Questions and Replies

Reply:

A binding fiscal anchor will protect the consistency of service delivery spending by preventing fiscal slippages that result in painful fiscal adjustment measures. Government’s objective of adopting a binding fiscal anchor in the 2024 Budget Review aims to enhance fiscal balances, ensure consistent fiscal targets, and lower borrowing costs. Achieving a primary budget surplus at the end of this month signifies an important step in the fiscal consolidation path, demonstrating our commitment to prudent fiscal management​​.

The strategy for fiscal sustainability integrates with broader economic performance objectives in a 3 pillar framework outlined in chapter 2 of the budget review. The 2024 Budget protects essential services and stimulates economic development by maintaining sound public finances. This approach is evident in our commitment to structural reforms across critical sectors such as energy, freight, and telecommunications, essential for removing growth barriers and creating a conducive environment for economic expansion​​.

Moreover, the Budget articulates a clear plan to accelerate economic growth through these reforms. The focus on establishing competitive markets in electricity and logistics underscores the government's strategy for fostering structural transformation​​.

The revised spending allocations in the 2024 Budget underscore the strategic approach to supporting essential services and infrastructure development, both critical for long-term economic growth. The Budget ensures provinces have the resources to fund key personnel such as teachers and nurses, vital for service delivery, while prioritizing infrastructure investment through innovative reforms and incentives​​.

Reply:

Section 72(1)(a) of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (MFMA) requires the Accounting Officer to assess the performance of the municipality during the first half of the financial year taking into account:

1. the monthly statements referred to in section 71 for the first half of the financial year;
2. the municipality’s service delivery performance during the first half of the financial year, and the service delivery targets and performance indicators set in the service delivery and budget implementation plan;
3. the past year’s annual report, and progress on resolving problems identified in the annual report; and
4. the performance of every municipal entity under the sole or shared control of the municipality, taking into account reports in terms of section 88 from any such entities.

Therefore, the issues to be considered by the accounting officer to recommend whether the adjustments budget is necessary are not only limited to subsection (iii) as indicate in Section 72(a) of the MFMA. It must also be noted that after the performance assessment and adjustments of the budget, the municipality must adjust the Service Delivery Budget and Implementation Plan accordingly.

In addition, Section 28(2) of the MFMA read together with regulation 23 of the Municipal Budget and Reporting Regulations (MBRR) provides details on the types of adjustments budget that can be considered and the timeframes. Therefore, the adjustments budget as a result of Section 72 performance assessment, must be undertaken according to regulation 23(1) of the MBRR. In terms of regulation 23(1), the municipality can table an adjustments budget referred to in Section 28(2)(b), (d) and (f) of the MFMA in the municipal council at any time after the mid-year budget and performance assessment has been tabled in council, but not later than 28 February of the current year.

Reply:

(a) None, since it is not part of the National Treasury’s mandate.

(b)(i) None

(b)(ii)(aa)(bb)(cc)(dd) & (ee) None

Reply:

	(a) Make	(b) Model	(c) Year of manufacture	(d) Date of purchase	(e) Purchase price paid since 8 May 2019
(i) Minister	BMW	X3 XDRIVE 20D	2022	4 March 2024	R786 710
(ii) Deputy Minister	Audi	Q5 4.0 TDI	2023	13 October 2023	R795 000

Reply:

(1) (a) What is the rationale behind the decision of the Land Bank to advertise the sale of its loan book, (b) what specific criteria were employed to determine which loans would be included in the sale and (c) which clients would be excluded;

Land Bank’s Response:

At the outset, it should be noted that a write-off of non-performing loans is an accounting term and a function of International Financial Reporting Standards (IFRS) 9. In terms of IFRS 9 a debt may be written off in its entity “if an entity has no reasonable expectations of recovering the contractual cash flows on a financial asset”. When a debt is written off by the Bank, it does not mean that the Bank can no longer enforce its rights in respect of that particular loan. In addition, it does not mean forgiving the debt. The debtor still owes money to the Bank, however, the Bank has derecognized this asset from its financial statements due to the low prospects of recovery. In case the borrower resumes servicing its debt, or the exposure is sold, a recovered amount would be directly recorded as profit in the books of the Bank.

The Bank issued a tender notice for the sale of its written-off loan assets for the submissions of expressions of interest. This sale relates to accounts where the Bank does not have reasonable prospects of recovering the debt, and where the Bank has consequently written off these amounts in line with the Bank’s policies and applicable laws. The disposal of already written off accounts is a standard practice within the financial services sector and there is nothing unique about the Bank’s intention in this regard. It is also important to note that this written off assets are NOT accounted for as part of the current loan book assets due to the fact that they have been written off, as such this tender does not have any links to the current loan book asset. As stated above, when a debt is written off by the Bank, it does not mean that the Bank will not continue to recover debt owed to it using the normal legal processes within the purview of the country’s laws. In this particular instance, the proceed of the successful sale of these written-off loan assets will be synonymous with the recovery of an amount of the written off assets. The tender process is currently underway and it is expected to be completed in the next few months.

(2) what is the (a) estimated timeline for concluding the sale of the loan book and (b) anticipated total amount of proceeds expected from the specified sale;

Land Bank’s Response:

As stated above, this is a tender process and it is still at its early stage as the closing date for the submissions of expressions of interest was on 23 February 2024. We expect to complete the process in the next few months. Given that the envisaged sale is being conducted through a tender process, the anticipated total amount of the proceeds cannot be disclosed. This is about the recovery from the written off assets which no longer form part of the reported value of the current loan book. Disclosing value of written off assets which the tender aims to recover will have a negative impact on the recovery process of the written off book.

(3) whether the sale is an effort to ensure the sustainability of the Land Bank in the long run; if not, what is the position in this regard; if so, what are the relevant details?

Land Bank’ Response:

The objective of the sale is to try and maximize the recovery on the bad debt that has already been written off. The proceeds of such a sale will contribute to the augmentation of the Bank’s liquidity position and profitability.

Reply:

1. No.

Employees and businesses operating in South Africa are generally subject to taxation in SA on the income derived from those SA activities. This is because the originating cause of the amount being received as income is the physical work that is undertaken to generate that income, which is located in SA (known as income from an SA source). However, most jurisdictions, including SA, also tax persons based on their being resident in those jurisdictions (known as residence-based taxation).

This could result in double taxation for the person concerned, as income may be taxed in SA based on that income being from an SA source while also being taxed in the jurisdiction where the person is a resident. To alleviate the problem of double taxation, SA has entered into a network of 79 tax treaties (23 jurisdictions in Africa and 56 jurisdictions in the rest of the world, mostly with SA’s main trading partners). Although the treaties are based on the OECD and UN models, there are variations between them depending on their age and the outcome of the negotiations between SA and the other jurisdictions. A list of the jurisdictions with which SA has tax treaties is available on the SARS website.

Under SA domestic law, SA will have the right to tax the employment income generated from the services rendered in SA. However, one of the rules generally found in a tax treaty, which will take precedence over domestic law, is that if the remote worker is in SA working for a foreign employer for less than 183 days in a twelve-month period, the employee’s country of residence will have the sole right to tax that income. No tax will be payable in SA and the remote worker should not register with SARS for income tax purposes. There are some exceptions to this rule, such as if the remote worker’s foreign employer has a tax presence (generally, a fixed place of business known for tax purposes as a “permanent establishment”) in SA; or if a South African business carries the cost of the remote worker’s employment by means of, for example, a cost recharge or service fee. In such cases, SA will have the right to tax the remote worker from day one.

Where the remote worker is in South Africa for more than 183 days in a twelve-month period, South Africa has a right to tax the remote worker on the income derived from working in SA, even if the foreign employer has no connection to SA. The remote worker will, therefore, have to register with SARS for income tax purposes and pay tax in SA on that income. As the foreign employer will not be deducting employees’ tax, the remote worker will be required to pay provisional tax every six months. The relevant provisions for the relief from double taxation in the employee’s jurisdiction of residence, set out in the tax treaty or the legislation of the jurisdiction of residence, will then come into play.

If there is no tax treaty between SA and the remote worker’s home jurisdiction, SA will tax the remote worker on the income generated in SA from day one.

A similar but not identical analysis applies if the remote worker is not an employee but instead renders independent personal services, such as a consultant with multiple foreign clients.

2. (a) The 1st phase of the SARS Traveller Management System was implemented during November 2022. As part of the implementation plan, the Communication and Marketing strategy included extensive public and private stakeholders’ engagements with, amongst other, the Department of Tourism; Department of Sports, Arts and Culture; Inter Ministerial Consultative Committee (IMCC); Border Technical Committee; Department of International Relations and Cooperation (DIRCO); Financial Intelligence Centre (FIC); Continental and Regional structures such as Southern African Development Community (SADC) and African Union (AU); WesGrow; Tourism Business Council of South Africa (TBCSA); and the Southern Africa Tourism Service Association (SATSA).

Furthermore, as part of making it easy for travelers to comply with their legal obligation, SARS also embarked on education and awareness initiatives such as a Traveller management webinar, digital advertising platforms, and a Traveller management webpage. Post implementation feedback sessions were also held with public and private stakeholders as part of continuous improvement.

The system was rolled out to all airports by September 2023 followed by specific land (Beitbridge and Skilpadshek), and seaports (Cape Town harbour) as pilot implementation. We are in process of finalizing roll-out at remaining ports. In order to make compliance easier a mobile app was implemented in December 2023, and we are currently developing additional functionality such as an online payment module, temporary import permits and the registration of goods for reimportation.

At this stage completion of the electronic Traveller Declaration is voluntary, and once the necessary legal provisions have been approved, it will be enforced as mandatory during the course of 2024.

b) The online Traveller declaration system enables travellers entering or leaving the Republic to meet their legal obligation to declare goods including currency in their possession before travelling and paying applicable taxes. The online declaration system is accessible through SARS website, Mobi-App and mobile device applications. Through this approach,

• The system creates a seamless process for compliant travellers at ports of entry/exit through providing the facility for pre-arrival automated declarations supported through integrated risk management and 3rd party data systems.
• Provides for the possibility of a coordinated border or whole of government approach to strengthen controls to detect and deter illicit activities such as illicit financial flows, prohibited and restricted goods, etc.
• Create awareness and provide clarity to build a culture of voluntary compliance.  

