Customs and Excise Amendment Bill [B44-2013] & Customs Duty Bill [B43-2013]: briefing & public hearings; Committee Report on MTBPS / Revised Fiscal Framework & BRRR

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Finance Standing Committee

29 October 2013
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Meeting Summary

SARS explained that drafting process for the Customs and Excise Amendment Bill & Customs Duty Bill had started five to six years ago in 2007/8. The first draft of the Bill had been produced in 2009 and four months had been allowed for consultations. The Bills had then been taken to the NEDLAC where it had spent three years culminating in a 35 page report. The one area of disagreement was on inland terminals. A second round of comment with stakeholders ensued. In February 2013 there was a round of consultation at government cluster and Cabinet level. The Bills had been gazetted on 23 August 2013 and tabled in Parliament on 24 October 2013.

The briefing was followed by public hearings on the Bills:
The Southern African Clothing and Textile Workers Union (SACTWU) said it supported the Bill as its members were negatively impacted by the flood of illegal and illicit clothing importation and customs fraud undercutting the production of local goods and resulting in job losses and it welcomed the harsher penalties on transgressors and on repeat offenders.

The SA Association of Freight Forwarders (SAAFF)asked for more time to consider the impact of the Bill. The freight industry needed to be better understood and that it was not easy to analyse the impact of the legislation and the impact of misaligned trade. The gazetted draft had 940 sections and included two additional chapters and SAAFF had been given only a few days to read, consult and apply their minds to the implications of the tabled Bill. SAAFF had tried to engage with SARS but an impasse had been reached regarding the definition of a port of entry. If the status of inland ports were rescinded, SA would lose its status as a transit corridor and lose trade to other transit corridors. SAAFF felt it needed 30 to 60 days to study the Bill and to meet with SARS possibly through a mediator to discuss the issue of inland ports. There were concerns that the Bills could be subjected to a constitutional challenge.

Johannesburg Chamber of Commerce and Industry (JCCI) said that Johannesburg’s City Deep inland port terminal had been established in 1977 to promote multi modal transport from inland port to inland port and was of benefit to landlocked countries. There was thus concern that it would become a container terminal only, at a time when there was a worldwide growth in inland ports. The benefit of an inland port was that it reduced congestion and berthing delays at the port city. If City Deep did not keep its inland port status there would be movement away from rail traffic as companies would not want containers lost in the Transnet system. In addition, liability would shift from the carrier for the transport leg from Johannesburg to Durban, adding additional costs to industry. At present the carrier accepted liability right up to City Deep.

Members asked the JCCI and SACTWU about how they tried to stop fraud and on the miscalculation of customs duties. What did the JCCI propose on the matter of inland ports. Some Members said the presenters had valid concerns about the parliamentary process and felt it reasonable to request a delay till the following year. Members pointed out that SARS was pushing ahead with the Bill while at the same time Transnet and the City of Johannesburg were investing R1b into City Deep. Members asked if SACTWU would prefer to see better policing rather than the amendments to the Bill. Members asked how customs fraud could be stopped. Members said that Transnet’s input was needed and more time should be given to SAAFF to study the Bill.

The Committee Report on the Medium Term Budget Policy Statement / Revised Fiscal Framework was discussed and adopted. The Budgetary Review and Recommendations Reports (BRRR) for National Treasury BRRR and Statistics SA were also discussed and adopted. The Committee noted that Statistics SA had been asked for written explanations for aspects of its performance but had not done so.
 

Meeting report

Customs and Excise Amendment Bill & Customs Duty Bill: briefing
Mr Kosie Louw, Chief Legal and Policy Officer at SA Revenue Service (SARS), gave a brief background on the process the Bills had followed to date. The process had started five to six years ago in 2007/8. The first draft of the Bill had been produced in 2009 and four months had been allowed for consultations. The Bills had then been taken to the National Economic Development and Labour Council (NEDLAC) where it had spent three years culminating in a 35 page report. There had been one area of disagreement, being on inland terminals. A second round of comment and interaction with stakeholders ensued. In February 2013 the Bills were pre-certified and this was followed by a third round of consultation at government cluster and Cabinet level. The Bills had been gazetted on 23 August 2013 and certified by the law advisors. It was tabled in Parliament 24 October 2013.

