National Treasury & SARS Budget: Committee Report

Meeting report

Committee Report on Strategic and Annual Performance Plans of National Treasury and SARS
Co-Chairperson Maswanganyi welcomed everyone to the consideration of Committee Report on the Strategic and Annual Performance Plans of National Treasury and South African Revenue Services. The two Committees will give consideration to the report jointly but vote separately. He took the joint meeting through the report and noted that Members had been given the opportunity to peruse it as the draft was sent to them prior to the meeting.

Members highlighted minor typographical errors which needed correction.

Observations and Recommendations 

Paragraph 7.4
Dr D George (DA) welcomed the loan scheme forming part of the government relief interventions to businesses.  He sought assurance from Treasury that race criteria will not be imposed on the loan scheme. Minister Mboweni himself had expressed views during a previous meeting that support should not be afforded along racial lines. He proposed the addition of a sentence to reflect that the ‘support criteria should not be on the basis of race’. 

Co-Chair Maswanganyi sought clarity whether the paragraph as it stood suggested that support from government would be race-based.

Dr George said he believed relief support was being offered along racial lines. If this was not the case, then he would be happy about that. But if it is so, then it should be corrected. There has to be inclusion of a clear statement pronouncing the Committee position on this.

Mr Dondo Mogajane, Director-General, National Treasury, commented that at no point had Treasury said race criteria would be linked to the scheme. There is a difference between recognising vulnerable and previously disadvantaged groups, and having race as a criteria. Having race a criteria was not the intention as it would be discriminatory and therefore unconstitutional. Banks disbursing government-guaranteed loans do not have race as a criteria. However, the bottom-line is vulnerable and previously disadvantaged groups should be the first in line.

Mr K Morolong (ANC) believed issues ventilated by Members during Committee discussions were well-captured in the paragraph.

Mr D Ryder (DA, Gauteng) pointed out that the Minister of Tourism was on record saying race would be a criteria for determining eligibility for relief funds in the tourism sector. It was therefore absolutely necessary to have an explicit statement to say race will not be a criteria if it would not be the case. This was an important issue to have clarity on. Minister Mboweni himself had raised this during a previous meeting when he spoke about a Limpopo restaurant he was fond of. Indicating that race should not be a criteria should not be a problem as the Minister of Finance believed so too.

Mr F Shivambu (EFF) insisted racial preferences should be implemented. The courts had already given judgment on that (in the tourism fund case). What the DA and Afriforum were saying was that Broad-Based Black Economic Empowerment (B-BBBE) policy and redress laws should not apply to assist small businesses. This opportunism should be rejected. Minister Mboweni, out of excitement, during a previous meeting, had almost said he did not believe redress laws should be applicable. Even if this is what the Minister had said; his opinion was wrong and must be rejected with contempt. There should be no tiptoeing around those opposed to redress measures and empowerment efforts, and are insistent on keeping the apartheid status quo.

Mr W Aucamp, (DA, Northern Cape) said Minister Mboweni was clear in his view that he did not believe race should be a criteria for determining relief support eligibility. The Minister did not beat around the bush about this. Obviously, the DA shared Minister Mboweni’s sentiments in that regard. Race should not be a criteria as everyone was equally affected by the pandemic- livelihoods must be protected across the board. This race-based criteria will take food out of the mouths of people, particularly the majority. Race should not play any role here.

Mr S Du Toit (FF+, North-West) added Minister Mboweni had repeatedly expressed the same sentiments that race should not be a criteria. Even if the Committees elect to insert the acronym ‘B-BBEE’, it would have the same implication as it is a race-based law. Paragraph 7.4 should be amended accordingly.

Dr George reiterated that the crisis as a result of the COVID-19 pandemic is not going away anytime soon and excluding some people from support would only compound the crisis. A lot of people will lose livelihoods. The pandemic knows no race. This is not the past; it is the present.

Mr Shivambu said Minister Mboweni’ reactionary opinions should not find expression in the report. The Committee did not agree with the Minister as the comments being referred were made as part of his concluding remarks, hence Members could not respond at the time. There should be no confusion as to how paragraph 7.4 should read. History cannot be ignored as it defines the present and future.

Ms D Mahlangu (ANC, Mpumalanga) felt the discussions on paragraph 7.4 were misdirecting the Committee’s focus. Why should there be insistence on amending 7.4? B-BBEE is an existing policy and should not be politicised. It was unfortunate that some Members disagree with a policy seeking to address the imbalances of the past.

Co-Chairperson Carrim said although it was true that COVID-19 did not distinguish between races, it is not the place of the Committees to undo empowerment legislation by trying to prescribe additional conditions for relief scheme eligibility. He believed government would not act irrationally. Interventions will not be applied in a crude way but will presumably take into account the difficult circumstances. ‘Say, for example, there is an Afrikaner farmer in the Free State and 90% of his workers are black – the government will not say his workers must suffer because he is white.’ The debate must not be polarised. Laws passed by Parliament could not be undone by the joint committee. Existing B-BBEE laws are borne out of 26 years of discussion. The finance committees have no mandate to undo or suspend application of these laws due to COVID-19. Members would all agree that the pandemic knows no race or any other identifier, but equally so- it is disproportionately affecting the poor and will widen racial and class inequality going forward. Why were some Members lashing onto the Minister’s comments; which might have been his own opinion? This is an unnecessary discussion.