Reply:

It is not consistent with the procurement policies of the Development Bank of Southern Africa to make material amendments in the requirements after a tender has been adjudicated.

 

Reply:

The investigation is still underway and will be finalised by the end of March 2024.

Reply:

(1)

(a) Accommodation	(b) Air Travel	(c) Ground transportation	(d) Entertainment	(e) Other ancillary expenses
R838 576,58	R325 238,64	R260 014,26	-	R125 258,00

(2) National Treasury covered the cost of the department’s delegation only.

(3) The costs were covered from the budget of the Minister and the International and Regional Economic Policy Division.

Reply:

1. No correspondence has been received by the National Treasury relating to the Sale and Purchase Agreement and the proof of funds necessary for the Strategic Equity Partnership transaction.

2. National Treasury did not conduct a review of the Strategic Equity Partnership transaction as it was not subject to section 54(2) of the PFMA. Once the Sale and Purchase Agreement is received by the National Treasury, it will be reviewed to determine whether it poses risk to the fiscus through fiscal obligations.

3. No details have been received by National Treasury on the compensation to be received by government for the sale of the majority shareholding to the Takatso Consortium. The details are contained in the Sale and Purchase Agreement which National Treasury was not involved in the negotiation thereof. National Treasury currently has no details related to the sale other than what has been made publicly available by the Department of Public Enterprises.

4. SAA submitted PFMA section 54 applications for the disposal of wide-body aircraft and non-core property that formed part of the old Durban International Airport. The Minister of Finance has approved both transactions.

Reply:

1. National Treasury (NT) during the many forums, intergovernmental forums and consultation processes always caution organs of state against fiscal dumping. Fiscal dumping is perceived when sector departments (transferring officers), that administrate and monitor municipal performance, transfer huge amounts of money during the last month of the national financial year (March). However, it should be noted that in terms of the division of nationally raised revenue that appropriates money through the Division of Revenue Act (DoRA), NT is of the view that the national departments are unable to ‘dump’ funding to municipalities because all transfers to municipalities are made in terms of the approved payment schedule and follow a project plan.

Municipalities also implement in-year budget adjustments changes in the last month of the national financial year, between January and March annually which is another process that may also appear to imply fiscal dumping of the funds to the local government sphere.

Additionally, NT conducts another process in terms of section 18 of the DoRA which is a mid-year process of assessing progress of municipalities in terms of their DoRA allocated funds. This process is undertaken during the middle of the municipal financial year, 31 December annually. The implication of this process is that should funds against slow moving municipalities be stopped in terms of section 18 of DoRA and be reallocated to fast moving municipalities in terms of section 19 of DoRA, the recipient municipalities would receive additional funding during the last month (March) of the national financial year, allowing a municipality three months to spend the additional amounts.

2. NT is not considering motivating the financial year-end of all spheres of government to be at the same time.

The national / provincial budget process involves managing the following simultaneously: the Medium-Term Strategic Framework (MTSF), the medium-term fiscal framework, the division of revenue process, and the budget processes of national government and the nine provincial governments.

The separation of national / provincial financial years from the local government financial years allows for a proper sequencing of the national / provincial and the local government processes. The MTSF, the fiscal framework, the division of revenue and the national and provincial conditional transfers to local government are all in place and certain by mid-February which is when municipalities begin compiling their budgets. This means that municipalities can compile their budgets with accurate awareness of what resources they will be receiving from the equitable share and in the form of national and provincial conditional transfers.

From the municipal perspective, the alignment of the municipal financial year with the national and provincial financial year will:

a) place enormous pressure on municipalities already strained financial management capacity.

b) impact negatively on the quality of municipal budgets, as they will not have access to the final equitable share and conditional transfer numbers until right at the end of the process.

c) undermine the community consultation and participation processes around municipal budgets, as they would have to happen during the same period while the national and provincial budgets are being compiled and changed; and

d) undermine the scope for effective coordination of national, provincial and local government planning, as the municipalities would be required to develop and revise their integrated development plans, at the same time the national and provincial departments are still doing their own planning.

The net result would be to condense coordination of national, provincial and local government planning which would inevitably result in gaps and weaker spending outcomes, particularly in relation to conditional grants and will generally impact negatively on the move towards improved planning and execution.

A further key factor to consider is the ability of the Office of the Auditor-General to audit all national departments and their entities, all provincial departments and their entities, municipalities and their entities, within two months after the end of the financial year. The current staggering of financial years means the work is spread over a four-month period and there are sufficient auditors to meet the requirements.

Reply:

1. SAA has cash reserves with which the airline absorbs losses incurred. Moreover, several of the expenditure items that contributed to SAA losses are non-cash items and thus would not have a direct impact on SAA’s available cash reserves. Non-cash expenses (Depreciation and Amortisation) amounted to R109 million for the first three quarters of the financial year. During the same period, SAA generated a total income of R4.4 billion which helped defray operating costs and foreign exchange losses.

2. As of 31 December 2023, SAA had Total Assets of R11.309 billion, Total Liabilities of R6.025 billion resulting in a positive equity value of R5.284 billion. The airline’s assets exceeded its liabilities and therefore the indication is that it is solvent.

Reply:

Question 1

The total revenue collection from the plastic bag levy since its introduction in 2004 amounted to R5.3 billion. Table 1 below shows the revenue collections for the period 2004 to 2023.

Table 1: Plastic bag revenue collection (2004 to 2023)

Fiscal year	2004	2005	2006	2007	2008	2009	2010	2011	2012	2013
Revenue (R million)	41,2	61,4	75,1	86,3	78,6	110,5	257,1	160,6	150,8	169,2
Fiscal year	2014	2015	2016	2017	2018	2019	2020	2021	2022	2023
Revenue (R million)	174,3	183,3	231,9	241,3	300,4	317,9	579,8	658,2	679,8	778,4

Question 2

In 2004, government introduced the plastic bag levy as part of a package of measures to promote the reduction, reuse, recycling and diversion of plastic bags away from landfills. These measures included a regulation on the minimum thickness of plastic bags; disclosure and transparency of the costs of plastic shopping bags by retailers; regulation of the type and amount of ink to be used for printing on bags; awareness and market promotion for recycled materials; and prohibition of plastic bag imports.

The levy gives effect to the polluter pays principle and is aimed at internalising the negative environmental and health costs of plastic bag production, use and disposal into the retail price of plastic bags. It contributes towards government’s goal of zero waste to landfill as set out in the 2020 National Waste Management Strategy and target for 100 percent recycled materials in plastic bags by 2027.

i) The ringfencing of tax revenues is not supported. Ringfencing introduces rigidities into the budget process and breaks the link between a budget allocation and efficient spending. Such practices prevent the continuous evaluation and modification of tax and spending programmes and could result in a misallocation of public funds where there may be too much or too little spending on a particular government priority.

ii) Revenues raised from taxes flow into the National Revenue Fund and are allocated to government priorities as part of the budget process. Although the plastic levy is not ringfenced, public funds are allocated to environmental protection and waste management initiatives of the Department of Forestry Fisheries and the Environment (DFFE). Details on the expenditure allocations to the Environmental and the Chemicals and Waste Management programmes are provided below.

• a) Programme 6: Environmental Programmes

The DFFE coordinates the implementation of green economy projects in the environment sector under the Expanded Public Works Programme and provides monitoring and evaluation support to the programmes. This includes the War on Waste, Working for the Coast, Working for Wetlands, People and Parks, open space management, and the Working for Water, Energy, Fire, and Forests programmes.

Table 2 below shows the spending allocations to the different subprogrammes amounting to about R11.2 billion from 2020/21 to 2023/24 and estimated allocations of R8.7 billion over the medium term up to 2026/27.

Table 2: Environmental Programmes expenditure trends and estimates by subprogramme and economic classification

Subprogramme (R million)	2020/21	2021/22	2022/23	2023/24	2024/25	2025/26	2026/27
Environmental Programmes Management	109,5	293,5	1 057,1	7,9	6,9	7,8	8,1
Environmental Programme Region 1	446,8	471,5	2 041,3	919,5	913,2	987,7	1 119,9
Environmental Programme Region 2	1 557,4	1 249,4	6,1	1 064,6	1 214,9	1 150,7	1 180,9
Environmental Programme Region 3	446,8	471,5	61,9	815,9	553,7	626,1	614,2
Sector Coordination and Quality Management	56,8	100,4		112,2	104,8	110,5	117,9
Total	2 617,3	2 586,3	3 166,3	2 920,0	2 793,4	2 882,8	3 041,1

Source: National Treasury

 

• b) Chemicals and Waste Management Programme

The objectives of the Chemicals and Waste Management programme are to oversee, monitor and evaluate the performance of the waste sector, ensuring that less waste is generated, and existing waste is better managed. Seven (7) subprogrammes for chemicals and waste management, including Integrated Waste Management, Hazardous Waste Management and Licensing, Chemicals and Waste Economy Programme Coordination and the Waste Bureau are implemented.

For the period 2020/21 to 2023/24, about R2 billion was allocated to the chemicals and waste programme, with R1.4 billion allocated to the Waste Bureau, accounting for about 68 per cent of the total budget, as shown in Table 3 below. The estimated allocation to the programme over the medium term from 2024/25 to 2026/27 is R2 billion.

Table 3: Chemicals and Waste Management expenditure trends and estimates by subprogramme and economic classification

Subprogramme (R million)	2020/21	2021/22	2022/23	2023/24	2024/25	2025/26	2026/27
Chemicals and Waste Management	6,1	5,9	26,3	7,1	7,6	7,9	8,2
Hazardous Waste Management and Licensing	26,0	29,8	27,1	33,4	37,9	39,5	41,1
Integrated Waste Management	17,3	46,5	113,0	47,3	47,9	49,9	51,1
Chemicals and Waste Management Policy and Specialized Monitoring Services	14,9	60,9	27,8	50,4	52,7	53,8	57,6
Chemicals and Waste Economy Programme Coordination	11,2	16,5	16,7	21,3	21,0	22,1	23,0
Chemicals Coordination	20,6	15,8	–	18,6	23,2	24,5	25,9
Waste Bureau	300,3	312,6	406,3	406,1	468,9	489,9	512,3
Total	396,3	488,1	617,3	584,2	659,2	687,6	719,2

Source: National Treasury

The Recycling Enterprise Support Programme was established to provide support to small and medium sized enterprises for establishing recycling businesses. Transfers to the Recycling Enterprise Support Programme over the period 2020 to 2026 are estimated at R380,5 million, as shown in Table 4 below.

