Committee Report on Oversight visit to SASRIA, Land Bank & Financial and Fiscal Commission

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Finance Standing Committee

31 May 2022
Chairperson: Mr J Maswanganyi (ANC) & Ms P Abraham (ANC)
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Meeting Summary

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Tabled Committee Reports

The Standing Committee on Finance met virtually to consider and adopt the Committee’s report on oversight visits to the South African Special Risk Insurance Association (SASRIA), the Land Bank, and the Financial and Fiscal Commission (FFC). The report was presented by the Committee’s Content Advisor and included an overview, key challenges, and recommendations for each institution.

Members of the Committee raised concerns about presenting each oversight visit in one report. Not all Members visited all three sites, and thus the impact of the absence of some Members during oversight visits needed to be assessed. The Acting Chairperson recommended seeking parliamentary advice.

Mr F Shivambu (EFF) found that some issues considered during the oversight visit to the Land Bank were not included in the report. These issues had the demographic make-up of the Land Bank and the need to reconstitute the legislative framework to turn the Land Bank into a developmental financial institution.

The parliamentary legal advisor recommended that if the Committee aimed to create a legislative framework for the Land Bank, a separate report would be more beneficial to make specific recommendations.

The Content Advisor expressed no issue dividing the report into three separate reports. He requested assistance from Mr Shivambu to draft paragraphs on his concerns. The distinct reports would be presented in the Committee meeting the following day.

Broader issues were raised on reconsidering the legislative framework of the Land Bank. It was suggested the Committee initiate a legislative process to reposition the Lank Bank into a developing financial institution that will empower citizens. The current framework borrowed money from private institutions to give to agricultural businesses, and this benefitted predominately white farmers because of the requirements of privately generated capital. The Land Bank needed to administer a grant system to empower emerging farmers. The only way to save the Land Bank was to reconstitute the current model that was not sustainable.

The Content Advisor and two officials from National Treasury informed the Committee about a typographical error that resulted in an accidental omission of a paragraph on a report adopted on 18 May 2022 on the Financial Sector and Deposit Insurance Bill. However, the error was only technical and had not caused any subjective damages. The Minister noted the error and submitted a letter supporting the amendments.

Meeting report

Committee Report on Oversight visit to SASRIA, Land Bank & Financial and Fiscal Commission

The report was presented by Dr Zakhele Hlophe, Committee Content Advisor. The report was divided into distinct sections for each institution. Each section included an overview of the institution and its key challenges. The oversight visits were necessitated by the challenges the institutions faced following particular events and the audit outcomes of the previous year.

The main concern at SASRIA was the increased liabilities that followed the unrest in KwaZulu-Natal and Gauteng in July 2021. SASRIA had faced enormous challenges in liquidity and solvency due to the unrest and riots. The Association could not submit its 2021 Integrated Report and Audited Annual Financial Statements for the previous financial year.

SASRIA was supported by the Committee and received financial support from National Treasury. The external auditors confirmed that they were able to finalise the audit opinion by the end of February 2022 due to the financial injection.

The main concern identified at the Land Bank was its liquidity and funding challenges that followed an event of default that occurred in 2020 and audit findings in 2019/2020 and 2020/2021. The Land Bank had been in default on its liabilities for two years, and it had been negotiating with lenders and developing a Liability Solution to cure its default position. Further, a Stabilisation Plan had been developed and was being implemented.

The main concerns of the FFC were the adverse audit outcomes and the high level of staff turnover at the executive level. The FFC played an essential role in advising government, Parliament, and provincial legislature on fiscal issues. The Committee found it concerning that recommendations made by the FFC during the budget processes were reportedly not considered. The high level of leadership instability was also a cause for apprehension. There have been seven Chief Financial Officers and four Chief Executive Officers in the past seven years.

Discussion

The Chairperson excused himself due to issues related to load shedding. Ms P Abraham (ANC) took over as acting Chairperson. She thanked Dr Hlophe for the report and opened up the floor for Members’ questions and concerns.

Mr F Shivambu (EFF) expressed serious concerns about the Land Bank section in the report. That was the only oversight visit that he participated in. Issues discussed during the oversight visit had not been included in the report. These concerns included the demographic representation in the Land Bank and how the institution did not play a developmental role in South Africa. There should be severe considerations in the legislative reconstitution of the Land and Agricultural Bank of South Africa. The best way to deal with challenges of the Land Bank was to reconstitute it as a developmental financial institution with direct appropriation from Parliament. The concerns need to be expressed in the report. The Chairperson of the Board of the Land Bank agreed that there was a need for further engagement.

He recommended that the oversight visits to SASRIA, the Land Bank and the FFC be divided into separate reports. Combining all the oversight visits in one report was clumsy and presented all three institutions as if they were one.

Dr Hlophe asked if Mr Shivambu could assist in drafting paragraphs on the issues he raised because he seemed to possess a good understanding of the challenges of the Land Bank. The report mentioned financing and that grants were needed, but Mr Shivambu could better express the needs and concerns. He asked the Member to expand on the issue of legislative reconstitution.

He disagreed that there was a need for three separate reports. All three institutions had their sections where the concerns were discussed separately. However, it was up to the Committee to decide how they wanted the report presented.

The Acting Chairperson replied that it was fair to ask Members of the Committee to assist in drafting paragraphs on the issues that Members felt were not covered adequately. There was a problem in the interaction between National Treasury, Land Bank, and the Committee. A meeting should be held to cover any shortcomings in the report. Mr Shivambu should still assist the content advisors in terms of drafting. She maintained that the report was well written and included distinct reports on each institution. Similar matters were addressed in all three oversights. She also expressed concern that if they presented three separate reports, they would need to present them to Parliament on three different occasions. The report needed to be edited, but the current format was preferable.

