Border Management Amendment Bill: Department response to submissions

Meeting report

Briefing
Departmental Overview on the Border Management Authority Bill
Mr Mkuseni Apleni, Director General (DG): Department of Home Affairs (DHA), said that the presentation was to clarify some contextual matters that informed the DHA’s responses to public comments on the Border Management Authority (BMA) bill. The DHA had met with the Department of Police and had drafted and submitted a report. It had also met with the South African Revenue Service (SARS) and Treasury that morning on a suite of customs law amendments, and the two parties were still working on the details.

His presentation covered the proposed institutional form of the BMA, which could be one of five institutional forms for an organ of state. He said the BMA was a form for the state to deliver its services and was not a form of privatisation. The proposed form under consideration for the BMA was for it to be under one government authority. This would mean the BMA was an implementing agent for an authority and would be fully accountable to the Public Finance Management Act (PFMA) and be subject to oversight by Parliament. He said a board may be established, or the head of the BMA may choose not to have a board, like in the case of SARS. It was not preferred that the BMA be a national department, because that would mean giving it a policy mandate, whereas the BMA was only an implementing body.
 
On international benchmarking, he said that there was no single model worldwide where it was integrated. In some countries, it was separate and in some countries it was combined in a single entity, as in Australia, Canada, the US and the UK. The Netherlands, Finland and South Korea had dual agencies. In India, China, Russia and Sweden, there were multi agencies. The DHA had visited countries in three regions, America, Europe and Asia, on a study tour in 2014.

The process of consultation had started in August 2015. Cabinet had been consulted and there had been three engagements with the Public Service Council Bargaining Chamber, seven with the National Economic Development and Labour Council (NEDLAC) and the bill had received certification from the Office of the Chief State Law Advisor (OCSLA).
 

He said there had been three areas of disagreement in the NEDLAC process. The DHA was responding to some issues raised in the process. There had been three areas of disagreement that could not be resolved at NEDLAC:

1)the establishment of the BMA as an authority, as a Schedule Three public entity;

2)the time taken to complete security vetting;

3)routine searches, when there were no grounds  to prompt a search.

Apart from the above key issues, the Congress of South African Trade Unions (COSATU) had raised the issue that the BMA should be a national department, and Business Unity South Africa (BUSA) had raised the issue that the risks of establishing a new organ of state were too high and would impact negatively on trade.

On the Socio-Economic Impact Assessment System (SEIAS) report, he said that the BMA was more about prevention rather than cure, and it could demonstrate why it would be more expensive if the BMA was not there.

The key options regarding the level of integration of BMA were voluntary coordination, full integration or mandated collaboration. Cabinet favoured the full integration model.

The OCSLA had said the best way to assign and transfer functions to the BMA would be via Presidential proclamation. The envisaged process would take place after the bill had been enacted by Parliament and after the President had agreed and brought the BMA Act into force.

Discussion
Ms H Hlophe (EFF) said there appeared to be a bone of contention between SA Revenue Service (SARS) and National Treasury (NT). Her one concern was regarding outsourcing, and the DG had not spoken about it in his presentation. When had the DHA visited these countries, and what had been learnt from these visits?

The Chairperson said a proper study tour to Germany was being considered for the Immigration bill, as Germany also had issues concerning immigration.

Mr D Gumede (ANC) asked if the DHA had interacted with border communities, because each border had its specific and unique problems. Was there an official record of the NEDLAC discussions? Regarding vetting, he said the Department of State Security clearly did not have the resources or capacity. Was there any plan to increase the vetting capacity in the BMA’s planning?

The Chairperson said he was unsettled that the issue of vetting was being raised, as he felt that was a problem for the Department of State Security to sort out. The DHA could not sort that matter out.

Mr A Figlan (DA) said he was concerned about the study tour, given that the DHA was under-funded. Where would the BMA funds come from? The DHA was coordinating between various departments in an integrated approach, so why then was there the need for the BMA authority? 

Mr Apleni said the DHA were engaged with SARS on customs law enforcement and revenue collection regarding what was SARS’s area of responsibility, and what was the BMA’s area of responsibility.

Regarding outsourcing, he said the Congress of South African Trade Unions (COSATU) had one disagreement, so DHA had put in a clause that there was no outsourcing.

He said there had been discussions with both SARS and Treasury.

