Collaborative Africa Budget Reform Initiative: National Treasury briefing & Istanbul Convention On Temporary Admission: SARS bri

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Finance Standing Committee

18 February 2008
Chairperson: Mr N Nene (ANC)
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Meeting Summary

National Treasury briefed the Committee again on the International Agreement on the Collaborative Africa Budget Reform Initiative (CABRI). The background to CABRI and its aims were outlined. It was a key vehicle for implementation of the Good Financial Governance Action Plan in Africa. It allowed members to develop approaches, procedures and practices for managing public finance systems, promoted peer learning, training and research and gave members a common African voice in international debates and forums. The terms of the Memorandum of Understanding and the key elements of the agreement were outlined. There were six founding organisations and South Africa would permanently host the CABRI Secretariat. There would be a membership fee of $50 000, payable in the 2009 financial year. Members asked questions around the secretariat, the role of parliament, the need to receive regular updates, and membership of CABRI. Members resolved to recommend ratification to the House.

South African Revenue Service briefed the Committee on the Istanbul Convention, which was concerned with the import of goods into a country for a temporary period. South Africa had signed this Convention and the minimum number of Annexes, in order to have a trial run of the carnet system of the Convention. This had now been tested for a year, and it was recommended that the remaining Annexes of the Convention be adopted. It was pointed out that this Convention streamlined the procedure and documentation for temporary imports, reduced costs to businesses of working across borders, promoted access for commercial purposes and contributed to development of world trade. The details of the remaining Annexes were tabled and explained. Members asked questions about the difference between the single administration document and the ‘carnet’, any disadvantages to the system, and the prime aim of the Convention. Further clarification was given around the number of carnets handled, and combating of corruption.  Members resolved to recommend that the House approve the accession of South Africa to the remaining Annexes.

Meeting report

International Agreement on the Collaborative Africa Budget Reform Initiative (CABRI): National Treasury (NT) Briefing
Ms Lesley Fisher, Director: National Treasury, noted that the Collaborative Africa Budget Reform Initiative (CABRI), formed in 2004, was an independent professional network of Senior Budget Officials (SBOs) in ministries of finance and planning. The International Agreement on CABRI had been signed by the Minister of Finance on 7 August 2007 and was approved by Cabinet on 24 October 2007. National Treasury had previously, on 13 November, requested the Portfolio Committee to ratify the CABRI agreement, but the Committee had been unable to do so because there had not been an official referral.

Ms Fisher reminded the Committee of the key elements of CABRI. It was a key vehicle for implementation of the Good Financial Governance Action Plan in Africa. It allowed members to develop approaches, procedures and practices for managing public finance systems, promoted peer learning, training and research and gave members a common African voice in international debates and forums.

There was growing interest in CABRI and even since the last presentation to the Committee in November 2007 its membership had increased by one member; there were now 29 members. A CABRI seminar had been held in December 2007 in Accra, Ghana.

Ms Fisher noted that the draft Memorandum of Understanding formed the basis of the existing structure of the informal network. It would enable financial independence from any national government and other regional bodies. It supported funding arrangements and cooperation with regional and international bodies.

Ms Fisher summarised the key elements of the CABRI International Agreement. There were 6 founding organisations, including South Africa. CABRI would be launched as an international organisation in May 2008. New members would join through accession. Membership fees were payable, based on a three-tier nominal fee structure. Those fees were summarised. South Africa, in category 1 would contribute $50 000. This would become effective in 2009.

South Africa would permanently host the CABRI Secretariat, and a standard agreement had been concluded in consultation with Departments of Foreign Affairs (DFA), SA Revenue Services (SARS) and Department of Home Affairs (DHA). After legal establishment of CABRI, there would be clear stipulations around privileges, immunities, disputes, amendments and office. National Treasury recommended that the agreement be ratified.

Discussion
Mr M Johnson (ANC) asked why South Africa had been given a role as the permanent host country for the CABRI secretariat. He asked if this did not feed the perception that South Africa was the “Big Brother” on the continent.

Mr Johnson asked for clarification regarding the role of parliament and its committees in relation to CABRI. He wondered if it was simply a matter of ratifying the agreement or if there were issues relating to governance and oversight to be considered.

The Chairperson reminded Members that the founding members of CABRI had already agreed that South Africa should play a permanent hosting role for the secretariat, and this was not subject to further interrogation by the Committee.

Ms Fisher noted that Article 5 of the Agreement stipulated that South Africa was the permanent secretariat host country but that this could be changed by the CABRI General Assembly. The reason for Article 5 was the need to ensure stability and certainty both for the member countries and the hosting country. This promoted both administrative continuity and financial efficiency.

Ms Fisher further noted that parliament’s role in relation to such agreements was set out in Section 231 of the Constitution and that National Treasury (NT) would keep members updated through briefings, its website and the Annual Report. There was also an opportunity to network with European Union parliamentarians later in the year to look at issues of public finance and legislative oversight.

