South Africa&#8217;s Hawks elite police unit said on Monday it is not investigating Deputy Minister Mcebisi Jonas, but only making enquiries at this stage over allegations that he was part of a probe into allegations of corruption at state-owned South African Airways (SAA).
City Press newspaper reported on Sunday the Hawks is investigating allegations that Jonas used his political influence to secure U.S. aircraft company AAR Corp contracts to supply components and tyres to the state airline.
&#8220;For now that investigation is still at an enquiry level and once we pick up anything then a case docket will then be opened. There is not even a case docket,&#8221; Hawks spokesman Hangwani Mulaudzi told Reuters.
 
(Reporting by Nqobile Dludla; Editing by James Macharia)﻿

S.African police say not investigating deputy FinMin Jonas

What you need to know about Budget 2017
South Africa’s Budget 2017 revealed that revenue has lagged behind the economy, leading to R30bn shortfall, to deal with this shortfall several tax changes have been proposed as highlighted below. It also painted an economy in dire need of economic growth. This is also mentioned in this Budget in a nutshell.
New taxes on the way
<ul>
<li>Revenue has lagged behind the economy, leading to R30bn shortfall</li>
<li>Total tax revenue for 2016/17 will be R1.14trn, up 7% on previous year</li>
<li>S.A’s tax proposals will raise an additional R28bn</li>
<li>A wealth tax will be introduced comprising a new top personal income tax rate of 45% for those with taxable incomes above R1.5mn. It is expected to bring in between R3bn-R5bn.</li>
<li>Dividend withholding tax rate to be increased from 15% to 20%</li>
<li>Treasury is looking at share repurchase schemes</li>
<li>Tax free threshold increased from R75 000 to R75 750</li>
<li>Personal tax changes are as follows:<img loading="lazy" decoding="async" src="/media/19338669/personal_tax_598x432.jpg" width="598" height="432" alt="Personal Tax"/>﻿</li>
</ul>
<ul>
<li>Fuel levy to increase 30c/litre and road accident fund levy &#8211; 9c/litre</li>
<li>Excise duties for alcohol and tobacco to increase between 6-10% </li>
<li>Relief will be provided in the affordable housing market</li>
<li>Annual allowance for tax free savings accounts increases from R30 000 to R33 000</li>
<li>Medical tax credit will be increased in line with inflation</li>
<li>Consultations ongoing on tax on sugary beverages </li>
<li>Proposed design of sugar tax has been revised to include both intrinsic and added sugars </li>
<li>Sugar tax will be implemented later this year once details are finalised and legislation passed</li>
<li>Proposed carbon tax &amp; implementation date will be considered in Parliament this year </li>
<li>S.A to sign a multilateral instrument this year</li>
<li>SARS received VDP disclosures totalling R3.8bn in foreign assets</li>
<li>Special VDP will be open until the end of August this year</li>
<li>Multinational companies will be required to file further information with SARS</li>
</ul>
The State of S.A
<ul>
<li>S.A’s income growth has been uneven</li>
<li>95% of S.A’s wealth is in the hands of 10% of the population</li>
<li>35% of the labour force are unemployed</li>
<li>Over half of all children in Grade 5 cannot read adequately in any language</li>
<li>A Charter of Economic Rights needs to be debated to deal with these glaring inequalities </li>
</ul>
The State of S.A’s economy
<ul>
<li>S.A’s growth has been too slow at 1% a yr in real per capita terms</li>
<li>S.A’s transformation will be built through economic participation, partnerships</li>
<li>R28bn to be raised in taxes</li>
<li>S.A’s budget deficit for 2017/18 will be 3.1% of GDP</li>
<li>S.A’s government debt will stabilise at about 48% of GDP over next 3yrs</li>
<li>Spending priorities: Education, health services &amp; municipal functions in rural areas IMF projects world economy to grow by 3.4% in 2017 &amp; 3.6% in 2018 Economic inclusion is being prioritised everywhere S.A’s GDP expected to increase from 0.5% last yr to 1.3% 2017 S.A growth to be spurred by commodity prices rebounding Plans are afoot to get S.A out of the present low growth trap</li>
<li>S.A is finalising legislation relating to mining development &amp; land redistribution</li>
<li>S.A is implementing transition from analogue to digital television</li>
<li>S.A is continuing its independent power producer programme</li>
</ul>
S.A’s 2017 Budget  Allocations:
<ul>
<li>R3.9 billion for small, medium and micro enterprises and cooperatives.</li>
<li>R4.2 billion for industrial infrastructure in special economic zones and industrial parks.</li>
<li>R1.9 billion for broadband implementation.</li>
<li>R3.9 billion for the Council for Scientific and Industrial Research.</li>
<li>An additional R494 million for tourism promotion.</li>
<li>An additional R266m to support the aquaculture sector and realise the goals of the Oceans Economy Phakisa Operation.</li>
<li>Spending on agriculture, rural development and land reform amounting to nearly</li>
<li>R30 billion by 2019/20.</li>
<li>Provincial Roads Maintenance Grant is allocated R10.8 billion in 2017/18</li>
<li>SANRAL receives R15.4 billion over the period</li>
<li>The Department of Telecommunications and Postal Services receives R1.9 billion</li>
<li>The Passenger Rail Agency of South Africa to receive R16.7 billion</li>
<li>Public Transport Network Grant receives R6.2 billion in 2017/18.</li>
<li>R600 million over the medium term is reprioritised to the Social Housing</li>
<li>R18.4 billion over the medium term is allocated to the Regional Bulk Infrastructure Grant</li>
<li>R12.5 billion to the Water Services Infrastructure Grant</li>
<li>R1 billion is added to the local government equitable share in 2018/19</li>
<li>An additional R5bn to the R32bn previously announced has been allocated to higher education</li>
</ul>
The shape of S.A’s finances
<ul>
<li>The proposed expenditure for 2017/18 totals R1.56 trillion</li>
<li>Interest on debt amounts to R169 billion</li>
<li>Projected revenues amount to R1.41 trillion</li>
<li>The balance of R149 billion, or 3.1% of GDP, will be borrowed</li>
<li>S.A’s government debt stands at R2.2 trillion, or 50.7% of GDP</li>
<li>Funds available after providing for debt service costs &amp; contingency reserve up 6.9% to R1.24trn next year; are projected to rise to R1.43 trillion in 2019/20</li>
</ul>
Over the next three years:
<ul>
<li>47.5% of available funds will be allocated to national government</li>
<li>43.4% to provinces and</li>
<li>9.1% to local government</li>
</ul>
Public service wage bill
<ul>
<li>Provincial spending on personnel has declined to just under 60% in 2016/17</li>
</ul>
Social grants
<ul>
<li>Three new conditional grants will take effect in 2017/18</li>
<li>National Treasury &amp; provincial treasuries to focus on four “game changers”</li>
<li>Social assistance grants to be increased in April</li>
</ul>
S.A’s social grant allocations:
<ul>
<li>The old age grant will increase by R90 to R1600 for pensioners over the age of 60, and R1620 for those over 75.</li>
<li>The disability and care dependency grants also increase by R90 to R1600 a month.</li>
<li>Foster care grants increase by R30 to R920 a month.</li>
<li>The child support grant increases by R20 to R380 a month</li>
</ul>
NHI
<ul>
<li>Eleven NHI pilots have yielded valuable insights, on which to build</li>
<li>NHI Fund will be established</li>
</ul>
Education
<ul>
<li>Spending on basic education next year will be over R240bn</li>
<li>The Heher Commission of Inquiry into Higher Education will complete work by June</li>
</ul>
Procurement
<ul>
<li>Public procurement will amount to about R1.5trn over next 3yrs</li>
<li>Further procurement reforms to be introduced this year</li>
<li>Draft Public Procurement Bill to be published shortly</li>
</ul>
Forex collusion among banks
<ul>
<li>Market conduct regulator proposed</li>
<li>Banks need tougher rules to cover financial market abuses</li>
<li>SARB &amp; Treasury have initiated work on a more comprehensive Financial Markets Review Financial Sector Summit to take place in 2017 ﻿</li>
</ul>