Departmental Response to Submissions
An official of the DHA then gave a briefing on the DHA’s responses to submissions and comments made at hearings and how these had been incorporated into the bill where applicable. Submissions and comments had been made by the SA Police Service (SAPS), the Department of Justice and Constitutional Development (DoJCD), Transnet, the Scalabrini Centre, COSATU, the National Education, Health and Allied Workers Union (NEHAWU), Katleho Mogase, the Tourism Business Council of South Africa (TBCSA),
Business Unity South Africa (BUSA), Fruit South Africa (FSA), Kimberley Resources, and
The Durban Chamber of Commerce and Industry. Their inputs were on:

The Preamble: 
clause 1 – definitions of 'border law enforcement area', and 'port of entry',  'border law enforcement functions',  'border management',  'border protection functions', 'commissioned officer', ‘Defence Force', 'prescribed', 'Airspace',  and the inclusion of the principle of non–refoulement.
clause 2 on the application of the Act,
clause 3 the object of the Act,
clause 4 the establishment of authority,
clause 5 the functions of authority,
clause 7 the appointment of the Commissioner, ‘border law enforcement area',
clause 8 the terms of office of the Commissioner,
clause 9 the removal of the Commissioner from office,
clause 10 conditions of service and remuneration of the Commissioner,
clause 11 the functions of the Commissioner,
clause 12 delegation by the Commissioner,
clause 13 appointment of officials,
clause 14 commissioned officers,
clause 15 the duties functions and powers of officers of the border guard,
clause 16 terms and conditions of service,
clause 17 limitations of rights of officers,
clause 18 powers of entry, search and seizure with a warrant,
clause 19 powers of entry, search and seizure without a warrant,
clause 20 routine searches and seizures,
clause 22 detained or arrested persons and seized goods,
clause 25 inter-ministerial consultative committee,
clause 26 border technical committee,
clause 27 advisory committee,
clause 28 implementation protocols,
clause 30 review or appeal of decisions,
clause 31 designation, determination, appointment, prescription, withdrawal or cancellation of ports, points and places of entry or exit,
clause 36 offences and penalties,
clause 37 regulations,
clause 38 transfer of employees from organ of state to the Authority. (See attachment 'Consolidated Public Comments’).    

During the briefing, a copy of the Davis Tax Commission report on the BMA was handed in by Treasury and copies were made and distributed to Members.

Discussion
Mr Gumede questioned whether the Davis Tax Commission Report recommendations would not defeat the purpose of the BMA to integrate border operations into one body. He said his fear was the leakage of revenue through fruitless and wasteful expenditure.

Mr Apleni said the Davis Tax Commission was giving its opinion in its report, and it had said it was not unconstitutional to establish the BMA. The DHA had also sought legal opinion from Mr Katz, who had said that there was nothing in the constitution to prevent the establishment of the BMA. SARS had been established similarly as a branch of Treasury, and did not have a constitutional mandate.

On the integration of operations, he said there was no particular blueprint. Every country made its own decision. The DHA had initially wanted to move customs but after holding discussions, revenue collection would remain with SARS. Once the customs border law function and revenue collections had been defined and clarified, then the BMA could be implemented.

He said Cabinet had approved that the bill come to Parliament, but had said the Home Affairs Minister had to talk to the Minister of Finance to ensure there were no unintended consequences as far as the tax part of the bill was concerned.

The Chairperson said the engagements with Treasury appeared to be a game of hide and seek, and the matter was dragging along. Up till that day there had been no clear formulation. Both parties were clear on their issues -- the DHA on ports of entry and SARS on customs and revenue collection. He said a formulation should be agreed upon within the following three days, otherwise it had to be assumed that the two parties could not agree and the Committee would take the responsibility to make a formulation and move forward.

Ms Hlophe agreed that something was lacking, and asked what was troubling Treasury.

Regarding the phrase where a matter had to be finalised 'without undue delay', the Chairperson asked whether there was a consensus on the meaning of the phrase. He asked what the view of the State Law Advisor was on the redrafted clause 18. He said the inter-ministerial committee should not be a bulky committee, otherwise it became difficult even to schedule meetings

On the reformulation of clause 18, a DHA official said a date had already been set for a meeting with the State Law Advisor to thrash out the suggested amendment. Regarding the phrase 'undue delay', there had been detailed discussions and the question had been raised on whether to put in a timeframe, but an agreement had been reached that an assessment would be carried out once a suspension had been made. It had thought of a timeframe of two months, but the DHA were open to further discussion regarding what a reasonable period was.

