tag:theconversation.com,2011:/ca/topics/south-african-revenue-service-32842/articlesSouth African Revenue Service – The Conversation2022-08-16T13:26:24Ztag:theconversation.com,2011:article/1878912022-08-16T13:26:24Z2022-08-16T13:26:24ZState Capture eroded institutions in South Africa. How the revenue service is rebuilding itself<figure><img src="https://images.theconversation.com/files/477698/original/file-20220804-16-peih1k.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><em>South Africa’s Revenue Service is one of many state institutions in South Africa that have been fingered in the <a href="https://www.gov.za/sites/default/files/gcis_document/202201/judicial-commission-inquiry-state-capture-reportpart-1.pdf">Judicial Commission of Inquiry into State Capture</a>. In addition, a special commission established to investigate internal governance at the agency found massive <a href="https://www.thepresidency.gov.za/sites/default/files/SARS%20Commission%20Final%20Report.pdf">failures of governance</a>. Professor Mills Soko spoke to Commissioner Edward Kieswetter about the turnaround at the state institution.</em></p>
<p><strong>Mills Soko: You worked as a power station manager at the state utility Eskom which is currently in so much trouble. What was your experience working there? And what comes to mind when you observe the utility today?</strong></p>
<p><strong>Edward Kieswetter:</strong> I was a young 33-year-old when I was appointed to run a small power station. We had a highly scaffolded environment, surrounded by people who were steeped in practical experience and institutional memory. </p>
<p>In the decade I was privileged to be there, we transformed Eskom from an average performing utility into a globally admired one. By 2000 it was constantly performing at a plant availability of above 90%, a breakdown rate of 3% or less, and the planned maintenance of 7%.</p>
<p>I am fortunate that I’ve been invited now to serve on the technical committee that the presidency has called together to try and fix the challenges facing electricity supply. </p>
<p>During the period of state capture institutions such as Eskom – as well as the South African Revenue Service, the National Prosecuting Authority and many others – were hollowed out deliberately and consciously so that they could serve a corrupt purpose. </p>
<p>I can tell you from my own experience that the damage exacted on these institutions is deep and painful, and it will take very persistent effort and focus for us to restore and to build for the future. </p>
<p>That’s the challenge of our country. The capability of the state has been significantly weakened by the period of state capture. But we also have to be honest enough to say there has been a steady decline over a number of years that has brought us to a point where we are largely a state that doesn’t have the capacity it needs to serve the country. </p>
<p><strong>Mills Soko: You were appointed as Commissioner to the South African Revenue Service in May 2019. What have you learnt? Achieved?</strong></p>
<p><strong>Edward Kieswetter:</strong> I have to tell you that the actual damage at the South African Revenue Service is significantly deeper than what any commission of inquiry could ever report. </p>
<p>One of the things we were able to do is institute a very focused modernisation programme that makes the tax filing obligation for most taxpayers a non-event. We believe the best service is no service. We don’t want to be better at queue management, we want to address the root causes so we don’t have queues. </p>
<p>And so we’ve introduced a value proposition for over 3 million taxpayers called auto assessment. We use data and artificial intelligence to select taxpayers for further auditing or investigation. But we’ll also use data and technology to provide a seamless experience for most taxpayers. </p>
<p><strong>Mills Soko: How were you received by employees?</strong></p>
<p><strong>Edward Kieswetter:</strong> The sad reality of state capture and the political dynamic of South Africa at an institutional level is that it forces you to pick a side. And when people pick sides, they lose objectivity. </p>
<p>When you come into an organisation that has been deliberately divided with a corrupt intent, you have employees who have picked sides. The South African Revenue Service is no different. We still have people who haven’t given up on the affiliation with a particular side or faction. </p>
<p>So a very clear message from me to all our leaders and our staff is we are not politicians: we do our work without fear, favour and prejudice. </p>
<p><strong>Mills Soko: Do we think organisations have been rid of state capture?</strong> </p>
<p><strong>Edward Kieswetter:</strong> The answer is no. I don’t think there are any institutions in South Africa that have been cured completely of state capture. The political dynamic in the country today, the contestation for power – within a political party or across political parties – is a very active attempt to keep alive the endowment that people derived from state capture. </p>
<p>South Africa is still inflicted by the residue of state capture and the 10-year period of the former administration. It has spilled over into this administration. We only have to look at the level of corruption that manifested during the procurement phase of the COVID response. We have a long way to go to cure ourselves from the ills of state capture. </p>
<p><strong>Mills Soko: How much progress has been made in terms of undoing state capture at the South African Revenue Service?</strong></p>
<p><strong>Edward Kieswetter:</strong> The Nugent report made about 27 recommendations. The first was to look at the leadership of the organisation, to evaluate EXCO. And we have substantively dealt with that. We reached agreement with a number of senior leaders and we have parted ways.</p>
<p>After years of being deprived of filling critical vacancies because of financial constraints, last year we began to start recruiting people and providing some inward mobility for people into more meaningful roles. </p>
<p>We established a listening campaign where staff could call in and talk, and report certain things that needed to be addressed. </p>
<p>We introduced an employee rights charter that we are socialising through change management.</p>
<p>We also introduced an internal reparations process. We have just over 30 individuals who felt that they were personally compromised. We are in the final stages of an external reparation process. </p>
<p>We appointed an advisory committee using eminent jurists independent of the South African Revenue Service to take representation from those we have settled with. </p>
<p>We have meetings underway to recoup wasteful and fruitless expenditure from a number of executives caught up in this, specifically in relation to the global management consultancy firm, Bain & Company. We have instituted a process of recovering the money plus interest that they paid. And we have handed over the files to the Hawks, the South African Police Services’ Directorate for Priority Crime Investigation, and the National Prosecuting Authority for further investigation. When the prosecution authority is ready to start prosecution, we will be drawn into this to provide evidence and to support that process. </p>
<p>We’ve also worked with our counterparts in the US about the misdemeanours at Bain to try and ensure that Bain is brought to book. We think there’s a strong enough case for them to be seriously investigated, to see if there are criminal cases to answer for.</p>
<p><strong>Mills Soko: During the difficult years the South African Revenue Service lost a lot of good people. Have you been able to woo some back?</strong></p>
<p><strong>Edward Kieswetter</strong> One of the things that we are entertaining is to build a pool of so-called grey beards (and female equivalents). We want them to be part of a resource from which younger, more or less experienced people can draw from. </p>
<p>We are also introducing new graduates, young people into the organisation so that we keep the generational mix. We’ve established a junior board so that we can institutionalise the voice of people below 35 years old.</p>
<p>*This is an excerpt of the Wits Business School Leadership Dialogue. The full interview is <a href="https://www.youtube.com/watch?v=-dVnVVSrYYI">available here</a>.</p><img src="https://counter.theconversation.com/content/187891/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mills Soko does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The South African Revenue Service is on a path to rebuild itself.Mills Soko, Professor: International Business & Strategy, Wits Business School, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1744412022-01-06T08:02:19Z2022-01-06T08:02:19ZState capture report chronicles extent of corruption in South Africa. But will action follow?<figure><img src="https://images.theconversation.com/files/439532/original/file-20220105-13-140qpgm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Deputy Chief Justice Raymond Zondo has delivered his first report on state capture to South African president Cyril Ramaphosa.</span> <span class="attribution"><span class="source">Photo by Veli Nhlapo/Sowetan/Gallo Images via Getty Images</span></span></figcaption></figure><p>No self-respecting theatre critic would dream of reviewing a three-Act play during the interval at the end of the first Act. But that is what one is compelled to do after South Africa’s State Capture Commission released <a href="https://www.scribd.com/document/550966842/Judicial-Commission-of-Inquiry-Into-State-Capture-Report-Part-1#from_embed">Part 1</a> of its inquiry report. This is more so because those implicated by its findings will be doing all they can to undermine the credibility of its reports. </p>
<p>And in keeping with this dramatic theme, spoiler alert: My view is that deputy chief Justice Raymond Zondo, who chaired the commission, has nailed it.</p>
<p>In response, many will ask the question: has he really? And, even if he has: so what?</p>
<p>In light of the apparent weaknesses in South Africa’s state capacity and institutions, there is understandable scepticism as to whether the government has the technical capability, let alone the political will, to implement the many recommendations that are emerging from the painstaking labour of the deputy chief justice and his small band of support staff and lawyers.</p>
<p>President Cyril Ramaphosa <a href="https://www.thepresidency.gov.za/press-statements/statement-president-cyril-ramaphosa-handover-first-part-state-capture-commission-report">described receiving the report as</a> a “defining moment” in South Africa’s history. It could yet be so. But only if the work of the Commission leads to decisive action and systemic reform.</p>
<p>Without this the Zondo Commission will merely have been an exercise in catharsis – not the first steps to delivering justice and accountability.</p>
<p>The hearings themselves, and the extraordinary range of evidence that was adduced before the Commission, certainly provided catharsis, but also ‘truth’. For those with open eyes, the denuding of democratic state legitimacy was uncovered and the key protagonists – both perpetrators and victims – identified.</p>
<p>The democratic state <em>was</em> captured; key institutions <em>were</em> looted as vast sums of public money were stolen. Former president Jacob Zuma and his motley network of exploited and exploitative allies <em>were</em> responsible.</p>
<p>That much is abundantly clear from just part one of Zondo’s report. Now they must be held fully to account. Justice will need to be done.</p>
<h2>What is in it</h2>
<p>Zondo <a href="https://mg.co.za/article/2018-01-09-deputy-chief-justice-raymond-zondo-to-head-state-capture-commission-of-inquiry/">was appointed</a> to chair the Commission almost four years ago in January 2018. This was after then-President Zuma had tried and failed to prevent it from being established as a part of the remedial action required by then Public Protector Thuli Madonsela in her October 2016 <a href="https://www.scribd.com/document/329756252/State-of-Capture-14-October-2016#from_embed">‘State of Capture’</a> report.</p>
<p>The Commission’s first hearing was six months later. Thereafter it sat for more than 400 more days, interviewing 300 witnesses and yielding 75,000 pages of transcription.</p>
<p>In all, 1,438 individuals and institutions have been implicated, according to the introduction to the document published on <a href="https://www.gov.za/speeches/president-cyril-ramaphos-handover-first-part-state-capture-commission-report-4-jan-2022">4 January</a>. </p>
<p>Given the cost of the inquiry – and the 1.7 million pages of evidence – a further question arises: was it worth the time, effort and expense?</p>
<p>Having read through the 874 pages of this first part, a number of notable features emerge. </p>
<p>First of all, it is lucid and cogent, despite the regrettable absence of an executive summary. The public will have to wait until the publication of Part 3 of the report at the end of February to review the executive report.</p>
<p>Despite this unusual inversion, the executive report will still matter a great deal, and will require skilled wordsmithery if it is to provide the public with a clear story line. This will, in turn, help ensure that the report remains ‘alive’ in the public eye and does not get pushed into the background by other events – as has happened with similar reports in the past, such as the <a href="https://www.sahrc.org.za/home/21/files/Reports/Report%20of%20the%20Ad%20Hoc%20Committee%20of%20chapter%209.%202007.pdf">Asmal report on Chapter Nine institutions</a> as well as the <a href="https://www.sahrc.org.za/home/21/files/marikana-report-1.pdf">Farlam report on Marikana massacre</a>.</p>