Mr Du Toit said there is no use window-dressing the wording in paragraph 7.4 in an ‘elegant way’ to push a racist policy that will not benefit all South Africans equally. FF+ cannot approve the approach implied by the paragraph.

Mr Aucamp maintained Minister Mboweni’s comments formed part of the Committee discussions and should be reflected in the report. The turnover threshold of R1 million, which is part of the eligibility criteria for the relief scheme, was equally problematic as it excludes businesses deemed to be large but are currently vulnerable and in need. This pandemic does not distinguish between races. 

Mr Ryder agreed with Mr Aucamp. He firmly believed the Minister’s comments with regards to race-based eligibility should find expression in the report. Not including the Minister’s comments is a deal breaker for the DA in as far as the report is concerned. It should not be too difficult to state clearly that race will not be a criteria to determine eligibility.

Co-Chair Maswanganyi said he had to be tolerant so that he is not seen to be making attempts to stifle the debate. There was no suggestion that white people will be excluded from accessing government relief.

Co-Chairperson Carrim agreed and reiterated the two Committees have no ability to suspend BEE or any other laws for that matter, except as provided for by the COVID-19 Regulations. The only issue could be that Members might have to consider inserting an additional statement to say redress laws must be applied in a way that takes into account the exceptional circumstances of COVID-19. He believed government will operate sensibly. If not, concerns should be brought to Parliament.  

Mr Shivambu said paragraph 7.4 should state clearly that in administering the R200 billion loan guarantee, government must take into account existing redress laws including BEE.

Mr Mogajane clarified that the R200 billion referred to by Mr Shivambu was not in the form of cash to be disbursed to businesses, but a guarantee. Banks will be using the normal criteria in processing applications for the loans. The guarantee scheme must not be confused with the grant scheme administered separately.

Co-Chair Maswanganyi said redress is a constitutional imperative which had to be well-understood. To that effect, laws meant to address previous injustices could not be undone by the two Committees. The Committees should proceed on an understanding that they agree with the eligibility criteria and thresholds suggested by Treasury for providing relief to businesses in need. The criteria did not imply the exclusion of white-owned businesses, but all existing policies and legislation will be taken into consideration in administering the support. He proposed paragraph 7.4 be left as is.

Majority Members agreed.

Paragraph 7.5
Dr George said while he agreed with the broad sentiments of paragraph 7.5, he had absolutely no reservations about government securing loans from the IMF and any other multilateral financial institution. He suggested the statement “while the Committee has severe reservations about government securing loans…” be taken out. However, government must be transparent in all this.

Mr Shivambu said the EFF’s proposal was that instead of government seeking loans from the IMF- which come with stringent conditionalities - it should look into deferring servicing of existing debt and repayment of existing loans. Also, to refer the R500 billion as a stimulus package was misleading. Loan guarantees and the unemployment insurance fund (UIF) relief should not be characterised as stimulus packages.

Mr Mogajane highlighted that the sovereignty of the country was non-negotiable during the ongoing discussions between Treasury and the IMF. Treasury commits to transparency and openness throughout the entire process. The detail will be in the implementation and effectiveness of the debt management strategy. Treasury sought to come up with a creative liability management process to save public funds.

Ms P Abraham (ANC) noted Mr Mogajane’s comments and added Treasury must not just leave it at briefing finance committees about the loans; Parliament should get a preview of the negotiated deal before signatures are appended.  Interest on IMF loans goes beyond the finance portfolio.

Co-Chair Maswanganyi said Treasury should work on a report on the loans it seeks to source from multilateral financial institutions. A Committee briefing will be held subsequently.

Paragraph 7.7
Mr Shivambu proposed the addition of a sentence to the effect that SARS would be expected to brief the Committees on how it intends to maximally collect tax from the digital economy. Further, a decision had to be taken to strengthen legislation to ensure that illicit financial flows as well as tax avoidance are decisively dealt with.

Co-Chair Maswanganyi said the proposal from Mr Shivambu was a not new resolution. He agreed to its inclusion.

Paragraph 7.8
Dr George stated it should be on record that the DA does not support procurement that is race-based and therefore would not welcome the new indicators as they are premised on that basis.  

Paragraph 7.11
Mr W Wessels (FF+) said it should be noted that the SARS Commissioner also alluded to the risks pertaining to the prevailing circumstances. Efforts towards combatting illicit trade are being curtailed by loss of potential excise tax revenue and expansion of the underground market. Also, the long term risks of revenue shortfalls owing to the fact that some small businesses would not the able to open their doors post-COVID-19 as they are being excluded from accessing government relief should be noted.

