Questions and Replies

Reply:

(a) The Deputy President needed to travel to Japan and due to unavailability of a long range jet with the capacity to fly to Japan with a single refuelling stop, the South African Air Force (SAAF) used Contract RT61, a transversal contract for chartering of aircraft and helicopters for VIP and VVIPs administered centrally by National Treasury in which ExecuJet is one of the duly appointed suppliers.

(b) The procurement process for putting together transversal term contracts is outlined below. The same procurement process was followed for putting together Contract RT61.

• Demand planning

National Treasury identifies strategic cross-cutting and commonly used commodities or goods and services of a repetitive nature. Government institutions are thereafter requested to indicate their institution’s specific requirements in terms of their strategic objectives. This may include, among others, quantities, technical specifications and indication of budget allocation over MTEF or terms of the contracts.

• Acquisition process

During acquisition process, a cross-functional team (Bid Specification Committee) constituted from all participating government institutions put together bid documents based on the requirements of participating institutions. National Treasury plays a facilitation role to ensure compliance with all relevant SCM prescripts and to ensure that technical specifications and special conditions are not written around a specific potential bidder.

Once a bid document has been put together, it is then processed for consideration and approval by the Bid Specification Policy Committee chaired by National Treasury prior to publication. This committee also involves end users and other institutions responsible for ensuring that broader government socio-economic objectives and other policy initiatives find expression in bid documents prior to publication.

Once a bid document has been approved, it is then published in the Government Tender Bulletin and e-Tender Portal with a specified closing date and time. Potential bidders can access bid documents through the e-Tender Portal or collect them from our Tender Information Centre. To save costs, we cut CD’s and potential bidders can print at their own costs. Potential bidders can either submit hard copy bids or bid electronically through the e-tendering system.

After closing, hard copy bids are captured manually through the e-tendering system. A cross-functional Bid Evaluation Committee (BEC) constituted from participating government institutions is put together to commence with evaluation and recommendation. It is important to note that the BEC members are appointed in terms of sections 44 and 56 of the PFMA by their respective accounting officers. National Treasury facilitates the bid evaluation process. This is to ensure joint decision making whenever recommendations are made.

The BEC compiles a memorandum for consideration and approval of the Bid Adjudication Committee (BAC) which is also cross-functional.

• Publication of the results

Once a bid is awarded, formal written notifications are then sent to all winning bidders. In addition, names of winning bidders, prices and preference points scored by each winning bidder are published on National Treasury website, e-Tender Portal and Government Tender Bulletin.

Further, end-users are notified through a contract circular which contains the same information as above, including addresses and contact details of winning bidders and all terms and conditions of contract.

• Execution of contract

Once this process has been finalised, end-users are expected to make use of this contract and comply with its terms and conditions. Participating institutions are prohibited from procuring same or similar goods or services during the tenure of such a transversal contract.

Accounting Officers of participating government institutions are responsible for management of the contract by placing orders, receiving services, paying for services rendered and monitoring supplier performance against the transversal contract. National Treasury does not get involved in this process.

However, should there be queries such as poor performance, issues of fraud, cancellation of the contract, restriction of suppliers litigation or other similar administrative issues, National Treasury then takes the lead to ensure that the necessary corrective action is taken.

Should the appointed suppliers not be in a position to render the required services in terms of the contract, participating government institutions are allowed, in terms of the contract to procure services outside the contract to meet their requirements.

(c) SAAF did not only approach ExecuJet but also first approached Fortune Air which is the first ranked supplier in terms of this particular line item on Contract RT61. However, Fortune Air could not provide an aircraft meeting the requirements for this flight. To ensure value for money, SAAF requested other quotes outside of Contract RT61. These quotes were, however, more expensive than the rates offered by ExecuJet on Contract RT61. SAAF therefore decided to use ExecuJet.

Reply:

(a) The National Treasury publishes detailed statement on actual tax revenue received into the National Revenue Fund on a monthly basis in the Government Gazette and on its website. This is done within 30 days after the end of each month, in terms of section 32(1) of the Public Finance Management Act 1 of 1999. The latest available monthly statement is for the period ending 31 July 2015, which was published as part of on 28 August 2015 (refer to Statement of the National Revenue, Expenditure and Borrowing as 31 July 2015 published by the Director-General of the Treasury, as attached). The data for the period ending August 2015 will be published by the end of September 2015.

The information below refers to the annual tax revenue targets as published in the 2015 Budget Review, and the actual collections for the year to date for this fiscal year and the previous fiscal year. The Treasury does not publish monthly revenue targets as these can be subject to great volatility. As you are aware, the Treasury does revise the annual tax revenue targets in October every year during the Medium Budget Policy Statement, and again in the annual Budget.

(i) The total (gross) tax revenue target for the 2015/16 fiscal years is R1 081 275 million. This is R94 992 million, or 9.6 per cent, higher than the actual collections of R986 283 million for the previous fiscal year.

(ii) The actual total tax revenue collections for the period April to July 2015 (the first four months of the 2015/16 fiscal year) amounted R309 742 364 million. The actual total tax revenue collections for the period April to July 2014 (the first four months of the 2014/15 fiscal year) amounted R279 047 million.

(iii) Hence the actual total tax revenue collections during the first four months of the 2015/16 fiscal year is R29 376 million, or 10.5 per cent, higher that for the same period last year.

(b) The table attached (Statement 1 as published on 28 August 2015) provides the breakdown of the aggregate (total) data provide in (a) by tax type. The table indicates that in nominal terms corporate income tax revenue, during the first four month of the 2015/16 fiscal year, were below the actual collections during the first four months of the previous fiscal year by 1.5 per cent. This may be an indication that total corporate income tax revenue for the 2015/16 fiscal is likely to be below the target for the year. It should, however, be noted that most corporate tax revenue is collected at the end of each quarter with June and December the more important months.

Reply:

1. Table 1 provides a summary of expenditure in relation to the amounts spent and the percentage increases or decreases related to (i) consultants, (ii) travel and subsistence and (iii) catering and events in departments. The table provides expenditure information for the 2012/2013, 2013/2014 and 2014/2015 financial years.

Table 2 provides a summary of expenditure in relation to the amounts spent on (i) consultants, (ii) travel and subsistence and (iii) catering and events in departments for months of 01 April 2015 to August 2015. The aforementioned information was extracted from the National Treasury’s transversal financial management systems that are utilised by departments.

Expenditure information on consultants, travel and subsistence and catering and events is not available for constitutional institutions and public entities listed in Schedules 2 and 3 to the PFMA since these institutions utilise different entity controlled financial systems for their payments.

Table 1:

Expenditure related to consultants, travel and subsistence and catering and events for the periods 2012/2013, 2013/2014 and 2014/2015

Departmental Expenditure	Actual 2012/2013	Actual 2013/2014	Increase    Decrease   Stagnant
	Amounts R’ billions	Amounts R’ billions
Consultants	12,517,130.00	12,825,333.00	2%
Travel and Subsistence	9,612,468.00	9,861,580.00	3%
Catering, entertainment and venue rental	1,919,882.00	2,277,808.00	19%
Departmental Expenditure	Actual 2013/2014	Preliminary Outcome 2014/2015	%
	Amounts R’ billions	Amounts R’ billions
Consultants	12,825,333.00	12,461,082.00	-3%
Travel and Subsistence	9,861,580.00	9,290,305.00	-6%
Catering, entertainment and venue rental	2,277,808.00	1,202,054.00	-47%

Table 2:

Expenditure related to consultants, travel and subsistence and catering and events for the periods 1 April 2015 to 31 August 2015.