<p>To allow the report to gather dust would be a huge waste of the investment in the Zondo Commission. </p>
<p>Despite the absence of an overarching narrative summary, each chapter of part one presents an intricate and fascinating account of how three public entities – South African Airways (SAA), the government’s information arm <a href="https://www.gcis.gov.za/">(GCIS)</a> and the South African Revenue Service (SARS) – were systematically ‘captured’ with criminal intent, and how misinformation, both through the diversion of public funds to a puppet-media organisation, The New Age, and the subversion of GCIS, was used to try and cover up what was going on.</p>
<p>There were notorious key ringmasters, some well known already. These include Zuma, former SAA chair Dudu Myeni and Mzwanele Manyi, Zuma’s current spokesman and the man who was helicoptered in to head GCIS after the incumbent Themba Maseko was summarily dismissed, according to the report, at the behest of the Gupta family. </p>
<p>But, now, a much wider cast of accomplices and useful idiots are exposed.</p>
<p>Private entities, such as the consulting firm Bain, where the evidence of <a href="https://www.dailymaverick.co.za/article/2021-11-28-athol-williams-i-will-continue-whistle-blowing-and-making-the-corrupt-uncomfortable/">whistleblower Athol Williams</a> is applauded by Zondo, were also deeply complicit. </p>
<p>Secondly, it reads like a legal judgment, which is how it should be. The concern was that Zondo might fail to grasp the nettle and either shirk the most difficult issues or fudge its findings – as the Marikana massacre report did, on the core issues such as police culpability in the murder of the miners. He has not. </p>
<p>Assisted by some trusted former judicial colleagues, but under his attentive eye, Zondo has recognised the need to be both specific and precise. As a mountain of evidence was combined and the report constructed, the strategy was to provide a sound basis for prosecutions. The dots have now been joined. </p>
<p>A vast database of evidence can now be placed at the disposal of the <a href="https://www.saps.gov.za/dpci/index.php">Directorate for Priority Crime Investigation</a>, known as the Hawks, and the <a href="https://www.npa.gov.za/">National Prosecuting Authority</a>.</p>
<p>In due course, no doubt, the legal coherence and rationality of the report will be tested in court. There will be numerous judicial review applications that will seek to obscure the picture and delay justice. It may be another four years before the whole process concludes – the completion of the Commission’s work is just the start.</p>
<p>Thirdly, flowing from the findings, part one of the report offers concrete recommendations. Some recommend that certain implicated persons are either investigated or prosecuted. In other instances, the report addresses institutional failings or legal gaps.</p>
<p>So, for example, in chapter 4 of this first part – on public procurement – Zondo recommends that a new institution be created to which whistleblowers can go (a Public Procurement Anti-Corruption Agency), and, furthermore, that the new agency have authority to negotiate a financial incentive for potential whistleblowers.</p>
<p>These are very concrete recommendations. They should be taken seriously, but they are not uncontroversial, and will require further debate. </p>
<p>Nonetheless, what Zondo is doing, in addition to providing the evidential bedrock so that those responsible can be held criminally to account for their abuse of power, is setting out how the governance system needs to be strengthened. By the time part three is published at the end of February, a substantial reform agenda will have been laid out.</p>
<h2>The end game</h2>
<p>Even with two Acts of this play to go, it is reasonable to conclude that Zondo has played his part. Now it will up to the government to deliver, and for the public, civil society and the media to ensure that it does.</p>
<p>But there will be many more twists in the plot. There will be <a href="https://projects.iq.harvard.edu/johncomaroff/john-comaroff-explains-lawfare">lawfare</a>, attempts to subvert the criminal justice system, which is still recovering from state capture. The power struggle within the governing African National Congress in the run up to its five-yearly national elective conference at the end of this year will be even more bloody as a result.</p>
<p>If the late <a href="https://theconversation.com/archbishop-desmond-tutu-father-of-south-africas-rainbow-nation-97619">Archbishop Desmond Tutu</a> was the moral compass of the nation, then Zondo is constructing an ethical map. How South Africa navigates its course in the coming years will define its long-term future.</p><img src="https://counter.theconversation.com/content/174441/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Calland is a founding partner of political risk consultancy, The Paternoster Group, and a member of the advisory council of the Council for the Advancement of the South African Constitution. He gave evidence to the State Capture inquiry commission as an expert witness on issues relating to parliamentary oversight and the legal protection of whistleblowers, not on any matter of substantive fact or allegation. </span></em></p>The inquiry’s findings could be a defining moment for South Africa, but only if the work of the Commission leads to concrete action and systemic change.Richard Calland, Associate Professor in Public Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1353732020-04-08T15:08:07Z2020-04-08T15:08:07ZCOVID-19 tax relief: a snapshot of what’s out there<figure><img src="https://images.theconversation.com/files/326076/original/file-20200407-182957-ty8h3g.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">COVID-19 public health measures are stalling economic activity</span> <span class="attribution"><span class="source">Getty Images</span></span></figcaption></figure><p>Across the globe, many governments have been forced to lockdown their countries in an attempt to curb the spread of the COVID-19 pandemic. A number of African countries have adopted similar measures. This has stalled, if not brought to a halt, economic activity, resulting in loss of income for businesses, workers (both in formal and informal sectors) as well as the self-employed. </p>
<p>In response, governments worldwide have implemented <a href="https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19">economic and tax relief packages</a> to help businesses and workers mitigate the impact of these measures. </p>
<p>The use of these tools varies across countries making direct comparisons difficult. </p>
<p>To provide some guidance, the <a href="http://www.oecd.org/tax/forum-on-tax-administration/publications-and-products/tax-administration-responses-to-covid-19-measures-taken-to-support-taxpayers.pdf">Organisation for Economic Cooperation and Development (OECD)</a> has developed useful design features based on examples from across the globe. Applicable to both developed and developing nations, they are:</p>
<ul>
<li><p>additional time for dealing with tax affairs;</p></li>
<li><p>quicker refunds to taxpayers;</p></li>
<li><p>temporary changes in audit policy and ways to provide quicker tax certainty; and </p></li>
<li><p>enhanced taxpayer services and communication initiatives.</p></li>
</ul>
<p>So which tax relief ideas are the best? Below I sift through the various options and identify ideas that could be useful examples to policy makers, including those in South Africa.</p>
<h2>Direct payment</h2>
<p>The first type of tax relief measure extends immediate financial aid to taxpayers by virtue of a cash payment from the revenue authority. It can take the form of a grant, subsidy or contribution from the government. A case in point is the recently enacted stimulus payments of the US.</p>
<p><a href="https://www.businessinsider.com/house-passes-coronavirus-stimulus-bill-payments-business-loans-hospital-aid-2020-3?IR=T">President Donald Trump</a> signed a massive $2 trillion economic relief package with the aim of easing the financial burden caused by COVID-19. Known as the Coronavirus Aid, Relief, and Economic Security (CARES) <a href="https://www.congress.gov/bill/116th-congress/senate-bill/3548/text">Act</a> , the relief <a href="https://www.foley.com/en/insights/publications/2020/03/cares-act-summary-of-tax-provision">plan</a> includes assistance to the unemployed, zero-interest loans, stimulus payments to individuals and more. </p>
<p>The stimulus payments will be administered by the Inland Revenue Service and are based on a person’s adjusted gross income. These payments are essentially an advance on a tax credit and will be available for the whole year.</p>
<p>In Germany, a state-funded program dating from World War II and used to great effect during the 2008 financial crisis, is again being implemented. The principle of short-time work (<a href="https://www.bmas.de/SharedDocs/Downloads/DE/kug-faq-kurzarbeit-und-qualifizierung-englisch.pdf?__blob=publicationFile&v=5">“Kurzarbeit”</a>) is aimed at helping companies navigate difficult periods without having to resort to large-scale layoffs, disrupt businesses and the economy. </p>
<p>The employer and employee reach an agreement to cut working hours in accordance with labour law provisions, with the Kurzarbeit covering 60% of lost wages. When the situation improves, working hours can be increased or returned to normal very quickly, without the company having to find and hire new workers. </p>
<p>It’s a win-win for both the employer and employee.</p>
<h2>Tax holiday</h2>
<p>A tax holiday is a period of time during which the collection of a tax is suspended, reduced or postponed. The <a href="https://www.gov.uk/government/publications/guidance-to-employers-and-businesses-about-covid-19">UK</a>, for example, waived business property taxes for retail, hospitality, leisure and nursery businesses for 12 months. <a href="https://www.twobirds.com/en/news/articles/2020/italy/covid-19-extraordinary-tax-measures-in-italy">Italy</a> has extended tax deadlines for residents and companies in the so-called “red zones” of the country.</p>
<p>In the US, a 10% excise tax is usually levied on certain early withdrawals from retirement plans. The CARES Act waives this 10% penalty in respect of COVID-19 related distributions of up to $100 000. Above this amount, the recipient can avoid any income tax by repaying the distributed amount as a rollover within three years.</p>
<p><a href="https://home.kpmg/us/en/home/insights/2020/03/tnf-spain-tax-relief-other-relief-for-companies-response-to-coronavirus.html">Spanish</a> SMEs and self-employed people will be allowed to defer income, corporate and VAT tax obligations for six months, with the first three months not subject to interest. And in Austria, <a href="https://www.roedl.com/insights/covid-19/corona-austria-economy-measures-crisis-management-fund">taxpayers</a> can apply for a reduction of advance payments of personal income or corporate tax if they can demonstrate a loss of revenue as a result of Covid-19 up until 31 October 2020.</p>
<h2>Other tax relief</h2>
<p>Then there are other categories that can be loosely grouped together: reduced tax rates and tax credits (or rebates), which decrease the calculated tax liability, thus resulting in less tax owed to the revenue authority. For their part, exemptions, deductions and allowances all have the effect of reducing the taxable amount on which a tax is levied. Ultimately, it results in less tax paid, but this benefit may not be felt immediately. </p>
<p>These <a href="https://www.internationaltaxreview.com/article/b1kjjn20mxcfyj/china-announces-tax-relief-measures-to-tackle-coronavirus-disruption">forms of tax relief</a> don’t put an instant strain on government funds. But they also don’t offer the same speedy cash flow assistance to taxpayers.</p>
<p>In Italy, businesses will receive a 50% tax credit for sanitation expenditure, for example daily cleaning services, masks and other precautionary measures to curb the spread of the virus. New Zealand taxpayers can opt to receive refunds related to R&D tax credits one year early. </p>
<p>Many countries have reduced Value-added Tax (VAT) rates or introduced exemptions. For example, China has introduced a VAT exemption on “lifestyle services”. This includes medical, catering, accommodation and personal services (such as hairdressing). Norway has temporarily dropped its VAT rate from 12% to 8%, with VAT payments postponed. <a href="https://www.ey.com/en_gr/tax/tax-alerts/covid-19-emergency-tax-measures-adopted-in-greece">Greece</a> has introduced a four-month suspension of VAT payments, and the UK three months. Greece has also lowered VAT on products related to the prevention of the spread of the virus.</p>
<p>Enhanced deductions or allowances serve as an incentive for companies to upscale capital investments. For instance, China allows a 100% deduction for investment in equipment to expand production capacity. Previously, only equipment valued up to $700 000 qualified.</p>
<h2>South Africa’s relief measures</h2>
<p>South Africa’s <a href="https://www.sars.gov.za/AllDocs/Documents/customsandexcise/Tax%20Measures%20FAQs%2003042020.pdf">tax relief package</a> contains four overarching proposals.</p>
<p>First, the existing Employment Tax Incentive regime is expanded by the introduction of a subsidy of up to R500 a month for the next four months. Certain categories of employees qualify. An estimated 4 million workers will benefit from this. The South African Revenue Service will accelerate employment tax incentive reimbursements from twice a year to monthly. This will help compliant employers with their cash flow.</p>
<p>The second and third proposals relate to employees’ and provisional taxes.
