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NRCS hammered over port delays

NRCS admits failure to meet LOA targets

…..sent to clients 16 Oct…...The National Regulator for Compulsory Specificationsasogan-moodley (NRCS), responsible for the issuance of letters of authority (LRAs) to complete import certification of imports in respect of critical safety regulations, came under intensive fire in Parliament from MPs across all party lines.

This included a warning from Trade and Industry Portfolio Committee Chairperson, Joan Fubbs, that the NRCS failure to meet its annual targets, particularly bearing in mind such targets were set by themselves, was not acceptable.

Chair Fubbs told CEO Asogan Moodley of NRCS his agency was “a blot on the otherwise excellent annual performance of the Department of Trade Industry (DTI)”, NRCS being the only one of the seventeen DTI entities to receive a qualified annual report from the Auditor General’s office for the past year.

Durban is problem area

sars-warehouse-durbNRCS has a mandate to provide LOAs for clearing goods for sale or service in various categories of goods imported into South Africa, with the port of entry of Durban providing most of the problems in supplying the necessary LOAs. Chair Fubbs said that the poor performance already shown in the first quarter of the current financial year did not auger well for any change in the immediate future. This cannot be the case, she warned.

NRCS divides imports into the main categories of automotive including all components; chemicals, materials and mechanicals; electro-technical including IT and electronic appliances and food in the form of fishery products, canned meat and processed meat. NRCS also ensures standards on building supplies and checks calibration and checks of weights and measuring equipment supplies, including gaming equipment.

Massive backlogs

CEO Moodley told parliamentarians that outstanding LOAs over the recognised maximum period of 120 days were, at worst, 191 days – where 179 consignments were involved. In all some 1,500 consignments exceeded 120 days across all imports at various ports of entry, he said. The worst failures to supply import LOAs were in respect of electrical goods, IT appliances, vehicles and automotive parts.

All imports were checked on a “risk-based approach” and dived into low-risk, medium-risk andcargo-vessels-durban high-risk as far as consumers were concerned. Target turnaround time, after inspection and issue of relative LOAs, was respectively 75 calendar days for low-risk, 90 calendar days for medium-risk and 120 calendar days for high-risk.

Asogan Moodley emphasised that a major problem had been that DTI had changed working days into calendar days which had overtime connotations for NRCS with already limited staffing levels.

The whole truth

Chair Fubbs queried the number of days that cargo was outstanding supplied by NRCS in their annual report, stating that she was aware that the situation was far worse that indicated by NRCS in their presentation. In fact, a number of consignments needed by commerce and industry has been sitting in bond for nearly a year, she said. This was not acceptable, she warned.

warehouseCEO Moodley named his problems in clearing goods as being as being a result of short staffing of expert examiners, who were difficult to find – although some personnel were being trained or re-trained to meet technological changes. Compounding the problem, he said, was the necessity to update the entire NRCS IT ability, which was budgeted for but which had not yet been completed.

He also complained that the volumes of incoming imports and the technical advances represented almost monthly in imported goods were not exponentially related to the growth of NRCS, its skills base and the level of monitoring expertise, particularly at major ports.

IT gear just standing

In respect of the electro-technical category, he said that whilst inspections were up 11% transnet-container-terminalagainst target, the processing of LOAs within the financial year stood at 68% lower than the target for 120 days turnaround. In other instances, inspections carried out at source or at retail level were also short on target level but CEO Moodley assured the Committee that the NRCS had embarked upon a process of implementing a new system of automation and modernisation to improve performance.

He said it would take 18 months to complete such a programme at a total cost of R50m.
Major problems encountered were that certificates of origin supplied by importers which differed when the same goods were subsequently imported resulting in the need for fresh LOAs and that all processes at present were manual which increased load.    He called for the regulations to be changed so that more categories were allowed for so that very low risk products could be handled specifically on a quicker turn-around basis.

Opposition members said that they could not see how this would improve the situation since the problem appeared to be an inability to handle any volumes with untrained staff, whether low risk or high risk.    MPs noted that import bottlenecks were a financial threat to businesses and industry who were reliant on such imports and failure by DTI in this regard led to job losses and low growth.

Technical advances not in tune                nrcs-logo                                    

CEO Moodley and his team of departmental heads went to great lengths to explain the technical variations in international goods and imports coming from various countries that were either substandard or which had wrong documentation. He said that the failure to provide standards for treated timber and safety footwear, for example, had caused a backlog and such issues as non or sub-standard tyres on vehicles had slowed things down in the automotive sector.

He complained that the lack of consistency in supplied products and the constant attempts to short-circuit the system by importers accounted for much of the delay in turnaround.

Where it matters

CEO Moodley said that the electro-technical industries represented an area where most product failures occurred.  He added that the introduction of LED technology had compounded the checks for accuracy and reliability and such issues as compatibility of electrical goods, in many cases portable generators and white goods, had a poor record of power specification labeling and consequent safety in South Africa.

This was a growing problem with many countries who worked to different standards, various plugging methods and a different disclosure ethic.

Warning

durban-port-bigIn conclusion, when the debate was wound up, the Committee noted that a complete change of direction in the methods and ability of NRCS to meet its targets had to be found and that future presentations by NRCS reflecting such dismal results would not be tolerated.

As a result of a number of critical comments from MPs across party lines, the backlog of 1,650 LOAs over 120 days would be tackled, regulator Moodley promised, “by October” but stated this as being with the use of “new inspectors”.

Also, in an effort to speed up the search for unsafe or non-compliant products, there would be no need to obtain a new LOA for additional imports of a product where one had been additionally granted, he said. However, NRCS reserved the right to carry out spot checks.

Consequences

From a subsequent follow-up report in Business Day, it was learnt that DTI had confirmed the resignation of CEO Asogan Moodley and that such a move “had been a decision of Mr Moodley himself”. Trade and Industry Minister, Rob Davies, said he had instructed DTI’s DG, Lionel October, “to engage with NRCS to ensure they meet their targets”.

