Tag Archive | National Treasury

Warning shot fired over PPE stocks

….article July 20…..

Parliament slaps Treasury on PPE procurement……

Last week a corruption weary public learnt that Parliament’s Finance Standing Committee were as outraged as them on the subject of state PPE purchasing arrangements. The complaints started as case after case of cronyism was aired by the media picked up when the additional Supplementary Budget was being processed through Parliament at committee stage.

This furore was heightened by the appearance of  somewhat arrogant Zulu clansman found by the media who had allegedly  included himself in the R500m COVID 19 emergency relief allocation. It was subsequently reported that after finding out that his apparent initiative was unacceptable, he may have then sold his successful tender bid to another party for R80m.

King rat

The fact that the royal person told everybody that he was attempting to benefit his tribal responsibilities did not wash with anybody, according to press reports and interviews.   The case for his innocence was not helped after a TV interview with the smiling gentleman who seemed not to understand that his problem was that his daughter was spokesperson for the President.  When it came to tendering, he said he thought all persons were equal.

Thank goodness this was all exposed in time  but the whole affair struck the same chord with MPs that has being plaguing South Africa for years.  This same problem was illustrated again by ANC secretary general Ace Magashule who reasoned, when discovered dipping into the same PPE pot with the state, that his sons who had been named as part of a Free State PPE tender process, “had the right to participate in the economy as do any other persons and small businesses”.

As a result of these cases, MPs across party lines in Parliament have called upon Finance Minister, Tito Mboweni, and his Treasury officials to come back to Parliament and give the background on all COVID 19 disbursements and some idea of who is responsible for what and Treasury understands as the parameters for state tendering.  This will final stand off presumably will take place sometime after the short recess in September.

Accounting issue

Not that the President did anything wrong, nor National Treasury either, but it just seems that  month after month Treasury signs off money but has no idea of, or even responsibility for, what happens once the allocations are made.  MPs have complained that Treasury merely seems to call upon the Auditor General, one year later, in order to reconcile with an annual report, opposition parties complained.

In the first case, instead of landing up as part of the small business developmental process,  the award nearly went to a chief exercising grace upon his fiefdom which it appears to consist of some forty or fifty persons, it was reported.   On such subjects, Parliament got specifically involved again when the Finance Minister came to the point where he had to answer questions during the closing debate on the Special Adjustment Appropriation Budget Bill, which had allowed for all the COVID 19 funding in the first place.

Serious implications  

Whilst all of this has been rather  a slap in the face of Minister of Health Mkhize personally, it must also have been a shock for the Department  of Health as well, bearing in mind that the NHI scheme is supposed to have a centralised “transversal” procurement system in place in a few years’ time where such things cannot be allowed to happen.

Furthermore, the Ministry of Finance has been for years planning a Procurement Bill allowing for centralised purchasing  when the budget for a centralised computer system can be afforded, so Minister Mboweni may have got some inkling of what the problems will be when it comes to political interference being wielded amongst those apparently without a moral understanding of what is required in the case of government process.

Fired in anger

That the Covid-19 emergency provision, or officially the Adjustment Appropriation Budget, would be passed by the National Assembly was never in doubt.    It had to be passed.   But for the first reading of the Bill, the vote was 226 in favour with 129 against recorded as a token protest and consequently the Bill was carried through on the back of the ANC numbers in the House.

The Bill from Treasury, being a Money Bill, cannot be stopped by Parliament but a warning shot had therefore been fired at treasury officials and the Minister.


Posted in Finance, economic, Health, Public utilities, Trade & Industry0 Comments

Face out in Parliament 

editorial….July 13 2020…             

High Noon…

Parliament recently saw a drama being played out that was reminiscent of the old and famous movie where, after a long number of small confrontations, the two parties shoot it out in Main Street.  With the critical matter of the approval of South Africa’s economic direction at stake, shooting straight was not really the issue but who pulled the trigger the fastest.

The movie set for the shootout occurred before the Finance Standing Committee under chair Yunus Carrim on 7 July.  The stage was the public sector hearings debate on Minister Tito Mboweni’s Supplementary Budget, and this was before the house for adoption in conjunction with consideration of the report from the Financial and Fiscal Commission (FFC), the independent entity that represents government opinion.

Amongst the twelve or so public submissions, including those from South African Institute of Chartered Accountants; Organisation Undoing Tax Abuse (OUTA); COSATU; and the C19 People’s Coalition; was a new group, the Economists Initiative (EI), who had been on e-NCA the night before with spokesperson Neil Coleman of the Institute for Economic Justice and COSATU fame speaking on their behalf.