Table 4: Transfers to Recycling Enterprise Support Programme

R'000	2020/21	2021/22	2022/23	2023/24	2024/25	2025/26	2026/27	Total
Recycling Enterprise Support Programme	2,749	-	92,824	74,506	67,084	70,088	73,309	380,560

The on-budget allocations to the Environmental and the Chemicals and Waste Management programmes of the DFFE exceed the revenue collection from the plastic bag levy.

Reply:

	(i) Minister of Finance	(ii) National Treasury	(iii) National Treasury Officials
(a) Sponsorships	None	None	None
(b) Donations
(c) Financial transfers
(aa) Qatari	None	None	None
(bb) Iranian
(cc) Russian organ of state, organisation and/or resident

Reply:

The Pension Redress Programme was an initiative negotiated and agreed to by parties to the Public Service Coordinating Bargaining Council (PSCBC) through Resolution 7 of 1998. The programme aimed to address discriminatory practices by recognising non-contributory service as pensionable service for employees affected by past discrimination. The programme's implementation period started on 29 November 2002 and concluded on 31 July 2012, following PSCBC Resolution 3 of 2012, which set the final application deadline as 31 March 2012. The resolution of the programme was further defined under PSCBC Resolution 2 of 2018, which detailed the compensation methodology and marked the formal conclusion of the redress process for qualifying applicants.

Applications for the redress programme were submitted via the PSCBC. The Government Employees Pension Fund (GEPF) acted as the payment facilitator for the redress payouts but was not the initiating body of the programme. The decisions regarding the programme's commencement, operational framework, and conclusion were determined within the PSCBC framework, with the Government Pension Administration Agency (GPAA) responsible for processing applications and implementing payments. As such, the GEPF would not be able to comment on the reasons for the programme's conclusion beyond the PSCBC resolutions.

a) Applications received to date

The PSCBC received a total of 150,444 applications of which 72 335 applications were identified as qualifying for the redress benefit. An independent audit was conducted to ensure the verification process was complete, fair, and accurate. This process involved a detailed review to distinguish between qualifying applicants, error cases, and those not meeting the eligibility criteria. Following the completion of the audit process, 53,717 records were identified as qualifying applicants and 18,618 error cases were noted.

As part of the implementation process, the GPAA undertook a meticulous re-verification of cases against the resolutions and pensionable periods recorded on the administration system. This was to ensure the utmost accuracy and fairness in the redress allocation. This re-verification process led to various outcomes, including:

• Error cases initially identified that later met the qualifications for approval;
• Approved/Error cases that, upon re-verification, did not qualify due to overlapping pensionable service;

As a result of this thorough process, the total number of approved cases was updated to 58,324, with the initial 17,045 error cases undergoing further review. Hence a total of 75 369 applications have been processed to date.

b) Applications that have been finalised

Of the initially approved cases, 58,123 applications have been finalised and processed for redress. Of the error cases revisited, 5,982 (35%) were reclassified from error to approved, 6,348 (37%) remained as error cases, and 4,715 (28%) were determined not to qualify (DNQ), hence a total of 68 820 have been finalised.

c) Remain to be finalised;

As we continue to work towards the finalisation of the Pension Redress Programme, a small fraction of cases remains outstanding. Specifically, of the approved cases, 201 remain unresolved. Additionally, 6,348 cases have not been resolved due to their initial classification as error cases. A targeted approach has been implemented to address these error cases, involving the redistribution of error letters by the GPAA to facilitate departmental engagements and case resolutions.

Moreover, there are a small number of members who, despite applying within the stipulated timeframe, were not included in the final costing of the Redress Programme. These cases, while few, are being carefully reviewed, and are addressed on a case-by-case basis.

The GEPF is committed to concluding these remaining cases with diligence and fairness, ensuring every eligible member receives due redress.

Reply:

1. The funding allocated to SAA was utilised to settle the obligations that arose from the business rescue processes. The settlement of the business rescue obligations is expected to be settled over several years.

2. One of the conditions attached to the funding provided to SAA was that government guarantees available to the airline would be reduced by the equivalent quantum. At present SAA does not have available government guarantees against which they can raise debt or other obligations. However, there is still a government guarantee exposure amounting to R91.5 million related to Unflown Ticket Liabilities and Letters of Credit. The airline is currently engaged in negotiations with lenders to provide a cash deposit in lieu of the guarantee. Once negotiations with lenders have been completed, these guarantees will then be cancelled, and government will therefore no longer have contingent liability exposure related to SAA.

3. SAA has and continues to submit monthly updates to National Treasury (NT) and the Department of Public Enterprises (DPE). Moreover, a Guarantee Monitoring Task Team comprising officials from the NT, DPE as well as SAA management meets monthly to discuss amongst other issues financial performance and forecasts, financial position and other developments. DPE, as convenors and secretariat of the monthly monitoring meeting and shareholder will be best placed to provide the monthly records.

Reply:

The provision of Section 15(1)(a) and (b) of the Customs and Excise Act, 1964, respectively provides that any person entering or leaving the Republic must declare all goods (including goods of another person) upon his person or in his possession on entering the Republic or before leaving the Republic. Goods according to Customs and Excise Act includes currency.

Noting the request from parliament, Section 4(3) Customs and Excise Act, 1964, prohibits the Commissioner and/or SARS officials from disclosing any information relating to any person, firm or business acquired in the performance of SARS duties. Accordingly, SARS is not able to disclose information requested to the Minister and Parliament.

Reply:

a) The VAT register has 951 716 Active VAT Vendors as at 16 February 2024. VAT vendors include Companies, Individuals, Trusts and other entities such as welfare organisations, municipalities etc. The below information therefore pertains to all VAT vendors.

b) 448 117 VAT refunds have been paid between 1 April 2023 and 16 February 2024. Of the 448 117 VAT Refunds paid, 336 608 (75.71%) were paid within 21 days. 128 513 VAT Refunds were stopped for verification. Of the 128 513 VAT Refunds that were stopped for verification, 55 373 were resolved and paid out within 21 days.

c) (i) Of the 128 513 VAT Refunds that were stopped for verification, 73 140 VAT Refunds were paid in more than 21 days.

(ii) There are many reasons that cause the delay of refund payments. The delays emanate from SARS as well as taxpayers. On the SARS side, these include amongst others, increased instances of impermissible VAT refund claims that put additional strain on SARS’ already constrained capacity. National Treasury has made funding available to SARS to secure additional temporary resources with effect from December 2023. Improvements in the finalisation of verifications are therefore being realised.

On the side of taxpayers, qualifying VAT refunds are not processed due to amongst others invalid banking details provided by taxpayers and outstanding returns. In the latter instance, the relevant provisions contained in the Value-Added Tax Act (No. 89 of 1991) read together with the Tax Administration Act (No.28 of 2011) provide for the withholding of refunds until such time that the vendor has submitted all outstanding returns.

SARS continues to engage taxpayers in these instances to attend to these issues.

Reply:

a) The high-level analysis of municipal debt for each government department as per MFMA S71 report for the financial period ending 31 December 2023 shows a total outstanding debt of R22 065 billion.

b) An additional breakdown of the total outstanding debt can be summarised as follows:

Total National Departments R8 015 billion

Total Provincial Departments R9 756 billion

Other entities and institutions R4 294 billion

Further details of the actual outstanding debt per department, entity or institution are depicted in Table 1 which is attached (Debtors Age Analysis for Organs of State).

c) National Treasury (NT) has encouraged municipalities to enforce its credit control and debt management policies and bylaws. This implies that if any organ of state neglects to honour their payment arrangement for services rendered by municipalities within the legislative timeframe of 30 days as per the PFMA and MFMA, the municipal, by law, must proceed to terminate or restrict the services to those customers (including government departments and businesses) with immediate effect.

Even if the customer questions the accuracy of the bill issued by municipalities, which may be a valid concern, it is not acceptable not to honour the payment for services that were consumed. In some cases, dependent on the specific credit control and debt management policy, the customer may have to pay first before any dispute is resolved.

In addition, the National Treasury have implemented various legislative mechanisms which are complemented by specific MFMA circulars, particularly those related to budgeting and debt, to guide municipalities towards financial stability and efficiency and applying debtors’ management and collection to all the customers including organ of state debt correctly.

Currently the National Treasury initiatives include smart solutions to enhance consumption accuracy by enabling precise tracking and billing; optimizing revenue collection; and ensuring fair charges for actual usage.

 

Annexure A

(Table 1: Debtors Age Analysis for Organs of State)

Reply:

a) As the Honourable member would be aware, the Minister of Finance does not have sight of transactions that are facilitated by banks on behalf of their clients. The role of the Minister of Finance, with regard to the operation of banks, is limited to formulating financial regulatory policy.

b) Please refer to (a) above.

c) Government has provided the reasons for South Africa being greylisted through public statements by National Treasury at the time (e.g. statement issued by National Treasury dated 24 February 2023[1], and related frequently asked questions, and responses to the many parliamentary questions, for e.g., Nos PQ943, PQ3967, PQ2641, PQ2642, NW1730E, and a question for oral response for the Deputy President CO254E). The country was greylisted, due to deficiencies on the extent to which the country complied with the 40 Financial Action Task Force (FATF) recommendations and 11 effectiveness outcome measures, as assessed through a Mutual Evaluation process that was conducted by the FATF between 2019-2021.

1. https://www.treasury.gov.za/comm_media/press/2023/2023022401%20Media%20statement%20-%20Response%20to%20FATF.pdf ↑

Reply:

Without getting into taxpayer confidential information as prescribed in Chapter 6 of the tax administration act, in a scenario where a taxpayer passes on, a family member or Executor of the deceased estate would normally inform relevant parties including SARS of the death of the taxpayer so that the matter may be coded accordingly as deceased. This includes publishing the death notice on the Government Gazette.

