The focus of meeting was on government bodies that could have a part to play in the Debt Relief Bill and ensure its success. Presentations were made by the Unemployment Insurance Fund, Department of Justice and Constitutional Development, South African Reserve Bank and the South African Revenue Service.
The Unemployment Insurance Fund Commissioner stated that the UIF could allow the DTI to verify employment and income of employees on the UIF database. The Commissioner cautioned that the database was based on information submitted by employers. The UIF and DTI would have to enter into a cooperation agreement to regulate the processes and ensure that the necessary confidentiality would be maintained. Adherence to the Protection of Personal Information (POPI) Act was important to the UIF.
Committee Members were pleased with the good news although they were aware that the UIF dealt only with those in the formal economy. Confidentiality was strongly supported by the Chairperson. The Commissioner was not aware of any countries using a UIF process for debt relief, but the Committee felt that it might be possible for South Africa to lead the way in using the UIF for debt relief.
The South African Reserve Bank appreciated the Committee’s efforts to assist with debt relief but felt compelled to remind it about the need to maintain the stability of the economy. The Reserve Bank requested permission to do a quantitative impact study. The impact of the Debt Relief Bill could only be assessed by the Reserve Bank once the criteria had been clearly defined. The Reserve Bank cautioned that less access to loans from the formal sector might drive vulnerable consumers to the informal sector, especially to loan sharks, which had to be prevented. SARB noted that the greatest access to unsecured credit was via credit cards.
The African Bank and how the Reserve Bank had bought its debtors’ book was raised but the Chairperson firmly ruled that matter as irrelevant to the topic. Members were concerned about interest rates being too high or too low at various times.
The Department of Justice and Constitutional Development noted its responses to the draft Debt Relief Bill. The current inadequate capacity at the National Credit Regulator to manage debt relief was a concern to the Department. The DDG indicated that the in duplum rule did not need to be included in the Bill as there was both common law and statutory law that dealt with the rule stating that that interest and collection fees could not exceed the sum of the outstanding amount of the debt. The Department recommended that the criteria “child headed households” be expanded, especially to include a situation where the parent was missing or mentally ill and asked whether older persons, women-headed households and persons with disabilities had been considered. In respect of realisable assets, the Department recommended that Committee referred to the Magistrate’s Court Act, which contained an extensive list of items that were protected from seizure by the sheriff. There was some concern about the retrospective date in the Bill for those in debt.
The Committee stated that the Bill was retrospective as there was a concern that people would rush out and get more credit, hoping to have it written off when the Act came into law.
The South African Revenue Service (SARS) explained that its mandate was to collect taxes and that it was critical to meet revenue targets. There was a distinction between private debts and taxes. Tax was not an option in law. Extending debt relief to taxes would be unfair. If unfairness was observed, other willing taxpayers might be reluctant to comply. Tax legislation allowed for debt relief and did consider the impact of enforcing taxpayer compliance and there was no need for any additional legislation to deal with tax debts. Tax legislation could not be superseded by secondary legislation. If the National Credit Act was extended to include tax debts, it would subvert and overwrite tax legislation and principles. Forgiveness on tax debt could lead to downgrade of the country if the tax system did not raise sufficient revenue and therefore the reduction of tax debts had to give effect to tax principles and should be contained only in tax legislation.
The Committee presented a united front against SARS, angrily accusing SARS of having no interest in alleviating the plight of the poor and indebted. One Member accused SARS of believing that it had trumping laws and suggesting that it was special and did not want to assist in the process to help the poorest of the poor. SARS was not a popular institution among both taxpayers and the poor. People saw that money was being collected and being wasted. It was incumbent upon SARS to send a strong message to the Executive that they could not spend money that as they wished because the money was held in trust for the taxpayers.
The Committee also dealt with the draft Budgetary Review, Recommendation and Recommendations following the Annual Reports and audits of the Department of Trade and Industry and the entities for which it was responsible.
The Chairperson thanked the Department of Labour and South African Reserve Bank (SARB) for being prepared to make submissions. She welcomed the Department of Trade and Industry (DTI), the National Credit Regulator and the National Consumer Tribunal.
