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Parliament looses control on government spending

SA’s big black hole in its fiscal galaxy…..

It  looks like the governing party knows even more about the daylight robbery going on in certain provincial and local government structures than was originally disclosed.    A big hole in local givernment spending is still swallowing up millions in taxpayer revenue.    Not good news when an election is happening.

As a result of the disclosures, this is a delicate moment for South Africa waiting to learn the make-up of the parliamentary political balance and who is nominated to Cabinet, and just as important as it is to see the structure of provincial government where most of taxpayer’s money is spent.

With the economy in peril, what happens now in terms of responses with regard to the outcomes on state capture and corruption, and how it is handled, is a matter of dancing on the edge of a financial cliff.  Financial commentators from the around the world are watching.

Gearing up

With Parliament re-opening, the third pillar of the South African democratic structure will again assume its critical role in debating and shaping government policy.    Equally important, it will resume its position as a listening post for business and industry.   We have sharpened our pencil.

Its seems such a short time since 1994 when Parliament started its first five-year government term. Looking back over the five terms, what a roller coast ride it has been.

Watching, waiting

Now, for the sixth time, 400 members on the national political party lists are allocated to the National Assembly (NA) and a further 90, representing provincial interests, go the National Council of Provinces (NCOP) in the form of 10 delegates for each of the nine provinces.

The NCOP has the task of monitoring the NA in fact, therefore representing, somewhat tenuously, the voice of the people in those provinces.

Good start

The home of the NCOP is a building opened in 1884 as the first parliament of the Cape of Good Hope which interestingly enough was multi-racial, condescendingly so some say.  Its good-looking edifice dominates the central portion of the parliamentary precinct, next to the more modern National Assembly building.

With political balance of the 490 MPs on the precinct about to be established and the voice of the people thus represented, there is a shadowy side to Parliament as well which many politicians at national, provincial and local government have learned to use or abuse.

 In reality, the NCOP is the combined voice of the nine legislatures of the provinces acting as a watch-dog and checking that the National Assembly is not disregarding their interests.

The watchers

Only 54 of its 90 seats allocated have voting powers, the balance of 4 members per province having a special status to be heard but who cannot vote.  One of those members with special status is the Premier of each province, all Premiers rarely attending being too busy with their legislatures.

The other three seats allocated as special status are for provincial members assigned for particular reasons, maybe on a specific debate, and who travel from the provinces.  Ordinary citizens cannot be heard unless invited to do so but may watch, unless the meeting is closed for good reason.

Basic work

When legislation is tabled, it goes first to the NA for debate and approval.  If it has strong provincial interests it is “tagged” to go to the NCOP not just for simple “concurring”. In this case, the matter is sent with a special call to all nine provinces for comment Houses_of_Parliament_(Cape_Town)and majority vote or rejection.  This mandate in reply from provincial power bases is then expressed upwards by the NCOP.

In the National Assembly, the 400 members are spread out into “portfolio” committees for debate on national government reporting on policy matters and in accounting terms.  Their main tasks are to approve the budget and allocate same to the nine provinces, also to debate tabled legislation and monitor how all national departments are performing against targets.

Numbers game

In the NCOP there is a problem. There are only 54 members allocated to it and who can vote.   With and far too many government departments to watch, as a result their monitoring brief on national departments is broken into selected groups. (Hence the term used by Parliament of “select” committees.)

In addition to the provincial presence, local government is represented in the NCOP by SALGA who can also attend meetings in the NCOP with a voice but have no voting powers. This really is the only contact Parliament has with local government.

Three-tiered cake

However, the snag with the system now becoming more and more evident is simply that the traffic on money matters is one-way only.  It goes from the top, downwards.    That is not because the system is wrong, since it was designed that way so that the NCOP is fully briefed on budgets and allocations to the provinces.

However, such a system can be easily “worked” to provide an outcome that hides criminal intent or sloppy accounting since no information is coming upwards other than when MPs decide to make personal visits as a committee team on a specific issue and travel themselves “downwards”.

Mushroom club   

Consequently, nobody in the NA has really any idea of what is happening in the nine provincial legislatures or how municipalities and local governments are spending the budget in a reportable audit form other than what is reported by to it by national government entities and departments.

For example, in the Free State, heaven knows what has been going on there for a number of years with past Premier Ace Magashule and his cohorts, who seemingly have only been monitored by AmaBhugane but certainly not properly by the Premier and the Free State legislature.

Nobody seems to have listened the DA in the Free State complain and their accounting experiences with Free State audits investigated, such matters having been brought up in question time in the NA again and again but written off as opposition trouble making. The NCOP, of course, does not come into the equation.

Another world

The net result is that none of the frightful qualified audits on Free State budget spending on infrastructure representing an accounting malaise of epic proportions have come fully before Parliament. At the moment the big black hole in the economy at provincial level appears to have much to do with the distortion in accounting terms between how the money was used for spending and what actually was the value of the work done, if at all.

When the power shortly returns to Parliament the President will only have a very short time to deal with his compatriots who, as Archbishop Tutu put it, have lost their moral compass and taught so many how to steal from the poor.

Perhaps the new challenge of the Sixth Parliament is to have better contact with provinces, municipalities and local government, since here lies the gaping hole in the economy coupled to lack of service delivery.

 

ends/ editorial /parlyreport/1 May 2019/sent to subscribers

 

 

 

 

 

Posted in cabinet, Finance, economic, Home Page Slider, Special Recent Posts0 Comments

Communal Property Bill part of land reform

From Aug/September ParlyReport….

Communal Property Bill posted 7 10 2018

Posted in Agriculture, Cabinet,Presidential, Finance, economic, Justice, constitutional, public works, Special Recent Posts, Trade & Industry0 Comments

ANC MPs face to face with reality

….SA on world stage for Parliamentary opening

….editorial 27 January 2018

Who is going to be doing what in the ANC as Parliament re-opens for the first session of 2018 is far from clear as the party cogitates over leadership factors.    However, the vessel, the SS Rainbow Nation, may have righted itself and could commence the long and difficult voyage to economic recovery, although the vessel could well be said to be currently in damage control mode.   But at last the glass is half full, not half empty.

For the next few weeks, all eyes will be on Parliament.  The Bard could not have put it better.   “All the world’s a stage: all have their exits and their entrances…”, to paraphrase a little.

Patience called for

Those who feel that injustices have taken place and people must go to jail will just simply have to wait and learn to control the anger and frustration in the coming weeks as we learn of further exposés indicating the real depth of the corruption and mismanagement during the Zuma era.  The wound has been lanced but it took far too long for the doctor to arrive and apply a dressing.

In the meanwhile, somehow, South Africans are going to have to put this ten year period of atrocious governance behind and just simply get on with the job.. The endless denials of who did what to whom and whose hands are clean will go on for a very long time.  Replays of past speeches which are totally contrary to current statements will be the order of the day and prepare for brazen lies about how so many people all miraculously got to stay at the Oberoi Hotel in Dubai, for example.

They told us so

AmaBhungane and Daily Maverick told us about the Vrede Dairy Project theft of R220m as long ago as June 2017, the scam set up by still current Minister Mosebenzi Zwane and ANC Secretary General Ace Magashule, then Free State Premier, and contemptuously planned as a siphon for personal financial gain.   It was almost tiring to see the whole story splurged again in the weekend press. The “I am innocent until proven guilty” answers from Minister Zwana were equally as absurd.

Consequently, for the last six months, it has also been most difficult to watch Zwane strutting about in parliamentary portfolio committee meetings in the confident manner that is his hallmark busily destroying half of the mining industry on behalf of the Guptas knowing that all around him knew what he was up to.

Fortunately, partner Ace Magashule appears rarely Parliament. His time may come, however, once his position at Luthuli House is clarified.

Failure of disciplines

Under Jacob Zuma, the habit of state “fruitless and wasteful” expenditure has become endemic ever since the example had been set by the top with Nkandla. This was probably the first awful display of arrogance in the face of overwhelming knowledge of the truth. Now with Eskom debacle included, we know that that the total of money stolen in the Zuma era is around R700bn. This is according to the Institute of Internal Auditors.

If the “fruitless and wasteful” aspect of bad governance are added to this already frightful figure, then whomsoever said “Every nation gets the Government they deserve” is right, meaning of course that if Parliament and the Auditor General fail in oversight of government expenditure then all are poorer for not having applied consequences.  A private member’s Bill, recently tabled in Parliament to give the AG more teeth, is most welcome.

How low can it get?

If the Sunday press coverage of the Vrede dairy swindle was not enough,  once again we had to watch, with no satisfaction we might add, this same sickening story of corruption and greed repeated by a TV announcer standing outside a sliding gate and a wall located in the back and beyond of the Free State with a few building structures in the distance.  The total sum of assets still technically belonging to the Department of Agriculture from their project from which the R220m had been blatantly diverted.

As had been told to us six months before by Amabhungane and by Jacques Pauw,  Minister Zwane’s son who works for the Gupta family, was the recipient of a good slice of this money.   Even the President’s son is deeply involved as a beneficiary.   One turns one’s head away in shame. All in the name of a few cows and a group of hapless indigent farmers. A line which should not have been crossed.

Parliament is the people

What has been learnt is that Parliament is the people’s place of refuge. That is all we have, however ineffectual it may seem at times.  The proof of this is in the pudding. That creaky old system invented centuries ago won the day and in the end the people spoke. Parliamentary enquiries, whilst not courts of law and cannot judge, have produced the questions which leave the ordinary person, “the people”, to judge for themselves.

It seems pretty common cause, therefore, that  “people say”  that President Jacob Zuma should no longer be allowed to occupy Tuinhuis with a whopping salary and a rather large home and family.  The “people” were supported, brilliantly, by a strong civic voice and whistleblowers who have not benefited.

The stage is set and the play will end where it started.  In  the people’s Parliament.

Fresh start

Time now to forget the past. We must start again. It would be good to rise above the obsession to see these partners in crime and state capture go to jail. The systems, it appears, are back in place to ensure whether this happens or not.

