Minister of Finance Budget speech

Minister of Finance, Mr Nhlanhla Nene, gave his Budget Vote Speech on the 07 May 2015.

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Honourable Chairperson

In presenting the National Treasury’s Budget Vote for the consideration of the House, allow me to begin with an update on the outcome of the 2014/15 budget. At the conclusion of the fiscal year, tax revenue was about R7.4 billion higher than the February estimate. We now estimate consolidated revenue for 2014/15 to be R1 102 billion, with the budget balance about R137 billion, or 3.5 per cent of GDP, R15 billion less than the February estimate.

The South African Revenue Service continues to do sterling work in raising the resources that are required for the delivery public services. However, economic growth remains lacklustre. We cannot continue to expand service delivery on tax collections alone. Stronger economic performance has to be the foundation of our development and better public services. 2

So it is right to emphasise that the National Development Plan sets the goals and provides the analysis for our medium term strategic framework, which is given practical effect in the budgets and plans of every department and public entity.

But it is not just what we do as government that counts in implementing the NDP. Development is fundamentally about broadening the participation in the economy, opening up opportunities for trade and social mobility and mobilisation of private investment. Much of the Treasury’s work is focused on these larger objectives.

So, for example, Honourable Members:

• We are strengthening regulation and oversight of our banking and financial services sector, on the one hand to ensure that our financial institutions are well governed and on the other hand to ensure that customers are treated fairly.
• We have introduced tax incentives aimed at encouraging investment and technology enhancements, and at expanding employment, especially of young work-seekers.
• Through our City Support Programme, we are working with metropolitan councils to accelerate housing and public transport investment, promote more efficient urban landscapes and strengthen urban economic development.
• The Municipal Finance Improvement Programme contributes to addressing financial management challenges in many of our municipalities.
• We have expanded the capital base of both the Development Bank of Southern Africa and the Land Bank, to enhance their capacity to partner with other institutions in financing infrastructure investment and agricultural development.
• The Jobs Fund has launched its fifth Call for Proposals, focused on partnering with businesses and non-governmental organisations involved in agricultural development and support for emerging farmers.
• The Treasury continues to work with other departments on a wide range of economic development initiatives:

1.  With the Department of Trade and Industry on manufacturing competitiveness enhancement,
2. With the Department of Telecommunications and Postal Services on investment in broadband communications,
3. With the Departments of Agriculture, Forestry and Fisheries and of Rural Development and Land Reform on support for agricultural investment and employment,
4. With the Department of Transport on moving people and goods more efficiently,
5. With the Department of Human Settlements on how to partner with banks in expanding housing investment and finance,
6. With the Department of Energy on bringing independent power producers into the electricity network and addressing Eskom’s financing requirements. 3

These are just some examples. Implementing the NDP involves a very wide range of activities. Honourable Members, we need to do more to reinforce partnerships with the private sector and all stakeholders in building a more inclusive economy. But as the NDP emphasises, these activities need to be coordinated within a sustainable, long-term framework but also for broader participation and a more equal distribution of opportunities.

Economic outlook

Allow me to comment briefly on the economic outlook, Honourable Chairperson.

The National Treasury forecast for economic growth in 2015 remains unchanged at 2 per cent. This is partly a consequence of the sluggish global economic recovery. It is also a consequence of domestic constraints, including the continuing shortfall in our electricity generation capacity. Subdued business confidence therefore continues to hold back investment and growth. The Kagiso Purchasing Managers’ Index recently declined to 45.4, which is its lowest level in 11 months, indicating the vulnerable state of our manufacturing sector.

While the low oil prices are providing support to our economy, the fall in the prices of our export commodities such as platinum, coal, iron ore and gold is putting pressure on our mining sector and related industries. This reduces the profitability of investments and limits the growth and employment potential of the sector.

Over the period ahead we are likely to see some upward pressure on inflation, partly because of a reduced maize harvest, higher electricity prices and the weaker exchange rate.

These are reminders that we must remain focused on the critical constraints holding back our economic progress: electricity supply, administrative capacity, especially at the local level, skills and access to globally competitive technology, transport and communication networks and the effectiveness of our labour relations institutions.

The NDP also emphasises our links with the rest of Africa. We have been reminded in recent weeks of how important cross-border linkages are to millions of vulnerable people, both in our own communities and across the Mediterranean. There are many aspects to these challenges, which we have to address in our social development and employment strategies and in development partnerships with our neighbours and the international community. Our linkages with other African countries are growing, including investment by South African companies abroad which increases job creation both at home and elsewhere in Africa. 4

National Treasury Strategic Plan and APP

Honourable Chairperson, allow me to draw the attention of the House to the National Treasury’s central organisational goals for the next five years, as set out in the Strategic Plan which was tabled last month.

