Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698924896832.pdf (South Africa)
Wednesday, 15 March 2023] No 35—2023] FIFTH SESSION, SIXTH PARLIAMENT PARLIAMENT OF THE REPUBLIC OF SOUTH AFRICA _____________________ ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS _____________________ WEDNESDAY, 15 MARCH 2023 _____________________ TABLE OF CONTENTS ANNOUNCEMENTS National Assembly 1.

Referral to Committees of papers tabled .......................................................................... 2 TABLINGS National Assembly and National Council of Provinces 1.
Minister in The Presidency for Women, Youth and Persons with Disabilities ............... 3 2.

Minister of Defence and Military Veterans ..................................................................... 3 National Council of Provinces 1.

Chairperson ...................................................................................................................... 3 COMMITTEE REPORTS 1 National Assembly 1.

2.

3.

4.

5.
Finance ............................................................................................................................. 4 Small Business Development ......................................................................................... 31 Communications and Digital Technologies ................................................................... 37 Justice and Correctional Services ................................................................................... 40 Justice and Correctional Services ................................................................................... 42 National Council of Provinces 1.
Security and Justice and Cooperative Governance and Traditional Affairs .................. 44 ANNOUNCEMENTS National Assembly The Speaker 1.

Referral to Committees of papers tabled Please Note: The following entry (1) replaces the entry under Announcements in the ATC (Announcements, Tablings and Committee Reports) of 13 March 2023, published on page 3.
(1) The following papers are referred to the Portfolio Committee on Basic Education for consideration and report: (a) Annual Performance Plan of the Quality Council for General and Further Education and Training – UMALUSI for 2023/24.

(b) Annual Performance of the South African Council for Educators for 2023/24.

(2) The following paper is referred to the Portfolio Committee on Basic Education for consideration and report: (a) Annual Performance Plan of the Department of Basic Education for 2023/24.
(3) The following paper is referred to the Portfolio Committee on Justice and Correctional Services for consideration and report: (a) Certificate of Exemption submitted to Parliament for approval, in terms of section 46(4)(a) of the Regulation of Interception of Communications and Provision of Communication-related Information Act, 2002 (Act No 70 of 2002).

2 TABLINGS National Assembly and National Council of Provinces 1.
The Minister in The Presidency for Women, Youth and Persons with Disabilities (a) Annual Performance Plan of the National Youth Development Agency (NYDA) for 2023 – 2024.

(b) Annexure A: Revised Strategic Plan of the National Youth Development Agency (NYDA) for 2020 – 2025.

2.

The Minister of Defence and Military Veterans (a) Annual Performance Plan of the Department of Defence for 2023/24.

(b) Annual Performance Plan of the Castle Control Board for 2023/24 – 2025/26.
(c) Corporate Plan of Armscor (Armaments Corporation) for 2023/24.

(d) Annual Performance Plan of the Military Ombud for 2023/24.

National Council of Provinces 1.

The Chairperson (a) Consolidated Annual Municipal Performance Report 2020/2021 Financial Year, Kwa-Zulu Natal Province.

Referred to the Select Committee on Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements for consideration.

COMMITTEE REPORTS National Assembly 3 1.


BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE STANDING COMMITTEE ON FINANCE, DATED 14 MARCH 2023 The Standing Committee on Finance (SCOF/ the Committee), having considered the performance report and audited financial statements of the National Treasury (NT) and the South African Revenue Service (SARS) for the 2021/22 financial year, reports as follows: 1.
INTRODUCTION 1.1.On 21 February 2023, the Deputy Minister of Finance, Dr David Masondo and senior staff of the National Treasury (NT) and the South African Revenue Service (SARS), led by the Commissioner, Mr Edward Kieswetter, appeared virtually before the Standing Committee of Finance to present their annual reports and audited financial statements for 2021/22.
The Minister of Finance, Mr Enoch Godongwana, and the Acting Director-General, Mr Ismail Momoniat, sent apologies as they were preparing for the tabling of the national budget the following day.

1.2.Prior to the presentation of the annual reports, the Office of the Auditor-General of South Africa (AGSA), led by Ms Nompakamo Matanzima, Business Unit Leader: Finance Portfolio, presented to the Committee the audit outcomes of all the entities that AGSA audits in the finance portfolio.