Budget highlights 2017: How it affects you

All South Africans, especially the wealthy, had best tighten their belts.
“Slow economic growth has held us back and so decisive steps are needed to strengthen confidence, investment and growth.”
This was one of the key messages on tax given by Pravin Gordhan, Minister of Finance, during his 2017 Budget Speech in Parliament, in Cape Town today.
This year’s budget has to tackle a pesky problem &#8211; economic growth has shown ‘green roots’, with a 1,3% estimated growth in 2017, but it is not sufficient to address unemployment and poverty. 
“Government debt now stands at R2, 2 trillion, or 50.7% of GDP, interest payments are a rising share of expenditure. By acting now to stabilize debt we will ensure that future generations will not pay for today’s expenses, 20 or 30 years from now.”
It means Gordhan needed to raise R28 billion as well as reduce expenditure by R10 billion over the next year to ensure a sustainable recovery.  The concern of those in the streets was how government intended to raise it.
Those who will be hardest hit are the wealthy. People earning more than R1, 5million will now pay 45% personal tax. There will also be a 5% increase in dividends paid out to owners of companies to 20%, up from 15%.
“Wealth remains highly concentrated – 95% of wealth is in the hands of 10% of the population.” 
South Africans driving fuel guzzler vehicles will also be digging deeper into their wallets. Petrol will rise by 30c/liter under the general fuel levy, as well as an increase of 9c/liter will go towards the road accidents fund.    
Sin taxes, like alcohol and tobacco, also took a hit with increases of between 6% and 10%.
Two new levies will also be rolled out once they have been finalized in Parliament. A levy on sugary beverages will charge 2.1c per gram of sugar content above 4g per 100ml. While a proposed carbon tax, is still undergoing consideration.  
There is some relief. Medical tax credit rose with inflation. For the low income earner the tax free threshold was raised from R75,000 to R75,750. Those looking to invest their money in tax free savings accounts now have an annual allowance of R33,000, with no increase to their limits,  and the affordable housing threshold above which transfer duty is paid was moved from R750,000 to R900,000.
“For many years we have enjoyed the benefit of tax revenue collections outstripping economic growth. This contributed to expand public service delivery. This year, revenue has lagged behind the economy, leading to a R30 billion shortfall” says Gordhan.
The government has a tough budgetary juggling task ahead of them. High on their agenda is bailing out state owned enterprise South African Airways and the post office.  Financial management of Provinces have also undergone reviews, to eliminate ‘duplication of activities’; reduce spending on non-core goods and non-essential services.
“Though the fiscal envelope is constrained, billions of rands have been shifted to meet new needs. A substantial additional allocation to higher education is again proposed, adding R5 billion to the R32 billion previously announced.”
Government plans to clamp down on tax avoidance. This year government intends to sign a multilateral instrument to reduce the scope of aggressive tax avoidance activities. This includes automatic exchange of information between tax authorities and requiring multinational companies file detailed information with SARS on cross border activities.
“We rely on global cooperation to address trade imbalances, the abuse of tax havens and the coordination of financial stabilization efforts.”  
Gordhan says that SARS received disclosures of R3,8 billion in foreign assets, which will yield about R600 million, under the Special Voluntary Disclosure Programme which ends in August.
“Across all three spheres of government, and in state owned companies and public entities, those responsible for deciding how money is spent have to do so with scrupulous rigor and care. It is only right that is households and firms face tough choices in balancing their income and expenses; the same disciplines must be applied in public expenditure,” says Gordhan.
“…we face immense transformation challenges – we must overcome the inequalities and divisions of our societies. All South Africans must share in a more prosperous future.”
Tough times ahead for state and citizen alike.  ﻿