These include:

1. Promoting economic policy coherence around the objectives of growth and jobs

2. Addressing risks on the public sector balance sheet

3. Executing a credible budget process that allocates resources sustainably to policy priorities, and is in line with spending plans

4. Exercising public finance management oversight responsibilities, including capacity building, that delivers value for money

5. Making the financial sector serve South Africa better

6. Building a happy and effective institution that is a centre of excellence, and

7. Implementing a strategic communications and outreach programme that addresses stakeholders.

Our Strategic Plan notes three critical areas in which capacity is being enhanced within the Treasury over the period ahead:

• A new unit will be created to focus on analysis of financial market conduct, in line with the Twin Peaks regulatory framework,
• Within the Office of the Accountant-General, dedicated capacity is being built to oversee and implement the Integrated Financial Management System, in partnership with the Department of Public Service and Administration and the State Information Technology Agency, and
• Following establishment of the Office the Chief Procurement Officer, centralised coordination of procurement in government is being strengthened.

Our Strategic Plan also draws attention to the establishment of the Government Technical Advisory Centre as a public finance advisory and support initiative. GTAC works with other departments, provinces and municipalities on a wide range of organisational development and programme management activities, including support for public-private partnerships, strengthening of operational capacity and learning networks focused on project management and local economic development. Administration of the Jobs Fund has also now been consolidated into GTAC.

Details of the Treasury’s programmes, activities, targets and performance indicators are set out in the Annual Performance Plan. The Departmental establishment for the current year comprises 1 153 posts. The National Treasury vote amounts to R27.0 billion this year, of which compensation of employees is R725 million. The Treasury also has the responsibility for the provincial equitable share and debt service direct charges, which amount to R382.7 billion and R126.4 billion respectively. 5

Time does not permit me to deal with all these plans and programmes in detail, Honourable Chairperson. But I will highlight a few key issues.

Limpopo intervention

A notable turning point has been achieved in the financial position of Limpopo Province. An intervention under the direction of the Ministry of Finance has been in progress since 2011, in terms of section 100 (1) (b) of the Constitution. This was necessitated by a precarious fiscal situation, including the province’s inability to finance a bank overdraft of R1.7 billion in December 2011 and accumulated unauthorised expenditure and departmental debts of R2.7 billion. Large departments such as Education and Health had been overspending their budgets continuously since 2007/08, and the number of unpaid invoices from service providers had reached over R2 billion.

As we speak, executive and accounting authority has been handed back to the provincial government and national government administrators are no longer in the province but they continue to issue directives under Section 100 (1) (a) of the Constitution.

Municipal debt to Eskom

Our more recent intervention to address municipal debt to Eskom is similarly achieving positive results.

Equitable share transfers were withheld this year in respect of 59 municipalities with long-standing arrear obligations to Eskom. In 20 municipalities, agreements have now been reached to enable the equitable share funds to be released. Discussions are in progress with the remaining municipal councils, with a view of resolving outstanding matters before the end of the municipal financial year on 30 June this year.

City Support Programme and Municipal Finance

Cities play a key role in driving economic growth and providing people with access to services and opportunities. To realise these benefits, cities must grow in ways that reverse the pattern of urban sprawl that sees new communities (and especially poor communities) located far from central business districts. It also requires substantial investment in the urban infrastructure required to provide services and support growth. Planning these investments is a formidable task for cities and so we have introduced the City Support Programme to assist cities to plan and implement these investments.

This programme already coordinates and supports the process through which cities identify areas for strategic investment in their Built Environment Performance Plans. Detailed planning for individual projects is then supported through a project 6

preparation facility managed at the Development Bank of Southern Africa. This support helps cities to develop implementation-ready plans for developments that will change the face of our cities and support long term growth and development.

National Treasury is also working with the Department of Cooperative Governance to support the capacity of our cities to raise the funding needed and to attract private investment for urban infrastructure expansions.

In our meeting with Minister Gordhan and the Executive Mayors of the metros, we re-affirmed our shared commitment to ongoing improvements to governance and service delivery in metropolitan areas, so that population growth in our cities can provide momentum to reconstructing more inclusive, productive and sustainable urban environments. Our city leaders have committed to focussing their attention on the security of supply of critical urban services through enhanced maintenance and renewal of critical infrastructure, and to reorient their expenditure priorities to contain growth in personnel costs, reduce waste and obtain clean audits. Building on their own built environment plans, they will also accelerate the preparation of a series of well-located, catalytic land development projects that will be implemented in partnership with the private sector.

