Tag Archive | National Treasury

Border Management Authority around the corner

SARS role at border posts being clarified ….

In adopting the Border Management Authority (BMA) Bill, Parliament’s Portfolio Committee on Home Affairs agreed with a wording that at all future one-stop border posts, managed and administered by the envisaged agency and reporting to Department of Home Affairs (DHA), were to “facilitate” the collection of customs revenue and fines by SARS staff present.

However, on voting at the time of the meeting, Opposition members would not join in on the adoption of the Bill until the word “facilitate” was more clearly defined and the matter of how SARS would collect and staff a border post was resolved.

Haniff Hoosen, the DA’s Shadow Minister of Economic Development said that whilst they supported the Bill in general and its intentions, they also supported the view of National Treasury that the SARS value chain could not be put at risk until Treasury was satisfied on all points regarding their ability to collect duty on goods and how.

Keeping track

Most customs duty on goods arriving at border controls had already been paid in advance, parliamentarians were told; only 10% being physically collected at SA borders when goods were cleared.

However, with revenue targets very tight under current circumstances both SARS and Treasury have been adamant that it must be a SARS employee who collects any funds at border controls and the same to ensure that advance funds have indeed been paid into the SARS system.

The Bill, which enables the formation of the border authority itself, originally stated that it allowed for the “transfer, assignment and designation of law enforcement functions on the country’s borders and at points of entry to this agency.”

Long road

It was the broad nature of transferring the responsibility customs of collection from SARS to the agency that caused Treasury to block any further progress of the Bill through Parliament, much to the frustration of past Home Affairs Minister, Malusi Gigaba.   It has been two years since the Bill was first published for comment.

DHA have maintained throughout that their objective is to gain tighter control on immigration and improve trading and movement of goods internationally but Treasury has constantly insisted that customs monies and payments fall under their aegis. The relationships between custom duty paid on goods before arrival at a border to Reserve Bank and that which must be paid in passage, or from a bonded warehouse was not a typical DHA task, they said.

Breakthrough

It was eventually agreed by DHA that SARS officials must be taken aboard into the proposed structure and any duties or fines would go direct to SARS and not via the new agency to be created or DHA.

This was considered a major concession on the part of DHA in the light of their 5-year plan to create “one stop” border posts with common warehouses shared by any two countries at control points and run by one single agency. More efficient immigration and better policing at borders with improving passage of goods was their stated aim.

Already one pilot “one stop border post”, or OSBP, has been established by DHA at the main Mozambique border post by mixing SAPS, DHA and SARS functions, as previously reported.

To enable the current Bill, an MOU has been established with SAPS has allowed for the agency to run policing of SA borders in the future but Treasury subsequently baulked at the idea of a similar MOU with SARS regarding collection of customs dues and the ability to levy fines.
Bill adopted

At the last meeting of the relevant committee, Chairperson of the PC Committee on Home Affairs, Lemias Mashile (ANC) noted that in adopting the Bill by majority vote and not by total consensus, this meant the issue could be raised again in the National Council of Provinces when the Bill went for consensus by the NCOP.

Objectives

The Agency’s objectives stated in the Bill include the management of the movement of people crossing South African borders and putting in place “an enabling environment to boost legitimate trade.”

The Agency would also be empowered to co-ordinate activities with other relevant state bodies and will also set up an inter-ministerial committee to handle departmental cross-cutting issues, a border technical committee and an advisory committee, it was said.

Mozambique border

As far as the OSBP established at the Mozambique border was concerned, an original document of intention was signed in September 2007 by both countries. Consensus on all issues was reached between the two covering all the departments affected by cross-border matters.

Parliament was told at the time that the benefit of an OSBP was that goods would be inspected and cleared by the authorities of both countries with only one stop, which would encourage trade. In any country, he explained, there had to be two warehouses established, both bonded and state warehouses.

Bonded and State warehouses

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

Duties and taxes were suspended for an approved period – generally two years but these had to be paid before the goods entered the market or were exported, MPs were told. The licensee bore full responsibility for the duty and taxes payable on the goods.

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

Slow process

MPs noted that it had taken over six years for the Mozambique OSBP to be finalised. SARS said there were many ramifications at international law but added two discussions with Zimbabwe for the same idea had now taken place. It was hoped it would take less time to reach an agreement as lessons had been learnt with the Mozambican experience.

On evasion of and tax, SARS said in answer to a question that losses obviously occurred through customs avoidance and evasion, so it was consequently it was difficult to provide an overall figure on customs duty not being paid, as evasion was evasion. Smuggling of goods such as narcotics, or copper, which could only be quantified based on what had been seized.

