Tag Archive | pravin gordhan

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

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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Special cabinet statement might correct damage to SA

Editorial…..

At last, a sensible special cabinet statement……

Sent to clients 15 Jan…On 13 January, a Special Cabinet Statement was issued and, as compared to previous irregular missives, the word “special” indicated some hope.   Instead of just containing the usual reasons for having to rejoice on certain public holidays, details of the passing of MK operatives and certain Bills approved, the latest document was full of economic facts and financial fiscal information placing a positive spin on the current economic gloom. At last, an acknowledgement that there is a hand on the tiller.

Clearly there has been a palace revolution, if only in this sphere alone.

As the Cabinet Lekgotla is planned, Parliament also prepares to receive it’s parliamentarians all fresh from the respective political party get-to-gethers. A lot has changed since they all parted company and quite likely a lot more is to change before MPs gather for their first meetings.

No doubt the EFF will try to make a circus out of things but nevertheless the show will go on.    However, EFF or not, it is becoming more and more difficult to sort out between political comment, which is not our focus, and the mechanics of State policy and its direction, oversight on financial issues and legislative alerts that affect business and industry.

Bad four days

Rob-DaviesRed lights are flashing in all camps, not least of which is the fact that it is difficult to tell who did the most damage to South African markets – China or President Zuma. In parliamentary terms, the Portfolio Committee on Trade and Industry seems determined to stand by SACP Minister of Trade Industry, Dr Rob Davies, in all matters dealing with BEE and trade agreements- as does DTI itself – and the Public Works Portfolio Committee seems unable to wear down SACP Minister, Jeremy Cronin, on issues regarding the Expropriation Bill.

Similarly, Lumka Yengeni’s Portfolio Committee on Labour Committee has no hope of a good outcome when it ordered, in the last session, an end to the shambles and confusion in Minister Mildred Oliphant’s Department of Labour, another Kwa-Zulu appointee of President Jacob Zuma.

Always a problem

Finally, despite some excellent MPs from all parties sitting in the Portfolio Committee on Energy, the vague report backs made to them by Department of Energy is leading to a sense of frustration in that particular Portfolio Committee which is not effective either as a result. In the area of good communications, Minister of Energy, Tina Joemat-Pettersson can only be described as a menace.

The good news is that stalwart ANC Joanmariae Fubbs remains Chairperson of the Trade and Industry Portfolio Committee  and holds the ship steady with her disciplines. SACP executive Yunus Carrim stays as Chairperson of the Standing Committee on Finance and one wonders if he will see eye to eye in view of his ideologies with Minister Pravin Gordhan.

Overlooked as well

A Jacob Zuma appointee, Ebrahim Patel of COSATU fame but a hard worker and very leftist, remains Minister ofebrahim patel Economic Affairs but even he was overlooked for Minister of Finance when the President came up with name of David van Rooyen, who, to be quite frank, we had great difficulty in recalling his presence in Parliament over the last few months. A close shave but costly.

Back onto legislation. Whatever happened to the Private Security Industry Bill nobody knows but one hopes that the President was not using it to play silly games with the Obama administration on the AGOA issue. Maybe it gets discussed at the Lekgotla. Maybe not.

Politics ahead of economics 

In the meanwhile, one hopes that the message is got through at the Cabinet Lekgotla that what the President says vitally affects each one of his citizens and that that the private and personal politics being played out at the moment are particularly damaging to the business of Parliament and its relationship with commerce and industry.

Just as importantly, there has to be a better understanding in government departments when reporting to Parliament why business institutions need clarity of policy to gain investment confidence.

opening parliamentParliament is an important and independent tool of democracy in the fight against autocracy but so many departments seem more in awe of the auditor general than they are of the need for answers to parliamentary questioning and attempts to get the truth.

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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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Africa Money

Davis Tax Committee Estate Duty report for comment

Estate Duty report follows VAT proposals….

JudgeDennisDavisThe Davis Tax Committee (DTC), formed by previous Minister of Finance, Pravin Gordhan, in 2013 to assess South Africa’s tax policy, has released the Second Interim Report on Estate Duty for comment by 30 September 2015.

This follows the release of an earlier interim report on Value Added Tax during the first part of July.