Neil Coleman claimed his group represented 122 economists and policy experts.   How fast this grouping had been cobbled together, we do not know. Coleman (brother of well-known Colin Coleman, businessman and also COSATU veteran) said in his interview at the time his group were going to reject the Budget in its entirety and ask Parliament to do the same.   Should Parliament fail to do this, he said, an approach to the Constitutional Court would be considered.   Most pricked up their ears at this and plugged in to the virtual debate following.

Broken promises

The shootout between EI and Treasury did eventually take place and most dramatically at that, the chosen venue being a Finance Standing Committee meeting on 7 July.    EI’s primary complaint was a repeat of what had been said before, in that in their view the Tito Mboweni austerity Budget had “completely betrayed the President’s R500bn Covid 19 rescue package”.  They told MPs that they strenuously opposed the extensive austerity package to be introduced over the next two to three years since it involved cuts of more than R400bn.

Joined by the Budget Justice Coalition (BJC – a coalition of civil society formations), both were the primary critics of the Budget and most vociferous on the subject, EI maintaining that National Treasury were “misleading the country by suggesting that the only route government had in financing the expenditure and the shortfalls arising from the economic crisis, was to borrow on international markets or from financial institutions internationally.”  This was totally untrue, they maintained.

BJC suggested that the Budget was “so regressive that it was probably unconstitutional”, EI stating that the Budget was “tantamount to committing economic suicide”.  As intimated on TV, they took the extraordinary step of calling for Parliament to reject the Budget and send it back for revision based on fresh ideas.


National Treasury’s response to the attacks was overwhelming in its anger, particularly towards the EI. Treasury DG, Dondo Mogajane, begged MPs not to be “deceived and misled” by such submissions, or for Parliament to be used as a “platform for false, misleading statements”.   Importantly, DG Mogajane attacked the BJC and Economists Initiative inputs as being “politically motivated”.

There it was, a clear statement by Treasury that political interference was at the heart of the EI submission.

In the open

Immediately the chair of the Committee, Yunus Carrim, intervened and reprimanded DG Mogajane severely for first dictating to his committee what they should or should not believe;  secondly, for insulting members of a public sector submission invited to Parliament;  then for advising Parliament how it should respond to a submission, and in particular, for calling EI’s input “false, alarmist and misleading”.   Yunus Carrim as chair said this was all outrageous and insulting.

Carrim noted, “The DG is normally a mild-mannered man” and said that he could not understand the DG’s “change of character”. Carrim then insinuated quite clearly that perhaps Minister Mboweni had put the DG up to this. This was a most unpleasant exchange. The Treasury team denied strenuously that they had been told to say anything.

Carrim must have been perfectly aware of what was really going on and that MPs were being asked to go above the Finance Committee by EI and appeal to President Ramaphosa, but he still chose to lambaste Treasury representatives.

So, let’s look at the reason why our respected, experienced and usually quiet DG Mogajane uncharacteristically exploded.

Long war

The gun battle between National Treasury and the extreme left-aligned followers in the governing party alliance, such as COSATU, SACP and a number of ANC followers, has been going on for almost a year.  Maybe it was started some time ago with comments from Ace Magashule on nationalising the Reserve Bank, then followed by the quantified easing or QE issue and the possibility of using PIC benefit funds. Perhaps even the issue spoken of in hushed tones, the printing of money.

To this grouping of opinion, strict debt control and Budget cutting on social projects hurts the “poorest of the poor” in a disproportionate manner as compared to the wealthy and middle-class sector, not necessarily where the power base of the governing party lies.  This theme of thinking has been expressed many times by a multitude of observers.

No, no issues

On the other hand, Minister Mboweni and National Treasury, hating debt in any form especially crippling long-term debt, intend to curtail any proposal to accumulate vast quantities of debt.  This might be an over-simplification of policy calls but the suggestion in Parliament clearly came from the EI, as was forewarned, that the Budget should be re-written, or at least “revised”, representing a call to battle between the two ideologies.

For National Treasury it was the final insult and boiled down to a suggestion that Treasury should be constitutionally arraigned.  Another low level had been reached in the intercine war being conducted between the two schools of thought within the governing party. President Ramaphosa as always and characteristically said nothing.

