Questions and Replies

Reply:

1. Sole proprietors earn business income as the base for the personal income tax. To calculate the taxable business income they would be able to claim depreciation and other capital allowances just like any other business. Therefore, should their investment conform to the requirements of the allowance, they will be able to claim the 125% tax deduction.

2. The rebate of 25% will not be available on any expenses that already enjoyed the 125% deduction against business income. If that deduction was not claimed, then a sole proprietor will be able to claim the rebate.

The policy process for the 2023 tax legislative amendments is underway. The Frequently Asked Questions document that was published on the day that the Minister of Finance delivered the Budget Speech states (and available on the website www.treasury.gov.za) that :

“This incentive will be included in the annual tax amendments. A draft version of the legislation will be published for public comment no later than the publication date of the 2023 Draft Taxation Laws Amendment Bill. The Minister tables tax bills during the Medium Term Budget Policy Statement (MTBPS) in October each year. Parliament considers the amendments after which the President can assent to the amendments – usually by January of the year after the announcement. The aim of this note [the FAQ document] and the draft legislation to follow is to provide as much upfront clarity as possible so that individuals do not feel they need to wait for the tax bills later in the year before making a decision to invest and benefit from the incentive. The guidance provided is, nevertheless, subject to the outcome of the consultative process on the proposal and Parliament’s ultimate decisions on the legislation giving effect to the

proposal.”

Reply:

The Public Investment Corporation (PIC) invests according to the mandates of its clients in line with section 10(4) of the PIC Act as amended. Any potential investment in Eskom will be in line with client mandates or their approval and assessed on its merits taking into account the expected returns and associated terms and conditions, especially the security thereof.

Reply:

National Treasury issued MFMA circular 117 on 04 May 2022 titled “SCM Circular on reporting of procurement in response to the National State of Disaster as a result of severe weather events”

The purpose of the circular was mainly to provide a framework in relation to procurement in response to the national state of disaster as a result of the severe weather events and a need for greater transparency on procurement and expenditure related to the disaster.

All municipalities and municipal entities affected by the flood disaster, must when procuring goods and services, follow section 217 of the Constitution, the Municipal Finance Management Act and its regulations and circulars as well as supply chain management policies of institutions.

In addition to MFMA circular 117, National Treasury issued MSCOA Circular 14 on 16 May 2022 to give effect to the recording of disaster events in mSCOA.

Reporting and monitoring

As contained in MFMA circular 117, all municipalities and municipal entities affected by the disaster are required to report all disaster-related transactions on a weekly basis effective from 13 May 2022. Furthermore, all municipalities and municipal entities are required to report monthly as per sections 71(1) and 87(11) of MFMA for both municipalities and municipal entities respectively.

National Treasury has advised all municipalities and municipal entities affected by the disaster to utilize their internal audit units to undertake preventative audits for quality assurance on procurement to respond to the effects of the damage caused by floods.

The reporting template provided in MFMA circular 117 requires affected municipalities and municipal entities to report weekly and both MFMA section 71(1) (municipalities) and section 87(11) (municipal entities) reports to provide real-time information that will allow Auditor General to conduct real-time audits.

The aim of the real-time audits is to prevent, detect, and report on the findings to ensure an immediate response to prevent leakage, potential fraud, financial mismanagement and wastage.

The Auditor-General of South Africa will further provide real-time insights into the management and usage of funds earmarked for disaster relief in accordance with the objectives and targets set for those funds.

Reply:

Kindly refer to Figure 1.6 of the Budget Review 2023.

Reply:

National Treasury will be engaging with the South African Local Government Association (SALGA) on its concerns, as it is not necessarily correct that a municipality will lose revenue, especially if there is greater economic activity as a result of more secure electricity to business and households.

Further, households are being encouraged to use and move to solar energy as part of the government's deliberate attempt to reduce the demand for energy that is causing the load-shedding crisis. In the absence of such efforts, more pressure on the grid could result in grid collapses which would be more detrimental to municipal finances. Therefore, participating in this initiative may benefit municipalities as a result of a "payback scheme". By feeding excess energy back into the grid, customers can provide stored excess energy at lower rates than Eskom at peak times.

National Treasury has observed that many municipalities adopted tariffs that are not cost-reflective, which in essence means they are not recovering the full cost of providing electricity in the first place. To make the tariff more affordable, municipalities need to eliminate inefficiencies in the service value chain. The changing energy sector and its impact on municipal services must also be considered when setting tariffs. Energy conservation and efficacy must be facilitated and enforced in municipal consumption (across all services). Municipal operations should align with the decline in traditional electricity purchases by buying less from Eskom. It is also necessary for municipal strategy to re-align any earlier resolutions to flat rate selected areas with national policy, which limits the supply of basic water and electricity to 50 kilowatt hours of electricity and 6 kiloliters of water for indigent consumers.

The National Treasury is currently undertaking research on establishing norms and standards for electricity surcharges. This is in line with section 8 of the Municipal Fiscal Powers and Functions Act, 2007. This Act gives the Minister of Finance the power to prescribe mandatory national norms and standards for regulating municipal surcharges on electricity. The National Treasury is also working on identifying supplementary or replacement revenue sources for electricity surcharges as part of this ongoing research.

Considering the fiscal and economic risks posed by loadshedding, there is a need for further research into: 1) the implications of local trends in municipal finances; 2) how the municipal electricity business can adjust; and 3) how to minimize the adverse fiscal and economic impacts that energy sector reforms could have.

The National Treasury’s 2021 State of Local Government Finances report found that 165 municipalities were in financial distress at the end of 2020/21. Revenue management was the most prevalent factor contributing to financial distress. Moreover, many municipalities fail to adopt funded budgets, which means they will not be financially sustainable even if they remain within their budgets. This implies that they lack credible financial management. Those indicators are early warning signs of dysfunctional councils in the future.

In addition to issues that are leading to dysfunctional councils, our analysis shows that municipalities are diverting the LGES free basic provision to other initiatives, mainly paying salaries and a generous system of benefits for employees.

Once the research and engagements with SALGA are concluded, National Treasury will respond to the budgetary challenges via the annual budget process.

Reply:

The phenomenon of mobile higher-income earners is well-documented and known across tax jurisdictions – beyond South Africa. Indeed, “increased tax competition” of highly skilled, but mobile labour was identified as a key risk to inclusive tax policies as far back as 2018 (see Tax policies for inclusive growth in a changing world (oecd.org)).

Our highly unequal distribution of income coupled with very progressive marginal tax rates necessarily means that we collect a high proportion of our revenue from upper income groups – more so than many of peer countries. This is due to (1) a relatively high personal income tax exemption threshold and (2) high upper income tax rates (see Inchauste et al for a comparison to other developing countries).

1. The latest Tax Statistics includes an analysis of changes in residence (on pg 44) along with a new table regarding taxpayers that changed residence (Table A2.1.10 on pg 79). It indicates that 32 831individuals changed tax residence in the period between the 2017 and 2021 tax years. Of those individuals, 2 788 earned taxable income greater than R500 000 p.a. A total of 1 125 earned more than R1 million p.a., equating to R1.3 billion in taxed assessed during 2021. While any loss in revenue is important to track and understand, it is useful to indicate the scale of the phenomenon relative to our revenue raising capacity. As indicated in Ch. 4 of the Budget Review, we expect to raise R280.6 billion in 2023/24 from taxpayers with taxable income greater than R1 million p.a.

2. It is not clear that the country will be losing or gaining future revenue from PIT. The most important contribution that National Treasury can make at this point is to fight corruption and promote tax morality and confidence in the country, and to ensure that public finances stabilize, in order to lay the foundation for strong inclusive growth. Restoring growth is the most reliable determinant of increased tax bases.

Over the Medium-Term National Treasury aims to:

• Restore value-for-money in public expenditure, particularly through spending reviews.

• Make it as simple and as easy as possible to comply with tax requirements, as SARS did with automatic assessments over the last years.

• Increase the probability of detection of non-compliance, which is one of the main reasons behind rebuilding SARS and an increase in their budget allocation, and

• Broaden tax bases to lower tax rates, as high tax rates offer a strong incentive not to comply.

National Treasury is not currently considering any specific taxes to compensate for fluctuations in the tax base. Moreover, there are no new policy announcements or proposals that aim to prohibit or discourage taxpayers from leaving. Indeed, exchange controls have been relaxed over the last 2 years – to enhance South Africa’s position as an investment destination and to lower the cost of business. From a policy perspective, we are trying to reconcile our provisions with the commercial reality of more globalised operations and careers that include stints in numerous tax jurisdictions – notwithstanding the challenges posed by Covid 19. From a tax perspective, the objective is to ensure that the appropriate tax is paid for any assets that are transferred abroad. Some of the measures that had been in placed have become outdated as a result of exchange control reforms. As a result, the tax provisions regarding foreign remunerative work and pre-retirement pension withdrawals on cessation of tax residence have undergone significant reform in the last 5 years.

