Questions & Replies: Finance
2012-10-31
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Reply received: October 2012
QUESTION NUMBER: 1996 [NO2444E]
DATE OF PUBLICATION: 6 AUGUST 2012
1996. Mr D C Ross (DA) to ask the Minister of Finance:
What is the state of readiness of the Development Bank of Southern Africa (DBSA) to provide assistance to under-resourced municipalities?
NO2444E
REPLY:
The DBSA has an established organisational capacity and proven track record in providing both financial and technical assistance to under-sourced municipalities supporting socio-economic infrastructure development. The DBSA remains a dominant player in providing development finance to under-resourced municipalities, as 85% of the debt in this market segment is held by the DBSA.
To address the challenges facing the under-resourced municipalities, the DBSA has adopted a delivery model that allows it to provide end-to-end integrated development solutions that focus on its roles as advisor, implementer and funding partner to municipalities. Through this model, the DBSA offers the following services in an integrated manner:
· Development advisory: DBSA assists municipalities with capacity to undertake long term development planning in identified areas in order to promote sustainable development.
· Project planning and preparation: DBSA continuously increases its capacity to expend resources to assist with funding and technical support to expedite project planning and preparation – feasibility and bankability studies.
· Infrastructure development finance: DBSA's role as a funder of infrastructure development entails the funding of viable and sustainable projects, as well as taking on substantial risk in order to enhance credits and crowd–in private sector capital.
· Implementation support and capacity building: DBSA plays a key role in assisting under-resourced municipalities with programme design, coordination, project management, construction and implementation management support.
The DBSA's ability to combine provision of technical assistance and investment support is further strengthened by partnering with government departments, in particular DCoG and National Treasury.
Reply received: November 2012
QUESTION NUMBER: 1962
DATE OF PUBLIC: 3 AUGUST 2012
Mr A Watsan (DA) to ask the Minister of Finance:
Wheather any entity reporting to him has budgeted for (a) financial donations or (b) sponsorships in the (i) 2009-10, (ii) 20111-11 and (iii) 2011-12 and (iv) 2012-13 financial years; if not, why not; if so, in each case, what amount was (aa) budgeted and (bb) spent?
CONSOLIDATED REPLY
Reply received: October 2012
QUESTION NUMBER: 1927 [NW2316E]
DATE OF PUBLICATION: 3 AUGUST 2012
Mr T D Harris (DA) to ask the Minister of Finance:
Whether, with reference to the British banking scandal (details furnished), the SA Reserve Bank (SARB) has placed any measures and safeguards in place to ensure that local arrangements for the setting of the Johannesburg Interbank Agreed Rate (JIBAR) (a) have not been and (b) will not be, subject to similar manipulations; if not, what steps does he intend taking to ensure that the (i) banking regulation and (ii) supervision functions of the SARB are able to prevent similar manipulations; if so, what are the relevant details?
NW2316E
REPLY:
(a) and (b) Yes, the SA Reserve Bank (SARB) has put in place measures and safeguards to reduce the possibility for manipulation in the local arrangements for the setting of the Johannesburg Interbank Agreed Rate (JIBAR), and together with the Financial Services Board, JSE and National Treasury, is following closely the revelations in the UK on the manipulation around the setting of LIBOR. The SARB issued a press release to this effect, dated 17 July 2012 (available on its website), to indicate the review process that it had initiated in 2011, to assess the procedures for determining domestic money market reference rates, including JIBAR.
The JIBAR is clearly an important reference rate for the SA economy, but it is nowhere near as significant globally as a reference rate as LIBOR, which is a benchmark for most international transactions. The JIBAR is the main benchmark for money market interest rates in South Africa and is published daily at 11:00 on the JSE website and on Reuters SAFEY for periods of one, three, six and twelve months. The three-month JIBAR is widely used and accepted as a benchmark in the domestic financial markets.
As noted in the SARB press statement, unlike LIBOR, which represents an estimate by banks in the London market of the rates at which they believe they could borrow funds between each other, JIBAR is based on interest rates at which South African banks buy and sell their own negotiable certificates of deposit (NCDs), and represent actual rates which can be traded in the money market. The JIBAR is compiled on the basis of contributions received from nine commercial banks before 11:00, five of which are local banks and four local operations of foreign banks. The JSE also distributes a spread sheet showing all bids and offers from all contributors through its data subscription system. All contributing banks are licensed and regulated by the SARB. The input required from contributors is bid and offer quotes on tradeable instruments issued by the contributing bank, such as NCDs. The offer quote is where the bank will sell this tradeable instrument to a client wishing to invest in this instrument. The level quoted by the banks into the JIBAR process is public information.
The daily calculation and publication of the JIBAR is currently overseen by the JSE. The JSE is a regulator in its capacity as a self-regulatory organisation (SRO) for certain activities, but in turn is also regulated by the FSB. The SARB has also played a regulatory role. As with LIBOR, it is accepted that the regulatory framework previously was not as tight as it should have been, and that these reference rates will need to be regulated more intensely in the future by the FSB or / and SARB. This more intrusive approach will be incorporated into the twin peak model for regulating the South African financial sector, where one of the regulators will be assigned to be the lead regulator.
The review undertaken by the SARB was not triggered by any event or development in the domestic financial markets or as a result of problems encountered or suspected, but proactively as part of the normal work programme of the Financial Markets Liaison Group (FMLG) which comprises representatives from the SARB, National Treasury, the five major banks, foreign banks, the JSE and Strate. This review will assess past practices, but will focus on the further steps to be taken for the future. It is expected to be finalised shortly. Whilst it is not possible to guarantee that there will be no manipulation in the future, these steps should reduce significantly the possibility of such manipulation. Whereas there has not been any evidence of past manipulation, we invite anyone with evidence to the contrary, to submit their evidence to the SARB.
The review is also expected to culminate in a Code of Conduct for banks contributing to the calculation of JIBAR.
(i) and (ii) Not applicable, given the response to (a) and (b)
Reply received: October 2012
QUESTION NUMBER: 1923 [NW2312E]
DATE OF PUBLICATION: 3 AUGUST 2012
Mr. I O Davidson (DA) to ask the Minister of Finance:
Whether any cases have been reported to the Financial Intelligence Centre in terms of the Financial Intelligence Centre Act, Act 38 of 2001, during the past three years up to the latest specified date for which information is available; if not, why not; if so, how many cases?