African Bank

I can also report that good progress has been made towards establishing a new African Bank. Yesterday, the National Assembly passed the Banks Amendment Bill which will provide the legal authority required to transfer identified “good assets” to a new bank, while enabling the curator to proceed with winding up of the remaining business.

In addition, a new Chief Executive Officer has been appointed, bringing appropriate expertise and experience to the leadership of a revitalised bank.

In its deliberations on this matter, the House has again highlighted concerns with unsecured lending and the pressures on many households associated with inappropriate and expensive credit. Cabinet has already agreed to a range of measures in response to this issue, including new regulations on reckless lending. In taking this forward, we have had the advantage of constructive support of the Ministers of Justice and Trade and Industry.

State-owned Companies

In addition to exercising general oversight of state-owned companies, the National Treasury has specific responsibilities relating to the Development Bank of Southern Africa, the Land Bank and South African Airways.

The DBSA aims to disburse R17.8 billion in 2015/16, rising to R26.4 billion in 2017/18, contributing to municipal infrastructure investment, public-private 7

partnerships and regional development in the energy, transport, water, communication, health and education sectors. Of special importance is the Bank’s support for addressing infrastructure backlogs in our cities, and deepening of the municipal debt market in order to facilitate greater private investment in urban renewal. The DBSA also coordinates implementation of the rural infrastructure strategic programme of the National Infrastructure Plan.

This year will see the Land Bank undergo an organisational review aimed at strengthening its role in agriculture financing. It plans to disburse over R2.2 billion in new development loans over the next three years, while supporting better coordination between agriculture initiatives, rural development and land reform.

In respect of South African Airways, we are now seeing the benefits in cost-reductions and improved operational efficiencies associated with the Board’s 90-day Action Plan undertaken in the first three months of this year. This provides a platform for refining the 2013 Long Term Turnaround Strategy. A strong working relationship has been established between the airline and the National Treasury and we are confident that we will see further improvements in the airline’s financial position.

New Development Bank

Honourable Chairperson, I am delighted to report that there is good progress in establishing the BRICS-led New Development Bank. This month, the Bank will announce its pre-management group comprising a President for the Bank from India and four Vice-Presidents from the other BRICS member countries. In the interim, an Interim Board of Trustees has been appointed to oversee the operationalisation of the Bank. With respect to the ratification process, the Agreements that we signed last year at the BRICS Summit in Fortaleza on the New Development Bank and the Contingent Reserve Arrangement are currently in Parliament. Once they are ratified, South Africa will be able to participate fully in these new initiatives. I hope that Parliament will be able to ratify the agreements before the end of May, and that the Bank will be ready for business in time of the BRICS Summit to take place in Russia in July.

Economic competitiveness

As emphasised in the Budget Review this year, the Treasury works closely with several other departments in promoting the medium term strategic framework objectives associated with economic growth, employment creation and infrastructure network investments. Tax measures to support industrial investment amount to some R19 billion a year.

Economic competitiveness is also advanced through various spending programmes, including the manufacturing competitiveness enhancement programme of the Department of Trade and Industry. Recent press reports have drawn attention to the growth in applications for this support. The Treasury will work with colleagues in 

Trade and Industry to expedite implementation of the incentive programme and determine its cash-flow requirements, while ensuring value for money in these targeted appropriations.

Financial management reform

As part of our continuing strengthening of public finance management, revised Treasury Regulations will be published by 31 July 2015 to take effect on 1 April 2016. This follows an extensive process of consultation with departments and entities. The new regulations contain a number of important reforms in areas such as procurement and governance, areas in which government’s performance has not been completely up to standard. A period of time will be allowed for departments and entities to implement the new reforms to ensure a smooth transition where required. Linked to the new Treasury Regulations are several measures to strengthen financial management. These include updated cost containment measures that will be published by 1 July which will introduce punitive measures where compliance is not satisfactory.

Public sector procurement will remain under the spotlight for the period ahead, not just because we need to contain costs but also because it contributes to both black economic empowerment and our industrial development objectives. The interaction between these aspects of our supply chain management policy is complex. The complexity, in turn, contributes to opportunities for corruption or leakages. So we need to step up our vigilance, and continue to enhance the regulations and systems through which procurement is managed. We have taken the first steps towards an e-procurement system and improved central coordination of supply chain management. Greater transparency and accountability will flow from these reforms, over time.

