Malusi Gigaba’s maiden press conference likely to cause more policy uncertainty in SA

Newly appointed Minister of Finance Malusi Gigaba’s maiden press conference to “restore confidence and restore calm” is likely to have exactly the opposite effect and create even more policy uncertainty when it comes to the economy in South Africa.
The minister expressed his commitment to “radical economic transformation” with almost religious zeal, but then did not seem to be able to explain exactly what it means and conceded that there was still “a whole lot of clarification that we have to do”.
This is unlikely to go down well with what the minister called the “credible ratings agencies”, with one ratings agency already warning that a change in policy may signal a ratings review of South Africa.
The real concern is that the minister was appointed with the Guptas’ stamp of approval and the real test of the new minister will not be his words, but his deeds when it comes to decisions that may have an effect on the Gupta empire’s interests in South Africa.
These include, but are not limited to, the following: the appointment of the Chief Procurement Officer at National Treasury; the approval of the joint venture or partnership with VR Laser Asia; the review of coal contracts entered into between Eskom and Tegeta Exploration and Resources; and any action in respect of the control over the Habib Overseas Bank.

Parliament must defend our Constitutional Democracy and fire Jacob Zuma

President Jacob Zuma’s decision to fire the Minister of Finance, Pravin Gordhan, and the Deputy Minister of Finance, Mcebesi Jonas, should be a rallying call for all South Africans to stand together and defend our hard-won Constitutional Democracy.
The President has once again shown that he has no interest in our beloved country’s future – or the 9 million South Africans who are unemployed. He has bowed to the whims of those who are determined to enrich themselves at the expense of the poor and jobless. This is an act of complete state capture.
We cannot sit by and let this happen. It is time that all South Africans stand together to protect our democracy.
It is Parliament who hired Jacob Zuma and it is Parliament that can fire him. We therefore urge all political parties, including members of the ANC, to vote President Jacob Zuma out when the DA’s motion of no confidence is debated in the National Assembly.
The time is now. We must stand together and defend what so many fought and died for.
Visit NoConfidence.co.za and become a citizen co-sponsor of our Motion of No Confidence in President Zuma.

DA to table Motion of No Confidence in Jacob Zuma following his reckless assault on our economy

The Democratic Alliance (DA) has today taken a decision to table a Motion of No Confidence in President Jacob Zuma – in terms of Section 102 of the Constitution – following his now confirmed intention to fire Finance Minister, Pravin Gordhan, and his Deputy, Mcebisi Jonas. I have therefore written to the Speaker of the National Assembly, Ms Baleka Mbete, in this regard, indicating our intention to have the motion debated and voted on by Parliament once it is back in session.
At a time when 9 million South Africans are without work and our fragile economy requires leadership and clear policy direction, President Zuma continues to play “Russian Roulette” with our economy and the future of our country.
Since his reckless and irrational decision to recall Finance Minister, Pravin Gordhan, and his Deputy, Mcebisi Jonas, from an international roadshow to boost investment, growth and job creation in South Africa, the gains made by Gordhan and Jonas to restore credibility in our economy following the disastrous firing of former Finance Minister Nhlanhla Nene, 15 months ago, have all but been eviscerated.
This is negatively affecting all South Africans – but in particular the poor and the jobless whose only hope is a growing and inclusive economy.
Zuma has threatened our economy by dangling the possibility of firing Finance Minister, Pravin Gordhan, and his Deputy, Mcebisi Jonas, before the country, and before the world, by using a bizarre and seemingly last minute “security report” to justify such removals. This is nothing more than an attempt at total state capture and cannot be accepted.
The President’s actions confirm what we already know: Zuma has abandoned the interests of the people, the economy and South Africa in favour of a kleptocratic Guptamocracy, where the keys to the Treasury and the Government are made available to anyone who puts Zuma first and the people last. The Treasury stands as the last line of defence against Zuma and his project of state capture and unfettered looting.
Such a crisis was seen previously during the Nenegate crisis of December 2015. That President Zuma has indicated his intention to go down the same destructive path shows that he has lost all sense of rationality and sound judgement. These actions will result directly in job losses and will thus be most profoundly felt by the poor and most vulnerable citizens in South Africa. President Zuma’s derelict leadership has resulted in a collapse of public confidence in the President of the Republic of South Africa, has created a government at war with itself and ultimately has undermined efforts to restore confidence in the South African economy. There can be no confidence in such a President.
Parliament hired Jacob Zuma, and Parliament must now fire Jacob Zuma. Only Parliament can act now – the Courts do not have the authority to remove a sitting president.
Therefore it is vital that a Motion of No Confidence be tabled against the calamitous, corrupt and job-killing Zuma presidency. For the sake of the country and the people, it is important that Members of Parliament, regardless of political affiliation, come together and put South Africa and our people first by removing Zuma from the Union Buildings.
We therefore call on all political parties to support our motion – including the South African Communist Party’s (SACP) deployees to Parliament. This is in light of their public pronouncements earlier today, in which it was confirmed that the removal of Gordhan and Jonas was discussed with its leadership, and that the party publically denounces Zuma’s assault on the National Treasury and the economy.
The SACP, along with the growing and increasingly public opposition to the Zuma leadership within the ANC, are now afforded the opportunity to put action to their words and support our motion.
This a call to remove Zuma before he destroys our economy and our shared future.
 