Departmental Expenditure	Total Expenditure for the period April to August 2015	April 2015	May 2015	June 2015	July 2015	Aug 2015
Consultants	1,732,426,679	297,622,187	468,593,838	276,016,927	295,309,972	394,883,755
Travel and Subsistence	3,257,077,554	423,396,914	599,404,614	721,937,277	776,152,420	736,186,328
Catering, entertainment  and venue rental	397,756,954	38,426,149	71,388,387	84,038,985	106,305,102	97,598,331
Total	5,387,261,187	759,445,250	1,139,386,839	1,081,993,189	1,177,767,495	1,228,668,414

 

2.The total expenditure in relation to consultants, travel and subsistence and catering and events for the 2013/2014 financial year amounts to R25 billion. Corresponding expenditure from 1 April 2015 to 31 August 2015 amounts to R5.4 billion.

 

Reply:

(a) Yes

(b) NA, no other consulting company specified

(a)(i)(aa) Yes

(a)(i)(bb) No

(a)(ii) No

(a)(aaa) Whitepaper: Regulatory Conduct Reform

(a)(bbb)(aaaa) 1 December 2013

(a)(bbb)(bbbb) 30 April 2014

(a)(ccc) Development of a discussion document on conduct of business policy for the financial service sector in South Africa.

(a)(ddd) R1,083,000.00

Reply:

1. Total claims for the employment tax incentive amounted to R3.9 billion since the start of the programme on 1 January 2014 up until the end of July 2015, with claims by 36 616 unique employers. It must be noted that, like most tax incentives, the data I am providing on the Employment Tax Incentive is preliminary and will be significantly revised once the more accurate annual tax returns are submitted by employers to SARS, and after they have been audited by SARS. The current data I am providing is from the monthly returns to SARS from employers, which are also not audited and hence subject to significant revision. Given that the most accurate information on any tax incentive is sourced from the annual tax returns made by taxpayers, which may only be available with a lag of up to 18 months, more accurate data on any such tax incentive is only available with a lag of at least two years, as the annual returns also have to be audited by SARS.

(a) (i) According to the monthly returns from employers, over the period 1 January 2014 up until the end of July 2015, the employment tax incentive has been claimed by 36 616 unique employers.

(ii) It is not possible to provide information on how many employees were employed for which the incentive was claimed by those employers from the monthly returns. This is because although it was possible to estimate the minimum number of employees for whom such incentive is claimed for the first year of this incentive from this source of data, this is no longer possible from the second year commencing from 1 January 2015 because the maximum incentive per employee varies and may be R500 or R1 000 (as it halves for those employees that have been employed for more than a year). Hence dividing by a single maximum of R1 000 is no longer possible to determine the minimum number of claimant employees, as could be done for every month of the first year of implementing the incentive.

The table below indicates the value of claims that can be attributed to employment in each month, and you will see that we stop projecting for the number of claimant employees for the reason outlined above. It must be noted that the updated numbers in the table will not coincide with previously reported figures as they may be based on more, or updated, returns by employers or SARS, which also takes into account any claims that may have been corrected after the normal engagements between the taxpayer and SARS.

ETI claimed by period*
Period	ETI (R 000s)	Count of employers claiming per month	Number of claimant employees**
January-2014	53 888	5 188	53 888
February-2014	125 833	10 114	125 833
March-2014	140 116	13 823	140 116
April-2014	158 993	15 321	158 993
May-2014	171 589	16 128	171 589
June-2014	201 297	17 091	201 297
July-2014	208 741	17 826	208 741
August-2014	227 941	18 561	227 941
September-2014	213 733	19 062	213 733
October-2014	251 475	19 287	251 475
November-2014	253 126	19 317	253 126
December-2014	254 151	17 280	254 151
January-2015	222 226	18 981
February-2015	317 121	20 045
March-2015	213 570	17 518
April-2015	211 336	17 852
May-2015	216 169	18 342
June-2015	218 697	18 680
July-2015	226 932	18 190
TOTAL	3 886 935

* The updated numbers in this table will not coincide with previously reported figures as they may be based on more, or updated, returns by employers.

**The minimum number of employees is an indicative lower bound of the number of employees in respect of whom employers have claimed the incentive. It is calculated as the total ETI claims divided by R1 000 – the maximum claim for the first twelve months of claiming the ETI. This can only be applied for 2014, as in 2015 some employees may be in their second twelve months of claiming the ETI, where an employer may claim a maximum of R500 per month per employee.

The number of employees as reported in the table above are likely to be higher as some ETI employees would be qualifying for claims of less than R1 000.

(b) The available data do not yet allow for a detailed sectoral breakdown at either the employer or employee level, but it appears that the bulk of the claims come from the Wholesale and Retail, Financial and Business Services, Manufacturing and Agricultural sectors as classified by SARS. The total monthly claims vary according to income received in a particular month, the maximum allowable claim in a particular month, and the number of employees in respect of whom employers claim the incentive.

2. According to section 5(1)(b) of the Employment Tax Incentive Act, only the Minister of Finance may disqualify an employer from claiming the employment tax incentive. To date there are no employers that have been disqualified from claiming the incentive, as no evidence has been presented to the Minister to satisfy the conditions for disqualification. However, the South African Revenue Service monitors the eligibility of employer claims that are made and disqualifies claims that do meet the qualifying criteria.

Reply:

The provisions of paragraph 4 of the National Treasury Instruction 01 of 2013/3014 that relate to expenditure on the engagement of consultants, travel and subsistence, domestic hotel accommodation, hiring of vehicles, entertainment allowances and expenditure related to catering and the hosting of social events are mandatory. The areas contained in the Annexure to the Treasury Instruction are not mandatory for implementation and expenditures related thereto are not auditable.

Therefore information related to (i) the acquisition of air tickets using corporate air miles and (ii) the discontinuing of purchases related to newspapers and other publications are cost containment measures that are not mandatory and can only be obtained directly from the respective departments, constitutional institutions and public entities. The information on expenses related to (iii) team building, social functions and year end functions are specifically precluded from being financed from the budgets of departments. Information related thereto is thus not available from the National Treasury and can be obtained directly from the respective departments, constitutional institutions and public entities.

Reply:

After more than 18 months of implementing Treasury Instruction 01 of 2013/2014, the National Treasury recognises that further savings could be realised by refining the cost containment applicable to institutions governed by the PFMA. For instance, conference expenditure has been identified as an area in which expenditure could be curtailed. Once the refined document has been through the approved processes it will replace the current one.

Reply:

National Treasury currently has 1.2% of employees disclosed as persons with disabilities against the total staff compliment.

In some instances, the Department is experiencing challenges with existing employees not willing to register their status, in that not every employee who is a person with a disability is comfortable to disclose such. There is an initiative in the Department to encourage disclosure and remove the stigma.