Tax compliant SMEs that meet certain criteria will be allowed to delay 20% of the employees’ tax liabilities and a portion of their provisional tax payments without penalties and interest for a number of months. About 75 000 SMEs are expected to be assisted by this intervention.</p>
<p>The fourth proposal creates a special tax dispensation for funds established to assist with the COVID-19 disaster relief effort. These funds, which include the national <a href="https://www.solidarityfund.co.za/">Solidarity Response Fund</a>, may be approved as public benefit organisations. As a result, donations made to such tax-approved funds qualify for the usual 10 percent income tax deduction.</p>
<p>As South Africa finalises its <a href="https://www.sars.gov.za/AllDocs/LegalDoclib/Drafts/LAPD-LPrep-Draft-2020-16a%20-%20Draft%20Disaster%20Management%20Tax%20Relief%20Bill%20-%201%20April%202020.pdf">Disaster Management Tax Relief Bill</a>, a couple of suggestions come to mind. These include allowing a full tax deduction for donations to approved COVID-19 disaster-relief funds and welfare efforts. Another is to grant zero-rated VAT on hand sanitisers and related medical supplies.</p>
<p>Perhaps the examples highlighted in this article could provide inspiration of what is possible in a time of crisis?</p><img src="https://counter.theconversation.com/content/135373/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Lee-Ann Steenkamp is affiliated with the South African Institute of Tax Professionals (SAIT).</span></em></p>Governments worldwide have put in place economic and tax relief measures to mitigate the impact on businesses and workers of drastic public health measures in response to the COVID-19 pandemicLee-Ann Steenkamp, Senior lecturer in taxation, University of Stellenbosch Business School (USB), Stellenbosch UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1261372019-10-30T15:21:09Z2019-10-30T15:21:09ZMini-budget underscores bad state of South Africa’s economy<figure><img src="https://images.theconversation.com/files/299509/original/file-20191030-17924-fhkgz8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South Africa's finance minister, Tito Mboweni, delivering his mid-term budget.</span> <span class="attribution"><span class="source">EFE-EPA/Nic Bothma</span></span></figcaption></figure><p>The <a href="https://www.news24.com/SouthAfrica/News/ramaphosa-promises-corruption-crackdown-at-maiden-sona-20180216">new dawn</a> promised by Cyril Ramaphosa when he took over as president of the country as well as the African National Congress (ANC) last year was always <a href="https://theconversation.com/why-ramaphosas-new-dawn-will-break-slowly-for-south-africas-finances-105302">going to break slowly</a> for South Africa’s public finances. This was because it was inevitable that the <a href="https://theconversation.com/why-the-anc-itself-is-the-chief-impediment-to-ramaphosas-agenda-108781">damaging effects wrought by his predecessor</a>, Jacob Zuma, would continue for a long time. </p>
<p>This year’s <a href="http://www.treasury.gov.za/documents/mtbps/2019/speech/speech.pdf">medium term budget</a> – an outline of state spending, revenue collection and borrowing over the next three fiscal years – suggests that the damage was deep. It also suggests that the new political administration is unable to stabilise public finances and increase economic growth.</p>
<p>Five years ago the then Finance Minister Nhlanhla Nene promised to stabilise national debt at <a href="https://www.iol.co.za/business-report/an-upward-revision-of-debt-to-gdp-ratio-1933784">less than 50%</a> of the size of the economy. It is now projected to breach 60% this year and grow to more than 70% by 2022/23 and 80% by 2027/28. </p>
<p>This dire outlook is a function of three main factors that are to some extent related. These are consistently low economic growth, revenue collection below targets, and support for state-owned enterprises beyond what had been planned in past years.</p>
<p>Economic growth for 2019/20 is now expected to be only 0.5%. This is significantly below the 1.5% forecast in the <a href="http://www.treasury.gov.za/documents/national%20budget/2019/review/FullBR.pdf">February budget</a> and means that economic activity is increasing more slowly than estimated population growth. </p>
<p>Slow growth has had an impact on tax revenue, which is now expected <a href="http://www.treasury.gov.za/documents/mtbps/2019/mtbps/Chapter%203.pdf#page=7">to be R250bn below</a> what was forecast in the 2019 budget. Meanwhile, additional support to state-owned enterprises like the power utility Eskom has caused the government to exceed its expenditure ceiling in the current year. It will need continued support, amounting to hundreds of billions over the next ten years. </p>
<p>Changes are needed, but where and how?</p>
<h2>Bad policies, and some good</h2>
<p>The Minister of Finance, <a href="https://www.gov.za/about-government/contact-directory/finance-ministry/tito-mboweni-mr">Tito Mboweni </a>, rightly notes that it cannot be business as usual. As he pointed out yesterday, sacrifices must be made and stale ways of thinking must be disrupted. </p>
<p>But it appears that the winds required to clear stuffy heads and focus minds may not yet be blowing through the corridors of those who inform and determine public finance decisions. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/tough-times-and-bad-advice-are-holding-back-south-africas-economy-125990">Tough times -- and bad advice -- are holding back South Africa's economy</a>
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</em>
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<p>A major concern is that government’s resolve is strongest on policies that are actually quite suspect. Some reflect the need for political rhetoric. But in many places it does reflect questionable policy positions. </p>
<p>One of these is the institutional separation of Eskom, even though the case for this as a crisis management tool <a href="https://theconversation.com/why-restructuring-south-africas-power-utility-wont-end-the-blackouts-114333">is unconvincing</a>. </p>
<p>The minister said yesterday that such enterprises must</p>
<blockquote>
<p>learn to stand on their own feet.</p>
</blockquote>
<p>This makes for a nice soundbite. But it papers over the origins of these crises and says nothing about the role these enterprises were expected to play in a developmental state.</p>
<p>Similarly, the idea that managers of these enterprises should be rewarded or punished based on meeting financial targets seems sensible until the case of the transport and logistics enterprise, Transnet, is brought into focus. The entity’s financial outcomes have often been relatively good because its port charges have been excessive for many years.</p>
<p>Another is the notion that introducing economic regulation and more private sector involvement in areas like transport will resolve problems that are mostly to do with basic failures by the state.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/south-africa-is-planning-more-regulators-this-is-a-bad-idea-123572">South Africa is planning more regulators: this is a bad idea</a>
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<p>And in the area of employment, the renewed commitment to the employment tax incentive is unsupported by any credible evidence of its efficacy. This means that it is likely simply to be a handout to the private sector at a time when the money could instead be used to create jobs at the coalface of public service delivery. </p>
<p>There were some positives, such as proposals on politicians’ salaries. These will be frozen and perks cut. And although no clear recommendations have yet been made, there appears to be an understanding that if the public sector wage bill is reduced, employees earning the most will also need to take the largest reductions. </p>
<p>This provides some credible basis for difficult negotiations with public sector unions. Those should be focused on reducing – or limiting – salaries, rather than reducing posts in a country where unemployment is at record highs and key service delivery areas remain understaffed.</p>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=772&fit=crop&dpr=1 600w, https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=772&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=772&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=970&fit=crop&dpr=1 754w, https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=970&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/299476/original/file-20191030-17901-hizxvg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=970&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Cyril Ramaphosa, president of South Africa.</span>
<span class="attribution"><span class="source">GCIS</span></span>
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</figure>
<p>It appears that compromises on public sector wages may be what the treasury is targeting in its efforts to somewhat reduce the anticipated escalation in debt levels. The policy statement says that the budget in February 2020 will announce R150bn of adjustments. Some may come from additional tax. But most will come from reductions in planned spending. </p>
<p>Other positive aspects include increased allocations to institutions critical for addressing the legacy of <a href="https://mg.co.za/article/2018-09-14-00-definition-of-state-capture">state capture</a> and increasing revenue. These include the <a href="https://www.npa.gov.za/">National Prosecuting Authority</a> and the <a href="https://www.sars.gov.za/Pages/default.aspx">South African Revenue Service</a>. </p>
<p>The minister also showed a clear appreciation of the fact that subsidising the national airline, South African Airways, is a highly regressive use of funds which must be stopped. And Gauteng province has been pulled back into line on the question of e-tolls, with government continuing to insist that road users must pay for the infrastructure they have benefited from. Whether this will have any tangible effect remains to be seen.</p>
<p>An emphasis on the importance of procurement efficiency and infrastructure investment is also positive. But it has been a feature of budgets over many years and it remains unclear whether anything significant has been achieved in either area. And cuts to local government budgets are expected to reduce infrastructure investment at that level.</p>
<h2>Dark days here to stay</h2>
<p>The minister argues that the medium-term budget is supposed to stimulate debate. But, in fact, history tells us that the national treasury never meaningfully changes its plans in response to public input. So now it is a matter of waiting to see what comes from behind-the-scenes negotiations with public sector unions and between spheres and departments of government.</p>
<p>Regardless of what proposals are ultimately tabled when the minister of finance stands before parliament to deliver the full-year budget in February, the long dark economic winter in which South Africa finds itself seems likely to persist for some time. </p>