The same applied to the Beit Bridge border with Zimbabwe where cigarette smuggling was of serious concern and through Botswana.

In general, it now seems that Home Affairs is to adopt an overall principle of what was referred to as having one set of common warehouses for one-stop declaration, search, VAT payment and vehicle movement with a SARS presence involving one common process for both countries subject to a final wording on the SARS issue before the Bill is submitted for signature.

Previous articles on category subject
Border Authority to get grip on immigration – ParlyReportSA
Mozambique One Stop Border Post almost there – ParlyReportSA

Posted in Finance, economic, Fuel,oil,renewables, Home Page Slider, Justice, constitutional, Mining, beneficiation, Public utilities, Security,police,defence, Trade & Industry, Transport0 Comments

Foreign assets amnesty Bill underway

Timing of window period resolved as 30 June

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

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

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

Alterations made

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

Foreign assets

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

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

More time

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

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

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

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

Safe with SARS

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

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

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

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

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

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

FIC Bill hold up goes to roots of corruption

Bill originally approved by Cabinet

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

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

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

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

Crime busting

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

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

More entrants

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

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

Split in the ranks

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

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

No stroke of the pen

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

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

The old argument

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

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

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

The aim

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

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

Aims of Bill

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

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

Prominent persons

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

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

Getting to know you

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

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

Objective views

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

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

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

Getting control

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

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

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

Who blinks first

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

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

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

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

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

Posted in cabinet, earlier editorials, Finance, economic, Home Page Slider, LinkedIn, Security,police,defence, Trade & Industry0 Comments

Anti Corruption Unit overwhelmed

Focus on top down elements of patronage 

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

Out of hand

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

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

Laundry list

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

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

Top down problem

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

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

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

Bottomless pits

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

Poor leadership

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

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

Upstream mayhem

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

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

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

Twisting path

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

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

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

Nothing but the truth

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

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

Legal jungles

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

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

In conclusion

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

Previous articles on category subject

 Parliament, ConCourt and Business – ParlyReportSA

Parliament and the investment climate – ParlyReportSA

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

Nkandla vs NDP: the argument rages – ParlyReportSA

Parliament closes on sour note – ParlyReportSA

 

 

 

Posted in cabinet, Earlier Stories, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, Home Page Slider, Justice, constitutional, LinkedIn, Public utilities, Special Recent Posts, Trade & Industry0 Comments

Carbon tax offsets on the way

Tax offsets plan almost ready for Parliament

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

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

SARS as usual

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

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

Eskom maybe dictates

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

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

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

Quantifiable is the word

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

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

How not to pay tax….offsets

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

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

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

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

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

Treasury goes with health pundits on sugar tax

Sugar tax threatens jobs say suppliers

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

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

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

In the background

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

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

Not medically holistic?

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

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

Who suffers most

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

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

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

Health objectives

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

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

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

World view

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

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

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

Posted in Health, Home Page Slider, Labour, LinkedIn, Trade & Industry0 Comments

Central Energy Fund hatches fuel plan

A lot going on at Central Energy Fund…..

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

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

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

Glaring omission

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

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

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

What the Minister said

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

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

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

Long term view

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

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

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

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

Trading nightmare

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

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

Gas nightmare.

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

Central Energy Fund seen as politically driven

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

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

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

Failed deal

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

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

First try

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

The last word

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

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

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

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

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Tax legislation for parliamentary debate

Treasury pushing for tax legislation changes…..

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

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

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

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

Twin Peaks also

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

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

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

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

Retirement funds

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

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

Harmony

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

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

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

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

At odds

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

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

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

No “nanny state” laws

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

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

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

Where to help or not

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

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

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

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

Time needed for politics

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

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

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

Other articles in this category or as background

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

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Red tape worries with FIC Bill

FIC Bill : lengthy hearings expected….

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

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

Hearings from public sector

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

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

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

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

Criminalising comes up again

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

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

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

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

Main purposes

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

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

Prominent persons

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

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

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

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

Obscurification

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

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

Risk Management

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

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

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The big SA cabinet crunch

Editorial….

Cabinet hopes are Brown, Ramaphosa, Gordhan…..

Public Enterprises Minister, Lynne Brown, reports that she is to introduce as a cabinet draft, the Lynne BrownShareholder Management Bill as part of a plan to introduce leadership ability and some form of continuity for the state owned enterprises (SOCs) under her control.   This includes Eskom, Transnet, Denel, SA Express, Alexkor and Safcol.

We hope this is the start of something big.