Revenge is not the issue, however. The job in hand is to get on speedily repairing the damage. One remembers with warmth the leadership style, vision and courage endowed to us all by Nelson Rolihlahla Mandela, who asked us to rise above the sins of apartheid and focus only upon building a country. Many feel the time has come for the ANC to repeat the exercise.

A long road

Africa is indeed rising again and for the first time, in a long time, we can look forward to newscasts that don’t leave one feeling helpless, as has been the case ever since the Gupta e-mails emerged. In the few days after Cyril Ramaphosa returns from Davos (with whatever title he may have assumed by then) parliamentary business can return to normal.

All eyes in the next few weeks will focus upon the State of Nation Address and the Budget. Why exactly is the glass half full and not half empty? Because the governing party has been given a chance to put things right. Their endeavours to do so will be for all to see on the stage called Parliament.

Previous editorials
Parliamentary start to 2018 will be stormy – ParlyReportSA
Parliament SA: the top half of the iceberg.. – ParlyReportSA

Posted in earlier editorials, Special Recent Posts0 Comments

Marine Spatial Bill targets ocean resources…

Bill to bring order to marine economy…

November 2017 ParlyReport…..

In the light of President Zuma’s emphasis in his recent speeches on oil and gas issues, it is important to couple this in terms of government policy with the tabling of the section 76 Marine Spatial Planning Bill (MSP Bill).  The proposals are targeted at business and industry  to establish “a marine spatial planning system” offshore over South African waters.

The Bill  also says it is aimed at “facilitating good ocean governance, giving effect to South Africa’s international obligations.”

A briefing by the Department of Environmental Affairs (DEA) on their proposals is now awaited in Parliament. The Bill until recently was undergoing controversial hearings in the provinces as is demanded by its section 76 nature.

Water kingdom

The MSP Bill applies to activities within South Africa’s territorial waters known as Exclusive Economic Zones, which are mapped out areas with co-ordinates within South Africa’s continental shelf claim and inclusive of all territorial waters extending the Prince Edward Islands.

The Bill flows, government says, from its Operation Phakisa plan to develop South Africa’s sea resources, notably oil and gas.   The subject has recently been subject to hearings in SA provinces that have coastal activities. This importantly applies to South African and international marine interests operating from ports in Kwa-Zulu Natal and the Eastern and Western Cape but also  involves coastal communities and their activities.

International liaison

Equally as important as maritime governance, is the wish to assist in job creation by letting in work creators.  Accounted for also are international oceanic environmental obligations to preserve nature and life supporting conditions which DEA state can in no way can be ignored if maritime operations and industrial seabed development are to be considered.

South Africa is listed as a UNESCO participant, together with a lengthy list of other oceanic countries, agreements which, whilst not demanding total compliance on who does what, are in place to establish a common approach to be respected by oceanic activity, all to be agreed in the 2016/7 year.  South Africa is running late.

Invasion protection

Whilst the UNESCO discipline covers environmental aspects and commercial exploitation of maritime resources, the MSP Bill now before Parliament states that in acknowledging these international obligations, such must be balanced with the specific needs of communities, many of whom have no voice in an organised sense.

As Operation Phakisa has its sights set on the creation of more jobs from oceanic resources therefore, the MSP Bill becomes a balancing act for the Department of Environmental Affairs (DEA) and the Bill is attracting considerable interest as a result.

The hearings in the Eastern Cape have already exposed the obvious conundrum that exists between protecting small-time fishing interests and community income in the preservation of fishing waters and development of undersea resources.  What has already emerged that the whole question of the creation of future job creation possibilities from seabed-mining, oil and gas exploration and coastal sand mining is not necessarily understood, as has been heard from small communities.

The ever present dwindling supply of fish stocks is not also accepted in many quarters, with fishing quotas accordingly reduced.

Tug of war

All views must be considered nevertheless but from statements made at the political top in Parliament it becomes evident that the potential of developing geological resources far outweigh the needs of a shrinking fishing industry.  At the same time, politicians usually wish to consider votes and at parliamentary committee level, the feedback protestfrom the many localised hearings is being heard quite loudly.

As one traditional fishing person said at the hearings in the Eastern Cape, “The sea is our land but we can only fish in our area to sustain life. The law is stopping us fishing for profit.”

Local calls

The attendees at many hearings have said that the MSP Bill and similar regulations in force restrict families from earning from small local operations such as mining sand; allow only limited fishing licences and call for homes to be far from the sea denying communities the right to benefit from the sea and coastal strips for a living.

Hearings last went to the West Coast and were held with Saldanha Bay communities.

Big opportunities

Conversely, insofar as Operation Phakisa is concerned, President Zuma, as has been stated, said clearly in his latest State of Nation AddressZuma that government has an eye for much more investment into oil and gas exploration.   He has since announced that there are plans afoot to drill at least 30 deep-water oil and gas exploration wells within the next 10 years as part of Operation Phakisa.

Coupled to this is the more recent comment in Parliament that once viable oil and gas reserves are found, the country could possibly extract up to 370 000 barrels of fossil fuels each day within 20 years – the equivalent of 80% of current oil and gas imports.

According to the deadline set by the Operation Phakisa framework, the MSP Bill should have been taken to Parliament at the beginning of December 2016 for promulgation as an Act by the end of June 2017, making it appear that things are running late.

Environmental focus

As the legislation is environmentally driven, with commercial interests coming to the surface in a limited manner at this stage, the matter is being handled by the Portfolio Committee on Environmental Affairs.    It is understood that later joint meetings will be held with the Trade and Industry Committee and with Energy Committee members.

Adding to the picture that is now beginning to emerge, is the fact that Minister of Science and Technology, Naledi Pandor, has signed a MOU with the Offshore Petroleum Association of South Africa.

Minister Pandor said at the time of signing, “The South African coastal and marine environment is one of our most important assets.   Currently South Africa is not really deriving much from the ocean’s economy. This is therefore why we want to build a viable gas industry and unlock the country’s vast marine resources.”

Moves afoot

OPASA is now to make more input with offshore oil and gas exploration facts and figures.   Energy publications are now bandying figures around that developments in this sphere will contribute “about R20bn to South Africa’s GDP over a five-year period.”   If this is the case, the Energy Minister might be compromised once again, as she was with renewables, on the future makeup of the planned energy mix.

Amongst the particularly worrying issues raised by opposition parliamentarians and various groupings in agricultural and fishing areas is that there is a proposal in the MSP Bill on circuit states that the Act will trump all other legislation when matters relate to marine spatial planning. DEA will have to answer this claim.

Opposition

Earthlife Africa have also stated at hearings in Richards Bay that in their opinion “Operation Phakisa has very little to do with poverty alleviation and everything to do with profits for corporates, most likely with the familiar kickbacks for well-connected ‘tenderpreneurs’ and their political allies.”

This is obviously no reasoned argument and just a statement but gives an indication of what is to be faced by DEA in the coming months.

Giants enter

With such diverse views being expressed on the Bill, President Zuma and past Minister  of Energy, Mmamaloko Kubayi cannot have missed the announcement that Italy’s Eni and US oil and gas giant, Anadarko, have signed agreements with the Mozambique government to develop gas fields and build two liquefied natural gas terminals on the coast to serve Southern African countries.

Eni says it is spending $8bn to develop the gas fields in Mozambique territorial waters and Anadarko is developing Mozambique’s first onshore LNG plant consisting of two initial LNG trains with a total capacity of 12-million tonnes per annum.  More than $30bn, it has been stated in a joint release by those companies, is expected to be invested in Mozambique’s natural gas sector in the near future.

Impetus gaining

In general, therefore, the importance of a MSP Bill is far greater than most have realized. The vast number of countries called upon to have their MSP legislation in place also indicates international pressure for the Portfolio Committee on Environmental Affairs to move at speed.

This follows a worldwide shift to exploiting maritime resources, an issue not supported by most enviro NGOs and green movements without serious restrictions.  Most parliamentary comments indicate that the trail for oil and gas revenues needs following up and the need to create jobs in this sector is even greater.

Ground rules

Whilst the oil and gas industry and the proponents of Operation Phakisa also recognize that any form of MSP Bill should be approved to provide gateway rules for their operations and framework planning, the weight would seem to be behind the need for clarity in legislation and urgency in implementation of not only eco-friendly but labour creating legislation.

Operation Phakisa, as presented to Parliament particularly specified that the development of MSP legislation was necessary and Sean Lunn, chairperson of OPASA has said that the Bill will “add tangible value to South Africa’s marine infrastructure, protection services and ocean governance.”  He said it will go a long way in mitigating differences between the environmentalists and developers.

Not so nice

On seabed mining, the position with the MSP Bill is not so clear, it seems.    Saul Roux for the Centre for Environmental Rights (CER) says that the Department of Mineral Resources granted a few years ago three rights to prospect for marine phosphates.

He also stated that the marine process “involves an extremely destructive form of mining where the top three metres of the seabed is dredged up and consequently destroys critical, delicate and insufficiently understood sea life in its wake.”   Phosphates are predominantly used for agricultural fertiliser.

“These three rights”, he said “extend over 150,000 km2 or 10% of South Africa’s exclusive economic zone.”

Something happening

One of CER’s objectives, Roux says, is to have in place a moratorium on bulk marine sediment mining in South Africa.   He complains that despite the three mining rights having been gazetted, he cannot get any response from Minister of Mineral Resources, Mosebenzi Zwane, or any access to any documents on the subject.

He stated there were two South African companies involved in mining sea phosphates and one international group, these being Green Flash Trading 251, Green Flash Trading 257 and Diamond Fields International, a Canadian mining company. All appeared to be interested in seabed exploration for phosphates although not necessarily mining itself.

Roux called for the implementation of an MSP Bill which specifically disallowed this activity as is the case in New Zealand, he said.

Coming your way

The MSP Bill was tabled in April 2017 and once provincial hearings are complete it will come to Parliament. The results of these hearings will be debated and briefings commenced when announced shortly.