Where SARS does not have a record indicating that a matter is an estate, such a matter is treated as active and the debt is pursued consistently until it is paid or a payment arrangement is made. SARS would like to encourage executors of the estates and family members of the deceased, to inform SARS as soon as possible once the family member passes on. This will allow SARS to immediately change the status from an “active” taxpayer to an “Estate Late” status. This will stop all future returns and allow the Executor to finalise the final return of the Estate to ensure that all outstanding tax returns, to the date of death, are filed and that applicable tax amounts are dealt with appropriately to have the estate account wound up accordingly.

SARS is currently working on a project to automate the coding of estates through the use of third party data, but this will take time.

Reply:

Section 27(3) of the Public Finance Management Act (PFMA) states that an annual budget must be in accordance with a format prescribed by the National Treasury. The Medium-Term Expenditure Framework (MTEF) Technical Guidelines 2024 for provinces were issued in June 2023 to make such prescriptions, provide government departments, as well as provincial public entities, with guidance on how to prepare their medium-term estimates for the 2024 Budget and to promote alignment between the budget and procurement plans.

As part of these guidelines, infrastructure projects and programmes must be undertaken following the Infrastructure Delivery Management System (IDMS) supported by the Framework of Infrastructure Delivery and Procurement Management (FIDPM). Infrastructure (User) Asset Management Plan (IMAP/U-MAP) must be prepared and updated annually outlining the asset activities and resources required. The plan must include a list of programmes and projects for a minimum period of five years. To promote alignment between the budget and procurement plans, the IAMP/UAMP must inform the development of the Infrastructure Programme Management Plan (IPMP) and Infrastructure Procurement Strategy (IPS) which specifies what the department intends to achieve in the next 3 years of implementation of projects/programmes.

In May 2023, the National Treasury also published a Guideline on Budget Submissions for Large Strategic Infrastructure Proposals. This guideline invites submissions from public institutions in respect of large infrastructure projects and/or programmes that require budget support over the 2024 MTEF. To promote alignment between the budget and procurement plans, each proposal should include a procurement strategy that details the selected packaging, contracting, pricing and targeting options for all the required goods and services or a combination thereof as well as the procurement procedure to ensure alignment to Constitutional requirements and other legislative requirements. Furthermore, all proposals that require direct budget support over the 2024 MTEF must be shovel ready – in other words, they should be ready for immediate procurement, contracting and construction.

Reply:

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

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

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

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

Reply:

1. NATIONAL TREASURY

The department has developed an audit action plan to address audit findings and improve on the quality of reporting on both the financial statements and performance information. The audit action plan will be presented quarterly to the NT Audit Steering Committee, where the responsible officials identified as per the action plan will be invited to provide progress updates on the proposed action plan.

The monitoring of the audit action plan will be facilitated by Internal Audit, wherein they will engage with the respective responsible officials on the inputs for the action plans to be implemented as well as monitoring the effectiveness of the corrective measures.

Continuous improvements on the effectiveness of the Internal Control through frequent assessment and enhancement of current controls to detect and prevent any deficiencies that may potentially hamper the department to achieving a clean audit. These includes amongst others the strengthening controls on the effectiveness of:

• Contract Management review processes to detect and prevent any possible Unauthorised, Fruitless & Wasteful, and Irregular Expenditure;

• Proactively engaging relevant stakeholders such as Office of the Accountant General, Internal Control and Audit Steering Committee on significant extra ordinary transactions that pose a potential for material misstatements i.e. Land Bank and ESKOM; and

• Identifying high risks areas coming from prior year audit to initiate early engagements and discussions to prevent the reoccurrence of material findings.

Of the 11 entities reporting to the Minister of Finance, 6 entities received an unqualified audit opinion, while 5 received an unqualified audit opinion with emphasis of matters.

2. ACCOUNTING STANDARDS BOARD (ASB)

We have only ever received unqualified (“clean”) audits since the inception of the ASB in 2002. This includes the audit for the financial year ended 31 March 2023.

3. CO-OPERATIVE BANKS DEVELOPMENT AGENCY (CBDA)

The CBDA is a relatively small entity without its own internal audit function. The CBDA appointed a service provider to perform qualify reviews during the 2022/23 annual financial statements. This measure resulted in an unqualified audit outcome with no material misstatement for the 2022/23 annual financial statements.

Five of the findings on material misstatements of the 2022/23 annual financial statements were resolved and one, relating to non-compliance with legislation, was resolved. The only outstanding finding relates to consequence management, which is in progress. The Acting Managing Director, after his re-appointment in July 2023, has now concluded the remaining consequence management matters and has sent it to NT Internal Audit for due diligence, as requested by the CBDA Audit Committee. All consequence management issues will be finalised during this financial year.

Yet again, a service provider has been appointed to perform qualify reviews for the 2023/24 annual financial statements.

The AMD is confident that the measures put in place will achieve a 100% clean audit for the 2023/24 financial year.

4. DEVELOPMENT BANK OF SOUTHERN AFRICA (DBSA)

N/A - DBSA achieved a clean audit.

5. FAIS OMBUD

We confirm that the FAIS Ombud Office achieved a clean audit for the 2022/23 financial year and will continue to strive to achieve it.

6. FINANCIAL INTELLIGENCE CENTRE (FIC)

The Financial Intelligence Centre (FIC) has achieved a clean audit in its 2022/23 financial year. The FIC will continue on this trajectory of rigorous financial management in the current financial year.

7. FINANCIAL SECTOR CONDUCT AUTHORITY (FSCA)

The Financial Sector Conduct Authority (FSCA) has adopted a comprehensive approach to maintain a clean audit status from the Auditor-General of South Africa (AGSA). Its commitment to financial prudence, transparency and accountability drives its efforts to ensure that Annual Financial Statements (AFS) are free from material misstatements, whether due to fraud or error and the Annual Performance Report (APR) meets the highest standards of accuracy and compliance. The following are the key measures the FSCA has put in place to maintain a clean audit status:

1. Annual Financial Statements

A dedicated team of qualified and experienced personnel is responsible for preparing the AFS. They ensure strict compliance with relevant accounting standards, the Public Finance Management Act (PFMA) and other applicable legislation. The Executive Committee (EXCO), Strategic Management Committee (SMC), Audit and Risk Committees provide oversight of the FSCA’s monthly, quarterly and annual financial reporting.

2. Irregular, Fruitless and Wasteful Expenditure

To prevent irregular or wasteful expenditure, the FSCA has implemented a rigorous multi-level approval process and established a system of internal controls. These measures ensure that all financial transactions align with organisational goals and adhere to FSCA internal policies and applicable legislation.

3. Predetermined Objectives

The FSCA’s Monitoring and Evaluation unit reviews quarterly reports and verifies the submissions against each division’s portfolio of evidence to ensure that all reports accurately reflect the performance against the predetermined objectives laid out in the Annual Performance Plan.

4. Procurement and Contract Management

The FSCA procurement decisions benefit from the expertise of supply chain professionals and the counsel of the Head of Office of General Counsel, who advise the Bid Adjudication Committee on the legal aspects of all procurement decisions.

5. Compliance with Key Legislation

The compliance unit continuously monitors the FSCA’s adherence to relevant policies, legislation governing financial matters, including the PFMA and other applicable legislation.

6. Effective Internal Control Systems

The internal audit function overseen by the Audit Committee reviews internal controls annually in alignment with the FSCA's risk profile. The audit annual plan incorporates a pre-assessment of financial and performance reporting. Additionally, all findings raised from audits, if there are any, are recorded in the audit tracker and implementation of controls as per the audit recommendations, are monitored on a monthly basis. The Governance, Risk and Assurance department conducts a thorough annual risk assessment to identify potential risks related to financial and performance reporting and takes steps to mitigate them. Regular training is provided to personnel responsible for financial and performance reporting to ensure that reports produced are in accordance with applicable laws and regulations.

7. Governance

The FSCA has four governance committees in place authorised to provide oversight and make recommendations to EXCO. These are the Remuneration, Risk, Audit, and Social and Ethics Committees. These committees have approved terms of reference that outline the purpose, scope, and operational rules for each committee. All committees have annual evaluation processes in place to measure the effectiveness of each committee.

Through these measures, the FSCA is dedicated to achieving and maintaining a clean audit status, demonstrating a commitment to uphold the highest standards of financial integrity, transparency and accountability.

8. GOVERNMENT EMPLOYEES PENSION FUND (GEPF)

The GEPF has received unqualified audit outcomes for 26 consecutive years from 1998 to 2023.

9. GOVERNMENT PENSIONS ADMINISTRATION AGENCY (GPAA)

The Government Pensions Administration Agency (GPAA) has historically never achieved a clean audit due to irregular expenditure and the inadequate consequence management related to it. The GPAA has made a concerted progress towards a clean audit outcome during 2022/23 financial year under the guidance of the newly appointed Chief Executive Officer and the Acting Chief Financial Officer. This is evidenced by a visible R14 million (33%) decrease in the irregular expenditure of (R29 million) reported during 2022/23 against the R43 million reported during 2021/22. The R25 million of irregular expenditure was due to the historic irregular recurring contracts emanating from previous financial years. The CEO GPAA has taken a firm stance and decision to terminate these recurring irregular contracts in order to halt the continuation of irregular expenditure.

The decrease in irregular expenditure was achieved due to management initiatives of improving the internal controls around the procurement processes. The GPAA CEO, Acting Chief Financial Officer and relevant Chief Directors also improved on the implementation of historical pending consequence management cases relating to irregular expenditure.

All these initiatives took place even though the GPAA has operated without the following Level 15 Executive positions for a decade:

Chief Financial Officer

Chief Operations Officer

Head Corporate Services

A decade long lack of Director-General Positions at GPAA has led to this void and the fact that we are currently operating at over 200 contract positions, has led to the instability of the work force. The finalisation of vacant Director General positions is currently in the DG: Treasury’s desk and we await feedback. Subsequently on the 7 June 2023; The Minister of Finance has recommended to the Minister DPSA the GPAA structure for approval. The GPAA still await the approval of the baseline structure from DPSA. Some supply chain management vacancies still need to be filled to improve on the capacity and performance of the unit. The approval of the structure will ensure that operationally we are more stable and rigid in achieving our mandate and circumvent matters that impede the organisation from achieving a clean audit, amongst others.