Southern African Clothing and Textile Workers' Union (SACTWU) submission
Mr Andre Kriel, SACTWU General Secretary, said SACTWU supported the Bill

Mr Simon Eppel, Researcher, sketched a justification for the Bill from the perspective of SACTWU. He said SACTWU’s members were impacted by the illicit and illegal clothing imports trade. The clothing, textile and leather industries in South Africa were large employers, especially of women. In the 2000s the industry had suffered because of a flooding in of illegally imported goods. It was currently recovering but was still in a precarious position and was impacted by customs fraud which was undercutting the production of local goods and resulting in job losses. NEDLAC's report had indicated that the Bills would redress the matter of customs fraud and customs capacity, would allow for clearance to take place at the port of entry and would impose harsher penalties on transgressors and on repeat offenders.

SA Association of Freight Forwarders (SAAFF) submission
Mr David Logan, CEO of SAAFF, said it wanted the freight industry to be better understood. It was not easy to analyse the impact of the legislation and the impact of misaligned trade.

Ms Virusha Subban, Legal advisor to SAAFF, said there were still many unresolved issues regarding the Bill. SAAFF wanted Parliament to understand the Bills impact on trade and be given time to comment on the Bill as it had been gazetted for information purposes only. The gazetted draft had 940 sections and included two additional chapters. SAAFF wanted the opportunity and the time to be advised by its legal advisors and to advise its clients on the implications of the Bill regarding compliance matters. SAAFF had tried to engage with SARS but an impasse had been reached regarding the definition of a port of entry. She feared the Bills would be subjected to a constitutional challenge. If the status of inland ports were rescinded, SA would lose its status as a transit corridor and lose trade to other transit corridors. The Bills had been tabled last week and SAAFF had been given only a few days to read, consult and apply their minds about the implications of the Bill. It needed 30 to 60 days to come to its conclusions and to meet with SARS possibly through a mediator to reach a middle ground on the issue of inland ports.

The written submission stated that there was concern that the legislation would result in job loses and annihilation of a significant number of SMMEs and it was contrary to the National Development Plan as well as the Government imperative for enterprise development

Johannesburg Chamber of Commerce and Industry (JCCI) submission
Mr Patrick Corbin, Director of the International Chamber of Commerce, said that Johannesburg’s City Deep inland port terminal had been established in 1977 to promote multi modal transport from inland port to inland port and was of benefit to landlocked countries. There was thus concern that it would become a container terminal only, at a time when there was a worldwide growth in inland ports. The benefit of an inland port was that it reduced congestion and berthing delays at the port city. If City Deep did not keep its inland port status there would be movement away from rail traffic as companies would not want containers lost in the Transnet system. In addition, liability would shift from the carrier for the transport leg from Johannesburg to Durban, adding additional costs to industry. At present the carrier accepted liability right up to City Deep. The World Customs Organization (WCO) – Kyoto perspective promoted inland ports. The WCO had a post importation focus on compliance and 91% of countries had signed up to the Kyoto perspective. It recommended that the WCO strengthen the Kyoto recommendations, that it promote private public rail partnerships, that the WCO education included the training of customs officers and getting international aid for transport infrastructure which focussed on multi modal transport.

Discussion
Ms Z Dlamini-Dubazana (ANC) asked the JCCI and SACTWU how they tried to stop fraud and about the miscalculation of customs duties. What did the JCCI propose on the matter of inland ports.

Mr T Harris (DA) said the presenters had valid concerns on the parliamentary process and had not proposed any amendments to the text. He felt it reasonable to request a delay till the following year. He said SARS was pushing ahead with the Bill while at the same time Transnet and the City of Johannesburg were investing R1b into City Deep. He asked SACTWU if they could confirm that NEDLAC had made a presentation and was their concern on the enforcement of the law rather than on the legislation. Did they want anything changed. He said a briefing was needed to indicate changes to incentivise a move from road to rail.

Mr N Koornhof (COPE) asked if SACTWU would prefer to see better policing rather than the amendments to the Bill. Did the presenters want to offer any amendments.

Mr D Ross (DA) asked how customs fraud could be stopped.