In addition, the National Treasury engages various organisations supporting persons with disabilities and has forwarded vacant positions to be included in their newsletters and / or websites to encourage applications from the target group. The Department’s engagement with tertiary institutions has also highlighted that there is a limited number of persons with disabilities studying in the fields required by the Department.

Reply:

(1)(a)(i)	(1)(a)(ii)	(1)(b)(i)(aa)	(1)(b)(i)(bb)	(1)(b)(ii)(aa)	(1)(b)(ii)(bb)
R207 079.83	31	-	-	-	-
(2)(a)(i)	(2)(a)(ii)	(2)(b)(i)(aa)	(2)(b)(i)(bb)	(2)(b)(ii)(aa)	(2)(b)(ii)(bb)
R237, 593.25	52	R 6 383.79	R 153 430.59	-	-

 

 

Reply:

Government has in place a clear performance monitoring system, which is headed by the Department of Planning, Monitoring and Evaluation. This system seeks to identify progress towards implementation of the NDP through the goals operationalized in the Medium Term Expenditure Framework, and the key obstacles to achieving these goals. Cabinet receives regular report backs from the Clusters in order to highlight performance against targets and where interventions are necessary.

Government also recognises the importance of consultation in order to identify policies and regulations which are negatively impacting on economic growth and job creation. The Presidential Business Working Group (PBWG), which consists of senior Government and Business representatives, to promote the identification of problems and finding solutions in areas such as: regulatory impact on investment; education and skills development; labour market; infrastructure; and inclusive growth.

The work of the PBWG has led to improved turnaround times at the Company and Intellectual Property Commissions; implementation of the Socio-Economic Impact Assessment (SEIAS), development of a set of regulatory principles, implementation of One Environmental System, alignment of water licensing regime with environmental impact assessment and mining licensing regime among other achievements.

The introduction of SEIAS, which came into effect as of 1 July 2015, will seek to proactively address problems. The SEIAS process seeks to improve the quality of legislation; reduce the unintended consequences of new laws and regulations; and better align regulations with Government’s priorities such as inclusive growth, social cohesion and poverty alleviation.

A set of regulatory principles that will define and characterise all regulations in South Africa has been developed. These will be implemented once approved by Cabinet. This would include ensuring that the objectives and purposes of regulation are clear and unambiguous, maximise efficiency and effectiveness, reduce the cost of doing business, and that regulation is administered in a manner which minimises unnecessary cost, complexity and duplication. The regulatory principles will complement the SEIAS in improving the quality and implementation of legislation.

Engagement are ongoing and concerted efforts are being put in place to address some of the key challenges affecting investors such as immigration regulations, challenges with energy supply and policy uncertainty in the mining sector. Government remains committed to ensuring that South Africa remains attractive for investment and the regulations and polices do not negatively affect the country’s developmental aspirations envisioned in the NDP.

Reply:

1) A floating exchange rate is an important part of the design of macroeconomic policy which allows the economy to adapt to changing global circumstances. A weaker currency can stimulate exports. The speed with which exports can grow in response to a weaker rand, however, is influenced by how high and how quickly domestic costs rise in response to the weaker rand, the pace of growth in major markets and supply side factors.

In an environment of weaker economic growth, it is imperative that policy supports the competitiveness of local business. The inflation targeting framework helps to anchor inflation expectation in the face of volatility. Continued government investment in infrastructure aims to lower the cost of doing business and increase the competitiveness of South African business. Furthermore, Government has a range of incentives in place to support economic growth and exports. The Department of Performance Monitoring and Evaluation (DPME) and / or the specific ministries involved (DTI, DMR, DAFF, EDD, DoT) can provide further details.

2) As South Africa is a price taker in international markets, there’s no evidence that the weakness of the rand has affected the terms of trade at this stage. The rand’s weakness is providing support to exports. To date, the knock-on impact of higher imported goods prices on inflation has been relatively low, although this remains a risk that the South African Reserve Bank is monitoring closely as it follows its mandate to keep inflation within the target band.

Reply:

National Treasury is currently assessing the relative financial costs, financial implications, and economic implications of a nuclear build programme with the Department of Energy. The recommendations are expected to be submitted to Cabinet once this work has been concluded.

Reply:

National Treasury is assessing the economic impact of a nuclear build on the economy, as well as alternative scenarios provided for in the Integrated Energy Plan. This work is currently not finalised yet, as there is an interactive process underway with the Department of Energy on the scale of the programme and possible financing / procuring scenarios that have a bearing on the modeling work and its results. The recommendations from this work are expected to be submitted to Cabinet as soon as the work is completed.

Reply:

No, I am not considering any plans whereby we compel private or public pension funds how to invest. The key point to note is that it is the trustees of a pension fund who have to determine the investment strategy for a pension fund, taking into account its assets and liabilities, and the need for long-term growth. All that government does is to provide a broad framework to protect members of retirement funds, by reducing risks to their funds, like concentration risks when investing (refer to maximum investment limits in Regulation 28 of the Pension Funds Act (1956)), poor governance practices or high and opaque charges.

Since 2011 when Regulation 28 was revised, trustees of retirement funds now have to consider Environmental, Social and Governance (ESG) principles before determining their investment policies and strategies. The principle is meant to encourage retirement funds to actively consider investments that might be of a developmental or infrastructural nature, without compromising returns in the long-term. Indeed, in the aggregate, retirement funds already have significant exposure to Government and State Owned Companies’ bonds, which, by their nature are developmental. In 2014, for example, 32 percent of Government issued bonds, excluding state owned company bonds, were held by local retirement funds (Budget Review 2015). Furthermore, according to the South African Reserve Bank’s Quarterly Bulletin March 2015, about 37.1 percent of total retirement fund assets are invested in public sector bonds (Government, state companies, and local government).

The nature of retirement funds means that they should invest for the long term. This implies that they do not necessarily have to be compelled to realise this long term objective to provide decent retirement savings for their members. Further, retirement funds, through their trustees, are in the best position to assess the retirement needs of their members and to decide how best to achieve this through various investment and asset-liability matching approaches. The National Treasury is also engaging with various stakeholders to unlock any funding bottlenecks for infrastructure projects and enable an environment which will facilitate more investment in public infrastructure.

Reply:

Please refer to my reply to PQ 2843

Reply:

(a) Yes. The Bank Supervision Department of South African Reserve Bank (BSD) has successfully shut down many Ponzi schemes both in the period 1 June 2014 to 30 June 2015 and before this period. Altogether, the BSD has investigated 40 from 1 January 2014 to 30 June 2015, of which the investigations for 30 schemes were finalised and 10 schemes are still current. It should be noted that all schemes where the investigation is finalised and that have contravened the Banks Act are referred to the South African Police Services for criminal investigations. The decision to prosecution any of operators of these schemes resides with the National Prosecuting Authority.