Ms Abraham said the Committees should be explicit in recommending a study on the implications of expanding the tax base by SARS, particularly within the digital space.

Co-Chair Maswanganyi said the Standing Committee took a decision to schedule a briefing with Treasury on how it plans to implement recommendations flowing from the following commissions of enquiry: Nugent, Katz as well as the Davis Tax Committee. The Committee Secretariat should work with Treasury and agree on a date.

Paragraph 7.12
Dr George put it on record that the DA does not support the establishment of a State Bank. The party believes it was a bad idea.

Paragraph 7.18
Dr George said while the DA does support measures to combat the illicit economy, it is very clear that government regulation, especially around the ban on cigarette and alcohol sales, were irrational. The ban is actually fuelling the illicit economy and was becoming a bigger problem. He emphasised the need for more sensible regulations. The Committee should recommend that the ban on cigarette sales be lifted.

Co-Chair Maswanganyi said the proposal to lift ban on the sale of said consumables was not within the Committee’s purview- it is the competence of the National Command Council. Singling out one or two commodities will be outside the scope of the Committees.

Mr Shivambu said the DA proposal that the Committees recommend a lifting of the ban on cigarette sales must be rejected. The ban was informed by scientific analysis on the relationship between smoking and incidence of respiratory illnesses. However, those involved in the illicit trade must be dealt with by law enforcement agencies. It should be noted that the majority of companies and enterprises affected by this ban were DA party funders.

Co-Chair Maswanganyi said the ban on the sale of alcohol and cigarettes was necessary. Law enforcements were called upon to deal decisively with participants in the illicit economy.

Paragraph 7.19
Dr George expressed his disagreement to the notion that the Land Bank is strategic. The DA position is clear- failed state-owned enterprises should not continue receiving government bailouts especially under these conditions. Throwing money into failed enterprises was not helping.

Ms Abraham said the paragraph aptly captures the essence of Committee discussions. The Land Bank ought to be rescued and must benefit the poor. Any concerns Members had could be addressed when the bank appears before the Committees to account.

Mr Shivambu said it was a sad reflection to have some Members calling for the collapse of the Land Bank. The Committee should get a report on the bank’s exposure to farmers. It must be given a clear developmental mandate. The attitude should be to save the bank and ensure its primary mandate is to effect agrarian reform. To say the bank is not strategic reflects a certain degree of insanity. Further, the Committee should receive a report on the governance of the Public Investment Corporation (PIC). Treasury was also expected to provide the Committees with a comprehensive report on challenges affecting all the entities under its purview, so that clearer political guidance is given. 

Co-Chairperson Maswanganyi invited comments from Treasury.

Mr Mogajane expressed government’s full commitment to saving the Land Bank at all costs. Treasury was in discussions with creditors of the Land Bank to come to an arrangement following the bank’s failure to pay its obligations in April. The state-owned specialist lender to commercial and emerging farmers played a major role in terms of food security, which would be negatively affected were the bank to collapse. A strategic decision was taken by Treasury and broadly in government that the Land Bank could not be left to collapse and should be supported at all costs. Efforts were under way to minimise the government’s exposure to the bank. It is all in the interest of investors, bondholders and lenders to find a solution in terms of supporting the bank as a total of about R40 billion or so would be lost if it collapsed. The Land Bank had to be supported; its business approach and strategy must change and reflect the challenges facing the country. One huge challenge facing Treasury is how to bring emerging farmers into the fold, and how to ensure that the development mandate of the bank is enhanced. These are things that Treasury was grappling with. As Treasury, having overseen the Land Bank for a number of years, we have had always had issues with the business model of the Land Bank where they borrow on a short-term basis and lend on a long-term basis. The business model is skewed and this is now coming to haunt us.

Co-Chairperson Maswanganyi appreciated the comprehensive input from Treasury and added the Committees should get a report from both Treasury and the Land bank on the way forward regarding the bank’s challenges.

Members were agreeable to the proposal.

Adoption of Report by Standing Committee on Finance
Co-Chairperson Maswanganyi indicated the Committees had received minority reports from the DA and EFF, and procedurally, it had to be put on record. He put the report up for adoption.

Ms M Mabiletsa (ANC) moved for its adoption.

Ms Abraham seconded.

Dr George said the DA reserves its position on the report.

Mr Wessels expressed FF+’s objection to the report.

Mr Shivambu expressed the EFF’s objection to the report.

The Report was adopted with amendments.  

Adoption of Report by Select Committee on Finance
Co-Chairperson Carrim noted amendments to the Report were minimal. He put it up for adoption.

Mr M Njandu (ANC) moved for its adoption.

Co-Chairperson Mahlangu seconded.

Mr du Toit expressed FF+s objection to the report.

Mr M Moletsane (EFF) objected. 

Mr Ryder reserved the DA’s position.

The Report was adopted with amendments.

The meeting adjourned.