Reply:

a) The Consolidated 2021/22 Audited Annual Financial Statements for eThekwini Metropolitan Municipality reported the following breakdown on Borrowings:

1. Local Lenders = R9 billion
2. Foreign Lenders – Agence Francaise de Developpement (AFD) = R233 million

        Total = R9.2 billion

 It should be noted that in terms of Section 47 of the Municipal Finance Management Act, municipalities are not allowed to incur any debt in any foreign currency, and must ensure its debt is denominated in Rands.

b)  As part of the oversight responsibilities, the National Treasury performs the following:

(i) The National Treasury analyses the borrowing capacity of a municipality by evaluating the size of the Gearing Ratios – total borrowing liabilities divided by the total operating revenue (also an indicator used to determine if a municipality is in financial distress).

(ii) When a municipality intends to borrow from the authorised financial service providers (lenders), they are required to obtain National Treasury’s views in terms of Section 46 of the Municipal Finance Management Act, 2003. A decision to borrow or not is the prerogative of a municipal council.

(iii) National Treasury has put in a place a Borrowing Policy Framework (which has been endorsed by Cabinet on the 17th of August 2022). The Policy sets out the following principles:

• Creditworthy municipalities should borrow prudently to finance capital investment and fulfil their constitutional responsibilities;

• Municipal access to private capital, based on investors’ evaluation of municipal creditworthiness, this is key to efficient local government and fiscal discipline as their financial sustainability is seen from an objective perspective;

• Municipalities should borrow in the context of long-term financial strategies, which reflect clear priorities and the useful life of assets; and

• Neither national nor provincial government will underwrite or guarantee municipal borrowing, again contributing to fiscal discipline as it would lead local government to think carefully on how they approach the borrowing market.

Reply:

No, as we need more clarity on what specific problems or audits where exorbitant spending on overtime has been identified as a problem requiring National Treasury to intervene. Further, overtime is regulated by the Basic Conditions of Employment Act (BCEA-section 10) and the SALGA Collective Agreement.

There are no planned meetings between the National Treasury and Department of Cooperative Governance to discuss overtime payments by municipalities.

However, there are measures currently in place to guide the implementation of Overtime and the related payments, such as MFMA Circular No. 86 on Cost Containment.

Municipalities are advised that overtime budgets must not exceed 5 per cent of the total employee related cost budget as a norm to guide them in this regard.

Reply:

We do not expect the greylisting by the Financial Action Task Force (FATF) to have any effect on any institutions implementing a Green Finance Taxonomy (GFT). The GFT is an important pillar in the comprehensive approach of reducing the carbon intensity of the South African economy. The primary purpose of the GFT is to provide market clarity for green/environmentally sustainable activities, thus reducing market risks. The GFT is a voluntary market tool and was established on 1 April 2022. While the Carbon Tax sets a price for emissions to help businesses fully internalize the costs of their activities, the GFT sets out those projects, investment and assets which are required to reduce the carbon intensity of companies (and thereby reduce their emissions). The GFT adopts international best practice in recognition of the fact that the capital required for investments into ‘green assets’ (as is the case generally) comes from both domestic and international sources.

In any case, as noted in National Treasury’s statement on the FATF greylisting: there are no items on the action plan that relate directly to the preventive measures in respect of South Africa’s financial sector. This reflects the significant progress that South Africa’s financial sector supervisors have made in the application of a risk-based approach to the supervision of banks and insurers. National Treasury therefore expects that the grey-listing will have limited impact on payments, broader financial stability or broader inward investment, including the use of the green finance taxonomy for green investment.

Reply:

The budget process involves making many trade-offs, including between different priorities. As stated in the 2023 Budget Review, the extension of the COVID-19 SRD grant and the inflationary increases to social grants cost R65.3 billion. Given the priorities and pressures facing the 2023 Budget and Medium-Term Expenditure Framework, it is clear that there was (and is) limited fiscal space to accommodate the increase in the COVID-19 SRD grant values. Under spending or savings from 2022/23 do not go through the next year because of the large budget deficit. In addition, a broader agreement on the future of the COVID-19 SRD grant is required, including the financial implications of the proposed change, and how to finance it.

Reply:

In recent years, government has proposed difficult but necessary measures to curb the growing and unsustainable public sector wage bill. Given the size and the share of the public sector wage bill to total consolidated expenditure, it is critical that the public sector wage bill is carefully monitored and managed in relation to the broader economy. A faster growing public sector wage bill in relation to economic growth, will lead to a crowding-out effect on other critical priority spending areas.

Government thus far has successfully in curbing or slowing down growth on compensation expenditure given the fiscal consolidation measures introduced in Budget 2020 and Budget 2021. This has resulted in consolidated compensation of employees’ accounting for 31.6% of total consolidated expenditure in 2022/23, which is a reduction from the 35.7% share in 2013/14. Please refer to Figures 3.5 and 3.6 in page 29 of the 2023 Budget Review for relevant details regarding growth in compensation of employees’ spending relative to other service delivery areas.

Reply:

The National Treasury does not generally have any official position on specific funding requests and focuses on the process on how budgetary decisions are made as funding decisions always involve trade-offs between different priorities. Such process includes consultation with the technical Medium Term Expenditure Committee and Technical Committee on Finance processes, as well as political forums like the Budget Council, Budget Forum, Ministers Committee on the Budget, and ultimately, Cabinet.

In the 2022 Medium Term Expenditure Framework and the 2023 Medium Term Expenditure Framework, as reported on pages 72 and 60 of the 2022 and 2023 Budget Reviews, R24 billion and R20 billion respectively was added to the provincial equitable share for provinces to deal with compensation of employees in provincial education departments, which includes dealing with the learner-educator ratio.

Reply:

1. Any legitimate trader ought to be licensed with SARS in terms Sections 19 (1),27 (1), and 60 (1) of the Customs & Excise Act, No. 91 of 1964 (the Act).

As per the Customs & Excise trader register, there is total of 64 (sixty-four) licensed facilities for tobacco products as follows:

(i) Manufacturer of tobacco products is 50 (fifty) Licensees

(ii) Storage of tobacco products as per register – 14 (fourteen) Licensees

(a)(b) In terms of the section 4 (3) of the Act, the Commissioner or any officer of SARS may not disclose any taxpayer-specific information, except in the performance of his or her duties under this Act or by order of a competent court. The taxpayer confidentiality provisions of the Act therefore prevent names and addresses of licensees to be shared as requested.

2. (a) Since the 01 January 2022 a total number of licenses issued for Manufacturers of

tobacco products is 8 (eight) and Storage of tobacco products is 4 (four)

(b) Licenses were issued to traders that submitted applications and met the criteria as per Sections 19 (1),27 (1) and 60 (1) of the Act.

3. Sections 19, 27 and 60 of the Act make special provision for Customs and Excise warehouses in which Excisable or fuel levy goods are manufactured or stored. Section 19A of the Act controls the activities in and movements of goods from and between such warehouses, with the rules numbered 19A1 thereto being specifically applicable to tobacco products.

Section 54E of the Act makes provision for a Customs and Excise manufacturing warehouse in which environmental levy goods are manufactured. Section 54J of the Act applies these licensing provisions in respect of Health Promotion Levy on sugary beverages.

No licensee may conduct other business / manufacturing in or on the same factory / plant that is licensed as a manufacturing or storage warehouse with the SARS.

Client is required to submit application through Customs & Excise branch with all relevant supporting documents and applicable annexures for the purpose of the application.

The following additional supporting documents must be presented with the application (DA 185):

i) Registration certificate of business (as issued by the Registrar of Companies or Master of the Supreme Court in a case of a trust);

ii) Resolution / consent or other authority applicable.

iii) Site plan:

A) Must be a detailed plan of the premises but need not be a blueprint although it must be according to scale.

B) Must show the position(s) of the proposed manufacturing or storage warehouse in relation(s) to the adjoining building(s) and public thoroughfare(s);

C) Adequate office space must be provided to enable excise officers to conduct enforcement functions on the premises; and

D) Must be signed and dated by the applicant.

iv) A list of plant and machinery; and

v) Identity / passport documents of –

A) Individual.

B) Partnership, Close Corporation and Trust (All members / partners / trustees).

C) Company (All Directors, including Managing Director and Financial Director).

Once application is submitted client is subjected to below verification processes before being granted with a license:

A).Case is generated at time of submission at branch office

B). Physical inspection will be conducted to ensure client meet the requirements

C).Compliance check is conducted – and client is required to lodge a bond (surety/guarantee) to minimum value of R 2 000 000.00

D)  Once all applicable processes are conducted and client meets all criteria, license will be issued.

4. No, since licencing is a regulatory measure. [Optional: It is not a measure to allocate finite resources that are in high demand, such as radio spectrum.