Previous articles on category subject

Operation Phakisa to develop merchant shipping – ParlyReportSA

Hide and seek over R14.5bn Ikhwezi loss – ParlyReportSA

Green Paper on nautical limits to make SA oceanic nation – ParlyReportSA

Gas undoubtedly on energy back burner – ParlyReportSA

 

Posted in cabinet, Energy, Enviro,Water, Finance, economic, Labour, LinkedIn, Mining, beneficiation, Special Recent Posts, Trade & Industry0 Comments

Credit regulations to squeeze racketeers

Debt relief and credit under microscope

… sent to clients 22 Dec 2016…. Further powers for the National Credit Regulator to regulate against reckless lending have been reaffirmed as necessary and the subject of debt relief for needy persons considered.

This conclusion was the result of a series of hearings conducted by Parliament and criteria are to be developed for the application of debt relief measures and how this could be achieved are now being studied.

Such criteria could include target groups of debtors who would be eligible for the relief; the period in which the measure would apply; the type of debt that would be covered and how the measure could be implemented.

An earlier study, commissioned by the National Credit Regulator (NCR) some months ago, concluded that there was a need for the National Credit Act to make provision for the introduction of some form of national debt relief but the NCR decided to consult Parliament and to involve public input.

Growing debt bubble

Whilst reckless lending and irresponsible borrowing which led to the disastrous housing bubble in the US, Joanna Fubbs, as chairperson of the Portfolio Committee on Trade and Industry, acknowledged that the situation regarding any retail debt bubble is not as bad in SA.   Nevertheless, she said that for some time she has been concerned that the National Credit Amendment Act is not working in the best interests of vulnerable groups.

On the issue of debt relief, whether from reckless lending or not, it was agreed some time ago by the Committee that it was important for stakeholders to be consulted to establish a better picture.  A parliamentary select committee, chaired by MP Eddie Makue of the same Committee, was formed to investigate whether debt relief would be an acceptable policy for SA and to organise parliamentary hearings focusing on banking input and debt control aspects.

The brief

The Portfolio Committee also recommended to this subcommittee that there needed to be a better understanding between the excesses of lending, the plight of borrowers and a view established on regulations which should refrain from fostering any culture of not paying debt in the hope that it might be written off.

Meanwhile, it has been proposed by the Department of Trade and Industry (DTI) to extend the powers of the National Credit Regulator to conduct proactive investigations into reckless lending . They would also be asked to impose administrative fines and to empower the Minister to provide debt relief mechanisms through further regulations, yet to be drafted.

Also, NCR submitted that it had already laid out its own proposals to tighten up existing regulations and penalties for perpetrators of reckless lending which the Regulator was currently entitled to enforce under the Act but the views of the Regulator were to be sought on debt relief by Makue’s Committee.

DTI view

DTI has since confirmed to this Select Committee that it was their view was that the Minister of Trade and Industry, Rob Davies, should be given the power to prescribe debt relief measures, the nature of which must be carefully thought through . At the time, DTI acknowledged that banks and credit providers had to make their views known preferably in a series of hearings now conducted.

NCR view

National Credit Regulator, Nomsa Motshegare, has confirmed to the Select Committee that in their view some form of debt relief is necessary given the reasons of the country’s slow economic growth; retrenchments that were taking place; and rising unemployment figures.

In general, she said, these factors had already diminished household income and led to difficulty for consumers to repay loans.   The NCR had found, they said, that there was a willingness in general amongst banks to find ways to relieve the financial burden of indebted clients, many of them stating that they did this already, but there was considerable doubt on whether this should or could be backed up by any enforcement measures and regulations.

 The banks

In this regard, during further public hearings, Cas Coovadia of the Banking Association of SA (BASA) emphasised that legislated debt relief for all would have negative consequences since this was far too prescriptive. He  called for “a customised debt relief approach that would suite various portfolios” as a better principle to follow.

At the outset of the discussions, Coovadia stated that BASA did not support the principle of debt forgiveness as an objective.  One of the banking system’s foundation principles, he said, was the need to efficiently and legally lend money to borrowers and to collect repayments from borrowers to settle the loans.

He told parliamentarians. “A confluence of pricing, regardless of individual consumer risk, will arise at a portfolio level to offset the inability to price for the risk.    This will mean that consumers who have a good repayment history will no longer be rewarded for such behaviour when they apply for further credit.”

He warned that blanket debt forgiveness would accelerate irresponsible borrowing and said all banks offered means to repay and gauged the circumstances when lending.   Any failure to perform on this principle would have severe consequences for the industry and economy; would increase risk to depositors/savers; would impose a cost on society; and would limit credit providers’ ability to extend credit, he said.

Making a plan

Nedbank said that the option of rehabilitation was always a preferred course rather than hard legal collections and the bank had recently adopted a philosophy in general banking terms that to become proactive in terms of debt relief solutions was the far better solution for those who had over-extended themselves.

They said the situation between credit provider and consumers should remain “mutually beneficial”, which principle bore in mind that the economy of the country was less affected.   Nedbank confirmed that a satisfactory low, in their view, of 4.6% of their clients could be classified as technically in total default without the any possibility of rescue, as at the end of 2015.

Too prescriptive

Individual banks, such as Standard Bank, Absa, First Rand, Capitec and African Bank generally supported BASA’s view that prescriptive laws or regulations regarding lending, collection and debt relief would remove the principle of case by case treatment which in turn, they said, would probably inhibit loans being granted or drive up their cost

Debt and labour

Chamber of Mines was blunter and took the view that employee over-indebtedness was a major problem in labour relations and “fed into unrealistic wage demand” scenarios.  Indebtedness, they said, was one of the major catalysts in recent mining unrest.

They were clear that education on family accounts and the implications of over borrowing had to be stepped up, rather than complicated prescriptive measures on relief that would favour one and not the other.  More important they said was that loan sharks should brought under control and whose malpractices were rife amongst the mine working community.

Ms Sue Fritz, speaking for the Chamber, said that any form of debt relief provisions must consider the danger of undermining the basic principle that with the ability to borrow came the understanding such debt had to be repaid or quality lending would cease and debt might increase.

Cosatu view

Cosatu’s Matthew Parks urged that some form of debt relief be provided to a defined base of categories, such as retrenched workers; those only on social grants; the poor; working-class and middle-class students with student loans and borrowers who had paid off a large part of a loan but fallen on hard times. He also appealed to parliamentarians that there was a need to crack down on loan sharks, formal and informal.

Paul Slot, speaking as president of the Debt Counsellors Association, said some form of debt relief was necessary to counter the current high level of household debt, noting that according to the association, 54% of those in financial trouble simply applied for more debt to extricate themselves.

Conclusions in process

The Select Committee has now made a call upon on the National Credit Regulator to tighten regulations further on loan sharks and the registration process.  Chairperson Eddie Makue has now reported back on the hearings to the Portfolio Committee but has noted in Parliament that he was deeply concerned that a large amount of vulnerable people remain exposed to unregulated credit and can become victims purely because of greed alone on the part of the lender.

On reckless lending, it was noted that often ridiculously high repayments from the poor were a weapon used to gain control of assets.    Makue said, “The NCR has to protect poor South Africans against such lending by unregistered and immoral micro-lenders.   In most rural and semi-urban areas people maintain their existence through borrowing and the interest they sometimes get charged is shocking, and interest rates should be capped by law”, Makue said.

State debt relief and debt relief regulations

The “jury is still out” therefore for 2016 on the issue of DTI tabling a Bill and the subject of debt relief generally.

Parliament closed 7 December and will resume this debate early in 2017

 Previous articles on category subject

National Credit Act Bill aims to help consumers – ParlyReport

Treasury proposals on debt control approved – ParlyReportSA

National Credit Amendment Bill changes – ParlyReportSA

 

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

Liquor licensing may have impractible conditions

DTI gets tough with age limits

...sent to clients 17 Oct…..   In what will be a tough ask, Minister of Trade and Industry, Robliqour-store Davies has proposed a number of changes to the National Liquor Act, the most contentious being to raise the legal minimum age for purchasing liquor from 18 to 21 years of age. The call for public comment on the draft National Liquor Amendment Bill as gazetted closed on 30 October.

The Department and Trade and Industry (DTI), who deal with liquor licensing at a national level, state that South Africa has globally the worst figures for alcohol related accidents and anti-social incidents involving liquor abuse.

Drastic steps had to be taken to gain control of alcohol related injuries, illnesses and abusive behaviour that were costing the state some R40bn a year, the Minister said.

Younger age groups

The Bill focuses specifically on youth since DTI maintains that alcohol abuse specifically damages the development of the brain making youth vulnerable. Liquor advertising aimed specifically at young persons will be prohibited under the Act and revised rules set down on broadcast times and content. Advertising billboards aimed at youth will be banned from high density urban areas.

Minister Davies called for “robust public engagement on the issues raised in the Bill” as it dealt with matters “that are of significance to South African society.” He noted that South Africans consume alcohol related products at double the world average rate.

On the question of the age threshold proposed in the draft Bill is a minimum purchasing age, not as has been widely reported a “minimum drinking age”. The onus of establishing age will fall upon the supplier who must take “reasonable steps to establish age” when dealing with a young purchaser.

Pressure point

A civil liability will now fall upon the manufacturers and suppliers as well who knowingly breach the new regulations, Minister Davies said, believing that this was the only way to get the problem understood and the new rules adhered to.

sab-youth-beer-adThe draft Bill states that responsibility will also fall upon the seller not only not to supply liquor to a person visibly under the influence of alcohol but that the seller could be in addition asked to show reason why they should not bear costs for damage incurred as a result of a subsequent accident involving that person who made the purchase.

On the problem of community issues, such as tackling foetal alcohol syndrome which is considerably worse in South Africa than elsewhere in the world and alcohol related crime, the onus of proof will shift not only to a supplier but also to manufacturers to show that reasonable steps were taken to ensure that liquor is not sold to illegal or unlicensed outlets. Which brings up the issue of liquor licences.