A R28-billion taxing problem

The relationship between labour and capital, rich and poor, black and white, still reflect the entrenched legacy of colonialism.
This was the word from South Africa’s Finance Minister, Pravin Gordhan, as he tabled the 2017 budget in parliament, Cape Town. A large portion of Gordhan’s speech addressed the lack of transformation in South Africa.
“Wealth is produced and allocated along the lines that remain fundamentally unjust. The ownership of assets and the distribution of income is captured by a minority of the population, a situation that is morally wrong and economically unsustainable,” says Gordhan.
The lack of transformation in South Africa has been a thorn on the side of the country for the last 23 democratic years with almost all the country’s industries still owned by a minority of the population.
The Finance Minister highlighted the importance of bridging the inequality gap in South Africa. He went on to agree with President Jacob Zuma on finding a new perspective for economic transformation.
“The litmus test for our programmes must be what they do to create jobs, eliminate poverty and narrow the inequality gap. Transformation must be mass-based, benefitting the most disadvantaged South Africans through the creation of new assets, capabilities and opportunities to build livelihoods,” says Gordhan.
Gordhan acknowledged the need to mobilize both private and public investment in social and economic infrastructure, new technologies and new activities that help build a modern and diversified economy.
“Our growth challenge is intertwined with our transformation imperative. We need to transform in order to grow, we need to grow in order to trandsform. Without transformation, growth will reinforce inequality and without growth, transformation will be distorted by patronage.” ﻿

S.A’s lack of transformation is morally wrong and economically unsustainable-Fin Min

