Tag: government

The presidential advisory committee has published its report on land expropriation without compensation.

The report makes allowances for the:

  • provision for the establishment of an integrated planning system’ which will be responsible for the planning and coordination of the land expropriation process
  • speedy distribution of land that is already owned by the government
  • speedy distribution of land that is “voluntary donated” from various sources such as churches, mining houses, and commercial farmers

The conditions for land expropriation without compensation include:

  • Where land is occupied or used by a labour tenant;
  • Where land is held for speculative purposes;
  • Where land is state-owned or owned by a state-owned entity;
  • Where the owner has abandoned the land;
  • Where the market value of the land is equivalent to or less than the present value of direct state investment or subsidy in the acquisition and beneficial capital improvement of the land
  • Hopelessly indebted land;
  • Land obtained through criminal activity;
  • Informal settlement areas;
  • Inner-city buildings with absentee landlords;
  • Land donations (as a form of EWC); and
  • Farm equity schemes.

Once the bill has been finalised it will be gazetted and undergo a full public consultation process.

This means that the earliest that land expropriation can be introduced is mid-2020. However, it will likely take much longer as the bill will face intense scrutiny from the opposition parties and members of the public.

SOE bailouts loom in South Africa

By Gaye Davis for EWN

Finance Minister Tito Mboweni said cash injections for state-owned entities like the South African Airways, the South African Broadcasting Corporation (SABC) and Denel wouldn’t be handed over all at once but in chunks, as certain conditions are met.

Mboweni was on Tuesday replying to debate on the Appropriations Bill, which was before the National Assembly.

The Appropriations Bill provides for budget allocations to all departments and entities and was tabled by Mboweni along with his February Budget.

It included provision for R3.2 billion for the cash-strapped public broadcaster.

The bailout money for the SABC, Denel and SAA would come from the contingency reserve account but Mboweni said it came with strings attached.

“We would not just make that available tomorrow, it would be a mistake but we will release in chunks as certain conditions precedent are met, to make sure there’s progress in improving the organisation.”

Mboweni said chief restructuring officers for each entity would be announced on Wednesday. They would work with the management of the SABC, SAA and Denel to get them back on track.

The minister has warned that the country’s debt to GDP ratio was at an “unacceptable level”: “Thus providing the basis for a serious crisis in the country.”

He said financial management needed to be improved across government and people needed to accept the principle of paying for the services they use.

Government runs out of money

Pay insecurity is on the rise amongst state-owned enterprises and municipalities as it seems the government is running out of money.

A recent Business Tech article illustrates this, listing the likes of Denel, Metrorail, Prasa and the SABC as not having paid staff on time.

Municipalities in trouble

  • 30 municipalities in the country have not paid employees due to lack of funds
  • Employees at the Amahlati municipality in the Eastern Cape were last paid in April
  • The latest report from the auditor general showed a shocking decline in the state of the country’s municipalities over the last year
  • 257 municipalities and 21 municipal entities were audited for the 2017-18 financial year
  • 63 municipalities regressed
  • 22 improved improved
  • Only 18 municipalities obtained a clean audit by producing quality financial statements and performance reports, as well as complying with all key legislation

Big bailouts

A large portion of South Africa’s state companies are currently heavily reliant on the state for bailouts.

  • The SABC is currently waiting on government approval of a R3.2-billion bailout
  • Eskom has a R69-billion guaranteed pledge from the government coming in over the next three years
  • SAA needed over R21-billion from government to fully implement its turnaround strategy, but had to turn to private funding after the government could not meet its needs.

What the 2019 budget means for you

By Dewald Van Rensburg for City Press

The 2019 budget review report deceptively promises that this year’s budget speech will “not increase taxes” but actually a number of minor taxes will increase from the start of the new tax year on April 1.

Major taxes like valued added tax (VAT) and corporate income tax won’t increase in the upcoming 2020 tax year.

However, the budget speech relies heavily on fiscal drag – basically a surreptitious way of increasing personal income taxes.

According to the document, the budget “will not increase tax rates in any category. Instead, they will increase collections by not adjusting for inflation.”

That is effectively a tax increase of R12.8 billion – the vast majority of extra revenue National Treasury hopes to scrape in.