(b)  Current financial sector laws address Ponzi and pyramid schemes in different ways, depending on which Act may be transgressed. The Reserve Bank can act against such activities if there is illegal deposit taking involved, through enforcement in terms of the Banks Act. The Financial Services Board (FSB) investigates instances of possible unregistered financial services business that might be conducted as an ancillary activity to a Ponzi scheme, or under the guise of a legitimate provider of financial services, and will take action against such contraventions in terms of the various Acts (eg Financial Advisory and Intermediary Services Act, 2002) enforced by the FSB. Where there are gaps in the current law, queries and complaints about Ponzi schemes made to the FSB are generally referred through to the Bank Supervision Department of the SARB and the South African Police Services: (Commercial Branch). Outside financial sector legislation, the National Consumer Commissioner (NCC) investigates certain Ponzi or pyramid schemes in terms of the Consumer Protection Act, and such queries and complaints can therefore also be referred to the NCC.

This illustrates the importance of the Twin Peaks reform currently underway (through the Financial Sector Regulation Bill), which will establish a market conduct regulator with flexible, system-wide powers that will, amongst other things, close the net on Ponzi schemes. Under this law, Ponzi schemes may be directly “prohibited” which means that the activity itself can lead to investigation and prosecution by the new Financial Sector Conduct Authority, rather than the current situation where a combination of other laws are required to indirectly reach alleged Ponzi operations.

With specific reference to advertising, the FSB is, as part of its Treating Customers Fairly approach, focusing on advertising across the financial sector, to ensure that advertising is not misleading and does not promote unfair customer treatment. This increased focus on fair advertising in the financial sector will help identify instances where advertising may be promoting illegal activities. Under current legislation, action may then be taken as described above if Ponzi or pyramid schemes, are identified in this manner. Currently, the Financial Advisory and Intermediary Services Act (FAIS Act) requires that an entity licensed by the FSB, must contain a reference to the fact that a licence is held in advertisements and promotional material, but it is not a requirement that an advertisement should reflect an FSP number. This again highlights the need for the Twin Peaks reform, to ensure that activities cannot fall outside of regulation. Currently, supervising advertising standards generally, rather than for FSP numbers specifically would better identify Ponzi schemes.

(c) Yes, action has been taken to counter instances of Ponzi and pyramid schemes. At this stage, the regulators in the financial sector are only able to take reactive action once such activities have been operating, and in some cases action are taken on ancillary aspects of Ponzi and pyramid schemes, such as, unregistered financial services or illegal deposit taking, rather than on the activity itself being illegal.

The proposed Twin Peaks reform of financial sector legislation aims to significantly strengthen financial sector regulation, so regulators may be more proactive and prevent such activities from occurring in the first place, and ensure better customer protection. The law will be more comprehensive, and will minimise instances of financial products or services falling outside of the legislative framework. It will allow for tougher action to be taken, including banning activities like Ponzi and pyramid schemes outright, and taking direct swift and harsh enforcement action against those who contravene the banning.

Reply:

Section 3 of the Public Audit Act (hereinafter referred to as “PAA”) provides that the Auditor-General (hereinafter referred to as “AG”):

• Is the supreme audit institution in the Republic;
• Has full legal capacity, is independent and is subject only to the Constitution and the law, including the PAA;
• Must be impartial and must exercise the powers and perform the functions of the office without fear, favour or prejudice; and
• Is accountable to the National Assembly.

From the above, it is abundantly clear that the AG is an independent institution which performs its functions in terms of the PAA and is accountable to the National Assembly. It would therefore be appropriate for this question to be addressed to the National Assembly or the AG directly.

The Municipal Finance Management Act (hereinafter referred to as the “MFMA”) places the responsibility on a municipality to disclose information correctly and to ensure that there is transparency when it comes to the financial affairs of the municipality. Specifically, section 61(1)(a) of the MFMA places a fiduciary responsibility on the accounting officer to act with fidelity, honesty, integrity and in the best interest of the municipality in managing its financial affairs. Section 122(1) of the MFMA also provides that every municipality and every municipal entity must prepare annual financial statements (AFS) for each financial year which amongst others, disclose the information required in terms of sections 123, 124 and 125 of the Act. Section 125 (2)(d) of the MFMA requires the municipality to disclose particulars in the notes to its AFS of “any material losses and any material irregular or fruitless and wasteful expenditures, including in the case of a municipality, any material unauthorised expenditure, that occurred during the financial year, and whether these are recoverable.” From the legislation it is clear that the responsibility to make the necessary disclosure vests with the municipality and any non-disclosure of material amounts in the AFS should be explained by the municipality concerned.

Reply:

Currently the office of the Chief Procurement Officer does not have a record of all procurement disputes. Therefore it is not possible to quantify the amount lost through procurement disputes.

As part of our Public Sector Supply Chain Management Reforms, a reporting framework is being developed. Disputes, among many other reporting requirements, will be published periodically. This will be progressively implemented in the next two years. However, starting from the end of September 2015, basic SCM reporting will be introduced quarterly.

Reply:

(1)(a)(b)(i)(ii)(iii)(aa)(bb)(cc)(dd)(2)(3)(a)(b)(4)

Due to the secrecy provisions contained in Section 69 of the Tax Administration Act No. 28 of 2011, SARS is prohibited from disclosing any taxpayer information (Including whether or not a taxpayer is subject to an audit/ investigation) to any person other than a SARS official. SARS is, therefore, unfortunately not in a position to respond to the above request.

Reply:

(a) National Treasury makes significant efforts to communicate publicly its fiscal strategy and implications for the debt outlook. Extensive budget information is released to the legislature and the public in general. According to the international Open Budget Index survey, South Africa ranks as one of the top countries for transparency and accountability. Parliament holds public hearings after the tabling of each Budget Review and Medium Term Budget Policy Statement. As part of its budget outreach programme, National Treasury representatives travel around South Africa presenting the fiscal outlook to universities and civil society organisations. The National Treasury conducts domestic investor roadshows and communicates regularly with the media on the implications of the fiscal framework for the national debt outlook.

The debt that government will incur over the coming decade is set out in the publicly available budget documents tabled in parliament in February each year. Provisions are made for debt that is falling due, with the details outlined in chapter 7 of 2015 Budget Review. A more detailed breakdown is published in the annual Debt Management Report, which is available on the National Treasury website.

(b) Government manages the debt outlook by narrowing the deficit over time while mitigating refinancing risk (i.e. the risk that government will not be able to raise money to finance the budget deficit and repay debt at any scheduled point, or will have to do so at high cost). In order to close the deficit, government has raised taxes and reduced the rate of expenditure growth. The budget also aims to change the composition of borrowing, in order to ensure that government debt is used to fund infrastructure spending with a positive long-term impact.

The medium-term borrowing strategy focuses on mitigating the risks presented by the sharp increase in loan repayments in 2017/18 and beyond. To meet these high loan repayments, cash has been generated from higher long-term borrowing in 2014/15. Over the medium term, the cash will be used to pay down short-term borrowing. Government also makes use of a bond-switch programme to ease pressure on targeted areas of the bond redemption profile by exchanging short-term for longer-term debt.

Reply:

(a)(b) Due to the taxpayer confidentiality provisions contained in Section 69 of the Tax Administration Act No. 28 of 2011, as well as section 4 of the Customs and Excise Act, 1964, SARS is prohibited from disclosing any taxpayer/trader information (Including whether or not a taxpayer/trader is subject to an audit/ investigation) to any person other than a SARS official. SARS is, therefore, unfortunately not in a position to respond to the above request in relation to any tax or customs matter.