In issuing the most recent report, the Estate Duty Sub-Committee said it had “consulted widely and took into account seven submissions from the public as a result of the invitation being made at the beginning of June”.

Wide coverage

The areas covered include avoidance; the formation of trusts; interposal requests; donations tax; capital gains tax; abatements and retirement funds. As a result of the submissions and further submission, the results for further comment are to be found on the government website.

The Value-Added Tax Interim Report, published a few weeks ago by the DTC, has a submission final datenene 2 also of 30 September and in this case 23 submissions were considered – finance Minister Nhlanhla Nene having seen the results already.

Looks like 1%

This report covered taxpayer compliance and the tax gap; structural features such as zero-rating; dual rates; exemptions; place of supply rules and e-commerce; and the macroeconomic impact of a hike in VAT.    The media has so far made extensive comment on VAT and a figure of 1% increase has been debated in public. No official confirmation of this at parliamentary level can be found.

In presenting to Parliament, the DTC recommended that raising VAT would be a more efficient way of boosting revenue than increasing direct tax. The DTC recognised that a VAT increase would also hurt the poor but, in contrast, by increasing personal or corporate tax rates such would cause less inflationary pressure.

The DTC said “It is thus clear that from a purely macroeconomic standpoint, an increase in VAT causes less distortion than an increase in direct taxes”. The Standing Committee on Finance were told, upon the release of the first interim report, that government may have to consider compensatory mechanisms, such as increasing social grants, to help shield the poor if the VAT rate was raised. No opposition to such measures were recorded at the time.

Zero food ratings misplaced

foodThe committee, headed by Judge Dennis Davis as usual, strongly recommended that no further zero-rated food categories be considered, noting there was clear evidence that zero rating certain foods – such as fruit and milk – benefited richer households more.

In general terms, experts on the subject have noted that the DTC recommended that the introduction of a capital transfer tax should be postponed pending further research on its suitability in the South African context.

They say the DTC also would like to see foreign trust distributions to be taxed as income; a review of criminal offences under the Tax Administration Act and inter-spouse exemptions and “roll-overs” and the all procedures involved either to be dropped or limited.

Basic tax rates maybe stay

Africa MoneyA call was made for the primary abatement be increased to R6m per taxpayer and that the current flat rate of 20% should not be increased. Comment by the DTC on these latter issues is awaited.

In all likelihood, these issues will finally reach Parliament in the form of Money Bills tabled by Minister Nene.  As such, this would mean that Parliament may hold hearings, debate the Bills and even call for submissions but any recommendations by Parliament would have to be referred back to the Minister who retains the final say as to what is submitted for vote. Final assent remains with the President.

This current period of public participation is therefore the most critical in terms of contributions to be made.

Other articles in this category or as background
SARS understaffed to deal with transfer pricing – ParlyReportSA
Transport ministry studies taxi, e-tolls and rail – ParlyReportSA
Treasury’s plan for carbon tax – ParlyReportSA
Treasury calls for “Twin Peak System” with two financial bills – ParlyReportSA

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Electricity connections not making targets

No hope of meeting Zuma’s promises…

elec poleThe inability of municipalities and local government to bring electricity to the poor and for the department of energy (DOE) to meet its promised target of electricity to all households by 2015 was a subject which dominated the DOE’s annual report to Parliament recently. New Minister of governance and traditional affairs, Pravin Gordhan, will have this issue before him as he tackles local government problems as will new minister of public enterprises, Lynne Brown.

Ms Nelisiwe Magubane, DG of DOE was reporting on the activities of her department for the 2o12/13 period and neither the minister of energy, Ben Martins, or his deputy, was present, much to the chagrin of portfolio  committee energy committee chairperson, Sisi Njikelena, who reported angrily on the subject.      DOE was reporting on its annual report and second quarter achievements.

Success with avoiding Middle East for oil

In noting that the year had been dominated by fluctuating oil prices, Ms Magubane noted that South Africa had succeeded in switching 41% of its oil imports to the African continent.

DG Magubane also reported that the electricity supply situation had improved in the country and the department’s own household electricity connection programme had also improved, mainly thanks to Eskom, but there was a large backlog that still existed due to lack of accountability by municipalities. This was a worrying factor for the country, she said. On this subject, further reports followed.