Distance from community

Licensing is a provincial matter and there are a number of changes that the amending Bill police-raidwill make to the anchor Act which will have to be abided by. Particularly notable is the proposal that licences cannot be granted to an outlet less than 500 metres from any school, recreation facilities and places of worship.

Provinces are stated as “having an obligation” to be far stricter in granting licences in highly urbanised areas, giving due regard for the need for stricter business hours and for the need to deal with noise pollution in stressful living conditions.

Previous articles on category subject
New health regulations in place soon: DoH – ParlyReportSA
Licensing of Businesses Bill re-emerges – ParlyReportSA
Medicines Bill : focus on foodstuffs – ParlyReportSA

Posted in Justice, constitutional, Security,police,defence, Special Recent Posts, Trade & Industry, Transport0 Comments

Communal Property Bill assists land reform

Reform assisted on communal property 

communal-land-4…sent to clients 21 Oct….The tabling of the Communal Property Associations Amendment Bill could represent a major advance in bringing order to many aspects of government’s land reform policy. In essence, the Bill will ensure that householders have security of tenure and thus have the ability to raise capital before they enter into any agreement on the management of communal land.

The new Bill focuses on developing the practical and legal aspects of ownership of communal land by a communal property association (CPA) whilst at the same time providing security of tenure with a new initial procedure of naming householders to benefit. The draft has now been approved by Cabinet.

Whilst the thrust of government policy on land reform has always been to bring ownership ofland-reform self-sustaining agricultural land to previously disadvantaged communities, the process has been much bedeviled by conflict over land falling under the control of traditional chiefs; the inability of small farmers to raise finance without title and, most important, for households able to enjoy security of tenure.

Communal confusion

An unintended consequence of the original CPA programme launched by government has been that government has not wished to involve itself, nor has any investing entity for that matter, in the community strife and argument over communal land, a feature of many CPAs. Consequently, the CPA system has demonstrated its inability to involve itself in loans, any state support, or receive the support of agricultural assistance programmes.

community-farmIt might be said that CPAs as a structural system is “off the banking radar”, a fact which MPs in parliamentary committee meetings have complained of a number of times.

As a result, expensive trusts have become the order of the day, banks preferring to deal with such entities and even government itself having to use them because of the informality of a CPA and the inability of loan applicant to show security.

The objective of the Act when it was signed into law was to create a new form of juristic person to allow disadvantaged communities to acquire, hold and manage property in common. A community that qualifies in terms of the Act can therefore, on the basis of agreement contained in a written constitution, form a legal entity (the CPA) and thereby become owners of property, including land, via the CPA.

Agricultural reform

A CPA as it currently stands allows its members to become owners of land which has been “prioritised for the provision of infrastructural support to land reform farmers to enable them to create sustainable jobs and alleviate poverty.”

However, over the few years since CPAs were established, it appears from parliamentary Lesedi traditionalportfolio committee meetings, that things have not gone well. In some cases, traditional chiefs had intervened and gained control of land previously under the aegis of the members of a CPA. Meanwhile, traditional chiefs had complained that CPAs were acting like “chiefdoms” in themselves, the department told parliamentarians.

Tweaking and compromising

Some attempts were made by the Department of Rural Development and Land Reform to persuade CPA members to appoint traditional chiefs on an “ex-officio basis” but the situation remained untenable, not necessarily just because of the problem of traditional control but because, due to shortage of staff, they said, had no ability to monitor the situation and no picture of what land was under CPA control, where CPAs were, and their needs.

In addition, no measurement of outcome of any schemes appeared possible, Opposition members complained. Quite clearly, they said, the NDP land reform programme has not been successful to date. Whilst the idea had been along the right tracks, it seemed the system was patently in trouble.

Green Paper study

After two years of investigation, in 2014 the Ministry, produced a Green Paper on the subject. After creating communal property ownership rights, the new proposal in the Paper was to secure individual tenure to each household beforehand, be it a farm-dweller or tenant, and for each household to own its rights at law before the CPA was formed to lock into this.

land-reform-5As per the Act in force, it would be possible for a community or group of persons to have access to a registered title to land through common or joint ownership with every name included (in a deed of transfer) or through a trust (with title vesting in the trustees) or a juristic person (with title vesting in that legal entity). Once registered, the CPA would become a juristic person – that can sue and be sued. It could acquire rights and incur obligations in its own name, in accordance with a CPA constitution.

In a policy statement, a Bill was proposed along these lines with a CPA constitution as before dealing with sub-divisions, servitudes, the right to encumber with a mortgage, deal with leases and settle disputes – all essential to the development of the area concerned but in respect of nominated persons giving those persons therefore security of ownership.

The bigger picture

The new Bill therefore speaks to a process to align a CPA to the broader land reform mandate in terms of the policy statement. The Bill also says a Communal Propertyland-claims-court Associations Office is to be established which is headed by a Registrar of Communal Property Associations. As a result, CPAs will be better equipped, it is felt, to take part in development; its status is recognised and is known to government; and has a secure system of tenure established as a base for ownership.

DHA said the plan was to clearly establish the connection between the land itself and those who live on it and depend on it for agricultural income. With more clearly established security and a need to register for compliance, it is hoped that a CPA structure will present a more viable face to the investing world.
Previous articles on category subject
New approach to land reform – ParlyReportSA
Restitution of Land Rights Act reversed – ParlyReportSA
Land Holdings Bill joins state acquisition trend – 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

 

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PetroSA on the rocks for R14.5bn

Project Apollo plan to save PetroSA…

Sent to clients 6 Oct.…..A team comprising of industry experts is now defining a new strategy to save the PetroSA struggling offshorePetroSA logo gas project on the East Coast.   The experts were not named but the exercise is entitled Project Apollo and reports were given to Parliament that the team has progressed well so far, said controlling body Central Energy Fund.

Despite producing a balance sheet that shows a technical cash profit of R2.5bn in simplistic terms made up of revenue less operating costs, in reality PetroSA is clearly beyond business rescue in proper commercial terms unless it manages to get a bail-out from Treasury to save the troubled entity from written off “impairments” of R14,5bn. But business rescue is on the way it would appear.

R11.7bn of the “impairment” was as a result under performance of its Project Ikhwezi to supply gas onshore to Mossgas.

Reality sets in

The total loss for 2014/5 was in reality R14.6bn after tax.      Project Apollo will now tackle the main cause of the loss at Ikwhezi, options stated as including “the maximisation of a number of upstream initiatives; the utilisation of tail gas; and how the gas-to-liquid refinery itself can be optimised with the new, revised and “limited under-supply of feedstock.”

cef logoThe Central Energy Fund (CFE), acting as the parent body for PetroSA, told Parliament that it is applying for such assistance, PetroSA being flagged by Cabinet some twelve years ago as “South Africa’s new state oil company”. CEF described PetroSA’s performance as merely “disappointing”, which raised the ire of most parliamentarians.

Those present

To add pain to the proceedings for Deputy Minister of Energy, Thembisile Majola, and senior heads of the Department of Energy (DOE) also in attendance together with the full board of CFE represented by new acting Chairman Wilfred Ngubane, the auditor general’s (AG) highly critical findings were read out one by one to MPs of the Portfolio Committee on Energy.

All this resulted in the remark from Opposition member, Gordon Mackay, that PetroSA “instead of becoming afikile majola national oil company had become a national disaster”. Criticism was levelled at both CEF and PetroSA across party lines, Chairman Fikile Majola demanding that Parliament conducts its own forensic audit and investigation into the facts that had led PetroSA to achieve such spectacular losses.

It appears that in the total accounting of the loss of R14.6bn for the year under review, R1.8m was also incurred in the form of non-performance penalties; stolen items of R110,000; over payments in retrenchment packages of some R3m; and R55,000 stock losses. Irregular transactions in contravention of company policy amounted to some R17m, the AG noted.

Lack of industry skills

Although the AG’s report was “unqualified” in terms of correct reporting, lack of management controls and bad investments were identified by the AG as the problem. In fact, acting CEO of PetroSA, Mapula Modipa, clearly inferred that lack of skills generally in the particular industry, lack of background knowledge in the international oil investment world and lack of experience in upstream strategic planning had led PetroSA year after year into its loss situation.

Particularly referring to troublesome investments in Ghana, Equatorial Guinea and continued exploration and production at Ikhwezi resulting in the “impairment”, a sort of write down of assets totalling R11.7bn, reports have been submitted before to the Portfolio Committee on Energy over the last two years. Warnings were given.

However in this meeting the AG’s views on the subject were under discussion and the terminology used by the AG could only be interpreted, as put by MPs, as poor management decision-making, lack of knowledge of the oil industry and the appropriate management skills in that area.

Roughnecks wrestle pipe on a True Company oil drilling rig outside WatfordHowever, over the years going back over previous annual reports for the last five years with forwards by Ministers and Cabinet statements issued over the period, it becomes self-evident that the “drive” to establish PetroSA as a state entity in the fuel and gas industry was politically driven, coupled with (as acting CEO Mapula Modipa had inferred) inexperience in the top echelons.

Still the Mossgas problem onshore

However, self- evident this year were the declining revenues from the wells at sea supplying Mossgas, where it was stated that now one wells had been abandoned, three were in operation and two had yet to be drilled. Project Inkwezi, against a target of 242bn barrels per cubic feet (bcf) only delivered 25 bcf from three wells. A “joint turnaround steering committee” had been formed to help on governance issues, technical performance and the speeding up of decision making. But the bcf is unlikely to change

Part of the new plan has involved of a “head count reduction” and employees had been notified. It was admitted that PetroSA had an obligation to rehabilitate or abandon its offshore and onshore operations costed at R9.3m in terms of the National Environmental Management Act and a funding gap of R9.3m now had to be bridged in the immediate future to pay this further outstanding in terms of the Act.

Further forensic audit

The cross-party call for an independent parliamentary forensic investigation that was made (which included thegordon mackay DA chairperson Fikile Majola as the driver behind the motion) “will hopefully not just result in a blame game”, said Opposition MP Mackay “but get to the bottom of how such an irresponsible number of management decisions with public money took place over so long a period.”

