General Laws Amendment (Anti-money Laundering and Combatting Terrorism Finance) Bill: adoption; Asian Infrastructure Investment Bank Agreement

NCOP Finance

09 December 2022
Chairperson: Mr Y Carrim (ANC, KZN)
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Meeting Summary


The Select Committee on Finance (the Committee) convened virtually to formally consider the General Laws Amendment (Anti-money Laundering and Combatting Terrorism Finance) Bill [B18B – 2022] and accompanying report. The Committee adopted both, notwithstanding the reservations of the Democratic Alliance (DA), Economic Freedom Fighters (EFF) and the Freedom Front Plus (FF+).

Additionally, the Committee was briefed by National Treasury (NT) on the Asian Infrastructure Investment Bank (AIIB) Agreement. The Committee agreed that the process followed by NT by presenting the agreement for approval close to the 31 December 2022 deadline, was inconsiderate. The Committee resolved to submit a complaint to the principals both in Parliament and National Treasury. But two opposing standpoints emerged in terms of the content of the agreement. Opposition parties viewed the agreement not in the best interest of the country and similar to the Cuban donation. The governing party argued that the country would benefit politically and ideologically and might gain economic and financial benefits in the long-term. The Committee resolved to adopt the agreement, notwithstanding the reservations of the DA, EFF and FF+.

The Committee considered and adopted 14 set of outstanding minutes dating back to 11 October 2022.

Meeting report

PMG missed the start of the meeting
The Committee considered its report on the Bill: ATC221212: Report of the Select Committee on Finance on General Laws (Anti-money Laundering and Combating of Terrorism Financing) Amendment Bill [B18B - 2022] (National Assembly Section 75); dated 09 December 2022

General Laws Amendment (Anti-money Laundering and Combatting Terrorism Finance) Bill: Voting

The Chairperson noted that they have gone through the Bill informally and sought clarity if they have to go through every page or can they subject the whole bill to a vote.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, Constitutional and Legal Services Office, explained that the rules require that a bill is considered clause-by-clause. What the Committee has done in the past, with the Financial Sector Regulation Bill was to go through it page-by-page to check if there are any clauses that people object to in order to save time. The Committee has to adopt the bill formally by going through it.

The Chairperson asked colleagues if they agree this is how they should proceed.

The Chairperson took the Committee through the Bill page-by-page.

No objections or comments were raised.

The Chairperson asked for a mover and adoption for the Bill as a whole.

The Bill was adopted.

The DA reserved its position.
The FF+ reserved its position.
The EFF reserved its position.

The Chairperson called on the Legal Advisor to present the Committee report on the General Laws Amendment (Anti-money Laundering and Combatting Terrorism Finance) Bill.

AIIB Agreement
The Chairperson called on National Treasury to brief the Committee on the AIIB Agreement. But he first wanted to know why the agreement was being introduced at such a late stage.

Mr Mfundo Hlatshwayo, Chief Director: Global and Emerging Markets, NT, apologised for the late submission of the agreement. He explained that the delay was due to a review of the agreement to consider the portion of the shareholding that should be subscribed to. Cabinet recently agreed to the minimum subscription of 50 shares.

Mr D Ryder (DA, Gauteng) said Cabinet had seven years, since the agreement was signed in 2015, to deal with this matter. It was unfair to expect the Committee to approve the agreement within a couple of days before the end of the term. The Select and Appropriations Committees had approved five bills within the last week which involved a fair amount of work. He was observing a trend by NT to submit apologies for putting forward agreements at the last minute. He felt it was in bad taste to pass the buck to Cabinet.

The Chairperson found the explanation by NT unacceptable and unconvincing. He sought a mandate from Members to refer the complaint to the National Council of Provinces (NCOP) Chairperson and NCOP Chief Whip. He intended to write to the Minister of Finance and the Director-General of NT in January 2023 to express the Committee’s dissatisfaction with the process.

