Relations and Cooperation (DIRCO).
Kgabo Mahoai

Whilst the advantages of a signed AGOA agreement to South Africa were great without doubt, Mahoai said, it had to be considered within the overall context of trade between Africa and the rest of the world. He was at pains to express that this was not just South Africa’s view.

AU plans for Africa

The overall African Union theme being developed by African states was clearly confirmed by DIRCO in that as a generalised policy, investment by international companies to gain access to poorer African zones had to be accompanied by reportable programmes of contributions to skills development, education, and small business and towards the upliftment of the African continent in general.   A price, he said, had to be attached for access to the African market.

Hence the Black Industrialists Investment Programme, devised by Department of Trade and Industry (DTI), they said, and whilst US President Barack Obama had given South Africa 60 days until January 4 to show it is meeting the requirements of AGOA before the US imposes normal tariffs on South African agricultural products, the two matters of development and trade were inter-dependent, whatever US senators might feel.

In the background

However, the whole issue is complicated by a third issue, say critics of DTI’s slowness in finalising AGOA, by the passage of the Private Security Industry Bill, held back by President Zuma and appearing to be compounded by national intelligence issues according to MPs. DIRCO said they could not discuss this but it was evident from questioning by MPs that this was “the elephant in the room” when it came to general US-SA trade relationships.

chickenWhilst the debate on AGOA has been complicated by US senators over anti dumping duties that South Africa had imposed on US chicken wings and drumsticks in 2000 – the argument then extending to meat and pork products – the stakes are high since the agricultural section of AGOA (which could be this isolated from AGOA and lose its duty-free status) involves some additional R140m of exports in wine, citrus and nuts, in addition to meat and poultry.

Kick back…

Senior SA MPs across party lines have observed that the position for DTI has also recently radically altered in that drought has seen the necessity to import cheap chicken as a substitute in the absence of red meat to poorer and lower income groups. This has adversely affected the SA position in negotiations.

No doubt, this is the dilemma facing DTI, Minister Rob Davies, having recently stated that “everything had been done which was possible to meet US requirements on certifications issues but did not wish to intervene in matters relating to ongoing veterinarian discussions between the two countries.”

In other words, previous arguments that the “US was bullying smaller countries into trade agreements advantageous to the US” might now have been negated by an additional need for chicken on the local market. Whilst meat is preferred in the average African household, chicken is a relatively cheaper substitute and acceptable, especially chicken wings and drum sticks, the drought in SA having changed the “quid pro quo”.

DTI at the front

DIRCO in their briefing said that they did not wish to make statements to MPs on “DTI territorial areas” but they were assisting where possible to ensure that the AGOA agreement was satisfactorily concluded in all aspects. Also the US, DIRCO was sure, were meeting all “developmental requirements” on general US-SA relationships, both here in the commercial world and on an inter-governmental basis.

DDG Kgabo Mahoai felt confident, he concluded, that AGOA was to be renewed in all aspects despite further late “anti-SA lobbying by some US senators attempting to resuscitate pressure on President Obama.”

Inside job

At this point, the meeting was disrupted by unruly NEHAWU protesters who blew vuvuzelas and sangnehawu freedom songs, disallowing any further debate. Chairperson, Eddie Makue (ANC), wisely concluded the meeting, objecting to protester’s that the disruption was illegal in terms of national law to interrupt parliamentary business. A good number of the NEHAWU demonstrators were in fact parliamentary staff and had full knowledge where meetings were taking place in the parliamentary precinct.

This was a sad conclusion to an intelligent meeting.

Other articles in this category or as background
EU and AGOA still important to SA, says govt – ParlyReportSA
AGOA : Parliament this week 3 Nov 2015 – ParlyReportSA

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