Reply:

State-owned entity	(i)(a) Chief Executive Officer	(ii)(a) Top Executive Position	(i)(b) Chief Executive Officer	(ii)(b) Top Executive Position
Accounting Standards Board (ASB)	R2 861 287	R2 139 230	The chief executive officer and top executives do not receive payment to attend meetings.
Co-operative Banks Development Agency (CBDA)	R594 000[1]	R1 214 000
Development Bank of Southern Africa (DBSA)	R8 061 383	R4 128 919
Financial and Fiscal Commission (FFC)	R1 759 809	R1 450 275
Financial Intelligence Centre (FIC)	R3 068 000	R2 073 000
Financial Sector Conduct Authority (FSCA)	R4 166 667	R3 621 890
Government Pensions Administration Agency (GPAA)	R2 137 000	R1 304 000
Government Technical Advisory Centre (GTAC)	R1 466 778	R1 601 147
Independent Regulatory Board for Auditors (IRBA)	R3 303 398	R2 651 221
Land and Agricultural Development Bank of South Africa (Land Bank)	Vacant	R3 535 999
Office of the Ombud for Financial Services Providers (FAIS Ombud)	R2 385 313	R1 593 228
Office of the Pension Funds Adjudicator (OPFA)	R2 586 223	R1 807 125
Office of the Tax Ombud (OTO)	R2 697 684	R1 903 092
Public Investment Corporation SOC Limited (PIC)	R9 500 000	R7 563 600
South African Revenue Service (SARS)	R6 156 000	R3 023 000
South African Special Risks Insurance Association (SASRIA)	R4 100 000	R3 800 000

All the related information is available in the Annual Report of the Public Entities reporting to the Department.

The Managing Director of the CBDA’s contract ended on 30 September 2021. ↑

Reply:

The provisions of section 121 of the Municipal Finance Management Act, Act 56 of 2003 (MFMA) together with section 127(2) – (3)(b) of the Municipal Finance Management Act, Act 56 of 2003 (MFMA) states that the mayor of a municipality must, within seven months after the end of a financial year, table in the municipal council the Annual Report of the municipality and of any municipal entity under the municipality's sole or shared control. Should the mayor, for any reason, be unable to table the Annual Report of the municipality or any municipal entity under the sole or shared control within 7 (seven) months after the end of the financial year to which the report relates, the mayor must: (a) promptly submit to the council a written explanation referred to in section 133(I)(a) setting out the reasons for the delay, together with any components of the Annual Report listed in section 121(3) or (4) that are ready and (b) submit to the council the outstanding Annual Report or the outstanding components of the Annual Report as soon as may be possible.

The responsibility to discharge this requirement in terms of the MFMA, vests with the respective municipality.

I have been advised from a report to the National Treasury, that Annexure A lists the municipalities that did not table their Annual Reports to Council by 31 January 2023 based on information received by the National Treasury. I am further advised however, the updating of such information for monitoring compliance, is ongoing.

Annexure A

Number	Name of Municipality	Province
1	Senqu	Eastern Cape
2	Emalahleni	Eastern Cape
3	Ngqhuza Hill	Eastern Cape
4	Koukamma	Eastern Cape
5	Kopanong	Free State
6	Mohokare	Free State
7	Masilonyana	Free State
8	Tokologo	Free State
9	Nketoana	Free State
10	Maluti-a-Phofung	Free State
11	Mantsopa	Free State
12	Mafube	Free State
13	City of Johannesburg	Gauteng
14	uMkhanyakude	KwaZulu Natal
15	Steve Tshwete	Mpumalanga
16	Richtersveld	Northern Cape
17	Ubuntu	Northern Cape
18	Magareng	Northern Cape
19	Renosterberg	Northern Cape
20	Sol Plaatje	Northern Cape
21	Thembelihle	Northern Cape
22	Siyathemba	Northern Cape
23	Tsantsabane	Northern Cape
24	Kgatelopele	Northern Cape
25	Phokwane	Northern Cape
26	JB Marks	North West
27	Naledi	North West
28	Mamusa	North West
29	Ditsobotla	North West
30	Ngaka Modiri Molema	North West
31	Cederberg	Western Cape

Reply:

There are many considerations when determining the rate of any tax. The National Treasury has undertaken an alcohol taxation review process and will soon publish a discussion paper for public consultation. The discussion paper will consider all the developments and relevant issues pertaining to the overall alcohol industry and the taxation of alcoholic beverages since the last review was performed in 2014. The excise duty regime for wine will also be specifically considered in relation to the industry and the excise duty regime for other alcoholic beverages.

Reply:

(a)

The Ciskeian Civil Servants Pension Fund (CCSPF) of the former Ciskei was administered by the former Ciskei Government until 1993 when Sanlam took over the administration. The GEPF took over from Sanlam in 1999. The Ciskeian Civil Servants Pension Fund was, together with certain other pension funds as specified in the Government Employees Pension Law, 1996 (GEP Law), amalgamated into the Government Employees Pension Fund (GEPF).

Any member of the CCSPF whose pensionable service data was received from the CCSPF correctly, was transferred to the GEPF as part of the amalgamation. Such a member’s GEPF pensionable service includes his/her CCSPF pensionable service for which such a member was not already paid and is recognised as a continuous pensionable service record.

Members who exited the CCSPF prior to amalgamation, would have been paid their pension benefits through the then administrator being Sanlam.

Any member who was amalgamated into the GEPF as explained above, has his/her CCSPF pensionable service recognized as part of their GEPF pensionable service. When such a member exits the GEPF the full pensionable service (inclusive of the CCSPF) is considered to determine the pension benefits.

There is accordingly no knowledge of “thousands of pensioners” who were not paid what is due to them as any such member whose data was correctly transferred and who was not paid any benefit under the CCSPF, has their pensionable service for such period recognized as part of their GEPF pensionable service. The GEPF investigates any individual case where it is submitted that a member’s pensionable service record differs and assesses such in respect of each individual case.

(b)

Accordingly, the Fund is not aware of any delays in the payment of pensions for former CCSPF members.

Reply:

(1)	(aa) Minister	(bb) Deputy Minister
(a) Destination	Dubai	Boston
	Egypt	Botswana
	Ethiopia	Dakar
	Germany	Egypt
	Ghana	Paris
	Indonesia	Senegal
	Japan	Swaziland
	London	Windhoek
	Morocco
	Niger
	Rwanda
	Singapore
	Switzerland
	Tanzania
	Washington
(b)(i) Accommodation	R1 022 286,58	R 68 232,47
(b)(ii) Travel	R1 808 642,36	R402 893,88
(b)(iii) Other costs	R 220 082,08	R 16 833.29

(2)	(a) Minister	(b) Deputy Minister
Total cost incurred for domestic air travel	R637 211,56	R783 050,91

Reply:

As announced in the 2023 Budget, the planned increase on the health promotion levy on 01 April 2023 has been suspended for two years. This has been done to enable stakeholders in the sugar industry to restructure or diversify, given the challenges on jobs and farmers from greater regional competitive pressures and the effect of recent floods and public violence.

No consultations generally take place before any tax announcement but is done after such an announcement as part of the legislative process that follows.

Government does, however, consult on policy proposals as explained in the 2022 and 2023 Budget. Government will also soon publish a discussion paper on the levy for consultation on proposals to extend the levy to pure fruit juices and lower the 4-gram threshold. Consultations on the proposals will take place after written comments on the discussion document have been received.

Reply:

As announced in the 2023 Budget, the planned increase on the health promotion levy on 01 April 2023 has been suspended for two years. Consultations with key stakeholders, like the health sector and sugar industry will take place after the publication of a discussion paper to extend the levy to pure fruit juices and lower the 4-gram threshold.

Reply:

(a), (b) and (c) Section 81(1) of the PFMA states that an accounting officer for a department or a constitutional institution commits an act of financial misconduct if that accounting officer willfully or negligently (a) fails to comply with a requirement of section 38, 39, 40, 41 or 42 or (b) makes or permits an unauthorised expenditure, an irregular expenditure or a fruitless and wasteful expenditure.

Section 85(1)(a) of the PFMA provides that, the Minister must make regulations prescribing the manner, form and circumstances in which allegations and disciplinary and criminal charges of financial misconduct must be reported to the National Treasury, the relevant provincial treasury and the Auditor-General including (i) particulars of the alleged financial misconduct; and (ii) the steps taken in connection with such financial misconduct.

Treasury Regulation 4.1.3 states that, if an accounting officer is alleged to have committed financial misconduct, the relevant treasury, as soon as it becomes aware of the alleged misconduct, must ensure that the relevant executive authority initiates an investigation into the matter and if the allegations are confirmed, holds disciplinary hearing in accordance with the prescripts appliable and agreement applicable in the public service. The relevant treasury may also direct that (a) an official other than the employee of the department conducts the investigation or (b) issues reasonable requirement regarding the way in which the investigation should be performed as provided in Treasury Regulations 4.1.4.