Fiscal drag operates by having people, who have normal inflation-related increases in pay, jump into new higher tax brackets because the brackets have not also moved up by at least inflation.

“Sin” taxes on alcohol and tobacco will be hiked.

These will increase, but these increases are automatic and based on market prices, not on deliberate tax increases, said the budget review report.

Another tax being increased is the Health Promotion Levy, popularly known as the sugar tax.

It will increase from 2.1 cents per gram of sugar in a soft drink – to 2.21 cents.

Another new tax that will hit motorists this year is the carbon tax on petrol and diesel.

This tax will kick in in June this year and add nine cents to a litre of petrol and 10 cents to diesel.

The existing levies on fuel also go up “by less than inflation”.

Treasury estimates that taxes will become 41.8% of the pump price in Gauteng compared with 40.6% before the increases.

The rest of the carbon tax is also set to start in June this year despite key regulations still not being finalised. There will be a “consultation workshop” on offsetting the tax in March and new regulations around sectors with high exposure to foreign competition will be published before the end of February.

Treasury also seems convinced that the end of the Tom Moyane era at the South African Revenue Service (Sars) should increase tax collections by restoring efficacy.

The budget review held up the outcomes of the recent Sars commission, which found Moyane’s reign at the tax collector was characterised by “maladministration and abuse of tender procedures”.

The commission’s recommendations will be implemented in the near future, Mboweni promised.

Among the things that knock down tax collection from companies was the poor performance of the mining sector and the financial sector.

Eskom’s massive diesel-fuelled emergency plants are contributing too.

“Higher diesel refund payments to electricity generation plants and primary producers, such as farmers and mining companies, have slowed fuel levy collections.”

The VAT increase from 14% to 15% brought in about what was expected, but much of that flew out the window as VAT refunds, said the budget review.

Almost all categories of tax collection under-delivered.

Personal and corporate income taxes delivered R21 billion less than expected.

VAT alone brought in R22.2 billion less than hoped.

This was due to Sars trying to clear out the so-called VAT credit book – unpaid VAT refunds due to taxpayers. It had previously been alleged that Moyane’s Sars was intentionally withholding these refunds in order to inflate Sars’ apparent performance.

Tax expenditure

The budget review pointed out that tax expenditure on various incentive schemes was growing faster than expected, eating away at tax revenues.

“Compared with the 2018 budget, the average share of tax expenditures to nominal GDP increased significantly, implying much higher foregone revenue,” said the document.

Since 2014, tax breaks have grown by R52 billion or 7.4% compared with GDP growth of 5.1%.

One recent addition to the suit of tax breaks is the venture capital incentive that cuts taxes for people who contribute to venture financing for investments in small companies.

The incentive as a whole is still a small part of the overall tax expenditure, but has shown a highly concentrated pattern.

About half of all spending on the venture capital incentive goes to 61 companies out of the more than 3000 who participate.

The employment tax incentive, known as the youth wage subsidy, climbed to R4.6 billion in the 2016/17 – the last year the budget has estimates for.

Treasury wants to expand it in line with the CEO Initiatives’ Youth Employment Service scheme, which hinges on a lot of new jobs for young people being subsidised by government.

In the new budget, a major change is made. The scheme’s maximum R1000-a-month subsidy will now go to young people earning R4500, not R4000.

In the course of 2018 another major increase in the scope of the subsidy was announced.

It will now apply to all workers earing below R6500 in special economic zones, no matter their age.

South Africa’s subscription for shares in the New Development Bank set up by the Brics counties, which are Brazil, Russia, India, China and South Africa, will soon displace the International Monetary Fund (IMF) as the country’s largest exposure to a multilateral funder.

According to the statistical annexures of the budget review, South Africa’s subscription for shares in the bank will be R89.4 billion by 2021 compared with the current R50 billion.

This reflects shares that have not been paid for, but can get called up if the New Development Bank ever fell into financial trouble.

Similar shares in the IMF currently total R80 billion but will only grow to R85 billion by 2021, getting eclipsed by the New Development Bank.

South Africa also has shares in the World Bank worth R25 billion and the African Development Bank worth R47 billion which will not grow much over the next few years, according to the budget.