DTI said that Minister Davies “simply expects management and labour of DTI entities to meet their targets”, referring specifically to LOA targets in the case of NRCS.
Previous articles on category subject
Customs Duty Bill cuts out inland ports – ParlyReportSA
Border Authority to get grip on immigration – ParlyReportSA
Tax law changes after mid-year budget – ParlyReportSA
New Customs Duty Bill opposed by BUSA – ParlyReportSA

Posted in Earlier Stories, LinkedIn, Public utilities, Trade & Industry, Transport0 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

Restitution of Land Rights Act reversed

Concourt says land bill “improperly” passed

…,sent to clients 25 August….  The Constitutional Court has upheld anconstitutional-court application that amendments to Restitution of Land Rights Act were improperly processed by Parliament.  The Bill was tabled by Land Reform Minister, Gugile Nkwinti.

Groupings opposed to the legislation successfully argued that the amending Bill went through Parliament without sufficient consultation with affected parties.

The proposal made by the Bill was that further claims may be lodged going back to the 1913 Natives Act but the Bill, about to become an Act, had been in any case “put on hold” for 24 months to allow for existing outstanding claims, some 8,000 of them in terms of previous legislation, to processed first.

Existing claimants brought that particular application against the Bill on the basis that those who lodged claims under the new amendment to the Act would be “jumping the queue” and their claims might or were being ignored. The re-opening of the restitution of land process was therefore greeted by a mixed re-action, a fact not expected by the ANC amongst the populace concerned.

More haste less speed

madlangaOnce again the particular habit now regular of the governing party of hammering legislation through Parliament at the last minute before recess has bounced back on the Cabinet and the Presidency.    Justice Mbuyiseli Madlanga said in his finding that the Constitutional Court could find “no cogent reason” for the apparent haste to sign the Bill into law.

He said that there had been a complete lacking in the required public consultative process by all nine provinces as the Bill went through the NCOP process of approval. He described Parliament’s behaviour with regard to the passage of the Bill as “improper”.

How it started

When the Bill was first tabled in a meeting of the National Assembly’s Rural Development and Land Reform Parliamentary Portfolio Committee, Minister Gugile Nkwinti confirmed that the whole process of land restitution for black persons dispossessed of their land was to be re-opened for a period of five years.

Under questioning,he confirmed that no constitutional changes were envisaged, despite the fact that the new Bill would mean an Act that backdated claims to 1913.    Critics of the Bill noted at the time that the tabling of such legislation was, as they put it, “politically motivated” in the light that it was being processed before national elections and with the then forthcoming provincial elections in mind just around the corner. The outcome of those elections would confirm the Minister’s fear and that of the Cabinet.

Critics also stated that there was insufficient time to process the Bill properly. ANC MPs chose to ignore this warning. Thw whole process has therefore been a waste of public funds.

In the kitty

Minister Nkwinti then announced that Cabinet had set aside R47bn for theGugile_Nkwinti envisaged exercise over a period of five years. Opposition members were again alarmed, stating the country had neither the resources nor court time to process such a plan and, in any case, the Department of Rural Development and Land Reform was already facing an uphill struggle to process and finalise the existing claims it had on their books. Opposition members also called for sight of Treasury approval.

During the course of the Minister’s departmental presentation on strategy leading to the budget vote a week later in Parliament, when confronted by opposition MPs asking for a direct answer as to whether he would call for constitutional change on property rights or not, he replied that there was “no such question arising.”

The whole truth

Since that time the tandem Expropriation Bill has also been returned to Parliament unsigned and similarly passed in haste before a recess but, in this case, in the light of a possible adverse opinion by the Constitutional Court.

Minister Nkwinti chose to issue a statement on the the passage of the Expropriation Bill upon its being voted through the National Assembly although not in the domain of his Ministry.

cronin2This statement completely contradicted the declared motivations of Deputy Minister of Public Works, Jeremy Cronin, who had steered that Bill through Parliament declaring his legislation to be necessary for public works to execute infrastructure projects.

Nkwinti’s statement  claimed  that the Expropriation Bill “would bring about the possibility of at last of speeding-up land restitution and reform” thus laying the groundwork of his new land Rights Bill and contradicting the assurances of Cronin.

The numbers game

In his original briefing on the tandem Restitution of Land Rights Bill, Minister Nkwinti stated at the time that since its inception, the state’s restitution programme had benefited some “370,000 households”.    Normally one refers to “claimants” but it was his way of getting to his point using self-serving mathematics.

This meant, he said, that some “1.83m persons had benefited so far from theland-reform process, as against an estimated 3.5m people who had been forcibly removed from their land as a result of colonialisation and racial and discriminatory laws”.

A new closing deadline for lodgement of land claims was set by the Act as mid-2019 and a booklet on how to lodge a claim published.  Mobile lodgement offices were to visit all areas, the department told subsequently told MPs, and the lodgement process required no fees.

Tough words

Whilst the Constitutional Court has now re-affirmed that the right to restitution “could not be overstated” and that “restitution of land rights equals restoration of dignity”, Justice Madlanga was not prepared to overlook the fact that the time line of the parliamentary process had been manipulated.

“As an example, the process of public participation in the Northern areas was reduced to a shambles by haste”, he said, “and as a result of the truncated process of the NCOP, the whole parliamentary procedure had been tainted”. The NCOP was found to have “not applied its mind to the task.”

Give it time

Pending re-enactment of the Act, the Commission on Restitution on Landland-claims-court Rights may continue to receive claims and acknowledge receipt but only process them once existing outstanding claims that had a closing deadline of 1998 are finalised. After 24 months, further consideration can be made on the possible re-enactment of the legislation.