Ms S Nkobo (IFP) asked SAAFF how much time they needed. She was concerned about what was not being said in the SAAFF presentation.

Mr Kriel (SACTWU) said they would be able to do a supplementary presentation. SACTWU had worked with SARS on the under invoicing of goods and had made recommendations. The NEDLAC process had been intensive with a report having been published regarding enforcement and legislation. It was supportive of SARS’ work and understood SARS’ position of seeking better legislative teeth to undertake its work. Regarding Mr Koornhof's question on whether they were happy, he said they respected the compromises that all parties were involved in, during the NEDLAC process.

Mr Eppel said SACTWU would prefer to see more immediate action and the implementation of the legislation sooner rather than later.

Ms Subban said that they had not had the time to read the Bill in depth but would provide suggestions to the Committee.

Mr Corbin said an inland port was where a ship theoretically docked inland. Customs officials have been assuming that City Deep did not exist as an inland port. JCCI did not want anything amended, it wanted to retain City Deep as an inland port. If the manifest meant cargo had to stop at Durban for customs inspections, then there would be a move away from rail container traffic and Transnet would have to give a more predictable and reliable service. He said the one issue at NEDLAC had been that of the inland port and JCCI had decided to do an impact study which had endorsed what had been said by JCCI. The SARS proposal in this regard was not helping as who was going to pay for congestion surcharges at ports?

Mr Koornhof said Transnet’s input was needed and more time should be given to SAAFF to study the Bill.

Committee Report on Medium Term Budget Policy Statement (MTBPS) / Revised Fiscal Framework
Mr van Rooyen asked which statistics were being quoted where the report said that statistics showed that the unemployment rate was increasing. He said that item 4.20 was not the Committee’s observation but rather a member’s view regarding the observation that three years ago 400 000 youth beneficiaries benefited over three years in comparison to the youth wage subsidy released recently where 200 000 beneficiaries would benefit from the budgeted amount of R2b as compared to the R5b previously.

Mr Harris said the figures came from page 17 of the Medium Term Budget Policy Statement (MTBPS) and the 400 000 came from Treasury’s discussion paper ‘Confronting Youth Unemployment - Policy Options for SA”

Mr R Lees (DA, KwaZulu-Natal) suggested that instead of it being under the heading of observations of the Committee which could be construed as endorsing the views, it could perhaps be considered as inputs to the Committee

Mr Van Rooyen requested that the observation be removed because they were the observations of outside bodies not that of the Committee.

Mr T Chaane (ANC-North West) said that observations from documents could not be used unless the quoted documents were part of submissions made to the Committee.

Mr Lees said there was a list of observations that was incomplete and questioned how one determined what should and should not be part of the observations. For example the input from Business Unity South Africa (BUSA) which he felt was critical and should be included as part of the observations.

Mr Mufamadi said that the recommendation’s thrust should be of the need to promote a partnership between the private and the public sector.

On 5.3, Mr Van Rooyen said he was not sure whether it was Treasury’s responsibility for the implementation of the NDP.

Mr Mufamadi said the Minister had said the budget was the beginning of alignment to the National Development Plan (NDP). Treasury should fast track and align its own plans to the NDP.

Mr Lees said Treasury should assist the implementation of the NDP by offering education or other assistance to departments to help align their strategic plans.

Mr Van Rooyen said that it was not the mandate of Treasury to support other departments.

 Ms Z Dlamini-Dubazana (ANC) questioned whether Treasury had the capacity to oversee other departments and that there were other monitoring and evaluation mechanisms.

Mr Mufamadi said there was monitoring of other departments and that at issue was the allocations to other departments.

Mr Harris said that Treasury should submit a progress report to Parliament on the work of the procurement office.

Mr Koornhof said Treasury could be asked to consult with BUSA as to why sub-Saharan Africa was doing better than southern Africa.

Ms S Nkobo (IFP) said that business should play a role in educating multinationals about opportunities in the country.

Mr Mufamadi said the Minister had said SA had more projects than the rest of the continent but not in terms of value. He felt there was a delayed reaction to SA corporations taking advantage of opportunities in Africa. There was a greater need for complementary action in taking advantage of investment opportunities in Africa.

