Questions and Replies

Reply:

1. I presume the Honourable Member is referring to the Health Promotion Levy (HPL) on sugary beverages that was introduced on 1 April 2018, to give effect to health policy to counter the rise in diabetes, obesity and other related diseases in South Africa. There is no “sugar sweetened drings tax” nor any “sugar tax”.

The HPL is administered and collected by SARS. The HPL is a domestic consumption tax and payable by manufacturers in the Republic. Imported sugary beverages are taxed when cleared for domestic consumption.

The cumulative revenue collected from the on domestically produced and imported products, from inception on 01 April 2018 to 31 March 2021, is R7.9 billion. Collections in 2018/19, 2019/20 and 2020/21 were R3.2 billion, R2.5 billion and R2.1 billion respectively. These revenue figures from both domestically produced and imported sugary beverages are published on the National Treasury website at http://www.treasury.gov.za/comm_media/press/monthly/monthly_2021.aspx.

2. Tax revenues from the HPL are not earmarked or ringfenced for any particular expenditures, but instead flow into the National Revenue Fund. However, additional funding for health promotion and chronic disease prevention was allocated in the National Department of Health budget (see 2018 Estimates of National Expenditure). This allocation is approximately R50 million per annum over the 2021 MTEF. The National Department of Health has spent R24 million in 2019/20 and R14 million spent in 2020/21 on the health promotion allocation.

3. The rate for the HPL was not changed for the 2021/22 fiscal year and no announcement has been made for the 2022/23 fiscal year. Rate and levy changes are normally only made as part of the annual Budget announcements.

In terms of revenue estimates, the 2021 Budget Review showed an expected growth of HPL collections from R2.0 billion to R2.2 billion for the 2021/11 fiscal year. Measured against the actual unaudited revenue outcomes for 2020/21, the estimates for 2021/22 were forecast to increase by R101.4 million (4.8%), with most of the growth emanating from the HPL on domestically produced products. In the next year, HPL collections were estimated to increase from R2.2 billion to R2.4 billion in 2022/23, representing a growth of R152.1 million (6.9%).

4. During the 2020/21 financial year, HPL collections from locally manufactured sugary drinks, which are the vast majority, contracted year-on-year by 16.4% when compared to the 2019/20 financial year. During the early stages of the hard lockdown levels, most manufacturers of sugary drinks were not classified as essential services and thus production was affected. Furthermore, it appears that the impact of the restricted sales on alcoholic products during the COVID- lockdown is one of the drivers behind the lower manufacturing of sugary drinks as demand has also fallen.

During the 2018/19 financial year the imports of HPL amounted to R1.34 billion with R53.1 million in duties collected, and imports increased to R1.45 billion with duties registering R67.8 million. In 2019/20 imports amounted to R1.23 billion with duties of R66.6 million.

The imports of HPL improved to R556.7 million and duties of R26.2 million in 2020 during the first five months of the strict lockdown, as compared to R444.4 million and R24.70 million of duties during the same period in 2019. Overall, Covid-19 had an insignificant impact on HPL collections from imports.

(5) At present there have been two studies that have been shared with the Ministry of Finance on the effectiveness of the health promotion levy. The first detailed the impact of the health promotion levy on the prices of beverages and did not find any evidence of price increases for beverages that were exempt from the health promotion levy, whiles those beverages that were taxed increased in price by around R1 per litre on average. The second study examined the impact of the health promotion levy on the consumption levels of sugary beverages. The study finds that there was a decrease in the consumption of taxable beverages, with a smaller increase in the consumption of non-taxed beverages, and that the impact was greater for lower income households. The citations of the two studies are provided below:

• Stacey, N., Mudara, C., Ng, S. W., van Walbeek, C., Hofman, K., & Edoka, I. (2019). Sugar-based beverage taxes and beverage prices: Evidence from South Africa's Health Promotion Levy. Social Science & Medicine, 238, 112465.
• Stacey, N., Edoka, I., Hofman, K., Swart, E. C., Popkin, B., & Ng, S. W. (2021). Changes in beverage purchases following the announcement and implementation of South Africa's Health Promotion Levy: an observational study. The Lancet Planetary Health, 5(4), e200-e208.

Reply:

It is not a function of the National Treasury to recover such amounts but well that of the related department. Once any formal processes in such cases have been concluded, and if it has been found that the department is to recoup monies from an individual or entity, then a debt must be recorded by the department on its financial system. It is only when such records are contained in systems controlled by the National Treasury that some report can be provided but again the correctness and completeness of such report will rely solely on the full and correct information submitted by the department itself.

Of such systems that National Treasury maintain, 84 individuals were identified from 17 National and Provincial Departments for the financial years 2016/17 – 2020/21 where cases were recorded on the Personnel and Salary System (Persal) where it relates to financial misconduct. The total amount of R 23 449 484,48 was recorded during this period on Persal where it relates to these cases where 13 individuals were dismissed.

The data for these cases and related individuals identified through Persal as per the above was then used to identify the appropriate recording of the related debt on the Basic Accounting System (BAS). Information for 46 officials of the 84 identified in Persal was captured in BAS with a debt take on amount of R 479 801,28. Of the take on amount recorded in BAS, R 385 697,91 has been recovered. The information is based on the appropriate recording of the data on BAS. And it must be emphasised that the correctness and completeness of this information is based on the appropriate recording of the data by the related institutions.

Reply:

(1) The Public Investment Corporation (PIC) has not abandoned its inquiry into Musa Group. The section 417 enquiry is chaired by a Commissioner and run by legal teams on behalf of the liquidators. Currently the forensic accountant is analysing the information gathered during the first part of the enquiry.

(2) Following the completion of the section 417 enquiry and the receipt of the Commissioner’s report, the liquidators and the PIC will be in a position to decide what legal and other steps should be taken.

Reply:

Yes. The draft 2021 “List of Qualifying Physical Impairment or Disability Expenditure” (draft 2021 Disability List) was prepared by SARS following proposals made by a stakeholder who represents a special needs school for learners with disabilities and, in addition, represents an association of independent schools. These independent schools provide general education together with interventions required as per the disability of each learner.

The guiding principle for qualifying expenses has always been to determine what additional expenses the person with a disability would incur, without which the person would not be able to perform activities of daily living. The amendments proposed in the draft 2021 Disability List were intended to assist schools and parents in more accurately drawing the distinction between expenses for education in the ordinary course, which would be incurred irrespective of whether the learner was living with a disability or not, and expenses for interventions required in consequence of disability, the latter of which would enjoy a tax privileged status under the Income Tax Act, 1962.

The stakeholder put forward the proposition that it was feasible for the schools to itemise their invoices and/or provide a letter to SARS separating the expenses for general education from those incurred in consequence of a disability, with the latter qualifying for tax relief. This appeared reasonable from the facts presented and the draft 2021 Disability List was accordingly prepared and workshopped with various stakeholders representing persons with disabilities before being published for general public comments.

Concerns were, however, raised by the public at large and some other schools. SARS has always been empathetic insofar as expenses required in consequence of disability are concerned and so decided to withdraw the draft 2021 Disability List in order to permit more time to engage with relevant stakeholders, consider the comments/suggestions raised, and clarify the intent behind the draft changes. It is only once this process has concluded that a further draft may be published.

Reply:

1. After liaising with my officials, I confirm that the letter referred to was received and not responded due to the transition from manual processing of documentation to electronic.

2. The National Treasury was not consulted with prior to the Minister of Defence and Military Veterans undertaking the visit to Zimbabwe with the ANC delegation using the SAAF Falcon 900.

3. Furthermore, the National Treasury was not part of the determination of the costs to be paid by the ANC but did receive proof that R105 545 was paid to the Department of Defence for this purpose.

4. The National Treasury has and will always engage departments and entities to ensure that they comply with the provisions of legislation that require consultation and concurrence of the National Treasury. As you may be aware, this matter has been handled and finalised by the President in terms of remedial actions.

Reply:

The National Treasury, annually as required by section 8 of the Public Finance Management Act, Act 1 of 1999 (PFMA), prepares consolidated financial statements (that include a statement of financial position or balance sheet) for national departments and Parliament (including the National Revenue Fund, State Debt and Loans Accounts) as well as for National public entities separately and these two sets of consolidated financial statements are then audited and tabled in Parliament. The consolidated financial statements are prepared separately for both national departments and public entities since these two types of institutions use two separate accounting frameworks. The latest sets of consolidated financial statements that were tabled in Parliament are for the 2019/2020 financial year. The consolidated financial statements are published on the Office of the Accountant-General website and can be obtained from https://oag.treasury.gov.za/Publications/Forms/AllItems.aspx?RootFolder=%2FPublications%2F04%2E%20Consolidated%20Financial%20Statements&FolderCTID=0x0120007EBBC03F454D95408FB944B7B07F6166&View={EA6E6B15-593D-4839-A804-A91A49CB20A0}

Reply:

1. The court order granted in favour of the applicant Astral Operations Limited related to a failure of the Provincial Executive to ensure implementation of the financial recovery plan rather than a failure of government to prepare a financial recovery plan for the Lekwa Local Municipality. When the application for a national intervention was first sought by Astral Operations Limited in 2018, it was agreed that a national intervention at that time was premature, since the Province had already resolved to intervene in the Lekwa Local Municipality in October 2018. A national intervention is a last resort remedy in terms of the hierarchy of interventions outlined in S139 of the Constitution. Consequently, the key role players agreed to support the provincial intervention and the application was subsequently held in abeyance to allow the provincial intervention to unfold and for the financial recovery plan to be implemented with the view that the intervention would address the concerns raised by Astral.

However, since the approval of the financial recovery plan for the Lekwa Local Municipality by the MEC for Finance in the Mpumalanga Province in October 2019, no significant improvement has been noted in the Municipality. Astral Operations Limited has now revived the application on the principle basis that the financial recovery plan was not implemented and ultimately the provincial intervention has failed. Astral now insisted on a national intervention.

2. Section 139(1) (a) (v) (bb) of the Municipal Finance Management Act, No. 56 of 2003 (MFMA) requires that a financial recovery plan be prepared within a period not exceeding 90 days determined by the MEC for Finance in the Province. The court order issued on 12 April 2021 allows for a period of 6 months from the date of the order, however, the financial recovery plan will be prepared in terms of the timeframes in the MFMA.

3. There are court applications and orders in this regard against the following municipalities:

• Emalahleni Local Municipality in Mpumalanga - a High court application brought by Save Emalahleni Action Group and Others to compel the province to invoke a mandatory intervention in the municipality. An order by consent of all parties was granted by the Court for the mandatory intervention. If the province fails to comply with statutory provisions relating to mandatory intervention and if the applicants intend to review any decision the applicants may enrol the matter file supplementary papers seeking appropriate relief which might possibly also include national intervention in terms of section 139(7) of the Constitution.

• Enoch Mgijima Local Municipality in the Eastern Cape - a High Court application brought by Let’s talk Komani against the Premier and Others seeking a mandatory intervention in terms of section 139 of the Constitution. An order by consent of all parties was granted by the Court to the effect that the financial recovery plan approved by the province was made an Order of Court; the province reports quarterly to the High Court on progress on the implementation of the financial recovery plan.

• Makana Local Municipality in the Eastern Cape - a High Court application was brought by the Unemployed Peoples Movement against the Premier of the Eastern Cape and Others seeking a mandatory intervention by the province into the Makana Local Municipality; the dissolution of the municipal council; and the appointment of an administrator.

• Kannaland Local Municipality in the Western Cape - a High Court application brought by the municipality against the provincial government for judicial review of decisions of the provincial executive to intervene in the municipality, claiming that the financial recovery plan of March 2017 and appointment of administrators was unlawful and unconstitutional.