Unemployment Insurance Fund (UIF) response
Mr Teboho Maruping, UIF Commissioner of the Unemployment Insurance Fund (UIF), Department of Labour, apologised for the absence of the Director General who was with a SADC group in the Eastern Cape. On using the UIF database for verification of employment and income to process the applications for debt relief, the UIF Commissioner stated that the UIF was obliged by law to cooperate with other state institutions and to link them to the database. The UIF would, therefore, be able to allow the DTI to verify employment and the income of employees on the UIF database but DTI had to note that the database was based on the information submitted by employers. The UIF and DTI would have to enter into a cooperation agreement to regulate the verifying the employment and income of debt relief applicants and ensure that the necessary confidentiality would be maintained. He expressed a willingness on the part of the UIF to be part of the process of debt relief for the poor.
Mr A Williams (ANC) stated that it was good news for the debt relief process that one could use the UIF database to facilitate the Debt Relief Bill.
Ms S van Schalkwyk (ANC) appreciated the information but asked about updating the information. Could UIF give information immediately if a person had applied for unemployment benefits? Could UIF give a twelve-monthly update?
Mr Macpherson (DA) said that UIF dealt only with those in the formal economy. He was concerned about those employed in the informal sector and might be earning, but the UIF would not know. He suggested that UIF could not say whether or not people were employed, but could inform the Debt Relief process whether they were or were not on the UIF database. That was different from whether they were employed or not.
The Chairperson asked at what level of income people were expected to pay UIF and who could receive benefits. She asked who would benefit if a person paying UIF passed away. Could children benefit from the UIF? Could the Commissioner give some comparative information about other countries that might use UIF or the equivalent to assist debt relief.
Mr Maruping replied that completeness of data was dependent on the employers but not everyone was on the database even though they worked hard at getting all employers to register their employees on the UIF database. He agreed with Mr Macpherson that the UIF database would not contain information about everyone that was employed or not employed. He told Ms van Schalkwyk that the UIF could give the information she required as the Commission was updated and it would share updates. To be eligible was not about income level, but if one worked for 24 hours or more a month, one had to pay UIF. The UIF legislation did not cater for debt relief as it was about getting people into employment or getting into employment as soon as possible, but he could look into it. He had not looked at other countries when preparing for the presentation, but he could also look into that matter. Issues such as use of language would be addressed in the memorandum of agreement between UIF and DTI.
Ms Judith Kumbi, Chief Director at UIF, explained that the first priority following a death was the spouse, and where there was no spouse, the second priority was the life partner and then any children up to the age of 25 were covered, as long as there was proof that the child had been dependent on the contributor.
Adv Mazwiogwani Phatela, Director: Legal Services, spoke about the Protection of Personal Information (POPI) Act and the fact that information on the database had to be used for an intended purpose only and could not be shared with a third party. The UIF had had experiences where information had been used for purposes not intended by the UIF. The Act allowed for UIF to share with other departments in Government.
The Chairperson agreed that the privacy of information and data was something that the Committee strongly supported. She reminded the Commission of her question of whether the UIF could be deployed for debt relief. Was there anything in labour law that prevented that?
Mr Williams asked if there was anything in the law that would prevent them from using UIF as a conduit method to facilitate debt relief as some of the people were UIF members. There might be a capacity issue but that was not the immediate concern.
Mr Macpherson said he had not seen Mr Williams’ proposal coming and he felt like he had been hit by a car.
Mr Williams interjected that he was asking question and not making a proposal.
Mr Macpherson felt that a question could lead to a proposal which could lead to something being included in the Debt Relief Bill. He asked if Mr Williams was proposing that debt relief measures were extended to people who were on UIF.
The Chairperson informed Mr Macpherson that she had originally asked that question, which Mr Williams had fleshed out. Her question had been to find out exactly what the labour legislation stated. She had asked for a comparative. Did other countries offer debt relief under a similar UIF scheme?
Ms P Mantashe (ANC) asked if updating the UIF database was proactive or whether the UIF waited for employers to update it.
The UIF Commissioner was not aware of any countries offering debt relief in any other countries. His team had attended many conferences around the world and had not seen a UIF process being used for debt relief, but there could be some countries doing it that they did not know of. Could UIF funds be used as debt relief funds? The Act did not allow that. Contributions were defined and beneficiaries were defined as well as the reasons for benefits being paid. All schemes were intended to get and keep people employed or allow them to return to work as soon as possible.
Ms Kumbi explained that the database was updated by employers but the Department was also proactive as there was a high degree of non-compliance. They had an agreement with payroll and other institutions and partners. Their people also went to employers and forced them to provide information where people were not complying. The information on the database was provided to UIF. Sometimes people moved and the employer did not register them for UIF. Other people said that that they were unemployed but they were actually employed. However, the UIF had systems whereby they could pick up a lot of this.