Chairperson Majola (ANC) concluded “This amount of money (R14, 5bn) cannot just be written off without someone being responsible.” He added, “There has appeared much difference between the abilities of technical staff and the technical knowledge of the leaders and decision makers on the board of PetroSA.”

Minister of Energy, Ms Joemat-Pettersson, was again absent from the meeting. However, earlier, in the meeting, the Deputy Minister standing in for her, said “when all is said and done we intend staying in this business”.

Nil from Necsa

necsaA meeting following in the same day, following the CEF presentation, was a report from the Nuclear Energy Corporation (Necsa) which failed to happen because Necsa were unable to produce an annual report or any report, Minister Joemat-Pettersson having obtained an extension of one month to the end of October for the annual report to be ready. Chairperson Majola said that the meeting could not take place without a financial report since oversight of such report was their mandate.

Opposition members complained that not only had Parliament’s time been wasted but that the whole instruction for Necsa to be present “appeared to be a media exercise to show that the governing party was on the ball”.

A litany of problems
The extension for the Annual Report conclusion had been granted to the Minister in terms of the Public Finance Management Act (PMFA), a fact well known, but the media were present in strength in the morning not only for the CEF’s explanation for the PetroSA loss but in the afternoon for Necsa explanation of its loss as a regulatory body, in the light of current media reports on irregularities, staff resignations and dismissals.

Other articles in this category or as background
PetroSA has high hopes with the Chinese – ParlyReportSA
CEF hurt by Mossel Bay losses – ParlyReportSA
Better year for PetroSA with offshore gas potential – ParlyReport

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Expropriation Bill grinds on

Expropriation: “public interest” and “property”

3- day précis…sent to clients 2 Nov….. Parties are coming closer during debate in the Portfolio cronin3Committee on Public Works to a slightly watered down Expropriation Bill, with Deputy Minister of Public Works, Jeremy Cronin, leading for the Minister who tabled the Bill before Parliament.

The name of the Bill has not resonated well amongst the international business community in the light of other events in Southern Africa.

Nevertheless, Minister Cronin has stated that eventually such a Bill will succeed, despite the concerns of many parties and that the proposed Bill has no malevolent purpose other than assisting “in the public interest”.

The public interest?

Therein lies the problem in that it remains a state responsibility to decide what the public’s interest is and which “public” is the subject matter of any decision for invoking the legislation.   As is the case with so much legislation at the moment, it is therefore a question of the wording of the Minister’s powers and the definitions of the tools at his or her disposal which is of debate.

Most of the debate earlier had centered around the definition of “property to be expropriated” in the light of the fact that the Bill cannot exceed the powers of the Constitution, wherein the word “property” is also not expanded upon – a number of court precedents arising previously where no final determination was made on the subject.

Calling in the Constitution

At one stage, the Deputy Minister proposed that “property” could be defined as “contemplated in section 25 of the Constitution”, the Deputy Minister considering this a major concession by the Department.  However, Opposition members still claimed that the word “property” could not be used in any piece of legislation without a definition of the term “property” also being listed and also in the knowledge that such terminology could not be contextualized even in terms of the Constitution.

On what could be expropriated, the Deputy Minister presented another alternative wording stating the that “the Minister’s power to expropriate property applies to property which is connected to the provision and management of the accommodation, land and infrastructure needs of an organ of state, in terms of his or her mandate”.

This was not found to be satisfactory either by the Committee since the term “that does not fall within his mandate” was vague and could be determined in any number of ways and open to any kind of interpretation.

The Deputy Minister was advised by senior counsel the way the Constitutional Court defined property land seizureremained “ a moving target”, especially section 25, and also in the Bill of Rights and this matter needed to be looked at again.

New draft for discussion

The Deputy Minister is to return to the next meeting with a further proposal on the definition of property issue which would possibly be part of a “B” version of the Bill, then to be reconsidered in totality by the committee. Such will be ready in a few days.

Another alteration of major importance so far is that a new wording using the expression “disputing party” has used in some cases instead of “claimant”. This is now used to describe “claimants” where they no longer are such in the process of expropriation, particularly in not accepting the amount of compensation offered. This is important, as thus the Bill and the parties will accept that indeed a dispute has occurred.

Two months in debate

At this stage the Bill has had three full days of “clause by clause” debate with more to come, draft clauses flying backwards and forwards, the final to be proposed by the Minister as agreed to and under the guidance of the State Law Advisor representing the State’s last offer of compromise and agreement to change wording and those changes as so far agreed to by the Committee.

Minister Cronin still maintains infrastructure projects are being held up, having to be changed or stopped. He had earlier called upon Eskom to give evidence of this.

There is general agreement that Deputy Minister Jeremy Cronin has bent over backwards with subsequent alterations to meet demands but there still exists amongst Opposition a feeling that ulterior motives exist for the legislation and the legislation is not simply “to assist Eskom buy land for electricity development”, as Minister Cronin first declared.  In the background is the threat of a constitutional challenge but this has dissipated somewhat.

The “E” word

pylonsMuch of the debate has also centered around the issues of “municipal planning” and “powers of municipal mangers” giving credence to Minister Cronin’s views. He has said the word “expropriation” is a loaded expression at this time in Africa’s history and has an unfortunate influence on the necessity for the Bill to proceed.

There is also change, seen by Opposition members as an improvement, which deals with the mediation process which previously allowed the expropriating authority to use the absence of a timeous response to bypass the process of mediation. This is not now the case, the issue of mediation being allowed to proceed under any circumstances should this be required.

Progress

More debate is to follow in subsequent days but a final document will no doubt be voted on by the committee shortly before going to the National Assembly, probably in this session of Parliament. In a meeting subsequently, a “B” version of the Bill was introduced and Chapter 4 on Intentions to Expropriate and Expropriation of Property was completed to the satisfaction of most, leaving the impression that much of the steam about the Bill in general had been reduced.

The issue of the definition of “property”, however, still remains a contentious issue simply because of legal determinations.  On 21 October, to expropriate where there was a mortgage bond was debated at length and satisfaction reached and that notice to the expropriated party and any farm workers or dwellers must be simultaneous before the issue of “just and equitable compensation” is considered.

More serious issues

On 27 October the major issue of debate involved the term of “just and equitable” compensation in the Constitution and how this would be applied to the expropriation process in the Bill.

Also debated was the question of a large community being expropriated and whether water availability, dwelling provision and the needs of a community restored. The Minister explained that the Expropriation Bill per se was about expropriation and the process and not about land reform and for this process there was plenty of legislation already to hand and new legislation planned.

The following week of November, however, should see this matter resolved mid-month providing hecronin current NEHAWU strike action of disturbing meetings does not continue, but whether all will be to the satisfaction of each party has become somewhat academic, it becoming more and more evident that Deputy Minister Cronin, who has handled each stage of the process personally, seems determined, in his patient and determined way, to see this Bill through with the property clause undefined.

Last minute attack

The EFF attempted to delete the whole of chapter 5 on compensation in the Bill as they maintained that the subject matter was expropriation, not compensation at all but such a suggestion was put aside by the chairperson Ben Martins as a political ploy rather than a serious contribution.

Other articles in this category or as background
Expropriation Bill phrases could be re-drafted – ParlyReportSA
Expropriation Bill has now to be faced – ParlyReportSA
Zuma goes for traditional support with expropriation – ParlyReportSA
Expropriation of land stays constitutional – ParlyReportSA
Amended Expropriation Bill returns – ParlyReportSA

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Draft Copyright Amendment Bill raises queries

Copyright Bill proposes revenues to state…

copyright graphicsent to clients 28 Oct….  Anomalies abound in the draft Copyright Amendment Bill, recently published for comment and now awaiting tabling in Parliament hopefully with a number of changes, say experts in the intellectual property industry.

The Bill primarily affects music, artistic and literary copyrights but the whole issue of patents, copyright and intellectual property rights are so intertwined that any changes will undoubtedly send up red flags up in various areas.

Government says in this instance it is trying to modernise the existing Copyright Act but as with any changes to established procedures that have existed for years, there are pros and cons that come with change it seems.

50 years after death

The draft Bill deals primarily with copyright of artistic, musical and literary work and most assume earphonesthat works of great composers such Brahms, Beethoven and Schubert are free of copyright, those geniuses having long since passed away. In fact under the existing Act, the author, composer or artist has copyright for life and then fifty years

The draft states both clearly and unambiguously that the ownership of all copyright held by individuals will automatically transfer to the state upon their death.

Until death do us part….

There is not the slightest indication of what body or entity is involved, other than the fact that the Bill is to be tabled by the Minister of Trade and Industry, meaning that DTI, or an entity controlled by it, would receive such, presumably the individual’s Estate being responsible for notifying DTI that they are heirs. The draft also states that government may never re-sell or pass on such copyrights.

The question to any casual observer is what happens to this money, at present collect by such bodies in doubtful manner by such bodies as SAMRO and passed to DTI? It is revenue and does it go to National Treasury, perhaps a fund for aged musicians, authors and artists even child education in the arts? On this the Bill is silent, no policy having been ever stated by any cabinet minister on such matters.

Another tribunal

In the absence of any new guides as promised on intellectual property in general, such having been promised by DTI in the form of a National IP Policy many months ago, more concerning is the establishment of an Intellectual Property Tribunal which is a case of “overkill” in dealing with this limited area of copyright and royalties.

Such a body may adjudicate on “on any application and on any legislation brought before it”, the draft supermarketstates.

On the whole, we have to assume that the majority of the draft Bill applies to individuals only, with the exception of the recording industry and literary reproduction industry, there also being certain clauses regarding End User Licence Agreements affecting software sales.

Criminalisation

Of concern though to many is the growing tendency to introduce criminalisation into legislation such as areas of BEE with fines normally reserved for more serious and harmful criminal police offences. In this case DTI have once again mentioned maximum jail and penalties of totally disproportionate periods and amounts.

To many, this Bill appears to have a lot more written in between the lines and prompts again many questions as to the direction DTI is taking with regard to international agreements, in this case the Agreement on Trade-related Aspects of Intellectual Property Rights.

