Trade Agreements & Customs Administration

Relevant document:
Presentation by South African Revenue Services (e-mail [email protected] for document)

SUMMARY
The South African Revenue Services said many industries are affected by smuggling resulting in a lot of revenue leakage and fraud. This costs the government millions of rand every month.

In order to fight fraud and revamp the customs system, the Customs Transformation Programme was launched in 1998. A team has been established to look into replacing the manual system with a more technological one. SARS called for the rubber-stamping problem to be eradicated. SARS is uncomfortable with destroying counterfeit goods which could be donated to needy areas such as Mozambique currently.

As a way forward, the Customs and Excise Act was amended last year to prevent fraud and to cater for disparities between what is on the book and what happens on the ground. SARS proposed that an agreement must be reached that goods entering the country must be cleared at the ports of entry and not in Johannesburg. They called for more control of the isolated land border posts to counter corruption and fraud.

SARS said it is imperative that the internal audit be strengthened in the customs area. Another initiative would be intelligence networking. SARS said that unless their prosecution campaign is intensified nobody will take them seriously.

MINUTES
Dr Pravin Gordhan, acting Commissioner of the South African Revenue Services addressed the Committee (see Appendix 1).

Discussion
(Q) Ms C September (ANC) asked what has been put in place to administer the EU/SA agreement. She wanted to know if SARS is ready for the agreement. She pointed out that certain industries had been hard hit by the entry of counterfeit goods in the market.
(A) SARS said they are ready for the SADC and EU agreements. They conceded that there will of course be glitches.

(Q) Mr R Davies (Chairperson, ANC) asked whether the reciprocal agreements are being implemented. He asked if an indication of implementation by the EU countries on the "grappa" agreement is available. He further enquired "why is it that revenue has declined, why are we collecting less revenue".
(A) SARS replied that nothing imported from the EU has been declined. The decline in revenue is caused by the undervaluing of goods and by the fact that 76% of all imports are duty free and the leakage factor also contributes.

(Q) Mr S Rasmeni (ANC) supported the view that the counterfeit goods must be donated instead of being burnt. In addition he enquired whether the airstrips in farming areas are also monitored.
(A) SARS said there are about 500 airstrips on farms and, as far as SARS is concerned, nobody monitors them.

(Q) A committee member enquired whether SARS is going to invest in scanners.
(A) SARS replied that the scanner in the Durban harbour cost over R20 m. The budget does not allow for the purchase of more. SARS realises that having one scanner for the whole country is as good as having none. They referred to the traffic overload at the Port Elizabeth port of entry that was evident immediately after the scanner was introduced in Durban.

(Q) Mr S Ntuli (ANC) enquired whether anything is being done about the shortage of skills.
(A) SARS replied that they are recruiting people with skills and the existing staff is trained on the various programmes SARS has.

(Q) An ANC committee member said he supports the view that a decision to clear goods at the ports of entry must be taken immediately. She further enquired about the advancement prospects of women within SARS.
(A) SARS said they are mindful of the fact that at top management level they do not have women and that there are no impediments to women being employed.

(Q) Mr L Zitha (ANC) asked how much revenue the country is losing due to the leakages. He asked how much it costs the country to clear goods in Johannesburg as the goods are likely to be transported by government vehicles.
(A) SARS said if VAT and customs duty is included, then hundreds of millions of rands are lost. Goods are not transported to Johannesburg by government vehicles for clearance so the cost does not fall on the government.

The meeting was adjourned.