After this altercation, EI then laid out before parliamentarians how the Budget had departed from the R500bn package promised.  The most important commitment to COSATU, EI said, was the implementation of the R100bn job creation promise but now, they said, just a mere 6% of this allocation was left.

Furthermore, Treasury in their view had gone back on the President’s promises had made cuts of more than R400bn, most of them they said affecting social delivery.

Arrived in Parliament

This rift in the governing party at the expense of national objectives is becoming more evident daily. For one party to the argument, the problem appears to be that the economy, spiraling downwards, is seen as becoming debt endemic which could well result in bankruptcy, no possibility of growth and therefore coupled into a scenario of endless poverty.

For the other party, the problem appears to be the view that the poor will not only continue to be poor, but that poverty will worsen unless further debt is risked by spending more into growth and spending to get out of debt.

Cul de sac

The legislation for the Supplementary Budget, the subject of the confrontation contains two Bills as with any budget, both of which are section 77 Money Bills in terms of the Money Bills Act.  This means that Parliament is allowed to comment upon the Bill in terms of the Constitution but not alter it in way, using a majority vote or not, unless so agreed by National Treasury.

The Constitution insists on this, in order to protect its people from interference in any Budget by any political party on an ideological basis or with motives not based on fiscal reasoning.

Particularly sensitive would therefore be any changes made subversively to the Division of Revenue Bill, the mechanism which breaks up the Budget and specifically passes the sums of money to the appropriate National Departments and to local government via the nine provinces. The reference to “political interference” is therefore the cause of the National Treasury’s discomfort  and what altered the mindset of the mild-mannered DG Mogajane.

 In conclusion

The person paid to make the final decision between the two choices is Minister of Finance Mboweni, and when he tabled the Division of Revenue Amendment Bill No 9 and the Adjustments Appropriation Bill No 10 said clearly in his speech on 24 June to Parliament that debt must be controlled. To change that, EI must go to the courts. So far nothing has happened.

Minister Mboweni summarised the details of his approach to the problem in his speech by stating that the “herculean task” for Treasury was to put measures in place to grow the economy but at the same time close the “hippopotamus mouth of burdening interest and loans”, i.e. the enormous sums required to repay debt in the future “in order to avoid a sovereign debt crisis”.

One man standing

Such a spectre could haunt any incumbent Minister of Finance, that of being considered as a bankrupt nation and a financial pariah, as was Greece, and dealt accordingly by creditor nations and international lenders.

Always we shall be distracted by the latest in Covid 19 regulations and the frightful pandemic engulfing our country but, in the background, this gun battle will continue within the governing party and, unfortunately, will play out in Parliament further.


Posted in cabinet, earlier editorials0 Comments

FFC: budget cuts may worsen service delivery

….article dated 20 July 2020…. 

Balance between needs and cuts required…. 

The Financial and Fiscal Commission (FFC), the independent body which reports to Parliament on intergovernmental financial relations (IGFR) in terms of the Constitution, has told MPs of its deep concern that Minister Mboweni’s budget cuts, announced in the Supplementary Budget Bill, may adversely affect the ability of local government to manage service delivery commitments in the coming year.

FFC manager for fiscal policy, Eddie Rakabe, is also concerned that National Government has not given guidance to provinces and local municipalities on IGFR matters and how they should reprioritise their budgets after having chopped them.

Help down the line

Whilst acknowledging the reasons for the cuts because of the unforeseen pandemic, he called for government to recognise that a delicate balance has to be struck between expenditure reduction and the meeting of basic needs. On top of this, the Minister had asked all parties to switch to zero-budgeting  which may not be understood or implemented properly.

FFC Chairperson, Prof Daniel Plaatjies, acknowledged that an adjustment Budget by Minister Mboweni was necessary to mitigate the downsides of responding to the COVID-19 crisis but FFC’s main point was that in making Budgetary adjustments in such a short period of time, it was going to be extraordinarily difficult for all to produce new frameworks that were growth enhancing.

Not how much but how

Eddie Rakabe told parliamentarians that their comments were somewhat critical in the light of the Minister indicating that about R230bn in expenditure will have to be cut over the next two years which appeared drastic and care had to be exercised.

The FFC advises, he said, that a delicate balance must be struck between expenditure reduction and the meeting of basic needs. He was insistent that as expenditure is reduced, there had to be a plan to ensure that critical social services are not compromised.