The last few weeks have been an exercise in disaster, so let’s try and take a positive spin on things from a parliamentary viewpoint. Whilst troubled SAA is now an independent, falling under National Treasury and if President Zuma minds his own business, Minister Pravin Gordhan is to sort out National Treasury itself and also the troubled SARS, which he re-designed in the first place and which became such a success working with Trevor Manuel.

More problem children

Meanwhile, PetroSA is in real deep water falling, the entity falling under Central Energy Fund (CEF) reporting to Department and Energy (DOE). With Minister Joemat-Pettersson not back from COP21 or wherever, the country still faces some serious energy issues. But at least the PetroSA problem is now all in the open, with somebody obviously having to take over the reins and the mess, probably CEF itself.
Oddly enough there are people in CEF who know exactly what the problem is but once again politicians pushed experts in the wrong direction, it appears.

In addition, the Passenger Rail Association (PRASA) is very much on the slippery slope and, together with SANRAL, both present highly contentious transport issues which are now in the hands of Minister Cyril Ramaphosa to untangle. Troubling times indeed.

Public Enterprises comes to the party

lyne brown 2Now Minister Lynne Brown appears to be getting the senior management of her portfolio under control and whilst we could still have shutdowns at Eskom she says, because “machines can break down unexpectedly”, the leadership is there she says, as is the case with her Denel.
Lynne Brown recently reported that there are around 700 SOCs, an extraordinary fact, but bearing in mind the fact that South Africa is reputed to have the largest head count in public service per population count, this would appear quite possible.

On the road again

With Deputy President Cyril Ramaphosa chairing an Integrated Marketing Committee, which will hopefullyramaphosa designate which entities should remain SOCs and those which should be absorbed back into their relevant departments, there appears some hope with regard to containing the ballooning public service machine which has characterised President Zuma’s presidency.

Hands off appointments

An essential element of Minister Lynne Brown’s plan is to remove the appointment to the boards of the entities under her domain away from cabinet and Ministers, including herself, to a shareholder management team that creates a leadership operational plan for all SOCs and appoints, through due process, a tightly run appointment book.

A brave proposition indeed but it does indicate that Minister Brown is her own person.

Whilst the proposals might look like state control, in fact it is a clear signal that government may have heard the message that the current system of Ministers appointing board members is not working, is open to abuse and what is worse, the consequent “jobs for the boys” system results in taxpayer’s money being thrown away through bad management, corruption and what the auditor general calls “useless and wasteful expenditure”.

On the drawing board

The Shareholder Management Bill, Minister Brown said in Johannesburg, will first need a concept paper (perhaps she means a White Paper) and such could be released after the February Cabinet Lekgotla in February, with an intention of introducing such as system by the end of 2016.

Whilst it is pretty obvious who should not be on such an appointment team, the plan begs the question of will be chosen to occupy such critical posts but it is far too early to cogitate on this one. With Ministers changing their portfolios as if it was a game of musical chairs, there is reason to congratulate Minister Brown on the statement that she herself as a Minister would be excluded from making appointments in her own SOCs.

Leadership needed

During the same address, she added that Eskom was “not out of the woods” yet and there was still not sufficient electricity to facilitate economic growth, but the leadership issue was being addressed satisfactorily with the right people being appointed. Brown said none of the entities under her control “would be approaching the National Treasury with begging bowls”.

Perhaps this is the principle being adopted behind the scenes with the SABC, which whilst not affecting business and industry other than travel costs, unlike trade and investment hurdles and industrial strategic changes, SABC is threatened by the possibility of being returned to its parent government department which at first glance appeared to be a move by President Zuma to gain control of state financed media, Mugabe style.

However, in a broad sense it seems to be Minister Brown’s idea that appointments to the top echelons running the country should be as a result of finding those qualified to do so rather than being handled by totally unqualified persons, some with solicitous intent, and others trying to retain power with dubious appointments such as having friends, in the case of the SABC, to broadcast “the truth” to specific rural audiences.

Unprincipled governance remains the one of the biggest problems facing South Africa, intrinsically coupled to (and in some cases causing} lack of growth and lack of jobs.

Croneyism

Bad appointments by Ministers and of Ministers has been the cornerstone of control by patronage, the route for corruption and the reason for sheer bad management, a practice now openly exposed but not yet controlled by any means. From a parliamentary viewpoint, let us leave it there. The rest is being said by the media but most MPs when they return to Parliament in late January 2016 will have realized that sheer stupidity can ruin their own futures and their pensions.

But if Minister Lynne Brown, in her practical and down to earth manner, can come up with the remarkable idea of Cabinet Ministers, hopefully including the Presidency as well, not interfering in who does what as far as expertise is concerned, then perhaps this can be applied to all 47 government departments and agencies.