The Chairperson noted that not every worker or member of staff had been registered and those people only found out when they left their employment. There was little that could be done for an employee at that point and so employees were encouraged to check with their human resources department that UIF payments were being made. She expected the Department of Labour (DoL) had its hands full collecting UIF. She once had an experience where the worker had been paying but the money had not been given to the UIF and, although the employer was fined, the employee’s problem could not be resolved and that was very difficult for people at that level. She noted that the Commissioner was not aware of any country offering debt relief, but it would not be the first time that South Africa had carved a pathway to the stars.
The Chairperson noted that the institutions apearing today were those who had been identified as having a part to play in the Debt Relief Bill. If anyone knew of any other institutions, she would appreciate the Committee secretary being informed.
South African Reserve Bank (SARB) response
Dr Janet Terblanche, SARB Head of Policy, apologised for the absence of the Deputy Governor, Mr Kuben Naidoo, and her Head of Department but they had approved the presentation. SARB appreciated the Committee’s efforts to assist with debt relief and requested the permission of the Portfolio Committee to do a quantitative impact study as the impact of the Debt Relief Bill could only be assessed by SARB once the options had been clearly defined. SARB was of the opinion that the role of debt counselling also needed to be considered.
Dr Terblanche stated that SARB had insufficient evidence to support the prescribed aspects of the Bill but the once-off debt relief was supported. The Bank felt that there were requirements in law in respect of reckless lending and suggested that the National Credit Regulator (NCR) needed to be supported more strongly and that legislation should be enforced, especially against loan sharks. SARB had to remind the Committee of the need to maintain the stability of the economy.
The Basel ll impact (i.e. the rules determined by the Basel Committee on Banking Supervision) suggested that if debt were suspended, it was likely to result in increased provision for bad debt. There would be increased capital requirements. The loss given default ratios were likely to increase and create a negative impact on profits and therefore there would be a knock-on effect on capital supply. Less money would come in so less money would be available for capital. There would be a loss of profit as owners would not go into those lines of production because of the potential loss.
Unintended consequences would very likely be increased interest rates due to perceived risk, a decrease in access to credit and a negative impact on the bank-consumer relationship. SARB wanted vulnerable people to be supported but debt relief might not be the best way to do it. Credit policies of banks might be redirected to less risk but there would always be a loss. Less access from the formal sector might drive vulnerable consumers to the informal sector which were generally outside of the regulatory support system. Dr Terblanche provided statistics and the greatest access to unsecured credit was via credit cards.
The Chairperson noted that the Committee had already decided not to include certain items in the Bill and so she did not want discussion on those matters.
Mr Macpherson found it ironic that SARB talked about reckless lending when SARB owned the debtors’ book of African Bank of R7 billion and was still collecting fees from persons who had been given credit recklessly. It was a disgrace that this had not been resolved. If they were going to talk about a Debt Relief Bill, they needed to deal with the billions that poor, mostly unemployed South Africans were paying to SARB. He could not understand why there had been a delay in dealing with the matter between SARB and the NCR. He could not understand why SARB would not suspend those debt payments, at least until such time, as negotiations had been completed, which should have been completed by now. Debt relief could not just be about the private sector. It had also to be about government and SARB. He understood that billions of rand from African Bank had been recklessly lent. So why was SARB still collecting those debts? When was the issue to be finalised with NCR? Did SARB not believe that it had a role to play in debt relief?
The Chairperson stated that she had told the Committee three times that the Committee was not dealing with reckless lending. The matter of reckless lending and SARB could be put on the agenda by Mr Macpherson for future engagements. The Committee had had two previous sessions with those involved in reckless lending. The Bill currently on the table was the Committee Bill on Debt Relief. She said that Mr Macpherson’s question was not applicable.
Mr Macpherson asked if she was ruling his question out of order.
After a tense exchange, the Chairperson agreed that she was ruling his question out of order and he enquired on what grounds she was doing so.
Her answer was that it was on the grounds of relevance.
Mr Macpherson was unhappy with the situation.
Ms C Theko (ANC) asked SARB about the dangers identified by the financial sector in the Debt Relief Bill. How could SARB ensure that interest rates were not increased? Perhaps interest rate hikes could be suspended for two to three years?