As far as collaboration and co-operation is concerned, SARS is not aware of any requests on record for assistance to the Central Energy Fund (CEF).

Reply:

1. SAA has been in a codeshare relationship with Etihad since 2013, providing network reach, connecting traffic as well as other commercial benefits to SAA on a profitable basis.  The 3rd phase of this relationship, which is contained within SAA’s Corporate Plan, entails SAA commencing operations to Abu Dhabi.

The Business Case indicates that the route would realise route losses in its first two years of operation, which is not unusual for a new long haul route, but would also provide (a) multiple connectivity options for SAA passengers into the Middle East, mainland China as well as into India and (b) enable the closure of the heavily loss-making Beijing and Mumbai operations. 

Strategic and socio-economic factors also formed part of the Business Case, as is invariably the case for international routes.

The financial performance for the route is subject to the following considerations:       

 

• The extent to which the SAA Management team continues to effect various interventions, including price promotions and marketing aimed at growing this newly established route;
• The success of efforts underway by SAA at improving the codeshare cooperation with Etihad to ensure optimal access to connecting capacity at minimum cost; and
• A more challenging revenue environment for SAA, and for all international carriers, than previously. All airlines are heavily exposed, as SAA is, to strong competition from mid-hemisphere carriers.

2. There are currently no negotiations with Air China on equity stake-related matters.

3. There are currently no engagements with any party on equity-stake related matters.

 

Reply:

1. There is no research which points to a global slowdown in the magnitude of the global recession in 2008. Whilst global growth is not as fast as we would have hoped, growth continues, supported primarily by a recovery in growth in developed economies.
2. The macroeconomic framework is designed to help the South African economy absorb shocks such as a global recession. Prudent fiscal policy ensures that we have a low enough debt to GDP ratio to borrow more in the event of a crisis; the inflation targeting framework allows interest rates to adjust to domestic and global settings, without negative implications for inflation expectations; the flexible exchange rate allows for the rand to adjust and for imports and exports to respond accordingly. The macroprudential framework in place helps to secure financial sector stability so that the knock-on effects of any global crisis will be mitigated, whilst our open and liquid capital markets encourage two-way flows of capital. Foreign currency reserves are in place to supply the market if required. The Government and the South African Reserve Bank maintain a close working relationship to ensure that in the event of severe market disruption, we stand ready to act in a cohesive and coordinated fashion.

Reply:

1. The National Treasury will not be conducting any investigations at the municipality, as the information at hand indicates that the Office of the Public Protector is still in the process of pursuing this investigation at the municipality. The Public Protector intends to seek cooperation of the municipality through application of its legislation, i.e. to issue a subpoena against the Executive Mayor to cooperate with the request.
2. National Treasury will allow the processes planned to be implemented by the Office of the Public Protector to unfold. National Treasury will decide thereafter on appropriate action upon the matter being referred by the Office of the Public Protector.

Reply:

(a)	(a)(i)	(a)(ii)(aa)	(a)(ii)(bb)
Yes	State visit to China in December 2014	R178 823.21	Air transport Medical Insurance Food and beverages Accommodation Car rental	R106 426.46 R 219.45 R 8 157.00 R 61 609.75 R 2 410.55

(b)	(b)(i)	(b)(ii)(aa)	(b)(ii)(bb)
No

(c)	(c)(i)	(c)(ii)(aa)	(c)(ii)(bb)
Yes	State visit to China in December 2014 Asian Infrastructure Investment Bank Workshop in March 2015	R437 732.77	Air transport Medical Insurance Food and beverages Accommodation Road transport	R342 280.19 R 1 316.70 R 3 958.54 R 87 927.34 R 2 250.00

Reply:

Due to the taxpayer confidentiality provisions contained in Section 69 of the Tax Administration Act No. 28 of 2011, SARS is prohibited from disclosing any taxpayer information (Including whether or not a taxpayer is subject to an audit/ investigation) to any person other than a SARS official. SARS is, therefore, unfortunately not in a position to respond to the above request.

Reply:

The department is currently gathering the information required to respond to this question as it is not information that is readily available. After the details of the 87 auditees referred to in the General report have been received from the Auditor General, each of these municipalities will be requested to provide the details of the cases that constituted the total of the irregular expenditure in question in order to respond to part two of the question.

The response will be provided as soon as possible after this information is made available.

Reply:

The Department of Energy, not the National Treasury, is responsible for developing the
Integrated Resources Plan (IRP) and making determinations relating to generation capacity required to enable procurement of power from the proposed Mmamabula Energy Project.

Reply:

NATIONAL TREASURY

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 58 945.10	R 60 760.00
(bb) 2013-14	R 131 131.69	R 31 640.00
(cc) 2014-15	R 183 605.28	R 0.00

 

FINANCIAL SERVICES BOARD

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 18 148.80	R 24 519.39
(bb) 2013-14	R 18 148.80	---
(cc) 2014-15	R 53 286.74	---

GOVERNMENT EMPLOYEES PENSION FUND

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 64 022.40	R 87 723.00
(bb) 2013-14	R 0.00	R 0.00
(cc) 2014-15	R 0.00	R 0.00

GOVERNMENT PENSIONS ADMINISTRATION AGENCY

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 726 707.52	R 812 130.97
(bb) 2013-14	R 598 581.50	R 705 080.88
(cc) 2014-15	R 462 578.27	R 362 853.79

INDEPENDENT REGULATORY BOARD FOR AUDITORS

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 20 174.00	R 0.00
(bb) 2013-14	R 53 904.90	R 0.00
(cc) 2014-15		R 0.00

LAND BANK

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 47 174.02	R 0.00
(bb) 2013-14	R 107 963.33	R 0.00
(cc) 2014-15	R 149 736.10	R 0.00

PENSION FUNDS ADJUDICATOR

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 8 166.96	R 0.00
(bb) 2013-14	R 0.00	R 0.00
(cc) 2014-15	R 0.00	R 0.00

SOUTH AFRICAN AIRWAYS

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 80 028.00	R 421 956.70
(bb) 2013-14	R 0.00	R 116 520.77
(cc) 2014-15	R 648 226.80	R 62 996.40

SOUTH AFRICAN REVENUE SERVICES

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 892, 611.88	R 651, 197.07
(bb) 2013-14	R 794, 341.85	R 452, 260.17
(cc) 2014-15	R 1, 405, 492.00	R 827, 689.12

SASRIA

Financial year	The Sowetan	The Daily Sun
(aa) 2012-13	R 0.00	R 0.00
(bb) 2013-14	R 0.00	R 0.00
(cc) 2014-15	R 33 744.00	R 0.00

Other entities have not spent any funds on advertising in Sowetan and The Daily Sun during the financial years in question.