Public service wage negotiations

I can advise the House, furthermore, that progress is being made in the current round of public service salary negotiations. We need a settlement that is fair and reasonable, and that takes into account the overall position of the fiscus and the broader economy, and an appropriate balance between remuneration and employment growth.

Social security and national health insurance

Honourable Chairperson, I should also comment briefly on the constructive discussions which were held with business and organised labour under the auspices of NEDLAC regarding the February UIF relief proposal. While a UIF contribution reduction would provide temporary advantages to businesses and workers, it was agreed that a more comprehensive approach would be better, taking into account the surplus that has accrued in the Unemployment Insurance Fund, the financial 9

position of other dedicated funds such as the Road Accident Fund and the broader challenges of social security reform. The decision not to proceed with the UIF relief proposal means that the consolidated deficit for 2015/16 will be somewhat lower than projected in February.

As indicated in the February budget speech, the interdepartmental work on social security reform will shortly be published. Our work on financial aspects of national health insurance is also ready for publication. These are important and challenging areas of social and fiscal policy, in which we look forward to active engagement with Parliamentary committees.

Conclusion

Honourable Chairperson, allow me to record my appreciation to the Standing Committee on Finance for its constructive engagement on the strategic and annual performance plans of the National Treasury and the South African Revenue Service, and its support for the entities of the Finance Ministry. Our financial and fiscal architecture is at the centre of our capacity to implement the National Development Plan, to accelerate growth and development and to transform our economy.

I thank you.

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BUDGET VOTE SPEECH BY Deputy Minister of Finance

Honourable Members

The National Treasury contributes not just to value for money in our public finances, but also to the broader financial environment that supports investment and growth. I will highlight the key roles of several institutions of the wider finance family in bringing together savers, investors, lenders and borrowers in an orderly manner.

The role of the financial sector in facilitating economic development in a modern economy is critical, but its destructive force if it is not well regulated should never be underplayed.

In fulfilling this important role, there are various policy challenges for Government, which have to be carefully balanced. For example: the need to facilitate financial access while ensuring that consumers are protected; the need to combat financial  crime while ensuring that honest customers are not excessively burdened by compliance; the need to ensure that financial entities are always financially sound to meet their commitments to their customers, while also noting the compliance costs associated with new regulations.

In our effort to fulfil the above objectives, and to adopt best international practice where appropriate, several draft laws were released over the past year for public comment. These include the Financial Sector Regulation Bill (2014) to give effect to the Twin Peaks regulatory model; the Insurance Bill (2015) to support the financial soundness of our insurance companies and enable low-income access to insurance; and the Financial Intelligence Centre Act Amendment Bill (2015) to strengthen the Financial Intelligence Centre’s ability to assist in combatting financial crime.

We have also prioritised the need to encourage South Africans to save, and thereby to rely less on excessive debt, especially debt offered on expensive and sometimes predatory terms.

Over-indebtedness, Honourable Members, makes our workforce depressed and less productive. On 1 March 2015, the Tax Free Savings Accounts became a reality in South Africa. We encourage South Africans to take up this offer. This saving initiative also reflects what can be achieved if both Government and the financial sector work together for a common cause.

The 2015 Budget Speech reiterated National Treasury’s commitment to continue with retirement reforms to ensure that workers are saving enough and get good value for their savings. We repeat our message that workers, especially government employees, should not panic and prematurely resign to access their savings. Their savings remain theirs and under the stewardship of trustees. 3

In fulfilling the above objectives, Honourable Members, the National Treasury is ably assisted by the various regulatory and supportive institutions within the Finance Family.

Financial Intelligence Centre

The Financial Intelligence Centre plays a critical role in protecting the integrity of our financial system. During the past year the FIC, in collaboration with the National Treasury, worked on the draft Financial Intelligence Centre Amendment Bill, 2015 which has been published for public comment after being approved by Cabinet.

South Africa has a long-standing commitment to combating money-laundering and the funding of terrorism, having ratified the United Nations Convention Against Corruption (“UNCAC”) in 2004, after joining the multi-lateral Financial Action Task Force (“FATF”) in 2003. In 2001 South Africa enacted the Financial Intelligence Centre Act and other related measures to criminalise financial crimes and facilitate access to information about illicit financial flows.