Since 2009, National Treasury has embarked on fiscal expansion to enhance the public sector’s infrastructure programme and support future economic capacity in South Africa. However, anaemic global economic growth over the last nine years has left the Treasury’s countercyclical expenditure programme unable to lift the GDP growth above 2% per annum.
Consequently, a combination of slow growth and lower tax buoyancy have reduced the in-year 2016/17 revenue estimate by R23 billion. Without policy adjustments, gross tax revenue will – this financial year – fall short of Budget 2016 estimates by R36 billion for 2017/18 and R52 billion for 2018/19. These budget deficits are leaving South Africa’s sovereign rating on the brink of being downgraded to non-investment grade.
 In order to mitigate against this revenue shortfall, Minister of Finance, Pravin Gordhan, announced in his 2016 Medium-term Budget Policy Statement (MTBPS) that an additional R13 billion for 2017/18 and an additional R43 billion over the Medium Term Expenditure Framework (MTEF) will have to be sourced through various tax increases.
In this article, we explore the Minister’s possible tax options to raise the required tax revenue and close the revenue shortfall.
Personal Income Tax (PIT)
Revenue potential: R7.5 billion &#8211; R10.0 billion
PIT accounts for at least 35% of tax revenue. It is largest source of tax revenue and the most buoyant since 2010. This is due to higher-than-inflation wage increases, tax increases and reduced tax relief. South Africa has a progressive tax system, which means higher income individuals pay a higher proportion of tax. Consequentially, this means if Minister Gordhan were to generate significantly higher revenue, he would have to increase taxes for higher income earners. ﻿
<img loading="lazy" decoding="async" src="/media/19332555/graphic_1_598x336.jpg" width="598" height="336" alt="Graphic 1"/>﻿
One option to raise additional revenue is to introduce a 45% marginal tax rate for individuals earning above R1.5 million per annum. Based on preliminary calculations, Treasury can realise between R7.5 billion and R10.0 billion using this option. However, high income individuals are often skilled and mobile. A punitive tax rate might encourage aggressive tax planning or incentivise them to relocate to countries with lower tax rates.﻿
Corporate Income Tax (CIT)
Revenue potential: R0.0 billion
In the current weak macro-economic environment, Treasury is unlikely to increase CIT, as this could result in base erosion, capital flight and hence generate little revenue. Furthermore, increasing the CIT rate will be uncompetitive. South Africa’s current statutory tax rate is already higher than most tax jurisdictions. (See below). However, there is room for Treasury to lower the tax rate to attract investment and send a business friendly signal.﻿
<img loading="lazy" decoding="async" src="/media/19332562/graphic_2_597x336.jpg" width="597" height="336" alt="Graphic 2"/>﻿
Value-added Tax (VAT)
Revenue potential: R0.0 &#8211; R15.0 billion
South Africa’s VAT rate is relatively low compared to most tax jurisdictions and there is less risk of tax avoidance and tax planning associated with this tax (see below).﻿
<img loading="lazy" decoding="async" src="/media/19332569/graphic_3_597x336.jpg" width="597" height="336" alt="Graphic 3"/>﻿
Preliminary calculations by KPMG suggest that a 1 percentage point increase in VAT could yield approximately R15 billion in additional revenue. However, the Davies Tax Commission First Interim report on VAT<a href="#_ftn1" title="">[1]</a>highlighted that an increase in VAT will have a negative impact on inequality, real GDP growth and inflation. Furthermore, VAT increases will be disliked by labour unions. Despite a high revenue yield these factors make a VAT increase
<div>Specific Excise Tax
Revenue potential: R5.0 billion &#8211; R7.0 billion
Treasury is likely to realise additional revenue through higher-than-inflation adjustments in sin taxes, particularly in luxury products like cigars, spirits and wines. In Budget 2016, this raised an additional R2.3 billion. However, disproportionate increases in specific excise taxes might encourage black market consumption. ﻿
<div><img loading="lazy" decoding="async" src="/media/19332576/graphic_4_597x336.jpg" width="597" height="336" alt="Graphic 4"/>﻿</div>
<div></div>
<div>
Furthermore, a new specific excise duty on sugar-sweetened beverages (SSBs) was announced in 2016 and could generate approximately R2.5 billion to R4.0 billion. However, this tax will be introduced at a higher effective tax rate than most other countries that have a comparable tax and is set at higher rates than most wines and spirits in South Africa. Furthermore, any job losses and impact on industry growth will have negative second round effects for the PIT and CIT tax bases.﻿
Fuel levy
Revenue Potential: R5.0 billion &#8211; R7.0 billion 
Treasury is also likely to increase the fuel levy. However, with higher crude oil prices the Minister will not have the same space to increase fuel levy compared to the last two budget periods, where he raised R6.6 billion and R6.8 billion, respectively.﻿
Other adjustments
Additionally, the Minister has the option of progressively providing reduced tax relief to raise short-term revenue. In Budget 2016, Treasury raised R7.6 billion through this option. However, failure to give tax relief over a sustained period is regressive, as lower income groups are disproportionately hurt by an increased tax burden. We also expect the Minister to announce other progressive adjustments to wealth-related taxes, similar to last year’s changes to property taxes. ﻿
Conclusion
While it is impossible to predict the exact adjustments the Minister will announce, above we outline several possible tax adjustments to raise the required revenue. We expect a combination of these tax measures to raise at least R13 billion in the 2017/18 fiscal year.﻿
  
</div>
<hr />
<div>
<a href="#_ftnref1" title="">[1]</a> Davis Tax Committee: Value-Added Tax &#8211; First interim report, 2015﻿
</div>
</div>