• Maluti-A-Phofung Local Municipality in Free State province - a High Court application which was brought by Harrismith Business Forum to interdict Eskom from discontinuing electricity supply to Maluti-A-Phofung municipality and to compel national government to intervene in terms of section 139(7) of the Constitution. An order by consent of all parties was granted by the Court to, amongst others, establish a consultative committee chaired by the Minister of Cooperative Governance and Traditional Affairs and prepare a financial recovery plan;

• Mafube Local Municipality in Free State province – a High Court application brought by Mafube Business Forum and Afriforum seeking declaration that the provincial intervention has failed and jurisdictional facts for national intervention in terms of section 139(7) of the Constitution are present.

Reply:

a) The loan from the International Monetary Fundf (IMF) was a Rapid Financing Instrument (RFI) facility, which was a temporary arrangement by the IMF for its member countries in response to the Covid outbreak. It is a loan that provides rapid and low-access (including low-interest) financial assistance to member countries facing an urgent balance of payments need, without having to agree to a full-fledged IMF structural adjustment program. It provides support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility. South Africa applied for the loan in the context of an unprecedented fall in government revenues, coupled with a spike in borrowing costs in the market. The loan was for the following purposes:

• 1. Implement a counter-cyclical fiscal policy, by avoiding a dramatic and damaging reduction in government spending in response to an unprecedent fall in tax revenues as a result of the CoVid-induced economic crisis; and
• 2. Finance a sizeable potion of the Covid relief package announced by the President on 21 April 2020 and implemented in the Special Adjustments Budget of 24 June 2020. At the time, this loan financed was estimated to finance between R70 billion and R75 billion of the overall fiscal relief package overall.

The loan supported the spending plans in the 2020 Special Adjustments Budget of 24 June 2020, along with other sources of borrowing. At the time of the Special Adjustments Budget, the total planned borrowings amounted to R776.9 billion. This was revised substantially down to R670.3 billion at the time of the 2021 Budget, with the IMF loan being around R75 billion of this. South Africa will repay the loan over a maximum 5-year period as stipulated in the Letter of Intent (LOI).

b) The loan is part of the overall pool of government borrowings and all the financing instruments that are accessed by government are used to finance spending appropriated by Parliament. At the time of finalizing the RFI arrangement with the IMF, there was no credible information internationally on a widely-available vaccine, and this was not the intended purpose of the loan. Following the development of a vaccine, government has made allocations for a full-vaccination programme over the MTEF. The spending ceiling was lifted in 2021/22 mainly for the vaccine, meaning that borrowings are in part directed towards the vaccine.

c) The loan was given with the broad understanding that it would assist with mitigating the effects of the economic crisis, and did not require earmarking of the funds towards specific spending items. The loan was not subject to conditionalities that compromised fiscal sovereignty. However, as outlined in the Letter of Intent (LOI) signed by the Minister of Finance and the Governor of the South African Reserve Bank (SARB), government is obligated to provide broad spending reports to the IMF in line with the requirements of the PFMA. The National Treasury has published spending reports on the 2020 Special Adjustments Budget in terms of section 32 of the PFMA, and provided an update on the spending against this package in the Budget Review published on 24 February 2021.

Reply:

1. & (2)

The National Treasury has not concluded any work exchange and / or employment agreements with any entity of the Republic of Cuba during the period 2010/11 FY to 2020/21 FY. The National Treasury is an equal opportunity employer and follows all prescripts in terms of employment in the public service. The department does not hold any formal position in regards to work exchange and / or employment agreements with any entity of the Republic of Cuba.

Reply:

In terms of section 227 of the Constitution, local government is entitled to an equitable share of nationally raised revenue to enable it to provide a package of free basic services to poor households and to support additional costs for municipalities with limited own revenue 1. potential. The local government equitable share (LGES) is an unconditional transfer that supplements the revenue that municipalities can raise themselves (including revenue raised through property rates and service charges). The components and sub-components of the LGES formula are neither an indicative budget nor a guideline as to how much should be spent on each service. Its annual baseline growth is determined, taking into account household growth (typically about 3% per year) and cost increases, including for bulk electricity and bulk water, which are typically above inflation. Despite the government's progress in ensuring that millions of households receive basic services, the demand for services remains high and outstrips the pace of delivery. Municipalities are able to use a variety of targeting methods to distribute free basic services to households, including household income, geographical, property and service value. This flexible approach means arbitrary decisions may exclude certain households. The intended recipients of free basic services should be poor households. Each municipality identifies households falling within their prescribed classification method and municipalities develop a subsidy framework based on targeting mechanisms designed to ensure that wealthy or middle-income people do not benefit from free basic service; that is, so long as the household has a municipal account and is registered on the municipality’s indigent register, it can get the free basic services package. Therefore, the R9 billion is indicative of how much it costs to cover the costs of providing free basic electricity to poor households and is therefore used to determine a fair and equitale allocation that each municipality is entitled to receive. Some municipalities have actually a Free Basic Services (FBS) policy that provides higher level of services than the norm indicated by the formual. The decision of how and where these funds are spent is up to the respective municipal councils. The Division of Revenue Act (DoRA) as a legislation that governs how grants are monitored does not give National Treasury and the National Transferring Officer (NTO) the powers to monitor spending on Equitable Share in line with indicative amounts reflected by the formula. This is different for direct grants whereby the DoRA is explicit on the monitoring mechanisms to be applied on a monthly basis.

2. The LGES is transferred by the Department of Cooperative Governance (DCoG). Due to being an unconditional transfer, the DoRA does not give National Treasury and DCoG the powers to monitor LGES expenditure. This is different for conditional grants as the DoRA is explicit on the monthly and quarterly reporting and monitoring requirements for these transfers. As noted above, the poverty threshold used in the LGES formula - which along with the cost factor for each service – determines each municipality’s allocation for each service in the FBS component, is not an official poverty line or a required level to be used by municipalities in their own indigence policies. The Explanatory memo to DoRA does however state that, if municipalities choose to provide free basic services to fewer households than what they are funded for through the LGES, then their budget documentation should clearly set out why they have made that choice and how they have consulted with their community during the budget process.

• Different national departments or NTOs administer conditional grants, and these departments are responsible for monitoring and ensuring that the conditional grants they allocate to municipalities are spent on their intended purpose. This is done through ensuring compliance with DoRA and the applicable conditional grants framework by municipalities, including providing business plans, implementation plans and cash flows. Municipalities also need to report on a monthly and quarterly basis to the national department administering the grant. The administering department also monitors and undertake site visits to ensure compliance by municipalities. Where there is non-compliance, they ought to apply the levers available to them through DoRA, which includes withholding transfers and they may propose the stopping and reallocation of a portion or an entire municipality's grant allocation.

In order to guard against the misuse of conditional grants, if the National Treasury (NT) anticipates that a municipality may underspend on the allocation or a portion of the allocation, NT may in its discretion or on request of a transferring officer, withhold, stop and re-allocate the transfer of a Schedule 4B or 5B allocation, or a portion to a municipality. This is in line with sections 17,18 and 19 of the 2020 DoRA and Section 38 of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (MFMA). Further, in instances where municipalities commit serious or persistent breach of any of the provisions of the DoRA or the MFMA, NT may decide to stop or withhold funds to a municipality by invoking section 216(2) of the Constitution and section 39 of MFMA for no more than 120 days subject to an approval by Parliament.

3. NT has not been informed and would not be in a position to determine that the funds for free basic services have been spent on other areas given that the allocations indicated by the formulal are not meant to be indicator of budgets but to ensure equitable allocations per muncipality. What can be of assistance is for the respective municipal councils to have ways of monitoring budget spending by municipalities and ensure that there is consequence management for non-compliance with the DoRA prescripts as the councils and municipal managers have powers to implement such measures.

Reply:

(1)(a) The total number of posts currently vacant in the National Treasury is 170.

(1)(b)(c) The time period and relevant details are as follows:

POST JOB TITLE DESCRIPTION	VACANT SINCE
Receptionist	2019/12/01
Parliamentary and Cabinet Support (OMIN)	2019/12/01
Administrative Support and Co-Ordination (OMIN)	2020/01/07
Director: Office of Deputy Minister	2019/06/30
Parliamentary Officer	2018/03/31
Private and Appointment Secretary (OMIN)	2019/12/01
Chief Director: Office of Minister	2018/03/31
Assistant Administrative/Appointment Secretary	2020/01/03
Administrative Assistant	2018/12/31
Director: Corporate Law	2021/02/01
Deputy Director: Corporate Law	2020/10/01
Deputy Director: Litigation and Administration	2020/05/31
Assistant Director: Legislation (ODG)	2021/02/01
Deputy Director: Marketing, Advertising and Public Relations	2020/10/01
Junior Graphic Designer	2020/02/29
Enterprise Risk Management Analysts	2021/02/28
Driver	2021/01/31
Analyst: Corporate Governance	2020/10/16
Snr Analyst: Prov Fin Development Institution	2021/01/01
Director: Treasury Operation	2018/04/01
Chief Director: Liability Management	2020/12/15
Analyst: Debt Issuance and Management	2020/02/01
Snr Analyst: Debt Issuance and Management	2021/01/31
Director: Debt Issuance and Management	2020/09/30
Helpdesk: Retail Bonds Operations	2021/02/13
Analyst: Accounting and Information	2021/03/01
Director: Accounting and Information	2020/09/01
Analyst: Market Risk	2020/12/10
Director: Energy and Telecoms	2021/03/31
Deputy Director-General: Budget Office	2017/12/01
Deputy Director: Programme Coordination	2020/09/01
Policy Analyst: National Budgets	2020/02/01
Snr Policy Analyst: Budget Reform	2021/04/01
Chief Director: Public Finance Statistics	2021/02/01
Policy Analyst: Extra Budgetary Accounts and Funds	2021/03/15
Snr Policy Analyst: Extra Budgetary Accounts & Funds	2019/09/30
Snr Policy Analyst: Portfolio & Strategic Management	2021/03/31
Snr Policy Analyst: Infrastructure Finance	2020/02/01
Assistant Director: Fiscal Research (BO)	2020/10/01
Snr Policy Analyst: Fiscal Research	2021/03/13
Chief Director: Public Sector Remuneration Analysis	2021/01/26
Snr Policy Analyst: Civil Pension	2020/02/01
Senior Budget Analyst: Public Finance	2020/12/17
Programme Coordinator	2019/06/30
Senior Budget Analyst: Public Finance	2020/10/01
Budget Analyst: Basic Education Sports & Recreation	2020/12/01
Senior Budget Analyst: Public Finance	2020/07/25
Director: Higher Education & Training	2020/11/11
Budget Analyst: Communications and Energy	2021/02/01
Senior Budget Analyst: Public Finance	2020/09/01
Director: Public Finance	2020/04/01
Director: Forecasting	2019/07/01
Economist: Econometric Research	2021/02/01
Economist: Econometric Research	2021/02/01
Senior Economist: Sectoral & Revenue Modelling	2020/10/01
Chief Director: Microeconomic Policy	2020/12/01
Snr Economist: Primary Sectors	2020/02/01
Director: Sectors	2021/04/07
Senior Economist: Secondary Sectors	2020/01/01
Director: Secondary Sectors	2020/09/01
Director: Environmental Economics	2020/10/01
Chief Director: Macroeconomic Policy	2020/08/07
Snr Economist: Growth	2020/11/01
Economist: Fiscal Framework (IGR)	2020/02/26
Director: Fiscal Framework (IGR)	2018/11/01
Director: Local Government Fiscal Framework	2020/11/11
Economist: Budget Process	2019/12/01
Snr Budget Analyst: Provincial Budget Analysis	2021/04/01
Snr Budget Analyst: Provincial Budget Analysis	2019/11/01
Director: Provincial Budget Analysis	2021/03/31
Deputy Director: Spatial Planning	2019/09/30
Project Coordinator	2020/09/30
Project Manager	2020/04/01
Budget Analyst: Provincial Budget Analysis	2020/10/01
Budget Analyst: Provincial Budget Analysis	2020/10/01
Snr Economist: Local Government Budget Analysis	2020/03/31
Director: Local Government Budget Analysis	2019/04/30
Snr Economist: Local Government Budget Analysis	2018/12/31
Director: Local Government Budget Analysis	2019/08/02
Manager: Investment Planning	2020/05/31
Project Manager	2021/04/01
Urban Economist: NDGP	2020/09/30
Project Manager	2020/11/09
Snr Economist: Financial Inclusion	2020/10/01
Snr Economist: Financial Sector Charter	2020/10/01
Snr Economist: Banking Development	2019/08/15
Chief Director: Financial Services	2020/10/01
Chief Director: Financial Markets & Stability	2020/07/31
Economist: Business Taxes	2020/11/01
Director: Business Tax	2018/10/15
Senior Economist: Tax Revenue Database	2019/09/01
Director: Environment & Fuel Taxes	2020/10/01
Team Assistant	2021/03/01
Deputy Director: International Tax Treaties	2021/02/01
Deputy Director: International Tax Treaties	2021/02/01
Economist: Africa Economic Integration	2020/10/31
Deputy Director: International Organisations	2020/10/01
Senior Economist: G20	2020/12/11
Director: BRICS	2020/11/04
Chief Procurement Officer	2016/12/31
Deputy Director: Transversal Contract Management	2020/10/31
Assistant Director: Transversal Contract Management	2020/10/01
Deputy Director: Transversal Contract Management	2020/12/31
Deputy Director: Transversal Contract Management	2020/02/29
Director: Central Supplier Database	2020/10/01
Assistant Director: Strategic Procurement	2020/10/01
Director: SCM Strategic Procurement	2021/03/15
Assistant Director: Strategic Procurement	2020/10/01
Director: SCM Client Support Local Gov	2020/06/30
Deputy Director: SCM Monitoring & Compliance	2020/09/30
Deputy Director: SCM GMC (OCPO)	2020/10/01
Deputy Director: SCM GMC (OCPO)	2020/10/01
Deputy Director: SCM GMC (OCPO)	2020/10/01
Deputy Director: SCM GMC (OCPO)	2020/10/01
Deputy Director: Programme Coordination	2020/09/01
Facilities Generalist: Help Desk	2020/06/30
Facilities Generalist: Help Desk	2018/11/01
Human Resources Support: Service Delivery	2020/01/01
Manager: Talent Development & Performance Management	2020/05/31
HR Support: Employee Wellness Programme	2020/01/01
Employee Relations Practitioner	2020/02/01
Manager: Organisational Development	2021/03/31
Deputy Director: Employee Health Wellness & Trans	2020/09/01
Human Resources Support: Recruitment	2019/10/01
Financial Admin Specialist: Internal Control	2019/12/01
Financial Admin Specialist: Budget	2020/02/01
SCM Database Administrator	2020/10/01
Bids Administrator	2021/03/12
Assistant Manager: Travel Coordination	2021/01/01
Manager: Performance & Risk	2019/11/30
Manager: Strategic Sourcing / Acquisition (Corporate Services)	2020/05/31
Receipt and Inventory Coordinator	2021/03/15
Deputy Director: SCM Operations (Corporate Services)	2019/07/03
Financial Analyst: Public Entities Oversight Unit	2020/10/01
Team Assistant	2020/06/03
ICT Administrator	2020/10/01
Deputy Director: Information Security	2020/10/01
Senior Security Officer	2020/12/18
Senior Security Officer	2020/09/30
Director: Security Management	2021/03/09
Chief Audit Executive	2019/07/31
Team Assistant	2019/12/01
Business Support Manager	2019/04/04
Jnr IT Audit Specialist	2020/04/30
Manager: IT Audit	2020/02/24
Manager: IT Audit	2020/08/31
Senior Manager: IT Audit	2019/05/31
Jnr Performance Audit Specialist	2019/09/30
Senior QA and Compliance Audit Specialist	2019/10/17
Senior Manager: Quality Assurance & Compl Audit	2019/06/17
Project Manager	2020/01/10
Accountant-General	2015/10/09
MFMA Advisor	2019/07/01
Director: MFRS	2019/10/31
Financial Analyst: NRF & RDP (Banking Services)	2019/08/31
Financial Analyst: NRF & RDP	2021/01/31
Director: Justice & Protection Services Cluster	2020/07/31
Director: MFMA Support	2020/10/01
Chief Director: Specialised Audit Services	2020/07/04
Snr Fin Analyst: Fin Man & Int Contr Systems Audit	2021/04/01
Chief Director: Capacity Building	2018/12/01
CAA Trainees	2021/03/11
Deputy Director: SCM Education Training & Development	2020/11/16
Chief Director: Financial Systems	2020/06/30
Refreshment Coordinator (Corporate Services)	2020/05/20
Financial Systems Administrator	2019/07/23
Systems Specialist: Projects Management	2021/02/11
Snr Systems Specialist: Projects Management	2021/03/31
Snr System Specialist: Training & Support	2021/02/28
Training Administration Officer (Financial Systems)	2019/07/01

(2)(a) The total number of vacant posts currently in the National Treasury have been filled on an acting basis is 17.

(2)(b)(c) The time period and relevant details are as follows:

VACANT POSTS FILLED ON AN ACTING BASIS	PERIOD POSITION HAS BEEN VACANT	ANY OTHER RELEVANT DETAILS IN EACH CASE
Deputy Director-General: Chief Procurement Officer	December 2016 to date	Headhunting stage
Deputy Director-General: Accounting General	October 2015 to date	Headhunting stage
Chief Director: Financial Systems	June 2020 to date	Waiting Organitational Review process finalisation
Chief Director: Capacity Building	June 2020 to date	Recruitment is underway: re- advertisement
Director: Provincial Fiscal Framework	July 2020 to date	Recruitment is underway: at offer stage
Chief Director: Microeconomic Policy	December 2020	Recruitment is underway
Director: Forecasting	July 2019 to date	To be re-advertised
Director: Secondary Sector	September 2020	Recruitment is underway: re- advertisement
Deputy Director-General: Budget Office	December 2017 to date	Recruitment is underway
Chief Director: Fiscal Policy	March 2021 to date	Awaiting funding confirmation, then will start with recruitment
Chief Director: Public Finance Statistics	February 2021 to date	Awaiting funding confirmation, then will start with recruitment
Chief Director: Public Sector Remuneration	January 2021 to date	Awaiting funding confirmation, then will start with recruitment
Director: Security Management	March 2021	The previous Director: Security Management got promoted to Chief Risk Officer
Assistant Director: Travel Coordinator	November 2020	Previous incumbent resigned pending disciplinary action
Chief Director: Financial Markets, Stability and Prudential Regulations	July 2020 to 15 March 2021	Recruitment is underway-assessment stage
Director: Treasury Operations	April 2018 to date	Recruitment is underway- assessment stage
Chief Director: Liability Management	August 2020 to date	Recruitment is underway: re- advertisement

Reply:

The numbers referenced in the document are BAS Payment numbers.

Please find attached the extract of BAS payments made by the National Department of Human Settlements and Water and Sanitation to Travel with Flair. These payments were consolidated payments which included other items and or services that were not Covid-19 related.

(a) PM-2420322, Total payment of R487 735.00 of which R103 000.00 was Covid related.

(b) PM-2420317, Total payment of R437 710.00 of which R126 875.00 was Covid related.

(c) PM-2420328, Total payment of R496 715.20 of which R59 830.00 was Covid related.

(d) PM-2420330, Total payment of R272 005.00 of which R135 000.00 was Covid related.

(e) PM-2420329, Total payment of R492 595.00 of which R253 750.00 was Covid related.

(f) PM-2420326, Total payment of R199 105.00 of which R125 750.00 was Covid related.

In all cases the Covid-19 related expenditure (in red text on Annexure A) is referring to “Consumables: Medical Kit”. Based in this payment information, the National Treasury cannot completely determine whether these payments constitute irregular expenditure.

The National Treasury will, however, request the Department of Human Settlements and Water and Sanitation to provide the details of the transactions to determine whether the transactions complied with National Treasury Instruction No. 05 of 2020/2021 which was applicable at the time of the transactions.

Reply:

1. Unpaid Invoices

The accounting officer for a department, trading entities or constitutional institutions are required in terms of section 38(1)(f) of the Public Finance Management Act (PFMA), 1999 (Act No. 1 of 1999) to settle all contractual obligations and pay all money owing, including intergovernmental claims, within the prescribed or agreed period. Treasury Regulation 8.2.3 provides that “Unless determined otherwise in a contract or other agreement, all payments due to creditors must be settled within 30 days from receipt of an invoice or, in the case of civil claims, from the date of settlement or court judgement”.

Accounting authorities of public entities are required in terms of section 51(b)(iii) to manage the working capital of the public entity efficiently and economically.

A National Treasury Instruction Note No. 34 was issued to accounting officers of departments requesting exception reports to be submitted to their relevant treasuries on (a) number and value of invoices paid after 30 days from the date of receiving invoices, (b) number and value of invoices older than 30 days that has not been paid and (c) reasons for the late and/or non-payment of the invoices.

The National Treasury established a Call Centre to allow suppliers to log and report non-payment of invoices by government institutions for the National Treasury to take steps in ensuring that such suppliers are paid and make necessary follow-up with those respective institution to determine root cause for the non-payment of reported invoices that remain unpaid and facilitate and fast track the payment of those invoices with the relevant institution, the Call Centre can be accessed on the following address: [email protected].

Similarly, section 65 (2) (e) and 99 (2) (b) of the MFMA requires the accounting officer of the municipality and municipal entity to take all reasonable steps to ensure that all money owing by the municipality be paid within 30 days of receiving the relevant invoice or statement.

Information on invoices specified in the list will be followed up with the relevant institutions to ensure that payment is made.

2. Payment of unpaid invoices

Accounting officers, accounting authorities, municipal managers and accounting officer of municipal entities are entrusted with financial management responsibilities in terms of the Public Finance Management Act, Act No. 1 of 1999 (PFMA) and Municipal Finance Management Act, Act 56 of 2003 (MFMA) to ensure that all contractual obligations are met and that payment to suppliers are made on time. Accountability arrangements in terms of these two pieces of legislation require each institution to plan, budget, contract and pay for goods delivered and services rendered, and it is, therefore, the responsibility of the institution to ensure that all valid invoices paid on time.

The National Treasury does not make payments to supplier’s invoices that remain unpaid by other organs of state due to accountability arrangements embedded in the PFMA and the MFMA. The Call Centre is used to assist suppliers to ensure that organs of state adhere to legislative requirements and honor their contractual obligations.

Reply:

a) On 2 December 2009, Cabinet resolved that departments must implement mechanisms to ensure that payments to suppliers are paid within 30 days from the date of receiving an invoice. On 22 November 2010, Cabinet reiterated its decision taken on 2 December 2009 regarding the payment of invoices.

b) In addition, the Forum of South African Directors-General (FOSAD) resolved that the National Treasury must provide the Forum with regular reports on the extent of compliance by departments with the requirement to pay suppliers invoices within 30 days.

c) In November 2011, National Treasury published a Treasury Instruction Note No. 34 which emphasised the importance of the payment of suppliers timeously and enjoins departments to submit reports to their relevant treasuries each month with information related to the:

• number and value of invoices paid after 30 days from the date of receiving invoices;
• number and value of invoices that are older than 30 days which remained unpaid; and
• reasons for late and / or non-payment of the invoices.