Fake “Operation Check Mate” intelligence report must be investigated by the IGI

Three days ago President Jacob Zuma announced he had instructed the Minister of Finance, Pravin Gordhan, to cancel his international investor roadshow and immediately return to South Africa.
There has been no reasonable explanation for the bizarre instruction, beyond the speculation that the minister is about to be fired in a cabinet reshuffle.
However, bizarre explanations for the bizarre instruction are now beginning to surface.
The most bizarre explanation by far is that President Jacob Zuma issued the instruction on the basis of an “intelligence report” claiming that the finance minister would be holding secret meetings with people in the United Kingdom and the United States to discuss “overthrowing the state”, as part of “Operation Check Mate”.
This is by far the most bizarre explanation for the bizarre instruction and is exactly the kind of rubbish that one would expect President Vladimir Putin to dream up and have published in “Pravda”.
The fact is that nobody in their right mind would believe the finance minister would participate in secret meetings with the intention of overthrowing the state.
However, President Jacob Zuma and his inner circle of securocrats are so prone to conspiracy and so clueless about international finance that we cannot be sure, mad as it may seem, that the bizarre instruction was not based on a fake intelligence report about a fake intelligence operation, comically called “Operation Check Mate”.
I will request the Inspector-General for Intelligence, Isaac Dintwe, to probe these allegations because we need to know whether a fake intelligence report about a fake intelligence operation played any role in the bizarre instruction for the finance minister to cancel his international investor roadshow and return to South Africa

President Jacob Zuma’s handling of the finance ministers’ recall is a monumental shambles that is damaging the economy in SA

Roughly twenty-four hours ago President Jacob Zuma announced he had instructed the Minister of Finance, Pravin Gordhan, together with the Deputy Minister of Finance, Mcebisi Jonas, to cancel their international investor roadshow and return immediately to South Africa.
The fact is that this bizarre instruction, cancelling the international investor roadshow without any explanation, is turning into a monumental shambles and is damaging the economy in South Africa.
The bizarre instruction, which was issued in the middle of an international investor roadshow designed to boost international investor confidence, must have severely compromised international investor confidence in the world’s financial capitals, and has triggered speculation that the finance minister is about to be fired, which would be a disaster for South Africa.
However, since issuing the bizarre instruction without any explanation there has been absolute “radio silence”, which proves that President Jacob Zuma has learned nothing from his reckless and disastrous handling of “9/12” and that either he does not care or he does not understand the consequences of his decisions for the economy in South Africa.
If President Jacob Zuma issued the instruction to cancel the international investor roadshow for a reason other than a cabinet reshuffle, including the fact that the trip may not have been authorised, then why does he simply not tell South Africa?

President Jacob Zuma must explain the bizarre recall of Pravin Gordhan

The fact that President Jacob Zuma has instructed the Minister of Finance, Pravin Gordhan, together with the Deputy Minister of Finance, Mcebisi Jonas, to cancel their international investor roadshow and return to the country immediately is a major setback for the economy in South Africa.
The instruction to cancel the international investor roadshow without explanation is so bizarre that it appears, at best, calculated to humiliate the minister or, at worst, to suggest that the minister is about to be fired in a cabinet reshuffle.
Whatever the case the instruction to cancel the international investor roadshow could not have come at a worse time as the minister battles to restore investor confidence among international investors in one of the financial capitals of the world.
The fact is that President Jacob Zuma must provide a public explanation for the fact that he has instructed the Minister of Finance, together with the Deputy Minister of Finance, to cancel their international investor roadshow and immediately return to South Africa.

DA welcomes that our request for the Tax Ombud to investigate SARS has been taken up

The DA is pleased that the Tax Ombud, Judge Bernard Ngoepe, has asked for permission from Finance Minister Gordhan to investigate possible systemic problems with the payment of refunds by the South African revenue Service (SARS).
All efforts by SARS must be to ensure the efficiency and credibility of the VAT system, which includes the payment of refunds of diesel and Employment Tax Incentive (ETI) claims. The DA has been reliably informed of serious backlogs across the board which is a clear indication of the weak administration and technology at SARS.
On the 3rd of February 2017, I wrote to Minister Gordhan and requested that he use his authority as contained in section 16(1)(b) of the Tax Administration Act to request the Tax Ombud to conduct an investigation into:

  • Whether or not;
    • There are systemic failures with regard to SARS refunds of tax/VAT?
    • There are grounds to conclude that SARS are deliberately delaying the payment of tax/VAT refunds?
  • Identifying the sections of legislation that SARS may be using in order to “legally” delay the payment of refunds.
  • Identifying any other methods that SARS may be using in order to delay the payment of tax/VAT refunds.
  • Recommend solutions that will ensure that tax/VAT refunds are paid out promptly by SARS and within 30 days of the submission of returns.

