2022 Fiscal Framework and Revenue Proposals: Committee Report

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Finance Standing Committee

08 March 2022
Chairperson: Mr M Maswanganyi (ANC) & Mr Y Carrim (ANC, KZN);
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Meeting Summary

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Video (Part 2)

2022 Budget Speech & Key Documents

Tabled Committee Report

The Finance Committees of the National Assembly (NA) and the National Council of Provinces (NCOP) held a joint meeting to consider their report on the fiscal framework and revenue proposals as contained in the 2022 budget.

The Democratic Alliance (DA) and the Freedom Front Plus (FF+) reserved their positions when the report was put to vote. The EFF made strong statements as to why it rejected the budget.

The Committees adopted the report with amendments.

During the page-by-page discussion on the report, Members made a number of proposals relating to creating a conducive environment for economic growth, restructuring the petrol price, encouraging investment and Corporate Income Tax. There was discussion on timeframes for entities to present progress to the Committee and the impact of the Russia war on Ukraine.

Meeting report

Report of the Standing Committee on Finance on the 2022 Fiscal Framework and Revenue Proposals

Co-Chairperson Carrim iterated that not all stakeholder submissions were included in the final draft of the report. He invited discussion on the section dealing with the Committees' observations and recommendations.

Mr W Aucamp (DA, Northern Cape) referred to section 5.1.3, which stated government's commitment to creating an environment for the economy to grow. He felt the sentiments of the President should be emphasised in that a conducive environment created by government, will encourage the private sector to grow.

Mr W Wessels (FF+) felt it should be included in section 5.2.2 that the Committee welcomed the attempt and plan to restructure the fuel price. It was recommended that it be done with haste.

The Co-Chairperson accepted the points.

Mr Wessels said that section 5.2.3 was in contradiction to 5.2.5. He said that section 5.2.5 incorrectly indicated a lack of reserves in the private sector where he felt many investments were made.

Co-Chairperson Maswanganyi asked, regarding section 5.2.5, whether National Treasury (NT) has investigated the restructure of Corporate Income Tax (CIT) to encourage investment. He noted the alarming rate of growth of offshore private investments as reported by the Reserve Bank. While government should create a conducive work environment for profit generation, private businesses must also invest in the country.

Co-Chairperson Carrim noted that the majority of the Committee felt concerned that the revenue generated from CIT reductions will go into productive investment.

Ms P Abraham (ANC) agreed with section 5.2.3 that reducing the CIT would not necessarily lower investments.

Mr Aucamp agreed with Mr Wessels. He felt that section 5.2.3 should be reworded to say that companies with more than sufficient domestic savings are encouraged to invest, especially in these uncertain times.

Mr A Sarupen (DA) supported Mr Wessels' comment that South Africa has seen poor investment – this was due to low levels of business confidence. He felt that the Committee must recommend that the state should take measures to increase business confidence.

C-Chairperson Maswanganyi disagreed with Mr Sarupen saying that the claims were founded on knowledge shared by the Reserve Bank.

Co-Chairperson Carrim said that the DA and EFF may include their positions after the section where policy differences can be expressed.

Ms Abraham said, regarding 5.1.3, that the tone was too strong in the phrase the 'economy is highly dependent'.

Mr D Ryder (DA, Gauteng) strongly disagreed and said it was widely stated that unless there are proper economic reforms and policy certainty, there would be no chance of economic recovery in the country.

Mr Wessels concurred with the views of Mr Ryder, and said that it could also reflect 'dependent on timely and successful economic reforms'.

Co-Chairperson Maswanganyi agreed with Ms Abraham and suggested the Committee should avoid using strong adjectives without a relative subject.

Co-Chairperson Carrim agreed that subjectivity should be avoided in the phrasing.

Ms Abraham asked, on section 5.2.4, whether SARS has seen returns from the private sector. She suggested the matter must involve the Standing Committee on Appropriations.

Co-Chairperson Carrim indicated that it was merely suggested that the Committee on Appropriations consider the matter.

Co-Chairperson Maswanganyi asked, concerning section 5.2.5, whether the Committee must prescribe a reasonable and specific timeframe for the Executive to have a meeting with the stakeholders without overreaching responsibilities.