Regarding undue delay, Mr Apleni said the Public Services Act talked about a disciplinary action having to take place in 60 days, but it was very difficult to achieve. There were lots of delays in a case, so there should not be a specified number, but there should also not be undue delay in investigating a case. The investigations had to be finalised within 60 days, because the DHA had control over the investigation

He said the inter-ministerial committee would be comprised of those departments whose primary functions would be affected. These were the DHA, SARS, Agriculture, Health, Police and Defence.

The Chairperson said the two departments had more expertise on the establishment of the BMA than the Committee. Their consultations had to be finalised and their roles should be completed within the next three days, otherwise there would be a need to call the Ministers to say the departments were not taking their responsibilities seriously. The alternative was that the Committee, who were not experts, would take the responsibility and make a decision. He asked what the Davis Tax Commission report said, and what the position of the Treasury was concerning the report.

Mr Ismail Momoniat, Deputy Director General: Tax Policy and Financial Sector Regulation, National Treasury, said he was sure that Judge Davis would be happy to present himself before the Committee. He spoke to the Davis report, which said the key issue was that Treasury was concerned about the revenue collection function. It had said revenue and tax administration went together, because there was a danger of fragmentation if there were separate entities, and hence a consequent loss of income through seepage. It had said that the functions and powers of SARS and the BMA should be kept separate and that the BMA should not be assigned any of the functions and powers of SARS with regard to revenue, taxes, excise collection and on the control of goods associated with such functions. The total customs, import, ad valorem taxes and VAT income for 2013/14 had been R176 billion, which was 19% of the total revenue collected, and it was the view of judge Davis that to attach uncertainty to such a significant figure was a risk in the current economic climate.

Mr Momoniat said tax policy tended to be a complex issue. A key issue was how to separate the clearing of the goods process from revenue collection. This was where the Treasury and the DHA were applying their mind,s because if the value chain was broken there would be seepage. Mr Momoniat said the Treasury agreed with Judge Davis's views, and that these concerns needed to be addressed.

He said the consultations between Treasury and the DHA were 80% complete, and Treasury needed certainty in legislation because creating uncertainty regarding SARS was extremely risky.

The Chairperson said that uncertainty had to be isolated and provided for properly in the bill. The BMA process had started in 2009, yet it was still incomplete. There were problems at the borders which were impacting on South Africa's socio-economic situation.

Mr Gumede said he thought that a risk analysis would have been done by the audit committee and the Auditor General to see where the problems lay. An independent risk assessment analysis was needed, and it should include the organisational structure.

Ms Hlophe said that to ask the departments to conclude within three days was a problem, as they needed time to complete their work. She asked the DG what the status of bilateral agreements with a neighbouring country were.

Mr Apleni emphasised that it was Cabinet, and not the DHA, that had taken the decision that customs should move to the BMA. In 2009, Cabinet had said that the BMA would be responsible for customs at the borders, but the Davis Tax Commission report was saying that customs had to be separate from the BMA. The DHA was currently engaging with the Treasury on separating the issues. If this could not be sorted out within the three days given, then Parliament had to take the decision. The DHA was following what had been sanctioned by the Cabinet.

Regarding bilateral trade agreements, he said the BMA was an implementing agency. It did not sign trade bilaterals.

He quoted the Davis report, saying that SARS had been established as a policy decision. Similarly, the establishment of the BMA and the delegation of powers to it was not in conflict with the constitution.
The report said the location of revenue collection could be changed, so key revenue powers could be devolved to the BMA. Mr Apleni said it could not be that only one department could collect tax.
If this had been a decision of Cabinet, then there was a need to implement it, and he believed that three days were enough to complete discussions with the Treasury.

The Chairperson said he wanted a situation where the Committee could begin going through the Bill clause by clause on the return of Parliament from the recess.

Mr Momoniat said that in making the decision to place customs into the ambit of the BMA, Cabinet had had concerns, and had asked Treasury and the DHA to look at unintended consequences, as there were huge risks attached to such a move. He would welcome the Members’ request for a risk analysis to be done, as Treasury needed to be satisfied about the risk because there was a lot of complexity, and the value chain had to remain unbroken. He would be happy to make a presentation to the Committee in this regard.

He said Treasury was striving to meet Cabinet’s concerns, but uncertainty in terms of tax collection had a cost (risk). Things needed to be spelt out clearly and in detail, so as not to bring in new risk. Security regarding the movement of people was different from the security of moving goods across borders. He said Treasury would need at least a week to discuss with the DHA, because it was dealing with difficult issues.

The Chairperson asked that objectivity and rationality be brought into the discussions.
 
The meeting was adjourned