At the same time, I suggested to Minister Gordhan that:
As an alternative approach, and as the Davis Tax Commission is currently reviewing the SARS operating model, we request that the Minister consider referring this vital issue to the Davis Tax Commission to review as part of the operational model review.”
After I had not received a response from Minister Gordhan by the 8th of March 2017, I sent a follow-up reminder and received the following response:
“Dear Mr Lees. My sincere apologies for not sending an acknowledgement.  Your matter has been escalated to the Tax Ombud for review and is receiving the necessary attention.”
I have no doubt that Judge Ngoepe initiated his request to investigate to Minister Gordhan on the basis of my letter to Minister Gordhan.
The delays with VAT, diesel and ETI refunds directly impacts on the creation of new jobs and negatively impacts small businesses which often rely on timeous refunds to keep their cash flow positive. However, it does artificially inflate the tax revenue collected.
The need for a far-reaching investigation is clear and the DA welcomes the fact that the Tax Ombud has taken up our call.

We need a super committee on inclusive economic growth in Parliament

Note to editors: The following speech was delivered in Parliament today by the DA’s Shadow Minister of Finance, David Maynier MP, during the debate on the Fiscal Framework 2017.
1. Introduction
Two weeks ago, the Minister of Finance, Pravin Gordhan, tabled the main budget in this Parliament with both hands tied behind his back and with very little political space, fiscal space and policy space to give hope to the 8.9 million people who do not have jobs, or have given up looking for jobs, and who live without dignity, independence and freedom in South Africa.
2. Main Budget 2017
The minister tabled the fiscal framework, outlining government’s revenue, spending and borrowing projections over the medium term, which envisages economic growth recovering to 2.2%; revenue of R1.66 trillion, or 30.1% of GDP; expenditure of R1.81 trillion, or 32.7% of GDP; and most importantly a budget deficit of R145.8 billion, or -2.6% of GDP, by 2019/20.
2.1 “Fiscal Target”
Whatever the case the central fiscal policy objective of government is to stabilize net loan debt, which is projected to reach R2.67 trillion, or 48.1% of GDP, in 2019/20.
To illustrate the magnitude of net loan debt, consider the fact that a net loan debt of R2.67 trillion is the equivalent of:
• a debt of R47 000 per person in South Africa; or
• a debt of R6.68 billion per Member of Parliament.
Because of the “debt mountain”, debt service costs are now the fastest growing expenditure item on the budget and are projected to reach R197.3 billion in 2019/20.
To illustrate the magnitude of debt service costs, consider that in three years’ time we will spend more on debt service costs than we will spend this year on:
• on Health (R170.8 billion); or
• on Defence, Police and Justice (R190.03 billion); or
• on Higher Education (R68.95 billion); or
• on Social Protection (R164.93 billion).
However, the fact is government has a “slow bleed” and simply cannot seem to stabilize net loan debt.
We were told that in Main Budget 2016 net loan debt was going to stabilize at R2.19 trillion in 2017/18, or at 46.2% of GDP.
Then we were told in Medium Term Budget 2016 that net loan debt was going to stabilize at R2.63 trillion in 2019/20, or at 47.9% of GDP.
And now we are told in Main Budget 2017 that net loan debt is going to stabilize at 48.2% of GDP, in 2020/21.
And that is why we propose that government consider implementing a debt-ceiling in South Africa.
2.2 “Slow Bleed”
The “root cause” of the “slow bleed” is stagnant economic growth, which is projected to average 1.83% between 2017 and 2019, and which is below what is required to stabilize our public finances.
Economic Growth: The economic growth projection is 1.3% for 2017, up from 0.3% in 2016, due to a moderate recovery, though it is insufficient to reduce unemployment.
Revenue: However, the moderate economic recovery is not only insufficient to reduce unemployment, it is also insufficient to generate the required revenue, because to borrow a phrase from former Minister of Finance, Nhlanhla Nene, “without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase”.
The minister penciled in revenue of R1.41 trillion, or 29.8% of GDP, for 2017/18. However, because of lower-than-expected revenue collection, due to stagnant economic growth, and poor tax administration, the minister was forced to announce tax proposals to raise an additional R28 billion in 2017/18.
What the minister chose to emphasize was the formation of a new “super tax bracket”, for personal income tax payers with a taxable income of more than R1.5 million, to be taxed at a new marginal tax rate of 45%, to raise an additional R4.4 billion in 2017/18.
However, what the minister chose not to emphasize was that:
• an additional R12.1 billion would be raised from all personal income tax payers as a result of limited relief for fiscal drag; and
• that an additional R3.2 billion would be raised from the general fuel levy in 2017/18.