Other DOE targets met

Dr Barnard

Dr Barnard

On clean energy as far as the year was concerned, she reported that in August financial close had been received from twenty eight of the independent power producer (IPP) bids: the biofuels blending regulations had been drafted; the draft pricing arrangements started; and a nuclear safety report compiled and submitted as a result of lessons learnt from the Fukushima disaster.
 Dr Wolsey Barnard took up the issue of DOE’s poor record on electricity connections and said that bearing in mind the lack of skills and training at local government, it “was a miracle that South Africa had achieved so much”.

Aside from the fact, he said, that the government financial year was different to the municipal year, which made a mockery of funding programmes and targets, he said dealing with municipalities was “extremely difficult”  but nevertheless “for each seventy seconds of each day there was a connection some here in South Africa”.

Treasury must ring fence local funding

On the problematic relationships with local government, Dr Barnard said DOE was doing as much as it could “but you can pull a rope but you can’t push it and that was the trouble in dealing with local government officials”.   He said he looked forward to the day when National Treasury’s promised Bill “ring fencing” funds was promulgated “and then we might get somewhere”, he said.

He noted that each municipality had to sign a contract to get funding in the first place, providing business plan, “but sometimes we get to a place to install for a lot of homes built and there is no sub-station or any hope of connecting to the national grid”.

Cabora Bassa dam debt at R1

nelisiwe magubaneMs Magubane confirmed that in the annual reports a loan to Mozambique for the Cabora Bassa dam had been written down to R1 with the permission of Treasury. This loan was in respect of money loaned in the ‘sixties and it was clear that the Mozambique government could not pay. However, the question of re-payment of this loan would be re-raised, she said.

On queries why there seemed so little interest in gas exploration by government in Mozambique, whereas other countries seemed to have “got their foot in first”, Muzi Mkhize, chief director of hydrocarbons, said that “unlike other countries, we do not subsidize our national oil exploration effort and, in any case, the quest of dealing with countries was a foreign affairs matter and country to country relationships had to come first.”

SA to meet Mozambique on gas exploration

Sisi Njikelana said that this was a totally unsatisfactory answer and called on Mkhize for a better explanation to his committee.  Mkhize admitted that South Africa was “meeting Mozambique on a government to government basis on gas exploration matters in mid-October”.

When asked what had happened to the nuclear safety report, deputy director general of nuclear, DOE, Zizamele Mbambo, said that this was a security document but it had been acted upon.

The Eskom representative was asked to speak on the subject when a question was raised about the Koeberg Nuclear plant by a Cape Town MP, and the Eskom official reported that a “fortnightly nuclear safety committee met in the area with all representatives present” and that the meeting was chaired by a person drawn from the local community.

Refer to articles in this category
http://parlyreportsa.co.za//public-utilities/municipal-free-basic-services-slow-build/
http://parlyreportsa.co.za//energy/dpe-

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Tax law changes after mid-year budget

Tax Administration Laws Amendment Bill….

pravon gordhanAs part of the presentation of the medium term budget policy statement by the finance minister, Pravin Gordhan, on the 24 October, the following are some of the Acts that will be amended by the simultaneous presentation of the new Tax Administration Laws Amendment Bill, legislation necessary as part of any budget re-allocation or implementation.

 

•    Transfer Duty Act of 1949;
•    Income Tax Act of 1962;
•    Value-Added Tax Act of 1991;
•    Skills Development Levies Act of 1999;
•    Unemployment Insurance Contributions Act of 2002;
•    Securities Transfer Tax Act of 2007;
•    Mineral and Petroleum Resources Royalty Act of 2008; and
•    Tax Administration Act of 2011.

Customs and excise changes

The Bill mainly focuses on search and seizure provisions in terms of the Customs and Excise Act; extension of prescription period in the event of delays by taxpayers and for a reduced assessment; a provision re-writing that there will be no penalty for an understatement resulting from bona fide error and, importantly, regulations regarding tax practitioners whereby direct supervision is replaced by acceptance of accountability.

Other issues arose in his medium budget statement to the House and are covered by the new Bill.