2.
2.

PRESENTATION BY NATIONAL TREASURY 2.1.

National Treasury started by presenting its audit performance, which for the first time in years received a a qualified audit opinion.

The basis of this audit finding was that NT failed to record R68 million in respect of the Integrated Financial Management System (IFMS) related payments to Oracle for technical support and maintenance.
AGSA also found that 1 4 the balance for these payments since 2017 was incorrectly removed from the balance sheet, resulting in an understatement of R400 million.

2.2.

NT and AGSA has been in dispute in respect of the IFMS payments since 2016/17.

Since then, AGSA has found that the expenditure incurred in line with annual support and maintenance of the IFMS was fruitless and wasteful expenditure.
NT told the Committee that its view with regards to these payments has been that they are not made in vain as failure to make them would result in legal and financial implications for NT.

NT stated that none of these payments have been regarded by AGSA or any forensic investigation as suspicious or inappropriate or criminal.

2.3.
2.3.

NT explained that the license support and maintenance fees are paid annually to ensure that the IFMS project has automatic access to updated versions of licenses and software and security patches, updates and specialised technical problem solving which would be required in the full implementation of the IFMS.

NT further explained that if these annual fees are not paid, any discounts given will be lost and penalties and back payments will be incurred.
NT stated that it had provided evidence of utilisation of licenses as well as support and maintenance.

2.4.

NT explained that AGSA had calculated the Department’s performance on the utilisation of the IFMS licenses at the time of the full rollout planned for 2023.

It said that given that AGSA agreed that the IFMS software should be treated as work in progress, NT is of the view that the support and maintenance should be reclassified.

2.5.
2.5.

NT explained that an unsuccessful procurement process was initiated through the State Information Technology Agency (SITA) for the appointment of a service provider to implement the pilot to establish the basis for its national roll-out.

NT further explained that the SITA Act required government entities to procure goods and services through SITA.

2 5 NT stated that Government has no alternative but to successfully implement the IFMS.
It said it is implementing mitigating measures to ensure this successful implementation.

2.6.NT explained that in respect of the IFMS related expenditure, it was exercising its rights, following the audit objection process and obtaining legal advice in the interest of government-wide treatment of such large, co-managed multi-year projects.

2.7.
2.7.

Other audit findings of NT in the 2021/22 financial were that it incurred irregular expenditure of R30,7 million due to not following a proper tender process and failure to properly approve expenditure.

This is an improvement as last year irregular expenditure by NT was R66.175 million.

2.8.

Although there were misstatements in the financial statements, there were corrected resulting in material findings.

3.
3.

STRATEGIC GOALS FOR 2019/20: NATIONAL TREASURY 3.1.The NT is responsible for managing the country’s finances and draws its mandate from Chapter 2 of the Public Finance Management Act, as well as Chapter 13 of the Constitution.

The overall legal mandate of NT is based on section 216 (1) of the Constitution which requires it to ensure transparency, accountability and sound financial controls in the management of the country’s finances and the Public Finance Management Act (1999).

4.
4.

OVERVIEW OF NATIONAL TREASURY’S PERFORMANCE 4.1.

During the year under review, NT achieved 77.78% of its annual targets, 14.81% were partially achieved while 7.41% were not achieved.

The Budget Office and the Jobs Funds are two divisions where none of the targets were achieved.

3 6 4.2.NT’s allocation for 2021/22 increased by 83% or R28.3 billion from the previous year.
The increase in spending is largely attributed to the payment of R22 billion made to the South African Special Risk Insurance Association (SASRIA) because of the 2021 July unrest.

4.3.The Administration Programme (Programme 1) which provides for strategic leadership, management and support services to the department achieved only 60% of its performance targets, and 20% were partially achieved or not achieved, respectively.
It managed to spend 89% of its R513 million budget, resulting in an under-expenditure of R57.9 million.

4.4.The Economic Policy, Tax, Financial Regulation and Research Programme (Programme 2) which provides specialist policy research, analysis and advisory services in the area of macroeconomics and regulatory reforms achieved 100% of its performance targets.