These commitments are very unlikely to ever get called up, Treasury said.

Grants

Social grants will be increased by 5% this year, reaching R1780 for the old age grant and R425 for the child support grant.

Total grant expenditure will likely increase from R192.7 billion to R207 billion with a minimal amount of this increase being due to additional beneficiaries.

Old age grants remain the major expense at R76.9 billion with child support costing R65 billion in the year.

The number of child support grant beneficiaries is estimated to increase by 1.5% while state pensioners are set to increases by 3.5%.

E-tolls

A once-off bailout for the Gauteng e-toll roads in getting cut this year, reducing expenditure on the ill-fated project from R6.3 billion down to R633 million by 2022.

The boss’s party

The presidency’s budget of R552 million will increase to R655 million in 2022, mostly because President Cyril Ramaphosa is reestablishing an old research and support unit that the presidency used to have.

The inauguration of the new president after the 2019 elections, most likely Ramaphosa, will get R120 million.

So long Hlaudi

The SABC is set to completely abandon the 90% local content target set by controversial former chief operations officer Hlaudi Motsoeneng.

The new targets for local content up to 2022 will severely impact the local industry. They are 55% for SABC 1 and 2 and only 45% for SABC 3.

The spending on local television content will fall from R2.55 billion last year to R2.28 billion this year. It won’t recover to historic levels in the next three years.

Over the next three years the SABC will also spend R7.2 billion on local radio content, the budget’s analysis of expenditure added. This will also decline year after year from R972 million this year to only R812 million next year.

The budget also envisions a personnel freeze at the SABC with employee levels staying at 3635 until at least 2022.

Fewer trips please

The department of international affairs has been given a target to reduce the number of international trips it organises to meet “high level potential investors”. Last year it had 161 such trips, but its target will be 90 a year from now on. This is to keep “in line with budget allocations”.

Fees still falling

In the wake of the Fees Must Fall campaign and renewed protests at technical colleges this year, the higher education budget reflects more major shifts in spending.

Preliminary figures show that university enrolments this year jumped from 975 837 to about 1 039 500 while technical and vocational education and training students increased more modestly to from about 703 000 to 710 000.

The big difference is that 450 000 of these students now receive some form of state support – more than double the previous year’s 225 000 – according to the budget document.

The spending at universities shot up almost 50% to R60 billion last year will reach R85 billion by 2022, according to the latest estimates.

By far most of this will go through National Student Financial Aid Scheme, not through universities directly.

Source: EWN

The trade union federation has warned doing so would not solve the struggling utility’s governance and debt problems.

The Congress of South African Trade Unions (Cosatu) says it does not support a proposal to split up Eskom into three different entities.

The trade union federation has warned that doing so would not solve the struggling utility’s governance and debt problems.

The proposal to split Eskom into three separate firms was reportedly made by a task team appointed by President Cyril Ramaphosa.

Cosatu’s first deputy president Michael Shingange says any unbundling would result in retrenchments.

“When you unbundle and turn debt into equity, as they say, we [Cosatu] view that as part of retrenchment. Even if you don’t pronounce that you’re going to restructure or privatise, we view it as privatisation because you are going to invite private ownership.”

Government seeks to ban medical aids

Source: MyBroadband

The ANC government wants to “ban” medical aids in its current format when its planned National Health Insurance (NHI) service kicks in.

This is according to a Rapport article, citing a leaked letter which the Treasury wrote to Olive Shishana, head of the government’s NHI war room.

This, the newspaper said, is a turnaround from the National Health Insurance Bill which was released for public comment in July – which stated that medical aids would continue to operate as normal.

The new version of the NHI Bill, which according to the leaked letter was already sent to cabinet for approval, does not support medical aids in their current format.

Rapport said the new version contains a clause which prevents medical aids or any other voluntary private health insurance scheme covering anything which is offered through the NHI.

This is to make sure the NHI “achieves its objectives” and will “eliminate the fragmentation of health care funding”.

NHI shenanigans exposed
Spotlight, which is published by Section27 and the Treatment Action Campaign, said the NHI Bill has been changed without consultation and agreed upon changes were not implemented.