The Bill will have the normal restraints that is a Money Bill; an explanatory summary has already been published by SARS and public comment invited by the minister to the department of finance.

Refer to articles in this category
http://parlyreportsa.co.za//finance-economic/various-tax-regimes-passed-parliament/
http://parlyreportsa.co.za//cabinetpresidential/pravin-gordhan-best-budget-vote-speech-of-the-year/

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Lock in at Parliament with budget speech

Gordhan Pravin with limited choices…

pravin gordhanRarely does a medium-term budget statement  in Parliament attract the kind of attention as has the current speech by South African finance minister, Gordhan Pravin.

He has been in a most difficult position. He is in fact juggling with the country’s “twin peaks” budget deficit numbers in order to come up with something that does not surrender the nation to movement down to a much lower position amongst the coterie of developing and emerging economies.

To amplify on the importance of what he says and how the newspapers and news agencies – and therefore world trading markets – depend on timeous information on this speech and perhaps it is worth pausing to note how the system in Parliament works.

Lock in part of parliamentary process

At a defined time a few hours in the morning preceding the speech that afternoon, all accredited financial journalists and those associated with news dissemination, gather in an allocated parliamentary meeting room and security is, to use the American phrase, “locked down”.  The doors are actually locked.

Even cell phones, i-phones, satellite phones and any form of communication device that has been invented since Graham Bell first telephoned anybody, has to be surrendered to parliamentary officials.      At that point round about 11.00am or mid-day, everybody gets to see the speech to be made by the finance minister Gordhan Pravin, scheduled for 15.00hrs, the same day.

This gives all those in the “lock in” the few hours needed to disseminate, consider and write what they wish to communicate on the budget itself, at that point the media being the only members of the public, especially the financial markets (and the rating agencies), to have any knowledge of what is to be said. There are no wi-fi facilities for laptops.

As the minister speaks……

At precisely the same time as the minister utters his first words in the House reading the Medium Term Budget speech, the doors are unlocked, cell phones returned, all journalists and media may release their material to the markets and well before the minister has finished his speech, Reuters, et al, have released their statements to the markets.

All of this, however utterly childish it may seem at the time, gives an indication of how important budget speeches are and the value of the message that is sent by the accumulated force of financial journalism – this particular budget speech being a sensitive one.

Of course, all would hope that in a perfect world minister Gordhan puts a freeze on public service pay packets for two years; announces further massive infrastructure spends with international funds for education, road and harbours; offers soft incentives to encourage exports with a weak rand and speed up the National Development Plan with ideas to counter the US resurgence. But all of this is unlikely.

Certainly on the left

ParlyReport is not a newspaper, so we confine our observations to monitoring government plans, department by department, in next issues but it is worth noting that finance minister Gordhan, himself a committed socialist and dealing with a cabinet that includes many a communist and certainly a number of trade unionists, will walk the tightrope with an election coming and votes needing to be collected, especially in the Northern Cape and Gauteng.

Our guess is that minister Gordhan will be forced to “talk the talk”, not “walk the talk”, talking his way through this one with South Africa in the grip of sluggish economic growth and an election coming. We should not expect too much from this speech other than bravery and it is hoped that minister Gordhan will resist pressure from the unions.

Our report therefore now relies upon the mundane and the “inside track” as usual and we await, like all, the results…….  although attending the “lock in” is an enjoyable process of watching the parliamentary system working and the financial markets re-acting.

Headlines to our clients this week were:

•    Codes of Practice given one year installation period
•    Nuclear stakeholders meeting avoids objections
•    Intellectual Property Bill aimed at medical patents
•    Shale gas regulations out for comment
•    Home Affairs in the mire
•    PetroSA keeps them all guessing
•    Minister of Finance tables Bill at halfway year budget
•    Central Energy Fund emerges from the shadows
•    Marcus steadies the ship
•    Land rights takes another step with new Bill
•    Department of energy reports for the year

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Various tax regimes passed by Parliament

Tax changes for 2013 imminent…

Giving effect to most of the tax proposals announced in the 2013 budget review, the Taxation Laws Amendment Bill, with its tandem enabling Bill – the Taxation Administration Laws Amendment Bill – have both passed through the standing committee on finance as a money Bill.