NW2312E
REPLY:
By "cases" reported to the Financial Intelligence Centre (FIC), I assume that the Honourable Member is referring to suspicious transactions reports (STRs) reported to the FIC by accountable institutions. The Table below sets out the number of STRs reported to the FIC:
| Financial year | Number of STRs | Accumulated total |
| 2002/03 | 991 | 991 |
| 2003/04 | 7,480 | 8,471 |
| 2004/05 | 15,757 | 24, 228 |
| 2005/06 | 19,793 | 44,021 |
| 2006/07 | 21,466 | 65,487 |
| 2007/08 | 24,580 | 90,067 |
| 2008/09 | 22,762 | 112, 829 |
| 2009/10 | 29,411 | 142,240 |
| 2010/11 | 36,990 | 179,230 |
Reply received: October 2012
QUESTION NUMBER 1879 [NW2268E]
DATE OF PUBLICATION: 3 AUGUST 2012
Mr L Ramatlakane (Cope) to ask the Minister of Finance:
With reference to (a) his reply to question 668 on 30 July 2012 and (b) the reports by the Auditor-General on the state of finances in all spheres of government, what steps did he take to strengthen the regulatory environment?
NW2268E
REPLY:
The Minister has put in a number of measures to strengthen the regulatory environment over the past 2 years. Notable are:
- Treasury Instruction Note 32 was issued in May 2011 to strengthen and improve accountability and provide supply chain management directives to accounting officers and accounting authorities;
- Treasury Instruction Note 34 aims to enhance compliance with section 38(1)(f) of the Public Finance Management Act (PFMA) which requires accounting officers to settle all contractual obligations and pay all money owing, including intergovernmental claims, within the prescribed or agreed period;
- The Office of the Accountant-General has put in place a support model where areas of weakness in financial management, internal audit and risk management are addressed by Strategic Support plans. The support plans are developed in conjunction with the prioritised departments and are monitored on a regular basis;
- Workshops on the key topics of the PFMA are hosted on a regular basis and are attended by officials employed in departments and entities;
- The Office of the Accountant-General continues to work with oversight structures and has hosted numerous workshops, in particular to APAC, over the last number of years. This aim is to strengthen their oversight responsibility.
Reply received: September 2012
QUESTION NUMBER: 1868 [NW2256E]
DATE OF PUBLICATION: 3 AUGUST 2012
Mr M G P Lekota (Cope) to ask the Minister of Finance:
Whether the National Treasury performed any debt sustainability analysis in 2012; if not, why not; if so, what are the (i) results and (ii) recommendations of the analysis?
NW2256E
REPLY:
The National Treasury regularly performs debt sustainability analyses. These analyses consider both the level and composition of debt. The most recent analysis suggests that national net loan debt is expected to stabilise at around 40 per cent of GDP in 2015/16, and will begin to decline thereafter. This is in line with the forecasts undertaken since the Budget Review 2010.
In terms of its composition, South Africa's debt is mostly issued in rands and therefore not susceptible to fluctuations in the exchange rate.
The debt management is informed by the strategic benchmarks that limit the domestic debt to 80 per cent of the total debt and foreign currency debt to 20 per cent. Domestic debt is made up of 70 per cent of fixed-rate debt (fixed-rate bonds) and 30 per cent indexed and discount debt (Treasury bills, inflation-linked bonds, floating rate notes and zero-coupon bonds).
As at 31 March 2012, foreign currency debt made up of 9.88 per cent of total debt. The average term-to-maturity and modified duration (risk indicators) of the domestic debt portfolio were 10.62 years and 6.83 per cent respectively, indicating that the refinancing risk is manageable.
Reply received: September 2012
QUESTION NUMBER: 1867 [NW2255E]
DATE OF PUBLICATION: 3 AUGUST 2012
Mr M G P Lekota (Cope) to ask the Minister of Finance:
Whether the National Treasury has taken any steps in respect of a certain report (details furnished) with regard to (a) procurement controls, (b) the legal regulatory requirement regarding open competition as the default method of procurement, (c) other, less competitive methods of procurement, (d) regulations regarding delay in procurement to justify emergency procedures for procurement and (e) bypassing of procurement rules at the end of the financial year; if not, why not, in each case; if so, what (i) steps in each case and (ii) are the further relevant details, in each case?
NW2255E
REPLY:
(a) (i) and (ii) Major Supply Chain Management (SCM) reforms were necessitated after the promulgation of the Public Finance Management Act in 1999. The SCM processes, as an integral part of financial management reforms in government, were subjected to independent assessments such as the Public Financial Management Performance Assessment Report (PFMPAR) dated September 2008. Prior to this assessment, in December 2001, the National Treasury also conducted an extensive Joint Country Procurement Assessment Review (CPAR) with the World Bank. The assessment covered the status of procurement reform initiatives across national, provincial and local government. The findings contained in these assessments, are being used, where applicable, to improve financial management processes in government.
With regards to procurement controls more specifically, a SCM Regulatory Framework was issued as part of the Treasury Regulations, as well as various instruction notes, circulars and guidelines.
(b) (i) and (ii) The legal regulatory requirement regarding open competition is contained in the Treasury Regulations. Treasury Regulation 16A6.1 prescribes that the procurement of goods and services, either by way of quotations or through a bidding process, must be within the threshold values as determined by the National Treasury. All bids above the determined threshold values should be advertised in at least the Government Tender Bulletin and in other appropriate media in order to ensure sufficient exposure to potential bidders.
(c) (i) and (ii) The Treasury Regulations make provision for an institution to deviate from inviting competitive bids. The provision is, however, intended for exceptional cases when it is impractical to invite competitive bids, such as cases of emergency where immediate action is necessary or if the services required are produced or available from a sole supplier. The reasons for such deviations must be sound and must be recorded and approved by the accounting officer of the institution.