National Treasury Presentation
Mr Hlatshwayo said he would convey the message to his principals. He explained that the purpose of the presentation was to get the support of the Committee for the minimum subscription of 50 shares with a nominal value of US$5 million. The cash amount of US$1 million, or R16.4 million at the time of reporting, would be payable within 30 days after ratification by Parliament. The outstanding US$4 million represented the callable portion of the shareholding. The AIIB Board set 31 December 2022 as the final deadline for South Africa to ratify the articles of the agreement and to become a founding member of the bank.

The AIIB was originally formed by 21 Asian countries, led by China. The Articles of Agreement (AoA) were signed on 25 December 2015 by 57 countries including South Africa as a prospective founding member. As a signatory to the AoA, a reasonable expectation had been created for South Africa’s ratification of the agreement. South Africa’s participation in the AIIB was intended to be a symbolic gesture aimed at strengthening the business relationships in the Asia region. As a non-regional member, South Africa would be able to borrow from the AIIB and may benefit through technical assistance and financing of its clean energy transition programme.

Mr Ryder said the agreement was a crazy idea. He drew attention to the legal opinion which stated that the role of the Committee was to approve and not to ratify the agreement. He saw no benefit for South Africa to become a member of the AIIB. He viewed the symbolic membership similar to paying for a diamond ring but receiving a ring in a Christmas cracker instead. He stated that the discount of US$1 million was inaccurate considering the outstanding callable portion of US$4 million that could be called up at any time. The contingent liability of US$5 million was going to impact the fiscus. The money could be better spent on useful projects such as the building of RDP houses and reservoirs considering the housing and water needs in the country. For this reason, he had been proposing the revaluation of departmental projects. The agreement differentiated between regional and non-regional members. Article one of chapter one of the agreement must be read in conjunction with article nine which stipulated that resources would be used exclusively for regional members. This meant that South Africans would be excluded from benefitting from the resources. He drew attention to the AIIB website which indicated that South Africa’s share would be worth 0.13% influence. In a situation where the country was struggling with generating electricity, ESKOM might want to get their hands on the US$1 million. From experience he was aware that the entire capital budget for Midvaal Municipality was about US$5.1 million. He argued that the money was a gift to China and of no benefit to South Africa. He wanted to know who signed off on the agreement on behalf of South Africa. He reminded Members that the infamous change of guard took place in 2015 when Minister Nene was fired and briefly replaced by Minister van Rooyen and subsequently by Minister Gordhan. Since then, six ministers had not bothered to bring the agreement to Cabinet. He found it diabolical that anyone would consider sending such a gift to China.

Mr Z Mkiva (ANC, Eastern Cape) viewed the agreement as an important financial instrument for South Africa. The special dispensation granted to South Africa was informed by the strategic nature of our economy because the country is regarded as the springboard to the economy on the African continent. He said Mr Ryder was correct to ask difficult questions but he disagreed because the membership was not only of a symbolic nature. A broader view of the agreement reflected the substance in terms of skills transfer and the green economy. For this reason, he supported the agreement. The fact that six ministers had been dealing with this matter was an indication that it took time to consider the content of the agreement. He held the view that institutions like the AIIB would do well for our economy and the value of participation would be priceless. The benefit would be greater than mere shareholding. The Asian Tigers had huge confidence in the South African economy. He did not consider the deadline as threatening and moved that the agreement be signed without further delay.

The Chairperson agreed with Mr Ryder that the timing of presenting the agreement was inconsiderate but disagreed that there was a conspiracy. He felt Mr Ryder was being too harsh in his opposition to and critique of the agreement. In his view, the agreement was political and was signalling a move away from the developing countries as the lodestar. The agreement should not be viewed only in terms of economic and financial benefits because international geopolitics involved broader considerations. South Africa should become less dependent on the tutelage of the West. The points of disagreement were not enough grounds for not approving the agreement. He agreed on the process issues but disagreed on the matter of content. He suggested that Mr Ryder would be more valuable to his party to serve in the National Assembly than in the NCOP.