One small step

No doubt as far as confirmation of an appointment, the Minister involved may still have to “approve” such a decision but it is worth watching the outcome of the debate on the shortly-to-be tabled Broadcasting Bill, if only to see if the appointment of inept senior appointments can be halted or reversed.

What has come out of the Eskom, PRASA and PetroSA issues is that a bad leader with no qualification or right to be in a position of leadership, or worse led by one who has supplied fraudulent qualifications, leads to frustration and anger by those with genuine skills and high academic qualifications lower down the ladder at the coalface. This is in the space of government service where technical skills are located and badly needed.

We hope Minister Lynne Brown has more of these “eureka” moments.

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Treasury’s plan for carbon tax

Morden’s thinking on carbon tax….

cecil mordenBearing in mind Cabinet has not agreed to a carbon tax at this stage, Cecil Morden, National Treasury, explained to the portfolio committee on environmental affairs that the carbon tax as currently proposed could reduce South Africa’s GHG emissions by between 35% and 45% by 2035.

It had to be noted, he said, that SA was in the top 20 in absolute global emissions.

Looking back, Cecil Morden said carbon tax policy proposals began with the Environmental Fiscal Reform Policy Paper in 2006, a Carbon Tax Discussion Paper in 2010 followed by a Carbon Tax Policy Paper 2013, a Carbon Offsets Paper in 2014 and now the current legislative drafting process.

The anticipated carbon tax implementation date, Cecil Morden said, was still mid-2016.

Balancing the books as well

The problem now was with South Africa joining with others COP15 in 2009 with a commitment to curbemissionsgraphic GHG emissions by 34% by 2020 and by 42% by 2025, the question was now of how to reduce the need for higher levels of growth and the energy and carbon intensive nature of the SA economy against the world commitment to reduce GHG emissions.

Cecil Morden told parliamentarians that there was always a concern that climate change could slow or possibly even reserve progress on poverty eradication based on the fact that most developing countries were more dependent on agriculture and other climate-sensitive natural resources for income and quality of life.

In addition, developing countries usually lacked sufficient financial and technical capacities to manage climate change, particularly in Africa and South Asia. Both of these continents seeing more substantial increases in poverty relative to a baseline without climate change, yet the cost of which would still fall disproportionately on the poor.

Done by offsets

carbontax1The rationale behind carbon tax was a means, Cecil Morden said, by which government can intervene by attempting to level the playing field between carbon intensive, fossil fuel based firms and low carbon emitting sectors using renewable energy and energy efficient technologies using a carbon offsets scheme.

In referring to the several carbon tax modelling schemes that had been produced and results of studies, the model proposed could reduce GHG emissions by between 35% and 45% by 2035, the study to be made public by the end of July 2015.

The major concerns at the moment and noted by Treasury were the impact of higher electricity prices on low income households and on the international competitiveness of exports in the world market.

Killing the cat

“The choice”, Morden noted, “had been between command and control measures, in other words byemissions regulation or by market based instruments. In other words by regulations that used legislation or administrative measures that proscribed certain outcomes usually targeting outputs or quantitative factors such as minimum ambient air quality measurements.

The second option of policy instruments that attempt to internalise environmental externalities through the market by altering relative prices that consumers and firms face.”

“Although this second option”, Morden said, “ does not set a fixed quantitative limit to carbon emission over the short term, a carbon tax at the appropriate level and phased in over time to the correct level will provide a strong price signal to both producers and consumers to change their behaviour over the medium to long term.”

He concluded that an introduction of a carbon price will change relative prices of goods and services, making emission intensive goods more expensive relative to those that are less emission intensive”.

Behavioural changes

Africa MoneyCecil Morden said that Treasury saw this as a powerful incentive for consumers and businesses to adjust their behaviour, resulting in a reduction of emissions.

MPs expressed concern that carbon offsets could be manipulated so they had to be related to actual reductions of emissions on paper, Morden replying that in terms of off-sets, there were going to be “quite rigorous requirements for how it should be monitored and Treasury would work closely with the DEA and DoE in this regard.”

Carbon thresholds the hope

In the discussions that followed Cecil Morden further noted that a carbon budget system was an evolving mechanism using information from companies to inform the budget. After a number of years, he said, the relative thresholds could be captured into absolute thresholds. The other possibility was to move towards an emission trading scheme and use the carbon budget just as an indicative monitoring tool, rather than as an instrument of penalty.

He then explained the use of border tax adjustments to try to level the playing field on imports. What ever happened, however, he promised, the entire matter would come before Parliament before South Africa participated in COP21.