(d)/(e) (i) and (ii) On 31 May 2011, an instruction note was issued on enhancing compliance monitoring and improving transparency and accountability in SCM. The measures included the submission of procurement plans in respect of advertised competitive bids. Institutions are compelled to submit to the relevant treasuries by 30 April of each year their procurement plans containing all planned procurement for the financial year. The procurement plans which are linked to budgetary provisions and strategic plans will contribute towards the reduction of "emergency" procurement and bypassing of procurement rules for the purpose of avoiding the surrender of unspent funds. These plans will be monitored by the relevant treasuries.
Reply received: October 2012
QUESTION NUMBER: 1797 [NW2188E]
DATE OF PUBLICATION: 27 JULY 2012
1797. Mr I O Davidson (DA) to ask the Minister of Finance:
(1) Whether his department has conducted a comprehensive actual cost analysis for the (a) establishment and (b) administration of all aspects of the Financial Intelligence Centre Act (FICA), Act 38 of 2001, to date; if not, why not; if so, what are the costs since the adoption of FICA; and
(2) whether his department has conducted cost estimates incurred by (a) the private sector since the adoption of FICA, as well as (b) individuals, (c) banks and (d) insurers complying therewith; if not, why not; if so, what are the relevant details?
REPLY:
1 (a) No, because it is not possible to fully assess the costs or benefits from all aspects of the FICA. As we have seen from the global financial crisis, and recent revelations by US and UK regulators concerning money laundering, there is a need to regulate all financial institutions that operate in our country, from both a prudential and market conduct perspective, and ensure that they take adequate steps to prevent money laundering and other financial crimes.
Some of the reasons for regulations arise from international obligations. The costs of not following international obligations can be enormous, as it could cut off our financial institutions from conducting business with other financial institutions based in countries that we deal with via trade or financial transactions. There are significant benefits to enabling our financial institutions to engage in financial transactions with the countries in the rest of the world, who also comply with anti-money laundering obligations.
The FIC Act is one of a number of pieces of legislation that are aimed at facilitating the administration of the criminal justice system, on the one hand, and also the protecting the integrity of the financial system, on the other. The FIC Act and the anti-money laundering measures of which it is a part is a requirement of international standards, which pertain to all countries, and in the absence of which banks and other financial institutions will not be allowed to transact with their counterparts in other countries.
The recognition of the integrity of the South African financial system and the reputations of the financial institutions that function within it is reflected in reports by international organizations.
The Financial Intelligence Centre (FIC) is responsible for the bulk of the activities related to the administration of the FIC Act, with the support of a range of other entities such as law enforcement and security agencies, the South African Revenue Service and supervisory bodies, as set out in the FIC Act. Whilst all the costs (and benefits) of implementing the FICA are not possible to estimate, information on the direct costs of the FIC can be provided as they are available from the annual reports of FIC tabled every year in Parliament. The Honourable Member should note that the only reliable information that any entity can provide is from its audited financial statements, and in terms of the breakdowns reported in such audited statements. There is no point in providing financial information that has not been audited, particularly if it is information that may be more than ten years old. The FIC has provided the total cost of the establishment and functioning since its inception to the end of the 2011/2012 financial year, which is R590.1 million. This amount, which is drawn from their audited financial statements, is as follows:
| Total costs of Financial Intelligence Centre | |
| Financial Year | R'000 (as rounded off) |
| 2003/04 | 3 923 |
| 2004/05 | 7 979 |
| 2005/06 | 17 027 |
| 2006/07 | 35 370 |
| 2007/08 | 48 730 |
| 2008/09 | 81 987 |
| 2009/10 | 114 452 |
| 2010/11 | 131 235 |
| 2011/12 | 149 416 |
| Total | 590 119 |
The coming audited financial statements for the 2011/12 financial year (to be tabled shortly) will be in the order of R180 million, therefore the total cost will be around R770 million as at 31 March 2012. With regard to the further breakdowns you require, you are welcome to check whether such information is provided in these audited financial statements. The Financial Intelligence Centre may be approached to provide the audited financial statements
Reply received: November 2012
QUESTION NUMBER: 1791 [NW2182E]
DATE OF PUBLICATION: 27 JULY 2012
Mr I O Davidson (DA) to ask the Minister of Finance:
(1) How many (a) licensed financial services providers are registered in terms of the Financial Advisory and Intermediary Service Act, Act 37 of 2002, with the Financial Services Board (FSB) and (b) representatives are registered with the FSB to date;
(2) (a) how many (i) persons in total were required to write the Financial Advisory and Intermediary Service examinations by the deadline of the end of June 2012, (ii) of these persons have written the required examinations, (iii) examinations including re-writes have been written, (iv) of those examinations written have obtained the required pass mark, (v) persons were required to re-write examinations they failed in previous attempts and (vi)(aa)(aaa) African, (bbb) Coloureds, (ccc) Indians and (ddd) whites have written these examinations and (bb) what percentage of each group has passed on the first attempt and (b) what pass mark is required for a person to pass these examinations?
NW2182E
REPLY:
The Financial Services Board (FSB) publishes the aggregated data in its annual report every year, but does not collect information by racial groups. Information indicated below is public information available to all.
(1) The 2011/12 FSB annual report (which will be tabled in Parliament later this month) will report that, as at 31 March 2012, the numbers were as follows:
a) 10 333, including a further 322 that were under suspension (as at 31 March 2012) and (b) 12 756 key individuals and 125 333 representatives, respectively (as at 31 March 2012). If the Honourable Member wants the latest figures, which really do not change significantly from the financial year end figures, the FSB informs me that as at 31 August 2012, there are 10 534 financial services providers, with 280 under suspension; and (b) 12 517 key individuals and 120 784 representatives, respectively.
(2) (a) (i) 96 671, (ii) 84 403, (iii) information not currently available, (iv) 66 370, (v) 18 033, (vi) Not available, as information not collected by racial breakdowns, hence (aa) (aaa), (bbb), (ccc), (ddd) and (bb) information is not available and (b) 65%.