<p>Ramaphosa has done relatively well in rolling back state capture in various key institutions. For the moment he appears to have solidified his political position, with internal opponents increasingly muted and opposition parties in disarray. And the immediate focus of the treasury is necessarily on merely stabilising public finances. </p>
<p>But a much broader state and societal effort is required to bring about the new dawn promised by Ramaphosa’s ascendance. At the heart of such an effort is further reform of state institutions whose functioning, in complex areas like education, is key for development. So too is the much-talked about “social compact” in which organised business and labour in particular – as well as those societal groups that can – make some sacrifices for the long-term public interest. </p>
<p>Ramaphosa remains arguably the best politician in the country to do this, but it remains an almost Herculean task.</p><img src="https://counter.theconversation.com/content/126137/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Seán Mfundza Muller receives funding from a European Union-funded project, "Putting People back in Parliament", led by the Dullah Omar Institute (University of the Western Cape), in collaboration with the Parliamentary Monitoring Group, Public Service Accountability Monitor (Rhodes) and Heinrich Boell Foundation (South Africa). He is affiliated with the Public and Environmental Economics Research Centre (University of Johannesburg), regularly making inputs to Parliament oversight of the national budget, advising civil society groups on public finance matters and consulting for private sector organisations on an ad hoc basis. He resigned from the South African Parliamentary Budget Office in 2016. The views expressed are his own.</span></em></p>A major concern is that the government’s resolve is strongest on policies that are actually quite suspect.Seán Mfundza Muller, Senior Lecturer in Economics, Research Associate at the Public and Environmental Economics Research Centre (PEERC) and Visiting Fellow at the Johannesburg Institute of Advanced Study (JIAS), University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1206952019-07-19T14:56:23Z2019-07-19T14:56:23ZZuma plays cat and mouse with corruption inquiry: it may be a high-risk strategy<figure><img src="https://images.theconversation.com/files/284974/original/file-20190719-116586-8zwm12.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Former South African President Jacob Zuma recanted his decision to walk out of the Zondo Commission. </span> <span class="attribution"><span class="source">EPA-EFE/Wikus de Wit/Pool</span></span></figcaption></figure><p>South Africa’s former President Jacob Zuma threatened on Friday to <a href="https://ewn.co.za/2019/07/19/zuma-to-continue-testifying-at-zondo-inquiry">walk away </a> from a judicial <a href="https://www.sastatecapture.org.za/">commission of inquiry into corruption</a>, throwing the process into temporary confusion and uncertainty. </p>
<p>An agreement was later <a href="https://www.timeslive.co.za/politics/2019-07-19-hlaudi-motsoeneng-sighted-as-jacob-zuma-arrives-at-state-capture-probe/">cobbled together</a> that will maintain Zuma’s participation in the process. But it may be a short-lived truce as he is likely to continue to use the threat of a walk-out as leverage over how his evidence and its truthfulness are tested. </p>
<p>For those that have attentively followed the former President’s legal and political strategy over the past two decades – referred to in some quarters as his <a href="https://definitions.uslegal.com/s/stalingrad-defense/">“Stalingrad” strategy</a> – this will have come as no great surprise.</p>
<p>Over the <a href="https://theconversation.com/south-african-probe-into-corruption-features-star-witness-jacob-zuma-120194">past months</a>, the commission headed by Deputy Chief Justice Raymond Zondo, has heard chapter and verse about the systematic abuse of public and private power that wreaked havoc with numerous key state institutions in the country. These included the National Prosecuting Authority, the South African Revenue Service as well as several state-owned entities vital for development and public service delivery, such as power utility Eskom.</p>
<p>According to numerous witnesses Zuma was the central protagonist. Several large files of witness statements were presented to his legal team in the run up to Zuma’s extraordinary appearance before the commission this week. They contain myriad accusations against him.</p>
<p>The responsibility of a commission of inquiry is to uncover the truth. Hence it has a duty – as Justice Zondo made absolutely clear to Zuma as he began his testimony – to make findings on all material matters. This is the case even though the commission is not a court of law and cannot hold any individual civilly or criminally liable.</p>
<p>Herein lies the dilemma and the risk for Zuma. He will have been advised that in the absence of counter-evidence, preferably from himself, the grave danger is that the commission will prefer the evidence of others and so make adverse findings against him.</p>
<p>That is probably why he was advised to appear before the commission. And why, having walked out, he returned. </p>
<p>But the strategic and tactical dilemma for Zuma and his legal team is this: by putting him on the witness stand, there is a risk that he would be found wanting, especially in terms of the details of any matter.</p>
<p>As every lawyer learns sooner or later in their career, the devil really is in the detail: the more detail you get into, the more likely that any discrepancy in the evidence is likely to emerge. And, in turn, the more likely that a dishonest witness will be exposed.</p>
<p>Hence, Zuma’s lawyers were very anxious to protect him from any scrutiny and, therefore, from any detailed questioning of his version of events.</p>
<p>This is why the quarrel between the legal teams – Zuma’s on the one hand, and the commission’s, on the other – ended up being about the pivotal issue of “cross-examination”.</p>
<h2>Unpacking the process</h2>
<p>Laymen watching events unfold this week may well have been greatly puzzled by this dispute. They could be forgiven for thinking that given that the whole point of a commission of inquiry is to find the truth this would, by definition, entail asking questions, difficult ones if needed.</p>
<p>My colleague Professor Pierre de Vos <a href="https://www.dailymaverick.co.za/opinionista/2019-07-17-zondo-inquiry-is-fully-within-its-rights-to-question-zuma/">explained</a> – with his customary thoroughness – the process as thus: the rules of the commission permit “examination” of any witness, including to “examine” the witness to try and establish whether he or she is being truthful. </p>
<p>Helpful as this legal analysis is, those of us who have practised at the Bar will know that in an adversarial court proceeding the distinction between “examination in chief” and “cross examination” is very clear. One side to the proceedings will lead evidence “in chief”. And then the other side (or sides) will cross examine the witness in order to limit the damage being done to their client’s interests. Or to undermine the credibility or veracity of it.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=898&fit=crop&dpr=1 600w, https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=898&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=898&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1129&fit=crop&dpr=1 754w, https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1129&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/284981/original/file-20190719-116596-1njt3ne.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1129&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Counsel for the Inquiry, Advocate Paul Pretorius.</span>
<span class="attribution"><span class="source">EPA-EFE/Kim Ludbrook</span></span>
</figcaption>
</figure>
<p>But in an inquisitorial proceeding, such as the Zondo Commission, the distinction is rather less clear and far more subtle. This is because there are no competing parties. Instead, what you have is a commission armed with a legal team whose job it is to assist it in making findings of fact by adducing relevant evidence.</p>
<p>Often, in this context when a witness is being forthcoming, the need to test the plausibility of evidence may be reduced. But when a key witness, such as Zuma, comes to the stand and time and again, as he did this week, says he cannot remember the detail – or otherwise deflects or obfuscates – then the need to probe deeper and ask more difficult questions is likely to be greater.</p>
<p>Zuma’s team protested that when Counsel for the Inquiry, Paul Pretorius SC, started to do so, he was “cross-examining” the witness and that this was “unfair”. Putting aside the semantics of whether it was “cross examination” as opposed to “mere examination” for a moment, it is difficult to understand the point from a legal perspective. But it’s easy to understand it from a political perspective.</p>
<h2>All about survival</h2>
<p>Legally, it would have been inappropriate if Zuma had been treated as a hostile witness from the beginning, as is often the case in an adversarial court proceeding. </p>
<p>So, when Zuma was able to give <a href="https://www.fin24.com/Economy/analysis-undisputed-winner-from-zumas-train-wreck-testimony-is-ramaphosa-20190718">detailed accounts</a> of events in the 1970s, as a part of his bizarre story of intrigue that was clearly designed to create a counter-narrative in which he is the victim of a devious and dangerous international crusade to eliminate him, rather than the perpetrator of state capture, but is unable to recall details of conversations from a few years ago when he was president, real cross-examination would be to put a question like this to the witness:</p>
<blockquote>
<p>Mr Zuma, can you really expect the commission to believe that you can remember details from 40 years ago but not from seven years ago? That’s not credible is it? You’re not being frank or honest with the commission, are you?</p>
</blockquote>
<p>However, somewhere along the spectrum of possible types of questioning, there is a middle ground in which the witness’ account could and should be tested by tougher questions. Otherwise, how else is Zondo to assess the evidence before him and make findings, especially if there are competing versions?</p>
<h2>The game’s not yet over</h2>
<p>Zuma and his legal team may think they have played a smart hand. Having volunteered to give evidence, having presented an alternative narrative that deflects from the core subject of state capture, and having avoided detailed questioning on the sort of detail that may have tripped their client up, they then walked away only to return within a few hours.</p>
