Tag Archive | twin peaks

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.


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

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

Financial Sector Bill after Ponzi thieves

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

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

Posted in Finance, economic, 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:


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

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

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

This website is Archival

If you want your publications as they come from Parliament please contact ParlyReportSA directly. All information on this site is posted two weeks after client alert reports sent out.

Upcoming Articles

  1. Jeremy Cronin back on land expropriation issue
  2. Integrated Energy Plan reflects cleaned-up thinking
  3. Changes to Companies Act headed for Parliament
  4. State Bank a strong possibility with certain provisos
  5. No more Competition Commission yellow card warnings
  6. Business to meet transformation targets by law

Earlier Editorials

Earlier Stories

  • AARTO licence demerit system studied  …. In what has been a legislative marathon, the update of the Administrative Adjudication of Road Traffic Offences Act (AARTO) has now reached a stage […]

  • 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 […]

  • Modernising SAPO a culture change ….. sent to clients 27 February…. Stage by stage, Mark Barnes, Group Chief Executive Officer of South African Post Office (SAPO), appears to be reforming cultures and […]

  • OECD money task force waiting for SA   ….sent to clients Feb 7…. Chairperson of the Standing Committee on Finance, Yunus Carrim, made it quite clear in terms of parliamentary rules that […]

  • President Zuma vs Parliament on FICA Bill …..editorial……The convoluted thinking that is taking place in South Africa to avoid the consequences of the law has once again become evident in […]