Reply received: October 2012
QUESTION NUMBER: 1790 [NW2181E]
DATE OF PUBLICATION: 27 JULY 2012
1790. Mr I O Davidson (DA) to ask the Minister of Finance:
(1) Whether his department has conducted a comprehensive actual cost analysis for the (a) establishment and (b) administration of all aspects of the Financial Advisory and Intermediary Services (FAIS) Act, Act 37 of 2002, to date; if not, why not; if so, what are the costs since the adoption of FAIS with reference to (i) the office of the FAIS Ombud, (ii) all salaries paid to (aa) FAIS and (bb) Ombud staff, (iii) rentals paid, (iv) travel and entertainment, (v) legal fees paid to (aaa) lawyers, (bbb) court costs, (ccc) all appeal board costs and (ddd) settlements and (iv) all other costs incurred;
(2) whether his department conducted cost estimates incurred by the private sector since the adoption of FAIS, including all (a) compliance officers, (b) reports of submissions, (c) training of personnel, (d) training courses, (e) study time, (f) travel, (g) examination fees and (h) all other costs complying therewith; if not, why not; if so, what are the relevant details;
(3) what are the expected future annual costs for the next five financial years for the (a) public and (b) private sector?
NW2181E
REPLY:
(1)(a) and (b): No, because it is not possible to fully and meaningfully assess the costs or benefits from all aspects of the FAIS Act since its establishment in 2002. The global financial crisis has shown as well as recent revelations by US and UKregulators around LIBOR and money laundering that there is a need to regulate all financial institutions that operate in our country, from both a prudential and market conduct perspective, and ensure that they take adequate steps to prevent money laundering and other financial crimes. I refer the Honourable Member to our 2011 publication "A safer financial sector to serve South Africa better", which outlines our approach to regulating the financial sector.
Some of the reasons for regulations emanate from international obligations. The costs of not following international obligations can be enormous, as it could cut off our financial institutions from conducting business with other financial institutions based in countries that we deal with via trade or financial transactions. There are significant benefits requiring financial institutions and providers to be fit and proper, and to be subjected to the enforcement mechanisms in terms of the Act.
(ii) (aa), (iii), (iv), (v) (aaa), (bbb), (ccc) and (ddd) and (iv) With regard to more direct costs of the functioning of the FAIS Ombud, the Honourable Member should note that the only reliable information that any entity can provide is from its audited financial statements and in terms of the breakdowns reported in such audited statements. There is no point in providing financial information that has not been audited, particularly if it is outdated information that may be ten years old and the accounting officers at that time are no longer available. The FSB estimates the cost for the FAIS division of the FSB at just under R665 million up to the end of 31 March 2011, extracted from the audited financial years, and broken down per year
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The coming audited financial statements for the 2011/12 financial year (to be tabled later this month) is R156 976 271, so the above total will come to just under R822 million as at 31 March 2012.
The FSB has also provided the following information pertaining to the cost of the FAIS Ombud since its inception, drawn largely from their published annual reports:
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With regard to the further breakdowns you require, you are welcome to check whether such information is provided in these audited financial statements. The Financial Services Board will be willing to provide the audited financial statements to you, should you not be able to secure the annual reports from Parliament. In addition, the FSB will also clarify any other information contained in the reports.
(2) and (3): As noted above, it is not possible to provide such costs or benefits as it affects individual financial companies or providers of financial services. The National Treasury does continually assess whether any specific costs are economically justified, where this is brought to the attention of the National Treasury by any affected financial institution, or by a representative body of financial institutions. For example, we are currently engaging with the Banking Association of SA, on how to make specific improvements to the functioning of the Banks Act.
Reply received: September 2012
QUESTION NUMBER 1787 [NW2178E]
DATE OF PUBLICATION: 27 JULY 2012
1787. Mr J H Steenhuisen (DA) to ask the Minister of Finance:
Whether, with reference to the intervention of the National Treasury in provincial government departments, any officials have been charged in terms of the Public Finance Management Act, Act 1 of 1999; if not, why not; if so, (a) how many officials have been charged, (b) in which departments were they involved, (c) what was the outcome in each case and (d) what penalties were imposed against the officials who were found guilty of such offences?
NW2178E
REPLY:
a) No official has been charged yet, in the Provincial Departments of Limpopo, Free State, Gauteng and Eastern Cape.
b) The departments involved in the interventions are as follows:
i) Free State: Provincial Department of Police, Roads and Transport.
ii) Gauteng: Provincial Department of Health
iii) Eastern Cape: Provincial Department of Education
iv) Lompopo:
· Provincial Department of Public Works
· Provincial Department of Education
Provincial Department of Health and Social Development
· Provincial Department of Roads and Transport & its Public Entity ( RAL)
c) The South African Police Services investigations are currently still in progress and outcome is not yet known. In respect ofLimpopo Provinces, the National Treasury referred 38 cases to the South African Police Services / Anti-Corruption Task Team for criminal investigation as follows:
· Provincial Department of Public Works( 4 cases)
· Provincial Department of Education ( 9 cases)
· Provincial Department of Health and Social Development( 19 cases)
· Provincial Department of Roads and Transport & its Public Entity( 6 cases)
d) No penalties have been imposed against any official as the criminal investigations and disciplinary proceedings are still in process. As a result no one has been found guilty of any offence yet.
Reply received: September 2012
QUESTION NUMBER 1748 [NW2139E]
DATE OF PUBLICATION: 27 JULY 2012
1748. Dr D T George (DA) to ask the Minister of Finance:
(1) Whether any provincial departments of Social Development returned any money to Treasury due to it not being spent in the (a) 2009-10, (b) 2010-11 and (c) 2011-12 financial years; if not, what is the position in this regard; if so, (i) how much money by each province, (ii) in each financial year and (iii) what were the reasons for the return of the money in each case;
(2) whether he intends to take steps to ensure that provincial departments of Social Development re-prioritise their spending in order to reallocate unspent money; if not, why not; if so, what are the relevant details?
NW2139E
REPLY:
1 No unspent funds were returned by provincial Social Development departments to the National Treasury. The only funds that would be returned if unspent would be conditional grant funds as stipulated in the annual Division of Revenue Act. Currently the only conditional grant that applies to Social Development is the Expanded Public Works Programme grant for the social sector. For the years being queried, the response is as follows:
a. 2009-10 - No funds were returned as the grant did not exist.
b. 2010-11 – Out of a budget of R56.6 million, R54.9 million or 96.9 per cent of the budget was spent. Unspent funds were not returned to the National Revenue fund as they were committed to be spent. The funds were consequently rolled over to the 2011-12 financial year
c. 2011-12 –Out of a budget of R206.1 million, R176.2 million or 85.5 per cent was spent. Spending and rollovers of unspent funds are in the process of being finalized for inclusion in the adjusted estimates.