Other articles in this category or as background
Carbon Tax under attack from Eskom, Sasol, EIUG – ParlyReportSA
Treasury sticks to its guns on carbon tax – ParlyReportSA
Minister Gigaba to line up Eskom for carbon tax – ParlyReportSA
Carbon tax not popularly received by Parliament – ParlyReportSA
Gordhan gives out strong message on carbon tax – ParlyReportSA
WWF warns that carbon tax must come to SA – ParlyReportSA

Posted in Enviro,Water, Facebook and Twitter, Finance, economic, Fuel,oil,renewables, LinkedIn, Special Recent Posts, Trade & Industry0 Comments

Houses_of_Parliament_(Cape_Town)

Parliament : some clarity on policy emerging

Departments brief new Parliament..

Editorial….

Again and again the words ‘certainty’ and ‘uncertainty’ have arisen in parliamentary working committees,  not only in terms of the foreign investment climate but also in terms of borrowing, building and direction of strategies to achieve growth and the creation of jobs.

More than anything else, uncertainty seems to be South Africa’s greatest economic stumbling block. Even public utilities, let alone investors, bankers and private sector industrialists, have made submissions asking for clarity on government policy and decision making.

Cabinet indecision could be the problem. Leadership could be the problem. Let the political commentators decide but from a parliamentary viewpoint this week one sensed the first elements of certainty and clarity.

IRP being finalised

No doubt the news that the integrated resources plan is finally happening will bring more certainty to the energy sector and the recent nuclear and hydro decisions have let everybody know where that sector is going.

Whether recent decisions are considered right or wrong in the health sector, Minister Dr Motsoaledi seems to have a firmer hand on the tiller.  Similarly in the transport sector, and more than just hopefully but certainly, the first Brazilian train is due to arrive and new coaches will shortly be going through some new stations that are being built.

Minister Pravin Gordhan has brought his experience with SARS to bear on local government and his unsmiling manner will no doubt rattle many a cage down the line and produce the necessary repayment plans.   He appears, from reports coming to Parliament, to be getting around the constitutional problem of local affairs being out of bounds to national affairs and will bring a number of errant provincial and local employees to court.

Saving the day

Although Parliament still cannot amend a money Bill but only debate same,  national treasury seem to have come to the party to plug the gap in certain instances, thus getting rid of expressions like “currently in negotiation on possible funding” in departmental and state utility reporting. But a what cost and will this be enough?  Be that as it may, the gap has been plugged.

Whether recent events are good or bad news according to the governing or opposition parties, confirmation of direction in government policy takes the crystal ball out of planning and strategy.   Decisions can be made.

We sense at the moment some direction in parliamentary affairs and in the coming weeks, whilst there will be surprises for some such as the Areva nuclear build award, disappointments for some such as no reversal of the decision to proceed with carbon tax and the worry of the decision to increase electricity tariffs despite the multi-year fixing, at least we are beginning to know for certain where we are.

Posted in Cabinet,Presidential, Energy, Facebook and Twitter, Finance, economic, LinkedIn, Trade & Industry0 Comments

Carbon offsets paper still open

emissionsCarbon tax offset plans down on paper….

A paper outlining proposals for a carbon offset programme for local businesses was released for comment a month ago, part of national treasury’s response to the challenge of reducing carbon emissions in South Africa.   Planned and instituted carbon emission reduction programmes will reduce carbon tax, the paper says.

Written comment on the paper is invited until 30 June 2014, which can be e-mailed to www.treasury.gov.za.    A little confusing at first is why what has been published should be dated 2010 but this is because the idea was first mooted in the 2010 Budget Review.

Black gold, maybe

The news of a carbon tax originally was not good for Eskom, their officials said in a submission to Parliament some time ago, Eskom being almost totally reliant on coal and to a small extent on nuclear input to the grid. What is known is that SA coal has the reputation of being particularly “dirty” insofar as carbon output is concerned making SA, relatively speaking, one of the largest emitters of greenhouse gases.

The tax itself is a form of penalty despite the knowledge of the country’s reliance on coal, the government seemingly wanting to stay in the lead as far as the question of a carbon economy is concerned.

Carbon offsets are described in the paper now published as “a measurable avoidance, reduction, or sequestration of carbon dioxide (CO2) or other GHG emissions.”

Carbon reduction

Accordingly, the “softer” aspects of such a tax are designed for those who have other avenues for reduction of carbon to be used for offsetting against the tax or who have mitigation plans in process or proven as planned.    They amount to 5% to 10% for electricity, pulp and paper and 5% fixed for other key industries with varying thresholds according to investment in reduction.