The programme spent 88% per cent of its R141.8 million budget, resulting in the underspending of R16.4 million.
4.5.The Public Finance and Budget Management Programme (Programme 3) aims to provide analysis and advise on fiscal policy and public finances, intergovernmental financial relations, expenditure and planning priorities and to manage government’s annual budget process and provide public finance management support.

This programme achieved 54.5% of its performance targets while spending 97% of its R4,3 billion budget, leading to an under-expenditure of R136.7 million.
4.6.The Asset and Liability Management Programme (Programme 4) manages the government’s annual funding programme in a manner that ensures prudent cash management.

It also aims to promote and enforce prudent financial management of state- owned entities through financial analysis and oversight.

This programme achieved 92.3 % of its performance targets and spent 98% of its R9 billion budget, underspending R442.7 million.
4 7 4.7.The Financial Accounting and Supply Chain Management Systems Programme (Programme 5) achieved 66.7% of its performance targets for 2021/22 and spent only 76% of its R1 billion allocation, leading to an under-expenditure of R238 million.

The targets not achieved were related to the rollout of the IFMS project.

4.8.The International Financial Relations Programme (Programme 6) again achieved 100% of its performance targets and 100% of its R7.8 billion budget for the year.
4.9.The Civil and Military Pensions, Contributions to Funds and Other Benefits Programme (Programme 7) also achieved 100% of its performance targets but spent 94% of its R6.4 billion budget, leading to an under-expenditure of R336 million.

5.
5.

STRATEGIC GOALS OF THE SOUTH AFRICAN REVENUE SERVICE: 2019/20 5.1.SARS’s mandate is to contribute to the economic and social development of the country by collecting all taxes, duties and levies due to fund the South African government’s public service programmes and priorities.

5.2.

Its objective is the efficient and effective collection of revenue and control over the import, export, manufacture, movement, storage, or use of certain goods.

6.
6.

OVERVIEW OF THE SOUTH AFRICAN REVENUE SERVICE PERFORMANCE 6.1.SARS constitutes Programme 9: Revenue Administration, in the NT’s strategic and annual performance plans.

It has got nine strategic objectives (SOs).

SO1 seeks to provide clarity and certainty for taxpayers and traders of their obligations.

SO2 seeks to make it easy for taxpayers and traders to comply with their obligations.

SO3 seeks detect taxpayers and traders who do not comply and make non-compliance hard and costly.
SO4 seeks to develop a high performing, diverse, agile, engaged and evolved workforce.

SO5 seeks to increase and expand the use of data within a comprehensive knowledge management 5 8 framework, to ensure integrity, derive insight and improve outcomes.

SO6 seeks to modernize systems to provide digital and streamlined online services.

SO7 seeks to demonstrate effective resource stewardship to ensure efficiency and effectiveness in the delivery of quality outcomes and performance excellence.
SO8 seeks to ensure that SARS works with and through stakeholders to improve the tax ecosystem.

SO9 seeks to build public trust and confidence in the tax administration system.

6.2.SARS achieved an overall performance of 68.75 over its targets and received a transfer of R11.2 billion and spent all it (100%).

6.3.

It collected 1.56 trillion net revenue, compared to R1.24 trillion the previous year.

The gross revenue collected was R1.8 trillion, offset by refunds of R321.1 billion.
Personal Income Tax (PIT-35.5%), Value Added Tax (VAT-25%), and Corporate Income Tax (CIT- 20%) contributed over 80% of the revenue collected in 2021/22.

6.4.Compliance-related revenue collection, which is revenue that was collected through compliance interventions by SARS, contributed 13.8% (R215.4 billion, that is R43.5 billion more than in 2020/21) to the overall revenue in 2021/22.
6.5.SARS received an unqualified audit opinion from the AGSA for its own accounts, performance audit as well as revenue accounts.

Audit findings on revenue and own accounts also reduced by 50% from the previous, while no audit findings were raised for fruitless and wasteful and irregular expenditure.

6.6.

SARS reported updates on the implementation of the Nugent and the Zondo Commissions of Inquiry recommendations.
The Nugent Commission Report made 16 recommendations for implementation by SARS, which were broken down into 27 sub-recommendations.

All these related to governance with 17 being the responsibility of SARS and 10, the National Treasury.