Financial crimes take several forms, for example: fraud, money laundering, terror financing and corruption. It fighting such crimes, we aggressively seek to protect the integrity of our domestic financial institutions and contribute to the resilience of the global financial system. Cabinet adopted this policy objective in 2011 in responding to the 2008 global financial crisis, as outlined in the policy document “A safer Financial Sector to serve South Africa better”. Moreover, the intelligence products from the FIC are increasingly used by the law enforcement authorities, intelligence services and the SARS as an integral part of their ongoing investigative work.

The FIC Amendment Bill proposes several measures to address threats associated with money laundering and terrorism financing and to address regulatory gaps which have emerged since the Act was last updated.

It introduces major shifts which seek to make complying with the Act easier for customers of financial products while maintaining the controls necessary to protect the integrity of the system. Being “FICA’d” will no longer be the frustration it has been in the past. It will become easier for all concerned. The Bill introduces a risk-based approach 4 to give financial institutions the flexibility to work out how best they can verify their client’s identity.

South Africa has long recognized the problem of illicit financial flows. We started taking strong steps to try and deal with this issue, long before it became fashionable to talk about it. This can be seen from the routine work of South African Revenue Service, the South African Reserve Bank, Finance Intelligence Centre and the prosecuting authorities.

While there are various mechanisms that are used to facilitate such illegal capital flows, like trade mispricing, money laundering, drug trafficking, corruption, we believe that aggressive tax avoidance and evasion probably form the most significant part of such illicit flows. This was one of the reasons why the former Minister of Finance appointed a Tax Review Committee chaired by Judge Dennis Davis to improve the tax system and reduce the scope of tax avoidance and evasion. Judge Davis and his committee have already produced a report to deal with problems of base erosion and profit shifting (BEPS).

The problem of illicit flows within Africa requires Africa-wide co-ordination and co-operation. But this is a global problem and it requires globally-coordinated action. South Africa strongly supports and is therefore part of the actions by the African Tax Administration Forum and other global forums. We recognise that collaboration in this area is critical..

The South African Revenue Service

The global and domestic economic environments continue to put at risk SARS’ revenue collection and compliance goals. Despite this difficult economic environment SARS managed to collect R986.4 billion during the 2014/15 fiscal period. This achievement was R2.8 billion above the target set during the Medium Term Budget Policy Framework and R7.4 billion above the revised target announced in February 2015. This achievement would not have been possible without SARS' determined efforts to improve compliance, and to close loopholes in the tax system. During the 2015/16 5

fiscal period SARS will increase its activities to address base erosion and profit shifting (BEPS) schemes used by multinational entities and high net-worth individuals to avoid/reduce their tax liabilities in South Africa. SARS will participate in, and implement multi-country exchange of information agreements to enhance its efforts in this regard.

Our focus is to ensure that SARS remains stable and focuses on its mandate of tax collection.

SARS' efforts to improve trade facilitation will also be enhanced by the implementation of the new Customs Control and Customs Duty Acts during the 2015/16 year. This will have many benefits for traders, importers and exporters. SARS will also continue in its efforts to reduce the compliance burden for small businesses operating in South Africa through its continued rollout of "small business desks" at its branch offices throughout the country. We have officially opened 138 small business desks nationally and it is most likely that the number will increase in mid-June once the provincial workshops are completed.

I stress again, that contrary to reports, SARS is focused on its core business and succeeding in its work.

The Financial Services Board (FSB)

A major focus of the FSB in 2015 will be the continued preparatory work for its transition to a Market Conduct Authority in terms of the “Twin Peaks” regulatory proposals and National Treasury’s Market Conduct Policy. This transformation encompasses the creation of a new structure aimed at better financial services delivery with a consumer dedicated regulatory focus. This entails a re-look by the FSB at its approach to supervision, embedding the Treating Customers Fairly principles, together with an outcomes-based approach in order to enhance supervision.

The FIC will also proceed over the next three years with its Retail Distribution Review, which aims to improve the financial product distribution model. A regulatory framework for hedge funds will be implemented, and the FIC will work with the National Treasury to finalise the Financial Sector Regulation Bill. 6

Financing Development

The Ministry of Finance has responsibility for three Finance Institutions: the Development Bank of Southern Africa, the Land Bank and the Public Investment Corporation. Over the period ahead these entities will further explore areas in which they can collaborate and work together while focusing on their respective comparative advantages.

The Development Bank of Southern Africa

The Development Bank of Southern Africa (DBSA), as a vehicle of the state and a development finance institution, is recognised as a single yet important component of the national infrastructure system with a mandate to contribute meaningfully towards the national infrastructure objectives. The Corporate Plan of the DBSA outlines a concerted effort to support the improvement in the standard of living of our people through the development of social infrastructure as well as support the growth of our economy. The promotion of regional integration remains also a key focus area for the Bank.