In conclusion, Opposition parties fear that the new Act will allow traditional chiefs with the additional powers granted in terms of legislation favoured by President Zuma to supersede rights on land already granted to communities.

One way only

Disquiet was also expressed by some MPs with the land acquisition claim alternatives as financial compensation was mainly the choice for claimants.

Some MPs expressed the view that they were “uncomfortable” with a monetary solution as a solution to dispossession since this almost amounted to a bribe.

DA MP Thomas Walters said in his view the reason for the slow rate of land occupation was not, as the ANC claimed, the result of whether or not there was a solution on the willing-buyer, willing-seller principle but rather a reflection of the fact that 92% of land claimants preferred to take cash pay-outs instead of working the land and creating jobs.

Minister Nkwinti strongly denied this as did the Department of Rural Development and Land Reform.

Previous articles on category subject
New approach to land reform – ParlyReportSA
Land reform: Something very sad is going on – ParlyReportSA
Minister says need for legislation on land reform a priority
Agri-SA gives views on minimum wage – ParlyReportSA

Posted in cabinet, Land,Agriculture, LinkedIn, public works, Special Recent Posts0 Comments

National Forests Bill enforces forestry control

SA forests critical to industry

…sent to clients 25  Aug…. With exports of forest products over R2bn and an industry that employs 170,000forests people, 66,000 of which are in hands-on forestry operations, the National Forests Bill now tabled in Parliament is of considerable interest.

The little known Minister of Agriculture, Forestry and Fisheries, Senzeni Zokwana, has published the draft Bill’s explanatory summary mainly to control and remedy deforestation. This will affect the eleven corporate timber companies operating in South Africa, 1,300 commercial timber farmers and an estimated 20,000 small-scale timber growers.

Sustainability

The Bill states that it will provide for the public trusteeship of the nation’s forestry resources; increase the promotion and enforcement of sustainable forest management and increase the measures to control and remedy deforestation.

woodlandsFrom what it appears, the Department of Agriculture and Fisheries (DAFF) has partially lost control over the whole forestry data collection story, particularly natural woodlands, although it acknowledges that thanks to hired consultants collecting data on the easy question of commercial forestries is where things are more up to date.

Short on facts

One of the major worries is that data on most of 25,000 small-scale timber growers’ data is not collected due to focus on major industries. Whilst intensively managed exotic tree plantations such as pine and eucalyptus (the largest) and wattle are highly regulated, with 70% production going in for pulp & paper production, as far as woodlands are concerned, mainly defined as 10% canopy cover, the areas are mainly exploited for firewood and represent some 40m hectares of natural resource not reported upon.

Last to know anything

On the commercial side where there is an established Investment value of some 1.3m hectares of plantations, wood-roofs-sawmillswhich have an annual sustainable production 20 million tons, such represents the national quoted figure for forest products of over $2bn. Nevertheless, by the time DAFF gets any figures on timber plantations, the data, it seems, is some three years out of date.

The problem is, it appears, that there is absolutely no back data on woodlands either, and trends cannot be calculated. The Bill wants to rectify this. With jobs to create and houses to build, there exists a vacuum in knowledge.

The air we breathe

Bearing in mind that no biomass inventory can therefore actually be represented in calculations for carbon trading purposes in terms of the Reduced Emission from Deforestation and Degradation (REDD) the calculations of the current carbon picture “do not have data baseline”, the Bill states. DAFF says it has a problem in that national figures must start somewhere but it seems that the baseline of what the heritage exactly is will take some time.

Looking around, about 0,5% of South Africa’s total land area is covered by natural forests and the word “natural” remains the expression when calculating figures because things look like a bit of a thumb suck. What is there, however, has to be saved and the quantity or area will define what is needed in money and effort.

Kynasa forests

It is known, for example, that there are some 1 700 indigenous tree and shrub species representing some 530 000 ha. of dense growth existing along the south and east coasts and on the southern and south-eastern slopes of inland mountains in South Africa. The other suspected half is spread over the interior plateaux in isolated valleys and ravines. This represents a somewhat scattered picture.

co-2-graphic“Catch up” is therefore called for in data form in order to start calculating the all-important figures surrounding carbon emissions. However, it appears from the emphasis on definitions in the Bill that the first step is to get control of the current mass extermination of South Africa’s woodlands, which is happening at a fast rate.

Stopping the destruction

To do this some clear definitions at law are necessary first, so it seems, and in order to take action it is necessary to amend the National Forests Acts so as to provide for what actually are “natural forests” and “woodlands” at law and to provide for public trusteeship of the nation’s forestry resources.

If land reform is on the horizon shortly, the perhaps the necessity for this Bill is therefore all the more important. Remedies and penalties for acts of deforestation are called for and it would appear that a great deal of thought has been given, by the State Law Advisor as well as DAFF, as to whether the Bill should remain as it is as a Section 75 Bill and therefore not referable to the Provinces through the NCOP or the Traditional Council of Leaders.

One gets the idea that this is a technical Bill rather than a Bill that needs emotive local participation at this stage.
Previous articles on category subject
New Air Quality Act will deal with major polluters – ParlyReportSA
Carbon offsets paper still open – ParlyReportSA
SA’s COP21 climate change paper debated – ParlyReportSA

Posted in Enviro,Water, Land,Agriculture, LinkedIn, Special Recent Posts, 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

Government stirs on intellectual property plans

New approach to SA intellectual property 

……sent to clients Aug 1trademark logo6…. The Cabinet has agreed that a new intellectual property (IP) framework is needed and has asked that discussions commence with all stakeholders in order to set out a future IP policy for South Africa.

In 2013 the South African government released a draft IP policy which ran
into heavy weather because of ambiguities and anomalies at law. This previous attempt was rejected by Parliament.

dti-logo2Since that time, the private sector has complained of no movement from the Department of Trade and Industry (DTI) on the subject, or even the Department of Justice and Constitutional Affairs.