SARS reported that it has finalised the implementation of 13 of the 17 sub- recommendations.
It said that the 4 remaining were under ongoing implementation, with 6 9 two of those having been referred to the justice system for investigation, particularly the BAIN matter and other investigations related to fruitless and wasteful expenditure by former employees.

SARS reported that at its request, BAIN has been restricted for 10 years from tendering for any government work.

6.7.
6.7.

With respect to the Zondo Commission of Inquiry, SARS has finalised implementing 8 of the 12 SARS specific recommendations and 4 are work in progress.

7.

REPORT OF THE AUDITOR-GENERAL SOUTH AFRICA ON NATIONAL TREASURY AND FINANCE PORTFOLIO ENTITIES.

7.1.

AGSA audits 17 of the entities in the finance portfolio.

These include the regulatory agencies, development banks, state-owned insurance and investment companies, government agencies, National Treasury and SARS.
The regulatory agencies audited are the: Accounting Standards Board (ASB), Co-operative Banks Development Agency (CBDA), FAIS Ombud, Financial and Fiscal Commission (FFC), Financial Intelligence Centre, Financial Sector Conduct Authority, Independent Regulatory Board for Auditors (IRBA), Pension Funds Adjudicator (PFA).

The SARB and the Prudential Authority are audited by private auditors.
The Development Banks audited are the Land and Agricultural Development Bank of South Africa (LB) and the Development Bank of Southern Africa (DBSA).

The audited government agencies are the Government Technical and Advisory Centre (GTAC) and the Government Pension and Administration Agency.

The insurance and investment companies are the Public Investment Corporation, Land Bank Insurance SOC, South African Special Risk Insurance Association (SASRIA) and the Land Bank Life Insurance SOC Limited (LBLIC).
The latter two are subsidiaries of the Land Bank.

7.2.

AGSA reported that the overall audit outcomes for 2021/22 regressed when compared to the previous year.

Only six (38%) entities (DBSA, FSCA, LBIC, LBLIC, LB and IRBA) 7 10 in the portfolio obtained clean audits, compared to 44% the previous year.

Despite this regression, some entities within the portfolio improved, such as IRBA and the LB.
AGSA however clarified that LB was not subjected to the audit process because of its exemption by the Minister of Finance as it was still resolving its default position with the lenders.

7.3.AGSA noted that the entities that managed to maintain clean audit outcomes have a strong leadership culture, sound financial and performance management processes, and effective governance.
It said that the effective governance structures in these entities ensured that actions were taken to address audit findings and were supported by adequately resourced and skilled officials.

AGSA said that the entities that did not do well could learn from the good practices implemented by these entities to improve their audit outcomes in the future.

7.4.

AGSA further noted that the entities that received clean audits achieved between 69% and 83% of their core mandate targets.
It said that it is important to ensure their achievements translate into service delivery to the citizens.

AGSA urged that going forward, the focus on these entities should be to ensure that they do not only achieve clean audit outcomes, but also ensure effective and efficient delivery of services in line with their respective mandates.

7.5.

NT regressed from an unqualified audit opinion with findings to a qualified auditing opinion.
NT’s qualified audit findings resulted from an incomplete disclosure of fruitless and wasteful expenditure relating to the IFMS project expenditure.
AGSA reported that NT lodged a formal dispute on the classification of the IFMS technical support and maintenance as fruitless and wasteful expenditure and removed the disclosure of fruitless and wasteful expenditure on the revised annual financial statements (submitted on 20 October 2022) and instead disclosed the previous fruitless and wasteful expenditure as a prior period error on an incorrect basis that such a determination can only be concluded 8 11 once the system is fully rolled out and the licenses were reclassified as capital work in progress.
7.6.

AGSA stated that as required by Section 40(3)(b)(i) of the PFMA all confirmed fruitless and wasteful expenditure must be disclosed in the financial statements.

It also said that as the expenditure was confirmed previously (the 2019-20 dispute resolution process) as fruitless and wasteful expenditure, AGSA disagreed with the removal.

As a result, this resulted in a modification (qualification) of the 2021-22 audit report of National Treasury.

7.7.
7.7.

Other entities (FIC, OPFA and the FAIS Ombud) regressed from a clean opinion the previous year to unqualified audit opinion with findings.

7.8.