Mr J Marais (DA) noted that membership currently appeared to be limited to sub Saharan Africa and said that it was important for such a network to be fully inclusive of all the countries on the continent. There were smaller countries such as the Gambia and Sao Tome, which could make use of such an opportunity, and greater inclusivity would give impetus to the goal of an African Renaissance.

Ms Fisher affirmed that all African countries were eligible to join CABRI and that the current secretariat endeavoured to encourage participation from all countries. There would be an opportunity at the official launch in Mozambique, during May 2008, to liaise with other potential member countries. She stressed, however, that CABRI was a voluntary and participative network and that countries should see for themselves the benefits of joining without being coerced into membership.

Mr Johnson argued strongly that in order to exercise any oversight role it was vital that the Committee, was regularly informed of all the work of CABRI. It was not possible to exercise this role or to critique the process without a thorough understanding of the issues. He also asked about the experience of other African parliamentarians in relation to such processes.

Ms Fisher replied that the focus in CABRI was more on SBOs of member countries, and less on parliamentarians. However, for example, at the Ethiopia seminar, there had been input from parliamentarians regarding the budgetary oversight role of elected representatives. On behalf of National Treasury, she committed to keeping the Committee and Parliament regularly informed of all CABRI activities.

The Chairperson concurred and reminded members of their mandate in relation to this professional international network.

The motion to recommend ratification to the full House was adopted by the Committee.

Convention on Temporary Admission (Istanbul Convention): South African Revenue Service (SARS) Briefing
Ms Varsha Singh, Manager:Customs, SARS that the World Customs Organisation (WCO), of which South Africa was a party,  represented 171 customs administrations, who processed 99% of all international trade transactions. The WCO aimed to simplify and facilitate international trade, harmonise and standardise customs formalities.

Ms Singh noted that the Convention on Temporary Admission (the Istanbul Convention) was adopted by the WCO on 26 June 1990, and it came into force in November 1993. 51 countries had signed. South Africa had previously acceded to the general provisions, but was now in a position to accede to the remaining Annexes.

Ms Singh noted that the Istanbul Convention concerned the import of goods into a country for a temporary period, when goods were not intended for final consumption in that country. It  streamlined the documentation required for temporary importation of goods, reduced the costs to business of working across international borders, promoted the easy access of international professionals and other commercial visitors to signatory countries, and contributed generally to the development of world trade. It allowed for the advance completion of documentation and was of particular relevance to international events such as the upcoming 2010 FIFA World Cup in South Africa.

The Convention allowed for the movement of relevant goods between countries, free of customs duties and VAT, through issuing, by national Chambers of Commerce, of carnets (single customs documents). There were two types – one for motor vehicles and trailers, and one for all other goods. The Istanbul Convention made the issuing authority responsible to the relevant tax authority for the duties and taxes outstanding if the terms of the carnet were broken – for instance, if goods were not re-exported within the prescribed term.

The Convention consisted of 34 Articles and 13 Annexes. In 2005 South Africa acceded to the General Provisions as well as annexes A and B1. SARS was now requesting Parliament to approve accession to the remaining Annexes.

Mr Erich Kieck, Head:Customs, SARS,  further clarified that South Africa had acceded to the minimum number of annexes in 2005, in order to give the carnet system a trial run. After a year of operation he was now able to confirm that things had gone smoothly, and thus the remainder of the Annexes should be acceded to, in order to reach full compliance with the Convention. He set out and explained the content of those Annexes (see attached presentation for full details)

Discussion
Mr K Moloto (ANC) asked about the difference between the single administration document (SAD) and the ‘carnet’.

Mr Kieck replied that the SAD differed from the carnet in the sense that the SAD was the normal documentation by which the international movement of goods was regulated in South Africa and within the SADC region. The carnet was a way of circumventing or short-circuiting this system in certain circumstances. He was at pains to point out, however, that under no circumstances could the issuing of a carnet override the regulations governing prohibited or restricted goods.

Mr B Mnguni (ANC) asked what were the disadvantages of the carnet system.

Mr Kieck replied that there were none, except that perhaps the Convention increased SARS’s workload.

Mr S Marais (DA) talked about his own experience of situations where the Convention was not in place and the ensuing chaos. He strongly supported the aims of the Convention and agreed with SARS that it was imperative for South Africa to become a full signatory.

 Ms N Mokoto (ANC) asked for clarity on the prime aim of the Convention.

Mr Kieck explained that the Istanbul Convention was an attempt to simplify and unify the various separate conventions which had hitherto existed. It governed a range of different types of goods for temporary admission into one overarching document.

Mr Krieck added that in South Africa SARS handled about five million SADs and about four thousand carnets each year. This illustrated that the SAD was the rule and the carnet the exception in the import and export of goods.

He assured the Committee that the key to combating possible corruption in the customs environment was having effective control systems. To this end SARS was ensuring that there were sufficient checks and balances between the central administration and branch offices.

The Committee resolved unanimously to recommend that the House approve the accession to the remaining Annexes B2 to B9, C, D and E of the Istanbul Convention.

The meeting was adjourned.

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