Mr Williams asked how the interest might go up if there was debt relief. He thought that it was a veiled threat. It was almost as if SARB was saying that if the Committee introduced debt relief, SARB would increase the cost of credit automatically. He had a problem with that because if interest rates had been put up years ago, South Africa would never have had an overindebted society. The reason South Africa had an over-indebted society was because the banks offered so much credit to the people. The banks were the ones responsible and therefore should be the ones paying for the debt relief measure.
Mr G Cachalia (DA) asked about the African Bank loans as he thought that the question was utterly relevant. The African Bank loans were unsecured and in such quantum that Mr Macpherson’s particular point was relevant. He recommended that the Chairperson revisited her reading of the relevance of the question.
The Chairperson asked if credit cards were the highest form of unsecured lending and, if so, was there a minimum income level at which a credit card was issued?
Dr Janet Terblanche, SARB, responded to the African Bank question stating that she did not work with the African Bank issues. She requested that the persons who dealt with the African Bank and the NCR on a daily basis be invited to answer the questions before the Committee.
The Chairperson informed Dr Terblanche that that was exactly why she had ruled the question out of order. People were invited to present on a specific issue and it was grossly unfair to ask questions out of that context.
Dr Terblanche continued, stating that SARB had requested permission to undertake a stability impact study so that it could estimate the impact on the economy. On interest rates, it was not about SARB interest rates but about how much extra the bank would increase interest as they adjusted interest rates according to risk. She noted that people did not get the Reserve Bank rates for their personal bank accounts. The data showed that credit cards were definitely the biggest unsecured loans on the books of the banks. Credit cards would probably be skewed towards upper income. At a lower income level, the banks might issue debit cards.
The Chairperson noted that banks were issuing students with credit cards which was why she had asked about income level. SARB would have to look into this. It may be the students’ loan allowance that had been taken into consideration. When there was time, the Committee would request SARB to return to talk about African Bank. It could not be ignored.
Department of Justice and Constitutional Development (DOJCD) briefing
Ms Kallay Pillay, DOJCD DDG: Legislative Development, spoke about the DOJCD’s views on the application process for requesting debt relief, in particular the adjudication process; application of the in duplum rule; and general concerns pertinent to the draft framework Bill.
A definition of “once-off relief” was required for clarity and certainty. The capacity of NCR had to be addressed. A single person could preside over the credit relief application without the applicant or the debt provider being present. The in duplum rule had been only a common law rule but had become statutory rule when it had become part of the National Credit Act. She asked if the Committee was considering the in duplum rule in terms of common law or statutory law. The common law rule stated that interest could start to run again once the consumer had made a payment and the arrear interest had been reduced. Under the statutory rule, interest and other costs only started to run once the consumer was no longer in any default.
She suggested that clarity was required on whether a consumer could apply once only or once per debt. The criteria “child headed households” could be expanded, especially to include a situation where the parent was missing or mentally ill. She queried the arrangement for older persons, women-headed households and persons with disabilities. The question of realisable assets could be addressed by looking at the Magistrate’s Court Act, which contained a much longer list of items that were protected from seizure by the sheriff. DOJCD considered the date and consequences as a concern as it was retrospective and might have unintended consequences. If consideration were given to the Magistrate’s Court Act and provisions were replicated, it would ensure consistency in law.
She advised the Committee that law had been written subsequent to the Stellenbosch case and that might be considered. On Section 88 (B), which empowered the Minister to grant debt relief, DOJCD was concerned about the lack of processes to be followed after the comments stage. Regulations sometimes went to Parliament for approval, which would be a good idea for the Debt Relief Bill as it would allow the Committee an opportunity to consider the regulation measures.
The Chairperson thanked Ms Pillay for a comprehensive presentation.
Mr Williams explained that the Bill was retrospective as the Committee was concerned that people would rush out and get more credit so that when the Act came into law, people would be chasing debt hoping to write it off. How could they deal with that without being retrospective? If the cut-off date were after the Bill became law, people would be aware of it and chase debt.
Ms Theko noted that DOJCD had posed questions, so she suggested DTI be requested to respond to the questions.
The Chairperson agreed and asked Adv van der Merwe to respond to the question of the in duplum rule.
Adv Charmaine van der Merwe, Parliamentary Legal Advisor, agreed with the DOJCD, saying that she had suggested removing the in duplum rule as the concept of in duplum was contained in law. For any debt before 2014, the common law in duplum would apply. Retrospective legislation had to be fair. The Bill could only speak to the problem going forward; it could not apply the current statutory in duplum to debts before 2014. The National Credit Regulator had stated that attorney’s fees were not seen as Section 101 costs but the Regulator was seeking a Declaratory Order declaring that attorneys’ fees should be considered part of the debt collection.