Mr Joseph said Treasury had to engage with BUSA to analyse the studies which had been made.

On item 5.8 regarding the cost of containment measures, Mr Koornhof said that Treasury could contemplate more measures and report back to the Committee.

Mr Harris said he had additional proposals to add to recommendations dealing with the recalibration of the budget deficit. Treasury should submit a report within a certain timeframe to the Committee on the recalibration of the budget deficit measure and include a comparison to the approach in other countries.

Mr Harris said Treasury should also report to the Committee on the approach to the allocation of the contingency reserve in light of the allocation of the full contingency reserve in this year’s MTBPS because he had heard that the reserve was zero. The contingency reserve was meant for unexpected events, which would leave Treasury exposed.

Mr Mufamadi said he would ask the Minister

Mr Ross proposed two recommendations. He said that while noting and recognising Eskom’s efforts regarding energy security, the Committee expresses concern regarding the cost and time overruns of the build program and its impact on the economy and its cost implications. His second recommendation was on progress made in inflation related administered prices in electricity and the concern in the increase in the petrol price and the regulated gas price.

Mr Mufamadi said the petrol price was determined by exogenous factors. But Mr Koornhof said that the petrol price was determined by market related issues.
 
The recommendation was not accepted.

The report with amendments was adopted by both the Standing and Select Committees of Finance.

National Treasury Budgetary Review and Recommendations Report (BRRR)
Mr Ross referred to page 6 of the report, regarding the Asset and Liability Management program. There had been an expenditure of 911.18% which was an excessive increase. The overall budget of Treasury had been increased by 21.4%, mainly because of the increase of the former. Similarly there had been an increase of 31.65% in expenses for Technical Support and Development Finance. He asked for an explanation.

The Committee researcher said the answer to these increases were that there had been R800m in transfers to the Land and Agriculture Development Banks.

Mr Ross wanted clarification on the 10% (R26.5m) of the allocated budget which was unspent and the R23m shortfall on expenditure.

The Committee researcher said these were reported shortfalls.

Dr Luyenge said that the use of sick leave by senior management needed an explanation as well as of employees who did not work for the whole year.

Mr Harris asked about the R300m underspend in the Employment Creation Facilitation Fund in Programme 8. He said Treasury should be asked for a report on that.

The report with amendments was adopted.

Statistics SA Budgetary Review and Recommendations Report (BRRR)
Mr Koornhof said there was no explanation of the increase in the entertainment budget and on the expenditure of R32m in insurance payments when the entity was only allowed a budgeted amount of R200 000 for insurance. This could not be accepted.

The Chairperson said the Committee would ask for a detailed written explanation. Statistics SA had been supposed to send that information to the Committee already and had not done so.

Mr Harris asked about the investigations regarding a payment of R35m noted in the 2011 audit report. The Committee had asked for a written update on the investigation which it had not yet received.

Mr Ross said similarly it had not received a written explanation on the R6.7m in fruitless and wasteful expenditure.

The report with amendments was adopted.

Financial Services Laws Amendment Bill report in the National Assembly
Joint Chairperson Mr T Mufamadi (ANC) said there was an outstanding matter to be disposed of first by the Standing Committee on Finance. At issue was whether there needed to be a debate in the House on the Financial Services Laws Amendment Bill report. He had received a report from the whip of the Committee that the matter would not be debated as there was consensus, but that the DA wanted to debate it in the House and he had taken this opportunity to allow for the matter to be discussed.

Mr D Van Rooyen (ANC) said the amendment Bill dealt with technical amendments and not major changes to the Bill and thus should not be debated.

Mr T Harris (DA) said he did not agree that the Bill was only of a minor technical nature and as such asked that it be debated because it gave new powers to financial regulators without those powers being balanced by increased accountability.

Mr N Koornhof (COPE) said that if it was not debated then every party had time to declare and get more speaking time. If this was not the case, perhaps a shortened debated could be considered.

Mr D Ross (DA) said it should be debated.

Dr Luyenge (ANC) said the changes were of a technical nature and that it should not be debated.

Mr T Mufamadi put the matter to a vote where it was decided not to debate the matter with the DA’s objections being noted.

The meeting was adjourned.
 

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