The National Treasury Instruction Note 34 further requires accounting officers to put systems in place to enable tracking of invoices received.

d) Since 2012, the National Treasury has been actively monitoring compliance with Treasury Regulation 8.2.3 and report quarterly on the level of non-compliance with the requirement to pay suppliers within 30 days as well as the recommendations to improve the level of compliance to the Department of Planning, Monitoring and Evaluation (DPME) to present to the FOSAD. The National Treasury also submits an annual report to the Standing Committee of Public Accounts, Standing Committee of Finance and Cabinet. These reports are also shared with the Public Service Commission and Department of Small Business Development.

e) The National Treasury in its continued effort to assist public sector institutions to meet their contractual obligations and to remind heads of institutions of this requirement, issued a treasury circular on 23 March 2018 to urge heads of institutions to put measures in place to pay valid invoices and claims as required by the legislation, strengthen internal controls and monitor the implementation thereof, institute disciplinary steps against those employees who undermine the legislative requirement or set internal controls, and to remind relevant authorities that failure to take disciplinary steps against those employees constitute non-compliance and misconduct.

f) Some of the initiatives that the National Treasury took to address this matter are as follows:

• The National Treasury in collaboration with DPME visited all provincial departments of Health to understand challenges that are faced by these departments in paying legitimate invoices within 30 days and to develop action plans to address identified challenges and improve compliance levels;

• The National Treasury embarked on roadshows in certain provinces to encourage government departments at various levels to adhere to commitments made on payment of invoices within the stipulated 30-day period as a critical element to support SMMEs who do business with the state;

• The National Treasury established a hotline where queries related to non-payment of invoices are received from suppliers. The National Treasury assists suppliers by following up with transgressing departments on reported late payment of invoices and provides feedback on to the supplier on (i) reasons for the delay and (ii) date payment will be effected. At a provincial level, the process is handled by the Office of the Provincial Accountant-General.

• The National Treasury is in the process of finalising a guideline on payments within 30 days to assist accounting officers with measures to implement to improve the level of compliance and pay invoices on time and also improve their internal control systems in relation to processes and procedures to be followed when effecting payments.

g) Whilst it is not currently a legal requirement that public entities must settle their invoices within 30 days, it is considered a best practice. When amendments are effected to the Treasury Regulations, public entities will also be legally required to pay their invoices within 30 days from date of receipt of an invoice.

Reply:

The National Treasury receives limited financial information from each of the municipalities and we therefore recommend that this detailed information is sourced directly from the finance division of the City of Ekurhuleni who is best placed to give the explanations required.

Reply:

National Departments

1. Table 1 below provides the total Rand value of invoices older than 30 days that were not paid as at 31 December 2020.

Table 1: National Departments: Rand value of Unpaid Invoices as at 31 December 2020

No.	National Department	Rand Value
1	Cooperative Governance	R 17,850
2	Police	R 71,674
3	Home Affairs	R 636,813
4	Statistics South Africa	R 832,404
5	Women, Youth and Persons with Disabilities	R 1,712,016
6	Mineral Resources and Energy	R 4,311,452
7	Public Works and Infrastructure including PMTE	R 51,673,929
8	Water and Sanitation including Trading Entity	R 357,636,505
Total Rand Value	R 416,892,642

Provincial Departments

(2)(a) Table 2 below provides the total Rand value of invoices older than 30 days that were not paid as at 31 December 2020.

Table 2: Provincial Departments: Rand value of Unpaid Invoices at the end of December 2020

No.	Provincial Government	Rand Value
1	Northern Cape	R 517,636
2	Western Cape	R 600,546
3	Limpopo	R 28,471,372
4	Mpumalanga	R 97,788,753
5	Kwazulu-Natal	R 104,363,510
6	Free State	R 112,778,551
7	North West	R 351,858,302
8	Gauteng	R 389,973,533
9	Eastern Cape	R 2,114,327,450
Total Rand Value	R 3,200,679,654

b) Table 3 below provides a list of provinces that are worst performing in terms of payment of suppliers within the prescribed period.

Table 3: Worst performing provincial departments in each province at the end of December 2020

No.	Provincial Government	Rand Value 31 December 2020	Worst offenders (Department)	Rand Value 31 March 2021	%
1	Northern Cape	R 517,636	Education	R 517,636	100%
2	Western Cape	R 600,546	Education	R 600,546	100%
3	Limpopo	R 28,471,372	Health	R 18,000,716	63%
4	Mpumalanga	R 97,788,753	Health	R 97,788,753	100%
5	Kwazulu-Natal	R 104,363,510	Education	R 71,235,451	68%
6	Free State	R 112,778,551	Health	R 64,549,129	57%
7	North West	R 351,858,302	Health	R 327,595,920	93%
8	Gauteng	R 389,973,533	Health	R 342,257,759	88%
9	Eastern Cape	R 2,114,327,450	Health	R 2,025,125,297	96%
		R 3,200,679,654		R 2,947,671,207	92%

Provincial departments of Health and Education contributed 92% of the total rand value not paid by provincial departments as at December 2020.

Reply:

The Municipal Finance Management Act (MFMA) section 5 mandates National Treasury to fulfil its responsibilities in terms of Chapter 13 of the Constitution and MFMA, to the extent necessary to comply with this requirement, the National Treasury may monitor and assess compliance by municipalities and municipal entities with the act; and any applicable standards of generally recognised accounting practice and uniform expenditure and revenue classification systems amongst others.

The National Treasury performs assessments on the establishment and the functioning of the audit committees in municipalities. The focus is on the Non-delegated municipalities, because of the size of their budgets and the types of services provided. The assessments are utilised to develop support programmes for audit committees and internal auditors in these municipalities. The review is performed annually and focuses on:

• Establishment, membership and appointment
• Skills, experience and training
• Meetings of the committee
• Resources
• Relationship with council and management
• Oversight responsibilities
• Audit Committee assessments
• Reporting

In terms of the oversight responsibilities of ensuring that management implements corrective action of previously reported findings by both Auditor-General and Internal Audit units, the National Treasury’s assessment found that the majority of the committees do track management’s efforts to implement corrective action, however, there is room for improvement on the rate at which management implements the recommendation from the auditors. This is one of the root causes for recurring or repeat findings from the auditors.

Reply:

In terms section 51(1) of the Public Finance Management Act, the responsibility to, amongst others, manage revenue, expenditure, assets and liabilities lie with the accounting authority. The executive authority of the South African Post Office is the Minister of Communications and Digital Technologies, who has the responsibility to oversee any plans to return the Post Office to solvency. The National Treasury cannot take over the functions of the Minister of Communications and Digital Technologies, and the accounting authority, who is the board of the Post Office.

Reply:

(1) A sustainable tariff is the one that is cost reflective (Includes all the costs of providing a service, such as bulk purchases). Several municipalities have not been able to establish a cost reflective tariff, which has negatively impacted the sustainability of municipal services. In response National Treasury has developed a tool for use by municipalities, that if used correctly it will see municipalities charging cost reflective tariffs that will cover the cost of bulk purchases. Treasury through its structures is also offering technical support to municipalities to assess and set cost reflective tariffs.

Additionally, National Treasury and CoGTA are jointly funding a Cost of Supply (COS) study that targets the top 20 municipal defaulters of Eskom and top 10 municipal defaulters of the water boards. The study is intended to assist municipalities determine the true cost for the respective services (water and electricity) which will subsequently influence better tariffs.

(2) Ideally the tariffs set by municipalities should cover the cost of bulk purchases. National Treasury consistently advocates this practice. In the same understanding full absorption of the costs such as bulk purchases into tariffs, might result in unaffordable tariffs for low-income households. In some instances, calculating a cost reflective tariffs makes use of municipal other revenue streams and the equitable share to subsidise the tariffs for the indigent and low income households.

(3) Municipalities that do not calculate tariffs through scientific means and merely impose a CPI incremental increase to the previous year’s tariff. There are observations that some rural municipalities or municipalities that have low revenue base, have been found to be charging tariffs which are insufficient to cover the cost or not cost reflective.

In some cases, as the result of improper methods for setting tariffs municipal councils reduce the proposed tariff based on their perception of is affordable to their constituencies.

Additionally, municipalities that have high distribution losses may also find it difficult to recover the cost of the service.

(4) No, it is enshrined in the municipal budget assessment process. All the budgets of municipalities are assessed by National and Provincial Treasuries to determine whether the budget of the municipality is funded or not. If the budget of a municipality is not funded National Treasury and Provincial Treasury determine the reasons why the budget is not funded and assesses specifically whether the tariffs are cost reflective to cover all the expenditure. If tariffs are cost reflective then the tariffs will cover all the cost the render that service. If the tariffs are not cost reflective then the municipality is advised to implement cost reflective tariffs and Provincial Treasuries will assist the municipality to implement such cost reflective tariffs.

The assessments are done annually during the budget process which have resulted in the development of a tariff tool by National Treasury to address the issue of non-cost reflective tariffs.

In addition, the National Treasury issue two budget circulars annual. These MFMA Budget Circulars can be obtained on the NT Website at the following link:

http://mfma.treasury.gov.za/Circulars/Pages/default.aspx.

The Tools to assist municipalities with cost reflective traffic can also be located on the National Treasury Website at the following link:

http://mfma.treasury.gov.za/Circulars/Documents/Forms/AllItems.aspx?RootFolder=%2fCirculars%2fDocuments%2fBudget%20Circular%20No%2098&FolderCTID=0x012000E772703726E2A8479752CF24A134692B

Reply:

(1) A manual collateral management system is in place. This process involves the Portfolio Management and Valuations-, Legal- and Finance teams in consultation with the respective deal teams and the collateral will be valued by external valuers. A process has started to upgrade to an automated system.

(2) The Report of the Mpati Commission of Inquiry into the Public Investment Corporation (PIC), together with its recommendations, was adopted in full by the PIC Board and is being implemented. The Report contains more than 300 recommendations. As at December 2020, 16.36% of the recommendations were fully implemented and 52.12% partially implemented. Implementation is continuing on those that are still open.

(A detailed presentation to the Standing Committee on Finance on the implementation of the recommendations is available on the PIC website under “Presentations”)

Seeing that some recommendations require additional work to be done, a few of which by external parties, it is difficult to put a timeframe to the finalization of all recommendations.

Reply:

a) The National Treasury collates some information on the chief financial officers and other financial officials, however, not specifically regarding officials who were found guilty of serious financial misconduct or convicted of any offence or set of offences. The appointment practices and vetting of those appointed are the domain of the municipality. In terms of regulation 16(1) of the Municipal Regulations on Financial Misconduct Procedures and Criminal Proceedings, municipalities and municipal entities must report any decision to institute or not to institute disciplinary proceedings against the person who allegedly committed a financial misconduct; the reasons for the decision; the outcome where disciplinary proceedings have been instituted; and whether a charge has been laid against the person concerned with the South African Police Service, if the alleged financial misconduct constitutes a financial offence in terms of section 173 of the Act. The above-mentioned reports must be sent to different stakeholders, including the MEC for local government in the province; the national department responsible for local government; the relevant provincial treasury; the National Treasury; and the Auditor-General. The municipalities must also report in their annual reports all suspensions, disciplinary or criminal proceedings instituted in cases of financial misconduct.

 

(i) The National Treasury monitors the establishment of disciplinary boards as required in terms of the above-mentioned Regulations, the effectiveness of the disciplinary boards as this is the instrument through which consequence management in relation to financial misconduct is implemented in municipalities and municipal entities. The National Treasury also monitors whether any municipal official has been charged with financial misconduct, including whether any disciplinary action has been implemented to address the financial misconduct.

(ii) The National Treasury also collates information on other financial officials within municipalities.