Probably the most important for economic growth is the proposed beneficial tax regime for companies that decide to take advantage of the new Special Economic Zones Bill introduced by minister of trade and industry, Dr. Rob Davies, and now almost finalised by Parliament.

Other tax proposals are to back up the cabinet wish to revitalise South Africa’s maritime sector with an attractive tax regime to encourage exports, mainly using Africa coastal routes.

Catching up with profit deflection

Minister of finance Gordhan Pravin’s tax proposals also include moves to discourage profit-shifting through excessive interest deduction and the use of artificial debt and the payment of certain dividends which gain tax deductions.

Retirement fund deductions are affected as from next year, as will be certain matters regarding provident funds. Most important are the easing of conditions under which low-income employees are acquire houses at below market value without tax being payable under the current fringe benefit system.

Foreign e-commerce suppliers are to register for VAT.

Tax practitioner’s regs

There are a number of changes affecting the completion of tax forms  and there are new regulations for tax practitioners, mostly involving the principle of “accountability”.

Treasury has promised specific legislation on the employment tax incentive and waste discharge incentive charges later this year and comments on both Bills was closed early August in order for the money Bills in question to be processed during September.

Refer previous articles in this category
http://parlyreportsa.co.za//finance-economic/dividends-withholding-tax-arrives-on-time/
http://parlyreportsa.co.za//cabinetpresidential/pravin-gordhan-best-budget-vote-speech-of-the-year/

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Pravin Gordhan : best budget vote speech

Pravin Gordhan speaks on corruption……

pravin gordhan MTBSDuring his budget vote speech to Parliament, Pravin Gordhan, minister of finance, said,  “In the same way we built in South Africa a new sense of tax compliance and personal discipline, perhaps we should now rid ourselves of the evils of corruption”.

Indeed, the fact that we are now headed towards becoming the major nuclear nation on the continent and with the issue of shale gas exploration on the cards, let alone gas exploration off the Mozambique coast, all of this will undoubtedly lead us into a different league in the years ahead on the African continent. So what we look like to others is especially important.

Until now, like two competing top league football teams, South Africa and Nigeria seem to have vied for top dog position. Then Marikana came along and we seem to have lost all confidence in ourselves and certainly Standard and Poor and all the others have voiced theirGoodluck Jonathan displeasure at the way we do things.

Nigeria has more problems

But then nothing can compare with Nigeria’s problems of declaring a state of emergency in three regions and the containment of insurrection from Boko Haram as radicals try to establish Sharia law in one third of its land mass. Trouble is therefore purely relative to what one is trying to achieve. But somehow President Goodluck Jonathan seems to do better than President Zuma in the PR stakes.

In South Africa’s case, we could be said to be lacking in a pool of skills but Willie de Beer of SANEDI, a quiet but respected leader in the energy field, says that South Africa certainly has the skills to put its energy mix together properly if it seriously puts it mind to it. Minister Dipuo Peters referred this week to bringing in outside strategic help on nuclear issues.

Working together at last

In fact it was refreshing to see Minister Gigaba of public enterprises and Minister Peters on energy both on the podium working from the same hymn sheet.

Then one turns to gas exploration and the potential that many claim that this is.  Gas will be realised sooner perhaps for its possibilities. Also probably it is easier subject to tackle, especially if PetroSA can get rid of its opportunists and some form certainty reigns for investors as far the regulatory environment is concerned – something that hasn’t happened in Kenya, Uganda and Mozambique. A steady environment for gas development has the potential to make South Africa great.

So is it the skills we lack?   Or just the confidence to become a bigger and better nation and consequently the giant on the African continent?

Poor issue management

Probably lot of it is bad PR at the top as well, with Mac Maharaj having to operate the bilge pumps so regularly as heavy waves of unexplained statements and odd decisions from cabinet swamp the decks. The fact that the cabinet sits so long on problems and fails to make decisions probably has a lot to do with the indecisive look that seems to emerge from our top brass – Waterkloof issues and Gupta’s aside, but on serious policy issues, all points to a cabinet that is lacking in cohesion and lacking in depth at this moment.

koebergCertainly a statement from a minister on entry into the nuclear top league and a picture of the president in loinzuma wedding cloths holding a spear in a KwaZulu marriage function on the same front page probably failed to inspire confidence that day. And nobody seems to be taking corruption seriously in the cabinet either. And it is all so easy to blame everything on bad PR, however.  Usually in times such as this the right man for the moment emerges but it is difficult at the moment to image who this is could be.