Management’s efforts has been carried forward into 2023/24 and the results should reflect a significant improvement.

10.GOVERNMENT TECHNICAL ADVISORY CENTRE (GTAC)

GTAC had achieved a clean audit for the 2022/23 year

11. INDEPENDENT REGULATORY BOARD FOR AUDITORS (IRBA)

The IRBA already receives a clean audit.

12. LAND BANK

Actions at entity level

Reason for Land Bank’s unqualified audit with findings:

The Land and Agricultural Development Bank of South Africa (Land Bank) received an unqualified audit opinion with findings for FY2023 due to internal control deficiencies that were identified by the Auditor General of South Africa on the reporting of collateral that resulted in material adjustments. The underlying collateral management system works as intended. The finding resulted from the erroneous reporting wherein some portfolios’ collaterals were duplicated.

Remedial Action

The Board of Land Bank instituted an extensive remedial plan post the disclaimed audit opinion in FY2020. The remedial plan process continues to be implemented with focus not only on areas where deficiencies were identified but broadly across the different processes of the Bank to ensure that adequate internal controls are in place.

Specific remedial work is being undertaken on the management and reporting of collateral to address the audit findings raised by the Auditor General of South Africa (AGSA) in the FY2023 audit.

The Land Bank’s Internal Audit Department (which has been strengthened with the appointment of a permanent Chief Audit Executive effective 03 July 2023) provides an independent review of the remedial work by management.

Progress Monitoring and Oversight.

Implementation of the remedial plan is done through a dedicated management forum and monitored through the oversight role of the Audit and Finance Committee of the Board which meets on a monthly basis for this purpose.

13. OFFICE OF THE PENSION FUNDS ADJUDICATOR (OPFA)

Not applicable, the Office of the Pension Funds Adjudicator received a clean audit for the 2022-23 financial year.

14. OFFICE OF THE TAX OMBUD (OTO)

1. Section 19(1) of the Tax Administration Act, 2011 (Act 28 of 2011) (TAA) provides that the Tax Ombud reports directly to the Minister of Finance and the Office of the Tax Ombud must submit an annual report to the Minister of Finance, within 5 months of the end of the South African Revenue Service (SARS) financial year.
2. In turn, section 19(3) of the TAA makes provision for the Minister of Finance to table the annual report of the Office of the Tax Ombud to the National Assembly.
3. The Office of the Tax Ombud (OTO) is not a public entity in terms of the Public Finance Management Act, 1999 (Act 1 of 1999) (PFMA).
4. That said, the Auditor General South Africa (AGSA) currently performs the external audit assurance only on performance information of the Office of the Tax Ombud at the request of the Tax Ombud. The audit conclusion on the performance of the Office of the Tax Ombud against predetermined objectives is included in the 2022/2023 Annual Report of the Office of the Tax Ombud that was tabled by the Minister of Finance in the National Assembly on 29 September 2023 and discussed in the Standing Committee Finance on 11 October 2023.
5. Therefore, the Office of the Tax Ombud received no material findings on its audit of pre-determined objectives for the 2022/2023 financial year.
6. To maintain the status-quo the OTO will incorporate combined assurance approach within its governance structure that involves the integration and coordination of various assurance activities to provide a comprehensive and well-rounded view of risk management, control systems, and overall performance. This includes bringing together multiple assurance providers, such internal audit, external audit, and oversight committees, to collaborate and share information, findings, and insights.

15. PUBLIC INVESTMENT CORPORATION (PIC)

1. Audit opinion: unqualified audit opinion with a finding.

 

The Auditor-General’s finding indicated that the investment activities performed did not, in all instances, comply with investment policies and guidelines, in that in some instances, the risk relating to politically exposed persons (PEPs) identified was not assessed to ensure that the necessary enhanced due diligence and enhanced monitoring processes are applied to the high-risk PEPs identified, as required by the established policy.

1. Action:

• The identified PEPs have been included in the PEP register.

• The custodian of the PEP register is now the Compliance Department that gets weekly PEP activity from the system.

• The policy will also be workshopped to the business.

16. SOUTH AFRICAN REVENUE SERVICE (SARS)

SARS received clean audits for its Expenditure Accounts (Own Accounts) (1), Revenue Accounts (2) and the report on the Audit of the Annual Performance Report (3) in the 2022/2023 financial year. The three (3) audit opinions attest to the quality of financial management in SARS and is aligned to one of its Strategic Objectives focused on inculcating good stewardship of its resources across the organisation.

SARS Internal Audit regularly perform audits on areas of risk. SARS has appointed resources such as Governance Specialists in the finance teams. Controls have been embedded to detect and pro-actively manage risks related to the regulated environment.

SARS also implemented action plans to not only sustain the audit outcome from 2022/23 but to further embed good financial management practices.

17. SASRIA SOC LIMITED

1. Audit opinion: unqualified audit opinion with a finding.

Finding related to SASRIA’s failure to comply with section 55 of the PFMA insofar as it relates to the submission of the annual report, annual financial statements and the report of the auditors on those statements.

1. Actions to be put in place

• SASRIA will have an Audit Steering Committee, comprising of External Audit, other Assurance functions and management.

• Ensure active management and implement improvements in communication and efficacy of the audit process.

• External Audit will be requested to develop a project plan which will be approved by the Audit Committee. The progress against the plan will be monitored by the Steering Committee on a weekly/bi-weekly basis.

• Significant deviations from the plan will be escalated to the Executive Committee and if no improvement to the Audit Committee.

Reply:

The investigations have not been finalised and as a result the National Treasury is unable to provide a response to the above question at this stage. The Honourable Member is encouraged to request the findings from the relevant institutions when the investigations are complete.

Reply:

a) The GEPF implemented its revised actuarial factors with effect from 1 November 2022. The actuarial factors of the GEPF are updated in accordance with any changes to the actuarial assumptions at each statutory valuation of the GEPF. In terms of the Government Employees Pension Law, 1996, (GEP Law), the actuarial factors are consulted with public sector labour unions. Upon conclusion of this process, the actuarial factors were implemented with effect from 1 November 2022, as referred to above. Pension benefits, as prescribed in the GEP Law, are determined and finally calculated as at date of service termination. The GEP Law specifies the date on which a benefit shall become payable to a member, pensioner or beneficiary, and this date is typically the last day of service at the employer.

Any Estimate of Benefits provided prior to the last date of service, is a mere estimation of current/future benefits. This is clearly indicated on the Estimate of Benefits which indicates that benefits are awarded in terms of the rules of the Fund and will be confirmed by the Fund when the benefits become payable.

Pension benefits are thus not calculated and/or confirmed on the date applying for retirement but on the information as on the last day of service. In this specific instance the Estimate of Benefits referred to, was provided as at 30 September 2022, being a date prior to the last day of service.

The actuarial factors applicable as from 1 November 2022 adjusted the actuarial factors applicable at 30 September 2022 and accordingly influenced the calculations. It is however not correct to state that the member did not receive her full pension. Members continue to receive their full benefits in accordance with the GEP Law, 1996, and rules. The adjustment to the actuarial factors were not applied retroactively as the adjustments were implemented effectively from 1 November 2022 onwards, applying only to exits on or after 1 November 2022.

b) The amended actuarial factors, which became applicable as from 1 November 2022, influenced all resignations as well as other exits where members had less than 10 (ten) years pensionable service and which members terminated service on or after 1 November 2022. Thus, all resignations and other exits from the GEPF, where the members’ exit date was on or after 1 November 2022, would have been influenced by the adjustment of the actuarial factors as all such benefits refer to the actuarial interest a member has in the GEPF. The adjusted actuarial factors was applied to all pension benefits paid as a result of resignation and other exits from the Fund where members had less than 10 (ten) years pensionable service, where the exit from the Fund occurred on or after 1 November 2022.

It is again confirmed that there was no retrospective application of the adjusted actuarial factors as it was implemented from a future date being 1 November 2022. The application of the adjusted actuarial factors follows the approval thereof by the GEPF Board of Trustees after the required consultation process with organized labour as per the GEP Law, 1996 and Rules of the GEPF.

The GEP Law,1996 and Rules provides for the adjustment to actuarial factors as part of the benefit structure of the GEPF. Actuarial interest factors are based on a set of financial and demographic assumptions as recommended by the Fund’s valuator in the statutory actuarial valuation report. These assumptions are expected to reflect the experience of the GEPF membership and its investments. The assumptions are based on reasonable expectations about future events and are guided by actual experience and statistics. The main driver of the actuarial factors is the investment returns above inflation, which the Fund’s investments are expected to earn from now until the pension benefits are payable. Economic conditions however change from time to time and, as a result, the actuarial interest benefits can rise or fall depending on how the actuarial factors is adjusted, as explained above.

Members however still received their pension benefits prescribed in the Rules of the GEPF as per the formula set out in the Rules.

It must be clarified that the adjustment to the actuarial factors apply consistently to all active GEPF members, maintaining fairness across the board and reflecting current economic realities.

Reply:

a) It is too early to provide a detailed answer to the question as the amended Regulation 28 only came into effect on 1 January 2023. The first investment reports, post the amendment, will be submitted to the Financial Sector Conduct Authority in 2024. Secondly, it will be difficult to make the comparison since there is no reference point to compare changes in investment in infrastructure due to the ERRP with the amendment to Regulation 28. It is also not only retirement funds that are expected to invest in infrastructure, but other asset managers that are not subject to Regulation 28.

In general terms the financial sector continues to heavily fund government. As noted in the MTBPS, National Treasury will seek to achieve infrastructure investment growth through establishing an Infrastructure Finance and Implementation Support Agency that will systematically address the need to crowd-in private sector finance and expertise into the public infrastructure programme. In addition, government will also widen the scope for concessional borrowing by creating new mechanisms through which private-sector investors and multilateral institutions can co-invest with government for selected infrastructure projects. These interventions will lay the basis for broader investment by private sector including pension funds through the 45% asset allocation to infrastructure investment in Regulation 28.

b) The share of foreign exposure relative to the 45% upper limit increased across all institutional investors moderately. Where increases in offshore asset allocations have occurred, retail investors i.e., unit trusts have accounted for the majority in percentage terms. For all institutional investors, offshore exposure remains at about 23% of total assets under management (AUM). The data suggests that the impact of the increases in offshore allowance has expanded the scope of possible outflows but has not triggered actual large outflows in line with the maximum permissible amounts.