<p>Had Zuma not returned, the risk would have been that in the absence of detailed evidence from him to set alongside that of the witnesses who gave evidence against him, Zondo may have no choice but to make damaging findings that are severely adverse to a former head of state whose legal and political options appear to be narrowing by the day.</p><img src="https://counter.theconversation.com/content/120695/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Calland is Associate Professor in Public Law at the University of Cape Town, a partner in political risk consultancy The Paternoster Group and a member of the Advisory Council of the Council for the Advancement of the South African Constitution.</span></em></p>The dilemma for Zuma and his legal team is this: by putting him on the witness stand, there is a risk that he would be found wanting, especially in terms of the detail of any matter.Richard Calland, Associate Professor in Public Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1121622019-02-20T14:44:24Z2019-02-20T14:44:24ZSouth Africa’s finance minister delivers a budget designed to steady the ship<figure><img src="https://images.theconversation.com/files/259943/original/file-20190220-148513-52lhi2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African Finance MInister Tito Mboweni delivering the 2019 budget speech in parliament. </span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>South Africa is supposed to be a secular state, but one can perhaps forgive Tito Mboweni, the Minister of Finance, for quoting numerous biblical verses in his <a href="https://www.gov.za/speeches/v-20-feb-2019-0000">2019 Budget Speech</a>. After all, South Africa’s fiscal situation is enough to make many people hope for divine intervention.</p>
<p>The 2019 budget numbers show that the past year has been no exception to some “new normals” that have been established in South Africa. These include slow economic growth, state-owned enterprises requiring unplanned financial support, failing plans aimed at stabilising national debt levels, and tax revenues significantly lower than forecast. </p>
<p>All were present in this year’s budget.</p>
<p>Economic growth forecasts have been revised down from a paltry 1.7% to 1.5%. Revenue collection was R42.8bn lower than expected in the 2018 Budget. And Mboweni is promising to stabilise gross national debt slightly above 60% of gross domestic product in 2023. This follows many failed promises in previous budgets to stabilise gross national debt below 50% of GDP.</p>
<p>The reasons for these failures are largely to be found outside of the Treasury and Ministry of Finance. Tax revenue shortfalls are partly due to low economic growth and problems in <a href="https://theconversation.com/why-removal-of-south-africas-tax-boss-is-key-to-ramaphosas-chances-of-success-106455">tax administration</a>. In addition, the South African Revenue Service has been clearing a backlog in refunds that had accumulated under the previous commissioner. On top of this, the financial and operational crisis at the <a href="https://businesstech.co.za/news/energy/299720/eskom-to-end-power-cuts-after-week-of-disruption/">troubled power utility Eskom</a> has necessitated some drastic measures. </p>
<p>The budget has to aim for fiscal decisions that serve the public interest and maintain the stability of public finances. So did the proposals tabled constitute a good response to the situation? And what are the implications?</p>
<p>Mboweni continues to walk a precarious tightrope. The budget is likely to be well-received by the private sector because it wasn’t asked to make any meaningful sacrifices while some sectors can look forward to new opportunities. Individual citizens and the state itself will bear the brunt of the most difficult decisions. </p>
<p>The only real defence for this asymmetry is a belief that wooing business and potential investors will lead to the economic growth and job creation needed to emerge from the current crisis. But there is no guarantee of that, and the likely negative effects on citizens have arguably been given too little attention.</p>
<h2>Major proposals</h2>
<p>Eskom is the main factor driving the most significant proposals in the 2019 Budget. Mboweni confirmed President Cyril Ramaphosa’s <a href="https://www.gov.za/speeches/president-cyril-ramaphosa-2019-state-nation-address-7-feb-2019-0000">announcement</a> that government intends to split Eskom into three parts (generation, transmission and distribution). What’s new is that the budget suggests transmission will be the first to be formed and private sector investors invited in. </p>
<p>From a public finance point of view, the critical announcement is that Treasury will be providing Eskom with financial support of R23bn a year over the next few years (and possibly longer).</p>
<p>There are no major changes to tax policy. But the government will try to get more revenue (about R10bn in 2019/20) from individual taxpayers by not adjusting tax brackets upwards for inflation. It will also increase taxes on alcohol and cigarettes. Tax on fuel will also go up and will now include a carbon tax.</p>
<p>The 2020 Budget will announce measures to raise an additional R10bn in tax revenue.</p>
<p>To try and limit the effect of Eskom support on overall government spending (and debt), the budget proposes to cut other areas of public expenditure by R50bn. The proposal is that this will be done through reducing the number of public servants and cutting funding to programmes that have under-spent or under-performed.</p>
<p>Finally, the budget proposes to raise the amount set aside for unexpected spending to R13bn for 2019/20 to account for possible financial support to other state-owned enterprises. </p>
<p>In line with an earlier policy, the Treasury has said that it ultimately intends to sell public assets to offset such support. These, however, aren’t listed.</p>
<h2>Implications and concerns</h2>
<p>In his speech, Mboweni said that:</p>
<blockquote>
<p>Pouring money directly into Eskom in its current form is like pouring water into a sieve. </p>
</blockquote>
<p>Past evidence certainly seems to support this claim. So why another R23bn per year for a failing enterprise? </p>
<p>The main reason is that the utility supplies the country with power. In addition, a lot of Eskom’s debt is being guaranteed by the Treasury. This means that the utility’s financial and operational problems are now the nation’s problems. Besides the dramatic evidence provide by <a href="https://mybroadband.co.za/news/energy/295616-eskom-deepens-south-africa-power-cuts-as-moodys-flags-risk.html">power cuts</a> in recent weeks, individuals citizens have also been affected by dramatically <a href="https://www.thesouthafrican.com/eskom-electricity-price-hike-approved-2019/">increasing electricity tariffs</a>. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=431&fit=crop&dpr=1 600w, https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=431&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=431&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=542&fit=crop&dpr=1 754w, https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=542&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/259944/original/file-20190220-148545-1y0l63u.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=542&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Finance Minister Tito Mboweni, left, shares a light moment with President Cyril Ramaphosa, before delivering the Budget speech.</span>
<span class="attribution"><span class="source">GCIS</span></span>
</figcaption>
</figure>
<p>Past efforts to resolve Eskom’s problems have clearly failed. It remains to be seen how Ramaphosa and Mboweni’s promise that it will be different this time will turn out. And while the general case for restructuring the electricity sector is strong, it is debatable whether doing that now will improve or exacerbate Eskom’s crisis.</p>
<p>Support for Eskom will be funded by cuts in spending elsewhere. A major component is a reduction of R27bn in salary payments. Treasury has been encouraging reductions in the number of public servants for some time: the budget shows that the number of employees declined by 16,000 at national level and almost 50,000 at provincial level between 2015 and 2018. </p>
<p>The Treasury’s plan for further cuts involves offering early retirement packages. The hope is that about 30,000 (out of 125,000) public servants aged between 55 and 59 will accept the offer. A serious concern is that the move might lead to the most competent public servants leaving. And that recent cuts have harmed state capacity and service delivery.</p>
<p>These are the kinds of issues that will need to be watched closely if Treasury’s proposed cuts are accepted by Parliament.</p>
<h2>Odds and ends</h2>
<p>As always, the Budget contained some proposals that are progressive but constitute an almost trivial level of expenditure. There is R157million in 2019/20 for free sanitary pads for learners in poorer schools. And in an attempt to respond to concerns about the increase in VAT to 15%, there will be VAT zero-rating on white bread, cake flour and sanitary pads. </p>
<p>In addition, the salaries of members of parliament and provincial legislatures, along with some state executives, will be frozen. </p>
<p>Meanwhile, other major policy issues from previous years have already faded into the background. Free higher education will be continued, with spending rising from R27bn to R40bn in 2021/22. But this major policy change has already been relegated to a paragraph of information with little detail on how funding decisions are being made at the level of individual students.</p>
<p>Mboweni’s strategy was clearly to downplay the negative effects of expenditure cuts on the one hand, and on the other to pin the country’s hopes on improvements in economic growth, revenue collection and the finances of state-owned enterprises. If none of these happen, no amount of biblical verses will shore-up the nation’s finances and economy.</p><img src="https://counter.theconversation.com/content/112162/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Seán Mfundza Muller receives funding from a European Union-funded project, "Putting People back in Parliament", led by the Dullah Omar Institute (University of the Western Cape), in collaboration with the Parliamentary Monitoring Group, Public Service Accountability Monitor (Rhodes) and Heinrich Boell Foundation (South Africa). He is affiliated with the Public and Environmental Economics Research Centre (University of Johannesburg), regularly making inputs to Parliament oversight of the national budget, advising civil society groups on public finance matters and consulting for private sector organisations on an ad hoc basis. He resigned from the South African Parliamentary Budget Office in 2016. The views expressed are his own.</span></em></p>South Africa’s finance minister delivered a budget that tried to balance serving the public interest, while maintaining the stability of public finances.Seán Mfundza Muller, Senior Lecturer in Economics and Research Associate at the Public and Environmental Economics Research Centre (PEERC), University of JohannesburgLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1065582018-11-08T10:37:00Z2018-11-08T10:37:00ZSouth Africa’s commissions of inquiry: what good can they do?<figure><img src="https://images.theconversation.com/files/244524/original/file-20181108-74772-5karpy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Former South African Deputy Finance Minister Mcebisi Jonas gave damning evidence at the State capture commission.