Information related to investigations conducted against accounting officers and disciplinary action instituted in departments can be found in the annual reports of those departments. In addition, the Frameworks issued by the National Treasury on unauthorised, irregular and fruitless and wasteful expenditure prescribes the process and requirements that should be followed by departments, constitutional institutions, trading entities and public entities when dealing with matters of financial misconduct linked to these expenditures. The Frameworks can be found on the National Treasury website at the following link:

https://www.treasury.gov.za/legislation/pfma/TreasuryInstruction/Annexure%20A%20%20PFMA%20Compliance%20and%20Reporting%20Framework%20Instruction%20No%204%20of%20202223.pdf

Reply:

Generally, the causes of South Africa’s poor economic growth and development are complex and multi-faceted. It includes the impact of state capture, as outlined by the Zondo Commission findings published in 2022. The National Treasury provides a bi-annual update on the performance of the economy and the policy proposals to improve it in the annual Budget Review and in the Medium Term Budget Policy Statement.

From a local government perspective, interventions in terms of section 139 of the Constitution are being more actively pursued as a measure to address the lack of service delivery and poor financial management in municipalities. Where necessary, such interventions in terms of Section 139(5) are mandatory, and require a financial recovery plan to be imposed on the municipality. Monthly reporting on the recovery plan is a legislative requirement and creates the mechanism to monitor the performance of the municipality, including how funding is being utilised by the municipality, prioritization of service delivery and inclusion of programmes to enhance social and economic development. However, interventions are led by the relevant Provincial Executive Committee and the role of the National Treasury is limited in terms of the Constitution to the preparation of the financial recovery plan and overseeing the monthly reporting on progress.

For more details on some of the policy work done by the NT to enhance transparency of local government spending, please refer to Parliamentary Question 293.

Reply:

We acknowledge the importance of the agricultural sector and its potential to generate low-skilled jobs needed to address unemployment in South Africa, however, the Honourable Member’s question is not clear, as we do not necessarily agree on the underlying causes and potential impact of the reasons he has stated in his question for example we are not in agreement with his assumption that an increase in taxes is a factor responsible for the major economic setback to the agricultural sector. The Honourable Member may kindly provide more details on the economic setback in agriculture referred to.

The fiscal support for agricultural sector is determined through the budget allocations to the Department of Agriculture, Land Reform and Rural Development, as articulated in the Estimate of National Expenditure (ENE) - Vote 29 and to provinces though the Division Revenue Act, and this information is available in various provincial budgets.

Reply:

In responding to the question, it is important to first contextualise the widespread and sometimes inaccurate use of the term municipal dysfunction. Municipal dysfunction refers to a situation where a municipality is not functioning as it is supposed to and the discharge of a municipality’s constitutional responsibilities is impaired for some or other reason. However, there are various degrees of municipal dysfunction ranging from dysfunction which is less serious or temporary in nature requiring only appropriate support to rectify and dysfunction that implies a full-blown crisis in the financial and service delivery affairs of a municipality warranting intervention. Often, the use of the term “municipal dysfunctionality” is construed to mean that a municipality is in crisis which is not necessarily the correct interpretation.

The 165 municipalities referred to by the President in his State of the Nation Address, are municipalities that the National Treasury has identified in its annual municipal financial health assessment to be in financial distress. This means that according to the 13 indicators used by the National Treasury to measure the financial health of municipalities based on their audited financial statements, these municipalities are showing signs of existing, recurring and/or potentially serious financial problems. Again, this should not be construed as a necessary crisis in the municipality’s financial affairs.

The assessment is just one of the many early warning systems developed by the National Treasury to indicate where problems are emerging in a municipality’s financial health and if used proactively as early warning systems should be, to avoid these problems from morphing into a financial crisis. This results of this annual assessment should be interpreted alongside many of the in-year monitoring systems already institutionalized by the National Treasury including the monthly S71 reporting process. The National Treasury also publishes on a quarterly basis municipal performance indicators outlined in Section 138 and 140 of the MFMA. S138 indicators are used to indicate “serious financial problems” in a municipality whilst S140 indicators refer to a “financial crisis”. Serious financial problems should ideally be addressed via a discretionary financial recovery plan prepared by the respective province whilst financial crises require that the Provincial Executive Committees institute a mandatory intervention in terms of Section 139(5) of the Constitution and imposes a financial recovery plan on the municipality.

The role of the Provincial Treasury is to implement S213 of the Constitution and to assist the National Treasury in enforcing compliance with the measures established in terms of S216 of the Constitution and chapter 2 of the Municipal Finance Management Act (no: 56 of 2003 as amended).

In terms of the delegation of responsibility, the National Treasury shares the responsibility for the oversight of municipal finances with the Provincial Treasuries. The role of the National Treasury is to develop the policies, regulations, norms and standards required to improve financial management and reporting in municipalities and the National Treasury is also responsible for directly monitoring the performance of the 17 largest municipalities responsible for 80 per cent of municipal expenditure. The remaining 239 municipalities are monitored by the respective Provincial Treasuries.

Apart from the development of early warning systems which help municipalities to identify the extent of their financial problems where they exist, there are several other support initiatives which the NT has focused on to strengthen and enforce transparency, improve fiscal discipline and promote the better use of municipal revenue. These include initiatives focused on improving budget compliance, such as the Municipal Budget and Reporting regulations which aim to standardize the format of municipal budgets, the adoption of a realistically funded and credible budgets by municipalities, integration and management of the revenue value chain, providing technical support to build municipal financial management capacity through the Municipal Finance Improvement Programme (MFIP), resolution of municipal financial problems through the development of financial recovery plans, the introduction of a Standard Chart of Accounts for municipalities (mSCOA) and processes to deal timeously with financial misconduct and consequence management.

National and Provincial Treasuries also engage municipalities annually through budget and benchmark engagements where the tabled budget is subjected to a rigorous assessment prior to adoption by the municipal council. There are also mid-year performance assessments which provide an opportunity to assess the financial and service delivery performance of the municipality against the adopted budget and effect the necessary adjustments. National Treasury also enforces compliance in terms of s18 of the Municipal Finance Management Act by ensuring that any municipality who adopts an unfunded budget must develop a credible funding plan which seeks to gradually improve the financial position of the municipality and achieve a funded budget status. The implementation of these funding plans is monitored on a quarterly basis by the Treasuries.

Reply:

Honourable Ceza’s question must be contextualised within the framework as contained in section 1 of the Municipal Finance Management Act (Act 56 of 2003) (MFMA). It outlines four instances where a municipality will incur irregular expenditure (a) where the expenditure incurred by a municipality is in contravention of, or that is not in accordance with a requirement of the MFMA, (b) where expenditure incurred by a municipality in contravention of, or that is not in accordance with a requirement of the Municipal Systems Act (c) expenditure incurred by a municipality in contravention of, or that is not in accordance with, a requirement of the Public Office-Bearers Act, or (d)

expenditure incurred by a municipality or municipal entity in contravention of, or that is not in accordance with, a requirement of the Supply Chain Management Policy of the municipality or entity or any of the municipality’s by-laws giving effect to such policy.

It is therefore incorrect to assert all amounts to fraud and corruption. To illustrate this using an example; the law requires a municipality to advertise a tender for 14 days and if a municipality advertises the tender for 13 days or less, the law requires for the associated expenditure to be disclosed as irregular expenditure.

Powers to deal with irregular expenditure vests with the Accounting Officer and the Municipal Council. Section 32 of the MFMA, requires municipalities to investigate the irregular expenditure and either recover the irregular expenditure from the person liable or write off that expenditure where value for money was obtained. Municipalities are also required to implement consequence management against officials who failed to comply with the MFMA and implement measures to avoid future recurrences of irregular expenditure.

Where matters are reported to law enforcement agencies, the recovery of proceeds of crime are largely dependent on the successful prosecution of criminal cases. This information is not maintained by the National Treasury.

Reply:

	(i) Minister	(ii) Former Minister	(iii) Deputy Minister	(iv) Former Deputy Minister
(a) Make	None	Mercedes-Benz	None	None
(b) Model		C-Class (C180)
(c) Year of manufacture		2016
(d) Cost		R653 943.27
(e) Purchase date of all official vehicles purchased since 1 June 2019?		28 June 2019

Reply:

The causes of South Africa’s poor economic growth and development are complex and multi-faceted. It includes the impact of state capture, as outlined by the Zondo Commission findings published in 2022. The National Treasury provides a bi-annual update on the performance of the economy and the policy proposals to improve it in the annual Budget Review and in the Medium-Term Budget Policy Statement. In addition, both publications provide an update on the state of public finances, with the Budget Review providing a comprehensive outline of the spending plans, division of revenue, the liability position of government, as well as government assets in the form of public entities. The President also submitted the response of Government to Parliament on 22 October 2022, which outlined the response of Government to the recommendations made by Judge Zondo in his report on State Capture. Members of Parliament and the public may examine the details of these publications for information on what government is doing to address the country’s challenges. All the documents are available on the National Treasury or government websites.