It will be interesting to see what is finally tabled in Parliament for debate and what emerges from parliamentary public hearings

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Draft Copyright Bill raises queries

Copyright Bill gives fees to State…

Sent to clients 6 October….

theatreAnomalies abound in the draft Copyright Amendment Bill, recently published for comment and now awaiting tabling in Parliament, hopefully with a number of changes say experts in the intellectual property industry.

The Bill primarily affects music, artistic and literary copyrights but the whole issue of patents, copyright and intellectual property rights are so intertwined that any changes will undoubtedly send up red flags up in various areas.

Government says in this instance it is trying to modernise the existing Copyright Act but as with any changes to established procedures that have existed for years, there are pros and cons that come with change it seems.

50 years after death

The draft Bill deals primarily with copyright of artistic, musical and literary work and most assume that works of great composers such Brahms, Beethoven and Schubert are free of copyright, those geniuses having long since passed away. In fact under the existing Act, the author, composer or artist has copyright for life and then fifty years

The draft states both clearly and unambiguously that the ownership of all copyright held by individuals will automatically transfer to the state upon their death.

Until death do us part….

There is not the slightest indication of what body or entity is involved, other than the fact that the Bill is to be tabled by the Minister of Trade and Industry, meaning that DTI, or an entity controlled by it, would receive such, presumably the individual’s Estate being responsible for notifying DTI that they are heirs. The draft also states that government may never re-sell or pass on such copyrights.

dti-logoThe question to any casual observer is what happens to this money, at present collect by such bodies in doubtful manner by such bodies as SAMRO and passed to DTI? It is revenue and does it go to National Treasury, perhaps a fund for aged musicians, authors and artists even child education in the arts? On this the Bill is silent, no policy having been ever stated by any cabinet minister on such matters.

Another tribunal

In the absence of any new guides as promised on intellectual property in general, such having been promised by DTI in the form of a National IP Policy many months ago, more concerning is the establishment of an Intellectual Property Tribunal which is a case of “overkill” in dealing with this limited area of copyright and royalties.

Such a body may adjudicate on “on any application and on any legislation brought before it”, the draft states.

On the whole, we have to assume that the majority of the draft Bill applies to individuals only, with the exception of the recording industry and literary reproduction industry, there also being certain clauses regarding End User Licence Agreements affecting software sales.

Criminalisation

copyright graphicOf concern though to many is the growing tendency to introduce criminalisation into legislation such as areas of BEE with fines normally reserved for more serious and harmful criminal police offences. In this case DTI have once again mentioned maximum jail and penalties of totally disproportionate periods and amounts.

To many, this Bill appears to have a lot more written in between the lines and prompts again many questions as to the direction DTI is taking with regard to international agreements, in this case the Agreement on Trade-related Aspects of Intellectual Property Rights.

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Financial Sector Bill after Ponzi thieves

“Twin Peaks” also to help on pyramid schemes….

Finance minister, Nhlanhla Nene, in taking the Financial Sector Regulation Bill or the “Twin Peaks”nene legislation, to its final stages of debate after public hearings has said the Bill will provide greater powers to regulators to deal with Ponzi and pyramid schemes.
It is unusual for a minister to comment whilst submissions are being heard but in this case Minister Nene was responding in writing to a parliamentary question by Mosiuoa Lekota (COPE) on whether government has taken action against such schemes.
Market Conductor Regulator on watch
The Minister indicated that a total of 40 schemes have been investigated from 1 January 2014 to 30 June 2015 with 30 investigations completed and 10 still underway. In some cases the Reserve Bank has concluded a shutdown of Ponzi schemes.
He said that according to the Financial Sector Regulation Bill as proposed, by setting up a market conduct regulator, the government will find it easier to deal with such irregularities which will in fact, he said, “close the net on Ponzi schemes.”
In terms of the Bill, the proposals are that Ponzi schemes as such may be directly “prohibited” which means that the activity itself can lead to investigation and prosecution by the new Financial Sector Conduct Authority, rather than the current situation, the Minister said, “where a combination of other laws had been required to indirectly reach what could be Ponzi operations”.
The same applied to pyramid schemes but these are not specifically mentioned as they are more a generalised activity.
Other articles in this category or as background
Financial Sector Regulation Bill heralds twin peaks – ParlyReportSA
Treasury calls for “Twin Peak System” with two financial bills – ParlyReportSA

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25.1% is maximum BEE control, says DTI

DTI upbeat on implementation of BEE codes…..

lionel october 3

In a report to Parliament on the amended BEE Codes of Practice and their implementation as from 1 May 2015, Lionel October, Director General of Department of Trade and Industry (DTI) and his B-BBEE staff team, emphasised that the generic scorecard was aligned to government’s key priorities. He also said the State had no ambitions to take their target on black control beyond 25.1% of ownership.

Supplier Development is new title

DG October said the main emphasis of the codes had now switched to greater emphasis on what was previously termed procurement – now referred to as “supplier development”. This approach was more in alignment with the National Development Plan (NDP) objectives, DG October said, simply because that was the main direction needed to empower the development of black enterprises and build the economy on a stable growth path.

“In fact the German auto industry working with the German Chamber of Commerce had established a fund

BMW-Werk Südafrika

in South Africa”, he said, “for financing, training and building expertise in black businesses to supply the auto industry”.

There was considerable discussion on this by members and DG October said that there had been a general recognition in business and industry of the word “must” had replaced “may” in terms of B-BBEE requirements; that level four had to be reached for incentives and in general now “certainty” had been restored to the business environment on BEE issues, he felt.

Five “Elements”

The generic scorecard now had five elements, he said, which all companies, except those micro-exempted, had to comply with for recognition. All employment equity and management control had now been merged into one of those elements, now termed “management control”.    Sector codes were now to be aligned by 1 Nov. 2015, as set out in Code 003.

He said that “in response to public submissions” the import exclusion principle would be maintained and that the definition of an “empowering supplier” in the context of code alignment was a compliant entity which could demonstrate that its production and/or value adding activities were taking place in this country.”

DTI said that that “deviations of sector codes in terms of targets must be over and above those of generic codes and companies that derive more than 50% of revenue from sectors where there is already a sector code must be measured in terms of that sector code.”

DTI has no doubtful intentions

George Washington, having cut down the cherry tree, with his fatherIn general, DG October said in response to questions from MPs about the amendments, it had been his impression that business seemed to accept there were no political mala fides on the part of DTI; just a wish to get on with the planned NDP growth path which required the co-operation of business and industry on black empowerment.

The funding of Sector Charter Councils was a “joint responsibility between government and the private sector and entities must report annually on their B-BBEE status to sector council who will in return reports to the BEE Commission”, DTI said.

New sectors in the sights

Sector codes were being considered for the tourism, which had reached the stage of gazetting for public comment; “alignment” was being reached in the construction, integrated transport, ICT, financial services and chartered accountancy sectors; the property and forestry sectors had reached gazetting stages and marketing, advertising and communication were with their appropriate ministries for approval.

DG October mentioned the fact that the manufacturing industry stood alone as there were so many different sectors but over a period, aspects would be dealt with such as the film industry and textile and clothing industry.

DTI concluded their input to the meeting by advising that a technical assistance guide to B-BBEE was in process and DTI were in the process of finalising the B-BBEE verification manual.

Recent faux pas

rob davies2Opposition members asked how it was that DTI went so wrong with the question of  downgrading the pointing system for employment schemes and why it was that the Minister of Trade and Industry, Dr Rob Davies, had to retract that portion of the amendments which were not gazetted for public comment.

Chairperson Joan Fubbs intervened at this point, noting the Minister had taken the blame, had apologised for the mistake and could do no more than admit that DTI had been wrong.

DG October added that at a DTI workshop on the subject with “some stakeholders” this direction had been considered as a good option for broader rather than narrow empowerment but it had now been recognised by DTI that “they had gone down the wrong route as far as investor confidence was concerned”.

DTI had now reversed everything with the promise that this would not occur on the agenda again.

Better ideas could come

It had also been realised that such a move could also destroy imaginative plans for black management control such as that pitched by Standard Bank where 40% shareholding went to staff who could have representation on the board; 40% went to recognised BEE shareholders and 20% went into community organisations and trusts.

In answer to direct questioning by MPs, DG October confirmed that by the term “black”, DTI translatedlionel october this as African, Coloured, Indian and Chinese. He also confirmed that all these groups, if foreign and not South African citizens, were excluded.

More than 25.1% “unrealistic”

DG October, when asked by ANC MPs whether the 25.1% target for black ownership was realistic and fair considering that the demographics in South Africa demonstrated a far larger proportion of black people, he said that 25.1% could be considered as a “basic critical mass to engender a solid forward movement”.  To go any further would be unrealistic, he added.

In Malaysia, he said, local ownership was considered fair at 30% and other African countries as high as 50%, but he felt that in South Africa, where the need for the transfer of skills and training from large to small companies, especially through supplier development by state utilities and large businesses, was essential, this was a fair percentage assumption and which called for co-operation and fairness between all parties, all bearing in mind “a pretty hideous past”.

Redress of the past in all preambles

joan fubbsAt this point, Chairperson Joan Fubbs referred to the South African Constitution, reading out the clauses which not only stated that all were equal despite race colour or creed but that discrimination was possible if it was fair and she reminded MPs that redress of the past was “fair”.

She asked for all “not to isolate clauses in the Codes to determine personalised interests but get on with job of re-aligning communities that had been excluded from ownership for over 300 years”.

One ANC MP asked that the focus on big businesses be less emphasised and that DTI rather spent considerably more time with the job of developing ownership of black small business, which he stated could be “the power house of South Africa”.

He called for legislation that enforced government and public utilities, “as custodians of state power” to set an example on supplier development since, he said, one could hardly expect the private sector to follow suit, if the SOEs did not lead the way on this issue.

Incentives needed, not law says DTI

DG October said such sort of things were “impractical in the real world” and said the main challenge was a phased process of change which now had the support of many in positions of power in business. He also emphasised that B-BBEE had to tie in business and industry with incentives rather than with the law.