The National Treasury does not have information relating specifically to the appointment of CFOs or other financial officials falling within the category mentioned in the questions, however, the Honourable Member should note that the appointment of senior managers, including CFOs in municipalities requires that a process be followed that includes reporting to and seeking responses from provincial MECs responsible for Local Government, in terms of the regulations issued under the Municipal Systems Act. The table below provides information on instances where disciplinary processes have been instituted during 2020/21 financial year.

Name of Municipality	Position held by officials
Alfred Nzo District Municipality	Debt Collection Officer; Revenue Officer and Senior Debtors Clerk
Dr Beyers Naude Local Municipality	Chief Financial Officer
Buffalo City Metropolitan Municipality	Head of Supply Chain Management
City of Johannesburg Metropolitan Municipality	Acting Group Executive Director (4) and Acting Director
Ekurhuleni Metropolitan Municipality	Cashiers (7), Sub-Accountant; Administrators (2) ; Administrative Assistant ; Senior Clerk; Executive Managers (2); Accountant; Admin Officer; Senior Manager (2); Senior Clerk; Clerk; Manager (6) and Admin Assistant
eThekwini Metropolitan Municipality	Senior Manager; Project Executives, a total of 29 officials have been charged and disciplined
Okhahlamba Local Municipality	Cashier
Alfred Duma Local Municipality	Chief Financial Officer; Debt Collector Legal
uPhongolo Local Municipality	Senior Managers (2)
Collins Chabane Local Municipality	Manager Revenue; Manager Supply Chain Management; Manager Planning and Development
Lepelle-Nkumpi Local Municipality	Executive Manager Technical Services; Manager: Supply Chain Manager; and Executive Manager: Community Services
Modimolle-Mookgophong Local Municipality	Divisional Managers (2)
Polokwane Local Municipality	Assistant
Thaba Chweu Local Municipality	Supply Chain Manager
George Municipality	Director: Corporate Services and Director: Community Services

.

Reply:

The Director-General of the National Treasury attended the ANC NEC on the 23rd and 24th January 2021 in his personal capacity.

Reply:

(1) The Public Investment Corporation (PIC) has policies and procedures in place to ensure that at all times procurement processes are fair, equitable, transparent and competitive as required by the Public Finance Management Act, Act 1 of 1999. During the 2019/20 financial year there were instances where the PIC Management were of the view that the PIC’s Delegation of Authority should apply during the procurement process, but assurance providers took a different view, as they believed that approval should have been sought from National Treasury.

(2) There are two main reasons:

• The PIC Management was of the view that Treasury Regulations in instruction note 3 is silent on deviations against internal processes, therefore the internal PIC Delegation of Authority was applicable and was duly applied. Subsequent to this audit finding, National Treasury and the PIC Management had discussions and agreed that this view was of a technical nature. To avoid any recurrence, all procurement that is not explicit in the applicable regulations or legislation, is discussed with National Treasury to avoid any misinterpretation. The PIC Management has also engaged National Treasury through the State Owned Enterprises Procurement Forum (SOEPF) on concerns with instruction note 3.
• In another instance the PIC Management approved a deviation as an emergency but due to the time frame taken to conclude the contract with the supplier, the audit opinion was that it should have been submitted to National Treasury for approval since it did not qualify as an emergency deviation that falls within the delegated authority of the Accounting Officer.

The PIC has improved its processes and procedures to prevent any recurrence.

Reply:

NATIONAL TREASURY

1. Yes

1. The appointed Security company is Excellent Security
2. Rendering of security guarding services for the National Treasury buildings
3. The contract amount for the services is R28 467 243.60
4. The contract is for 3 years (January 2021-December 2023)

ASB

(i) NATIONAL SECURITY AND FIRE

(ii) Armed response and monitoring services

(iii) R645.84 per month

(iv) Contract commenced on 01 March 2020 – 1 month notice period, no specified contract length, but contract reviewed annually and request for quotations issued every three years.

DBSA

NO- The DBSA does not use private security firms, it has insourced security services. The personnel in that unit are all DBSA employees.

FIC

FINANCIAL INTELLIGENCE CENTRE, CENTURION

1. Raite Security
2. Providing physical security services
3. R 2 126 840.27
4. 01 April 2019 to 30 November 2023

FINANCIAL INTELLIGENCE CENTRE, CAPE TOWN

1. Striving Mind
2. Providing physical security services
3. R 1 401 512.16
4. 01 April 2020 to 31 March 2023

GEPF

The GEPF does not utlise private security firms as the landlord provides security services as part of the contract.

GPAA

The Government Employees Pension Agency (GPAA) does make use of private security firms for the sole purpose of protecting the employees and assets in respect of all of the GPAA’s 16 offices, which includes Head office, 15 regional and satellite office across the country in all nine provinces.

All procurement at the GPAA is in line with Public Finance Management Act prescripts. Therefore, the GPAA acquired the services after following an open tender process inviting bids to provide security services.

The details set out in Annexure A attached.

ANNEXURE A

Name of Company	Region (s)	Total value across multiple years	Duration of Service Agreement
			Start	End
Peuloane (Pty) Ltd	Security Services to GPAA HQ & Traven	R 39 386 603,75	2019/08/01	2022/07/31
Peuloane (Pty) Ltd	Security Services to GPAA DBN, PMB	R 3 878 152,14	2019/08/01	2022/07/31
Peuloane (Pty) Ltd	Security Services to GPAA Polokwane, Nelspruit, Thohoyandou	R 11 417 272,73	2019/08/01	2022/07/31
Peuloane (Pty) Ltd	Security Services to GPAA JHB, Rustenburg, Mafikeng	R 8 733 493,76	2019/08/01	2022/07/31
Peuloane (Pty) Ltd	Security Services to GPAA BFN, Phuthadichaba, Kimberley	R 8 320 608,14	2019/08/01	2022/07/31
Peuloane (Pty) Ltd	Security Services to GPAA PE, Bisho, Mthatha	R 8 971 897,34	2019/08/01	2022/07/31

IRBA

1. Fidelity – ADT
2. Armed response for building security
3. R926.72 per month
4. The term of the building lease

LAND BANK

(b) The Land and Agricultural Development Bank of South Africa as an entity under the National Treasury uses private security firms for the following purposes:

• Monitoring and Armed Response
• Static or Physical Guarding of Property

(b)(i) The following is a list of all service providers being uses:

BUILDING	SERVICE PROVIDER NAME
Bloemfontein	Fidelity Security
Bethlehem	Wulfe Alarms
Kroonstad	CSS
Cape Town	Fidelity ADT
Beaufort West	Beaufort-Alarms
Worcester	Capital Security
East London	Chubb – National Security (Pty)Ltd
Cradock	Cradock Sekuriteit
Port Elizabeth	Atlas Security
Nelspruit	ADT Security
Ermelo	ASCU Security
Ermelo	Bethal Security
Pietermaritzburg	PMB Security
Vryheid	Link Up Security
Polokwane	Salute Security
Tzaneen	Northern Security - Kloof Alarms
Upington	Fidelity Security
Vredendal	Fidelity Security
Vredendal	BAI Security
Vryburg	Ravens Security
Lichtenburg	Golden Eye Security
Rustenburg	ARS Security
Rustenburg	Fidelity Security
Potchefstroom	Fidelity Security
Head Office	Fidelity Security
Head Office	ADT Security

 

(b)(ii) Purpose of the services, is to protect people and assets in the case of Monitoring and Armed Response. Additional to this, it is to exercise access control, in the case of Static Guarding.

(b)(iii) Contract values differ significantly and can be expressed in the following manner:

BUILDING	SERVICE PROVIDER NAME	Contract value p/a, ex VAT	Type of Service
Bloemfontein	Fidelity Security	R5,520.00	Monitoring & Armed response
Bethlehem	Wulfe Alarms	R5,060.76	Monitoring & Armed response
Kroonstad	CSS	R3,798.24	Monitoring & Armed response
Cape Town	Fidelity ADT	R8,263.20	Monitoring & Armed response
Beaufort West	Beaufort-Alarms	R3,005.16	Monitoring & Armed response
Worcester	Capital Security	R4,219.80	Monitoring & Armed response
East London	Chubb – National Security (Pty)Ltd	R7,074.36	Monitoring & Armed response
Cradock	Cradock Sekuriteit	R2,473.68	Monitoring & Armed response
Port Elizabeth	Atlas Security	R2,869.56	Monitoring & Armed response
Nelspruit	ADT Security	R6,758.52	Monitoring & Armed response
Ermelo	ASCU Security	R5,791.32	Monitoring & Armed response
Ermelo	Bethal Security	R5,530.44	Monitoring & Armed response
Pietermaritzburg	PMB Security	R6,125.16	Monitoring & Armed response
Vryheid	Link Up Security	R5,263.20	Monitoring & Armed response
Polokwane	Salute Security	R5,980.32	Monitoring & Armed response
Tzaneen	Northern Security - Kloof Alarms	R5,739.12	Monitoring & Armed response
Upington	Fidelity Security	R7,014.12	Monitoring & Armed response
Vredendal	Fidelity Security	R3,856.56	Monitoring & Armed response
Douglas	BAI Security	R2,784.00	Monitoring & Armed response
Vryburg	Ravens Security	R3,130.44	Monitoring & Armed response
Lichtenburg	Golden Eye Security	R3,394.44	Monitoring & Armed response
Rustenburg	ARS Security	R10,643.52	Monitoring & Armed response
Rustenburg	Fidelity Security (Static Guarding)	R163,428.72	Physical Guards
Potchefstroom	Fidelity Security (Static Guarding)	R307,527.60	Physical Guards
Head Office	Fidelity Security (Static Guarding)	R2,122,054.56	Physical Guards
Head Office	ADT Security	R8,133.60	Monitoring & Armed response

(b)(iv) Duration or expiry of each Contract:

BUILDING	SERVICE PROVIDER NAME	Contract Expiry Date/Duration
Bloemfontein	Fidelity Security	08 July 2022
Bethlehem	Wulfe Alarms	Month to month
Kroonstad	CSS	Month to month
Cape Town	Fidelity ADT	01 April 2021
Beaufort West	Beaufort-Alarms	Month to month
Worcester	Capital Security	Month to month
East London	Chubb – National Security (Pty)Ltd	Month to month
Cradock	Cradock Sekuriteit	Month to month
Port Elizabeth	Atlas Security	Month to month
Nelspruit	ADT Security	Month to month
Ermelo	ASCU Security	Month to month
Ermelo	Bethal Security	Month to month
Pietermaritzburg	PMB Security	Month to month
Vryheid	Link Up Security	Month to month
Polokwane	Salute Security	Month to month
Tzaneen	Northern Security - Kloof Alarms	Month to month
Upington	Fidelity Security	01 April 2021
Vredendal	Fidelity Security	01 April 2021
Douglas	BAI Security	17 December 2022
Vryburg	Ravens Security	Month to Month
Lichtenburg	Golden Eye Security	Month to month
Rustenburg	ARS Security	Month to month
Rustenburg	Fidelity Security (Static Guarding)	Contract is Expiring 30 March 2021
Potchefstroom	Fidelity Security (Static Guarding)	Contract is Expiring 30 March 2021
Head Office	Fidelity Security (Static Guarding)	Contract is Expiring 30 March 2021
Head Office	ADT Security	Month to month

PFA

The Office of the Pension Funds Adjudicator does make use of private security firms. Its offices are rented and situated inside a secure office park.

PIC

(i) Bidvest Protea Coin (Pty) Ltd

(ii) Provision of security services at PIC’s head office at Central Square; Menlyn Maine.

(iii) R13 754 696 inclusive of VAT

(iv) 3 August 2018 to 31 August 2021

SARS

(i)(ii)(iii)(iv) SARS has contracted security service providers to render a service on four categories,

in terms of the normal procurement processes.