According to national treasury, the paper “outlines proposals for a carbon offset scheme that will enable businesses to lower their carbon tax liability and make investments that will reduce greenhouse gas (GHG) emissions”, the plan as proposed for comment being designed to be introduced from 2016.

In the draft Bill, certain eligibility criteria for carbon offset projects are laid down.   The proposal is that successful projects will be awarded a “tradable emissions reduction credit”.    Projects could be the subject of energy saving and efficiency; transport re-organisation; agricultural emphasis on biomass; and waste applications, for example.

Commitments

In 2009, South Africa, at the UN conference on climate change, committed government to reducing carbon emissions from projected “business-as-usual scenarios” by 34 % in 2020 and 42% in 2025.  South Africa released a carbon tax policy paper last year.

The National Development Plan also calls on the nation to transform the local economy into an “environmentally sustainable low-carbon economy”.

Other articles in this category or as background
http://parlyreportsa.co.za//cabinetpresidential/carbon-tax-comes-under-attack-from-eskom-sasol-eiug/
http://parlyreportsa.co.za//cabinetpresidential/treasury-sticks-to-its-guns-on-carbon-tax/

Posted in Electricity, Energy, Enviro,Water, Facebook and Twitter, Fuel,oil,renewables, LinkedIn, Mining, beneficiation, Public utilities, Special Recent Posts, Trade & Industry0 Comments

Financial Sector Regulation Bill heralds twin peaks

Twin Peaks underway for financial sector with new Bill……

The Draft Financial Sector Regulation Bill, proposed by national treasury and approved by cabinet in December 2013, has had its public comment period extended to 7 March. This is probably the most important financial legislation to be drafted since the global financial crisis of 2008.

The Bill mandates the South African Reserve Bank (SARB) to promote and maintain financial stability within an agreed policy framework and form a Financial Stability Oversight Committee to assist the SARB to “maintain, protect and enhance financial stability.”

More regulation

The Bill marks the generalised movement towards the recently declared “twin peaks system” of regulating the financial sector which, Treasury says, is founded on the principle of protecting customers more effectively and ensuring that financial institutions are financially sound.

The “twin peaks” system provides for two dedicated regulators: a Prudential Authority to ensure the soundness of financial institutions, and a Market Conduct Authority, to protect customers and ensure financial institutions treat them fairly.

Treasury says that its two recent policy papers responding to lessons learnt in the 2008 global financial crisis – “A Safer Financial Sector to Serve South Africa Better “ released back in and the more recent paper. “A Roadmap for Implementing Twin Peaks Reforms” released in February 2013 – are available on the treasury website.

Financial Stability Oversight Committee

The draft Financial Sector Regulation Bill covers the first phase, which is to establish the two regulatory authorities. The Financial Stability Oversight Committee (FSOC) is to be chaired by the Governor of the Reserve Bank, with appropriate financial stability powers.

Importantly, the Bill provides a legal framework to enhance coordination and cooperation between both regulators and a memorandum of understanding between the two. In particular, the FSOC will ensure a coordinated and immediate response to risks to the stability of the financial system.

In addition, a Council of Financial Regulators (CFR) will coordinate all regulators, standard-setters and other agencies with a mandate over financial institutions on issues like financial stability, market conduct, competition, legislation, and enforcement, even those not reporting to the department of finance.

Global financial threats

Treasury says in its introduction to the draft Bill that the global financial crisis illustrated the importance of having mechanisms in place to deal with disruptions in the financial system that threaten financial stability. Now, where taxpayers’ money is at risk, the Bill provides for crisis management decisions to be taken by the Minister of Finance.

The Bill also establishes a shared enforcement mechanism, the Financial Services Tribunal, which is aimed at encouraging compliance with all aspects of the new regulatory regime. The Bill enhances existing regulatory and enforcement action powers (such as suspension or withdrawal of licences and approvals; orders to take or cease particular actions; and debarments) of the regulators, Also, it says, it “provides for a robust appeal mechanism”.

The Bill also, by changing the Financial Services Ombuds Schemes Act, seeks to strengthen the ombuds system by putting measures in place to enhance public awareness of the ombud system, requiring all financial institutions to be members of an ombud scheme as part of public protection.