Hidden agendas?

Suspicions existed that a lot more was written “between the lines” by DTI in the light of a feeling that government medical authorities, including the Minister of Health and a large number of public sector entities, were favouring the case for making it easier for generics to come on to the market in view of the wish to introduce national health insurance and cheaper medicines.

copyright graphicThe law courts, always sticklers in their respect for the international word of law, favoured, it seemed, external legal international precedent as the basis for a new approach.

Discussions with DTI surrounded their attitudes and their not so transparent views on the Trade-related Aspects of Intellectual Property Rights agreement (TRIPS). However, that approach may have altered with DTI now more openly favouring Bi-lateral Trade Agreements (BITs).

Bad influence

In 2014, the whole question of IP policy became mired in controversy with a statement from a US-based lobby group based from Washington who surprised all by stating they were working with the local pharmaceutical
industry to influence the SA government and also the Department of Health (DOH) in particular in order to gain more ear to the international view. This was subsequently denied by the pharmaceutical world in SA (IPASA).

The whole matter appeared to inflame the incumbent Minister of Health, Dr Aaron Motsoaledi, who will no doubt be a key player in the new discussions.
After this the 2013 proposals seemed to fall away. Parliamentary hearings were at the time controversial, to say the least.

The major complaints boiled down to the fact that there were no time frames in the government proposals; no regulatory impact assessment had been done; and there was no appearance of a follow through of the effect of the Bill on international commercial ties.

Expert patent lawyers complained of ambiguity and lack of clarity at law.

Where it stood

After some heated debates at the time it appears that TRIPS, despite BITs copyright symboleven then being a new DTI “hobby horse”, has been respected by DTI and the generalised view accepted by most that there would be compulsory local patent registration based on a localised validity acceptance and acceptance by a localised body of all medicines dispensed. The query remained, however, on the skills available to undertake such a policy and time lags.

Whether the originally proposed patents tribunal will have final say in dispute or the High Court of SA will no doubt now be debated, as well as the critical issue of the length and duration of registered patents in a transparent manner with experts and a broad based body to represent the private sector.
As before, probably a “workshop” will be called for to air views.
Previous articles on category subject
Impasse on intellectual property rights – ParlyReportSA
Intellectual property law still in limbo – ParlyReportSA
Intellectual Property Laws Bill goes forward – ParlyReportSA
Medical and food intellectual property tackled – ParlyReportSA

Posted in Home Page Slider, Justice, constitutional, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Treasury goes with health pundits on sugar tax

Sugar tax threatens jobs say suppliers

With the publication by Treasury of the policy paper on a sugar tax on sugar-sweetened beverages of 2.9 cents percanning gram of sugar, Treasury is set to raise some R3bn from fizzy or carbonated drinks and the possibly of a total R4.5bn from the food and beverage industry as a whole. Others in political circles estimate that revenue could exceed R11bn.

Minister of Finance, Pravin Gordhan, promised that such a tax would be forthcoming in last year’s budget speech. As this figure quoted by the Minister is minuscule in terms of the total country’s overall budget needs and the administration may outweigh the costs of actually collecting it the Minister has pointed out in mitigation that there are easier ways to garner tax revenue.

With that disclaimer, the release from Treasury also says the tax “flows from work undertaken by the health department on non-communicable diseases and obesity.”   They said, “The problem of obesity has grown over the past 30 years in South Africa resulting in the country being ranked the worst in sub-Saharan Africa”.

In the background

sars logoWhat Minister Gordhan says is usually the truth but most of the influence is more likely to be coming from the Ministry of Health.     At the most, Minister Gordhan says that the idea in Treasury is to “nudge consumers into better choices to fight obesity.”  Whether this move will in fact contribute to a cut in obesity deaths remains in the strange area of whether an increase in the price of whisky reduces the number of whisky drinkers.

Treasury is following the theory that by making the cost of cool drinks higher and thus less affordable, it will make sugar-sweetened beverages (SSBs) less appealing to consumers, a theory also which appeals to the Minister of Health whoaaron motsolaedi has been most vocal on the subject.    Such an idea also conforms to sugar-related food and beverages studies conducted by Wits University, they both say.

Not medically holistic?

Most objectors to the idea of a “sin” tax on SSBs say that if one wishes to really succeed in a fight against high obesity rates in SA, then only a whole package of measures will achieve the desired result.    In the UK apparently, where the argument also raged, it was stated that a sugar tax was an impractical answer without a tax on crisps and snacks, a whole range of harmful foodstuffs and, especially with children, other “goodies” sold to them from tuck shops and cafés.

In SA, many have said that to isolate SSBs, when they are sometimes more available than potable water in a number of rural areas, is counter-productive. There will be more “unintended consequences”, they say.

Who suffers most

From a political viewpoint, the Democratic Alliance (DA) and the Beverage Association of SA both echo the same sentiment that all the tax will do is “hurt the poor and will most likely fail in its objective to reduce obesity”. The debate will obviously become quite intense in this area alone.

The DA has already gone on record as saying “It is difficult to compel consumers to eat healthier foods by making unhealthy foods expensive. There are always cheaper, fizzier and sweeter alternatives on offer.” This does of course make that point that SSBs, in their view, are unhealthy.    The DA added it would reject Finance Minister Pravin Gordhan’s proposed sugar tax if its purpose was “simply to raise more revenue under the fig leaf of a public health benefit”.

The proposed date for the enforcement of such a sugar tax is April 1, 2017, and bottlers such as Coca Cola state thatcoke bottle sugar is in most food and drink and they ask how far this form of tax will go.  Already government has announced regulations restricting the amount of salt in most foods, including bread and processed foods, in an effort to reduce the cost to the State in respect of heart attacks.

Health objectives

Dr Aaron Motsoaledi has set out the intentions of the Department of Health (DOH) to reduce obesity by ten percent in South Africa by 2020.