Ms Pillay explained that retrospective effect was not permitted in law, unless there was a way of explaining it, which it seemed there might well be. It was being flagged as a matter of law. She did not know about the attorneys’ fees matter but the DOJCD would be prepared to assist in dealing with that as the Rules Board for Courts of Law, which set fees for attorneys, fell within the scope of DOJCD.
The Chairperson said that the list of realisable assets in the DOJCD document was particularly useful and addressed the challenge that the Committee had faced in considering what could be classified as realisable assets. She noted that the retrospectivity was to prevent abuse. The point about considering the expansion of the term “child headed households” was important and the Committee needed to consider it. The Committee had to read the DOJCD documents and discuss with party caucuses so that the Committee could debate the Bill fully. She asked about a single Tribunal member presiding over cases.
Adv van der Merwe noted that Committee had been concerned if a single person presiding would be sufficiently skilled and whether there could be a lack of fairness, but she was aware that the Committee was trying to ensure a speedy process. She believed that there would be a great concern about bias if a single person adjudicated in the investigatory system. However, the accusatory system utilised in South African courts was different and there should not be a problem having a single person adjudicate.
South African Revenue Service (SARS) response
Ms Refilwe Mokoena, SARS Legal Advisor, gave the position of SARS on two issues: whether taxes should be included in debt relief, and what tax consequences followed debt relief. She explained that the mandate of SARS was to collect taxes and that it was critical to meet revenue targets. There was a distinction between private debt and taxes. Tax was not an option in law and tax was a social contract between residents and government.
Extending debt relief to taxes would be unfair. If unfairness was observed, other willing taxpayers might be reluctant to comply and pay tax. Tax legislation already provided debt relief for those who were distressed. SARS could write tax off if it was impossible for a taxpayer to pay. Tax legislation allowed for debt relief and did consider the impact of enforcing taxpayer compliance. There was no need for additional legislation to deal with tax debt. Debt relief was akin to a voluntary disclosure and there was a comprehensive regulatory framework to authorise instalments, compromise and write-off taxes. There were SARS Committees in existence to manage the process. The SARS Commissioner was obliged to report on tax relief to the Auditor General and to the Minister. Tax legislation could not be superseded by secondary legislation. If the National Credit Act was extended to include tax debt, it would subvert and overwrite tax legislation and principles that already accommodated tax relief to distressed debtors. Forgiveness on tax debt could lead to the downgrade of the country if the tax system did not raise sufficient revenue. Therefore the reduction of tax debt had to give effect to tax principles and should be contained only in tax legislation.
Mr Macpherson noted that SARS said it provided debt relief but he was not sure if it did exactly what the Bill intended to do. He did not believe that the word “may” was in keeping with the Bill. Debt forgiveness was at SARS discretion. He asked how SARS would treat someone who owed R50 000 but had no job and no income and was unable to pay the debt. He was not sure that the person would receive the same debt relief that was being considered in the Bill. He asked why someone could apply for credit debt relief and not for tax relief.
Adv A Alberts (FF+) noted that money collected through taxes did not belong to SARS or government but was held in trust for people in the country. People were suffering, but SARS was "special" and could intimidate people and give the tax money to politicians who wasted the money. He wanted to know why SARS was so special and so reluctant to share the burden of relieving poverty. SARS had enormous powers but would not share the burden.
Mr Williams asked how much debt SARS had written off to date. He asked the difference between SARS writing off debt and the Debt Relief Bill writing off debt under particular conditions. Obviously, the intention was not to write off everyone’s debt but the debt owed by the poorest of the poor who could not afford to repay. A person might have had a job the previous year and owed tax from that time, but had not had a job in the current year, although there was possibility of work in the future. If that person fulfilled the criteria for debt relief, why should he not get it? Why did SARS think that they could choose to write off debt but the debt relief Bill could not do that for SARS?
Ms Mantashe asked what made SARS so special that they collected public monies but they could not assist South Africans from the mire of indebtedness. Why could SARS not be part of the solution for the people of the country? She noted the very high interest rates that SARS charged on debt. What were they doing with that money?
The Chairperson gave an example of a retailer who was obliged to write off for example, R2 million. If a retailer wrote off R2 million, how would SARS respond to that taxpayer? Could the retailer ask for a tax reassessment? Would there be any concessions?