Category A: Armed Guarding, Close Protection and Tactical Response Security Services for a period of twelve (12) months

• • Tshedza Protective Services CC : contract value R 16 386 785

Category B: Armed Response and Alarm Monitoring Services for a period of three (3) years

• • Maxi Phumelela Security: contract value R 1 827 355.75
  • Royal Security CC: contract value R 678 670.20
  • Fidelity Security Services (Pty) Ltd : contract amount R 574 259.40

Category C: National Guarding Security Services for a period of twelve (12) months

• • Royal Security CC: contract value R 33 605 282.70
  • Fidelity Security Services (Pty) Ltd : contract value R 35 638 716.30
  • Wenzile Phaphama Security Services : contract value R 36 092 011.71

Category D: Secure transport of high value goods for a period of 5 years

• • Fidelity Security Services (Pty) Ltd: R 54 058 010.61

SASRIA

Name: Mavee Security (Pty) Ltd - 2012/033849/07

Purpose: To provide 24-hour security to the premises

Value: R847 800.00

Duration: 36 Months (Commencement Date 01 January 2021)

TAX OMBUD

• The Office of the Tax Ombud (OTO) uses physical security services for the Office building.
• The Fidelity security services are contracted to provide the physical security services to the OTO.
• The security company is contracted by the South African Revenue Service (SARS).
• The physical security expenses relating to OTO is paid centrally by SARS.

Reply:

The Public Investment Corporation (PIC) has policies and procedures in place to ensure that at all times procurement processes are fair, equitable, transparent and competitive as required by the Public Finance Management Act, Act 1 of 1999. However, during the audit for the 2019/20 financial year it was found that certain contracts have led to irregular expenditure. There were two main reasons for that:

1. The PIC Management was of the view that Treasury Regulations in instruction note 3 is silent on deviations against internal processes, therefore the internal PIC Delegation of Authority was applicable and was duly applied. Subsequent to this audit finding, National Treasury and the PIC Management had discussions and agreed that this view was of a technical nature. The PIC Management has also engaged National Treasury through the State Owned Enterprises Procurement Forum (SOEPF) on concerns with instruction note 3. However, to avoid any recurrence, all procurement that is not explicit in the applicable regulations or legislation, is discussed with National Treasury to avoid any misinterpretation.
2. In another instance the PIC Management approved a deviation as an emergency but due to the time frame taken to conclude the contract with the supplier, the audit opinion was that it should have been submitted to National Treasury for approval since it did not qualify as an emergency deviation that falls within the delegated authority of the Accounting Officer.

The PIC has improved its processes and procedures to prevent any recurrence.

Reply:

The Public Transport Network Grant (PTNG) is appropriated to Vote 40: National Department of Transport. Therefore, the responsibilities of approval of all aspects of the PTNG, industry compensation included, lie with the Department of Transport to ensure that money spent in the conditional grant meet the conditions in the Division of Revenue Act, but to also ensure that it is consistent with the Public Transport Policy and Regulations. It is therefore recommended that these questions be referred to the Ministry of Transport.

Reply:

(1) SARS collected approximately R5 million in Corporate Income Tax (CIT) from the Taxi Operators; however, this amount includes tax collected from their employment income. This is because the industry does not correctly disclose income from taxi business on their CIT returns but included under a generic income source code. We were not able to determine income solely from taxi operations. Our analysis indicates that the majority of the taxi industry is declaring a nil return or are having a refund due to them.

(2) SARS is concerned about tax avoidance across the tax ecosystem in general; this is more so in this particular industry; to this end, SARS adopting a number of targeted interventions. The interventions are aimed at achieving the SARS strategic intent of building a tax and customs system that is premised on voluntary compliance. The strategic intent is achieved through the creation of clarity and certainty of tax obligations, making it simple, easy and seamless to meet tax obligations and ultimately by creating a credible threat of detection whilst making it hard and costly to remain non-compliant. To this end, SARS has a unit dedicated to improving compliance of SMMEs, Taxi industry included; we had various engagements with the industry bodies in the year 2020/21 to create alignment as well as to educate. Furthermore, SARS has worked in collaboration with the Department of Transport to share data on work on their Taxi industry transformation agenda. In response to the perceived non-compliance by the Taxi industry, SARS has commenced a process of developing a compliance plan for the Taxi industry to encourage voluntary compliance and potentially propose the appropriate tax regime specifically for the industry. This work will be concluded in the 2021/22 financial year.

The working with and through stakeholders as one of the stated strategic objectives is crucial and informs the stakeholder engagements as detailed above.

Reply:

Parliament approved a fiscal framework that proposes significant adjustments to spending over the medium term in order to stabilize government debt and reduce the pace of growth in debt servicing costs in October 2020. This approval by Parliament meant all spheres of government and all department’s budgets would be reduced to achieve debt stabilization. Furthermore, Parliament passed the 2021 fiscal framework tabled by the Minister of Finance in February 2021 proposing the same fiscal consolidation through lowering the levels of expenditure. The decision to reduce departmental budgets was not a National Treasury decision but a Cabinet decision.

Table 1 provides a summary of expenditure trends and estimates for Vote 28: Police. Between 2020/21 and 2021/22, the department’s budget for compensation of employees is expected to decrease from R76.1 billion to R75.3 billion, while its budget for goods and services is expected to decrease from R19.2 billion to R16.3 billion. The main items influenced under goods and services are non-essential in nature, e.g. advertising, consultants, catering, and travel and subsistence, and will be managed through cost-containment. Reductions on compensation of employees will be managed through salary freezes and non-filling of less critical post vacancies.

                                   

Table 1. Expenditure trends and estimates: Vote 28 (Police)
Economic classification	Audited outcome			Adjusted appropriation	Average growth rate (%)	Average: Expen- diture/ Total (%)	Medium-term expenditure estimate			Average growth rate (%)	Average: Expen- diture/ Total (%)
R million	2017/18	2018/19	2019/20	2020/21	2017/18 - 2020/21		2021/22	2022/23	2023/24	2020/21 - 2023/24
Economic classification
Current payments	82 469.3	86 118.7	92 232.1	95 366.4	5.0%	95.7%	91 570.7	92 036.9	92 097.1	-1.2%	95.2%
Compensation of employees	67 124.5	71 282.4	76 357.7	76 147.0	4.3%	78.1%	75 300.5	75 299.7	75 297.1	-0.4%	77.5%
Goods and services	15 344.8	14 836.3	15 874.5	19 219.4	7.8%	17.5%	16 270.2	16 737.2	16 800.1	-4.4%	17.7%
Transfers and subsidies	1 049.3	1 268.5	1 225.1	1 613.7	15.4%	1.4%	1 333.5	1 258.4	1 267.2	-7.7%	1.4%
Provinces and municipalities	44.5	49.5	52.8	53.2	6.1%	0.1%	55.6	57.6	61.4	4.9%	0.1%
Departmental agencies and accounts	39.7	45.6	52.9	51.0	8.7%	0.1%	49.9	51.4	53.5	1.6%	0.1%
Non-profit institutions	–	1.0	–	1.0	0.0%	0.0%	–	–	–	-100.0%	0.0%
Households	965.1	1 172.5	1 119.5	1 508.5	16.1%	1.3%	1 228.0	1 149.4	1 152.2	-8.6%	1.3%
Payments for capital assets	2 947.9	2 894.7	2 440.6	2 580.8	-4.3%	2.9%	3 451.3	3 562.3	3 719.3	13.0%	3.4%
Buildings and other fixed structures	575.4	686.3	513.3	497.7	-4.7%	0.6%	946.7	960.9	1 003.2	26.3%	0.9%
Machinery and equipment	2 340.4	2 201.4	1 927.3	2 078.7	-3.9%	2.3%	2 497.3	2 593.8	2 708.2	9.2%	2.5%
Biological assets	5.9	7.0	–	4.4	-9.2%	0.0%	7.3	7.6	7.9	21.4%	0.0%
Software and other intangible assets	26.2	–	–	–	-100.0%	0.0%	–	–	–	0.0%	0.0%
Payments for financial assets	13.9	15.6	32.3	–	-100.0%	0.0%	–	–	–	0.0%	0.0%
Total	86 480.4	90 297.5	95 930.2	99 560.9	4.8%	100.0%	96 355.5	96 857.6	97 083.6	-0.8%	100.0%

 

 

Over the medium term, compared to other departments in the Peace and Security function group, Table 2 confirms that the Police services baseline decreases least, i.e. a marginal rate of only 0.2 per cent. Government’s support to the attainment of the objectives and outcomes set out under priority 6 (social cohesion and safer communities) of the 2019-2024 medium term strategic framework is therefore corroborated.

Table 2. Peace and security function expenditure

	2020/21	Medium term expenditure estimate	Percentage of total MTEF allocation	Average annual MTEF change
R million	Revised estimate	2021/22	2022/23	2023/24
Defence and state security	53 968	46 656	47 811	48 132	22.5%	-3.7%
Police services	106 603	104 570	105 946	105 994	49.9%	-0.2%
Law courts and prisons	48 263	48 482	49 632	49 919	23.3%	1.1%
Home affairs	9 780	8 862	9 463	9 372	13.4%	-1.4%
Total	218 615	208 570	212 853	213 417	100.0%	-0.8%

Reply:

In terms of Instruction No.11 of 2020/21 (PFMA institutions) and Circular 105 (MFMA institutions), all institutions are required to report procurement transactions on a monthly basis. All procurement transactions related to the emergency procurement for COVID-19 PPE items, fabric masks as well as other goods, works or services that were procured to prevent an escalation of the national state of disaster, declared on 15 March 2020 (the Disaster) or to alleviate, contain or minimise the effects of the Disaster, must be reported. This includes, inter alia, expenditure for quarantine and isolation services, humanitarian relief, etc.

The reports are published monthly in the public domain and serves as a transparency mechanism to lay bare non-compliant government institutions. It is therefore the responsibility of the accounting officers and accounting authorities to ensure that the information provided to the National Treasury is credible, accurate and auditable.

National Treasury has thus far followed up with National Departments, in writing, to make the accounting officers aware of the non-compliance to Instruction no. 11 of 2020/21. It must, however, be noted that not all non-reporting is necessarily regarded as non-compliance as some departments do not procure on a monthly basis. There are instances where departments have not reported in a certain month because no procurement was done in that month.

National Treasury has also engaged the Auditor-General to request that AGSA follow up with selected government institutions whether any expenditure was actually incurred and whether the institutions reported the expenditure in accordance with Instruction no. 11 of 2020/2021 or Circular 105. This will be included in the next annual audit cycle.

Reply:

1(a) National Treasury only has access to payments information from national and provincial departments using the BAS payment system. In order to search for information against individuals, the National Treasury would need the identification numbers as a search by names may result in inaccurate results.

1(b) A search was done on the BAS payment system for the period 1 April 2017 to date and no payments were found that were made to the entities or initiatives mentioned. (name and details furnished)

2 The National Treasury is not aware of any application of any nature to obtain state funding and/or tenders by the specified persons, entities and/or initiatives.

Reply:

It is generally not possible in South Africa for the state, or any bank or company, to secure loan funding without paying interest except, possibly, for small amounts of concessional funding. No bank in South Africa is likely to lend to customers without covering the full cost of capital, including interest. Some institutions may be able to structure a small part of their loan market for non-interest or sharia-related lending but such lending is very limited, and uses other mechanisms to recover their costs.

The question of whether any state bank can lend at lower interest rates than commencial banks, and whether such a business model will be sustainable, and bring no additional risk to the fiscus, is a separate question that the management of each state bank has to consider, including the extent of non-performing loans and affordability of its customers. It is imperative that no state bank must be a burden on the fiscus and that all state banks must be able to generate sufficient own-revenue to fund their operations. State banks which engage in lending activities need to develop robust lending and risk management models, so that they do not depend on fiscal transfers, or impose losses on depositors. As such, no funds have been budgeted to fund any interest-free lending, by any bank.

a) The amount of funds budgeted to fund interest on the national debt is available in the annual Budget documentation, including the Budget Review.