AGSA further reported that most of the entities in the portfolio, especially the large ones such as NT, SARS and the PIC, continued to struggle to achieve clean audit outcomes.
It said that the main key root causes were inadequate review and monitoring controls over the preparation of financial statements and performance reports and vacancies in key positions.

7.9.

AGSA acknowledged that the delay in finalising NTs audit impacted negatively on the accountability and oversight process.

It said that the cause of the delay was a dispute relating to the treatment of the IFMS project’s annual technical support and maintenance payments.
However, AGSA reported that it has revised its dispute resolution processes to ensure that there are no delays of this nature going forward.

The new dispute resolution policy was shared with the Committee.

7.10.

Nine (56%) entities in the portfolio (CBDA, FAIS, FFC, FIC, OPFA, SARS, GTAC, GPAA, and PIC received unqualified audit opinions with findings.
AGSA said that these entities, including NT, continued to struggle with compliance with legislation and prior year action plans appear to have failed to adequately address significant internal control deficiencies.
AGSA said that the prevalent instances of non-compliance were in the areas of expenditure management (GPAA, NT, FFC, OPFA), supply chain management (GPAA, 9 12 FIC, FAIS, FFC, OPFA), consequence management (GPAA, FFC) and material misstatements identified in the financial statements submitted for auditing (GPAA, SARS, NT, PIC, CBDA, FFC, OPFA).

7.11.
7.11.

AGSA stated that these challenges are like those reported in the prior year and may be indicative of ineffective audit action plans and inadequate consequence management in some entities in the portfolio.

7.12.
7.12.

AGSA further presented the outcomes of the portfolio and the drivers of these outcomes in the key nine focus areas which are: performance against Medium Term Strategic Framework (MTSF) targets and annual performance, governance and stability, expenditure management, material irregularities, consequence management, quality of submitted financial statements and annual performance reports, financial health and information technology.

7.13.
7.13.

On the MTSF targets, AGSA reported that the finance portfolio entities played a direct role in all seven priority areas of the MTSF.

It noted that all the strategic plans and annual performance plans (APPs) of the entities in the portfolio are aligned with government priorities as contained in MTSF and the National Development Plan (NDP) 2030.

Six entities in the portfolio achieved more than 80% of their targets as per the annual performance report for the 2021/22 (NT, FFC, FIC, GTAC, FAIS, FSCA).
Eight of the entities achieved more than 60% of their targets (SARS, PIC, IRBA, GPAA, CBDA, LBLIC, LBIC, DBSA) and only one (OFPA) achieved less than 60%.

AGSA said that the main reasons for failure to achieve targets included the lingering impact of Covid-19 restrictions on the effectiveness of operations and the delays in implementing the necessary initiatives on the planned targets.

10 13 7.14.

AGSA reported that the indicators in the FFC strategic plan were not aligned with its core mandate.
It said that this was due to inadequate reviews of the strategic plan by the Commission’s leadership.

7.15.

AGSA said that to improve delivery of services and the realisation of the MTSF priorities, strategic planning documents should be reviewed by the accounting officer/authority to ensure alignment with government priorities and commitments, and that there should be regular monitoring over service delivery.

There should also be effective consequence management for non-achievement.

7.16.
7.16.

On governance and stability, AGSA noted that although the portfolio is stable as most of the entities have fully constituted boards/accounting authorities and key positions at executive level are filled, vacancies in critical positions in the portfolio impacted the overall audit outcomes.

Some of these vacancies are one of the root causes of the overall stagnation of audit outcomes as they impacted on the effectiveness of the developed action plans.

7.17.
7.17.

AGSA said that the following vacancies for the current year were reported: accounting officer positions remain for GTAC, GPAA, chief executive officer (CEO)/managing director (MD) for CBDA, LB, IRBA, and chief financial officer (CFO) positions for NT, GPAA, PIC, IRBA were filled with acting appointments.

7.18.
7.18.

AGSA noted that NT had made progress in filling vacant positions that were reported in the prior year but the positions of the accountant-general, chief procurement officer (CPO), and chief audit executive remained vacant during the year under audit.

It said that after the financial year-end, the director-general (DG) position at the NT also became vacant.

The new Accountant-General and CPO were appointed after the financial year-end and resumed duty during the 2022/23 period.

7.19.
7.19.