</span> <span class="attribution"><span class="source">Sunday Times/Alan Skuy</span></span></figcaption></figure><p>South Africans might be forgiven for expecting two key commissions of inquiry currently underway to change the country. Some of these expectations, however, are unrealistic, as a look at the commissions’ functions and powers show. </p>
<p>Some expectations might be met, but only if the commissions achieve public buy-in and generate enough pressure for change. </p>
<p>Whether they can do that depends not only on their powers but also on how they are run.</p>
<p>The probe into tax administration and governance at the <a href="http://www.thepresidency.gov.za/press-statements/president-ramaphosa-establishes-commission-inquiry-tax-administration-and">South African Revenue Service</a> – headed by Judge R Nugent – and has already led to the axing of Tom Moyane as head of the tax collection agency. The other inquiry – headed by Deputy Chief Justice Zondo – is looking into allegations that the South African state has been <a href="https://www.sastatecapture.org.za/">captured</a> by private business interests allied to former President Jacob Zuma. It’s expected to run for two years.</p>
<p>Unrealistic expectations about what commissions can achieve come from the fact that they’re often confused with courts of law. This isn’t surprising given that they seem to function like courts. For example, they’re often chaired by judges, affected parties are often represented by lawyers and witnesses take oaths to tell the truth. </p>
<p>But they aren’t courts. And it’s important to understand the difference between the two when it comes to their functions, powers, and procedures.</p>
<h2>The differences</h2>
<p>A court judgment is binding and has direct legal effect on the parties involved. The court will determine that the accused goes to prison, for example, or that the defendant pays damages. The only way affected parties can escape the court order is by getting it overturned on appeal or review by a higher court. </p>
<p>Commissions of inquiry, on the other hand, make non-binding recommendations to the person who set them up. (In the case of these two commissions, that’s President Cyril Ramaphosa.) Technically, all commissions do is offer the person who set them up advice. And they’re required to stick to the issues on which advice was requested. These are set out in the terms of reference which establish what questions the commission must answer, who will head it up and what its powers are. </p>
<p>Commissions of inquiry are completely different from courts when it comes to procedures too. </p>
<p>South Africans courts are adversarial. The judge sits as an outside observer while the two teams before her attempt to establish their version of events. Commissions of inquiry, on the other hand, are inquisitorial. This makes the commission the driver of the investigation itself. It seeks out the facts rather than waiting for two opposing parties to choose and present their evidence. In an inquisitorial process, the witnesses and their lawyers are <a href="https://www.politicsweb.co.za/documents/moyane-vs-sars-inquiry-judge-nugents-ruling">merely assisting</a> the commission’s investigation.</p>
<p>An important consequence of the inquisitorial process is that a commission is not bound by the same rules of evidence as in a court. Thus evidence will never be “inadmissible”, as the commission enjoys discretion to consider all evidence that it finds relevant to its inquiry. </p>
<h2>Why the confusion</h2>
<p>With these important distinctions in mind, why have some commissions become “judicialised” and lawyer-driven? Why was the first day of the Zondo Commission taken <a href="https://www.dailymaverick.co.za/opinionista/2018-08-21-zondo-turns-the-first-day-of-state-capture-inquiry-into-a-massive-yawn-fest/">up with technicalities</a>? Why have postponements been built into the process so that “implicated parties” can study the allegations made against them?</p>
<p>It’s not just to stave off the threat of a court challenge to any findings. Such a threat is, in fact, not much of a threat at all. Commissions of inquiry will not be subject to the (higher) standards of so-called “administrative” review unless their findings have a direct effect on the persons who might want to challenge them. But the direct effect would arise only when the president acts on the findings. </p>
<p>The president wouldn’t be subject to administrative review in many of these cases either. Instead, the president and the commission will be subject to review for “rationality”. A rationality review asks only whether there is a rational connection between the conduct challenged before the court and a legitimate governmental objective. </p>
<p>But commissions have another, equally crucial function – to educate the public and ensuring its buy-in for important processes of change and renewal.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/244356/original/file-20181107-74769-14otren.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Tom Moyane has been fired as South Africa’s tax boss.</span>
<span class="attribution"><span class="source">Sunday Times/Masi Losi</span></span>
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</figure>
<p>South Africans are already incensed at the loss of public funds to corruption, the devastation of public institutions at the hands of those who sought to profit by it, the damage this has caused to the country’s economy and the suffering it has inflicted on the poorest in society. </p>
<p>But all South Africans have to be on board with the solution to the problem. This sort of buy-in is possible only if the facts are widely known, the relevant law is clear, and the commission investigating the problem is accessible to the public and is seen as legitimate.</p>
<p>A commission can achieve this by having open hearings, broadcast publicly, public access (such as a <a href="https://www.sastatecapture.org.za/">website</a> and an enquiry desk) and a strong, independent commissioner. </p>
<p>This is where the judicial procedure comes in. Although it can render the body <a href="http://rabble.ca/blogs/bloggers/views-expressed/2014/10/national-inquiry-mmiw-yes-do-it-right">less accessible</a>, it does have the strong advantage of satisfying people’s innate sense of natural justice.</p>
<p>And the decisions of the commissions will only have legitimacy in the eyes of the public if they are seen to <a href="https://www.dailymaverick.co.za/article/2018-11-02-with-moyanes-dismissal-ramaphosas-slo-mo-revolution-claims-a-crucial-scalp/">treat people fairly</a>. That is one of the reasons why implicated people need enough time to respond to the allegations against them.</p>
<h2>The value of the commissions</h2>
<p>The Nugent Commission is due to report soon while the Zondo Commission may take two years. </p>
<p>The long delay between the advent of a crisis and a commission’s report is often used as an argument that they’re being used to put matters <a href="https://www.theguardian.com/world/2004/feb/03/law.politics">“on hold”</a>. </p>
<p>However, commissions of inquiry don’t remove an issue from the public eye if they’re run openly and transparently. Instead, they draw the public in to the issue, educating and inviting engagement. The most important work of the Zondo and Nugent Commissions might be done before their formal function – the submission of their reports – is completed.</p><img src="https://counter.theconversation.com/content/106558/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cathleen Powell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Unrealistic expectations about what commissions can achieve comes from the fact that they’re often confused with courts of law.Cathleen Powell, Associate Professor in Public Law, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/977892018-06-12T14:24:21Z2018-06-12T14:24:21ZRamaphoria in South Africa: just a honeymoon, or the start of true love?<figure><img src="https://images.theconversation.com/files/222198/original/file-20180607-137312-22d1j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The public liking towards South African President Cyril Ramaphosa has benefited the ANC.</span> <span class="attribution"><span class="source">GCIS</span></span></figcaption></figure><p>As 2017 drew to a close South Africa’s governing party, the African National Congress (ANC), had reached <a href="http://citizensurveys.net/sa-citizens-survey/">the nadir</a> of its popularity with voters. The decline was driven by public hostility towards <a href="https://theconversation.com/survey-shows-zuma-and-ancs-mutual-dance-to-the-bottom-92126">Jacob Zuma</a>, then president of both the party and the country.</p>
<p>The good ship ANC wasn’t quite sinking, but it was seriously listing. Then Cyril Ramaphosa became the party and the state’s new leader – and attention turned to whether he could steer the ANC into calmer waters.</p>
<p>The results of our new <a href="http://citizensurveys.net/sa-citizens-survey/">South African Citizens Survey fieldwork</a> – conducted in March 2018 – suggest Ramaphosa has done well so far. Compared to the 23% of all citizens aged 18 and over who said they approved of Zuma’s performance in January and February, almost two-thirds (68%) approved of Ramaphosa’s performance.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=331&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=331&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=331&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=415&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=415&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222546/original/file-20180611-191962-1j03q8y.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=415&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>Ramaphosa’s rise in popularity has also helped the ANC. The proportion of people who held a positive image of the party rose from 42% (in November 2017) to 68%. </p>
<p>Such a sharp reversal might simply be chalked up to the usual <a href="https://presidential-power.com/?p=7692">“honeymoon phenomenon</a> historically observed by public opinion polls around the world with new presidents. Even if he’d done nothing at all, Ramaphosa stood to benefit from any comparison with his deeply unpopular predecessor.</p>
<p>But, far from doing nothing, Ramaphosa has acted swiftly in several areas since he took the oath of office <a href="https://www.timeslive.co.za/politics/2018-02-15-the-oath-is-sealed-ramaphosa-is-officially-the-president-of-south-africa/">on February 15</a>. These surely account for a large part of the the good feelings in which he now basks. </p>
<h2>Ramaphoria at work</h2>
<p>The population’s elation about Ramaphosa, tagged as <a href="https://www.fanews.co.za/article/investments/8/economy/1021/south-africa-ramaphoria-and-the-global-backdrop/24085">Ramaphoria</a>, didn’t just begin when he inherited the mantle of high office. His popularity had already begun to rise in mid-2017 (see Figure 1) when his campaign to lead the ANC <a href="http://ramaphosa.org.za/cyril-ramaphosa-website-siyavuma-anc-2017-campaign/">swung into high gear</a>.</p>
<p>During the April to June 2017 polling period, Ramaphosa and his main competitor for party leader, Nkosazana Dlamini-Zuma, enjoyed equal levels of (un)popularity among the electorate. Their favourability ratings were just 34% and 31%, respectively. </p>
<p>Ramaphosa’s numbers increased to 47% during the October-December fieldwork, on the eve of the <a href="http://www.anc.org.za/54th-national-conference">ANC National Conference</a> in December. They kept on climbing in the new year, to 60% in the January - March 2018 survey. Importantly, positive views of Ramapahosa rose sharply across all age and racial groups, and in all nine provinces. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=326&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=326&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=326&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=409&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=409&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222548/original/file-20180611-191974-1d7jdlb.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=409&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>There are at least two different ways to explain this upward trend. One account would focus on the widely cited explanation for Ramaphosa’s ascendance to the ANC presidency. That was his ability to strike bargains with other party power brokers who then delivered their provincial delegations on <a href="https://www.businesslive.co.za/fm/features/cover-story/2017-12-21-analysis-how-cyril-ramaphosa-won-the-anc-sort-of/">the day of the key vote</a>, making him ANC president. By extension, this logic would also presume that these power brokers were able to shift mass opinion among their respective constituencies.</p>
<p>But such a view would fail to explain why the largest increases in Ramaphosa’s favourability since mid-2017 occurred in the Free State and North West, two of the provinces run by members of the so-called <a href="https://www.huffingtonpost.co.za/2017/12/19/the-rise-of-the-premier-league-and-their-failed-bid-to-install-ndz_a_23310554/">Premier League</a> of pro-Zuma provincial leaders.</p>
<p>That’s where a second account comes in. This would focus on Ramaphosa’s very conscious attempt to court public opinion directly and to reacquaint himself with average voters. Indeed, Ramaphosa’s <a href="https://mg.co.za/article/2017-11-10-00-on-the-hustings-with-cr17">"CR17” campaign</a> for the party presidency was organised, well-staffed, and built around a widely publicised speaking tour that projected his image as a leader.</p>