The constitutional criteria in any Budget consideration had to be on the basis of spending where the basic rights of people are protected, Rakabe noted.  In this respect, the reprioritisation proposed by the supplementary Budget in the view of FFC complied with this criterion, he said.  However, the FFC was deeply concerned about the absence of a framework to guide provincial reprioritisation as a process — provinces having to do the reprioritisation on their own.

A little left and a little right

FFC agreed with the Parliamentary Budget Office, who had reported in the same meeting beforehand, that it was going to take a lot to get South Africa back to its pre COVID-19 position, which was not very strong in any case and the situation was fraught with the threat of collapse of social security plans.

Eddie Rakabe said, “We agree with the Minister that SA’s sovereign credit rating is a major concern since credit rating downgrades affect government’s ability to meet borrowing requirements and that to raise revenue from tax to meet social needs just because of the overwhelming need to meet debt servicing costs is not correct.

All the same, he said, the proposals needed much more care in application. Conditional grants had to be the main focus and whether there was a complete necessity for each.

 All too fast

FFC recommended that government reconsider the sequencing of the phases for managing the Covid 19 pandemic.    It was essential that capacity of provincial and local government treasuries be strengthened to ensure that they promote spending control and enhance spending effectiveness, they considered.

The FFC acknowledged the zero-based budgeting announcement but Rakabe said that he still remained most concerned about the effectiveness of changing the budget structure and the way things had been done for years so suddenly.  He said time and resources were necessary to “ operationalise zero-based budgeting” properly.

Hamba gahle

He warned that there are “a whole lot of issues that need sorting out before  moving full steam ahead with such a complicated financial concept being endorsed for all levels.

He told MPs of the Finance Standing Committee that in the FFC view, there was a great need to outline more clearly on how the un-allocated R19.6bn for job creation allocation is to work and who gets it needs to be  a lot more explicit.  On the President’s Covid-19 relief package, the divisions between national and provincial allocations were unclear, he commented.


Managing the fiscus through and beyond the Covid-19 pandemic had to be fleshed out in a lot more detail, Eddie Rakabe concluded.

From the meeting it became clear that whilst the FFC believes that  an increase in tax revenues  immediately was not a feasible policy option to assist local government through the COVID 19 period, the Minister’s announcement that future tax increases of R5bn in 2021/2022 year, R10bn in 2022/2023, R10bn in 2023/2024 and R15bn in 2024/2025 were considered as an acceptable necessary alternative.

Posted in Agriculture, cabinet, Education, Enviro,Water, Finance, economic, Health, human settlements, Land,Agriculture, Mining, beneficiation, public works, Trade & Industry0 Comments

Tax Avoidance Bill: NPA and Hawks on illicit flows

Treasury, FIC, Hawks, NPA give Parly update…

report to clients end of April …

It now seems inevitable that the Minister of Finance will be tabling a General Anti Tax-avoidance (GATA) Bill by July 2019 as part of National Treasury’s plan to protect the tax base primarily aimed, as one MP put it, at “knocking profit shifting on the head”.   Changes to the Companies Act are also to be introduced.

A high-powered meeting, chaired jointly by Yunus Carrim of the Standing Committee on Finance and Joan Fubbs of the Portfolio Committee on Trade and Industry, listened  a few days before Parliament closed in April, to report-backs which came from National Treasury, the Hawks, National Prosecuting Authority (NPA) and others combiningg to stem the flow of illicit funds.

Read more…Tax avoidance Bill

Posted in Cabinet,Presidential, Finance, economic, Justice, constitutional, Police, Security, Trade & Industry0 Comments

Gigaba pushes for control of border posts

Treasury, Home Affairs at odds on customs issues

Parliament will be debating in the new session in August the Border Management Authority Bill.   What the Bill proposes is a single state entity known as the Border Management Authority (BMA) to oversee all aspects of the movement in the import/export of goods and to control movement of all persons either leaving or entering the country.

The idea is that all border law enforcement functions along South Africa’s fragmented 5,000 kilometres of border will be the responsibility of the BMA.   Read More……    Border Management Bill July 2018 PDF

Posted in Agriculture, Finance, economic, Security, Security,police,defence, Trade & Industry, Transport0 Comments

Financial Sector Regulation Bill back to Presidency

….article 17 July 2017…..

Last minute passage for ‘Twin Peaks’ Bill…

After nearly a year of debate and argument during its passage through Parliament and countless years of drafting beforehand, the Financial Sector Regulation (FSR) Bill now sits with the President for the second time for signature and enactment. Parliament feels that the  reasons for its return by the President have been answered.