2. Provincial departments of Social Development are accountable to their Provincial Legislatures, the Provincial Executives as well as the Provincial Treasuries according to the PFMA in terms of budgets and spending. National Treasury can, through the National Government, advise provinces on how to allocate funds and implement projects. As it relates to non-conditional grant spending, the provincial departments of social development have full discretion on how to spend funds. The provincial legislature, which approves the budget, should monitor to ensure that the department spends in terms of its budget and strategic plans. However, National Treasury on an on-going basis engages with provinces to ensure that budgets are aligned with priorities of both national and provincial government and where necessary, funds are re-prioritised to accelerate service delivery. With respect to the conditional grant, there is a business planning and performance reporting process established in terms of the Division of Revenue Act. This is designed to ensure that funds are utilised for the purpose for which it has been intended.
Reply received: September 2012
QUESTION NUMBER 1725 [NW2108E]
DATE OF PUBLICATION: 27 JULY 2012
The Leader of the Opposition (DA) to ask the Minister of Finance:
(1) Whether he intends transferring funds earmarked for the implementation of the Youth Wage Subsidy in the national Budget in 2011 to provinces that are willing to support the implementation of the policy; if not, why not; if so, what are the relevant details;
(2) whether he intends to provide any additional assistance to provincial governments that have implemented policies that aim to subsidies the employment of young South Africans; if not, why not; if so, what are the relevant details?
NW2108E
REPLY:
(1) The proposed youth employment incentive would be run through the South African Revenue Service (SARS) as a tax incentive to firms that hire young, inexperienced workers. As a tax expenditure, there is no allocated budget for the youth employment incentive. The estimated cost to the fiscus of approximately R5 billion over three years will be through foregone tax revenue, not earmarked funds, and the actual amount will depend on the uptake and job creation for young people that takes place due to the incentive.
Leveraging an existing operational and administrative platform confers significant benefits over developing piece-meal and new operational platforms to administer
Reply received: September 2012
Reply received: July 2012
QUESTION NUMBER 1690 [NW2040E]
DATE OF PUBLICATION: 22 JUNE 2012
Mr G R Morgan (DA) to ask the Minister of Finance:
(1) Whether he will make a statement in respect of the Inclusive Wealth Report 2012 (details furnished) that was released by the United Nations Environment Programme (UNEP) on 18 June 2012;
(2) whether he intends to initiate inclusive wealth accounting; if not, why not; if so, what are the relevant details;
(3) whether the National Treasury is collecting capital stock data of (a) exhaustible natural, (b) land, (c) physical and (d) human capital that can be used for inclusive wealth accounting measurements; if not, why not; if so, what are the relevant details?
NW2040E
REPLY:
1) No.
2) The UNEP's report on inclusive wealth is welcomed and highlights some of the key challenges facing South Africa, however at this time there is not a plan to initiate inclusive wealth accounting.
3) National Treasury itself does not collect any of the relevant statistical data. However, to date, both the South African Reserve Bank (SARB) and Statistics South Africa have done a great deal of work pertaining to a number of the areas raised in the inclusive wealth index. The SARB already compiles a number of wealth indicators such as the fixed capital stock and has recently released data on household wealth. Currently the majority of this wealth is defined in physical and financial asset terms. Extending the coverage of financial assets is an ongoing project at the SARB. Whilst natural capital estimates are not included in the SARB's current wealth estimates, its Research Department aims to quantify at least some important elements by 2015. This research will be in large part based on the data generated by Statistics SA surveys, which include research relating to water, minerals, fisheries and energy.
- Whilst Statistics South Africa runs numerous household surveys such as the income and expenditure survey, living conditions survey, and the census, which provide us with some idea of human and social capital, there are as yet no specific plans to formalize this in terms of the inclusive wealth index designed by UNEP.
- Considerable effort would be involved in moving to the full range of proposed wealth measures – but there are resource constraints, and also significant underlying uncertainties and assumptions in such quantification. For instance, at different levels of commodity prices the estimates of the value of natural capital could differ significantly.South Africa needs to ensure that we have the underlying statistical data before we can be prepared to take on the huge amounts of work – and divert the resources that would be required – to develop an accurate dataset of inclusive wealth, particularly within the current constrained financial environment. It should be noted that only a small number of countries are likely to have the information required to develop these inclusive wealth estimates in a reliable manner. Consideration could be given to moving towards an inclusive wealth accounting over time.
Reply received: July 2012
QUESTION FOR WRITTEN REPLY
QUESTION NUMBER 1530 [NW1850E]
DATE OF PUBLICATION: 8 June 2012
Mr A P van der Westhuizen (DA) to ask the Minister of Finance:
(1) Which trade unions or federations of trade unions submitted written comments on the discussion document titled Confronting Youth Unemployment: Policy Options for South Africa before the due date of 30 April 2011;
(2) whether any of these inputs suggest an alternative solution to the proposed youth wage subsidy to alleviate youth unemployment; if not, what is the position in this regard; if so, what were these alternative solutions?
NW1850E
REPLY:
(1) No trade unions or federations of trade unions submitted written comments to the National Treasury on the discussion document "Confronting youth unemployment: Policy options for South Africa" before the due date of 30 April 2011. However, the document is currently being discussed at Nedlac; several meetings including a workshop have been held.
During engagement at Nedlac, oral comments have been made and several issues have been raised including concerns regarding the possible substitution of older workers younger workers, destructive churning (the process whereby subsidised workers are "let go" at the end of the subsidy period and replaced by a different subsidised worker), the duration of probation, to lower the age threshold of 18 possibly encouraging early exit from the school system and the impact on the collective bargaining system.
The Business constituency of Nedlac has submitted written comments to Nedlac.
COSATU has issued a response to the youth employment incentive on its website on 25 June 2012.