<h2>The change factor</h2>
<p>Just as important was what Ramaphosa said: particularly, his decision to frame his candidacy as a departure from the “normal politics” of the ANC under Zuma. He ran as a <a href="https://www.huffingtonpost.co.za/2017/12/18/how-he-won-nenegate-convinced-cr17-to-mobilise_a_23310334/">“change” candidate</a> committed to clean government. </p>
<p>He launched this arm of his campaign in April 2017 at the late South African Communist Party leader Chris Hani’s <a href="https://www.news24.com/SouthAfrica/News/full-speech-by-cyril-ramaphosa-at-chris-hani-memorial-lecture-20170423">memorial lecture</a> with a sharp attack on Zuma and the <a href="https://www.news24.com/SouthAfrica/News/3-arrested-in-hawks-gupta-raids-20180214">Guptas</a>, Zuma’s friends who are accused of have <a href="https://www.news24.com/SouthAfrica/News/download-the-full-state-of-capture-pdf-20161102">captured the South African state</a>. </p>
<p>Given the sourness of the public mood at that time, an attack on the sitting president was not an especially daring act. As of April 2017, 70% of South Africans surveyed said Zuma should resign his position as State President.</p>
<p>But it surely was an exercise in courage to make this speech in a forum of the <a href="http://www.anc.org.za/kids/tripartite-alliance">ANC-led tripartite governing alliance</a> – and to say it as a deputy president who could be easily fired by a president who had already <a href="https://www.timeslive.co.za/politics/2017-10-17-zuma-announces-cabinet-reshuffle/">sacked senior cabinet ministers</a>.</p>
<p>Our data suggests that voters had been waiting for a clear signal that Ramaphosa was not a core part of the Zuma network. Voter ratings of Ramaphosa only began to move upward after that speech. Indeed, as Figure 3 shows, until that point Ramaphosa had enjoyed only slightly higher ratings among voters who wanted Zuma to stay in office, compared to those who wanted Zuma to resign. </p>
<p>After his speech at the Hani memorial his popularity rose sharply among the majority of South Africans who wanted Zuma to go.</p>
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<img alt="" src="https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=331&fit=crop&dpr=1 600w, https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=331&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=331&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=416&fit=crop&dpr=1 754w, https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=416&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/222549/original/file-20180611-191959-1ldvbhf.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=416&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<h2>Towards a lasting relationship</h2>
<p>The Ramaphosa campaign correctly read the mood of the electorate in 2017 and strategically positioned itself accordingly. It was this crucial decision, as much as any ephemeral “honeymoon” effect, that accounts for the good feelings in which the president now basks. </p>
<p>If he can maintain the focus on clean government, and show that he is committed to fixing the sins of the Zuma years, chances are that the current levels of Ramaphoria" might be more than just a brief honeymoon, but the “beginning of a <a href="https://www.scpr.org/blogs/offramp/2013/07/01/14145/casablanca-a-beautiful-relationship-that-starts-at/">beautiful relationship</a>” with South Africans.</p><img src="https://counter.theconversation.com/content/97789/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Robert Mattes is Professor of Government and Public Policy at the University of Strathclyde, Honorary Professor at the Institute for Democracy, Citizenship and Public Policy in Africa at the University of Cape Town, co-founder and Senior Adviser to Afrobarometer, and has previously worked as a consultant to Citizen Surveys. He receives funding from the South African National Research Foundation,</span></em></p>President Cyril Ramaphosa’s popularity has improved the favourability of the governing ANC among South Africans.Robert Mattes, Professor in the Department of Political Studies, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/844782017-09-21T15:48:16Z2017-09-21T15:48:16ZLessons from KPMG: be on guard, South Africans are on your case<figure><img src="https://images.theconversation.com/files/187066/original/file-20170921-21005-r60q7w.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">South African protesters hold placards as they march against corruption.</span> <span class="attribution"><span class="source">Reuters/Siphiwe Sibeko</span></span></figcaption></figure><p>Moses came down from the mount with tablets inscribed with 10 commandments. Most of us know (most of) them, and most of us fail to live by (most of) them. But if Moses had turned them over and looked in the fine print on the back, he’d have found the 11th Commandment: </p>
<blockquote>
<p>Don’t get caught.</p>
</blockquote>
<p>That in essence summarises the rise and fall of the South African arm of the international accounting firm <a href="https://home.kpmg.com/za/en/home.html">KPMG</a> which has been <a href="https://www.timeslive.co.za/news/south-africa/2017-09-20-darkness-descends-on-kpmg/">caught</a> with its hands in the slush fund jar. It stands accused of <a href="https://www.dailymaverick.co.za/article/2017-09-20-analysis-unchartered-territory-kpmg-zuptas-and-the-tainting-of-chartered-accountancy-in-sa/">taking money from companies</a> owned by the politically connected Gupta family.</p>
<p>Even more damaging is the charge that it submitted formal reports “confirming” that a “rogue” unit was operating inside the South African Revenue Service (SARS) – <a href="https://www.timeslive.co.za/politics/2017-09-15-kpmg-cans-sars-rogue-unit-report-apologises-to-gordhan/">accusations</a> that were used as the smoking gun to remove ministers and senior public officials who were seeking to hold the line against state capture.</p>
<p>KPMG has miraculously grown a conscience. Suddenly – having broken the 11th commandment – it was reborn as a hand-wringing, apologetic company living up to high ethical standards. It was now willing to <a href="https://www.timeslive.co.za/sunday-times/business/2017-09-15-nine-kpmg-senior-executives-quit-over-gupta-scandal/">fire</a> its CEO and some senior managers, to reject its own findings and to <a href="https://mg.co.za/article/2017-09-15-kpmg-to-donate-r40m-it-earned-in-fees-from-gupta-related-entities-to-ngos">“donate”</a> Gupta-company earnings to education and anti-corruption NGOs. The latter gesture was a revolting display of supine reprehensibility – we got caught in corrupt deals so we’ll hand the profits over to anti-corruption NGOs. Really? Go to jail would be a better outcome.</p>
<p>KPMG isn’t alone. Throughout South Africa’s <a href="https://www.opensecrets.org.za/corruption-in-south-africa-from-apartheid-to-zuma/">history</a>, and across the globe, the litany of private sector corruption is breathtaking. </p>
<h2>Private sector corruption</h2>
<p>South Africans can recall an unending litany of private sector corruption. In the recent past, there was the case of Tiger Brands making <a href="https://www.moneyweb.co.za/archive/tiger-brands-admits-to-bread-pricefixing-pays-fine/">bread more expensive</a> so the poor would pay more to eat. Tiger Brands paid a fine and carried on trading. And a clutch of major construction firms were found <a href="http://column.global-labour-university.org/2013/10/a-lesson-from-south-africa-are.html">looting monies</a> for the construction of stadiums for the 2010 Fifa World Cup in South Africa. They also paid fines and carried on building. The list continues. </p>
<p>The private sector, contrary to those who believe that ‘market forces’ will regulate the ethics of capital, is not taking a strong line against corruption. Those on the front line include, more recently, the portfolio committees in parliament, and previously, the Public Protector and a dwindling cluth of Ministers, MECs and the like. </p>
<p>NGOs such as <a href="http://www.corruptionwatch.org.za/">Corruption Watch</a>, the <a href="http://www.seri-sa.org/">Socio-Economic Rights Institute of South Africa</a> and the <a href="http://www.casac.org.za/">Council for the Advancement of the South African Constitution</a>, have by a long distance, been the most vocal campaigners in the area, and academics have worked with them to <a href="http://pari.org.za/betrayal-promise-report/">uncover</a> the scale and identify the perpetrators of corruption. The media has also played a <a href="http://amabhungane.co.za/#">massive part</a> in exposing corruption.</p>
<p>So let’s not fool ourselves that the private sector has set a benchmark for anything more than export-class venality.</p>
<p>South Africa’s <a href="https://theconversation.com/africa/search?utf8=%E2%9C%93&q=state+capture">state is corrupt</a> – “captured” makes it sound as if this occurred against its will. But - it has found a multitude of willing partners in the private sector. The match between corrupt state and corrupt private sector is perhaps South Africa’s most functional display of <a href="http://ewn.co.za/2017/06/13/mps-debate-willing-buyer-willing-seller-policy-in-land-reform">“willing buyer, willing seller”</a>.</p>
<p>KPMG executives have not set any benchmark for probity, as claimed by some – they simply acted when they got caught. Their focus was on maximising profits, even if it meant signing off on the use of public funds for a <a href="http://www.biznews.com/guptaleaks/2017/06/30/gupta-wedding-taxpayers-kpmg/">private Gupta wedding</a> (among other sins of commission), and now buying their way out of the mess with a few heads rolling and dirty money being donated to NGOs. If this is the standard for the private sector, South Africans are in more serious trouble than initially thought. </p>
<p>The KPMG <a href="https://www.dailymaverick.co.za/article/2017-09-15-kpmg-weak-apology-suggests-company-saw-no-evil-heard-no-evil-therefore-did-no-evil/">“apology”</a> can’t come close to compensating for the damage done. Its report “confirming” that a rogue unit had operated in the South African Revenue Services fuelled developments towards state capture and triggered events that have had a disastrous impact on the country. These included the axing of ministers, deputy Ministers, and the subsequent haemorrhage of senior public servants from the state. </p>
<p>Everyone in South Africa is paying for the sins of KPMG.</p>
<h2>Holding power to account</h2>
<p>Governance is about the distribution of power in society, and the ability of citizens to hold power to account. This requires an engaged citizenry – whether in NGOs, ratepayer associations, street or block committees or faith-based organisations – who are sufficiently organised to call officials to account. </p>
<p>What is fascinating about South Africa is how engaged its citizen are. They kicked out the ruling party from running cities after just two decades of democracy and they’ve given the middle finger to <a href="http://www.enca.com/south-africa/e-toll-drive-slow-%E2%80%98-resistance-growing%E2%80%99">e-tolls</a>. They don’t behave the way they are told to. And they’ve reached a tipping point. When South Africans of all shapes, colours, sizes, creeds share simply being <em>gatvol</em> (fed-up), there’s trouble.</p>
<p>Ask the British public relations firm <a href="https://www.businesslive.co.za/bd/companies/2017-09-12-bell-pottingers-british-business-collapses-after-south-african-scandal/">Bell Pottinger</a> what it feels like. The company faces foreclosure following a concerted campaign - domestically and abroad - to shame it for stirring racial hatred. </p>
<p>Ask the Guptas <a href="https://www.dailymaverick.co.za/article/2017-09-21-bank-of-baroda-what-next-for-the-soon-to-be-unbanked-guptas?utm_medium=email&utm_campaign=Afternoon%20Thing%2021%20September%202017%20Chamber%20of%20Commerce&utm_content=Afternoon%20Thing%2021%20September%202017%20Chamber%20of%20Commerce+CID_e5f871ce65510d308e294e0c3db99f65&utm_source=TouchBasePro&utm_term=Bank%20of%20Baroda%20bails%20on%20Guptas">how it feels</a> now that all of South Africa’s banks have said they aren’t willing to touch their money. </p>
<p>South African residents and citizens have become acutely aware that they’ve been screwed. By many in the state, to be sure. But by as many or more in the private sector, for decades. And they’re sick of it. </p>
<p>The world is watching – South Africans brought down Bell Pottinger. They’re now going after the likes of McKinsey, KPMG and SAP, all of these companies tangled up by <a href="http://www.biznews.com/thought-leaders/2017/09/18/john-mulcahy-sa-kpmg-mckinsey-sap/">allegations</a> of corruption. </p>
<p>The only way South Africans will ever get governance and accountability is by being organised, vocal, obstreperous, and demanding. So keep it this way – private and public sector are both on terms. And South Africans will hold them accountable, or if necessary, break them.</p><img src="https://counter.theconversation.com/content/84478/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Everatt does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The South African arm of the international accounting firm KPMG has learnt the hard lesson: Don’t break the 11th commandment - don’t get caught. That’s because South Africa’s citizens are fed up with corruption.David Everatt, Head of Wits School of Governance, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/842792017-09-19T17:57:29Z2017-09-19T17:57:29ZWhat KPMG’s Gupta imbroglio says about corruption in South Africa<figure><img src="https://images.theconversation.com/files/186581/original/file-20170919-25319-1uqvawo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>As far as corporate accountability goes, the recent announcement that the CEO and seven senior executives at auditing and consultancy firm KMPG in South Africa <a href="http://www.fin24.com/Companies/Financial-Services/kpmg-sa-ceo-7-others-quit-on-guptaleaks-fallout-20170915">have resigned</a> is a welcome development.</p>
