Task No 1 :  Tackle greylisting

National Treasury is now busier with reform legislation on its way through Parliament than it has been for many a year.  Since there is no better barometer of change in parliamentary outcomes than the traffic which finally gets past the finishing post, we seem to be doing quite well.

Shaking off the chains of cadre deployment is a subject also now more out in the open and, probably as a result, better contained.   Lets call a spade a spade – this is insofar as it refers to the furtherance of ANC policy for a price.  Nowhere has it been more evident that in Parliament.   One has to remember that ‘jobs for the boys” has been around as long as business has but its reasonable to expect that with all the talk and publicity given to political interference for a price, it might have been tamed to some extent.

The real thing

SA Reserve Bank deputy governor, Kuben Naidoo, put the problem of cadre deployment in the public service in a more polite way when he told Carol Paton at the recent News 24/ Nedbank conference that a two-way partnership of strength was building with the more “enlightened members of government” and business.  Such indicators were that government of national unity had been “met with confidence by the business community”

Confidence in knowing what one was doing was a basic platform for success, Kuben Naidoo said.    He noted there was a “genuine sense of urgency in government which I have not seen in many years, and this is particularly the case when it comes to the urgent structural reforms needed.”

It is also quite clear that in terms of parliamentary affairs, Finance Minister Enoch Godongwana is leading a busy team.    Director-General, Dr Duncan Pieterse and his ministry seems determined to get things back on course.   Part of the GNU good news story are the two new deputy ministers under Minister Godongwana, namely David Masondo and Ashor Sarupen.

GNU mix

Masondo has been for a time outspoken on ANC’s past history of international blindness as a result of tribalism and ethnic followings, culminating in a hard hitting-speech at the recent OR Tambo memorial lecture.   He told his ANC audience, “It is naïve to think changing public spaces, employment and deployment practices, without addressing the economic situation of the people, will build the nation that Tambo envisaged.”

Sarupen, the quiet academic, has already waded into financial crime waters in public interviews by revealing that criminal syndicates and site disruptions are estimated by  government to have cost SA two years ago in the region of R63bn.

Weighing in:

• Deputy Minister David Masondo will guard the assets held in the PIC fund as its chairman, the funds recently valued at R2,548 trillion ($148 billion) of assets under Treasury management as of 31 March 2022 and producing a comprehensive income of R 280,329 billion for 2024. Probably the more senior of the two deputy ministers, Dr Masondo obtained his PhD at New York University (USA).
• The other “newbie” in the top team is experienced Deputy Minister Ashor Sarupen, BSc Hon (Wits), MBA (Wits), with an MPhil in Corporate Strategy from GIBS. His MBA research was focused on business modelling for the “Internet of Things” and his MPhil research was into the impact of anti-globalization on the South African economy.

• Representing National Treasury, Dr Duncan Pieterse is the highly qualified new leader of Treasury now replacing the almost legend Ishmail Momoniat.    He has worked in various positions in Treasury for the last 10 years consequently he has a rounded knowledge of what matters in key Treasury financial matters. Dr Pieterse was a research fellow at Yale and Brown Universities in US.  He holds a Bachelor of Business Science, Master of Business Science and Doctor of Philosophy degrees, all in economics, from the University of Cape Town. He also has a master’s in public administration from Harvard University.

Financial embarassment

At the moment therefore it is quite clear that above the normal task of balancing the national books, a primary objective of Treasury is to beat the shameful tag of grey listing.  Most of the damage has been self imposed and having been running the country’s liquidity issues in the critical ALM department, Dr Pieterse must be aware more than most exactly where the blockages are and who the destroyers are. In SA, there are near to 200 director generals in government service and probably the most important office is that of DG, National Treasury, followed closely by the Auditor General.

Tick list

National Treasury  closed the year 2024 in busy mode, having now proposed with SARS further changes to the new two-pot system, all as a result of more public hearings on the Pensions Act for starters.    Now, both pension members aged fifty-five or older as well as those younger can switch to a different fund if they choose; and the money for the savings pot added from the day the member chose to join the system.

The release of R21 billion into the economy as a cash spend must have been music to the ears of Dr Pieterse, coming just at the right time.  Whilst some have said this too much loose cash running around  in a tight situation, the ends seemed to have matched the needs.

Ownership declarations

The Companies Act now introduces stricter compliance measures generally, with the Companies Act and Intellectual Property Commission (CIPC) itself empowered to deregister companies failing to submit key ownership documents.

Non-compliance could lead to fines up to R10 million or 10% of turnover which should rattle alarms in many areas void of a respectable company secretary.  Also, the Financial Sector Regulation Act broadens licensing to include digital and fintech products, ensuring that new financial technologies such as virtual assets fall under regulatory oversight.

Exam time

Under pressure from the deadline to host the G20’s international Financial Action Task Force (FATF), Treasury is rapidly advancing key legislative amendments to tighten its anti-money laundering and the Combating Terrorism Financing legal framework. These changes in two new Bills under debate aim to address FATF’s six action items required by May 2025, ahead of an on-site evaluation by this elevated level G20 entity probably sometime in May 2025.

Treasury knows that by meeting successfully these requirements, excising South Africa’s grey listing status could be erased, probably the biggest challenge faced by a hungry GNU looking for better times.

 Charity cover ups

Notable amendments in the two Bills include increasing penalties for non-profit organizations violating money regulations to R1 million or five years in prison, or both.  The Financial Intelligence Centre Act will also be updated, allowing the new Public Procurement Office to manage frozen funds for urgent expenses, with finance minister approval.

Additionally, institutions will be required to assess risks before introducing new products, particularly those involving innovative technologies, and report measures to mitigate such risks.

Procurement

Probably the major task undertaken by National Treasury in 2024 was to set up the Office of the Public Protector in Pretoria, following the passage of the somewhat painful Public Procurement Bill now signed by President Ramaphosa into law.  It’s provisions are to seek to restore public trust by enhancing transparency and accountability in the state tender process and respond to the Zondo Commission findings that better systems are installed for government purchasing. So where are we?

 Disbursements

Government spent R2,04 trillion in the 2022/23 fiscal year and is finalising the allocation of  funds at the moment as appropriations.  If the GNU works, then government will be spending even more and Treasury, in order to transfer its policy and institute national financial systems, working down through the nine provincial governments and then out to the eight major municipalities, the money will reach hundreds of local government entities under SALGA, their government authority. This is where the leakage has been.

National Treasury still has to face the problem of the prescriptive nature of granting its contracts based on certain categories of people and mandating the idea of “set-asides,” sparking debate over the Act’s constitutionality.  This is in terms of the principles outlined in Section 217 of the Constitution, which require procurement processes to be fair, equitable, transparent, competitive, and cost-effective.

Ready, go

Some contend that the Bill places too much emphasis on equity at the expense of cost-effectiveness and competition, the matter going beyond arbitration to the courts.  If this is resolved, the Act will commence on dates determined by the President through proclamations in the Gazette in the next few months.

Once again, in order for the GNU to survive and for Adam Smith’s epithet on supply and demand to work with fiscal discipline in both provincial and local arenas, no better person than Ashor Sarupen to create a connected working environment and drag some of the more backward accounting zones back into the present time zone.  Treasury will have a mountain of work on its hands to beat the present unwieldy embedded overlay of BEE policies and cadre appointments.

Where it matters

Treasury officials recently learnt that in some areas of a least four provinces, no audit trails of appropriated funds exist.    If the team at National Treasury can crack the massive overall problem of common application down the line and bring governance and oversight on taxpayer’s money to all three operational levels, then economic light can surely spread across the southern tip of Africa.

Patrick McLaughlin

editor