Reply:

The Honourable Member should note that the Department of Energy is responsible for administering the petrol and diesel prices, and also for determining the basic fuel price (BFP). The Minister of Finance is only responsible for setting the levies and any taxes on petrol and diesel. However, to make it easy for the Honourable Member, I will draw from the website of the Department of Energy (http://www.energy.gov.za/files/petroleum_frame.html) to assist in providing a comprehensive response to the question. The starting point in arriving at the domestic wholesale retail selling price of petrol diesel in South Africa is the calculation of the basic fuel price (BFP), and I will draw on the website of the Department of Energy in response to questions 1(a) and (b) (i) (and (iv)), and then provide my own response to the questions on the tax and levies on petrol and diesel.

(1). (i) and (iv) The website of the Department of Energy states that the basic fuel price (BFP) attempts

“to represent the realistic, market-related costs of importing a substantial portion of South Africa's liquid fuels requirements, and it is therefore deemed that such supplies are sourced from overseas refining centres capable of meeting South Africa's requirements in terms of both product quality and sustained supply considerations.

The petrol price in South Africa is therefore directly linked to the price of petrol quoted in US dollars at refined petroleum export orientated refining centres in the Mediterranean area, the Arab Gulf and Singapore. This means that the domestic prices of fuels are influenced by (a) international crude oil prices, (b) international supply and demand balances for petroleum products and (c) the Rand/US Dollar exchange rate”.

The website goes on to note that there are both international and domestic influences that are added to the BFP to arrive at the final pump prices in the different fuel pricing zones (magisterial district zones). The domestic influences include inland transport costs, wholesale margin, retail profit-margin, the slate levy, and various taxes / levies as listed below. It should be noted that diesel prices are regulated only up to the wholesale level; so the retail price of diesel is not regulated.

(ii), and (iii) Levies on fuels and taxes

The following levies and taxes that apply to liquid fuels in South Africa are provided below:

Table 1: Levy, tax and additional items on PETROL AND DIESEL

Levy	Date first imposed	Amount of levy Fiscal year 2015/16	Objective of the levy
General fuel levy	Early 1980s; Customs and Excise Act, No.91 of 1964 Introduced for the first time around April 1983	255 cent per litre on petrol and 240 cent per litre on diesel	Revenue (net of the refunds) go to the National Revenue Fund, from which they are appropriated to fund government’s general expenditure programmes, including the construction and maintenance of roads and support of public transport. Refer to the annual Budget Review for more information for any specific fiscal year. . Since the abolishment of RSC levies, about one third of the revenue is shared with metropolitan municipalities.
Customs and excise levy	1994; Customs and Excise Act, No.91 of 1964 Introduced in April 1983	4 cents per litre on petrol, diesel and biodiesel. The 4 cents per litre has been fixed since the 1990s.	Included in the Southern African Custom Union (SACU) pool and shared amongst the SACU member countries.
Road accident fund levy	Road Accident Fund Act, No.56 of 1996 Introduced in May 1997	154 cents per litre on petrol, diesel and biodiesel	Provides cover for all road users against injuries sustained or death arising from accidents involving motor vehicles.
Equalisation fund levy	Central Energy Fund Act, No. 38 of 1977; Introduced in January 1979	Zero cents per litre on both diesel and petrol since 1996	The fund was in the past primarily used to smooth out monthly fluctuations in the price of liquid fuels. This was an attempt to try and limit the impact of volatile international crude oil prices and fluctuations in the Rand / US $ exchange rate on fuel prices. This effort has not been very successful and was ceased about 5 years ago.
Demand Side Management Levy	The Central Energy Fund Act, No. 38 of 1977; Introduced in January 2006	10 cents per litre on 95 Octane petrol in inland areas	Most vehicles in the inland market do not require 95 ULP. In an effort to limit the demand for 95 ULP in the inland area to prevent "octane wastage" and to ensure sufficient supply for motorist who really need it the DSM levy was introduced.
Petroleum Pipelines Levy	The Petroleum Pipelines Levies Act, No. 28 of 2004 Introduced in March 2007	0.15 cents per litre - NERSA	To meet the general administrative and other costs for the functions performed by the Petroleum Pipelines Regulatory Authority.
Slate Levy	The Central Energy Act, No.38 of 1977 Introduced in January 2009	Fluctuates	To finance the balance in the Slate account when the Slate is in a negative balance. If the daily Basic Fuel Price (BFP) is higher than the BFP in the fuel price structure, a unit under recovery is realised otherwise there is an over recovery for the oil companies.
IP tracer dye levy	Central Energy Fund Act, No. 38 of 1977. Introduced in August 1999	0.01 cents per litre	To curtail the unlawful mixing of diesel and illuminating paraffin, an illuminating paraffin tracer dye is injected into illuminating paraffin. An illuminating paraffin tracer dye levy was introduced into the price structures of diesel to finance expenses related thereto.

The Table below indicates how the pump price for petrol, and the wholesale price for diesel, is determined for an inland province like Gauteng.

Table 2: Composition of levy, tax and additional items in Gauteng

COMPOSITION OF THE RETAIL PRICE OF PETROL AND THE WHOLESALE PRICES FOR DIESEL IN GAUTENG FOR June 2015
GAUTENG FUEL PRICES	Petrol 93 ULP	Diesel * 0.05% S
	c/l	c/l
Basic fuel price (BFP)	644.65	638.63
Wholesale margin	33.50	64.70
Service cost recoveries	30.00	30.00
Dealers margin (*)	151.10	N/A
Zone differential in Gauteng	35.30	35.30
Fuel levy	255.00	240.00
RAF levy	154.00	154.00
Customs & excise duty	4.00	4.00
IP Tracer levy	N/A	0.01
Slate levy	0	0
Petroleum Pipelines Levy	0.15	0.15
Rounding	0.3
Retail price	1 308.00
Wholesale price		1 166.79

(2) Fuel levy revenue

The money received from the fuel levy is recorded in the relevant audited financial statements every year, and included in the appropriate Budget Review, all made available to Parliament and the public. The figures below are drawn from annual Budget Reviews.

Table 3: Revenue from the General Fuel Levy and RAF

R million	General Fuel Levy (net)*	Road Accident Fund Levy
2011/12 (audited)	36 589.07	16 628.02
2012/13 (audited)	40 320.20	17 621.42
2013/14 (audited)	43 684.65	19 961.98
2014/15 (estimate)	48 466.52	22 038.71
* Net of diesel refunds
Source: Budget Review Table 4: Initial estimate of revenue collected since 1 April 2015 to 31 May 2015
2015/16#	8 602.88	4 364.56
Revenue from 1 April 2015 to May 2015
Source: Statement of the National Revenue, Expenditure and Borrowing as at 31 May 2015 issued by the DG: National Treasury

(3) No, as noted in the Budget Review and other budget documents every year, there is no money received from the fuel levy that is ring-fenced for the maintenance of roads. The building and maintenance of roads is done by departments or agencies in all three spheres of government, and is appropriated in national and provincial laws and municipal budgets. The amounts spent directly by the national government on the maintenance of roads are appropriated from the National Revenue Fund, and the budget information is provided below. A national entity like SANRAL also funds maintenance of certain roads, using budgetary funds and revenue it may collect. The actual funds spent per year on the maintenance of roads requires the Honourable Member to consider the budgets and annual reports of all organs of state involved with road funding in all three spheres of government.

It should also be noted that in 2014/15 R10.19 billion of the net revenue from the general fuel levy was allocated to the eight metropolitan municipalities as a part of a revenue sharing arrangement.