Spotlight said Shisana and Minister of Health Aaron Motsoaledi have sidelined Department of Health and Treasury officials in preparing a new version of the bill for submission to Cabinet.

“The Treasury letter highlights an amended provision stating that the role of medical schemes will only be complementary to the fund,” Spotlight said.

“Medical schemes will thus not be allowed to offer services already offered through NHI”.

According to the Treasury letter, such a provision is “highly premature given that it will take years for the fund to be meaningfully offering services equivalent to those existing 8.8 million current medical scheme users access from the private sector”.

“This section is unnecessary at this point and will be perceived as extremely threatening to existing medical scheme users and tax payers, to the entire private health sector, and will undermine investment.”

“This section will almost certainly bog the bill down in endless legal challenges and should be deleted,” the Treasury letter states.

Government adopts land expropriation report

By Gaye Davis & Babalo Ndenze for EWN

South Africa’s taken the first step towards legislating for the expropriation of land without compensation, but there is a long road ahead before it becomes law.

Parliament’s constitutional review committee has adopted its final report, which recommends that Section 25 of the Constitution, the property clause, be amended to make expropriation without compensation explicit.

The report is expected to come before the National Assembly for debate and adoption in two weeks’ time.

Parliament is expected to debate and adopt the committee’s report at the end of November, but that’s just the start of a lengthy process to amend the Constitution, which could also face legal challenges along the way.

A parliamentary committee will then have to draft and process what will be the 18th Constitution Amendment Bill.

That’ll involve a fresh round of public participation and comment.

Given some parties’ and civil society organisations’ opposition to amending the Constitution, legal challenges could delay the process.

Parliament’s schedule also makes it unlikely the bill will be voted on before next year’s elections.

A final hurdle is that any constitutional amendment that affects the Bill of Rights requires a much bigger than a normal majority to pass.

Constitutional review committee co-chairperson Stan Maila said: “If you want to change anything in Chapter 2 (which deals with the Bill of Rights, and is where Section 25 appears), then you need a two-thirds majority vote in the National Assembly and six (of the nine) provinces (backing it) in the National Council of Provinces.”

At the same time, the ANC has made it absolutely clear that there’s no chance of a constitutional amendment before next year’s elections, as stated in the committee’s adopted report.

The EFF, which voted with the ANC, has also called on the amendment to be finalised before the end of the current term.

Committee member Vincent Smith said: “What is very clear is that there will be no voting on the actual constitutional amendment before elections, I hope that clarifies it. There will be no voting on it, it’s just not practically possible.”

The ANC has also dismissed opposition accusations that the party and EFF are using land expropriation as an electioneering ploy.

“Is this a sham for electioneering purposes? It’s not, because people who understand know that the process of actually amending the Constitution is not going to happen until after the elections,” Smith added.

The party added that the adoption of this final report will bring about an end to policy uncertainty while also addressing historic wrongs.

By Luke Daniel for The South African 

Government departments and state owned enterprises (SOE) have accumulated irregular expenditure exceeding R72.6-billion.

This is according to an analysis undertaken by the official opposition party, the Democratic Alliance (DA), which has since been reported on by Fin24. The party held a media briefing on Sunday, citing the 2017/18 annual financial reports released by government departments and SOEs.

What is irregular expenditure?
Simply put, irregular expenditure is a term used to describe the gross mismanagement of funds, particularly within the realm of governmental departments and state entities.

Technically, any costs involving state funds which fall outside the parameters of the Public Finance Management Act can be described as irregular expenditure. This wanton wastage of funds is a particularly painful thorn in the side of South Africa’s already uneasy economy, further embittering taxpayers as their hard-earned cash, effectively, goes to waste.

DA says total irregular expenditure could be much more
Natasha Mazzone, the DA’s Shadow Minister of Public Enterprises, addressed the media briefing, adding that not all government departments and SOEs had finalised their financial reports, meaning that the actual amount of irregular expenditure could be much higher.

The official opposition party pointed out that irregular expenditure stood at R42.8 billion last year. This year, that amount has increased by 70%.