Over the next three years, the DBSA will seek to increase investments to sectors such as energy, transport & logistics, water, ICT, health and education by significantly increasing its infrastructure financing support, contributing to municipal lending, State-Owned Enterprise infrastructure plans, regional lending as well as public-private partnerships.

Given the country’s current energy supply constraints, the DBSA will continue to investment in power generation projects, including renewable energy as well as coal and gas-fired power sources. Key initiatives to be supported over the medium term include the Small Projects Independent Power Producers (SPIPP) Programme facility and the Independent Power Producer Coal Base-load Programme.

The DBSA actively supports infrastructure development in municipalities aimed at addressing backlogs and expediting the delivery of essential services in support of sustainable living conditions and improved quality of life within communities.

The Bank aims to increase its annual infrastructure lending to municipalities from R6.0 billion in 2015/16 to R7.6 billion in 2017/18.

To complement these funding activities, over R30 million a year will be set aside to provide planning and implementation support for the origination of infrastructure projects. We will also be rolling out R150 million a year for interest subsidies in selected under-capacitated municipalities.

The DBSA will continue to manage the Infrastructure and Invetment Programme for South Africa (IIPSA) programme on behalf of the National Treasury and the European Commission (EU). The IIPSA facility EU was concluded during the 2013/14 financial year, unlocking €100 million for project preparation over a seven year period. It is estimated that a leverage effect of at least five to 10 times the amount of financial non-refundable contributions could be achieved. In order to be eligible, projects should preferably be supported by more than one of the participating finance institutions in consortium.

In line with government’s objective to progress to a low-carbon and sustainable economy, the Bank will continue to provide programme implementation support for the R800 million Green Fund which remains crucial to provide finance for high-quality, high-impact, job-creating green economy projects around the country.

The Public Investment Corporation

The Public Investment Corporation currently has assets under management of approximately R1.8 trillion. The key strategic focus area for the PIC is to invest in sectors and industries that are aligned to government economic priorities as encapsulated in the National Development Plan (NDP). The PIC investment strategy is focused on developmental investments across all its activities. These include:

• Economic infrastructure, such as roads, ports, water and telecommunications
• Renewable energy
• Support to Eskom in its long-term investment in generation capacity
• High priority job creation sectors, such as agriculture and agro-processing, tourism, mining beneficiation and employment-intensive manufacturing and downstream sectors
• Small and Medium Enterprises (SMMEs), as they are generators of jobs
• Support for black industrialists and transformation in previous untransformed sectors both on the JSE and in private companies
• Social infrastructure, such as affordable housing, further education, health facilities and student accommodation.

The PIC is also invested in the African continent, with a special focus on contributing to regional integration. The PIC is also actively working with other development finance institutions and state-owned companies to provide sustainable financing to ensure economic growth through infrastructure development.

Land Bank

In the case of the Land Bank, it is recognised that expanded financing for agriculture and emerging farmers is a critical requirement for both food security and faster job creation. In its efforts to strengthen its balance sheet and operational efficiencies, the Bank has decided to conduct an organizational review focusing on the following:

• The Bank’s mandate and business model, including processes, systems and people
• Improvement of the Bank’s sustainability by rebuilding its capital base
• Optimisation of the Land Bank’s operational efficiencies and reduction of costs; and
• Development of an appropriate funding model for an agricultural DFI.

McKinsey & Company has been appointed to assist with the review, which has recently commenced and will take approximately four months.

Over the past five years, the Land Bank disbursed R1.9 billion in targeted development loans. It will continue engaging multilateral development banks in order to secure affordable funding, and will partner with other local development finance institutions in large scale development projects. Through the Wholesale Financing Facility, the Bank

is able to offer low interest rates for emerging farmers, having advanced more than R500 million in this facility. In order to achieve better co-ordination of delivery of development funds, including those allocated in the fiscus, the Land Bank is considering a number of options as an aggregator of various grants programmes for agriculture.

Conclusion

Honourable Members, on the strength of an improving fiscal position and our well-developed financial sector, South Africa is able to mobilise finance and adopt innovative financing arrangements to accelerate infrastructure investment, enhance economic competitiveness and improve living conditions. We need to proceed with greater urgency in translating plans into projects – in converting our National Development Plan, sectoral strategies and municipal integrated development plans into investment programmes, jobs and economic activity.