Tax predictions for S.A's Budget 2017

The upcoming Budget will be a critical one given there is no more room for the upward revision of deficit targets as seen over the last few years. As a result of the current slow growth environment, the tax increases and expenditure cuts set in October’s Medium-term Budget have to be adhered to if Treasury is to deliver a positive Budget. However, given that the current fiscal year is running about R5 billion short of target, Treasury will have to go beyond the tax and expenditure targets set in October requiring an even tighter Budget.
The Medium-term Budget last year set out targets of R20 billion for expenditure cuts and R28 billion for tax increases in order to achieve the R48 billion contraction target needed for the Budget. With the current fiscal year running R5 billion short, due to slower tax growth and slight over-spending, they will need to go bigger on tax increases and expenditure cuts this year to make this up.
Whether or not they actually do take these necessary steps remains to be seen, but it will be a very big positive if they do as it will be a departure from the historical trend.
The rating agencies will be watching this very closely. Treasury sticking to the 3.1% Budget deficit target they set in October in the Medium-term Expenditure Framework is one of the crucial issues they will be considering in the decision on SA’s sovereign rating.
They will also be keeping an eye on the actual mix of tax increases introduced by the Budget. For example, if they decide to increase VAT, this would be viewed as a significant step in the right direction. While most economists are skeptical about the prospects of an actual VAT hike, there is increasing talk of a 0.5% VAT hike, which would contribute R10 billion to the Budget, although I still think the probability of this falls below 50%, despite the market and currency strength that such a move would bring. 
A VAT increase is a notoriously unpopular political move among lower income groups, particularly during an election cycle. Nonetheless, the chances of a VAT hike are still better than this time last year given the increased pressure that Treasury is under. If they were to raise the VAT rate, they can still sell such a move politically by, for example, raising the top marginal rate by more, by increasing social grants, zero rate more food stuffs or even introducing a much higher VAT rate on luxury goods. While a varied VAT rate structure is not favoured by Government, it can still be done.
The fact that growth is picking up marginally, the improvement of the global economic environment, and stabilising employment numbers are all positive factors for the tax take or growth. The risk of tax increases in this year’s Budget is that, while we know that hikes will happen across the board, we don’t want Treasury to become too reliant on tax increases over the prioritising of expenditure cuts. We need them to focus on both, but expenditure cuts are more challenging given that public sector wages, social grants and interest payments make up 60% of the total expenditure budget. So where do they cut if they cannot easily cut these components?
The risk of rising taxes hurting the economy through downward pressure on SA’s currently improving growth can be avoided through a suitable mix of taxes. “If the tax increases come in at the top level, as we expect they will, then the impact on the man in the street won’t be as severe.
So yes, while a 2% VAT hike would be painful, a 0.5% increase could be manageable in terms of impact on the consumer. And if, as we expect, the mix means hiking the top marginal tax rate, which includes the wealth or rich taxes such as capital gains tax and dividend taxes, then we don’t expect the economy and consumer to be put under increased pressure. Of course there will be tax hikes such as fuel levy and excise increases, but these will be the normal increases we see every year.
In order to meet the Ministry’s tax target of R28 billion, other tax options, in addition to those already mentioned, include an increase in estate duties, securities and sugar taxes. I do not expect the much-talked about Wealth tax to be implemented in the short term.
A tighter Budget is key when it comes to SA’s policy mix as it could give the SA Reserve Bank the room that they need to be able to cut interest rates as we still expect them to in the second half of this year. At least some of the tax pain expected from this Budget will be negated by lower inflation and interest rates &#8211; but the bulk of the tax pain will be at the top end.

Op-Ed: S.A. Budget must go bigger on tax & spending cuts

South African banks accused of rigging rand currency dealing should be punished if a report by the competition watchdog is true, the National Treasury said on Thursday.
&#8220;We view this matter in a very serious light and welcome any steps taken against wrong-doing by any financial institutions,&#8221; the treasury said in a statement.
The Competition Commission said on Wednesday it had found the banks, including U.S., European, Japanese and Australian lenders, had colluded to coordinate their trading activities when dealing in the South African and U.S. currencies.
 
(Reporting by Mfuneko Toyana)﻿

S.Africa Treasury says banks should be punished if currency rigging is true

While higher taxes on corporates and the super-rich may be popular ideas, they could in fact be detrimental to the economy. Consumers may still be treasury’s best hope.
It is no secret that Treasury is under substantial pressure to find a way of bringing in the necessary funds. Tax Consultant for Mazars, Tertius Troost says that with Treasury’s stated goal to raise R43 billion over the next two years, the long-term effects of every possible tax change needs serious consideration.
“Some of the most popular tax changes that have been discussed in the media include measures like new tax brackets for high-net-worth individuals and increases in corporate tax, which may in fact negatively affect the economy in the long-run. At the same time, the tax increases that seem to affect the average consumer the most, just may be the most viable option,” Troost says.
As Troost points out, there is currently a global trend towards lower tax rates, with countries like the UK and the United States proposing to cut corporate tax to below 15%. “Reducing the corporate tax rate, encourages growth and increases jobs, which translates to increased revenue collection from individuals.”
“Unfortunately, South Africa is unable to follow this global trend as a result of its vast budget deficit. Any upward adjustments of these rates would result in South Africa becoming less competitive internationally which will decrease foreign investment that is vital to the country. Luckily, I believe that Treasury also sees this issue,” he states.
A new, so-called super tax bracket may also not be a permanent solution. “South Africa has imposed super tax brackets in the past and these have had some success historically.”
“It is a decision that Treasury should not make lightly. Individual income tax is the simplest source of revenue to adjust but it was already raised two years ago. It will be difficult to justify any increase since they are not able to show an improvement in curbing wasteful expenditure and combatting corruption,” he says.
“Once again, Treasury will need to balance its need to raise gross tax revenue in the short term with the need to encourage increased investment and growth in the country. Raising taxes on high-net-worth individuals may actually drive them to emigrate to more tax favourable jurisdictions, which means taking their money out of the country,” he adds.
According to Troost, an increase in VAT will be the most equitable change that Treasury can impose. “It is the fairest and quickest way to increase revenue and it has remained unchanged for quite some time. It is also widely known that South Africa’s VAT rate is low when compared to other African countries, which is why we believe there is scope to increase.”
“Of course, this is a tax that affects all classes of consumers, which is why Treasury would probably encounter pushback if they plan on increasing it. Its effect on the poor also has political implications. An increase in VAT will need to include amendments to exclude more products consumed by the lowest income classes.”
“Tactically I believe that Treasury’s best move would be to announce a 2% increase in VAT and to adjust that number down to 1% after the initial pushback from consumers,” Troost concludes.﻿

Is a 2% VAT increase necessary in South Africa?