Reply:

1. Major public entities as listed under Schedule 2 of the Public Finance Management Act (1999) are required to operate as sustainable profit-generating businesses that borrow on the strength of their balance sheets. However, over the years the financial and operational performance of these entities has steadily deteriorated due in large part to state capture, corruption (as noted by the Zondo Commission), weak corporate governance, archaic business models and burdensome cost structures. Too many SOEs continue to rely on government bailouts. Various initiatives are underway across government to ensure that we create an environment where our SOEs can become sustainable and fulfil their developmental mandate without government support. In this regard, the 2022 Budget Review outlined the need for a new framework for managing bailouts to state-owned companies to reduce fiscal risks and promote long-overdue reforms. The framework, when finalised, will link bailouts of these entities to a range of reforms needed to make them sustainable and efficient.

2. Some SOEs have indeed become a burden on taxpayers. Between 2012/13 and 2021/22, SOEs received about R266.6 billion in bailouts from government. These bailouts crowd out important social expenditure. Therefore, government has shifted its approach in dealing with funding support to these entities, in particular those that are listed under Schedule 2 of the PFMA. Starting last year, and going forward, any fiscal support to SOEs is accompanied by strict conditions to ensure that these SOEs fix their underlying structural challenges if they are to qualify for support from taxpayers.

Reply:

(a), (b), (c), (d) It is assumed that the Honourable Ceza is referring to the 2020/21 municipal financial year in which R1.26 billion was spent on consultants by municipalities to assist them with financial statement preparations as reported by the AGSA in its MFMA General Report (see the link below for a copy of the 2020/21 MFMA General Report, https://www.agsa.co.za/Reporting/MFMAReports/MFMA2020-2021.aspx). Section 2.2 of the MFMA General Report (page 18) sets out the AGSA’s conclusions on the use of consultants for financial reporting. Furthermore, section 2.3 of the MFMA General Report (page 20) sets out the AGSA’s conclusions on the “Financial Health” of municipalities. Information for use of consultants for the 2021/22 municipal financial year is not yet available as the audits are still in progress.

Various disciplines and specialist knowledge is required in financial management. An appropriate use of consultants, coupled with transfer of skills to municipal officials, can assist in making a difference in stabilising and sustaining municipal finances. In this regard, the National Treasury issued a Circular to municipalities in 2016 dealing with cost containment, followed by Regulations in 2019, requiring municipal managers to only appoint consultants if a gap analysis confirmed that the requisite skills or resources are not available to perform the necessary work. It also reminded municipalities of the legislated requirements to closely monitor contracts and the importance of transferring skills. The responsibility for the effective use of financial reporting consultants lies with the Municipal Manager and the relevant Chief Financial Officer.

Reply:

The purpose of Business Rescue process as per the Companies Act is to provide for the efficient rescue and recovery of financially distressed companies so as to balance the rights and interests of all relevant stakeholders (employees, creditors and shareholders)

The primary objective of business rescue is the development and implementation of a business rescue plan that either:

• 1. Rescues the company by restructuring its debt and equity in a manner that maximises the likelihood of the company continuing in existence on a solvent basis; or
  2. Results in a better return for the company’s creditors or shareholders than would result from the immediate liquidation of the company

SAA was placed into voluntary business rescue on 06 December 2019 by its Board of Directors as they believed that the company was in financial distress, after which the airline’s Business Rescue Practitioners (BRPs) took over the management of the airline.

The National Treasury is not aware of any non-compliance to any legal prescripts in relation to SAA’s business rescue process as regulated by the Companies Act and the PFMA.

Reply:

The Honourable Member appears to be basing his question on the underlying repurchase (repo) rate, which then impacts on the prime lending rate. The repo rates are the primary tool that the SARB uses to control inflation, which is the rate at which the SARB lends to commercial banks. The prime lending rate is the rate at which commercial banks then lend to their customers, and is higher than the repo rate, as it incorporates their costs and profit margin.

The raising of the repo rate (and thus prime the lending rate) is a necessary intervention in response to inflation. Inflation erodes the ability of households in South Africa – particularly workers and those living on fixed incomes such as social grants or pensions – to buy necessities. Inflation in South Africa has risen sharply over the past year, reflecting both high global inflation, markedly higher food and fuel inflation, as well as domestic drivers, particularly core inflation. As inflation rises, the ability to buy the same number of products becomes more difficult as prices rise.

National Treasury supports the South African Reserve Bank in the exercise of its constitutional mandate, which is to protect the value of the rand, in the interest of balanced and sustainable economic growth. The Governor of the South African Reserve Bank and the Minister of Finance and their officials are in regular consultation to maximise coordination between fiscal and monetary policy objectives. The national government pursues a comprehensive approach to assist households in the Republic facing cost-of-living pressures via the annual Budget process, by funding basic services, grants (eg old-age, child support and social distress grants) and specific programmes, including:
The South African government has suspended the anti-dumping duties on poultry imports from five countries and this should ease chicken prices and provide the much-needed relief to consumers. On August 1, 2022, the Minister of Trade, Industry and Competition announced a decision to suspend the imposition of Anti-Dumping Duties (ADDs) on poultry from Brazil, Denmark, Ireland, Poland, and Spain for a period of twelve months “considering the rapid rise in food process as well as the impact that the imposition of the anti-dumping duties may have on the price of chicken.
The government intervened through the introduction of the temporary reduction in the general fuel levy to provide relief to consumers. On 31 March 2022 the Minister of Finance and the Minister of Mineral Resources and Energy jointly announced a temporary reduction in the general fuel levy of R1.50 per litre from Wednesday 6 April 2022 until 31 May 2022 to provide limited short-term relief to households from rising fuel prices following the Russia/Ukraine conflict. This relief package was further extended for two months until 2 August 2022. (the reduction was adjusted downward to 75c per litre from 7 July 2022 to 2 August 2022).

The sharply higher domestic inflation is the reason why South Africans are finding their incomes unable to buy the same basket of goods they afforded just a few months ago. Raising of the repo rate is the necessary corrective intervention required to reduce inflation.

Reply:

(1) The Department of Social Development is responsible for the hiring and bidding for funds for social workers. Since the 2018 Cabinet resolution allocations for the employment of social workers within the social development sector were as follows:

In Budget 2019, an average of R226.3 million per annum was shifted to provinces through the Provincial Equitable Share to sustain the employment of over 600 social worker graduates that were employed through the Social Worker Employment Conditional Grant.
In the 2019 Adjusted Budget the National Department of Social Development shifted R93.0 million from other programmes towards Social Crime Prevention and Victim Empowerment subprogramme for the employment of 200 social workers in areas of high prevalence of gender-based violence.
In Budget 2020, an average of R132.7 million per annum was shifted to provinces to sustain the employment of the 200 social workers in areas where they were most needed.
In the 2020 Supplementary Budget, the National Department of Social Development shifted R33.0 million from other programmes for the temporary employment of 1809 social workers.
In the 2020 Adjusted Budget, the Department received a further R92.5 million as unforeseeable and unavoidable expenditure to sustain employment of these social workers.
Most recently, in the 2021 Adjusted Budget, R120 million was added to the Provincial Equitable Share as part of the Presidential Employment Stimulus for the employment of 2000 social workers over a period of 10 months.

(2) Any announcement on additional funds will be made in the Budget Speech in February 2023. We do not announce such allocation decisions before the Budget.

Reply:

All budget related matters including increases to social grants will only be announced by the Minister of Finance in the February 2023 Budget Speech. The National Treasury does not make budgetary announcements before Budget Day

Reply:

The Honourable Member should note that Cabinet does not have any spending authority as an entity and its activities are funded under the vote of the Presidency, so it is incorrect to suggest that Cabinet as an entity has “blown” any public funds. Any spending to support a Cabinet Minister is done under the vote of the relevant department that a Cabinet Minister is responsible for, so any spending on official vehicles or fuel for any Cabinet Minister is done through their departmental vote, and not by Cabinet.

With regard to how spending on official vehicles is regulated by the National Treasury, it should be noted that Treasury issued an instruction no 6 of 2019-2020, revising the threshold for the procurement of official vehicles for members of the executive from R700 000 to R800 000.

The National Treasury also facilitates a transversal term contract (RT57) for the outright purchase of vehicles. Participation on the contract is voluntary as provided for by Treasury Regulation 16A6.5 and purchases of vehicles on the contract takes place at an organ of state level through the RT57 transversal term contract. Organs of state are compelled by the instruction issued to adhere to the limit that was set by the National Treasury when purchasing vehicles for the members of executive, regardless of whether a department chooses to use the transversal contract.