Mr G Skosana (ANC) agreed that the current format of the report was sufficient. If the report was separated into three distinct reports, three distinct presentations would be required. He agreed that Mr Shivambu could assist the report in emphasising the issues that the Committee regarded as necessary.

Mr Shivambu replied that when a report is tabled for programming purposes, parliamentary considerations, it must be the Committee’s report on one institution. During the SASRIA or FFC visit, he was not present, so he felt he could not express an opinion on the issues addressed in those sections but was present for the Land Bank oversight visit. Therefore, he could consider that section of the report but not all visits in their entirety. He could not consider all three reports at once. He recommended seeking advice from the Chairperson on how the report should be presented.

He said that he would provide a written submission on the legislative reconstitution and concerns around the demographics of the Land Bank. He suggested that Committee considers the submissions before they table the reports to Parliament. The Chairperson of the Land Bank Board had expressed support for the legislative reconstitution. There was no legal or legislative framework for the Lank Bank to be given direct financial injections from any governmental department. Therefore, it needed a legislative reconstruction to play a developmental role that would mainly assist black farmers and women.

The Acting Chairperson agreed that the Committee should seek advice from parliamentary officials on the legalities of programming. She was not opposing Mr Shivambu, but she said that clarity was needed on the format of the report. There was also a need to assess the impact of some Members' absence during oversight visits.

Mr I Morolong (ANC) expressed no qualms with either of the suggestions. A report per site visit may be the safer option. However, the Committee should not delay adopting the report/s. There was not necessarily a need to schedule a meeting to consider newly drafted paragraphs. Most of the issues raised were matters of emphasis and could be addressed point-by-point. He agreed with the issue of demographics and that it should be emphasised. If there was disagreement, the Committee could address concerns. He suggested that the report should be adopted subject to legal advice.

The Acting Chairperson said that Dr Hlophe and his team should consider the comments and emphasise the issues raised in the meeting. The Committee needed to agree on the proposals raised in the meeting. She proposed voting on issues raised about each institution separately with the Members who were present during the oversight visit.

Dr Hlophe said the team was able to separate the reports if that is what the Committee wanted. It would only take ten minutes because of the format of the report. However, it was still necessary for Mr Shivambu to help articulate the issues he raised, especially in the case of the legislative reconstitution of the Land Bank. The report spoke about the Land Bank’s issue of the Strauss Commission report, which addressed challenges to funding, and it was raised as a concern that still needed to be presented to the Committee. 

Adv. Frank Jenkins, senior parliamentary legal advisor, said the Committee could decide how to report. If the Committee wanted to consider the legislative framework for the Land Bank, a separate report would be more beneficial to make specific recommendations. If the Committee wanted to change the legislative framework of the Land Bank, it could either ask the Minister to look at the report or the Committee itself could restructure it. He suggested that a separate report for the Land Bank, with specific recommendations, be adopted by the House. The recommendation could be that the Department relook at the legislation, or the Committee could review the legislation. The Committee needed a House resolution to kick-start the process.

Mr Shivambu recalled a previous Committee Bill on the Public Investment Corporation after an oversight visit. The report was not combined with other oversight visits. He recommended a separate report for the Land Bank and the legislative process initiated on a Committee-level to reposition the Lank Bank into a developing financial institution that will empower citizens. The current framework borrowed money from private institutions to give to agricultural businesses. This benefitted predominately white farmers because of the requirements of privately generated capital. The Land Bank needed to administer a grant system to empower emerging farmers. The Chairperson of the Board of the Land Bank said that the most experienced farmers were the ones defaulting on their loans, not the emerging farmers. The Lank Bank needed direct appropriation and to generate additional capital from private lenders. The Committee could introduce the legislation, and then the Land Bank could come in and make submissions. The Lank Bank Board Members agreed that the only way to save the Land Bank was to reconstitute the current model that was not sustainable. The report should include that there were recommendations to reconstitute the Land Bank, and public hearings will be held to adopt a separate report.

The Acting Chairperson suggested giving the report drafters time to edit the report, and Dr Hlophe could present the report to the Committee in a meeting the following day. The reports would then be tabled separately and adopted separately.

The Members agreed with her.

[find the reports adopted the next day here: https://pmg.org.za/tabled-committee-reports/]

Consideration of the Amended A-list and the Updated Committee Report on the Financial Sector and Deposit Insurance Bill

Dr Hlophe asked the Committee relooked at a report adopted on 18 May 2022. The report required additions based on the information that the Minister sent through at a later stage. The Minister noted the changes and supported the amendments in a letter presented to the Committee. 

Adv Jenkins said that a typographical error resulted in an inadvertent omission after the meeting, and it was corrected with no further damages.

Mr Ismail Momoniat, Deputy Director-General: Tax and Financial Sector Policy, National Treasury, confirmed that it was just a technical correction. He wanted the Committee to note the Minister’s letter supporting the amendments.

Adv Empie van Schoor, Chief Director: Legislation, National Treasury, elaborated on the error. In the A-list, it was only intended to replace (a) to (d), while (e) remained. The (e) paragraph was inadvertently removed, and the error was corrected. Paragraph (a) to (d) was meant to be omitted, but paragraph (e) was never intended to be removed.

The Acting Chairperson thanked National Treasury for letting the Minister write and sign the letter.

Dr Hlophe confirmed that it was only a technical issue with no subjective amendments.

The Committee noted and accepted the changes.

The Acting Chairperson thanked everyone for attending the meeting.

The meeting was concluded.

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