<p>By resigning, the KPMG executives reinforced the principle of executive responsibility. This is a matter not taken seriously in South African culture, particularly when it comes to the public sector. The usual pattern when misdemeanours are uncovered is for government ministers and other senior executives to blame their staff – or someone else – when things go wrong. </p>
<p>At this level the action of the KPMG executives is to be respected. The hope must be that this behaviour becomes an example for others.</p>
<p>KPMG executives have set a new South African benchmark: executives assuming responsibility for wrongdoing in their organisations. South Africans should thank the firm for setting a new standard with this decisive action. Its executives have taken oversight responsibility for the action of others.</p>
<p>The role that companies such as KPMG plays is particularly crucial because auditor firms and consultancies are meant to hold companies and state entities to account by ensuring transparency and honesty. The fact that a firm of KPMG’s standing should be embroiled in a matter as murky as compiling false reports to serve the political ends of particular politicians highlights the degree of corruption that has taken hold in South Africa.</p>
<p>In light of this, are KPMG’s actions enough? I believe not. To pull South Africa back from the brink, the auditing firm should opt for full disclosure of all its involvement with the Gupta family as well as the companies they own. This should, inter alia, include all working papers, correspondence and audit findings. This would allow public scrutiny of the work it claims to have done under the banner of professionalism and provide the opportunity for a deeper understanding of the Gupta network. Nothing short of this will clear KPMG’s name. </p>
<h2>From state capture to country capture</h2>
<p>There is no doubt that KPMG’s report on a rogue unit completed for the South African Revenue Service has <a href="https://www.iol.co.za/news/politics/kpmg-report-on-rogue-unit-has-tarnished-sars-future-sa-11241403">damaged South Africa’s image</a>. But it has done more than that and raises the question whether South Africa suffers only state capture, or whether the rot is growing into economic capture of the whole country, what I term “country capture”.</p>
<p>The basis for asking this question is that the South African economy – and as a result its citizens – are paying a heavy cost for the mismanagement of the country’s resources. This has been through a combination of bad and neglectful management and out-and-out corruption. All this for the account of South African taxpayers.</p>
<p>South Africa’s fiscal position is precarious, with a revenue shortfall of more than <a href="https://www.businesslive.co.za/bd/economy/2017-08-21-downgrade-alarm-as-revenue-shortfall-could-hit-r50bn/">R50 billion</a> expected in the fiscal year to 31 March 2018. This growing shortfall is driven by subdued economic performance and will continue until the domestic economic growth recovers.</p>
<p>The shortfall is directly linked to low economic growth and recessionary conditions. These in turn have been caused by state capture. The private sector is reluctant to invest in the midst of corruption. This means that there is no new economic activity being started, a particularly bad situation given that industries such as mining are shrinking. This week Implats <a href="http://www.fin24.com/Companies/Mining/">announced</a> it was in negotiations with unions to lay off 2 500 workers. <a href="https://theconversation.com/the-lesser-known-and-scarier-facts-about-unemployment-in-south-africa-83055">Unemployment</a> is already at 27.7%.</p>
<p>Individual South African taxpayers are therefore being forced to bail out the government as it faces fiscal difficulties, placing the country on the slippery slope of country capture. This is reflected in the fact that government’s final consumption <a href="https://data.worldbank.org/indicator/NE.CON.GOVT.ZS?locations=ZA">expenditure</a> as percentage of GDP currently exceeds 20%. </p>
<h2>What next?</h2>
<p>Having ended up in this precarious position, it’s necessary to consider the way forward for KPMG and for South Africa. </p>
<p>KPMG clearly wants to save itself as a company and South Africa wants to rid itself of state/country capture. In redeeming itself, the firm can render a great service to South Africa in the quest to break the stranglehold. KPMG should disclose all dealings, findings, work papers, interactions and the like with the Gupta family businesses. This would achieve two objectives.</p>
<p>Firstly, it would show who is implicated and who is not. KPMG stated that there was no wrongdoing on its side in <a href="https://www.timeslive.co.za/news/south-africa/2017-09-14-kpmg-denies-any-dodgy-dealings-in-controversial-gupta-coal-deal/">audits it did on companies owned by the Guptas</a>. But this can only be settled through full disclosure.</p>
<p>Secondly, such a disclosure would help to reveal the full scope of state/country capture in South Africa. </p>
<p>Naturally KPMG’s dealings with the Gupta companies and Gupta family are subject to client confidentiality agreements. KPMG should therefore inform the Gupta family of its intention to publish within seven days. If the Guptas object in writing KPMG should approach the courts with a request to issue a clarification order to authorise disclosure.</p>
<p>This is the only way in which KPMG can salvage what’s left of its reputation in South Africa. KPMG should stand for: “Keep Pushing Mighty Guptas”.</p>
<p>At the same time South Africans would be able to use the disclosures as the basis for beginning to understand the full extent of state/country capture and the remedial steps necessary to turn this around.</p>
<p>Here is a small opportunity to make progress towards some light at the end of a very long and dark tunnel. The opportunity rests in the hands of KPMG. South Africa waits.</p><img src="https://counter.theconversation.com/content/84279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jannie Rossouw is a C3 NRF-rated researcher and receives grant funding from the NRF. </span></em></p>KPMG South Africa executives have set a new benchmark for the country assuming responsibility for wrongdoing in their organisation.Jannie Rossouw, Head of School of Economic & Business Sciences, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/680782016-11-02T12:35:42Z2016-11-02T12:35:42ZSouth Africans learn that the law can be a double-edged sword<figure><img src="https://images.theconversation.com/files/144188/original/image-20161102-27231-y7cqgn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Head of South Africa's National Prosecuting Authority, Shaun Abrahams, dropped a fraud charge against the finance minister Pravin Gordhan.</span> <span class="attribution"><span class="source">Siphiwe Sibeko/Reuters</span></span></figcaption></figure><p><em>South Africa’s National Prosecuting Authority charged the country’s finance minister Pravin Gordhan and two of his former colleagues at the tax authority, Ivan Pillay and Oupa Magashule, with <a href="https://www.enca.com/south-africa/npa-charges-gordhan-pillay-and-magashula-with-fraud">fraud</a> last month. The charge was widely criticised as <a href="https://theconversation.com/charges-against-finance-minister-show-misuse-of-south-african-law-67177">baseless</a> and <a href="http://www.sowetanlive.co.za/news/2016/10/23/helen-suzman-foundation-and-freedom-under-law-launch-bid-to-set-aside-gordhan-s-charges">politically motivated</a>, amid allegations of <a href="http://www.biznews.com/leadership/2016/10/25/south-africans-mobilise-to-save-sa-from-state-capture-can-they-eject-zuma/">state capture</a>. It sent the currency into a <a href="http://www.timeslive.co.za/sundaytimes/businesstimes/2016/10/11/Rand-and-banking-shares-plummet-on-Gordhan-NPA-summons">nosedive and wiped billions</a> off the stock market. This week, the NPA <a href="http://www.iol.co.za/news/crime-courts/npa-drops-charges-against-gordhan-2085233">withdrew</a> the charges on the eve of the trio’s court appearance. Politics and society editor, Thabo Leshilo, asked law professor Penelope Andrews for her view.</em></p>
<p><strong>What’s the significance of the charges being withdrawn against Gordhan?</strong></p>
<p>The significance lies in three things: first, it was the extraordinary level of public attention that the case generated. The airwaves, the media and social media were alight with commentary on the case. </p>
<p>Second was the educational function that the charges provided. Ordinary citizens got another peek at the <a href="https://www.npa.gov.za/">National Prosecuting Authority</a> and its operations and there is now greater awareness of the meaning of fraud since this was the charge laid.</p>
<p>The third was that as events unfolded they showed that public campaigning and public pressure may actually yield results.</p>
<p><strong>What does all this say about the NPA and its independence?</strong></p>
<p>At the moment there is a lot of <a href="http://www.destinyconnect.com/2016/10/23/shaun-abrahams-met-zuma-behind-closed-doors-charging-gordhan-report/">speculation</a>, some of it quite persuasive. But something as serious as this – a minister being charged and the flagrant disregard for its consequences – requires a concerted probe into the reasons for the actions of the National Prosecuting Authority. We have to move from widespread speculation to confirmed facts.</p>
<p><strong>What’s to be read into the lateness of the decision not to prosecute, coming as it did on the even of their court appearance?</strong> </p>
<p>My sense is that the National Prosecuting Authority was taken by surprise at the level of <a href="http://www.timeslive.co.za/politics/2016/11/02/The-leading-figures-supporting-the-Save-South-Africa-protest">public disapproval</a> of its actions and the <a href="http://www.moneyweb.co.za/news/south-africa/da-eff-and-save-south-africa-march-against-state-capture/">overwhelming support</a> for Gordhan. In particular, they must have been alarmed by the level of <a href="http://constitutionallyspeaking.co.za/gordhan-is-there-any-case-to-answer/">legal opinion</a> about the spurious nature of the charges and opposition to the case itself.</p>
<p>The lateness of the decision to prosecute may have been hubris on the part of the head of the National Prosecuting Authority, <a href="https://www.npa.gov.za/content/adv-shaun-kevin-abrahams">Shaun Abrahams</a>. Or it may have been a decision of his to persevere and let the chips fall as they did. The decision not to prosecute may also have been a last ditch attempt on his part to save his reputation, such as it was, and to prevent a drubbing by the court.</p>
<p><strong>There has always been suspicion there was no case against the the trio and that the charges were politically motivated. This appears to be vindicated by the withdrawal. What does it say about the rule of law in South Africa?</strong></p>
<p>It actually says contradictory things about the rule of law. It can be used as a shield that protects those who might be falsely accused. This was clearly the case here. But the rule of law could also be a sword –- to attack those who obstruct the nefarious plans of powerful people.</p>
<p><strong>How does all this reflect on the head of the prosecuting authority? Are there grounds for him to resign?</strong> </p>
<p>I take no position on whether Abrahams should resign. Many prosecutors make decisions to withdraw charges for a host of reasons, some of them quite legitimate. The better route would be an inquiry into what went into the decision to charge the minister and the two others in the first place. Was it malice? Incompetence? A conspiracy? An inquiry would highlight whether Abrahams and his team are fit to run the nation’s prosecuting authority. </p>
<p><strong>What needs to happen to prevent a replay of similar situations in future, and rebuild confidence in the NPA?</strong> </p>
<p>An inquiry, not necessarily judicial, but led by credible individuals trained in the law, needs to be held into the <a href="http://www.dailymaverick.co.za/article/2016-10-27-game-over-for-abrahams-moyane-and-co-documents-prove-gordhan-prosecution-political/#.WBnHAfp97IU">fiasco</a>. It should be underpinned by a transparent process with unlimited access to a wide range of sources. Only such a concerted effort to clarify what has transpired will ensure that it is not repeated.</p><img src="https://counter.theconversation.com/content/68078/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Penelope Andrews does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>South Africa’s National Prosecuting Authority charged the country’s finance minister Pravin Gordhan and two of his former colleagues at the tax authority, Ivan Pillay and Oupa Magashule, with fraud last…Penelope Andrews, Dean of Law and Professor, University of Cape TownLicensed as Creative Commons – attribution, no derivatives.