On the PIC, AGSA noted the appointment of the chief investment officer (CIO) and the precautionary suspension of the chief operating officer (COO) due to an allegation of 11 14 misconduct after year-end.

The IRBA CEO was also appointed in September 2022, after the year-end under audit.

7.20.

On expenditure management, AGSA noted that although there were some improvements in the levels of irregular expenditure over the past two years, it remained high at R122 million (2021: R171 million).
Fruitless and wasteful expenditure remained unchanged at R73 million, AGSA reported.

It said that although NT, GTAC and GPAA remained the highest contributors to irregular expenditure (more than 84% of the total irregular expenditure), there were significant improvements in the control environment at GTAC and NT as the irregular expenditure relates to the previous year’s multi-year contracts and no new irregular contracts were identified.

7.21.
7.21.

AGSA said that the FFC and OPFA had material non-compliance findings on expenditure management, which were driven by irregular expenditure incurred from non- compliance with procurement prescripts.

It said that although, in most instances, the entities were able to detect non-compliance with procurement prescripts and the related irregular expenditure, the preventative controls implemented by management were not adequate to prevent non-compliance.
AGSA recommended that preventative controls be strengthened.

It further noted that NT remained the biggest contributor of fruitless and wasteful expenditure due to the IFMS project that had still not been implemented.

It recommended that the accounting officer should take steps to prevent further fruitless and wasteful expenditure and should ensure that procurement delays and proper project management concerns over the IFMS project are addressed and the solution implemented.
It said that failure to do this could result to material irregularities (MI’s) in terms of the Public Audit Act (PAA).

7.22.

AGSA reported that NT and DBSA were included for the implementation of the material irregularity in terms of the Public Audit Act.

It however did not identify or report 12 15 material irregularity in respect of the DBSA for the 2021/22 audit.

For NT, it had identified a material irregularity relating to the IFMS project.
It explained that a formal material irregularity notification was issued to the accounting officer of NT, as required by Material Irregularity Regulation 3(2), and the accounting officer had responded to the notification.
It explained that it considered the accounting officer's response, however, as the accounting officer had already done several investigations on this matter and the matter was already a dispute, AGSA decided to refer the matter to the Special Investigation Unit (SIU) for further investigation (furthermore, the SIU was already investigating IFMS in accordance with a Presidential Proclamation).

AGSA referred the matter to the SIU in January 2022 and the investigation was still in progress.
It must also be noted that there is an ongoing Public Protector investigation on the IFMS into alleged mismanagement, irregular and wasteful expenditure.

7.23.

On consequence management, AGSA noted that the finance portfolio has effective consequence management processes in place to investigate and up on irregular expenditure and this has led to the reduction of irregular expenditure by 29% from R171 million (2020/21) to R122 million.
AGSA further noted that over the past two years more than R402 million of irregular expenditure had been condoned, demonstrating that progress had been made to resolve prior year irregular expenditure cases.

AGSA noted however that consequence management remained a challenge at the FFC and GPAA as material non- compliance findings were raised relating to the lack of investigation or evidence to support such investigations.
AGSA recommended that there must be timely investigations and disciplinary action against those found wanting.

AGSA noted that failure to implement consequence management encourages a culture where disregard for legislation, policies and procedures thrive.

13 16 7.24.

On the quality of submitted financial statements, AGSA found that the portfolio had regressed as only three entities (NT, CBDA and PIC) had material misstatements which resulted in non-compliance with section 40 and 55 of the PFMA.
However, this number increased to seven (GPAA, SARS, FFC, CBDA, NT, PIC, OPFA) in the current year.

AGSA urged management to develop action plans that address the root causes, augment existing capacity in their finance divisions, use internal audit to perform a more detailed review of the financial statements and, enhance the review processes and implement consequence management by holding officials accountable.

7.25.
7.25.

On the quality of performance reporting, AGSA noted that most of the auditees in the portfolio maintained the quality of performance reporting during the year and had no material findings reported on the reliability and usefulness of the reported performance information.

It pointed out that GTAC and CBDA had material findings on the usefulness and reliability of reported performance information.
This was due the performance information in the annual performance reports not supported by reliable evidence.

AGSA said that the technical indicator descriptions did not clearly specify the method of calculation for key indicators.