Reply:

1. The predominance of domestic debt indicates that the local financial sector is heavily invested in government bonds and loans. This scenario fosters a mutually dependent relationship, wherein the financial well-being of the government significantly influences the stability and health of the domestic financial sector. If this risk premium were to increase (due to an impairment in risk perceptions) and National Treasury were not to include this increased premium into the price of government bonds, investors would choose to invest their cash in other instruments (i.e. corporate bonds or equity, which offer better return, albeit at greater risk). This would result in government being unable to borrow the funds necessary to finance the borrowing requirement. The same principle would apply when borrowing in foreign markets; however, there is less quantum demanded for South African bonds at attractive rates in the international markets. Higher premiums on government debt can lead to crowding out of private investment, as the government absorbs a significant portion of available credit. This can slow economic growth, affecting both the state and the financial sector. The risk premium highlights the need for sustainable borrowing practices, efficient debt utilization, and a clear plan for debt reduction.

2. Risk premiums, while a considerable factor, are not the sole determinants of fiscal policy. They are, however, a critical indicator of investor confidence and perceived risk. When investors demand higher premiums, it reflects their concerns about the country's ability to repay its debts, often influenced by factors such as political stability, economic performance, and fiscal management. Most domestic investors in government debt, such as pension funds and insurance companies, are crucial for the country's financial and economic stability. If the government's debt becomes unsustainable, these institutions could face severe challenges, impacting a broad spectrum of the population. The instances of US regional banks facing near collapse due to holding weakened debt, highlights the tangible consequences of fiscal mismanagement and the importance of maintaining liquidity through the appropriate government loans. It underscores the need for prudent fiscal policies and sustainable debt management. Chapter 3 of the MTBPS emphasizes government's commitment to sustainable debt management, ensuring that borrowing is balanced with economic growth and fiscal responsibility. This along with reforms in the Logistics, Electricity, Water and Communications sectors will ensure that government plays its part in reducing the risk premium.

Reply:

a) In 2020 National Treasury launched the Covid Loan Guarantee Scheme (LGS) as part of a package of measures to help small and medium business survive the most severe lockdowns related the global Covid pandemic. The LGS enabled eligible businesses to access loans via commercial banks in terms of a finance facility administered by the Reserve Bank. At the termination of the LGS scheme (27 March 2021), banks had approved 14 827 in loans, with the LGS providing R14,6 billion in loans.

Following the conclusion of the LGS, South Africa experienced another economic set-back due to civil unrest in KwaZulu-Natal and Gauteng from the period 8 July 2021 to 19 July 2021. The civil unrest resulted in damage to business properties and caused major supply chain disruptions. The impact of the civil unrest was mostly felt by businesses, some of which were still recovering from economic losses caused by the Covid-19 pandemic induced lockdowns.

The Bounce Back Support Scheme (BBS) was launched in April 2022 and was terminated in April 2023. This scheme operated on an opt in basis. The BBS resulted in 3211 small businesses being provided with support. The total disbursed amounts was around R 1 billion (R935,385,620.)

2. Data on the geographic and other demographic information was not collected.

Reply:

Table 3.8 from Chapter 3 of the MTBPS 2023 shows a projected national government’s gross debt. Gross debt is projected to reach R5.28 trillion by end of 2023/24. This debt is made up of domestic debt of R4.64 trillion and foreign denominated debt of R595.2 billion.

Reply:

a) The ceiling on main budget non-interest expenditure was introduced in 2012 to anchor fiscal policy. However, budget deficits and debt have continued to grow, in part because the ceiling was not binding. The target of reducing and stabilising debt has been persistently shifted out, largely because of lower‐than‐expected economic and revenue growth, and large spending pressures such as state‐owned company bailouts and compensation costs. As a result, main budget expenditure has remained relatively high at over 29 per cent of GDP over the past two years. This has led government to consider additional rules to provide an anchor for fiscal sustainability. Further details will be provided in the 2024 Budget.

b) Over the medium term, government will support the economy, stabilise the public finances and protect the social wage. In the context of persistently low economic growth, government’s fiscal strategy remains focused on consolidating the public finances to narrow the budget deficit, stabilise public debt and ensure fiscal sustainability. Fiscal policy will pursue a balanced approach that includes spending restraint, revenue measures and additional borrowing. Tax measures to raise additional revenue of R15 billion in 2024/25 will be proposed in the 2024 Budget. Relative to the 2023 Budget estimates, proposed reductions to main budget non-interest spending mainly baselines and provisional allocations and changes in reserves amount to R33.1 billion in 2023/24 and R213.3 billion over the next two years. On a net basis, non‐interest expenditure will decrease by R3.7 billion in 2023/24 and R85 billion over the next two years. Compared with the 2023 Budget, the main budget deficit increased by R54.7 billion in 2023/24, R51.8 billion in 2024/25 and R66.7 billion in 2025/26. The gross borrowing requirement for 2023/24 has increased from R515.6 billion to R563.6 billion, relative to the 2023 Budget. Gross loan debt is projected to stabilise at 77.7 per cent of GDP in 2025/26. And government will propose new fiscal anchors to ensure a sustainable long‐term path for the public finances.

Reply:

It is not clear to the Minister of Finance what specific consultative measures the Honourable member refers to. As enshrined in section 224(2) of the Constitution, the operational independence and autonomy of the South African Reserve Bank are constitutionally guaranteed. The Minister of Finance and the Governor of the South African Reserve Bank regularly interact so as to ensure the alignment of fiscal and monetary policy.

Whilst there is constant collaboration between the Minister of Finance and the South African Reserve Bank, the investigation into allegations of uncompetitive practices by banks was conducted by the Competition Commission, with neither the Minister of Finance nor the South African Reserve Bank taking part in it.

Reply:

The misconduct investigated by the Competition Commission is specifically the type of abuse the National Treasury considered in 2011 when proposing and implementing the Financial Sector Regulation Act (FSRA) as part of the Twin Peaks reform.

This reform established a new dedicated market conduct regulator to ensure that all financial institutions treat their customers fairly and operate with the highest ethical standards, which is the nature of the misconduct Standard Chartered Bank was found to have committed.

Specific reforms have also been undertaken as a result of observing misconduct in other jurisdictions to ensure that these do not occur domestically. For this reason, National Treasury tabled Regulations in Parliament in March 2023 which proposed to designate the “provision of a benchmark” as a financial service in accordance with section 3(3) of the FSRA, and to specify that the Financial Sector Conduct Authority is the responsible authority for the regulation, supervision and oversight of the financial sector. In terms of section 288(1)(b) of the FSRA, which empowers regulations to provide for procedural and administrative matters that are necessary to implement the provisions of this Act, some specific powers and duties are provided to the Financial Sector Conduct Authority in relation to the provision of benchmarks to enable the effective regulation and supervision of the “provision of a benchmark”.

In 2024, National Treasury will introduce further legislation to ensure South African financial markets are fair, transparent and operate with integrity. The Conduct of Financial Institutions (CoFI) Bill proposes that banks and other financial institutions in the Financial Exchange market are carried into the CoFI licensing activities and will be subject to the CoFI Act in addition to the markets regulation. This implies that requirements for good governance, transparency, managing conflicts of interest, among others will continue to apply.

Reply:

1. Please note that responses on the greylisting of the country by the Financial Action Task Force has been provided including a response relating to illicit financial flows. Please refer to PQ943, PQ3967, PQ2641, PQ2642 and PQ4712.

In PQ4712, the following was indicated, the United Nations Economic Commission for Africa and the United Nations Conference on Trade and Development UNCTAD were running a 12-country pilot on the building of in-country capacity on the measurement of Illicit Financial Flows, with the pilot later being expanded to 22 countries, of which South Africa was one of the pilot member countries. The pilot has only produced unofficial estimates.

2. The areas that were identified by the FATF when it greylisted South Africa are listed in National Treasury’s media statement (https://www.treasury.gov.za/comm_media/press/2023/2023022401%20Media%20statement%20-%20Response%20to%20FATF.pdf which was published by
National Treasury on 24 February 2023. Furthermore, as indicated in the Medium-Term Budget Policy Statement on 1 November 2023, since the greylisting of the country by the FATF in February 2023, a large number of government departments and agencies – including SAPS, the Hawks, NPA, SIU, SSA, SARB, FSCA, and SARS – have been working hard to address the deficiencies. The FATF noted during its plenary meeting on 27 October 2023 that the work is showing positive results, with South Africa having addressed 15 of the 20 technical deficiencies in our legal framework and making good progress on 17 of the 22 effectiveness action items, including 2 that are now deemed to be largely addressed.

Reply:

There are two main challenges in terms of arrears owed to Eskom as well as municipalities: first, consumers who do not pay for municipal services delivered; and second, a lack of leadership to ensure that credit control is enforced and Eskom and / or municipal revenue is collected. As a result, a blanket approach to consumer debt write-off is not economically viable, affordable or prudent as it will not address these underlying challenges and will likely further exacerbate the consumer debt owed to Eskom and municipalities.

In this context, it should be noted that the write-off of consumer debt owed to municipalities and Eskom falls within the ambit of Eskom and / or the respective municipalities who are providing the consumer with electricity within the demarcation and cannot be separated from proper indigent management.

Annually the Local Government Equitable Share (LGES), based on the most recent statistical data, provides for a package of free basic services (FBS), including 50 kilowatt hours free electricity to poorer households within the identified municipal demarcations (including Eskom supplied areas). Unfortunately, the National Treasury analysis indicates that many municipalities do not provide all households that qualify with this benefit and many municipalities divert the LGES: FBS component earmarked for poorer households to fund other municipal priorities and salaries. Consequently, they do not pay Eskom the FSB: electricity component.

Both the Eskom and municipal debt relief conditions allows the write-off of consumer debt. However, this is subject to the implementation of pre-paid smart metering for any consumer who is unable to repay Eskom or the municipality coupled with restricting electricity to the national FBS: free electricity policy limit in the case of indigent consumers.

Please refer queries regarding the removal or confiscated transformers to Eskom as they are the appropriate institution to respond to this matter.