The DA have argued that by that date any sugar tax would have contributed as a major item in driving drive up food prices, whereas the answer they say lies in a “holistic healthy lifestyle campaign”. They have also said that they  would object to Finance Minister Pravin Gordhan’s proposed sugar tax if its purpose was “simply to raise more sweet counterrevenue under the fig leaf of a public health benefit” but its difficult to see how they could stop the tax as most Bills on tax are incorporated in ‘money’ Bills.

The DOH paper on obesity points to a US report that “sugary” drinks may lead to an estimated 184,000 adult deaths each year globally and that South Africa was ranked second in the world. That seems a rather unsupported figure but is an example of the rather extraordinary claims being thrown around.

World view

Most bottlers seem to have unsweetened versions on the market it is noted, so technically the matter remains a consumer choice but marketing people say people don’t like switching.   Confirmed by Treasury is the fact that other countries such as Denmark, Finland, France, Hungary, Ireland, Mexico and Norway have all levied taxes on SSBs.

The DA point out that Mexico is the only case comparable with South Africa with such a large sector of poor and there the tax has failed to reduce obesity. Treasury disagrees and says “a tax on foods high in sugar is potentially a very cost effective strategy to address diet related diseases”.

Written comment on the proposals is invited until 22 August 2016.
Previous articles on category subject
Sugar tax possibilities – ParlyReportSA
SA health welfare starts in small way – ParlyReportSA

Posted in Earlier Stories, Health, Labour, LinkedIn, Trade & Industry0 Comments

Broadband allocation could involve SABC

ICT White Paper to set up broadband allocation…

An Integrated ICT White Paper involving broadband allocation is in its final stages of preparation involvingSiyabonga Cweley consultation with various parties, said Telecommunications and Postal Services Minister, Siyabonga Cwele, during his Budget vote speech to Parliament.  This matter is a long outstanding issue in the industry and delays are imperiling broadband development.

What has concerned Opposition members during earlier parliamentary meetings on the subject was the remark by the Minister that “Some of the delay has been the delay to allow the Department of Communications to make a contribution to the decision regarding allocation across the spectrum and how this would be applied.”

This remark must be seen in the light of the fact that the two ministries and departments were split some five years ago and the conclusion is that Minister Faith Muthambi and the SABC under it’s new and controversial head of broadcasting, Hlaudi Motsoeneng, has been drawn into the equation.

Minister Cwele also said at the time that also added that his Ministry was working with Treasury to establish a “funding model” for the broadband “roll out”, estimated at R67bn.

Spectrum policy included

In his budget speech, Minister Cwele re-affirmed that the White Paper would be supported by a new Spectrum Policy Paper in order to provide for “open or public access networks and opening up the use of high demand broadband spectrum for use by all licensees while adequately compensating those who invest in infrastructure.   All South Africans must benefit from participation in the digital society, he said.                                  ‘

Until now, there have been a number of unfortunate reasons for the holdup in broadband which have been given by government in parliamentary meetings to date. With both DTPS and Minister Cwele present at the most recent parliamentary meeting before Parliament with ICASA as the regulatory body also  present, it became quite evident  that the two were at loggerheads on the manner and method of spectrum allocation.

Different signals

Minister Cwele, during the portfolio meeting, prioritised his department’s requirement as being the need to

transform the sector to ensure meaningful Black participation when allocation takes place. ICASA meanwhile placed far less emphasis on this, preferring an allocation on an “auction” basis style whereby bidders not only name their price but declared their additional contributions to Black upliftment and general social and community development programmes, knowing this would more likely attract outside investors.

Dr. Cwele admitted at the time that “broadband allocation is perhaps the biggest regulatory bottleneck in the South African deployment of wireless technologies at the moment.”

Minister says industry “monopolistic”

In his subsequent budget vote speech he notably remarked, “Radical supply side interventions will reduce barriers to investors by moving away  from monopolistic infrastructure allowing for competition in opening access tobroadband broadband networks”.

The Minister told MPs in his speech that the White Paper will provide for “a simplified, streamlined and nationally coordinated framework to accelerate the use of networks meaning, he said, a capability to “drastically reduce the costs to operators and, down the line, to consumers.”

This issue has been plaguing the South Africa consumer market for a number of years, he added, and it was widely accepted that with the growth of cell phone usage by all income groups, he said, the present pricing cannot continue at the expense of ordinary households.

Domestic WiFi roaming

Separately, private sector operators such as Cisco have said that any such move will present mobile operators intelecommunications South Africa with a tremendous opportunity to optimize capital and operational expenditures and improve user experience.

From discussion after the Minister had spoken, it emerged also from MPs that the more mobile data offloaded makes viable alternative to mobile broadband users in crowded locations such as shopping malls where spectrum availability for present mobile access to networks is limited.   In addition, it was noted that a bigger data offload will give operators the opportunity to reduce data costs, allowing them to accelerate adoption of competitive market share opportunities. The Minister made no comment on this and it was clear that the BEE component was a ministry priority.

Crosscutting in government

HlengiweMkhizeThe Deputy Minister of Telecommunications and Posts, Hlengiwe Mkhize, followed up the Minister in her address to the committee by focusing on “discussions taking place with the labour, public service and administration and higher education and training departments to boost ICT skills.”    She also mentioned that the White Paper would map out some of the internet connectivity plans for the rural economy to stimulate growth and opportunities.

In response to both Minister’s briefings, the following day in debate Opposition members said as far as the public service use of broadband was concerned in all aspects of communications, health and education, “it was time for the discussions to stop withe other departments and for the roll out to begin.”

 MPs noted the comment that out of 46 African countries surveyed, the cheapest mobile prepaid product in South Africa is still nearly 7.5 times more expensive than the African continent’s cheapest similar product.   The South African government is one of the smallest users of broadband facilities in the world, according to Cape Town based Research ICT Africa.