Adherence to the instruction is monitored on an annual basis through the audit process, and non-compliance leads to an audit finding that the relevant accounting office should account for with the Auditor-General and Parliament. Given that accounting officers have discretion on the procurement approach, there is no practical arrangement in place to monitor each transaction that participating organs of state undertake at the time when each transaction takes place.

Individual departments are responsible to make decisions on replacing the Executive Member vehicle on reaching the set mileage of 120000 kilometers or 5 years or when the vehicle experiencing mechanical problems as per the provisions of the Guide.

Any additional maintenance, such as tyres, fuel, oil, toll fees and repairs should be done through a transversal contract administered by the Department of Transport for this purpose. Therefore, the Department of Transport is best positioned to answer whether systems are in place to monitor in-year compliance to the limits set in the transversal contract relating to spending on fuel.

Reply:

The National Treasury has not recovered any funds from any person accused of defrauding the State since the beginning of this financial year commencing 1 April 2022, nor the previous financial year.

In terms of the Government Employees Pension Law, 1996, Government is able to recover or deduct from the pension benefit of an employee any amount of loss which has been sustained by the employer through theft, fraud or any misconduct on the part of the member, pensioner or beneficiary and which has been admitted by such person in writing or has been proved in a court of law.

I have been informed by the Government Pension Administration Agency (GPAA) that neither they nor the GEPF have been furnished with any court order since the beginning of the current financial year commencing 1 April 2022 requiring them to recover or deduct funds from the pension benefit of any person accused of defrauding the State.

Reply:

The information below is provided by the municipality to National Treasury. It is not audited and so cannot be verified by Treasury.

1. (a) The Municipality paid an amount of R18.6 million in the month of September to the Pension Funds. That reduced the total arrear debt to R20.9 million in terms of the narrative report submitted by the municipality to both Provincial and National Treasury. It should be noted that non-payment of pension fund contributions constitutes a criminal offence in terms of Section 13(A) of the Pension Fund Act.

b) The narrative report indicates that the Medical Aids are paid up to date and there is no arrear amount on the account.

2. According to the municipality, it owes the South African Revenue Service a total amount of R30.3 million. This information is obtained from a narrative report the municipality submitted to both Provincial and National Treasury. SARS are unable to confirm with the National Treasury as they do not discuss taxpayers’ affairs of a taxpayer with third parties.

3. The National Treasury does have the power to stop the transfer of the equitable share to the municipality in terms of Section 216(2) of the Constitution and other applicable legislation in the event of persistent failure by a municipality to honor its financial commitments. National Treasury does require municipalities to report on the non-payments of its commitment to South African Revenue Service, pension and other staff benefit deducted from municipal officials to be paid over the appropriate funds and/ or institutions. Failure for municipalities to provide this evidence may result in their equitable share being withheld to influence compliance.

The onus lies with the Executive Mayor to impose consequence management to the Accounting Officer. The Executive Mayor must recommend financial misconduct proceedings against the accounting officer in line with Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings.

The other option is also for the relevant Pension Fund to implement their credit control policies to collect the monies due to their institutions. Pension Fund Administrator must also lay criminal charges against the accounting officer in terms of their own legislation.

Eastern Cape Legislature must further exercise its oversight responsibility effectively. The matter must be directed to the Provincial Legislature for the relevant committee to summon the Mayor to the Legislature to provide responses on how the municipality is planning to address the matter.

Reply:

1. (a) There is enabling legislation which makes provision for the Minister of Finance to appoint a Tax Ombud in terms of Section 14 of the Tax Administration Act, 2011 (Act No 28 of 2011).

(b) Section 15 of the Tax Administration Act, 2011 is the enabling legislation which deals with the Office of the Tax Ombud and makes provision for the Tax Ombud to appoint the staff of the office of the Tax Ombud.

(c) The Office of the Tax Ombud has functional independence, in that the Minister of Finance and the South African Revenue Service (SARS) cannot interfere with the decision of the Tax Ombud.

2. The Office of the Tax Ombud is financed by a budget approved by the Minister of Finance, which is a ringfenced in the SARS budget.

Reply:

This question is very general, and it is not very clear what specific information the Honourable Member is requesting. It is generally the policy of the Government and the National Treasury to seek public comments on policy and legislative proposals. Such policy and legislation proposals are generally published on the National Treasury website for public comment, and once finalised, made public once again on our website.

I refer the Honourable Member to the National Treasury website (www.treasury.gov.za)

Reply:

The Minister of Finance does not generally make tax announcements in the Medium-Term Budget Policy Statement (MTBPS). However, the 2022 MTBPS did state that efforts to expand generation capacity would include “facilitating investments in rooftop solar by developing a feed-in tariff for small-scale embedded generation projects, and investigating the expansion of tax incentives for commercial installations”.

This is in line with what the President stated in the July 2022 announcement that a feed-in tariff would be developed by Eskom to incentivise greater use of rooftop solar.

To quote the President:

“Fourth, we intend to enable businesses and households to invest in rooftop solar. South Africa has a great abundance of sun which we should use to generate electricity. There is significant potential for households and businesses to install rooftop solar and connect this power to the grid.

To incentivise greater uptake of rooftop solar, Eskom will develop rules and a pricing structure – known as a feed-in tariff – for all commercial and residential installations on its network. This means that those who can and have installed solar panels in their homes or businesses will be able to sell surplus power they don’t need to Eskom.”

Reply:

The Agri-Parks Initiative falls under the domain of the Minister of Agriculture, Land Reform and Rural Development and not the Minister of Finance. I will, however, deal with some of your queries as related to the National Treasury.

a) According to the Department of Agriculture Land Reform and Rural Development, Agri-Parks entails the creation of a nexus of rural agricultural businesses across South Africa to serve as primary vehicles of agrarian transformation and comprehensive rural development in order to:

• • Enhance agricultural production and efficiency;
  • Promote household food security and national food sovereignty;
  • Engender agrarian transformation through rural enterprise development and employment creation; and

b) The AgriParks therefore aims to grow rural economies by facilitating the efficient movement of rural produce to markets. They support smallholder farmers by providing capacity building, mentorship, farm infrastructure, extension services, and the production and mechanisation inputs.

At conception the department has committed R2 billion per annum (this was part of the existing budget and no specific budget line was established for Agri Parks), for establishing and operationalising the Agri-Parks in all 44 Municipal Districts. However, this has been scaled down to 9 Agri-Parks.

Agri-Parks programme does not have a specific dedicated programme and budget item in the department, but is implemented through all the departmental programmes.

To maximise value for money and address inefficiencies in departmental spending, the department is embarking on the review of programmes, with Rural Infrastructure Programme as the first programme to be selected.

National Treasury does not intend to do a policy review. The programme falls under the oversight of Minister of Agriculture, Land Reform and Rural Development, the department is therefore mandated to undertake a policy review and financial cost benefit.

Reply:

(a) The Economic Recovery and Reconstruction Plan (ERRP) outlines the country’s near-term growth agenda. It includes a number of structural reforms aimed at supporting the economic recovery by unlocking investment and removing barriers to growth.

(b) The National Treasury provides forecasts from the expenditure side of GDP, details of which can be found in the Budget Review 2022 and Medium Term Budget Policy Statement (MTBPS) 2022.

With regard to the estimated impact of reform implementation, this was estimated to result in a 2.3 percentage point growth above the baseline over the next ten years. The details of this work can be found in the Economic Recovery and Reconstruction Plan.

(c) The MTBPS does not make specific allocations to departments and programmes. Such allocations will be published in the 2013 Budget.

Reply:

National Treasury works with departments to assist them with their budget requests and implementation of processes that will allow them to achieve their strategic plans. Departments mostly will, through the budget process, inform the National Treasury if funding is requested for a specific project. These funding requests will then be dealt with through the budget process.

In terms of the policy and implementation timelines, the Department of Home Affairs will have this information and should be requested to submit the plans and their timelines. The National Treasury has not yet received the specific funding request for this specific project.

Reply:

The disciplinary process is governed by the Public Service Act and not the Public Finance Management Act (PFMA). The PFMA in its current form does not provide the National Treasury with powers to institute disciplinary action against accounting officers. Information related to disciplinary action instituted in departments can be found in annual reports of those departments. The Frameworks issued by the National Treasury on unauthorised, irregular and fruitless and wasteful expenditure prescribes the process and requirements that should be followed by departments, constitutional institutions, trading entities and public entities when dealing with matters of financial misconduct linked to these expenditures.

Section 85(1)(a) of the PFMA provides that, the Minister must make regulations prescribing the manner, form and circumstances in which allegations and disciplinary and criminal charges of financial misconduct must be reported to the National Treasury, the relevant provincial treasury and the Auditor-General including (i) particulars of the alleged financial misconduct; and (ii) the steps taken in connection with such financial misconduct.