Mazzone bemoaned the unsustainability of SOEs, adding that despite revitalisation strategies, most companies still remain wholly incompetent and reliant on government bailouts, saying:

“SOEs are going from one bailout to the next, one disaster to the next. It’s got to a point where it doesn’t matter who you put in the boards because the entities are so broken, it is almost impossible to fix.”

Government irregular expenditure: the main culprits
The DA made its report on the government’s irregular expenditure public, listing, in order, the entities which have recorded the greatest losses.

Here are the top wasters of public funds:

  • Eskom – 19.6 billion
  • South African National Roads Agency (SANRAL) – R10.5 billion
  • Transnet – R8.1 billion
  • Department of Water and Sanitation – R6.2 billion
  • South African Broadcasting Corporation (SABC) – R5 billion
  • Water Trading Entity – R4.9 billion
  • Department of Correctional Services – R3.2 billion
  • Property Trading Management Entity (PTME) – R2.3 billion
  • Department of Basic Education – R1.7 billion
  • Department of Defence – R1.7 billion
  • Department of International Relations and Cooperation (DIRCO) – R1.2 billion
  • South African Social Security Agency (SASSA) – R1.7 billion
  • South African Post Office (SAPO) – R1 billion

By Kgomotso Modise for EWN

The Gauteng government says while it would like to see e-tolls scrapped, it’s not up to the province to make the call.

Last week, while answering to Parliament, Transport Minister Blade Nzimande revealed that over 15 000 motorists have been issued with summonses for outstanding debt.

In July, the provincial ANC announced plans to do away with the disastrous system with Premier David Makhura conceding that it has failed.

Gauteng government spokesperson Thabo Masebe says the e-toll system was introduced by the national government so the province has no power to scrap it.

“The Gauteng government has made its position clear. But we don’t run or operate the e-toll system. This is a national government project and can only be scrapped by them.”

Masebe also says Gauteng has no say in who gets summonsed by roads agency Sanral.

“I can’t talk about Sanral’s fees and the operation of the e-tolls. That must be directed to the national government.”

He says Makhura and President Cyril Ramaphosa agree that something has to be done, but no plan has been finalised.

By Luke Daniel for The South African 

Embattled state owned enterprises (SOEs) are South Africa’s biggest and most dangerous economic stumbling blocks.

This is according to the international rating agency, Moody’s, which points to Eskom’s major failings as a cause for national concern.

State owned enterprises all performing dismally
While speaking at the Investor Service’s conference on Thursday, the agency’s senior credit officer for infrastructure finance, Helen Francis, outlined the dire position most SOEs find themselves in.

The massive financial drain perpetuated by failing SOEs has been well documented. Eskom, in particular, has reported over R19bn in irregular expenditure and continues to rely on government bailouts to stay afloat.

Worrying, Eskom is undoubtedly the largest and most vital SOE – supplying 90% of South Africa with electricity.

Yet, the embattled national power supplier just can’t seem to get back on its feet, following Gupta interference involving former company boss, Brian Molefe. Recently, the company issued an ominous statement, bemoaning the fact that its coal reserves were dwindling as a result of dodgy tenders.

Looking across the entire SOE spectrum paints a dismal picture. It’s not just Eskom that is dying, and in that way draining the already unsteady economy of vital funds. Transnet, South African Airways (SAA), the South African Broadcasting Corporation, and many more national companies are failing to make ends meet.

Corruption still plaguing SOEs
Speaking to Fin24, Futuregrowth Asset Management’s, Olga Constantatos, said that turning the situation around would not be easy and that much more needs to be done.

Constantatos commented on the disease of corruption and gross mismanagement which afflicts both Eskom and Transnet, saying:

“Much more needs to happen. The latest results at Transnet and Eskom point to the circumventing of controls – with Eskom’s R20 billion in irregular expenditure and Transnet’s R8bn. We need to see prosecutions. We need to see arrests of people who were stealing money essentially from you and me.”

Constantatos added that there needs to be stiffer repercussion for SOEs which flout due process, and as such, essentially, steal from the taxpayer and investors, saying:

“As bond investors, we are custodians of the nation’s pension funds. We should not be allocating capital to institutions where there is malfeasance, or lend blindly to companies that are not responsible.”

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