AGSA said that it was therefore unable to obtain sufficient appropriate audit evidence that clearly defined the predetermined simple count for the required level of performance and method of calculation to be used when measuring the actual achievement.
AGSA recommended that the management of these auditees implement effective action plans to address these repeat findings.

7.26.

AGSA also identified material misstatements in the annual performance reports submitted for auditing by the PIC, NT, and DBSA.

However, these were subsequently corrected the misstatements, leading AGSA not to raise any material findings on the usefulness and reliability of the reported performance information.

14 17 7.27.
14 17 7.27.

On financial health, AGSA noted that the entities in the portfolio were in good financial health, except for NT, SASRIA and LB.

It explained that NT provides financial guarantees which enable entities to obtain funding to fulfil their mandates.

It said that by 31 March 2022, NT had issued total guarantees of R22 billion (a R1 billion increase from previous year) to the South African Reserve Bank (SARB), LB and DBSA.
AGSA explained that the guarantees issued created pressure on the fiscus due to the potential interest and capital payments in the event of a default.
The guarantees to entities within the finance portfolio hold potential risks to operating performance and continued service delivery due to the potential negative impact on the department’s ability to fund planned operations, activities, programmes and projects, as funds may need to be diverted away from operating and service delivery objectives in order to fund the guarantees if called on.

7.28.
7.28.

On the financial health of LB, AGSA explained that towards the end of April 2020, LB experienced a liquidity shortfall, which resulted in the bank defaulting on some of its obligations.

This triggered a cross default and resulted in de-facto stand still on capital and interest payments to its funders, AGSA explained.
The bank is currently working on a liability solution to remedy the default and the liability solution to cure the default was still in progress and is dependent on the signing of the commitment agreements with lenders.

The planned date for finalization of the liability solution was the end of September 2022.

AGSA explained that these events or conditions indicate that a material uncertainty exists that may cast significant doubt on the entity’s ability to continue as a going concern.

7.29.
7.29.

AGSA said that an emphasis of matter paragraph has been included in the audit report to draw this matter to the attention of users of the financial statements of LB.

It explained that the bank's underperforming loans showed a decrease from R11.33bn (2021) to R4.99bn (2022) which resulted in an impairment release of R800m.
AGSA explained further that the profits reported in the current year mainly related to the reversal of the previous 15 18 recognised expected credit losses (provision for bad debts) in prior years.

It said that this reversal is mainly due to a significant decrease in the debtors’ book due to credit worthy customers leaving the bank for other commercial banks since LB could only provide limited facilities during the default period.
AGSA said that LB appears to be losing customers who are servicing their debts well and might be left with under performing loans which may cause sustainability challenges to the bank.

7.30.

AGSA further explained that LB was allocated R5 billion in the 2021-2022 financial year by NT, but the funds could not be paid due to the outstanding commitment agreements.

AGSA recommended that LB should consider rehabilitation and recovery of the non- performing loans to improve the quality of the loan book.
It also recommended that the bank should work on a strategy focusing on the new business model of the bank that will enable recognition of new business to improve performance and financial viability of the bank.

7.31.

On financial health of SASRIA, AGSA reported that it faces liquidity and solvency risks due to the July 2021 riots in Kwazulu-Natal and parts of Gauteng.

AGSA said that it noted the announcement by the finance minister to support SASRIA in dealing with the claims arising from the riots.
It said that to date, NT had provided financial assistance amounting to R22 billion to enable the entity to address the immediate liquidity and solvency risks.

AGSA recommended continuous engagement with SASRIA to address this risk and ensure that liquidity and solvency risks are identified and mitigated.

7.32.
7.32.

AGSA explained that NT plays an enabling role in the economic recovery plan of the country and to ensure that departments and public sector entities deliver on their mandates and key imperatives of the economic recovery plan.
AGSA said that NT needs to ensure that there is adequate oversight over government spending and that the continued government debt is capped to the extent possible and that there are adequate funds available 16 19 to stimulate the South African economy, which has been severely impacted by the covid- 19 pandemic.

7.33.
7.33.

On information technology, AGSA said that the finance portfolio has effective IT management processes in place and the entities in the portfolio have improved on the IT general and application controls.