Clever Trevor

Trevor Manuel used to have the uncanny habit of making the right kind of statement when South Africa needed it. Perhaps his successor Pravin Gordhan hit the right button when during the treasury budget vote speech this week, he said, “SARS managed to bring to the country a new sense of tax compliance and personal discipline and perhaps a new national campaign is needed to rid ourselves in the same way of the evils of corruption and bring a sense of discipline.”

We have been lucky with our ministers of finance in South Africa and perhaps we should take the lead of Pravin Gordhan when he says that we really can do these things if we put our heads down, put only properly qualified people into jobs and do what we have said we will do, on time and every time.

http://parlyreportsa.co.za//energy/new-energy-legislation-is-lined-up-for-next-two-years/
http://parlyreportsa.co.za//energy/downwards-spiral-in-electricity-distribution-can-be-reversed-say-energy-leaders/

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Sovereign rating time after budget and SONA

SONA and Budget 2013/4 beat the pundits…   

zuma2With budget behind us, the script for the state of nation address (SONA) becomes a little clearer.

At the time SONA wasn’t what was expected and represented to many a total let down insofar as direction, information and inspiration was concerned.   President Zuma’s speech was really quite remarkable for the subjects it didn’t touch upon or skirted around.   Perhaps that’s what happens when a majority party is half way through its current tenure of office.

In all fairness, however, there is so much that is about to happen in South Africa on infrastructure development and so much “in the pipeline”, that there was little the current government could do other than recycle the list of eighteen major projects that the twenty seven government departments and sixteen utilities having been talking about for months, sometimes years, all of which seem in a pretty embryonic stage. The hope is that when it all comes together, it won’t be too late.

NERSA played a trump card

On energy, little was said – in fact practically nothing at all that was not patently obvious such as the fact that Medupi and Kusile are being built. In fact nothing was said on electricity at all, the reason for which was to become evident in the NERSA decision the following week when Eskom’s multi year price determination call of 16% was toned down to 8%.

Dangerous budget

pravon gordhanAlso the following week and following SONA came Pravin Gordhan’s budget with its surprising nil increase on income tax, severe budget cuts, the introduction of carbon tax and an increased fuel levy. Once again the National Development Plan was heavily emphasised and perhaps at last government is going to get on with it with a new presidential infrastructure co-ordination commission to support the initiative.

The Budget was in some ways masterful but still frightens the credit rating agencies, with Gordhan trying to balance the books after an increased deficit over the previous year, something the new government used to pride itself on not needing under finance minister Trevor Manuel – but times change and the global recession arrived.

Executive powers

Interesting for Parliament is the introduction of the draft Infrastructure Development Bill giving extraordinarily wide powers to an all-powerful commission to be known as the presidential infrastructure co-ordination commission, as stated above, with all nine premiers, the President and Deputy President steering the ship in an effort to cut red tape and speed things up.

This can only be good, if only for the fact that the captain of the ship can speak alone to the twenty seven departments and sixteen utilities described above.

Public Service too big

Which leads to the issue of a somewhat bloated public service which has had the benefit of above-inflation increases this year, so it was pleasing to see that a skills audit of public servants is about to be commenced amongst the 1.2m public servants, which in a country of only 51m, is totally disproportionate.

Public Service and administration minister Lindiwe Sisulu told Parliament that the increase of 1% per year in salaries has to be turned into a decrease of 1% next year.

Encouragingly also, planning minister Trevor Manuel (who has but ten staff) has clearly indicated that he is relying on the parliamentary oversight system to beef up his programme to wake up to the National Development Plan.  How well Parliament scrutinizes the national budget in the coming weeks in every parliamentary portfolio committee demanding both value for money and delivery on time, every time, is now the critical issue.