 Previous articles on category subject  

Broadband allocation on its way – ParlyReportSA

Govt and Nersa differ on broadband – ParlyReportSA

Overhaul of broadband policy underway – ParlyReportSA

Parliament gets final dates for digital TV – ParlyReportSA

Posted in Communications, Facebook and Twitter, LinkedIn, Public utilities, Security,police,defence, Special Recent Posts, 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

Border Authority to get grip on immigration

Border controls for trade as well…..

A Bill enabling the formation of an overall border authority to be known as the Border Management Authority has reachedborder lebombo Parliament following its publication for comment last October by the Minister of Home Affairs. The legislation will “allow for the transfer, assignment and designation of law enforcement functions on the country’s borders and at points of entry to this agency.”

The Authority’s objectives include the management of the movement of people crossing South African borders and putting in place “an enabling environment to boost legitimate trade.”  The Authority would be empowered to co-ordinate activities with other relevant state bodies and will also set up an inter-ministerial committee to handle departmental cross-cutting issues, a border technical committee and an advisory committee.

Mozambique border

sa moz logoThree years ago, Kosie Louw, then chief legal officer at SARS, told Parliament that a “one stop border post” to handle customs and immigration was being established at the Mozambique border.

An original document of intention was signed in September 2007 by both countries and consensus on all issues was reached between the two covering all the departments affected by cross-border matters.
Kosie Louw told the standing committee at the time that on finance the benefit of an OSBP was that goods would be inspected and cleared by the authorities of both countries with only one stop, which would encourage trade. In any country, he explained, there had to be two warehouses established, bonded and state warehouses.

Bonded and State warehouses

Bonded warehouses, he said, which were privately managed and licensed subject to certain conditions, were to allow imported goods to be stored temporarily in order to defer the payment of customs duties.

Duties and taxes were suspended for an approved period – generally two years, Louw said, but these had to be paid before the goods entered into the market or were exported. The licensee bore full responsibility for the duty and taxes payable on the goods, which could be removed only after all the customs requirements had been met.

State warehouses on the other hand, Louw said at the time, were managed by SARS for the safekeeping of uncleared,
detained,state warehouse seized or abandoned goods. They provided a secure environment for the storage of goods in which the State had an interest. Counterfeit and dangerous or hazardous goods were moved to specialised warehouses.

MPs noted that it had taken over six years for the Mozambique OSBP to be finalised which to them seemed an unduly long period. The SARS response was that that were many ramifications at international law but he added they had already had two discussions with Zimbabwe at that time.

Slow process

South Africa, he said, was looking at the establishment of more such posts and it was hoped it would take less time to reach an agreement as many lessons had been learnt through the Mozambique experience.

SARS, said losses obviously occurred through customs avoidance and evasion, so it was consequently very difficult tosa border beit bridge provide an overall figure on customs duty not being paid as evasion was evasion. Smuggling of goods such as narcotics, or copper, which could only be quantified on the basis of what had been seized. The same applied to the Beit Bridge border with Zimbabwe, where cigarette smuggling was of serious concern.

The overall principle of what was referred to then as an OSBP was for both countries to have one set of common warehouses for stop, declaration, search, VAT payments to South Africa. involving therefore vehicles going through only one process for both countries.

It seems that the new Bill is building on that experience but the whole process is taking an inordinate period of time put down to the fact that so many departments in two or three countries have to be consulted and consensus obtained.
Previous articles on category subject
Home Affairs gets tough on expired visas – ParlyReportSA
Customs Duty Bill cuts out inland ports – ParlyReportSA
Home Affairs fails on most targets – ParlyReportSA

 

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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

Parliament and the investment climate

Seven issues spooking investment…….

editorial……Nothing, absolutely nothing, will stop growth more effectively than to be constantly changing the investment national assemblyclimate by altering the playing field levels; criminalising business for non-compliance of local laws which have nothing to do with business; and bringing about the kind of atmosphere of uncertainty in which investors are constantly attempting to establish current government policy and the reasons for any changes.

Not to understand the reasons is sometimes worse than disagreeing with them. At least if one dislikes an idea one can usually work around the issue. As long as you know its constant its good for investment.

What we know

At parliamentary portfolio committee level, the issue of transformation has been accepted by all as necessary. All are agreed that apartheid was a terrible thing. Most realize that taxes will, without doubt go up, such as carbon tax and probably VAT, as will the cost of living. Most are agreed that service delivery in respect of the ideals of the NDP, especially at local level, is pretty poor.

Also, most agree that just before any kind of election, parliamentarians say some pretty odd things and make totally impractical promises in order to get votes. Look at the USA. However, in rating agency terms of where we stand in South Africa most of these issues have been “discounted”, to use their term.

What we need to know

stone sizaniHowever, in Parliament, cabinet statements, budget vote speeches and government departmental briefings are important to study in terms of trying to establish some measure of understanding as to where government is headed. The aim is always to establish certainty, not give views.

With certainty in the offing, capital investment can be planned for and growth expected. A clearer picture of government policy is always necessary for the greenhouse of ideas in planned expansion and development; whether the plans are worth the risk to exploit and, furthermore, to create an environment where the international message goes out…… this is the place to invest.

What we don’t knowgreen question mark

So what is troubling investors?    Aside from the nonsense going on at the SABC, here’s a few ideas and we are sure there are more….

Seven good reasons for a start:

1. What is the real plan of execution behind the Expropriation Bill? Definitions ranging from “the basis of land reform”; queries on the definition on “the public interest”; and a determination, it appears, not to study the constitutional aspects; all these queries and worries contribute to uncertainty.

2. Imagine what happened to planning departments in the mining industry during the last eight months with Minister Zwane’s surprise contributions to BEE shareholder arrangements and also by stating he was turning charters into law, presumably as part of MPRDA legislation. Uncertainty reigned.