Mr Ryder responded that the Committee has oversight over the Executive. From previous Committee discussions, he said it was clear that National Treasury did not attempt to meet with certain people and that there had not been sufficient follow-up. On that basis, he said the three-month timeline was reasonable and necessary.

Ms D Mahlangu (ANC, Mpumalanga) said that timeframes are important for the Committee to conduct oversight while displaying some urgency and authority.

Ms Abraham agreed Mr Ryder.

Co-Chairperson Carrim said that timeframes encourage entities to report back to the Committee.

Mr Wessels said, regarding section 5.3.4, it should be added that the Committee recommends that provisions included in the Public Procurement Bill should prioritise procurement.

Co-Chairperson Carrim said that the matter falls under the Minister of Trade and Industry, Minister of Finance and the Presidency. He suggested that the matter could be rather be written and sent to NT as it could not easily be implemented into the text [of the Committee report].

Co-Chairperson Maswanganyi agreed that the matter would fall under the ambit of the listed departments, though he felt the recommendation was limited to the executive members. He suggested it rather refer to the government fleet to make an impact.

Co-Chairperson Carrim accepted the recommendation as part of the proposal.

Mr Wessels asked, on section 5.4.6, that it be added that the Portfolio Committee on Public Enterprises should meet for an update on all state-owned entities (SOEs) which was raised during the stakeholder engagement.

Co-Chairperson Maswanganyi agreed with Mr Wessels' view. He further said, on section 5.4.4, that the research team must provide a report on the impact of the invasion of Ukraine on the fiscal framework. He asked to what extent South Africa is exposed to Ukrainian and Russian trade as it has severe global economic impact.

Mr Aucamp felt that 5.4.4 should be worded as 'the Russian war in Ukraine' and agreed that a report must be drafted on the potential economic effects.

Mr S Du Toit (FF+, North West) said that the proposal must mention that there will be a strain on the South African agricultural sector, including fertiliser and fuel prices increasing.

Ms Abraham disagreed with Mr Aucamp and felt the current wording was fine as is.

Co-Chairperson Carrim agreed with Ms Abraham. He said that a separate point should be made to say that, understandably, the fiscal framework does not adequately factor in the consequences of the Ukraine-Russian war. The Committee expressed concern about the extreme likelihood of significant cost increases on fertiliser, fuel and other commodities which affects all South Africans, disproportionately the poor and disenfranchised.

Ms Abraham felt the same concern was raised in section 5.4.5 and should be listed as effects of COVID and the Ukraine-Russian war respectively.

Mr Ryder said, on section 5.4.6, that inclusive wording should be used.

Mr Aucamp asked that an additional point be made to add that consequence management must be in place for individuals not fulfilling their job or not spending properly.

Co-Chairperson Carrim said that it was mentioned before but should be reiterated for the Committee to monitor it.

Co-Chairperson Maswanganyi appreciated the proposal.

The Committees adopted the report with amendments.

For the Standing Committee on Finance, its adoption was moved by Ms Abraham and Ms M Mabiletsa (ANC), with the EFF voting against the report and the FF+ and DA reserving their positions.

Mr F Shivambu (EFF) said the Economic Freedom Fighters (EFF) rejected the report. He felt the exercise of going through the report "useless" as majority of issues were not followed up on. The EFF felt the budget was emphatically right-winged for suggesting that privatisation of state-owned companies and services will lead to economic growth, which has not occurred anywhere before. There was no use in simply saying conducive environments must be created – there must be legislation to enforce this e.g. with procurement and localisation. Legislation must be complied with. He voiced disagreement with the Committee report not referring to state-owned financial institutions, such as a state bank, or the sovereign wealth fund, despite commitments to do so. Further, there is no legislation to deal with tax avoidance by multinational corporations, especially in the resources sector. These companies avoid tax by having relationships with international tax havens. The EFF felt the current fiscal framework would deepen the poverty of South Africans and actually admits people will not be taken out of poverty, jobs would not be created and the economy would not grow. The EFF rejected the fiscal framework of 2022 with contempt.

For the Select Committee on Finance, the report adoption was moved by Mr E Njadu (ANC, Western Cape) and Ms M Mamarengane (ANC, Limpopo), with the EFF rejecting the proposal and the DA and FF+ reserving their positions.

The meeting was adjourned.

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