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Parliament debates three financial market and tax Bills

A series of three pieces of financial legislation have been tabled in Parliament by the minister of finance, Pravin Gordhan, namely the Financial Markets Bill, the Credit Rating Services Bill and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.

The standing committee on finance originally called for written comments by the end of May on the Financial Markets Bill, numbered B12, heard on 30 May 2012, the purpose of the Bill being stated to:

• Provide for the regulation of financial markets; • Regulate exchanges, central securities, clearing houses and trade repositories • Regulate and control securities trading and the administration of securities • Prohibit insider trading and other market abuses • Provide for the approval of nominees • Provide for codes of conduct • Replace the Securities Services Act, 2004 for the reasons given.

The same committee called for written comments by the same date on the Credit Rating Services Bill, numbered B8, now also heard, the purpose of the Bill being to:  • Provide for the registration of credit rating agencies; • Provide for the regulation of certain activities of credit rating agencies; • Provide conditions for the issuing of credit ratings and rules

The third Bill  tabled before the Standing Committee on Finance is the Rates and Monetary Amounts and Amendment of Revenue Laws Bill, numbered B10, public hearings having taken place and deliberations now scheduled.   The purpose of this last Bill is to: • Fix the rates of normal tax; • Amend the Income Tax Act, 1962, amending rates and monetary amounts • Amend the Customs and Excise Act, 1964, so as to amend rates of duty

Deliberations by the finance committee on all three Bills will continue in June.

 

Posted in Finance, economic, Trade & Industry, Uncategorized0 Comments

Taxi and Bus Exemption from E-Tolls: Cabinet confirms

Cabinet has reconfirmed that taxis and buses will not have to pay toll fees on Gauteng’s roads. In a statement released after the latest cabinet meeting, government emphasised that this decision was taken in the interests of the poor.

The Gauteng Freeway Improvement Project is set to come on stream on 30 April 2012. The poor are the main users of taxis and buses, the statement says, and added, “These transport modes will pass through the gantries free of charge”.

Reference was also made in the statement to the recent capital injection of R5.8bn announced by the finance minister, Pravin Gordhan, on Budget day. The money was made available, the statement says, “to help ease the burden on road users in Gauteng.”  The additional finance will also help government to reduce the tariffs for e-tags.

Light motor vehicles will now pay 30c per km; motorcycles 20c per km; non-articulated trucks 75c per km, whilst articulated trucks will pay R1.51 per km. The maximum amount that road users can be charged per month is to be capped at R550. The statement stressed that the credit card-linked e-toll account was not the only payment option available. Road users can also opt for the pre-paid e-toll account.

Posted in Energy, Labour, Public utilities, Trade & Industry, Transport0 Comments

Discussion Paper Next Step On Carbon Tax

Finance Minister Pravin Gordhan is reported to have told lawmakers in Cape Town that a revised carbon tax policy paper is definitely due sometime in the course of 2012 and that government has agreed in principle to the need to price carbon emissions and on the phasing in of a tax based on such a pricing structure.

According to reports, BUSA has, in the meanwhile, called upon the cabinet for relevant ministers to engage further on a framework before implementing any such proposals on a carbon tax, especially given recent electricity price hikes and rising costs to the consumer.

Similarly, the Manufacturing Circle said it “would welcome the opportunity for engagement”, with the caveat that a carbon tax, if not applied suitably, would “hurt manufacturing and jobs”.

National Treasury has argued previously that such a tax was necessary to create incentives for the public and industry to change behaviour and to encourage cleaner-energy technology and energy-efficiency amongst the public.

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Treasury tables Credit Rating Bill to upgrade risk measures

Released initially for public comment in August last year, National Treasury has tabled the Credit Rating Services Bill in Parliament .

The hope is to promote greater investor protection; more integrity; increased transparency and more evident accountability in financial dealings, thus it is hoped and improvement and greater international acceptance of the integrity and value of South African markets.

Whilst treasury officials have described credit rating agencies as important instruments in the financial backdrop of South Africa providing measures against credit risk and enhancing security, the Bill states one of its objectives “as a shift towards a twin-peak model for regulating the financial sector” and the introduction of a “wider macro-prudential system of supervision.