3. It’s not good to hear that the BEE pointing system is to change yet again under the Preferential Procurement Act in major sectors that contribute to growth. One understands that President Zuma warned of this in SONA but how many more changes are to come but how many more times will DTI refine their idealogical BEE process?

4. When are intellectual property uncertainties to end? Where is the new legislation? Planning for the internationals in the pharmaceutical industry can hardly be easy.

5. New climate change fuel specifications are upon us and the Minister of Energy is totally uncertain on this issue, as she is with gas exploration, shale gas, a state refinery and the energy mix generally. Many potential investors have given up the waiting around and have gone, whether the oil price drop was to blame or not.

6. Minimum wage legislation will eventually arrive as far as the human resources environment is concerned but labour law as a whole is in flux with new drafts still with NEDLAC. South Africa is now rated one of the worst countries for an uncertain labour climate.

7. The national health insurance scheme coming from the likes of Minister Aaron Motsoaledi is foggy, unsettling to the financial world and confusing to medical health providers. Issuing White Papers is fine but turning these into legislation requires a finely tuned plan and policy directive. One never knows what the good doctor is to say next.

Cabinet cohesion

A lot of the problems come either from Ministers with little interest in the investment climate and who are probably not up the demands of their portfolio, or who appear to have “hobby horses” of their own. In addition, the friction between National Treasury and the Cabinet, so evident in Parliament, is adding fuel to the fire in terms of financial uncertainty.

A good orchestra always needs a good conductor with the ability of bringing people together accompanied by legislative certainty providing the musical score. South Africa badly needs a leader who can do this.

In parliamentary terms, most will be more relaxed when the current local elections are over; Parliament can restart and pressure then applied again to get clarity on exactly what investors can and should expect.

Previous articles on category subject
Parliament, ConCourt and Business – ParlyReportSA
Minister Brown wants utility shareholder management – ParlyReportSA
Editorial: Working committees – ParlyReportSA

Posted in earlier editorials, LinkedIn0 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

Here it comes again…. the Traditional Courts Bill

Dubious motives ……..

justice minister masuthaMinister of Justice Michael Masutha is to re-table once again the Traditional Courts Bill setting up a parallel system of justice in rural areas,  he says.   Minister Masutha was appointed by President Zuma in May 2014 and this same Bill, known to have the President’s wishes behind it, was withdrawn last year in the form it was proposed. It was thought by many to have been scrapped.

Whether this is an election ploy or whether a draft will actually appear from the Ministry of Justice for public comment remains to be seen. Should it appear, in whatever shape and form, it will have to be debated as a Section 76 Bill by all nine provincial legislatures. At least five would have to approve it for the Bill to move forward from the NCOP to the National Assembly.

Gender insensitive

It was said at the time by the media when President Zuma originally withdrew the Bill that it had been proposedtraditional chiefs
as a trade-off with traditional leaders to get rural support. The Bill then was perceived as chauvinistic by many and was certainly frowned up by legal professionals as a distinct attempt to set up two legal systems and was therefore constitutionally unacceptable.

Lulu Xingwana, at that particular time Minister of Women, Children and People with Disabilities, said the proposals “took the issue of women’s rights back into medieval times”. Her ministry was subsequently closed down.

Unexpectedly, the incumbent Minister of Justice, before his 2015/6 budget vote debated just before Parliament went into recess, told a parliamentary media briefing that he intended to re-introduce the Bill as “a priority”. He added. “We are working with representatives from traditional leadership and civil society to take this process forward, with a view to introducing the Bill in June.”

Majority provinces voted against

butheleziDr Mangosuthu Buthelezi, in his capacity as leader of the IFP, said of the old Bill when it was debated by all nine provinces, that five provinces had put in votes to scrap the proposals entirely, two would not make a decision and only two were in favour. Even then, said Mangosuthu Buthelezi, the two in favour did not support all the Bill’s provisions. In the end, he noted, the Bill did not even get past parliamentary committee stage in the NCOP.

“Its demise marked a major victory for rural people who had opposed it”, he said.    Mangosuthu Buthelezi’s view was that the Bill would bring oppression by traditional and unaccountable leaders many of whom were apartheid appointees. “It would have meant also the resuscitation of some of the boundaries of the old Bantustans”, he added.

Four tiers of govt

Chief Buthelezi also noted at the time that the Bill would mean that chiefs would become a fourth tier of government, something the country could ill afford. The Minister of Justice’s next move should be to gazette a draft for public comment.

Previous articles on category subject
President Zuma determined to push Traditional Courts Bill – ParlyReportSA
Zuma goes for traditional support with expropriation – ParlyReportSA

Posted in Cabinet,Presidential, Facebook and Twitter, Justice, constitutional, Land,Agriculture, LinkedIn, Special Recent Posts0 Comments

SAPO – one big bungle at taxpayer’s cost

Total management failure…..

The horror story of the uncontrolled mess in the South African Post Office (SAPO) and how this state entity,
without forSAPOmal management control to speak of and facing imminent danger of structural collapse, was reported upon in Parliament recently

The route to near bankruptcy was recounted to the Standing Committee on Public Accounts (SCOPA) by current SAPO board chairperson, Mr Simo Lushaba, who had been summoned to explain the crisis at SAPO, accompanied by the new CEO of the Post Office, recently appointed Mark Barnes.  Comments were added by Minister of Posts and Telecommunications, Siyabonga Cwele.

Previously Mark Barnes had tried to respond to the call by SCOPA to report but the meeting had to be abandoned, incurring the ire of the Committee, since it is the chairman of the board of the state entity in question, in this case Simo Lushaba, who can only respond to a SCOPA call as the nominated person in terms of parliamentary procedure was unavailable.

Rulings are clear on this, as is the Public Finance Management Act (PMFA) in the case of SOEs.