Ms Mokoena replied that basically there was one answer to all the questions asked. She told Mr Macpherson and Adv Alberts that SARS did not have an attitude of not caring about citizens. SARS had a mandate for collecting taxes. Tax regulations regulated the collection of taxes. If taxes were not paid, they became tax debts. The legislation was very specific. If a taxpayer found it difficult to pay the debt, the taxpayer could approach SARS. If the taxpayer was unable to pay, there could be debt relief or a tax debt write-off. Secondary legislation had no purpose when there was primary legislation that dealt with tax debt. That could not happen. She had referred the Committee to the provisions of the tax legislation. She placed it on record that SARS was not special but SARS had a constitutional mandate. She did not have on her the amount of taxes written off, but it would be in the SARS Annual Report.
Mr Williams objected, saying it was disrespectful that the Committee should have to look up the information. SARS should send the figure to the Committee and state if the debt had been written off or put on hold.
The Chairperson instructed Ms Mokoena to supply any information that she did not have, in writing.
Ms Mokoena replied that she had not referred Mr Williams to the Annual Report but had explained that it would be in the Annual Report. She had not been aware that the information was required immediately.
Ms Mokoena responded to the Chairperson’s question explaining that if a company or retailer had written off debts, that retailer would have access to bad debt tax relief. There was a bad debt deduction and therefore a tax benefit.
Mr Cachalia said he was astounded. Ms Mokoena had stated that SARS was not special but then had said that SARS had primary legislation and therefore could not be subject to secondary legislation. SARS could not have its cake and eat it. What was she saying question?
Ms Mokoena responded to Ms Mantashe stating that SARS had to treat taxpayers in a fair and equitable manner. It could not allow some taxpayers to get debt relief except via the SARS primary legislation which made provision for debt review and debt write-off. SARS had stringent tax targets and, if it did not meet those targets, the country could be downgraded. People would not want to pay their taxes if others were permitted not to pay. SARS could not lose its moral stand that everyone had to pay tax. SARS did not say that it did not care for the citizens. It made provision for the poor. She told Mr Cachalia that SARS was not special. SARS proposed debt relief on tax that was not even in the Debt Relief Bill.
Mr Macpherson was not sure why Ms Mokoena had come to the meeting to fight with the Committee. She had referred to primary and secondary legislation and had stated that no legislation could supersede the tax laws. He pointed out that legislation such as the BBBEE legislation cut across all legislation. He still did not know how debt was written off by SARS. If someone were a no-income, no-asset (NINA) person with a R50 000 debt, how did SARS treat that person? What was the cumulative write-off of taxes in the past financial year, how much was written off on average, and who were the people who had had debt written off? SARS would harass a person for R5. He thought that SARS did think that it was special. SARS was not just about meeting targets. If it were, bonuses would not be paid to SARS employees. How was the meeting of targets dealt with?
Mr Williams said that it was important to realise that the Debt Relief Bill was not really aimed at people who had income or assets - so the Committee was trying to service the poorest of the poor in South Africa. He was concerned about whether the SARS provisions for write-off were for the poorest of the poor. He asked if write-off meant to extinguish the debt. When the Bill was published, and if it included tax write-offs, would SARS refuse to write off the debts in terms of the Debt Relief Bill? He thought that that attitude should change it immediately.
Ms Mantashe was worried as Ms Mokoena was referring to SARS as a very special entity that was not worried about the plight of the poor in South Africa. She asked for permission to put her question in a different way. Was SARS able to open a window to be part of a solution? The Committee was not saying that SARS should not collect taxes but it was trying to collaborate with every entity to be able to assist the indebted. Ms Mokoena and her entity took money from South Africans so they had to be part of the solution.
Adv Alberts said that the fact that SARS believed that it had trumping laws meant that it was suggesting that it was special. SARS did not want to assist in the process to help the poorest of the poor. SARS was not a popular institution among both taxpayers and the poor. People saw that money was collected and being wasted. It was incumbent upon SARS to send a strong message to the Executive that they could not spend money as they wished because the money was held in trust for the taxpayers. The Executive should spend less money. They could not wring money out of people who had no money, i.e. the middle class and the poor. The middle-class no longer had enough money to even pay taxes as they were getting poorer. If everyone had full employment, everyone would willingly pay taxes. He added firmly that many provisions in the tax laws were unconstitutional and were used to infringe on people’s rights. The Committee would write law that trumped tax laws. SARS could take it to court and the Constitutional Court could make the decision.