South Africa&#8217;s ruling African National Congress (ANC) denied a newspaper report on Thursday that President Jacob Zuma had accused the finance ministry of thwarting the party&#8217;s efforts to give blacks a bigger stake in the economy.
Citing sources that attended an ANC meeting of top leaders last week, Business Day newspaper said Zuma had accused the National Treasury of restricting funds for certain projects.
ANC spokesman Zizi Kodwa denied the president had attacked the ministry, saying the article was &#8220;poor journalism.&#8221;
&#8220;It&#8217;s not true. The President never said that,&#8221; Kodwa said.
Zuma&#8217;s spokesman Bongani Ngqulunga did not respond to telephone requests for comment.﻿

S.Africa's ANC denies Zuma accused Treasury of foiling transformation

South Africa&#8217;s Finance Minister Pravin Gordhan said in court documents on Monday that the Gupta brothers were carrying out an &#8220;organised campaign&#8221; against him and the Treasury.
Gordhan also denied in the affidavit that he had a vendetta against the Guptas as claimed in court documents filed by the Gupta family on Jan. 20. The Gupta brothers had accused Gordhan of planning to diminish their business.
This affidavit had been filed in response to one issued by Gordhan in October linking them and their firm to suspicious transactions made by Indian-born Ajay, Atul and Rajesh Gupta. The Guptas have denied any wrongdoing.
The Gupta brothers&#8217; lawyer were not available to comment on Monday.﻿

S.Africa's Gordhan alleges campaign by Guptas against Treasury

South Africa needs to fix its politics in order to grow its economy, as credit rating agencies have emphasised, Treasury director-general Lungisa Fuzile said on Monday.
S&amp;P Global Ratings downgraded South Africa&#8217;s local debt by one notch to BBB on Dec. 2 but kept its sovereign credit rating unchanged at BBB- with a negative outlook, warning that political tensions could hamper efforts to boost GDP.
Fitch and Moody&#8217;s also warned that political turmoil could derail economic growth when they affirmed their own investment grade ratings.﻿

South Africa needs to fix politics to grow economy

South Africa&#8217;s Treasury said on Wednesday it supported the report by a government-appointed advisory panel that suggested a national minimum wage of 3,500 rand ($245) per month, throwing its political weight behind the policy initiative. 
&#8220;The report represents &#8230; an important milestone in our government&#8217;s efforts over the years in this regard,&#8221; Finance Minister Pravin Gordhan was quoted as saying in a statement.
Supporters of a minimum wage say it can stimulate growth as workers can spend more while reducing inequality. Critics say it could lead to increased unemployment as employers will be unable to afford higher wage bills.
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South Africa's Treasury supports minimum wage recommendation

South Africa measures favourably in most indices bar economic growth, which the Treasury has forecast will be 0.5 percent this year, a Moody&#8217;s representative said on Tuesday.
&#8220;South Africa is doing relatively well in a lot of the indices when you strip out growth &#8230; and when we look at a sovereign rating you&#8217;ve got to look through the cycle,&#8221; Moody&#8217;s country representative Sylvia Chahonyo told a business conference.
Moody&#8217;s rates South Africa two notches above subinvestment grade with a negative outlook and is due to publish its next review in December.﻿

South Africa doing well if you strip out growth says Moody's

South African Finance Minister Pravin Gordhan has revealed in a court affidavit distributed by the Treasury on Sunday that 6.8 billion rand ($490 million) in payments made by wealthy brothers Ajay, Atul and Rajesh Gupta, companies they control, and other individuals with the same surname have been reported to authorities as suspicious since 2012.
The three Indian-born businessmen are the subject of an official investigation into allegations that they have had undue influence over President Jacob Zuma. The payments in question, whose destinations were not disclosed in the document provided by Gordhan, were ascribed to the three brothers, their nephew Varun Gupta, numerous companies that they control as well as other individuals named as Chetali Gupta, Shivani Gupta and Arti Gupta. Reuters could not establish whether all these individuals were members of the same family.
Gordhan&#8217;s court submission caps a week of high drama in which he was charged with fraud by approving early retirement for a deputy commissioner in 2010 while Gordhan was head of the tax agency and re-hiring him as a consultant &#8211; a charge that Gordhan said was politically motivated.
Gordhan has for months been at odds with Zuma, not least over the alleged political influence of the Gupta brothers, but is looked to by edgy financial markets as a guarantor of stability.
Gordhan&#8217;s submission, dated Oct. 13, is a request to the High Court in Pretoria for a declaratory judgment that he cannot interfere with decisions by South Africa&#8217;s major banks to cut their ties with businesses owned by the Gupta brothers.
Gordhan&#8217;s submission had the effect of airing what he considered to be evidence supporting his concerns about the Gupta brothers&#8217; political influence.
The Gupta brothers are close to Zuma and the subject of a just-finished report by the outgoing Public Protector, a constitutionally-mandated anti-graft official, into allegations that they influenced the appointment of ministers. It was prevented from being made public on Friday by Zuma&#8217;s application to the High Court to delay its release.
Zuma has denied granting undue influence to the brothers and they have denied seeking it. Nevertheless, they said in August that they planned to exit all of their South African investments.
Several banks and companies have cut ties this year with the Gupta brothers&#8217; investment vehicle, Oakbay Investments, without publicly disclosing their reasons. They included South Africa&#8217;s top four banks: Standard Bank, Nedbank, Barclays Africa&#8217;s Absa and First National Bank (FNB), part of FirstRand.
 