Mr W Aucamp (DA, Northern Cape) agreed with Mr Ryder that giving money without getting a benefit should be viewed as a donation. It was important to consider whether the agreement was in the best interest of South Africa. He reiterated that it should be regarded as a donation if it was of no benefit to South Africans.

The Chairperson replied that South Africa had a right to participate rather than seeking favour from either China or the United States of America. He expressed his frustration at being stuck with the matter at the last minute but cautioned about the consequences of not signing up. South Africa would benefit from political and ideological viewpoints and might gain economic and financial benefits in the long-term. South Africa was not the only country involved in similar processes around the world.

Mr Aucamp said the government did something similar with the R50 million donation to Cuba. He reminded Members that the Constitutional Court denounced the donation because it did not benefit South Africans.

The Chairperson was surprised that Mr Ryder did not raise the Cuba issue. He stated that politically, Cuba had enormous resonance with ANC members and amongst other South Africans. He expected NT to respond to the technical issues in the agreement and not to venture into the political domain.

Mr Hlatshwayo agreed that NT could not respond to political issues but stated that the main objective of joining the AIIB was political in nature. For this reason, NT consulted with the DIRCO desk who had been very supportive of the geopolitical and financial benefits that would be accruing to the country. He cited Rwanda and Egypt as examples of non-regional members with similar shareholdings who have benefitted in terms of funding for Covid-19 recovery programmes and a pipeline of domestic development projects respectively. It is clearly stated in article three of the agreement that members affiliated with the World Bank are able to get financing from the AIIB. Although the focus is on regional members, Asia regard Africans as strategic partners, hence twelve African countries have AIIB membership. He acknowledged that the US$1 million represented the cash amount and that the shareholding consisted of a further callable portion of US$4 million. South Africa’s membership with similar institutions such as the African Development Bank, the New Development Bank, and the World Bank all make provision for callable options but which have never been exercised. The objective is to leverage the US$1 million for other investments.

Mr Ryder replied that he did not mention article three of the agreement because the allocation of resources was outlined in article nine. He was of the view that lending money to South Africa at this point in time would go against sound economic principles. He was however aware that Members would not find his statement convincing.

Committee Report on South Africa’s AIIB membership 
The Chairperson indicated the Committee needed to draft a report on the consideration of South Africa’s AIIB membership. He requested the Secretariat to capture the position of the Committee in terms of both the process and content of the agreement.

Mr Ryder proposed a five-minute break to allow the Secretariat time to compile the report.

The Chairperson, post the break, presented the report to the Committee for approval. The Committee adopted the report but the Democratic Alliance (DA), Economic Freedom Fighters (EFF) and the Freedom Front Plus (FF+) reserved their positions.

Read: ATC221209: Report of the Select Committee on Finance on the Agreement of South Africa’s membership to the Asian Infrastructure Investment Bank (AIIB), dated 09 December 2022

Adoption of Committee Minutes
The Chairperson accepted blame for the delay in adopting the minutes. He proposed that the minutes should be dealt with on the last Tuesday of each month in the new term. The minutes of the following meetings were adopted without corrections;

11 October 2022
14 October 2022
18 October 2022
27 October 2022
1 November 2022
2 November 2022
4 November 2022
8 November 2022
15 November 2022
22 November 2022
30 November 2022
1 December 2022

The Chairperson proposed minor grammatical corrections to the minutes dated:
23 November 2022 and 25 November 2022

The Chairperson said this was the last meeting of the term. He felt bad about lumping all the minutes in the last meeting although the circumstances of passing five bills contributed to the situation. He thanked Members for their cooperation. He anticipated that next year would be a difficult year considering that it is ahead of an election year and a number of Bills needed to be passed. He thanked all the staff for the good work. He said in jest that there was no need for Members of other parties to campaign but ANC members knew what was expected of them. 

The meeting was adjourned.


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