(2) The COSATU document proposes that the National Skills Development Strategy be used to expand the number of young people in the FET sector to 1 million a year by 2014, combined with state owned enterprises, government departments and the private sector absorbing these young people through practical training and work experience.
Reply received: July 2012
QUESTION NUMBER 1494 [NW1773E]
DATE OF PUBLICATION: 1 JUNE 2012
Mr N JJ van R Koornhof (Cope) to ask the Minister of Finance:
Whether he has undertaken pilot studies on the implementation of the youth wage subsidy; if not, why not; if so, (a) how many and (b) when does he intend to release the findings?
NW1773E
REPLY:
The National Treasury has not undertaken pilot studies of the youth employment incentive proposed in the discussion paper "Confronting youth unemployment: policy options for South Africa" that was released at Budget 2011.
Given the scale of youth unemployment in South Africa, however, National Treasury, working with the Department of Labour and other government departments, commissioned the University of the Witwatersrand to investigate the dynamics of the youth labour market in South Africa. The study has been investigating a range of factors influencing the youth labour market and youth unemployment, including the impact of employment services provided by the labour centres (run by the Department of Labour), job search behaviour, firm recruiting behaviour, and the school-to-work transition.
Reply received: July 2012
QUESTION NUMBER 1360 [NW1605E]
DATE OF PUBLICATION: 25 MAY 2012
Mr N JJ van R Koornhof (Cope) to ask the Minister of Finance:
Whether he intends to investigate the possibility of outsourcing the duties of the Government Pensions Administration Agency (GPAA) after 2015 in order to save money for the Government Employees Pension Fund (GEPF); if not, why not; if so, what are the relevant details?
NW1605E
REPLY:
There is no intention on the part of Government to outsource the Government Pensions Administration Agency (GPAA) duties.
The Government Pensions Administration Agency plays a very important role in the management of the pension affairs of Public Servants and non-contributory pensions for Special Pensioners. This is a unique role which can best be played by the Government itself to ensure that those who have devoted their lives to the public and other related services receive the necessary service and support.
Secondly it is not correct that by outsourcing the GPAA business to the Private Sector will save cost for GEPF.
Currently the administration cost based on the 2012/13 budget is R37 per member per month. This cost includes the administration of the post retirement Medical Subsidies, Injury on Duty of Public Servants on behalf of the Compensation Commissioner, Military Pensions (for injured soldiers) and Special Pension. This is a huge benefit because all these categories of pensions are administered by one GPAA team.
In a study undertaken by the Association for Savings and Investment South Africa (ASISA) in 2009, the administration costs in the Private Sector averaged R37 per member per month while those of GEPF amounted to R22 per member per month due to the economies of scale.
The administration costs in the Private Sector range from R35 to R60 per member per month depending on the complexity of the portfolio.
The above clearly shows that it will not be cheaper to outsource the GPAA business to the Private Sector pension administrators.
Reply received: July 2012
QUESTION NUMBER: 1320 [NW1531E]
DATE OF PUBLICATION: 18 May 2012
Mrs J F Terblanche (DA) to ask the Minister of Finance:
(1) Whether the Landbank registered a bond against a certain property (details furnished); if not, how was this conclusion reached; if so, (a) what amount was secured by the bond, (b) who is the current registered owner, (c) what is the zoning of the property and (d) what is it currently being used for;
(2) whether the value of the property was evaluated by a registered valuator prior to the bond being registered; if not, why not; if so, what (a) is the name(s) of the evaluator(s) and (b) was the result of the evaluation(s);
(3) whether it is standard practice for the Land Bank to register bonds against the security of urban residential property; if not, why not; if so, what are the relevant details;
(4) whether the funds availed in terms of the bond will be utilized for agricultural purposes; if not, why not; if so, what are the relevant details;
(5) whether the Land Bank relied on any provisions of their mandate when it approved the loans; if not, why not; if so, what are the relevant details?
NW1531E
REPLY:
1 Yes
a) R4 880 000
b) Ms T.R Modise ID 581225 1133 081
c) Residential
d) It is utilized for residents
2. Yes
a) EP Zietsman, Professional Associated Valuator and Appraiser, Registration no. 3739
b) As per the valuators valuation the property was for R2 000 000.
3. Yes
a) Urban residential property is an acceptable form of additional security to be offered for the purchase of farm property or for agricultural purpose. It is standard practice by the Bank to use urban residential/industrial property particularly if the applicant does not have sufficient security or any other form of security acceptable to Land Bank.
4. All funds were utilized to finance the purchase of farm property mention in the first paragraph under reply. As mentioned the urban residential property was only used as "additional security".
5. No funds were allocated to this property. As mentioned above this bond was registered as additional security for the Bank. The Bond over the farm property financed by the Bank is B009089/12.
Reply received: July 2012
QUESTION NUMBER: 1319 [NW1530E]
DATE OF PUBLICATION: 18 May 2012
Mr I O Davidson (DA) to ask the Minister of Finance:
Whether the Government received any (a) aid and/or (b) low-interest loans from any countries; if so, (i)(aa) from which countries, (bb) how much money was received from each country and (cc) what is the total monetary value of all aid received by the Government (aaa) in the (aaaa) 2009-10, (bbbb) 2010-11 and (cccc) 2011-12 financial years and (bbb) during the period 1 April 2012 up to the latest specified date for which information is available? NW1530E
REPLY:
In responding to this question, certain clarifications are required with regard to the aid received by South Africa.
(1) The aid for which the South African Government is held accountable is deemed to be Official Development Assistance and is governed by government to government agreements. This assistance can be in the form of technical cooperation (e.g. provision of expertise, technical assistance, training, study tours, secondments etc.), or in the form of grants and in this instance, the funds are usually channelled through the RDP Fund. It is however difficult to give an exact figure on the amount received in terms of technical assistance as the amounts identified in most of the agreements signed during the mentioned period is in the currency of the specific donor. It should furthermore be noted that due to the variance in the exchange rates over a financial year a set exchange rate cannot be determined to convert these amounts into a rand denomination as this would give a distorted picture in terms of what was allocated and what was received.