Reply:

a) South Africa's financial services sector is sophisticated and well-regulated, and it offers a vast array of financial products and services. This level of variety requires consumers to be equipped with the information, knowledge, and skills necessary to evaluate their options and select the ones that best suit their needs and circumstances. This is especially true for populations that have historically been underserved by our financial system and those with low incomes who confront additional obstacles owing to resource constraints.

Several gaps have been identified as loopholes that allow the existence of bogus financial services that swindle vulnerable people. Firstly, limited financial literacy levels among South African consumers. According to the 2020 Financial Sector Conduct Authority Baseline survey, South Africans have an average financial literacy score of 52 out of 100. This suggests that South African consumers have limited knowledge to understand financial sector products/services. This exposes South Africans to predatory lending, financial scams, and acquiring inappropriate financial products or services with inadequate disclosures. As a result, there is a continued need for comprehensive financial consumer education programmes, complemented with a range of consumer protection measures.

Secondly, the rapid pace of digitalisation has encouraged development of innovative financial sector products and services, creating new opportunities and risks for consumers. While technology and digital financial services offer great opportunities to boost financial inclusion, increase access to the mainstream financial system and increase consumer conveniences, this development, adds complexity to how consumers engage with the financial services industry. Challenges are more pronounced for consumers with low financial and digital literacy.

According to the South African Banking Risk Information Centre annual crime statistics report for 2022[1], South Africa faces challenges related to an array of financial and banking crimes spanning contact crimes, digital offenses, application fraud, and card fraud. Furthermore, South Africans continue to fall prey to get-rich-quick schemes. Scammers are increasingly exploiting conventional and trusted systems, such as stokvels. Scammers may, for instance, present themselves as legitimate stokvels, investment schemes, or property stokvels when, in fact, they are Ponzi or pyramid schemes[2]. The pursuit of unreasonably high returns also makes uninformed consumers easy targets for fraudulent investments. With the emergence of crypto assets, Ponzi schemes that are crypto based have become more common[3]. There is a need for greater vigilance and caution when engaging with this sector of the financial system.

b) National Treasury, through the National Consumer Financial Education Committee (NCFEC), comprising of representatives of government departments, regulators, financial sector industry associations, professional bodies, academia, and non-profit organisations, has annually been running a Money Smart Week South Africa (MSWSA), a financial education awareness campaign since October 2018. A variety of topics[4] including scam awareness are addressed through community radio station interviews, in-person activations and social media channels to relay the messages to consumers.

Furthermore, the Financial Sector Conduct Authority (FSCA) regularly issues warnings to the public on fraudulent companies and individuals purporting to be offering legitimate financial services to the public. Members of the public are always urged to be cautious and verify the authenticity and registration status of service providers, by contacting the FSCA through a number of mechanisms the FSCA has made available on their website.

National Treasury has not been made aware of the existence of bogus medical insurance companies.

1. South African Banking Risk Information Centre annual crime statistics report for 2022 https://www.sabric.co.za/media/gq4hmbjw/sabric-annual-crime-stats-2022.pdf ↑

2. FSCA issues public warning against United African Stokvel https://www.fsca.co.za/News%20Documents/FSCA%20Press%20Release%20-%20FSCA%20warns%20the%20public%20against%20United%20African%20Stokvel%20-%2017%20July%202023.pdf ↑

3. FSCA media statement on investigation on Mirror Trading International Available https://www.fsca.co.za/News%20Documents/FSCA%20Press%20Release%20-%20The%20FSCA%E2%80%99s%20investigation%20on%20Mirror%20Trading%20International%20nears%20completion%2017%20December%202020.pdf ↑

4. Money Smart Week South Africa 2023 Activity List https://www.mswsa.co.za/MSWSA%20Documents/Money%20Smart%20Week%20South%20Africa%202023%20Activity%20List.pdf ↑

Reply:

Municipalities have the option to utilise several grants, such as the Integrated Urban Development Grant (IUDG), Municipal Infrastructure Grant (MIG), and Urban Settlements Development Grant (USDG), for infrastructure-based LED initiatives. This is an acceptable practice. However, in terms of a specific introduction of a conditional grant like the Local Economic Development Grant, created to drive economic development and alleviate unemployment in rural areas, we are unable to offer details until the conclusion of the current review. Currently, government is reviewing the structure and system of conditional grants, limiting significant changes to existing grants until the review is completed.

Reply:

	(a) Minister	(b) Deputy Minister	(c) Any other National Treasury official
(i) Details of each person in department who attended the Rugby World Cup in France in October 2023	No	No	No
(ii) Total number	N/a	N/a	N/a
(iii) (aa) Travel	Nil	Nil	Nil
(iii) (bb) Accommodation	Nil	Nil	Nil
(iii) (cc) Any other related costs	Nil	Nil	Nil

Reply:

1. The expenditure data presented in the 2023 MTBPS is a synopsis of the comprehensive details that will be presented at the time of the 2024 Budget. In the meantime, as indicated in the 2023 MTBPS the rise in debt-service costs, and weaker revenue collection, is having an adverse impact on the total amount available for government spending. This is the first and most fundamental consideration.

The National Treasury conducts regular assessment of the financial performance of departments, including in respect of entities that fall under the ambit of specific Ministries. In addition, since 2021 the National Treasury has conducted detailed spending reviews whose outcomes have been shared with departments. With this in mind, and in the context of proposed spending reductions, the National Treasury’s assessments has highlighted poor or low spending over time, poor programme performance, the accumulation of surpluses within departmental accounts and entities, own revenue generation capacity, and opportunities for savings as key considerations in applying reductions. In addition, broader policy decisions of government to refocus priorities has an impact on the decisions related to spending allocations.

The budget process, especially any downward or upward adjustments, is undertaken as a collaborative and consultative process within government. This is because it involves difficult choices and decisions that cannot and should not be made in a purely mechanistic fashion. Moreover, departments and sectors of government perform vastly different functions.

The choices and decisions that must be made are discussed in engagements at the national level in the Ministers’ Committee on the Budget, as well as Cabinet. For sub-national governments, all relevant budgetary issues are determined through the Budget Council (a legislated structure composed of provincial MECs for Finance and the Minister of Finance), and the Budget Forum (a legislated forum that includes members of the Budget Council, the Department of Cooperative Governance, and the South African Local Government Association (SALGA). Prior to these discussions, direct engagements take place between departments and officials of the National Treasury on the details of their budgets. Through these processes, agreements are reached on the how to manage the adverse situation for the fiscus, including the choices for spending reductions. Some of these issues remain under discussion.

2. The fiscal constraints on government and the budget are determined by economic performance, tax revenues and market conditions for borrowing. High and rising debt-service costs act as an automatic crowding-out of government spending priorities, including the most important priorities. For this reason, the 2023 MTBPS proposes staying the course for growth and sound public finances, in order to arrest this negative trend. The MTBPS proposal includes measures to boost economic growth so as to improve tax revenue collections without increasing the individual burden on tax-payers – otherwise known as base expansion, and some spending reductions to ensure that the debt position of government does not go out of control. This strategy, if implemented, will prevent the need for even more severe spending adjustments to the budgets of critical service delivery functions.

Reply:

The South African income tax system is progressive, meaning that taxpayers who earn more pay a higher rate of tax than those who earn less. Consequently, taxpayers at the lowest tax brackets get to take home a larger portion of their income after tax than those at the higher income tax brackets. For example, taxpayers who earn less than R 95 750 per annum (for those below 65 of age) fall below the tax threshold, meaning they keep 100 per cent their income after tax. In contrast, those who earn in excess of R 1.817 million per annum have to pay 45 per cent tax on their earnings above that amount. The majority of income tax revenue is collected from the higher income brackets. The tax brackets below indicate at which percentage each income group is taxed. South Africa’s graduated income tax scale ensures that there is progressivity and equity in the tax system.

Income tax brackets for 2023/24

Taxable Income	Rates of tax
R0 - R237 100	18% of each rand
R237 101 - R370 500	R42 678 + 26% of the amount above R237 100
R370 501 - R512 800	R77 362 + 31% of the amount above R370 500
R512 801 - R673 000	R121 475 + 36% of the amount above R512 800
R673 001 - R857 900	R179 147 + 39% of the amount above R673 000
R857 901 - R1 817 000	R251 258 + 41% of the amount above R857 900
R 1817 001 and above	R644 489 + 45% of the amount above R1 817 000

Over the 2024 MTEF period, 61 per cent of consolidated non-interest spending goes to the social wage towards healthcare, education, social protection, community development and employment​.

Reply:

1. Table 3.7 (below) of Chapter 3 of the MTBPS provides a breakdown of redemptions for the current year and over the medium term. (a)(b) Government will redeem debt of R155.5 billion in 2023/24, (c) R78 billion has been penciled in for Eskom in 2023/24 (d) the gross borrowing requirement will be raised through the issuance of domestic long term loans, domestic short term loans, foreign loans as well as the drawdown of cash balances (refer To table 3.7 below).

2. Chapter 3 of the 2023 MTBPS states: “... the Minister of Finance will propose tax measures to raise additional revenue of R15 bliion in the 2024 Budget”. In this regard, Budget 2023 will provide details fo measures to be implemented.

Reply:

(1) The instrument used for this loan is a Development Policy Operation (DPO), which means this loan is provided to South Africa on the strength of a completed set of policies and reforms. The institutional reforms that are referenced on the DPO fall under climate change and the electricity sector, mostly covered under NECOM.

(2) The DPL terms includes the following:

Institutions	Disbursement date	Interest rate	Terms (years)	Grace period1 (years)	Amount billion
World Bank	n/a	6-month SOFR plus 0.95%	15	5	US$1.0

(c) & (d) the loan and interest are to be repaid biannually in March and September, principal repayment to begin in 2029 and end in 2038.

(e) The DPL is a sovereign loan and does not require collateral or guarantee.

(f) & (g) In line with the World Bank’s International Bank of Reconstruction and Development (IBRD) General Conditions for Loans and Guarantees, if any amount of the withdrawn loan balance remains unpaid when due and such non-payment continues for a period of thirty days, then the Borrower shall pay the Default Interest Rate on such overdue amount in lieu of the interest rate specified in the Loan Agreement.