Mr Cachalia pointed out that the Committee was trying to address the matter of the poorest of the poor in a holistic manner and the Committee wanted to avoid any loopholes and anyone getting preferential treatment. It should be clear that everyone had to comply with the law that the Committee was drafting.
The Chairperson explained that the Committee Bill was intended to deal with people earning under R7 500 per month. The Committee had had requests to include teachers and policemen but they earned more than R7 500 so they had not been included. Could SARS respond to the intention to provide relief to the poorest of the poor? The Committee Bill would be an Act and therefore primary legislation. Could Ms Mokoena respond on who was being prioritised for SARS tax relief? What was the debt level at which SARS provided relief and was there a cap? She understood Ms Mokoena’s position and that she believed the tax law covered a lot of what the Committee was trying to do with the Debt Relief Bill. However perhaps she could share with the Committee exactly how the system worked at SARS. Who or what was being prioritised?
Ms Mokoena apologised to Mr Macpherson if she had come across as if she were fighting. If a person had no income, SARS would not be pursuing the person. If taxpayers were being harassed when they did not have an income, she would return to the tax office and ensure that such a process was stopped. Ms Mokoena told Mr Williams that she would provide clarity on all debts that had been written off permanently and those temporarily deferred. She assured Ms Mantashe that as a government entity, SARS was always willing to assist where needed. She thought that perhaps she should backtrack the statement that SARS was dealing with debtors adequately and rather propose that SARS could be part of the process to see that there was alignment between SARS legislation and the Committee Debt Bill. SARS did not see itself as special. It was the duty of SARS to ensure that the poorest of the poor were assisted. She welcomed the Debt Relief Bill. Even as a SARS employee, she was a citizen of South Africa and she could not ignore what was going on around her. She just did not want other taxpayers to be impacted because this could cause low tax morale and the ability of SARS to meet its tax targets might be compromised. She was on record as saying that she would ensure that taxation legislation would be aligned with the Debt Relief Bill.
The Chairperson agreed about the moral hazard and stated that all entities faced moral hazards but the entities would have to work together. She asked about the tax implications on a R50 000 debt.
Ms Mokoena did not have the answers to hand.
The Chairperson noted that SARS could respond in writing and that she was welcome to add anything that she might have overlooked.
Trade and Industry Budgetary Review, Recommendation and Recommendations (BRRR)
The Chairperson said that the Committee would look at the first draft of the BRRR. The verification of figures was ongoing. She asked the Committee Members for input into the BRRR report on the Annual Reports of 2016/17. She would highlight key issues that would need to be included in the conclusion and in the recommendations.
Department of Trade and Industry (DTI)
A key concern of DTI was the failure of state-owned entities to support local producers. The Report would make special reference to Transnet. She noted that the Minister had raised the issue with State-owned Enterprises many times so the Committee’s question was what could be done about it. He had also raised the concern that some tenders had been granted in the name of Black Empowerment but that those companies had imported the components instead of buying them locally. It all related to the localisation enquiry that the Committee would be holding before the end of the year. The Committee had discussed who could do the monitoring of localisation and had been informed that the Department of Planning, Monitoring and Evaluation could assist as it would be looking at localisation. It had been pointed out that South Africa had only signed the WTO rules for procurement for the private sector and not for the government sector. Localisation had to apply to the R70 billion contract for the Moloto Corridor and the Umzimvubu Dam Project. The Minister had said that localisation did not imply that it should be a South African company and that many international companies working with government could also be involved in localisation. However, the Moloto Corridor and the Umzimvubu Dam projects fell under the Presidential Infrastructure Coordinating Commission (PICC).
BBBEE compliance around major transactions of above R25million had to be registered with the Commission and applied retrospectively. A penalty was that entities could be excluded from doing business with government for up to ten years.
The Chairperson noted that the Mining Charter had not been developed by Trade and Industry and BBBEE legislation. The Minister for Trade and Industry had simply been asked for technical input.
The Chairperson asked if the Committee could agree to the virement of R1.4 million for the DTI Consumer and Corporate Regulation Division as it had spent its budget, notwithstanding that the division had not met all targets. The funds had been used for legal fees and to augment legislation and implementation. National Treasury approval was necessary for a virement. Members agreed to the virement.
The salary overpayment issue was that all government employees were paid on 15th of the month and any money owed to DTI if a person resigned after the 15th of a month would be recouped from the pension fund. It was a bigger issue than just the particular payment raised in the Annual Report and should be flagged with National Treasury.