(a) The government has received assistance from various development partners (grant and in-kind assistance) during the last three financial years with the European Union, Global Fund, Canada, United Kingdom and Germany being amongst the biggest development partners with a total grant received amounting to R4.3 billion for the period 2009 – 2012.
(b) The individual contributions received from the abovementioned development partners for the last three financial years is as follows:
Here is the table: www.pmg.org.za/files/questions/RNW1319-120625.pdf
The total in-kind assistance received as recorded in the Estimates of National Expenditure amounted to R365 million, R116 million and R197 million during the 2009/10, 2010/11 and 2011/12 years respectively.
South Africa as a Government has not received any low interest loans from any country during the previous three financial years.
(c) The total monetary value of all aid received (grant and in-kind assistance) totals R5 billion
Reply received: July 2012
QUESTION NUMBER: 1266 [NW1463E]
DATE OF PUBLICATION: 25 MAY 2012
Mr N JJ van R Koornhof (Cope) to ask the Minister of Finance:
Whether the National Treasury uncovered any corruption in any of the departments they have taken over in terms of section 100 of the Constitution of the Republic of South Africa, 1996, in the Limpopo province; if not, what is the position in this regard; if so, (a) in which departments, (b) what is the extent of the corruption and (c) what steps has he taken in this regard?
NW1463E
REPLY:
The various administrators did discover instances of transactions that were suspicious; these were mainly in the area of supply chain.
(a) These are the cases found during forensic investigation sufficient to be referred to the South African Police Services ("SAPS" ) for criminal investigation in the following departments:
· Department of Education: 9 cases referred to SAPS
· Department of Public Works: 4 cases referred to SAPS
· Department of Roads and Transport: 6 cases referred to SAPS
· Department of Health and Social Development: 19 cases referred to SAPS
(b) The extent of corruption of these transactions cannot be determined, as the investigations are yet to be concluded by the South African Police Services.
(c) The 38 cases that were discovered have been referred to the SAPS/Anti-Corruption Task Team for criminal investigation.
Reply received: June 2012
QUESTION NUMBER 1259 [NW1455E]
DATE OF PUBLICATION: 18 MAY 2012
Mr Lekota (Cope) to ask the Minister of Finance:
Whether the National Treasury conducted an analysis of the reasons for three of National Treasury's inflation-linked bonds failing to receive adequate bids for the R800 million issue of paper for two consecutive weeks in May 2012; if not, why not; if so, what are the relevant details? a) Was there a recent comparable precedent for luck lustre demand? b) Was the market seeking a higher price and better guarantees? c) Was the prospect for incurring further debt at historic rates to support government spending becoming uncertain? d) Was local and international interest for government bonds tracking previous peaks or falling off in a noticeable manner?
NW1455E
REPLY:
Yes, weekly funding meetings are held to monitor and analyze the funding progress of both the government and state owned companies. In addition, market developments that could potentially derail the funding programme of government are discussed.
a) Yes, the demand for inflation linked bonds tends to be irregular at times. In the 2011/12 fiscal year, the National Treasury failed to receive adequate bids in three auctions. The first failed auction was in April 2011 and the other two were in September 2011. The worst auction was in September 2011 where R95 million of bids were received against an auction amount of R600 million.
In 2010/11 the National Treasury failed to allocate the full issue amount in thirteen auctions. Seven auctions out of thirteen received lesser bids than the issue amount. In the six auctions, the National Treasury decided to allocate lesser amounts than the issue amount, although the bids received were adequate. The reason being that the bidding prices were much higher than the prevailing market prices.
It should be noted that the auction held on the 18th of May 2012 received bids amounting to R1 585 million more than the auction amount of R800 million. This is an indication that the demand for inflation linked bonds is still strong.
b) No.
c) No, the fiscal framework remains on a sustainable path as presented in the Budget Review.
d) Notwithstanding recent political developments in Europe, non-residents' interest in South African government bonds remains strong. Year-to-date non-residents have purchased R36 billion of government bonds.
Month-to-date they have purchased R14 billion of domestic government bonds. The ownership of domestic government bonds by non-residents more than doubled since 2007 to a record high of 31 per cent of total domestic government bonds. This foreign interest is a sign of investor confidence in the South African government's ability to service its debt.
Local investors continue to buy domestic government bonds.
Reply received: July 2012
QUESTION NUMBER 1028 [NW1203E]
DATE OF PUBLICATION: 4 MAY 2012
Mrs Z B N Balindlela (Cope) to ask the Minister of Finance:
(1) Whether the National Treasury achieved its objectives in the (a) 2008-09, (b) 2009-10, (c) 2010-11 and (d) 2011-12 financial years; if not,
(2) whether any persons were held accountable for such failure in the specified financial years; if not, why not; if so, what are the relevant details?
NW1203E
REPLY:
(1) National Treasury substantially achieved its objectives in the financial years referred to. Please refer to the respective years' Annual Reports for details.
(2) No, National Treasury employees were not held accountable for failure to meet NT's strategic objectives in a specific year as objectives were substantially achieved. The few instances where objectives were not thoroughly achieved were beyond the control of the National Treasury employees. These include instances where objectives needed to be altered in order to take account of changing circumstances.
Reply received: July 2012
QUESTION NUMBER: 809 [NW895E]
DATE OF PUBLICATION: 20 April 2012
809. Mr J F Smalle (DA) to ask the Minister of Finance:
Whether National Treasury has provided any securities to any municipalities during the Medium-Term Expenditure Framework (MTEF) period including 2011 and 2012; if not, how was this conclusion reached; if so, in each case, (i) which municipalities, (ii) for what purpose and (iii) for what period? NW895E
REPLY:
1. No. In terms of section 51 of the Municipal Finance Management Act (Act 56 of 2003), National Treasury has neither budgeted for nor provided securities to any municipality in the current Medium-Term Expenditure Framework (MTEF) including the 2011 and 2012 MTEF periods.
2. It is the view of National Treasury that by providing a security to any municipality, we will create an unsustainable precedent that is likely to:
a. place the national fiscus at serious risk; b. cause municipalities to disregard their revenue raising responsibilities and ignore issues of efficiency, economy and effectiveness in their operating expenditures; and c. take on over-ambitious capital programmes and sink themselves with unsustainable levels of borrowing.