Treasury Regulation 4.1.3 states that, if an accounting officer is alleged to have committed financial misconduct, the relevant treasury, as soon as it becomes aware of the alleged misconduct, must ensure that the relevant executive authority initiates an investigation into the matter and if the allegations are confirmed, holds disciplinary hearing in accordance with the prescripts appliable and agreement applicable in the public service. The relevant treasury may also direct that (a) an official other than the employee of the department conducts the investigation or (b) issues reasonable requirement regarding the way in which the investigation should be performed as provided in Treasury Regulations 4.1.4.

Therefore, The Frameworks can be found on the National Treasury website at the following links:

www.treasury.gov.za/legislation/pfma/TreasuryInstruction/Annexure A Irregular Expenditure Framework 20192020.pdf

http://www.treasury.gov.za/legislation/pfma/TreasuryInstruction/Annexure%20A%20Fruitless%20and%20Wasteful%20Framework.pdf

http://www.treasury.gov.za/legislation/pfma/guidelines/Guideline%20on%20Unathorised%20Expenditure%2027%20May%202014.pdf

Reply:

Government is cognizant of the importance of having credible risk assessments as this enables the fight against money laundering, corruption and related financial crimes to be focused and targeted to high-risk areas and sectors. In this regard, to ensure the credibility of risk assessments, the government, including the supervisory authorities, takes into account the guidance that was issued by the Financial Action Task Force on the conducting of risk assessments, which rely on reasonably standardized methodologies that rely on analysis of existing data as well as in-depth engagement with relevant stakeholders and practitioners. The guidance can be accessed using the following link on the FATF website: https://www.fatf-gafi.org/media/fatf/content/images/National_ML_TF_Risk_Assessment.pdf.

Supervisory bodies are required to adopt a risk-based approach to supervision and effect these in line with their internally documented mechanisms. Additionally, supervisory bodies, including the Prudential Authority and the Financial Sector Conduct Authority have conducted money laundering and terrorist financing sector risk assessments. These methodologies are reasonably standardized. The second round sector risk assessments for the banking and life insurance sector have been issued by the Prudential Authority and are available at the following link: https://www.resbank.co.za/en/home/publications/publication-detail-pages/media-releases/2022/Banking-and-Insurance-sectors-assessment-reports.

The supervisory agencies have developed sectoral risk assessments for AML/CFT which have been submitted to the Interdepartmental Committee on Anti-Money Laundering and the Combating of the Financing of Terrorism (AML/CFT) for consideration.

Although the IDC-AML/CFT also comprises the investigating and prosecuting authorities, the IDC-AML/CFT does not interfere with the work of the investigating and prosecuting authorities, as they operate independently in line with their investigating and prosecutorial policies. However, the IDC-AML/CFT guides the investigating and prosecuting authorities of the improvements that are required in the anti-money laundering and related offences policy framework, and also for them to address deficiencies identified in the Mutual Evaluation report. Government is strongly of the view that considerable progress has been made in the effective use by South Africa’s law enforcement agencies of the powers provided for combating financial crimes and money laundering. While much remains to be done, substantial progress is evident in relation to “state capture” cases, the policing of PPE-related corruption, and corporate frauds.

The IDC-AML/CFT considers reports on risk assessments at regular intervals when assessments are updated, and that these are included in the IDC-AML/CFT’s formulation of AML/CFT policies. 

The IDC-AML/CFT is in the process of finalising a National Risk Assessment (NRA) for money laundering, terror financing and proliferation financing, and also a strategy for AML/CFT and the Countering of Proliferation Finance (CPF). The NRA document and the strategy document will be submitted to the FATF around end-November 2022 as part of the process of demonstrating progress in addressing deficiencies identified in the Mutual Evaluation report relating to Risk, Policy and Co-ordination (FATF Methodology for effectiveness relating to Immediate Outcome 1) (https://www.fatf-gafi.org/media/fatf/documents/methodology/fatf%20methodology%2022%20feb%202013.pdf.)

The IDC-AML/CFT will publish summarised versions of the NRA and national strategy documents as soon as they are finalised.

Reply:

The National Treasury cannot certify the data provided in respect to this question, as only the accounting officer at each national or provincial department or municipality can do so. The data provided is not verified.

National Treasury Instruction Note No. 34 requires departments to submit exception reports to the relevant treasuries by the 7th day of each month with details of the number and rand value of invoices paid after 30 days and those that remain unpaid from the date of receiving invoices. Provincial departments submit information on the late payment of invoices to their respective treasuries. Information at provincial government is collated by their respective treasuries, consolidated, and submitted to the National Treasury by the 15th day of every month with information on the preceding month. Therefore, statistical information for each provincial department can be obtained from the relevant treasuries. The treasury instruction further requires the accounting officers of departments to confirm the accuracy of information reported by signing off these reports prior to its submission to the relevant treasuries.

Since the inception of the National Treasury Instruction Note No.34, the National Treasury provides progress reports on this requirement to the relevant stakeholders and continues to monitor the level of compliance with the requirement to pay supplier’s invoices within the prescribed period. Such progress reports are shared with the relevant stakeholders on a quarterly and annual basis. The information collated from departments forms the basis of compiling the quarterly and annual reports which can be located on the link below:

http://www.treasury.gov.za/legislation/pfma/Compliance%20on%20Payment%20of%20Suppliers/default.aspx

The statistics provided below provides information collated from departments for quarter 1 of the 2022/2023 financial year. The tables below contain information owed by departments to all suppliers including SMME’s for quarter 1 of 2022/2023 financial year, but we do not have a more detailed breakdown on amounts owing to SMMEs.

(a)(i)

Table 1 below provides a list of national departments that reported invoices older than 30 days and not paid at the end of June 2022.

Table 1: Total number and rand value of invoices older than 30 days and not paid by national departments at the end of June 2022

Department	Older than 30 days and not paid
	Number	Rand Value
Home Affairs	2	R14 806
Public Works and Infrastructure (Main Account)	1	R11 154
Water and Sanitation (Main Account)	3	R19 647
Social Development	4	R92 567
Statistics South Africa	6	R599 146
Forestry, Fisheries and Environment	7	R71 720
Public Works and Infrastructure (Trading Account)	23	R3 010
Tourism	149	R705 591
Water and Sanitation (Trading Account)	764	R2 590 747
Total	959	R4 108 387

(a) (ii)

Table 2 below provides statistics of provincial government on the number and rand value of invoices outstanding at the end June 2022.

Table 2: Total number and rand value of invoices older than 30 days and not paid by provincial departments at the end of June 2022

Provincial Departments Number and Rand Value of invoices older than 30 days and not paid per province
Province	Number of invoices	Rand Value of invoices
Mpumalanga	3	R 3 033 218
Western Cape	4	R31 293
Limpopo	26	R3 533 130
Kwazulu-Natal	669	R27 353 872
Free State	967	R281 492 366
Northern Cape	1 131	R233 665 843
Gauteng	3 530	R1 334 443 888
North West	3 769	R392 170 711
Eastern Cape	14 143	R2 541 533 317
Total	24 242	R4 817 257 638

(a)(iii)

The information below represents the first quarter reported to the local government data base by municipalities as per section 71 of the MFMA. It is aggregated per province for ease of reference. Unfortunately, the level of information that the question requires is not available from the reporting template and must be obtained from the municipality directly.

Information related to Municipalities may be obtained at those relevant Municipalities

(b)

The common reasons provided by national and provincial departments for late and/or non-payment of invoices during the first quarter of the 2022/2023 financial year are as follows –

• IT system issues (BAS, LOGiS, Safety web etc);
• Delay in submission of invoices for processing;
• Unresolved invoice discrepancies;
• Client departments not confirming Funds timeously;
• CSD information not updated timeously by suppliers;
• Inadequate budget; and
• Inadequate internal capacity

(b)

In addition to the response under a(iii) above, information on Municipal Finance Management Act (MFMA) can be obtained from individual municipalities as currently there is no process instituted by the National Treasury to collate and report on such information.

Reply:

a) The demographic representation of the farmers whose loans have been written off by Land Bank.

In the past 3 Financial Years, there were approximately 116 matters written off. Whilst both types of write-offs were considered (i.e. full write-offs of outstanding amount and partial write-offs of outstanding amount), the bulk of the written off matters were partial write-offs (i.e. being matters written-off subsequent to Land Bank having received the maximum achievable recovery amount and thus writing off the irrecoverable remaining balance).

Of the 116 written-off matters, the demographic representation is as follows:-

46% - White Farmers

42% - Black Farmers

12% - Colored Farmers

0% - Indian Farmers

b) What adjustments is the Bank making to ensure that it provides more development finance to emerging Black farmers and beneficiaries of land reform.

The Bank has adopted a new strategy and an operating model tailored to make it more developmentally focused and financially sustainable.