When asked about his recent public statement that he had set DTI’s target to produce “100 black industrialists”, he was referring rather to 100 black industrial leaders “financed and supported by DTI initiatives”.

Other articles in this category or as background
BEE comes under media scrutiny – ParlyReportSA
Rumblings in labour circles on BEE – ParlyReport
B-BBEE Codes of Good Practice far more onerous – ParlyReportSA
One year to implement B-BBEE Codes – ParlyReportSA

Posted in BEE, Facebook and Twitter, Finance, economic, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

SARS understaffed to deal with transfer pricing

Davis report on transfer pricing confirms …

NB: This article updated after two recent meetings of committee on transfer pricing. Report with clients.

JudgeDennisDavisSouth African Revenue Service (SARS) was completely lacking in sufficient staff to deal effectively with transfer pricing in order to spot illegal transactions, said Judge Dennis Davis in his capacity as chairperson of the Tax Review Committee when addressing the Parliamentary Portfolio Committee on Mineral Resources.

He also pointed out that SARS, in any case, was also not provided with sufficient information by declaring companies, particularly multinationals as legislation stood at present, to further probe cross-border transactions to determine whether the movements involved the illicit transfer of profits from high-tax to low-tax regimes.

He told parliamentarians that whilst about three years ago SARS had conducted a very specific and targeted investigation, and had raised in one financial year alone some R1.1bn, this only illustrated the far larger amount of “haemorrhaging” that was taking place.

Not transfers but manipulation…

The Judge had to explain to MPs time and time again that transfer pricing in itself was not illegal, only any manipulative tax behaviour usually involving non-declaration or undervaluation.

Judge Dennis Davis referred to the recent highly publicised case involving HSBC where some R23bn directly involved the SA fiscus “and which was under review by SARS”.  He also drew attention to the fact that as a result of disclosures during the Marikana inquiry, Lonmin appeared to have profited by some R280m in saved taxes by transfers.

railfreight“Fictitious transfer pricing declarations were the problem”, he said, where multinationals managed to declare profits which appeared lower in countries with higher tax rates and higher in countries with lower tax rates. This occurred where the culprits identified transfers of intangibles for less than full value; showed over capitalisation of tax group companies and declared contractual arrangements with low risk tax environments.

Digging deeper

The Davis Tax Committee had recommended to National Treasury Department that the current unit in SARS, dedicated to base erosion and profit shifting be strengthened. At present this constituted only twenty personnel. “Building up this team would enable SARS to dig deeper into companies’ affairs”, he said.

Billy JoubertBilly Joubert, Tax Director, Deloittes, pointed to the fact that transfer pricing was in fact a “neutral” instrument in terms of its intention to promote industrialisation because its purpose was in fact to achieve arm’s length profits across the value chain.

Transfer pricing rules based on international best practice provided investors with certainty and it also protected the tax base of the relevant country, he said.   It was therefore an essential part of any tax system, providing taxpayers did not manipulate prices by shifting profits to lower tax jurisdictions. He condemned the practice.

Arm’s length reporting in question

Joubert said South Africa was an observer and an active contributor to the OECD and their transfer pricing guidelines was a resultant consensus document. It was critical for SA to align with the tax policies adopted by their trading partners where they could, endorse “the arm’s length principle” adopting the guidelines in their own domestic environment and follow global standards.

He said that SARS had achieved the collection of approximately R5bn over the last three years from some 30 audits and adjustments of R20bn.

He concluded that SARS’s new rules “were now more closely aligned to the global standard and possibly ahead of many other countries”, noting, however, there was a lack of certainty in terms of outdated practice notes; limited guidance on implementation of “secondary adjustment mechanisms”; and also a lack of interaction with double tax agreements which were closely allied to the process.

Back to understaffing…

Prof Johann Hattingh of UCT pointed to the fact that the Davis Tax Committee recommended full compulsory OECD style taxpayer information disclosure and there “was more than enough in the legislative armoury of SARS to effectively combat intercompany mispricing or tax abusive behaviour”.

However, he also pointed to the fact that SARS was understaffed and simply outnumbered by input of declarations to effectively implement transfer pricing legislation across a broad spectrum.

Prof Hattingh explained that insofar as tax interpretation was concerned it was a complex and ultimately subjective evaluation because of the difficulty in identifying intangibles and services which were transferred or provided and the arm’s length price at which they were valued. Even the whole definition of an “arms length transaction” was subject to difficult legal, accounting and tax interpretation, he pointed out.

OECD the genisis

He said all BRICS countries, except Brazil, took the OECD guidelines as a starting point, Brazil using fixed international commodity prices which provided more certainty but which conflicted in many cases with double tax agreements, since double tax could arise in one of the countries involved in transfers.

EFF member Freddie Shivambu said that in terms of SARS, staffing with skilled personnel was not the only problem as far as could see but there was a lack of clarity on the way forward.  Judge Davis replied that there were indeed criminal elements involved, such as illegal siphoning of money and under-declaration of assets, but his committee had established “empirical evidence” that the amount lost to the fiscus was not always as high as it was reported to be.

But the way forward, he re-empahsised, involved updating wording of legislation; the ability to follow up on “arms length transactions” and more staff to do this. His Committee’s report was with the President.

ANC says transfer pricing is manipulation

Some ANC members pointed to the fact that some multinationals were making “massive profits and not contributing to the country’s agenda to address poverty, inequality and unemployment and transformation” and that transfer pricing should be banned. Others called for it to be declared “illegal”.

They were corrected again by Judge Davis who explained that transfer pricing was a legitimate necessary process for companies doing legitimate transactions and as such it could not and would not be “banned” or illegalised.

D Macpherson DAMr D Macpherson (DA) joined the debate to say that the issue of illicit transfer pricing should not become a political matter but that it was a national concern for all, pointing to the fact that whilst transfer pricing was one issue, the country was losing some R6bn through other forms of corruption.

It was all part of the same problem, he said, and the country had to take a stand against all illicit activities that deliberately robbed the government of revenue.

Not just mining worldwide

Meanwhile Judge Davis agreed with ANC members that “additional revenue was needed to redress historical injustices” but the World Bank had reported that South Africa had addressed this challenge better than most countries, including Brazil. There was no evidence to suggest that transfer pricing affected the mining industry notably.

He was joined by Billy Joubert of Deloittes who stated that such a transaction should not be criminalised because they were cross-border transactions, which was essentially transfer pricing, and re-emphasised that they were “neutral” until  assessed and found to be illicit or not.

National Union of Mineworkers said transfer prices should in principle match either what the seller would charge an independent, arm’s length customer, or what the buyer would pay an independent, arm’s length supplier. He claimed that transfer pricing defeated the objectives of the Minerals and Petroleum Resources Development Act.

“All it meant”, said the NUM spokesperson, “was retrenchment of employees; low and unequal salaries: inadequate investment on skills development; poor implementation of social and labour plans and less investment on health and safety standards, resulting in injuries and fatalities.”

brigette radebeBridgette Radebe of South African Mining Development Association (SAMDA) said her records showed that “out of 151 countries, South Africa lost, on average, the twelfth highest amount of money through illicit financial outflows”. She disagreed with Joubert of Deloittes on the ‘neutrality’ of transfer pricing and the effects and that the statement that the mining industry was a “small player” was incorrect.

She said the mining industry contributed 17% of GDP and 38% of exports, plus 19% of private investment with R78 billion spent in wages and salaries. “These figures were totally eroded and made misleading by transfer pricing”, she said.  She provided the parliamentarians with a series of figures explaining how transfer pricing in the mining industry took place and claimed that manipulation was often the practice.

SAMDA suggested the immediate alignment of the mining charter with the B-BBEE Codes of Good Practice with transfer pricing and to address the issue of penalties contained in the charter for non-compliance.  Much agreement from ANC members took place.

Multinationals under attack

One ANC member stated that “the bulk of South Africa’s mineral resources were in the hands of foreign nationals and it was good that SAMDA and organised labour came together and addressed the issue of transfer pricing in terms of the South Africa’s economy.”

A department of mineral resources (DMR) staff member attending was called upon by the chair to respond, who stated that all the issues raised would be discussed by his department and in the light of success with penalties under the Mine and Safety Act, increased penalties for breeches in declarations might be considered.

Cooperation possible

DMR and SARS had been working together, the spokesperson said, on the whole issue of transfer pricing, a memorandum of understanding between the two departments having been established.

SAMDA said that some multinational companies often wished to “manipulate prices to such an extent that there was no income for beneficiation or share distribution and consequently loans on shares could not be repaid.”

Other articles in this category or as background
http://parlyreportsa.co.za/uncategorized/sars-to-be-given-right-to-search-without-warrant/
http://parlyreportsa.co.za/securitypolicedefence-2/customs-duty-bill-cuts-inland-ports/
http://parlyreportsa.co.za/finance-economic/promotion-and-protection-of-investment-bill-opens-major-row/
http://parlyreportsa.co.za/finance-economic/financial-sector-regulation-bill-heralds-twin-peaks/

Posted in Facebook and Twitter, Finance, economic, LinkedIn, Mining, beneficiation, Special Recent Posts, Trade & Industry0 Comments

Competition Commission zeroes in on retailing

Minister on new Competition Commission focus…

large retailerThe Competition Commission is to announce the terms of the market enquiry into “parts” of the retail industry within the next few weeks, said Minister of Economic Development, Ebrahim Patel, in his budget vote speech to Parliament.

What “parts” exactly were not clear from his speech, Minister Patel only saying itebrahim patel would involve large supermarket chains, grocery stores and small retail outlets like spaza shops.

At present the Competition Commission has launched a market enquiry into both the private medical industry and liquefied natural gas distribution process and was now in discussion with the construction industry on a similar restitution package as “redress for their collusion and price-fixing.”

Property ownership focus

Unusually, Minister Patel’s speech was short and to the point but he did say on the Competition Commission would be looking into the retailing industry and property ownership area.