(i) The total amount of funds that was budgeted to fund interest on the national debt in the 1995 Budget for 1995/96 was R39,5 billion.

(ii) The total amount of funds budgeted to fund interest on the national debt in the latest, 2021 Budget is R232,9 billion for 2020/21.

b) As announced in the 2021 National Budget, the cost of servicing government’s debt, at R232,9 billion or 11,3% of consolidated expenditure in 2020/21, and rising in the next few years, is not sustainable. Hence, in the 2021 Budget, government has undertaken several measures which are expected to stabilise government debt at 88,9% of GDP in the 2025/26 financial year, and for the ratio to decline thereafter.

Reply:

1. (a) The DALRRD’s requested the National Treasury to retain the surplus from the 2019/20 financial year due to underspending on a number of projects for the following reasons.

• Recapitalisation and development projects: Non- Accountability of previous disbursements.

• Guarantees on Land Acquisition: The DALRRD indicated that there were lengthy negotiations on some projects between sellers of land and the department which concluded at the end of quarter 3 and beginning of quarter 4. After conclusion of agreements, the projects had to go for conveyancing and registration process by Deeds Office which delayed the payments.

• Contracted one Hectare one Household projects: were not completed due to slow mobilization of the projects due to lengthy stakeholder consultation process, and disputes amongst beneficiaries.

• Contracted Land Development Support: The DALRRD indicated that they had to request Section 66 and Section 72 approvals (PFMA restrictions on borrowing, guarantees and other commitments) from the National Treasury to enter into contracts with ABSA and FNB for the purpose of mitigating the risk of farmers misusing the funds as experienced in the past with the Recapitalization and Development Programme (RADP) program. The approval was granted during December 2019. A team of agricultural engineers from former the Department of Agriculture, Forestry and Fisheries (DAFF) were assembled and deployed to the farms to reassess the infrastructure. Transfers were made after receipt of the assessment reports of relevant infrastructure required on farms, and some of these project assessments were only concluded during the 2020/21 financial year.

• Contracted forensic audit: delays due to ongoing forensic audit. The DALRRD indicated that the amount would be paid after close up report is received on forensic audit performed. The expenditure was expected to be disbursed within 30 days after receipt of invoice.

• Open orders: Valuations for land acquisition projects not yet concluded at the end of the financial year.

• Further ALHA received an additional R277 million towards the end of March 2020 (end of 2019/20 financial year) for COVID-19 Disaster Fund.

2. 

(b) The DALRRD, did not provide any proposed spending changes. The retained surplus is supposed to be spend during the 2020/21, during which the approval would be valid.

• The DALRRD provided the cash flow / expenditure disbursement terms, which ranges from 2 days after registration of land by Deeds Office; 30 days after receipt of invoice; and some projects expenditure to be disbursed within 1 year.

• The table below indicates the disbursement terms, project values and project terms.

Table 1: List of commitments at the end of 2019/20

Commitment description	Project term (years)	Cash flow disbursement term	Reason for slow spending	Project budget (R’000)	Project Surplus (R’000)
Recapitalisation and Development projects	5	1 year	Non Accountability of previous disbursements	122 436	122 436
Guarantees on Land Acquisition	0.5	2 days after land registration by Deeds	Lengthy negotiations on some projects between seller and department which concluded end of quarter 3 and beginning of quarter 4, after agreement projects have to go for conveyancing and registration process by Deeds Office.	146 436	146 436
Contracted one Hectare one Household projects	unlimited	1 year	Slow mobilization of the projects due to lengthy stakeholder consultation process. Disputes amongst beneficiaries These commitments are mainly second or third tranches, which are earmarked to be finalised this financial year.	28 257	28257
Contracted Land Development Support	5	1 year	The Department had to request Section 66 and Section 72 approvals from Treasury to enter into contracts with ABSA and FNB for the purpose of mitigation the risk of farmers misusing the funds as experienced in the past with the RADP program. The approval was granted during December 2019. A team of Agricultural Engineers from DAFF were assembled and deployed to the farms to reassess the infrastructure. Transfers were made after receipt of the assessment report of relevant infrastructure required on farms. Some of these project assessments were only concluded in the current financial year.	716 990	716 990
Contracted forensic audit	1	I year	Retention amount will be paid after close up report is received on forensic audit performed.	1 710	1 710
Contracted project management	1	30 days after receipt of invoice	Balance for project will be paid after final review and sign off the close up report.	477	477
Open Orders	0.5	30 days after receipt of invoice	Valuations for land acquisition projects not yet concluded.	2 828	2 828
Total				1 019 135	1 019 135

COVID Disaster Fund	0.5	30 days after receipt of invoice	Current financial year, funds received from department during 2019/20.	513 844	513 844
Grand Total				1 532 979	1 532 979

Reply:

National Treasury has not received nor approved any requests for deviations from procurement processes from the Department of Human Settlements (DHS) or Department of Water & Sanitation (DWS) for the procurement of personal protective equipment from Travel with Flair (2004/028611/07) for the period 1 January 2020 to 31 January 2021.

The National Treasury does, however, notice the Covid-19 transactions that were reported by DHS against Travel with Flair to the amount of R939 349.00. These transactions were undertaken by the authority of the accounting officer and not as a result of any deviation that NT approved.

National Treasury did not find any transactions for DWS against Travel with Flair on the Covid-19 Reporting Dashboard.

Human Settlements – Extract from the Covid-19 Reporting Dashboard

Reply:

I presume that the Honourable Member is referring to the R200 billion Loan Guarantee Scheme (LGS), which is 40 per cent of the broader government-led R500 billion package that was announced by the President on 20 April 2020.

Firstly, there is no shortfall, or grant or loan, that any business is entitled to receive directly from the R200 billion scheme. Since it was introduced on 4 May 2020, the purpose of the loan guarantee scheme was to assist financially distressed businesses due to the Covid-19 pandemic. As stated in my response to a previous Parliamentary Question, No 1346 [NW1716E] on 24 August 2020, National Treasury entered into a partnership with the South African Reserve Bank (SARB) and the Banking Association South Africa, to launch the Covid-19 loan guarantee scheme on May 2020, to make it easier for banks to lend more than they normally would have, to small businesses during the lockdown, to assist them in their efforts to survive the pandemic. When the scheme launched, it applied to small businesses with a turnover below R300 million. On 27 July 2020, the scheme was improved and this turnover limit was abolished and replaced with a maximum loan R100 million per loan to qualifying businesses. Banks were to fund such loans from their own funds, using their own balance sheets. Government would only pay from the fiscus if these small businesses defaulted on their payments to their bank, and only after the bank had taken the initial losses, as follows:

• First loss is absorbed by the lending bank, 2% on each Covid-19 guaranteed loan;
• Second loss is indirectly absorbed by the lending bank – there is a guarantee fee with the SARB of 0.5%;
• Third loss is also absorbed by the lending bank to a maximum of 6% of the Covid-19 guaranteed loans; and
• Fourth loss is the guarantee provided, to be paid by Government.

As of February 2021, banks had provided R17.8 billion in relief to 13 173 approved beneficiaries. It should be noted that the actual take-up was lower than initially expected, as the demand for such loans was low, possibly because many small businesses were reluctant to take up additional debt, given the uncertainty around how long the pandemic would last. Companies may not want to re-invest and borrow more until they feel more confident about the future strength of the economy. In addition, even before the loan guarantee scheme took effect, many banks took their own initiatives to assist their customers, by allowing for payment holidays and other forms of forbearance, which provided significantly more relief than the loan guarantee scheme.

It is important to note that the National Treasury and the SARB never intended for the guarantee to be called in full, and expected only a relatively small portion of the R200 billion to be paid. Any call on the guarantee would impact negatively on our fiscal framework and our efforts to stabilise the debt-to-GDP ratio. As such, any underutilized portion of the scheme cannot be regarded as a “shortfall” nor should there be any expectation that it can be used to fund other programmes, as it would effectively increase such debt-to-GDP.

There is regular information on the take-up of the loan guarantee scheme, which is published in Treasury documents like the 2021 Budget Review, as well as on the website of the Banking Association South Africa at https://www.banking.org.za/news/jan-loan-scheme-update/ .

Reply:

Please note that the procurement of the Covid-19 vaccines is a line function responsibility of the Department of Health. The Department of Health is the sole procurer of Covid-19 vaccines in South Africa on behalf of the public and private sector.

The National Treasury plays an advisory; compliance monitoring; and oversight role in the procurement of the Covid-19 vaccines.

Insofar as the role of the National Treasury in this regard is concerned, the NT will ensure that procurement legislation is complied with which includes the appropriate requests and approvals for departures from procurement procedures in line with Treasury Regulation 16A6.4 and SCM Instruction Note 3 of 2016/2017 (Preventing and Combating Abuse in the SCM System).

The National Treasury engages with the Department of Health on an ongoing basis prior and during the vaccine procurement process, particularly in respect of departures from procurement procedures.

The funding and procurement of the vaccines are kept central (through the National Department of Health). This allows for comprehensive central control of procurement, governance and the spending of funds. This approach also minimizes the opportunities for corruption, provides for central record keeping of agreements and centralised contact with manufacturers.

Reply:

Yes, National Treasury has appointed Revenue and Budget Advisors in seven (7) provinces. These advisors have undertaken a baseline assessment on revenue and budget management in municipalities in each of the seven Provinces through a tool called the “Survey Monkey” which is a questionnaire based assessment. The results of the assessments are collated into a support plan for the respective municipality.

a) The following are the main findings impacting on the revenue potential of the municipality:

Covid-19 impact - During the total lockdown some businesses had to close and a large number of customers lost their jobs and did not earn an income, consequently, their ability to honour the municipal account was affected, thus, increasing the consumer debt drastically. As the result unemployment increased and these consumers failed to register as indigent beneficiaries, causing the outstanding debt to increase.

On the municipal operations side:

Effective Credit Control - Although municipalities have Credit Control Policies in place, the ability to implement them efficiently is a challenge. The officials are reluctant to implement the credit control for various unethical benefits and there is no political will to support the implementation thereof. Additionally, municipalities lack of resources to implement the credit control policy effectively.

Bad Debt Write-off – Where the situation warrants a debt write-off, municipalities fail to correct their records timeously especially in cases where there is uncollectable debt due deceased estates and indigent households.

An effective Customer Care strategy is most neglected in municipalities. This unit is not well capacitated and lack the prerequisite skill to manage a “Help Desk” with a proper control over the handling of queries. Subsequently, feedback to the customer regarding their queries are very poor resulting in a very unhappy customer.

Poor Infrastructure (Water and Electricity Networks) - Due to the poor and dilapidated infrastructure, proper credit control cannot be implemented. With poor infrastructure, illegal connections cannot be controlled. The Free Basis Services of the indigent households cannot be monitored and the indigent household cannot be restricted or disconnected when the allocated consumption is exceeded.

Billing System and Inaccurate Billing - Incorrect and inaccurate billing pose a challenge in the municipalities. The communities in the various municipalities are dissatisfied with the municipal bills and public confidence suffers, communities are unwilling to pay for the bills issued and as such, municipal debt gradually accumulates and the municipal collection rates fall.

Illegal Connections is a huge area of concern. A lot of consumers use adverse methods not to pay for the consumption. In some municipalities the technical staff seems to promote illegal connections by bypassing the system for a bribe. This behavior is unacceptable and seriously impacts on the finances of the municipality.

Indigent management – The observation is that most municipalities do have an approved and adopted Indigent policy. Indigents are not properly vetted and several households that can afford to pay for services are benefiting unjustly.