The Bill as now structured provides for a “twin peaks” model of financial regulation, with the one pillar being financial conduct managed by one authority‚ which will replace the Financial Services Board‚ and the other a prudential authority located in the Reserve Bank. The financial world has been deeply involved with the Bill’s drafting.

Final disagreement

The DA and EFF both opposed the Bill on final vote as in their view  the regulatory structure proposed in the Bill did not include the Office of the National Credit Regulator (NCR) under the aegis of National Treasury with those encompassed by the Bill. They said that this rendered the “twin peaks” system of regulation proposed as “toothless” and leaves the the credit industry outside of the ambit of the proposed legislation, which harming lower income groups since they will not be catered for.

This disagreement, voiced in final parliamentary meetings, should not be, allowed to hold up the Bill’s passage, the the majority in the Committee said.

Credit Bill drafted

Meanwhile, the Trade and Industry Portfolio Committee under Joan Fubbs is currently involved in drafting a new  approach to debt relief for the poor covered by a new Bill to be tabled by Parliament with the assistance of the Department of Trade and Industry (DTI) under whom the NCR falls.  Contributions to this Bill have already been made by National Treasury, say DTI

DA finance spokesman, David Maynier, Floyd Shivambu (EFF) and the Inkatha Freedom Front remained concerned on Bill’s failure to include the NCR, saying that for effective regulation of the entire financial industry all disciplines should fall under the supervision of the one financial sector conduct authority only.   Maynier said this meant that the credit industry would continue therefore to fall under the old system despite DTI wishing to control aspects of credit in order to specifically focus on debt relief and controls aimed at unscrupulous credit providers.


The FSR Bill, now approved in the National Assembly, will overhaul the system of regulation of banks‚ insurance companies‚ retirement providers and other sectors of the industry and replaces existing legislation that divides subsequent regulation between the types of institutions supervised, rather than by the nature of the supervision

Bearing in mind that when the Bill was returned by the Presidency, the reasons given pertained to three areas which had to be dealt with by the NCOP.  Firstly, the call was made by the President to further take regard of the protection of financial customers on matters that arose during the hearings on the transformation of the financial services sector.

Also raised was the issue of entering and inspecting premises subject to powers assigned in the recently passed Financial Intelligence Centre Amendment (FICA) Bill, now at last signed by the President but not yet implemented by Minister of Finance Malusi Gigaba.

Actions to be lawful and reasonable

Secondly, the Presidency asked that amendments to address issues in respect of financial conglomerates that arose in the public hearings and on the Insurance Bill and deal with those clauses in like manner on the issue of closing of bank accounts.

The NCOP did indeed propose and pass the alignment of powers given to similar powers granted under the amended FICA Bill and proposed that the new Financial Sector Conduct Authority with the responsibility to make conduct standards in respect of refusal, withdrawal or closure of a financial product or a financial service by a financial institution.


On the Insurance Bill issue, the NCOP at the same time endorsed that amendments made under that Bill that the right to administrative action that is lawful, reasonable and procedurally fair would apply to the FSR Bill.

This dealt with the issues raised by the Presidency but on another issue raised that regulatory powers should consider in their decision-making processes “the costs of implementation to businesses as well as the implications for financial inclusion of all South Africans”, the Committee agreed with this “non- Presidential” request for inclusion but could not implement such in terms of Parliamentary rules.

This being a Treasury Bill, it was therefore proposed that the Minister takes the matter into account and the Bill was returned as parliamentary recess occurred.

Previous articles on category subject

Financial Sector Regulation Bill heralds twin peaks – ParlyReportSA

Financial Sector Bill after Ponzi thieves – ParlyReportSA

FIC Bill hold up goes to roots of corruption – ParlyReportSA


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

Border Management Authority around the corner

SARS role at border posts being clarified ….

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

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

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

Keeping track

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

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

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

Long road

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

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


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

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

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

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

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


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

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

Mozambique border

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

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

Bonded and State warehouses

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

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

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

Slow process

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

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

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

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

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

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

FIC Bill hold up goes to roots of corruption

Bill originally approved by Cabinet

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

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

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

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

Crime busting

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

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

More entrants

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

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

Split in the ranks

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

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

No stroke of the pen

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

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

The old argument

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

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

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

The aim

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

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

Aims of Bill

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

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

Prominent persons

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

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

Getting to know you

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

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

Objective views

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

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

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

Getting control

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

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

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

Who blinks first

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

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

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

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

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

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