(h) All other conditions of the DPL are governed by the IBRD General Conditions for Loans and Guarantees https://documents1.worldbank.org/curated/en/577851500256855740/pdf/GCs-Board-paper-June-22-Final-with-Annexes-06232017.pdf

3. No, this type of funding is categorised as budget support loans aimed aims to support South Africa’s economic recovery, inclusive and accelerated growth, and commitment to the just transition to a low-carbon and resilient economy.

The loan will take effect within 90 days from signing the loan agreement.

Reply:

1. Blended Finance Scheme.

The approval information of the Blended Finance Scheme (BFS), which was launched in October 2022, is provided in the attached Annexure A.

The Bank prepares a report on a quarterly basis to provide the kind of details that is being requested. Therefore, the information herewith provided is for a period from the launch of the BFS to the end of September 2023.

2. Agro Energy Fund.

The Agro Energy Fund was launched on the 29th of August 2023. There are no transactions approved yet. As at 31st October 2023 the Bank had received 19 applications to the value of R53m that are still going through the due diligence assessment.

Reply:

1. (a) The draft report (termed revision 1) of the VGBE Energy Service GmbH’s Independent Assessment of Eskom’s Operational Situation was submitted to the National Treasury on 21 July 2023.

(b) There was no additional mandate given to the consultants beyond the original scope of work that was agreed on which included the following:

• to undertake a review of the operational situation of the coal fleet;
• to assess the power plants maintenance budgets;
• to assess the skill levels of power plant personnel; and
• to assess the status of the transmission grid.

(c) The final report (termed revision 2) was submitted to the National Treasury on 01 September 2023.

2. The Minister of Finance is currently engaging with his Cabinet colleagues on the recommendations of the report to agree on the way forward as Eskom is expected to incorporate the findings into its Corporate Plan for 2024/25 financial year as part of the Eskom Debt Relief operational conditions. Once these consultations have been concluded, the conditionalities of its publication will be finalised.

Reply:

1. SARS cannot speak to the specifics of a particular case. However, the legal position is that a Public Benefit Organisation (PBO) approved by the Commissioner under section 30 of the Income Tax Act, must conduct one or more Public Benefit Activities (PBAs). These activities are listed in the Ninth Schedule to the ITA. In general, these activities must be conducted in a manner referred to in section 30 of the ITA i.e.

• In a non-profit manner and with an altruistic and philanthropic intent;
• Should not be intended to promote the economic self-interest of anyone beyond reasonable remuneration; and
• Should be widely accessible to the general public at large (not small and exclusive groups).

In determining whether a PBO is conducting the activities as required in law, SARS will consider the merits of each case on the facts and within the framework of the legal provisions available.

2. to reassure the Honourable member that SARS addresses all non-compliance irrespective of who the taxpayer may be without fear, favour or prejudice. Again, SARS cannot speak to the specifics of a particular case. However, where it is discovered that any PBO has contravened the conditions of its approval as stated in law, its exemption will be taken on review and, if necessary, withdrawn and subjected to related tax consequences. All other sanctions available to SARS through the Tax Administration Act also apply to PBOs. Such measures available to SARS include conducting of audits and other administrative actions. In executing its legal mandate, SARS deals with all acts of non-compliance by any PBO without fear, favour or prejudice.

Reply:

Government Employees Pension Fund (GEPF)

(1) As of the conclusion of the first quarter of the fiscal year 2023/2024, all state departments and public entities participating in the Government Employees Pension Fund have been diligent in remitting their monthly contributions on behalf of their employees to the Fund. The data indicates that 99.90% of the total monthly pension contributions due were received and reconciled punctually as mandated by the relevant legislation.

(a)

(i) The minor discrepancy of 0.10% does not reflect arrears from any particular state department or public entity but rather pertains to adjustments necessitated by various scenarios such as service termination or changes in service conditions.

(ii) Consequently, there are no specific public entities identified as being in arrears with contributions.

(b) Given the nature of the discrepancy, it does not affect a quantifiable number of employees in a manner that would result from arrears in contributions.

(c) The financial impact represented by the 0.10% discrepancy is being analysed and resolved on a regular basis. The administrator conducts a reconciliation process which is a routine and rigorous part of ensuring compliance and accuracy in the contributions made to the Fund.

(d) To rectify the matter and ensure complete reconciliation:

- A robust process of reconciliation is conducted monthly to address any discrepancies and ensure that contributions reflect the accurate service conditions of all employees.

- Any adjustments required are being handled expeditiously, with a standard resolution timeframe of 30 days.

- Continuous monitoring and engagement with all participating employers are being maintained to ensure timely payment and accurate reporting of contributions, thus fostering a culture of compliance and transparency.

(2) No. All the concerned state departments and public entities have maintained a consistent track record of timely contributions, irrespective of the fiscal situation

South African Revenue Service (SARS)

1. From an employer point of view, SARS pays all statutory contributions on behalf of its employees to third parties such as Government Employees Pension Fund, Medical Schemes and the South African Revenue Service (PAYE, UIF and SDL) in full on a monthly basis. The current CC measures has no negative impact on the monthly commitments for the current staff establishment covered by the grant allocation.

From a Revenue Administration point of view, SARS is responsible for the collection of PAYE, UIF and SDL part of the payroll creditors (contributions) from respective employers. Pension and Medical Aid contributions are paid directly to the respective fund administrators.

(a) Of the 5,303 Departments and Public entities, 4,899 (92%) pay their PAYE, VAT and other tax obligation on time. In observing taxpayer confidentially provision of the Tax Administration Act, we are unable to provide any further specific taxpayer information including the list of the defaulting taxpayers as prompted by the question, it should be noted further that the specific entities can provide directly to the parliamentary oversight bodies such information.

(b) SARS information is limited to Employer account and the defaulting taxpayer debt is at an aggregate entity level. Information on the affected Employees is not yet available from the current Tax Administration data.

(c) The balance of 404 entities (from the total of 5,303) owe SARS R5.9bn in debt for the 2023/24 fiscal year comprised of PAYE R2.4bn, VAT R3.5bn. Of the R5.9bn debt R1bn is under dispute leaving a balance of R4.9bn undisputed of which R2.9bn is older than 3 years.

(d) SARS debt collection processes are employed to follow up on defaulting taxpayers and arrangements made to enforce that the debt is settled within reasonable time where feasible. Engagements with National Treasury to deduct from Grants the necessary amounts to settle taxes owed to SARS have been evoked as the last resort following lack of cooperation or lack of positive response from defaulting taxpayers. It is genuinely concerning for State Organs not to comply with the very tax laws that generate revenue that enables them to exist in order to delivery on their respective mandates of rendering public service to SA citizens who are the taxpaying community.

2. Prior to the Cost Containment measures coming into effect, SARS records have over the years noted an increasing level of Departments and SOCs indebtedness to SARS. There is no correlation between the current Cost Containment measures and the increase in the Departments and SOCs inability to pay their tax obligations over to SARS. This will be monitored closely in the coming months to observe trends post the implementation of the Cost Containment measures.

(a) Not applicable

(b) (i) Not applicable.

(b)(ii) Not applicable

 

Reply:

The mis-alignment between the budget process and the finalisation of wage agreements has been a feature of South Africa’s public sector remuneration system for many years.

The budget included a 1.5 per cent pay progression increase for civil servants in 2023, which was the baseline that existed at the time, taking into account the projected change in staffing numbers. The National Treasury excluded any further adjustments to compensation of employees to steer clear of pre-empting the outcome of the wage settlement in 2023/24. This was in line with the discussions at the Public Service Labour Summit on collective bargaining, that was convened and attended by both Government and Labour Unions, from 28 to 31 March 2022. It was also agreed in the Summit that parties will work towards the alignment and the timing of the annual budget process, with the PSCBC wage negotiations process for public service employees.

An ideal situation moving forward, as agreed with labour unions, would be to conclude the wage negotiations processes before the finalisation of the budget for the subsequent financial year to ensure the credibility of the fiscal framework.

Reply:

In terms of section 3 of the Preferential Procurement Policy Framework Act (Act No. 5 of 2000 – “the PPPFA”), the “Minister may, on request, exempt an organ of state from any or all the provisions of this Act if –(a) it is in the interest of national security; (b) the likely tenderers are international suppliers; or (c) it is in the public interest.

The Minister, before exempting any organ of state, including State-Owned companies, must receive a request from that organ of state, setting out the reasons for the exemption request, which reasons are limited to the three grounds provided for in the PPPFA, whereupon the Minister must then assess the reasons provided in the application for exemption.

The objects of the PPPFA are to give effect to section 217(3) of the Constitution by providing a framework for the implementation of the procurement policy contemplated in section 217(2) of the Constitution. If organs of state are exempted from the PPPFA, they will not have any basis on which to provide for empowerment objectives in their institutional policies.

With regard to Telkom, it should be noted that Telkom was exempted from the PFMA and PPPFA because the State is no longer the majority shareholder in Telkom.

Reply:

The process of selecting a Strategic Equity Partner for SAA and the subsequent negotiations and conclusion of the terms and conditions for the sale of 51% of SAA’s shareholding was performed by the Department of Public Enterprises.

The National Treasury did not perform any due diligence related to the transaction as it was not subject to section 54(2) of the PFMA. The Minister of Finance’s approval in terms of Section 54(2) of the PFMA was not required for this transaction. Section 54(2) of the PFMA does not find application in this instance as it is the government, as the shareholder selling its stake in SAA. Section 54(2) of the PFMA only finds application where a public entity concludes any of the transactions mentioned under Section 54(2) of the PFMA. In other words, Section 54(2)(c) would apply in an event whereby SAA was seeking to dispose a significant shareholding in any of its subsidiaries or was seeking to acquire significant shareholding in another company.

Reply:

Since the 2020 MTBPS fiscal consolidation measures have been driven by multiple goals: to eliminate the primary fiscal deficit and stabilize debt; support economic growth through fiscal stability and a composition of spending focused on investment rather than consumption; and to protect funding for the most vulnerable. Accordingly, the budget has retained the percentage spent on the social wage at around 60 per cent of the total budget. Government intends to broadly maintain this approach.

In the meantime, and to limit the negative effects of weaker-than-anticipated revenues and more difficult financial conditions, proposed savings and cost-cutting measures are meant to protect the ability of government to sustain the spending on its key service-delivery priorities.