A key component of the strategy is the adoption of the Blended Finance Model in which the Bank has partnered with the Department of Agriculture, Land Reform and Rural Development (DALRRD) through a 10-year Memorandum of Agreement which is effective from the current financial year (FY2023) to FY2033. DALRRD has committed a grant allocation of R325m per annum for the first three years of the agreement. Land Bank will provide an equivalent amount of funds which will be advanced as loans to the clients. The Bank is in the process to partner with provincial governments of agriculture, land reform and rural development, as well as other strategic partners to complement the grant funding from DALRRD.

The targeted clients and beneficiaries of the Bank’s Blended Finance Model are black persons and majority black-owned small and medium-scale farmers and/or entities.

The Bank will be utilising a significant part of the equity allocation from National Treasury for the next five years (FY2023 to FY2027) towards the Blended Finance Programme which will be complemented by grant allocations from DALRRD and other strategic partners. The equity allocations to the Bank will be preserved for recycling into the sector through the collection of loan repayments from clients, as well as the recovery of notional cost of funds from clients which will assist to cover for expected credit losses from non-performing loans, whilst still offering affordable financing to clients.

Resultant from this state support the bank projects that the development and transformation portfolio will shift from the current 30% of its total loan book to above 50% by FY2027.

The utilisation of equity and grant allocations is important to ensure affordable financing to the clients as the use of blended funds reduces the cost of funding and enables pricing subsidisation. The use of blended funds also enables the Bank to provide pre- and post-finance support to farmers to increase their chances of success and reduce entrepreneurial failures. The Bank would be unable to afford these pre- and post-finance support services were it not for the deployment of state allocated equity and grants from DALRRD and other strategic partners. The magnitude of the grants need to sufficiently cover for both the beneficiaries’ equity contribution and these pre- and post-finance services, which is not yet fully catered for.

It is important to note that for the Bank to meaningfully support development at affordable financing levels and still be financially sustainable beyond the five-year period its current funding model will have to change such that in the long term the Bank has an increased portion of its funding mix coming from equity, patient funds, and grants. It is for this reason that the Board has prioritized the need for a review of the Bank’s Funding Model which is a critical prerequisite for the Bank to accelerate development and transformation on a financially sustainable basis.

Note: For further details on the Blended Finance Model please see the attached brochure (Annexure A).

Reply:

The Minister of Finance has commenced with the recruitment process for the appointment of the Tax Ombud in terms of section 14 of the Tax Administration Act, 2011 (Act No 28 of 2011). The advert for the position was published in the Sunday Times on Sunday, 30 October 2022 and in the Business Day on Monday, 31 October 2022. It was also published on the following social media platforms, namely Twitter, Facebook and LinkedIn. The closing date for the advert was 14 November 2022. Following the closing date, the shortlisting process will commence and thereafter interviews will take place.

Reply:

The two departments are still engaging on this very complex policy framework given the challenges faced fiscally and the need for better economic growth. As Minister of Finance stated in the MTBPS, “Discussions on the future of the grant are on-going and involve very difficult trade-offs and financing decisions. Despite the provision made in this budget, I want to reiterate that any permanent extension or replacement will require permanent increases in revenue, reductions in spending elsewhere, or a combination of the two.”

Ongoing discussions on social relief responses involve the Department of Social Development, Presidency, Department of Employment and Labour, Department of Public Works and Infrastructure, and are exploring various options taking into account affordability, efficacy in addressing poverty, and possibilities of enabling developmental and long-term economic inclusion outcomes as opposed to focusing only on short term food provision.

DPME is coordinating some of the work assessing performance against the National Food and Nutrition Security Plan, 2018 - 2023. Assuming that 70% of social grant expenditure is spent on food, we estimated that approximately R182.1 billion was spent on food related interventions in 2021/22, as shown in Table 1 below. This includes spending on the school nutrition programme, feeding in ECD centres, clinic based nutritional support and other areas. In our view, the major problem pertaining to access to food is due to demand side factors, such as low household incomes, as opposed to supply side factors.

Table 1. Summary of food and nutrition spending

There is some evidence that child malnutrition and fatality rates from malnutrition have declined over the years (see table 12 and Figures 22 inserted in Annexure 1). There is also some indication that the substantial increase in social grants and UIF during COVID-19 gave some protection against hunger (see Figure 5).

Nevertheless, we acknowledge the pressures on households arising from substantially higher inflation. This is partly why the MTBPS indicates that the SRD 350 grant will be extended by a further year and why temporary support was given to cushion the fuel price increase. The MTBPS suggests that total non-interest expenditure will increase by R52.4 billion in 2023/24 (as compared to Budget 2022 projections). Extension of the SRD 350 grant will be by far the biggest item within this and this reflects prioritisation given to this area.

ANNEXURE 1

Reply:

•  

a) Illicit Cigarettes

(i) 01 April 2020 to 31 March 2021

The unit conducted 432 interventions during the period and has had 284 detentions of 91,790,304 cigarettes valued at R72,686,107.77

The unit has achieved 322 seizures of 89,356,949 cigarettes to the value of R102,878,429.40

(ii) 01 April 2021 to 31 March 2022

The unit conducted 102 interventions during the period and has had 106 detentions of 190,795,489 cigarettes valued at R273,527,115.63

The unit has achieved 97 seizures of 81,241,405 cigarettes to the value of R92,071,583.81

Illicit Tobacco

(iii) 01 April 2020 to 31 March 2021

The unit conducted 30 Illicit Tobacco interventions during the period and has had 9 detentions of 207,036 units valued at R5,240,665.00

The unit has achieved 7 seizures of 1,240 units (combination of weight in kg’s and boxes) Illicit Tobacco to the value of R19,282.00

(iv) 01 April 2021 to 31 March 2022

The unit conducted 45 Illicit Tobacco interventions during the period and has had 13 detentions of 536,774.50 units (combination of weight in kg’s and boxes) valued at R55,951,740.00

The unit has achieved 3 seizures of 23,039 units (combination of weight in kg’s and boxes) Illicit Tobacco to the value of R110,762.00

•  

b) Illicit Alcohol

(i) 01 April 2020 to 31 March 2021

The unit conducted 56 Illicit Alcohol interventions during the period and has had 43 detentions of 227,292.53 units (combination of liters/ bottles & cans) valued at R9,376,353.83

The unit has achieved 25 seizures of 25,146,924.25 units of Illicit Alcohol to the value of R8,931,872.30

(ii) 01 April 2021 to 31 March 2022

The unit conducted 39 Illicit Alcohol interventions during the period and has had 35 detentions of 578,304.17 units (combination of liters/ bottles & cans) valued at R19,491,172.39.

The unit has achieved 11 seizures of 12,730.25 units of Illicit Alcohol to the value of R6,915,339.00

Summary of the above data.

Period	01 April 2020 to 31 March 2021
Illicit Industry	Number Interventions	Detentions	Seizures
		Number	Quantity	Value	Number	Quantity	Value
Illicit Cigarettes	432	284	91,790,304	R72,686,107.77	322	89,356,949	R102,878,429.40
Illicit Tobacco	30	9	207,036 units	R5,240,665.00	7	1,240 units	R19,282.00
Illicit Alcohol	56	43	227,292.53 units	R9,376,353.83	25	25,146,924.25 units	R8,931,872.30
Period	01 April 2021 to 31 March 2022
Illicit Industry	Number Interventions	Detentions	Seizures
		Number	Quantity	Value	Number	Quantity	Value
Illicit Cigarettes	102	106	190,795,489	R273,527,115.63	97	81,241,405	R92,071,583.81
Illicit Tobacco	30	9	207,036 units	R5,240,665.00	7	1 240 units	R19,282.00
Illicit Alcohol	39	35	578,304.17 units	R19,491,172.39	11	12,730.25 units	R6,915,339.00

Reply:

As stated in the previous response, the need for and timing of further updates the NHI costing model will be determined by practical progress with NHI, spending patterns, and the timing of the legislative process. Further cost modelling will need to be informed by further development of the NHI benefit package, healthcare utilization trends and projections, and unit costs. However, the cost model will not automatically translate into budget allocations as these would have to be made as part of the budget process which will take into account the macro-economic environment and fiscal space. We agree that inflationary pressures and effects of COVID-19 are important considerations. It is difficult to give a blanket commitment that any implementation of NHI will not come into operation without further detailed modeling. However, it is likely that a set of gradual, transitional reforms will require more detailed costing in order to assess budget requirements, as opposed to the full national implications of NHI as envisaged in the NHI Bill, which will almost certainly require a major updating of the existing and other cost models. Note that the NHI Bill is still in Parliament and the 2022 MTBPS emphasises that budget allocations in Budget 2023 are more likely to focus on fixing budgetary gaps that emerged after the economic slowdown due to COVID-19 and addressing service backlogs and is unlikely to have a substantial focus on NHI.