Workshops on the “twin peaks” system have been held by National Treasury for all financial institutions and government financial agencies

Earlier articles on this subject:

http://parlyreportsa.co.za//cabinetpresidential/treasury-calls-for-twin-peak-system-with-two-financial-bills-2/
http://parlyreportsa.co.za//uncategorized/parliament-debates-three-financial-market-and-tax-bills/
http://parlyreportsa.co.za//cabinetpresidential/banks-amendment-bill-sets-up-faster-interventions/

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New Customs Duty Bill opposed by BUSA

SARS customs duty bill to close inland ports…

portsharboursThe newly tabled  Customs Duty Bill, with its two enabling Bills, were the subject of  vehement objections from Johannesburg Chamber of Commerce (JCCI) and Business Unity SA (BUSA), who both led the charge against the SARS proposals tabled by National Treasury.

This was in the  in the form of the vehement objections to the Customs Duty Bill, the Customs and Excise Amendment Bill and the Customs Control Bill, which propose that the principle of inland ports be scrapped and all clearances for imported goods be conducted at SA coastal locations.

Nevertheless, the Bills were eventually passed before the present government ended after an extended session of the NCOP to provide concurrence.

JCCI said that this would not only upset SADC and sub-Saharan  importers but also cause unintended consequences such as the “death of such inland ports as City Deep in Johannesburg” aside from inconveniencing local importers generally.

They said that many importers having now to be responsible for the movement of goods up the Durban/Johannesburg corridor would switch from rail to road freight to complete the import journey, thus placing further strain on Durban /Johannesburg road systems.

Transnet to become nonviable

Such unintended consequences , it was felt by JCCI, whilst of no consequence to SARS who were obviously only interested in the current losses of tax revenues by evasion, illegal imports  and corruption would result in serious strain for existing importers and make Transnet targets impossible.

Also, they said in their submission, the moves would cause further congestions at coastal ports and that the SARS proposals were in conflict with normal practices allowed for by the WTO.

Currently, JCCI told parliamentarians, only 20% of imports were being received through the Durban/Johannesburg corridor destined for movement by Transnet, who were in the process of spending enormous sums of money on infrastructure and rolling stock to change this imbalance. Now was not the time to encourage more road freight, they said.

BUSA weighs in

BUSA said that such radical changes of insisting that the three day customs clearance required by importers at port of entry, if construed as coastal only, was an unacceptable arrangement and although two alternative options were offered by SARS, neither had been found to be acceptable.

It was the wrong time to make such changes, said BUSA, and SARS should re-consider its approach and new ways found to reduce their losses of revenue in duty.

Also BUSA complained of the high penalties proposed for late clearances of goods if the proposed three day notice was not met and that new approaches should be considered generally that incorporated and embraced the concepts declared by the minister of trade and industry who has stated he wants to increase South Africa’s sub-Saharan business.

The concept of removing City Deep as a customs clearance point was akin to changing a practice that had existed for 37 years, JCCI noted.

SARS unmoved by the arguments presented.

(SARS responses to these submissions is in a later story on this website)

Earlier articles on this subject:
http://parlyreportsa.co.za//energy/fueloilrenewables/illegal-diesel-coming-in-from-mozambique/
http://parlyreportsa.co.za//finance-economic/one-stop-border-post-with-mozambique-almost-there/

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

Treasury nudges DBSA into Africa

DBSA goes all out for Africa

sacu mapThe ability of Development Bank of SA (DBSA) to finance development in any national territory on the African continent and surrounding coastal island territory has been incorporated in a new draft Bill for public comment known as the Development Bank of Southern Africa Amendment Bill.

Cabinet  approved the Bill for early tabling in Parliament, the cabinet stating some months ago that the “main objects of the draft Bill was to propose amendments to the Development Bank of Southern Africa Act, 1997; to enable the extension of the operations of DBSA to any national territory on the African continent and its oceanic islands; to increase the authorized share capital of the Bank and enable further increases in such; to provide for the application of certain legislation to the Bank and to adjust the regulation-making powers.”

Whilst the Bill gives the powers for DBSA to move into Africa in a generic sense, it seems from the cabinet statement that adventures into sub-Saharan Africa only have been countenanced so far and little has been encouraged in territories well to the North.

For other articles on this subject, go to

http://parlyreportsa.co.za//uncategorized/clinton-says-it-should-be-easier-to-do-business-in-africa/

http://parlyreportsa.co.za//cabinetpresidential/get-sadc-free-trade-agreement-right-first-davies-warns/

 

 

 

 

 

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Treasury proposals on debt control approved

Tough measures on debt approved by cabinet….

squeeze To counter what is feared in some quarters as a minor debt “bubble”, as occurred in the United States and set of a major run on banks, National Treasury have had approved by cabinet tough proposed measures to assist over-indebted households and prevent consumers from becoming over-indebted in future.