The issue of the poor quality of legislation presented to the Committee by the Department was of concern. The Committee did not budget for the legal advice required if legislation was badly constructed. In addition, it had taken the Copyright Bill an additional year in preparation because of the poor-quality work at DTI. DTI would also be delaying the gambling and liquor legislation, which should have been dealt with some years back. The position of the Gambling Regulator could not be filled until the legislation had been completed. That was a serious matter.
Vacancies in the DTI was a concern to the Committee.
Entities under DTI
The Chairperson noted that there was the matter of the regression of the entities which had been asked to prepare an audit action plan. The National Consumer Commission (NCC) was the most concerning of the entities.
Assurance and key control measures had to be addressed at the South African Bureau of Standards (SABS). The issue of the Auditor General’s opinion that a misstatement was responsible for the qualified audit had conflicted with the opinion of SABS that the incorrect entry in the Commercial branch of SABS had caused the audit result. Nontombi Matomela, Acting General Chief Operating Officer at DTI, had engaged with Auditor General and informed the Committee that SABS had been correct. It was also noted that SABS had infrastructural challenges, especially with regards to the laboratories. The Committee had concerns about key control measures, the high number of disciplinary processes and the number of vacancies.
The National Regulator for Compulsory Specifications (NRCS) and SABS had been instructed to meet, and NCC had offered to mediate. DTI would have to confirm whether the entities had met. The key issues with NRCS were quality assurance and key control measures and the status of the Ford Kuga investigations. NRCS had concluded that the specifications did not relate to what had caused the fires in the Kuga vehicles. The status on vehicle system technology was awaited. The Interim requirements for tolling and the 12-month check on the e-tolling system did not seem to be happening. The Committee needed to follow-up and therefore should not report that it was happening. The NRCS had stated that it had implemented a risk-based approach but the entity had recently advertised for a Development Officer for their IT system so the system could not be up and running. The Chairperson suggested that the manual implementation was working but not the IT system. Mr Macpherson stated that that meant that NRCS had abandoned the target of getting the ICT system up and running by December. The Chairperson noted that that point had to be flagged for the conclusion.
Concerns raised about the National Credit Regulator were the poor auditing performance and issues related to methodology and the accounting system. The Auditor General had said that the issues also had to do with leadership issues. The Chairperson reminded Ms Matomela that the Committee needed a generic presentation on GRAP and GAAP and the other accounting systems used by the entities so that they could have a better understanding of issues. The Committee also noted that the issue with the NCR premises was putting a strain on their budget. Labour relations were strained: one person had been charged with assault and another had been fired for having falsified qualifications.
Members were requested to contribute to the Conclusions of the BRRR. Members had to give input for the conclusion personally and from their caucuses. The Chairperson asked if from Members what needed to be included in the introduction. Ms Mantashe did not have an input as she had been absent but she wanted to appreciate the work done, although she would like the shaded grey areas on the document to be cleaned up and repetition to be eliminated. The Chairperson stated that qualified staff needed to look at the bullets as there were too many in the document. The programme indicated that the Report should have been ready on 18 October 2017 but the ANC, DA and FF+ had caucuses on Wednesday and she wanted to hear from them the following day about positions taken by their caucuses. If she could not finalise the Report on the following morning, the Committee would conclude the matter on Thursday evening. She requested Members to submit inputs for the introduction. Ms Theko agreed with the proposals made by the Chairperson.
The Chairperson stated that items for the introduction had to be in before 06:30 the following morning. She thanked the Committee staff for the work done on the BRRR.
In discussing the Committee Programme, it was noted that Members had requested that the Committee work late on Friday but Adv van der Merwe was unavailable that day. The Trade and Industry BRRR would be discussed on Wednesday and not the Debt Relief Bill. On Thursday, the Committee would finalise the BRRR and not deal with Debt Relief. Permission had been given to hand in the Committee BBBR on Thursday instead of Wednesday. Mr Macpherson could not attend on Thursday night. He was told that a DA representative would need to be present.
The Committee adopted the minutes of 3 and 4 August 2017
Meeting was adjourned.
- Trade and Industry BRRR
- Copyright Amendment Bill
- South African Reserve Bank response to Debt Relief Bill
- Department of Justice and Constitutional Development briefing
- Unemployment Insurance Fund: Verification of Employment and Income using UIF database
- SARS Debt Relief Bill and taxation issues
- Department of Justice and Constitutional Development response to Debt Relief Bill
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