Customer information – Capturing of customer information is a critical task in municipalities. Incorrect information and outdated information makes it difficult to implement credit control when required. Equally, credit checks are not adequately undertaken and municipalities lack the methodology to do credit check for new accounts.

Non-payment Culture - Culture on non-payment for municipal services is throttling the finances. Even customers that can afford to pay are reluctant to pay due to fear that municipal finances will be misappropriated.

b) The first and foremost the responsibility rests with the municipality to self-correct, put in efficient processes and procedures. These are underpinned by adequate policy formulation and oversight responsibilities. This means that governance and leadership is essential and critical to ensure that prudent financial management practices are carry out. This is complimented with well-functioning system as an enabler to bill and collect what is due to the municipality. Proper asset management serves as a conduit for efficient revenue generation in municipalities. Many municipalities underperform on their budgets for repairs and maintenance which is allocated to ensure that their revenue generating infrastructure are optimized thus impacting on a sustainable and reliable delivery of service.

Reply:

(1) (a) Yes

(b) The Public Service Regulations in this regard came into effect in August 2016. It should further be noted that the approval is only valid for a period of one year from date of approval. Below are the current valid cases:

(i) Number of Staff Members (25)	(ii) Job or work categories are the specified staff members employed
11	Economic Cluster
1	Human Resources
1	Security Management
11	Financial Cluster
1	Information Technology

(2) Approval was granted to all employees doing other remunerative work outside public service.

a) National Treasury is guided by the provisions of the Public Service Regulations, 2016 and associated procedures

b) All cases are sent to the Director-General for consideration and approval

c) No contraventions were identified following an investigation of such cases

d) There were no transgressors

Reply:

1. National Treasury does not need to approve donations to public entities. Treasury Regulation 21.2.1 permits accounting officers to accept gifts, donations and sponsorships.

2. National Treasury is not able to quantify the irregular expenditure at this point.  Irregular expenditure is incurred when the resulting transaction is recognized in the financial records of a department, constitutional institution or public entity in accordance with the relevant Accounting Framework. For a department or a government component applying the Modified Cash Standards (MCS) to incur irregular expenditure, the non-compliance must be linked to a financial transaction. Although a transaction may trigger irregular expenditure, a department or government component will only record irregular expenditure when a payment pertaining to the non-compliance is actually made (i.e. when the expenditure is recognized in accordance with the Modified Cash Standards). For a government component, a constitutional institution, a trading entity or a public entity listed in Schedules 2 or 3 to the PFMA applying Generally Recognised Accounting Practice (GRAP) or International Financial Reporting Standards (IFRS) to incur irregular expenditure, the non-compliance must be linked to a financial transaction. Although a transaction may trigger irregular expenditure, a constitutional institution, government component, trading entity or public entity will only record irregular expenditure when a transaction is recognised as expenditure in the Statement of Financial Performance in accordance with GRAP or IFRS, whichever is applicable. The National Treasury only receives applications for condonation of irregular expenditure once it is declared as such and this is usually for previous financial years as a result of audit findings.

3. The National Treasury supports the work of the Fusion Centre with the review of bid processes followed. The reviews are conducted on cases referred and based on an assessment of specific procurement processes followed by a given institution in line with the principles of the definition of emergency procurement and its adherence with various COVID Emergency Instruction Notes. Findings are then submitted to the Fusion Centre for further handling. Further detail on the outcome of cases investigated can be provided by the Fusion Centre.

The Centre is compromised of the Special Investigating Unit (SIU), State Security Agency, SA Revenue Service, the Hawks and the Financial Intelligence Centre, and acts as the coordinating body of law-enforcement agencies tasked with looking into Covid-19 related graft.

Reply:

National Treasury is working on designing a Zero-based budgeting (ZBB) framework that will be implemented for the National Treasury and Department of Public Enterprises during the 2021/22 medium term expenditure framework. The framework will aim to reduce unnecessary government expenditure to create space for other priorities including prevention of deficits and spiraling of government debt. The objectives will include:

• Improving the performance of programmes/projects
• Identifying redundant programmes/projects
• Identifying bottlenecks within government’s finance supply chain
• Identifying possible duplication of activities between and within departments
• Improve and optimizing resource allocation, to prevent wasting available resources

The framework to implement the ZBB will be mainly through utilising expenditure reviews, which are used by several countries that have implemented ZBB before. The elements of the framework will include, amongst others:

• Identifying objectives and outcomes
• Roles and responsibilities and required skill sets
• The link between ZBB and the budget process

Reply:

There are several factors that determined employees’ annual leave entitlement in 2019-20;

• employees are entitled to a maximum of 22 – 27 days per annum (depending on years of service);
• employees have a period of six months within which to take all annual leave days that they may have accumulated in respect of the previous calendar year;
• employees may have had annual leave days from before the previous calendar year, as prior to a leave policy change, employees were allowed to maintain a carry-over balance of 10 days in accrued leave; and
• some employees received once-off additional leave credits, to correct for leave unduly lost owing to an electronic leave system error.

 

 

SIGNATURE PAGE

NATIONAL ASSEMBLY

QUESTION FOR WRITTEN REPLY

QUESTION NUMBER: 91 [NW94E]

Deadline = 19 February 2021

Recommended / Not recommended

DR. KAY BROWN

CHIEF EXECUTIVE OFFICER: FINANCIAL AND FISCAL COMMISSION

DATE:

 

Approved / Not approved

DR. DAVID MASONDO, MP

DEPUTY MINISTER OF FINANCE

DATE:

Reply:

There was instability and a lack of leadership and oversight in the Finance Division. This was related to the disciplinary hearing of the now dismissed chief financial officer, leading to the commission having to appoint acting Chief Financial Officers (CFOs) while finalizing the disciplinary process. This resulted in weaknesses in the processing and reviewing of transactions during the compilation of the Annual Financial Statements. The commission has appointed a permanent CFO and has capacitated the internal control systems.

Reply:

Value-added tax was levied at the standard rate of 14% on all 2010 World Cup ticket sales.

VAT revenue from such sales amounted to R318 million.

Reply:

The Financial Intelligence Centre (FIC) receives and analyses regulatory reports, which the Financial Intelligence Centre Act, 2001 (Act 38 of 2001) (FIC Act) requires certain institutions to submit to it. These regulatory reports include those that relate to suspicious and unusual activities and/or transactions (as per section 29 of the FIC Act).

Provisions in the FIC Act preclude the FIC from divulging information about the receipt of regulatory reports, their content, the subject(s) of reports and the identities of reporters. These provisions protect reporters and subjects of reports, and safeguard sensitive information concerning the FIC’s analysis of reported information.

The confidentiality requirements in the FIC Act also serve to avoid disruption of investigative processes that the competent authorities may undertake, based on the financial intelligence reports they receive from the FIC.

Reply:

The FIC received an unqualified audit report with no findings (“clean audit report”) and there were no internal control deficiencies identified.

The Audit Report indicates:

“The matters reported below are limited to the significant internal control deficiencies that resulted in the annual performance report and the findings on compliance with legislation included in this report.”

And below it recorded:

“I did not identify any significant deficiencies in internal control.”

Reply:

(a) Internal delays in the payment of invoices resulted mostly from the following:

• Suppliers often send invoices directly to business units instead of directly to the Finance business unit (Finance) which is responsible for payment. This results in a delay in the processing of invoices and the subsequent late payment.
• There are incidents where relevant documentation is not timeously approved or submitted to Finance, resulting in Finance having to follow up on the status of the documentation which subsequently results in undue delays.
• These internal inefficiencies have been identified and addressed and although not fully eradicated, the results have been improving. The FIC is committed to achieving and maintaining 100% compliance to the target.

 

(b) The reasons were extended to the relevant employees.

Reply:

a) All the changes to departmental budgets for the implementation of the SAA Business Rescue are reflected in the 2020 Adjusted Estimates of National Expenditure (AENE). Changes to each departmental appropriation are reflected in Table 3 of the AENE, while Table 2.1 outlines the changes per economic classification, including shifts between votes for all adjustments, mostly the SAA Business Rescue and the extension of the Social Relief of Distress allocations.

b) The Business Rescue Plan of SAA has been activated and envisages the establishment of a new, restructured airline. In this regard, any previously projected losses will ha to be reduced and finally eliminated and the business rescue plan is specifically designed to achieve this objective, which is the reason for the allocations towards its execution. The allocations made for SAA in this Second Adjustments Appropriation Act will include payment of severance packages for staff, and other requirements to reduce costs over the long term.

Reply:

1. The level 16 posting is that of the Chairperson of the Commission who is not an employee in terms of the definition and who serves on a five-year fixed term contract. The Chairperson’s remuneration is a Presidential determination after recommendation by the Independent Commission for the Remuneration of Public Office Bearers. Accordingly, the Chairperson of the Commission is not a recipient of performance rewards.

2. Two employees were dismissed after having been found guilty of the charges they were served with at their respective disciplinary hearings. The one employee was found guilty on a charge of sexual harassment, while the other was found quilty on a variety of charges relating to the transgression of the Public Finance Management Act, 1999 (Act 1 of 1999, as amended) and FFC Policies.

Reply:

The audit finding in question involved an instance of appointment of a recruitment agency which was not the cheapest based on the Preferential Procurement Policy Framework Act,2000 (Act 5 of 2000) (PPPFA). It was an oversight on the side of management for failing to document reasons and acquire approval to not appoint the cheapest bidder, as required by section 2(1)(f) of the PPPFA. Measures have now been put in place to prevent any other recurrence of this error. This was also related to the staffing capacity challenges then in the procurement domain, which are now addressed.

Reply:

The error contained in the financial statements related to misclassification and reconciliation mistakes in respect of certain assets, liabilities and expenditure. No such error had occurred in the prior year and corrections were effected before final submission of the Annual Financial Statements. There were several challenges that led to the audit query raised, which were predominantly in relation to staffing in the finance section. Some of the reasons noted by the Audit and Risk Committee and the Commission are:

The institution is small with only a few people in the Finance Section. There were three CFOs heading up the finance section in respect of the execution and audit preparation phases for the 2019/20 statutory audit. Although contracted by the Commission to cover the financial year and preparation of audit (prior to the Covid-19 situation, for the period estimated to conclude end August 2020), permanent employment opportunities led to CFO resignation and absence of continuity. Given a short period for handover during Covid-19 lockdown, this affected the preparation of audit process. In addition, key staff members left during the financial year e.g. Procurement Officer in November 2020, Financial Controller in October 2020 and the Management Accountant went on maternity leave in December 2019. This all resulted in new recruitment and/or temporary staff which had to be sought. This absence in continuity of the majority of staff members affected the preparation for the audit process.

To prevent the above finding from recurring, the institution is in the process of filling the position of the Chief Financial Officer on a permanent basis and this is key in implementing the plan developed and being executed, to get the institution ready for the audit process. The plan developed is designed to ensure that the misstatements raised by the Auditor General on the annual financial statements are not repeated.

Reply:

All evidence pertaining to the above audit query was obtained, however at the time it was finally collated, the Auditor General indicated that they were no longer accepting documents for audit purposes as they were then at their reporting phase. In addition to the staff turnover, which in the institution’s small-sized finance division presented challenges of continuity - during May 2019, the erstwhile CFO issued a directive in the finance section to de-activate the automated requisitioning functionality on Pastel. This decision led to challenges being experienced with regard to the storage of documents on the system and affected the audit trail with regard to the linking of requisitions, quotations, approved memos and other supporting documentation to a transaction. The requisitioning functionality has been re-instated on Pastel, which will ensure that all and sufficient evidence documents e.g. requisitions, quotations & other supporting documentation are stored and retrievable for audit purposes.