Money from the Road Accident Fund levy is ring-fenced and used by the Road Accident Fund to compensate victims of vehicle accidents for injuries sustained as a result of such accidents. The Road Accident Fund Levy is thus a form of a personal injuries insurance policy. Further information is available from its annual reports.

The tables below are from the 2015 Budget document Estimates of National Expenditure (ENE) and provide an overview of the funds allocated to the National Department of Transport.

Vote 37: National Department of Transport
Subprogramme: R million	2014/15	2015/16	2016/17
Administration	382.90	399.80	423.50
Integrated Transport Planning	81.20	84.30	89.10
Rail Transport	15 034.60	18 362.00	19 389.60
Road Transport	21 645.30	22 852.10	23 876.20
Civil Aviation	148.30	154.00	162.70
Maritime Transport	110.60	115.40	121.80
Public Transport	11 323.80	11 846.40	12 779.10
TOTAL	48 726.70	53 814.00	56 842.00

Vote 37: National Department of Transport
Subprogramme: %	2014/15	2015/16	2016/17
Administration	0.8%	0.7%	0.7%
Integrated Transport Planning	0.2%	0.2%	0.2%
Rail Transport	30.9%	34.1%	34.1%
Road Transport	44.4%	42.5%	42.0%
Civil Aviation	0.3%	0.3%	0.3%
Maritime Transport	0.2%	0.2%	0.2%
Public Transport	23.2%	22.0%	22.5%
TOTAL	100%	100%	100%

Reply:

The department is currently gathering the information required to respond to this question as it is not information that is readily available. After the details of the 12 auditees referred to in the General report have been received from the Auditor General, each of these municipalities will be requested to provide the details of the cases that constituted the total of the irregular expenditure in question in order to respond to part two of the question.

The response will be provided as soon as possible after this information is made available.

Reply:

(a) Section 62(1)(d) of the Municipal Finance Management (MFMA) provides that the Accounting Officer must take all reasonable steps to ensure that unauthorized, irregular, fruitless and wasteful expenditure or other losses are prevented. Furthermore section 125(2)(d) of the MFMA requires that the notes to the annual financial statements must include particulars of any material losses or any material irregular or fruitless and wasteful expenditure, including in the case of a municipality, any material unauthorized expenditure that occurred during the financial year and whether these are recoverable.

From the above it is clear that the legislation places the obligation to make public and disclose particulars of any irregular expenditure incurred, including taking steps to prevent such expenditure from being incurred, on the Accounting Officer. Moreover, the legal principle underpinning the MFMA is that the Accounting Officer and Council are responsible for implementation of the MFMA and to ensure appropriate corrective measures are taken.

b) The Honorable member to note that section 62 of the Municipal Systems Act sets out the process to be followed when aggrieved persons are dissatisfied with decisions taken by a municipality. The process provides for appeals to be dealt with by the municipality within its internal governance structures. There is no requirement in section 62 for decisions with regard to the outcomes of appeals to be reported to the National Treasury. Information in this regard is therefore only available at institutional level and therefore National Treasury was not made aware of the extent of the appeals.

c) With regards to supply chain management disputes or objections, regulations 49 and 50 of the Municipal Supply Chain Management Regulations provide the procedure to be followed. The regulations provide that such disputes be first investigated internally by the municipality before it escalates the matter to the provincial or national treasury. It is therefore clear that the National Treasury will not be aware of supply chain management disputes unless a municipality or the relevant treasury was unable to resolve the matter through its internal processes. The details of such information will be available at institutional level.

(2) Correspondence was received from the City Manager dated 3 September 2012. However, this only provided information of irregular expenditure relating to the request for condonement. As mentioned earlier, the detailed information on all irregular expenditure is maintained within the municipality and in this instance was not shared with National Treasury.

(3) (a) Section 32(2) of the MFMA provides that the Municipal Council must recover all irregular expenditure incurred unless the municipal council has, after an investigation by a council committee, certified the expenditure as irrecoverable and has written it off. It is therefore clear that legislatively, the municipal council is the only appropriate structure who should take action in relation to the irregular expenditure that has been incurred. Information in this regard is therefore best obtained from the municipality concerned.

(b) Section 171 of the MFMA defines when an accounting officer of a municipality commits an act of financial misconduct. To further support the implementation of this section and chapter 15 as a whole, the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings (“Financial Misconduct Regulations”) was promulgated on 31 May 2014 which sets out processes to be followed by municipalities in dealing with allegations of financial misconduct. The regulations provide that as a start, allegations has to be dealt with by the municipal council through its internal established structures that deals with disciplinary matters. This relevant matter will therefore be referred to the Executive Mayor of this specific municipality for his further handling consistent with the provisions of the Financial Misconduct Regulations.

(4) The National Treasury will not be conducting any forensic audit at the municipality at this stage as the information at hand indicate that the Office of the Public Protector is in the process of conducting an investigation at the municipality. The National Treasury will await the outcome thereof.

Reply:

1. National Treasury’s forensic investigation into the Nelson Mandela Bay Metropolitan Municipality on the Integrated Public Transport system commenced on the 12th of November 2014. The Investigation is being conducted in phases as follows:
   • Phase 1: Establish the total amount paid on the projects since its inception in 1 July 2004, obtain and secure all available documentation; conduct preliminary investigation to verify the reasonableness of allegations. This phase was completed in March 2015.
   • Phase 2: An In-depth forensic investigation that is informed by the results of Phase 1, which commenced on 9 April 2015.
   • Other Phases This will be informed by the results of Phase 2 and might include criminal, civil or disciplinary action depending on the findings of the investigation.

1. The investigation is still in progress for Phase 2, which is focusing on an in-depth investigation of all the alleged implicated service providers, officials and other parties.

1. The final report on Phase 2 is estimated to be completed by the 15 August 2015, but subject to cooperation by the relevant parties to provide the required information to reach an informed conclusion.

1. The Investigation Team is composed of National Treasury Special Audit Services officials and its co-sourced forensic investigation firm, Deloitte & Touche.

1. (i) The objective is to conduct comprehensive investigation that will assist the Municipality to implement the appropriate corrective action.

(ii) The terms of reference include, but is not limited to the following:

• Conduct a comprehensive investigation of IPTS since its inception.

Reply:

1 (a) The value of the official gold reserves as at 31 May 2015 was US$4.8 billion, which is approximately 4 million fine ounces.

1 (b) The SARB holds a large percentage of South Africa’s gold reserves in vaults of official sector institutions at offshore bullion centres, while a smaller amount is held locally. It is operationally efficient to store gold at offshore bullion centres should the need arise to conduct gold transactions. The exact percentage allocation is not made public.

2 (a) Gold reserves held locally are held at Rand Refinery Proprietary Limited (Rand Refinery), the South African Mint Company (RF) Proprietary Limited (SA Mint), and various branches of the SARB, including its head office.

2 (b) The SARB performs regular reconciliations on reports based on gold held at various local locations. An audit of locally held gold reserves is also conducted annually.

3 (a) Most of South Africa’s gold reserves are kept at secure offshore bullion centres, in vaults of official sector institutions.