REQUEST TO INTERVENE
Gordhan says in his 96-page submission to the court that Oakbay &#8220;demanded that on behalf of the government I intervene with the banks to achieve a reversal of their decision&#8221;.
Gordhan supported his assertion by attaching correspondence between himself and Nazeem Howa, the chief executive of Oakbay Investments, although the letters viewed by Reuters did not appear to provide evidence of undue pressure.
Neither Howa nor the Treasury responded to requests for comment by phone and email, and an Oakbay spokesperson said the firm would not comment on the issue.
A lawyer representing the Gupta family did not respond to an email seeking comment. However, on Sunday the Oakbay-controlled ANN7 television news network cited unnamed Oakbay sources as rejecting allegations of wrongdoing.
In one of the attached letters, Howa said that 7,500 jobs were at risk as the company could not function without the support of local banks.
&#8220;Given your strong relationship with the captains of industry, I implore you help us save the jobs &#8230; I look forward to hearing from you about any possible assistance you are able to offer,&#8221; Howa wrote in the letter, dated April 17, 2016.
In another letter, dated May 24, Howa said &#8220;we seem to have no options open to us other than our appeal to you for assistance&#8221;.
Gordhan also included in his affidavit advice from his lawyers stating that no minister, nor the cabinet as a whole, had &#8220;any power to intervene in the banker-client relationship&#8221;.
The affidavit includes a report from the Financial Intelligence Centre (FIC), a government anti-money-laundering agency, listing 52 payments worth a total of 6.8 billion rand that were reported to the FIC between 2012 and 2016, presumably by the banks entrusted with them. It also included 20 cases of &#8220;multiple transactions&#8221; with no amounts specified.
The FIC requires banks to notify it of transactions that appear potentially improper. It says the transactions were &#8220;reported or sent to the centre in terms of Section 29&#8221; of the FIC Act, which deals with transactions regarded as &#8220;suspicious and unusual&#8221;.
 
&#8220;SERIOUS STATE OF AFFAIRS&#8221;
Gordhan&#8217;s affidavit says that the FIC report &#8220;reflects the increasingly serious state of affairs which has arisen&#8221;, adding: &#8220;This is illustrated by the number and scale of reported transactions linked to Oakbay.&#8221;
The FIC report did not say why the transactions were regarded as suspicious and did not disclose who reported them or to whom they were directed. Nor did it say whether any had eventually been found to be improper. Reuters was unable to independently confirm any details about the transactions.
A spokesman for Standard Bank said on Saturday that the bank could not comment and the three other major banks did not respond to requests for comment. The FIC also did not respond to a request for comment.
Although the Gupta brothers&#8217; relationship with Zuma has been a source of controversy for years, it burst into the open in March when Deputy Finance Minister Mcebisi Jonas said in a statement that he had been offered his previous boss&#8217;s job as finance minister by unnamed members of the Gupta family.
Gordhan, who had been finance minister from 2009 to 2014, was put back in the job in December after Zuma sacked Nhlanhla Nene and replaced him with the little-known backbencher Des van Rooyen, triggering a crash in the rand currency and sending banking shares sharply lower.
The Gupta family issued an emphatic denial of Jonas&#8217;s allegation at the time.
Zuma told parliament in March that he was not the right man to question on the allegations.
“If Jonas says he was offered by the Guptas, I think you will be well-placed to ask the Guptas, or Jonas. Don’t ask me. Where do I come in?” he said. “I never offered Jonas the ministry. That’s why he is the deputy minister.”﻿

S.A finmin Pravin Gordhan's affidavit shows suspicious Gupta transactions worth $490mn

South Africa&#8217;s President Jacob Zuma said on Tuesday that a process by the government to expand nuclear power generation was continuing despite the Treasury saying funds for the project were not immediately available.
Africa&#8217;s most industrialised country has said it intends to build new nuclear power stations to reduce its heavy dependence on coal but critics have said the costs will be prohibitive and have questioned the transparency around the process.﻿

Zuma says S.Africa's nuclear expansion plan on despite tight funds

South African Public Enterprises Minister Lynne Brown said on Tuesday she had asked power utility Eskom to immediately provide a report required by the Treasury, which is investigating the utility&#8217;s coal contracts.
Brown said she was concerned a public row between the Treasury and Eskom could lead to the utility being downgraded by credit rating agencies.
The Treasury on Monday accused Eskom executives of blocking the probe, but Eskom said it was cooperating in the investigations.
 