Pravin Gordhan referred to such a draft Bill in his 2011 budget speech when he spoke of reforms for the financial sector, “We need a safer financial sector to serve South Africa better”, he said. At the same time the minister has called for public comment on the draft Financial Services Laws General Amendment Bill, legislation in tandem.

Under the new Credit Rating Services Bill, credit rating agencies will be registered; certain financial rating activities will be controlled; the principle of insurance of credit rating will be extended and rules for agencies will be stipulated.

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Roads fingered as top culprit in infrastructure “under-spend”

Many will remember last year’s April launch by the South African National Roads Agency Limited (SANRAL) of the S’hamba Sonke (Moving Together) R22bn provincial and municipal roads campaign, due to run for the three years – 2011 to 2014.

Transport Minister Sibusiso Ndebele, in a briefing to the media of the infrastructure development cluster in Cape Town, had to acknowledge recently that at present only R1.7bn had been spent on projects since the programme’s launch leaving over 90% of funds so far unspent, meaning that R6.4bn is still unspent for the 2011/12 fiscal period.

Minister of finance, Pravin Gordhan, had earlier estimated in Parliament after presenting his budget and in his response to the debate, that only 68%, or R178bn, of the R260bn set aside for infrastructure in 2010/11, was actually spent as planned owing to weaknesses in government infrastructure capacity. This theme crosscut all departments, he said

However, it is clear that SANRAL has one of the largest back logs; minister Ndebele estimating that the various levels and contractors had to spend R169bn if SANRAL was to catch up – about the equivalent of 500 000 kms of road.

Minister Ndebele added, in answer to questions from the media, that that the worst-affected areas were typically those outside of the urban nodes of Johannesburg, Pretoria, Durban and Cape Town.

The forthcoming infrastructure summit would look at various models to get the job done, including the ‘user-pays’ model to address the backlog.

Whilst the problem appeared to be the fact that the work was simply not being done, the minister focused on issues surrounding financing the infrastructure, particularly the issue of tolling. He said, “As South Africans we need a dialogue on how we will pay for this infrastructure development,” he said, referring to the fact that SANRAL had received R5.8bn to reduce debt as a result of its inability to install e-tolling on the Gauteng Freeway Improvement Project (GFIP).

The proposed tariff had been reduced to 30c/km, capped at R550 a month, for motorists, as a result of public outcry but Minister Ndebele said that government could not listen again to such calls. His department was now focusing on ways to pay for more phases of not only the GFIP but highway projects in Cape Town as well.

The minister said lessons had been learned, but South Africa still needed to reach consensus on how it would pay for the second phase of the GFIP, as well as other urban highway projects. All possible law enforcement loopholes that could prevent the implementation of e-tolling on April 30 this year had to be studied and legislation to allow for road tolling as a permanent feature to assist in funding highways was on its way shortly to Parliament.

At this stage no clear cabinet statement has been issued as a result of the COSATU marches to protest against tolling – a march somewhat confused by labour broking issues, but at the time of the infrastructure development cluster briefing last week, Minister Ndebele seemed unmoved by the possibility of labour backlash against tolling.

Posted in Cabinet,Presidential, Finance, economic, Fuel,oil,renewables, Land,Agriculture, Mining, beneficiation, Public utilities, Trade & Industry, Transport, Uncategorized0 Comments

Gordhan gives out strong message on carbon tax

en:Primorye Power Plant in Luchegorsk, Primors...

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Finance Minister Pravin Gordhan is reported to have told lawmakers in Cape Town that a revised carbon tax policy paper is definitely due sometime in the course of 2012 and that government has agreed in principle to the need to price carbon emissions and on the phasing in of a tax based on such a pricing structure.

BUSA has, in the meanwhile, called upon the cabinet for relevant ministers to engage further on a framework before implementing any such proposals on a carbon tax, especially given recent electricity price hikes and rising costs to the consumer. Similarly, the Manufacturing Circle said it “would welcome the opportunity for engagement”, with the caveat that a carbon tax, if not applied suitably, would “hurt manufacturing and jobs”.

National Treasury has argued previously that such a tax was necessary to create incentives for the public and industry to change behaviour and to encourage cleaner-energy technology and energy-efficiency amongst the public.

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