What this means is that whether you are rich, and taxed directly, or whether you are poor, and taxed indirectly, the minister will reach into your pocket and help himself to the R28 billion, required to plug the fiscal hole in 2017/18.
That is why it is a pity that government seems to have abandoned the sale of non-strategic assets to raise revenue.
The former minister began a process of selling non-strategic assets, and made a good start by selling government’s stake in Vodacom, which raised R25.4 billion in revenue in 2015/16.
The fact is that substantial revenue could be raised by disposing of non-strategic assets, including the sale of government’s stake in Telkom, which could raise about R14.7 billion.
And that is why we propose that government considers selling non-strategic assets to raise revenue that could, for example, be “ring fenced” to fund infrastructure expenditure.
Expenditure: The minister pencilled in expenditure of R1.56 trillion, or 33.0% of GDP, for 2017/18.
However, because of lower-than-expected revenue the minister announced that the expenditure ceiling would be lowered by R10.2 billion and expenditure of R16.9 billion would be reallocated in 2017/18.
We welcome the R151 billion that will be spent on social grants and the R77.5 billion that will be spent on higher education.
However, new spending pressures loom in the form of the public sector wage bill, which will consume R550.3 billion in 2017/18, and irregular expenditure has skyrocketed, reaching an all-time high of R46 billion in 2015/16.
The Minister of Mineral Resources, Mose(wabenzi) Zwane, became a powerful symbol of the let-them-eat-cake style wasteful expenditure, when days before the budget was presented, it was revealed that he had purchased a new Mercedes Benz E400, at the cost of R1.35 million, in violation of cost containment measures implemented by National Treasury.
We have to get on top of reducing expenditure, but the minister employs a fragmented arsenal of “fiscal tools” to contain spending, including an expenditure ceiling, cost containment measures, procurement reform, and performance and expenditure reviews.
We need to do things differently and implement a Comprehensive Spending Review that would require National Treasury, working together with national departments, provinces, municipalities and state-owned entities, to review the composition of spending, the efficiency of spending, and future spending priorities with a view to reprioritizing expenditure in the medium term between 2017/18 and 2019/20.
And that is why we propose that government considers implementing a Comprehensive Spending Review which has proved successful in Australia (Comprehensive Spending Review 2010), Canada (Strategic Operating Review 2011) and the United Kingdom (Comprehensive Spending Review 2010).
2.2.4 Borrowing: There has been considerable “fiscal slippage” with the fiscal deficit of R149 billion, or 3.1% of GDP, being pushed up by R1.9 billion; and net loan debt of R2.22 trillion, or 47% of GDP, being pushed up by 17.1 billion, in 2017/18.
3. Conclusion
However, in the end the “root cause” of the “slow bleed” and the fact that government is unable to achieve the central fiscal objective and stabilize net loan debt is that private sector investment has collapsed in South Africa.
Who would invest:
• when President Jacob Zuma, ditches his own policy of “inclusive economic growth”, set out in the National Development Plan, and inspired by Trevor Manual, in favour of “radical economic transformation”, inspired by the likes of Hugo Chavez;
• when you have an aspirant Deputy-Minister of Finance, Sifiso Buthelezi, who seems to believe that corporate income tax should be increased to punish the private sector for not investing in South Africa; and
• when you have another aspirant Deputy Minister of Finance, Brian Molefe, who is committed to destroying the private sector, or what he calls, the “monstrous beast” in South Africa.
We cannot stop the “madness”. But we can start doing our jobs.
And that is why will propose that parliament establishes an ad hoc multi-party committee to provide scrutiny and oversight of the implementation of the structural reforms necessary to boost economic growth and create jobs in South Africa.
Because a multiparty ad hoc committee holding governments feet to the fire on the implementation of structural reforms to boost economic growth and create jobs will give hope to the “lost generation”, which includes millions of young people, who do not have jobs, or have given up looking for jobs, in South Africa.
When we look back the minister did not apportion blame for government’s failures, but what he did do was apportion the burden for government’s failures, in the form of a R28 billion tax hike in 2017/18.
The fact is that last year the minister reached into your left pockets and helped himself to R18 billion, and this year the minister reached into your right pockets and helped himself to R28 billion.
And that is all because President Jacob Zuma, and his cronies inside, and outside the ruling party, are reaching into your back pockets and are helping themselves to billions of rands.
That is why, unless the corruption and waste stops in this country, it is not going to be long before people say, “we are prepared to pay our fair share, but this far and no further” and we have a “tax revolt” on our hands in South Africa.