(Reporting by James Macharia; Editing by Ed Cropley)﻿

S.A minister tells Eskom to release coal contracts report

The National Treasury is surprised by media reports of Tegeta “warning” and threatening to interdict the department should it release a report into its investigation of Eskom’s coal contracts.
National Treasury has also noted with concern the statement issued by Eskom on Sunday 28 August 2016, see below, suggesting that it has been co-operating with the process of reviews of the coal contracts. The National Treasury would like to categorically state that, its efforts have met resistance.
Eskom Media Statement: Eskom continues to co-operate with the National Treasury on its coal contract probes
Sunday, 28 August 2016: Eskom continues to co-operate with the National Treasury on its investigations of the coal contracts. Contrary to the allegations made by theSunday Timestoday, the National Treasury has not issued any conclusive findings against Eskom on any of these contracts.
Through our normal interactions with the National Treasury, Eskom has repeatedly provided information to the National Treasury and where additional time is required has informed the National Treasury that some of the additional information that it had requested would only be supplied after Board approval. 
Meanwhile, the latest correspondence Eskom received from the Treasury was on 17 August 2016, in which the latter supported the extension of the coal supply contract for the Komati Power Station. In approving the extension, the National Treasury stated that the reason provided for the extension is that there is a need for continuous supply of coal to Komati as well as the utilisation of the stockyard at Koornfontein premises to supplement the coal stockyard at Komati. “The National Treasury supports the extension of this contract.”
The Koornfontein Mine is owned by Tegeta Resources &amp; Exploration.
Eskom disputes that it has received out of specification coal worth more than R134-million from Tegeta, and we have provided the documentation to that effect to the National Treasury.
In addition, the Department of Water and Sanitation issued Tegeta with a water use licence on 22 December 2014 (copy attached). The spurious allegations by theSunday Times, which have are being continuously regurgitated, are therefore wholly incorrect, mischievous and misleading.﻿
Since April, the National Treasury has made several attempts to get information from Eskom including:
 Sending a report to the Eskom Chief Executive Officer, Mr. Brian Molefe and the Chairperson of the Board Mr Ben Ngubane and a request for comment on it.
 Granting an extension that Eskom requested to provide the comments.
 A request for Eskom to submit a system generated list of payments made to Tegeta and invoices received from Tegeta for the period 1 September 2015 to 30 April 2016.
 A letter by National Treasury Director General Mr Lungisa Fuzile, requesting that Eskom withdraw its statement suggesting that “all the Tegeta coal contracts with Eskom have been extensively audited by various agencies, including National Treasury,” whilst clearly that was not the case.
Furthermore, Minister Pravin Gordhan escalated the matter to the Eskom Board Chair Mr Ngubane, raising concerns about advance payments made to Tegeta and failure to submit the information requested in relation to the matter.
To date, not only has Eskom failed to honour its undertaking to submit comments to Treasury’s report but it chosen to ignore correspondence and put all forms of hindrances.
It needs to be noted that, Section 217 (1) of the Constitution stipulates that for any goods or services contracted, public entities are required to use a system that is fair, equitable, transparent, competitive and cost effective. In addition, in line with section 54(1) of the Public Finance Management Act, the accounting authority for a public entity must submit to the relevant treasury or the Auditor-General such information, returns, documents, explanations and motivations as may be prescribed or as the relevant treasury or the Auditor-General may require.﻿
Subsequent to Treasury&#8217;s statement Eskom released the following:
Eskom stands by its statement that it is cooperating with the National Treasury investigation
Monday, 29 August 2016:Eskom is shocked and perplexed that the National Treasury has chosen to issue a statement that it has issued on the Tegeta contracts as they relate to Eskom.
National Treasury started an investigation into Eskom contracts with Tegeta in July 2015. Eskom wants to reiterate that it has been cooperating with National Treasury. Since then, as outlined below, Eskom has been responding to National Treasury requests.
The first request for information from National Treasury to Eskom was received on 31 July 2015. A response was sent to them and they came back with their first draft report requesting further information on 15 September 2015. We responded to that request and they came back with a second draft report asking for more information on 21 October 2015. Eskom responded on 11 November 2015 with the required information including all invoices and payments made to Tegeta as an annexure to the response. The third request was received on 12 April 2016. Eskom was asked to comment on a 172-page document. This request came with a specific instruction from National Treasury to provide comments after they had been considered by the Eskom Board. The deadline given was 30 April 2016.
This was an unreasonable request. Consequently, Eskom requested an extension to provide the information, which was granted by National Treasury. We therefore think it is neither unreasonable that our Board will have considered responses to the 172-page document by end of September 2016 nor a reason for National Treasury to label Eskom as uncooperative. Furthermore, in a letter from Mr Molefe to Mr Brown dated 24 June 2016 Mr Molefe informed National Treasury of Eskom’s intention to submit the required information after it has been reviewed by the Eskom Board, as per National Treasury instruction of 12 April 2016. 
Eskom has compiled a response to National Treasury’s report dated 12 April 2016 and the responses are due to be tabled for consideration by the Eskom Board as per National Treasury’s instruction during September 2016. These responses have already been tabled and reviewed by the procurement subcommittee of the Board on 16 August 2016.
The only letter that Eskom is aware of in which the Minister of Finance refers to prepayments to Tegeta was dated 17 August 2016 (attached). Eskom is in the process of compiling a response in this regard in line with our media statements already issued on this topic.
It is also true that the National Treasury has requested all contracts related to Tegeta (as noted above) and that these contracts were subject to an investigation by National Treasury. We therefore see no reason to retract the statement to the effect that National Treasury has investigated Tegeta contracts extensively. ﻿

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