Poor management

Immediately, it became evident in the meeting that whilst the worst period of poor management in SAPO had occurred in the last two years culminating in four strikes in 2015, although not necessarily connected issues, the common factor was a collapsing management hierarchy over a number of years beforehand.

Senior officials, it appears, throughout the organisation were totally out of touch with employees and no overarchingSimo Lushaba managerial directives were passed according to any form of plan. The disastrous current situation was a culmination of “systemic mismanagement over a long period of time”, said Lushaba.

The SAPO board chairperson said SAPO did not have the cash available to continue with legal disciplinary proceedings against the former CEO and CFO, both persons having received a total of R5.7m in salaries whilst suspended for a year, during which it was alleged that they were responsible for the chaos when in control of SAPO.

The SAPO board had decided to cut its losses and halt the legal proceedings with regard to the legal case. “It was not an ideal outcome but unfortunately it was just taking too long, plus we did not have the money to follow the case through”, said Lushaba.

Ship with no rudder

When asked for sum up comments by MPs of the SCOPA committee towards the end of the meeting, new CEO Barnes said that SAPO, as an entity, was currently suffering a loss of about R125m a month. He told sapo queuesparliamentarians that twenty-five post offices had been closed down, some of them because of rent arrears.

Despite a further allocation of R650m in terms of the last Budget allocation, “this came nowhere near to eliminating the mountain of debt which amounted to more than R800m by March 2016”, he said.

With a balance sheet such as this, he said, “a government guarantee was no longer sufficient to persuade banks to lend SAPO money, despite Treasury agreeing to extend on its repayment loan date.” An immediate cash injection was the only route, he said, and that was on its way as agreed to by the Minister of Finance and Treasury. “This means that SAPO can pay its some of its creditors within the next few days”, he said.

Compromising with creditors

“The very existence of SAPO under threat on a daily basis is evident as creditors understandably want simple proof of future income which is extraordinary for a state entity”, Barnes said.

“Every month the delay in paying creditors has made it increasingly difficult to continue operations and negotiate commercial contracts on favourable terms since there is a total lack of trust on the part of suppliers.”

CEO Barnes said there was now a plan in place to turn around the organisation, with an estimated loss of R1.5bnsapo3 expected for the current year, adding to the R1.2bn loss for R2014/5. By the end of 2017/8 there could be a small gain reflected on the balance sheets. But the plan still hangs in the balance awaiting decisions from banks, he said at the time.

He also said he was “disturbed by the fact the banking sector did not automatically accept government guarantees”. This fact was slowing the downturn around and the plan was losing momentum. He suggested that the state should take another view on their relationships with the banks and enormous sums of cash they receive from the state to pay public servants.

SAPO was already three months behind in its strategy to achieve future successful financial outcomes whilst the banks made up their minds and Treasury despatched the cash on a painfully slow basis, he noted.

Oligarchy over

He stated that never again should SAPO ever be “a one man one show business.” It could indeed be rescued, he said, and made profitable in the next three years but no sooner and it could become a valuable asset in five years.”

This could be achieved by doing vigorous work to identify every source of loss, he said. The memory of the postal strike was also very evident with all speakers, still not resolved in entirety.

Mark Barnes“The Public Finance Management Act is the challenge”, CEO Barnes noted. “The competitors of SAPO make decisions in three to six minutes whilst SAPO made decisions in three to six months.” It was clear he included Treasury in this remark.

He stressed that PostBank was unaffected by SAPO’s trading deficit since it was an entirely separate enterprise holding some R7.3bn in cash in the form of savings. In this area lay the future, CEO Barnes said, adding that SAPO had to turn from a postal operation to a faster and cheaper package/courier service for the citizens of South Africa.

Minister weighs in

Minister Cwele added to this comment when he noted that reckless trading decisions had been made when globally mail volumes were going down. There were far too many post offices in unprofitable areas paying enormous rentals to developers all resulting from the days when it was “the hype to have a post office in every major shopping centre.” This was bad management and bad thinking at the time, the Minister said.

cweleHe pointed out that Parliament had passed the Post Bank Act and the PostBank could eventually work as a limited savings banker and bank operator in post offices, especially in unreachable areas where the private sector did not wish to venture, if not in small towns as well.

The Minister said that at some stage strategic decisions needed to be taken on such issues and also such matters as government officials being paid through PostBank. The Minister echoed the view that post offices should become competitive, low cost, courier service providers as well as handling smaller volumes of mail now being experienced and be run individually on a profit basis.

Where the money is

A recent survey had been conducted of post offices running at a loss and those most profitable, the Minister said. The most profitable were in the old Transkei area in the Eastern Cape and the one post office running at the biggest loss was the Sandton Post Office, he concluded.

Chairman Lushaba explained that the service called PostBank was a division of the post office. There was a risk osapo7f talking of the organization as a whole. For example, the disaster recovery IT programme of PostBank had worked well but the IT problems of post offices itself were still causing high risk. For example, he said, the entire post office backup system was on its own system and there was no separate system to switch to. He wondered how such elementary mistakes had been made.

Bad record

During the debate on a litany of irresponsible financial decisions, absent financial systems and even the lack of a working asset register, it emerged after a full day of reporting and cross questioning by MPs that a call had to besapo5 made for upgrading of IT and general management skills, Treasury officials present took a dim view on the future unless this was done, they said.   The question of basic training was also seen as an impediment as was the lack of broadband facilities to improve the IT position.

SCOPA demanded, as a committee, that the previous CFO and CEO be brought to book since, besides matters involving the rejection of the auditor general to undertake an audit; the inability to produce a balance sheet and ignorance of the Public Finance Management Act in all matters of procurement, criminal charges should be investigated as a matter of course and with speed.

Previous articles on category subject

Lack of skills hampering broadband rollout – ParlyReportSA

The big SA cabinet crunch – ParlyReportSA

Broadband allocation on its way – ParlyReportSA

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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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