3. However, section 8(5) of the 2011 Division of Revenue Act has provided an opportunity for municipalities to "pledge" future conditional grant allocations for purposes of securing a loan or any other form of financial support from a person or institution.
4. In order to exercise a right to pledge future conditional grant allocations, permission must first be sought from the National Treasury. However, approving a request by any municipality to pledge future conditional grant allocations does not equate to providing a security for any loan taken by the municipality.
5. Guidelines on assisting municipalities with information required when submitting a request to pledge and the approval process, have been issued as part of MFMA Circular no. 51 and is also available on the website of the NT.
6. For the 2011/12 financial year, National Treasury has received eight requests from municipalities requesting permission to bridge their future allocation by securing a loan from their preferred financial institution. These municipalities are:
i. Umzinyathi District Municipality;
ii. Lesedi Local Municipality;
iii. Tsantsabane Local Municipality;
iv. Ngaka Modiri Molema District Municipality;
v. Thulamela Local Municipality;
vi. Tswelopele Local Municipality;
vii. Sol Plaatje Local Municipality; and
viii. uMgungundlovu District Municipality.
7. Of the eight submissions, only three have been approved by the National Treasury. These relate to the Ngaka ModiriMolema District Municipality, Tswelopele and Thulamela local municipalities. The other submissions are still in the process of being considered with additional supporting information requested from the municipalities concerned.
Reply received: September 2012
QUESTION NUMBER: 772 [NW941E]
DATE OF PUBLICATION: 16 MARCH 2012
Mr T D Harris (DA) to ask the Minister of Finance:
(1) Whether, with regard to the opinion article which he submitted together with the Australian Deputy Prime Minister in Business Day of 7 March 2012 (details furnished) he intends to implement the wage subsidy; if not, why not; if so, what (a) measures does he intend to take to implement the subsidy and (b) input does he intend to give on the draft labour legislation that is currently at NEDLAC;
(2) whether he intends to propose any amendments to labour legislation to improve the flexibility of the labour market and create more employment opportunities; if not, why not; if so, what are the relevant details;
(3) whether, in light of his references to sustainability and labour-market reforms, he intends to propose (a) the easing of restrictive hiring and firing in general and (b) that the right to strike for important categories of workers in the education and health care sector be limited; if not, what is the position in each case; if so, what are the relevant details in each case?
NW941E
REPLY:
(1) (a) President Zuma responded to a similar question previously (PQ 606). The consultation process on strategies for stimulating employment is still ongoing. The discussion has been broadened to look at active labour market policies more broadly. It is my sincere wish that the discussion will come to a useful conclusion very soon.
(b.) The Cabinet decisions made on the Basic Conditions of Employment Amendment Bill and the Labour Relations Amendment Bill on the 20. March 2012 represent the collective decision of Cabinet.
(2.) No. Labour legislation is the responsibility of the Minister of Labour.
(3.) (a) These are important matters that business and labour must reach agreement on.
(b.) No. These matters fall under the responsibility of the Ministry of Labour and the Public Sector Bargaining Council.
Reply received: March 2012
QUESTION NUMBER: 741 [NW909E]
DATE OF PUBLICATION: 16 MARCH 2012
Ms A M Dreyer (DA) to ask the Minister of Finance:
Whether any officials from (a) the National Treasury and (b) any entities reporting to the National Treasury were on an official visit to Bloemfontein in (i) December 2011 and (ii) January 2012; if so, in each case, what (aa) is the (aaa) name and (bbb) position of the specified official, (bb) was the (aaa) purpose and (bbb) date of such visit and (cc) was the cost of (aaa) transport, (bbb) accommodation and (ccc) other expenses? NW909E
REPLY:
The reply is on this table: http://www.pmg.org.za/files/questions/RNW741-120515.pdf
Reply received: April 2012
QUESTION NUMBER: 726 [NW892E]
DATE OF PUBLICATION: 16 MARCH 2012
Mr N D du Toit (DA) to ask the Minister of Finance:
Whether he: (a) has had discussions with or (b) took any steps to meet with (i) wine producers and/or (ii) the wine wholesale sector on the proposed increase in excise duty on wine before the budget with regard to the effect that the increase will have in the industry; if not, what is the position in this regard; if so, what are the relevant details of the (aa) comments and (bb) recommendations made by the stakeholders?
NW892E
REPLY:
(a) and (b)
No, I have not had any discussions or meetings with wine producers on the proposed increase in excise duty on wine before the budget. It is in the nature of tax policy that we do not provide prior information to any industry about the tax announcements to be made on Budget Day, as such information is market sensitive and it would also be fundamentally unfair to provide such information to some and not all of the public.
Officials from the National Treasury do consult with the alcohol industry, including wine producers, on a regular basis, on excise duties on alcoholic beverages. Such consultation involves the overall methodology and data to calculate excise duties. The actual increases announced in the 2012 Budget, however, are not the subject of consultation with either (i) wine producers and/or (ii) the wine wholesale sector. Instead, consultations with affected industries and affected stakeholders take place after Budget Day, and such consultations are taken into account when preparing the necessary legislative documents to be tabled in Parliament or gazetted.
The Honourable Member should note that the total indirect tax burden for wine has remained unchanged in Budget 2012. I would like to offer the following details on the indirect tax approach towards the alcoholic beverages sector.
The total indirect tax burdens (excise duties plus VAT) as a percentage of the weighted average retail selling price for wine, clear beer and spirits have been set at 23,33, and 43 per cent respectively since 2002.
The alcoholic beverages sector, including the wine industry, was consulted on the methodology setting out these tax burden benchmarks in 2002. Following a review of the appropriateness of these benchmarks by the National Treasury, Budget 2012 retains the tax burden (excise plus VAT) for wine at 23 per cent, while that for beer and spirits are increased to 35 and 48 per cent respectively.
Further consultations with all stakeholders within the alcohol industry are planned for later this year in order to explain the revised (higher) tax burden targets for beer and spirits. An updated tax policy framework paper relating to the taxation of alcoholic beverages will also be published later this year.
(aa) and (bb)
Not applicable.