A number of ministers have supported Pravin Gordhan’s observations, stated in his Medium Term Budget Statement, that the curbing of reckless lending is a priority for government. Growing debt issues in middle to lower income groups has been an issue with rating agencies.

Over-debtedness the issue

Despite fierce opposition to a credit amnesty earlier, which was perceived as simply contributing to such a “bubble”, the measures that were approved by cabinet recently include an “immediate set of comprehensive steps” to tackle over-indebtedness in lower and middle income situations.

Such measures include insisting on affordability criteria in place for retail lenders and prohibiting reckless loans; ensuring that the provision of credit is suitable for each circumstance and reviewing National Credit Act pricing caps; there will be a “strengthening of regulation and enforcement to prevent unregistered credit providers and a review the regulatory framework for credit insurance policies.

The expression “controlling access to the payment system” was used.

Whole household approach considered

Government is also considering providing assistance to households labouring under a debt burden. No details emerged on this particular issue but some of the proposed measures included steps include reducing borrowers’ installment burdens; the setting up of voluntary debt relief measures within major lenders and regulating debt-collection firms.

Most importantly, employers will also be encouraged to investigate the legitimacy of all emolument attachment or garnishee orders in force against their employees. Treasury says such measures will be implemented within the public sector early next year; the department of trade and industry working with Treasury.

Posted in Cabinet,Presidential, Finance, economic, Labour, Trade & Industry0 Comments

Banks Amendment Bill sets up faster interventions

Speed to allay collapses

Relevant, as has been seen in other countries, is the speed at which a curator can get a bank back on the right track, a main factor contributing to the current proposed wording in South Africa’s new Banks Amendment Bill which gives the Reserve Bank the right to intervene without first having to obtain a banks agreement to such curatorships.

Until now interventions have first needed the agreement of the bank itself before the subject of the regulator’s instruction and the curator’s directions alter the course of trading and new directions and decision making occurring.

Roy Havemann, chief director at National Treasury told parliamentarians that one of the lessons coming out of the current globanational treasury logol financial crisis was the speed at which bank regulators had been able to act and avoid a run on a bank by allaying anxiety of depositors once the subject of curatorships arise.

Every five years

Proposals to alter the Banks Act is a five year exercise conducted every fifth year in the form of amendments in the light of current IMF and World Bank moves; banking regulatory trends around the world; and global financial trading changes. Playing their part are the Basel 2.5 and Basel III standards; the King lll recommendations; and issues emerging from G-20 and stated by the Financial Stability Board.

Work, said Havemann, had been going on with current amendments since 2009 resulting in the first draft of the current Bill now tabled – intensive consultation with the banking industry having taken place all the time. The Bill as it stands was finally gazetted in November last year.

New tiered capital structures

Some banks, Havemann said, might now have to come up with more capital as a result of new tiered capital requirements; unimpaired reserve funds settings and levels of high quality liquid assets would have to be re-set, affecting sections 70,70A, 72 and 79 of the Act.

Also the Act had to be lined up with Companies Act (meaning a change in what a bank refers to as a “director”, amongst other issues, resulting in “directors” having to be called “general managers”, for example) and replacing the expression “registrar of companies” with the new term “commissioner”. Other such changes are needed envisaged with the up-dating.

Aligning with Companies Act

A considerable number of changes are in terminology therefore, noting for example that the business rescue provisions in the Companies Act do not refer to banks per se. Important, however, are the issues affecting foreign banks operating in South Africa which are defined in various ways, such as whether they be head offices, branches or sub-branches, but all now having to comply with Basel lll requirements.

Changes also are proposed on the acquisition of foreign assets by banks located in SA involving notification of the registrar. On this subject, opposition MPs called for a lessening of the power of regulators when it came to the issue of South African banks wishing to make investment moves in the sub-continent. Treasury said it noted this comment.

Bonuses set by independents

On bonuses, Havemann said the whole concept of providing for bonuses to bank officials “can be the driver of the wrong kind of behaviour” and remuneration committees, independent of executive directors, to establish that pay was determined independently and that any incentives did not encourage detrimental risk- taking, are proposed and will be set up under a new section 64C.

Finally, Havemann said it was important to define better and to have absolute clarity as to who eventually makes payments out as instructed by the registrar when dealing with compliance issues and that person shall be an appointed “repayment administrator” and not just the present confusing term “manager”.

The Bill will now go for parliamentary hearings as per advertised conditions.

previously archived stories

http://parlyreportsa.co.za//cabinetpresidential/treasury-calls-for-twin-peak-system-with-two-financial-bills-2/

Posted in Cabinet,Presidential, Finance, economic, Public utilities, Trade & Industry0 Comments

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