He said the inquiry would involve “The structure of the industry including retail outlets in townships, the tenancy arrangements in shopping malls that seem to squeeze smaller players out and the impact of the growth of large retail chains on competition, jobs and small business development.”

Announcement appears in vacuum

large retailer 2Nothing was said on Minister Patel’s plans for the Competition Commission in the budget vote speech from Minister of Small Business, Lindiwe Zulu, nor in Minister of Trade and Industry, Rob Davies’ speech, DTI having been split the Competition Commission but still interested in entrepreneurship and job creation.

Deputy Minister of Economic Development, Madala Masuku, said nothing at all on the subject the Competition Commission in her speech but did advise Parliament that the department had been on a series of provincial business studies over six months on how to create more jobs and build small businesses and better service to the provinces. That possibly is the basis of what is now happening as a result of what they saw.

Small business seems stifled

The structure of small business and the relationship to retail chain outlets, competitive pricing and rentals must have been part of such observations.spazza

Also minister, Lindiwe Sisulu, before being transferred to the post of minister of human settlements had told the select committee on economic development that “SMMEs contributed 57% of South Africa’s GDP and accounted for 56% of employment.  The National Development Plan (NDP) envisaged that 90% of jobs created would be coming from small and medium enterprises.”

Partnerships in retailing and distribution

She told parliamentarians that economies around the world had shown that jobs were not created by large corporations, but by SMMEs.    However, large corporations and big businesses should seek partnerships in South Africa so that they could assist the department in building small and medium enterprises and thus contribute to economic development, she said.

Manufacturing distribution was also an area discussed at length  in government small business workshopsdistribution recently attended by parliamentarians where it was seen that the large retailers have also control of country wide market distribution at retail level, only dealing with areas providing suitable economic return and more sophisticated road and rail infrastructure.

This market inquiry by Minister Patel therefore has an investigative ring to it rather than any direct attack on certain sectors in the retail industry.

Other articles in this category or as background
http://parlyreportsa.co.za/energy/competition-commission-turns-lp-gas-market/
http://parlyreportsa.co.za/uncategorized/competition-commission-promises-health-care-inquiry/

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Lack of skills hampering broadband rollout

Broadband for SA needs local tech….

computerSchoolThe lack of IT skills in broadband development in government, especially those responsible for implementation of the new broadband policy in SA as well as technicians in the field, has become a major issue of debate in Parliament recently.

The department of telecommunications and postal services (DTPS) has increased it spend in consultancy services by nearly 400% in the last year according to its presentation documents to the relevant parliamentary portfolio committee.

Also, once again the rationale behind the splitting of the department of telecommunications and postal services (DTPS) away from the department of communications (DOC) was queried in Parliament as “not being in line with world trends” causing delays in implementation plans.

DTPS in long terms will benefit

Both these issues were responded to by the responsible minister, Dr Siyabonga Cwele, who was in attendance when DTPS presented their strategic and annual performance plans to the relevant portfolio committee.

Dr Cwele said that he was far happier to leave DOC concentrating on matters surrounding the SABC and migration to digital TV, leaving his department (DTPS) to pursue the objective of uplifting South Africa into the world of broadband.

Broadband will help all

This objective also fitted into the plan to re-model and reassess what was expected from the South African Post Office (SAPO) and for government to decide, like many other countries had done, where postal services fitted in and how to consolidate on the valuable rural outreach of SAPO in respect of other services required by poorer sections of the community.

What was clearly missing during the meeting was, according to parliamentarians, exact timelines for broadband introduction to schools, health services, government departments and state owned utilities, Dr Cwele being quite clear that DTPS had been mandated to ensure that affordable broadband was available.

Staff needed to do the job

Dr Cwele acknowledged, however, that DTPS was greatly under qualified to achieve this due to lack of technical skills and the department did not have enough capacity to deliver on its mandate, as this was a very technical sector of public services. It was too early to commit to timelines but at this stage they had to build the staff complement to do the job, he noted.

He said that DTPS had to bring highly skilled young people into the organisation considering the internet revolution and the growing need for national broadband services. “We need skills not expensive managers”, he added.

Technicians not paper creators

It was explained, in general, broadband refers to telecommunication in which a wide band of frequencies is available to transmit information at greatly increased speed, the installation of which should bring costs down, South Africa having some of the highest communication cost factors in the world.

Ms Rosey Sekese, DG, DTPS, in presenting her strategic plan, said her immediate  priorities were:

• broadband connectivity focused on radio frequency spectrum
• cyber security
• the cost to communicate
• an Information Communication Technology (ICT) policy review
• a national e-strategy
• a turnaround plan for SAPO

The total budget allocation for the Department was R1.4 billion, a reduction from R2 billion in the previous financial year.

Opposition members wanted to know the criteria that DTPS had used to choose Telkom as the leading agency in the rollout of broadband and whether this was fair competition.

Also, they asked why DTPS had emphasised the roll-out of e-governance in the public service to meet NDP targets as first objective. Rather, they said, the focus should have been on business and industry, the ICT sector in the commerce and industry sectors needing this and who played a far greater role in economic development and job creation.

Telkom has to lead in this..

TelkomMinister Cwele responded that the selection of Telkom as the leading agency in the rollout of broadband was as a result of Telkom having the largest terrestrial fibre network and was also based on cost, as this was a state owned entity.

On business and industry needs, he also said DTPS needed to find a way to work with the private sector that could improve economic growth and he, the deputy minister and the DG had been in constant engagement with the private sector as it was realised that this was essential.

The department would also work together with the department of trade and industry and the department of small business development to create incentives for investment in SMMEs, as they realised that many small companies had been marginalised by slow internet services and limited access to the many international IT developments taking place and additional sea cable services.

Creating certainty

He added that he was perfectly aware of the challenges in the finalisation of a spectrum policy to internetcreate a smooth path for the regulators and he was also aware of the need to create certainty in the telecommunications industry. He acknowledged that DTPS was following closely the experiences of the Western Cape and Gauteng broadband rollout plans.

The minister promised that all critical posts within DTPS would be filled within the next three months. However, opposition members continued to draw attention to the question of the general IT skills shortage and said it was yet another “crisis about to happen”.

DA’s Gordon Mackenzie noted “a dramatic increase in outsourced services from R52.5m in 2014 to R230m in 2015” and said this route only added to the high cost of communications in South Africa.

Other articles in this category or as background
Overhaul of broadband policy underway – ParlyReportSA
Parliament gets final dates for digital TV – ParlyReportSA
More state powers for ICASA proposed – ParlyReportSA

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Pravin tackles COGTA intervention at local level

 COGTA getting somewhere with municipalities…..

pravin gordhan MTBSIt is quite apparent why the seemingly impossible task of integrating local, provincial and national government service has been given to minister Pravin Gordhan of cooperative governance and traditional affairs (COGTA). He seems quite determined that all provinces and municipalities have to deliver on their constitutional mandate.

His department of cooperative governance (DCOG) recently updated Parliament on the current situation, led by some opening remarks by the minister himself.   He went straight to the nub of the issue by stating that section 139 of the Constitution provided for intervention by the relevant provincial executive if a municipality could not or did not fulfil an executive obligation.

First steps

Whilst the Local Government Reform Act, passed in 2014, has helped considerably by refining local electoral areas nationally down to 137, whilst 95 municipal districts have been designated in most cases to correspond with electoral areas. Thus, more representative structures have been established although some suspected at the time this was an election ploy.

Stabilisation of local government was the key, said minister Pravin to parliamentarians, and the process of “Back to Basics”, one of the 16 SIP strategic items on the list of the National Development Plan, was the basis of the department’s 2015/6 annual performance plan. This to ensure municipalities performed in their dealings with local government at the coal face.

Minister Pravin said, “Local government plays a key role in determining whether people live with dignity and whether they are able to access economic opportunities, consequently contributing to the overall development of the country”.    Part of COGTA’s mandate, he said, was to understand and support the development of intergovernmental relations in all three tiers of government.

New Bill to make third tier accountable

vusi madonaselaVusi Madonsela, DG of DCOGTA, advised that they were “aiming to build accountability for performance in local government systems by setting and enforcing clear performance standards by March 2019. To this end a new Intergovernmental Monitoring, Support and Intervention (IMSI) Bill would be processed through Parliament.

The performance of municipal public accounts committees (MPAC’s) therefore in all “dysfunctional municipalities as well as municipalities with adverse and disclaimer opinions would be monitored and enforced”, he said.

Changing attitudes to debt

Madonsela also said, “The culture of payment for services would be encouraged nationally with campaigns” and part of DOCG’s task was to improve the ability of at least 60 municipalities to collect outstanding debt. He named other targets such as to strengthen anti-corruption measures by 2019 and to have achieved a full local government anti corruption tribunal systems working.

He also said DCOG would start with 12 districts to develop integrated development plans and eight cities and towns would also be supported and monitored in developing long term strategies and proper spatial development programmes.

Skills always the problem

Opposition members called on COGTA for better performance by local government training SETAs. Many institutions were conducting training programmes for councillors but in the process had found that many councillors literally have no skills or formal education. Madonsela responded by saying there were now regulations being passed to weed out unqualified persons and those with false CVs.

Minister Pravin agreed that some of the factors that led to dysfunctional local government structures included political instability and problems with service delivery and institutional management inability.  Councillors were nominated and appointed by their political parties, he said, and “perhaps it should be a conversation amongst MPs on how councillors should be appointed.”

Back to “Back to Basics”

The net result at the moment, said minister Gordhan, that one in three municipalities, according to a study conducted nationwide, were failing and the success of the “Back to Basics Programme” would now depend on inter-government transfers to bring in skills and changing the employment criteria to economic, tax and financial viability experience.

He concluded that his department was getting tough where municipalities had broken the law and some of the answers may lie in strengthening district municipalities with specialists and merging some municipalities.   Another option was to abolish local municipalities completely and in their stead, start again with district management areas but he did not elaborate on this.
Other articles in this category or as background
Municipal free basic services slow – ParlyReportSA
Local government skills totally lacking – ParlyReport
Electricity connections not making targets – ParlyReportSA

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

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