3 (b) The exact percentage allocation is not made public.

4 (a) Senior SARB officials conduct due diligence visits to inspect gold reserves held offshore on a regular basis. The last due diligence visit was conducted during 2014.

4 (b) The report on each due diligence visit is forwarded to the executive of the SARB. As these reports contain confidential information, they are not publically available.

5 No.

Reply:

1. (a) Government borrows money to finance the main budget balance and maturing debt. To partly mitigate refinancing risk – the risk that government will not be able to raise money to finance the budget deficit and repay debt at any scheduled point, or will have to do so at high cost – government also makes use of a bond-switch programme to ease pressure on targeted areas of the bond redemption profile by exchanging short-term for longer-term debt. Between 2008/09 and 2014/15, government switched R203 billion short-term debt (domestic bonds) for longer-term debt.

(b) (i) National Treasury estimates the impact of fiscal policy on economic growth. Internal estimates of the fiscal multiplier are in line with published South African peer-reviewed journal articles, which find that fiscal stimulus has a fairly significant short-term impact on growth.

As was the case for South Africa, many governments had estimated in 2010 that the economy would quickly recover to pre-crisis growth rates. Countercyclical stimulus was expected to reduce the time it would take for economies to return to potential levels of output. These growth projections proved to be over-optimistic; a secular decline in global growth delayed fiscal consolidation and produced rising levels of debt.

Countercyclical policy can influence short-term deviations from trend growth, but cannot be used to address structural declines in output. Many governments have grappled with the fiscal implications of a global slowdown in growth. In South Africa’s case, potential growth has been revised downwards due to lower long-term global growth projections and electricity supply constraints.

Slower potential GDP growth implies that the output gap is fairly small, with two implications for fiscal policy: first, the level of output cannot be significantly increased by running larger deficits; second, the deficit will not likely be reduced by a cyclical upturn in taxes, implying that there is a structural imbalance between revenue and expenditure. The focus of the 2015 Budget is on narrowing the structural fiscal deficit by raising taxes, slowing spending growth and putting in place measures to improve spending efficiency.

(b) (ii) Government is paying interest at an average coupon/interest rate of 10 per cent on the debt which needs to be refinanced over the next four years. It is projected that this debt will be refinanced at a lower average coupon/interest rate of 9 per cent.

2.    The 2015 Budget is aimed at ensuring long-term fiscal sustainability, which is a defining feature of intergenerational equity. The budget also aims to change the composition of borrowing, in order to ensure that government debt is used to fund expenditures with a long-term impact.

Government has stated that there is a long-term (or structural) imbalance between revenue and expenditure, and is addressing this imbalance by raising taxes and reducing the rate of expenditure growth. The bulk of the slowdown in spending growth has been targeted at government consumption, with the current deficit (i.e. the gap between revenue and consumption spending) projected to close in 2015/16. Government is protecting capital expenditure, which remains the fastest growing area of non-interest spending. These three elements of the budget are likely to improve the intergenerational fairness of fiscal policy.

Government reports on the long-term implications of its fiscal choices. The 2015 Budget Review includes estimates of the debt outlook and debt repayments up to 2020/21. In addition, the main findings of the long-term fiscal model are available on the Treasury website. The long-term model’s main finding is that current social spending policies are sustainable over the next three decades.

Reply:

(a) (b) (c) (d) (e) (f) During a joint meeting of the Select Committee on Appropriations and the Portfolio Committee on Education on 02 June 2015, the acting Director General of Basic Education and other staff members of the Department of Basic Education made a presentation to the meeting regarding the delivery performance of the Accelerated School Infrastructure Delivery Initiative (ASIDI) and the Education Infrastructure Grant. During the same meeting the National Treasury also made a presentation about the expenditure of these two programmes, and also reflected on non-financial performance within the same presentation. The National Treasury indicated that the non-financial data was sourced from the Department of Basic Education, which oversees and manages these programmes.

Following the National Treasury presentation the acting co-chairperson of the hearing, Mr C de Beer, informed members of both committees that questions regarding the actual service delivery performance of the grants or programmes should be directed to the Department of Basic Education, as this was the reason why they had been invited to the joint hearing. For this reason, and since the questions that have been asked are specifically related to the mandate of the Minister of Basic Education, please be advised that the questions have been forwarded to the Ministry of Basic Education, who will provide a reply.

Reply:

South Africa is a sovereign country and would not copy or follow the tax policies of other countries without completing a thorough due diligence process to establish the benefits for our citizens. South Africa tax policy is developed in a transparent manner and outlined in the annual Budget and forms part of the fiscal framework which is shaped by the long-term objectives of the government as outlined in the National Development Plan and medium-term objectives like the Medium-Term Strategic Framework. Tax policy has been broadly stable since 1994 and provides relative certainty to all citizens and investors. Major tax policy changes are referred to expert committees like the Davis Tax Committee, which is currently considering various challenges faced by tax policy in South Africa. This follows on the work of the Katz Commission which shaped the tax policies of the democratic government soon after 1994. To the extent that changes in policy are made, they are done in a deeply consultative way and on the advice of expert committees and are not done in an ad-hoc manner. It should be noted that South Africa has different objectives and challenges to an advanced economy like Britain and our policies therefore reflect different priorities from Britain.

In considering the objective of encouraging South Africans to own their homes, I do not believe that tax certainty is an issue at all. The bigger challenges posing home ownership probably relates to non-tax issues like the cost of borrowing; availability and supply of housing, land; and the price and affordability of houses.

Reply:

(a) The National Treasury has not paid out the remainder of any employee’s contract before the contractually stipulated date of termination of the contract for any financial year since 2008.

(b) Yes, the following entities paid out the remainder of the employees’ contractually stipulated date of termination of contacts for the specified period;

FINANCIAL INTELLIGENCE CENTRE

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2010-11 FY	R 35,741.50	Goitsimang April	Settlement agreement
	R 445,677.08	Dineo Motsepe	CCMA Settlement agreement
2013-14 FY	R 93,970.00	Derick Letlonkane	Service no longer required

GOVERNMENT EMPLOYEES PENSION FUND

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2010-11 FY	R 1,548,217.00	M Ramataboe	Board agreement

GOVERNMENT PENSIONS ADMINISTRATION AGENCY

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2013-14 FY	R 191,799.00	Mr. J. Ramatlhape	Permanent CIO was appointed

LAND BANK

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2011-12 FY	R 527,769.64	Lehlohonolo Andrew Makenete	Mutual agreement

PUBLIC INVESTMENT CORPORATION

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2014-15 FY	R 3,188,014.00	Confidentiality agreements	Voluntary termination of contract

SOUTH AFRICAN AIRWAYS

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2008-09 FY	R 9,350,000.00	K Ngqula	Seperation Agreement

SOUTH AFRICAN REVENUE SERVICES

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2008-9 to 2014-15	R 4,745,571.68	Confidentiality agreements	Confidentiality agreements

SASRIA

Financial years	(i)(bb) Amount paid on early termination?	(ii) Names of payout recipients	(iii) Reasons for early termination
2010-11 FY	R 766,800.00	Mr Collin Macheke	Position became redundant after restructuring.