AGSA recommended, however, that at DBSA management needs to enhance the processes in relation to the approval of IT governance policies and procedure documents, in particular IT governance framework, IT disaster recovery plan, cyber security management and user access administration.

7.34.
7.34.

AGSA noted that at LB, LBIC and LBLIC, Information and communication technology (ICT) management oversight had not ensured that policies and procedures are adequately documented, approved, implemented, and monitored to ensure adherence.

AGSA said that this has negatively affected the governance of IT and controls within and around the key financial and performance information systems.
Should these concerns not be attended to, the entire IT environment is susceptible to loss of data, phishing, cyber-attacks for ransom and unauthorised access to sensitive information.

7.35.

AGSA noted that at FSCA management did not review user and administrative access on the payroll system, as they were still embedding user account processes on this new system.
AGSA further recommended that at SARS, management needs to ensure that the firewall standard and procedure is revised to include the control on firewall rules.

It also recommended that the management of GPAA needs to enhance processes in relation to management of ICT plans and budget, security management and change management.
AGSA said that the government component at GPAA needs to implement new technologies, and in other instances, enhance the current capabilities offered by the technology tools in place to improve audit trail logging and encryption.

17 20 7.36.

On NT, AGSA said that improvement is still required to address the repeat weaknesses identified within the IT environment, which were due to utilisation of unsupported Windows operating systems.
AGSA said that no weaknesses were identified during the audit of the program change management, user access management and automated controls in the Personnel Salary System (Persal), basic accounting system (BAS) and the logistical information system (Logis), transversal system environments and controls were adequately maintained and implemented.

There were also no weaknesses identified during the testing of automated controls embedded into the central supplier database (CSD), AGSA said.
AGSA however identified weaknesses regarding the inadequate design and implementation of controls in the focus areas of network security and ICT service continuity in the CSD environment.

7.37.

With respect to the IFMS, AGSA explained that in the prior year it had reported that the overall project status was behind the delivery milestones, mainly due to procurement delays.
It explained that during the current year, AGSA noted that NT had attempted to appoint the service provider through SITA, however the process was unsuccessful because the bid price exceeded the allocated budget, and the bid was subsequently cancelled in September 2021.

7.38.

AGSA urged management that urgent action plans must be implemented to expedite the procurement process and re-define the programme milestones to ensure successful implementation of the IFMS by 31 March 2024.
AGSA further recommended that the memorandum of agreement (MoA) regarding the IFMS steering committee between NT, SITA, the Department of Communications and Digital Technologies (DCDT) and the Department of Public Service and Administration (DPSA), as the latter two have not signed the MoA.

AGSA explained that the finalisation of the MoA by all stakeholders is critical to ensuring that adherence can be effectively monitored, and accountability be enforced.

18 21 8.
OBSERVATIONS AND RECOMMENDATIONS GENERAL OBSERVATIONS AND RECOMMENDATIONS ON THE FINANCE PORTFOLIO 8.1.The Committee again regrets the delays by the National Treasury to table in Parliament its annual report with audited financial statements This is the second year in a row that NT’s annual financial statements were only tabled in January due to the resolution of a dispute between NT and AGSA over the IFMS project issues, which this year resulted in NT receiving a qualified audit opinion, a regression from the previous year’s audit finding.
While the Committee recognises NT’s prerogative to challenge the findings of AGSA, and there is need to comply with all the due process prescripts of dispute resolution thereof, the Committee notes that this, nonetheless, negatively affects the Committee’s oversight role and the National Assembly’s programming schedule.

This year the Committee had to deal with annual reports while also processing the fiscal framework and revenue proposals.
The Committee welcomes that a new policy for dispute resolution has been adopted by AGSA and will, in the future, minimise or eliminate the delays that have been occurring in the past three financial years between NT and AGSA.

8.2.The Committee extends its gratitude to AGSA on the detailed audit report and recommendations.

The Committee further notes all AGSA’s recommendations to the Committee and will implement them as it has in the previous year.
In this regard, the Committee will immediately, on 28 and 29 March 2023, conduct an oversight visit to NT over its adverse audit outcomes, particularly on the IFMS project, and meet all the entities in the portfolio to receive reports on the implementation of audit action plans.

This will be followed by continued monitoring including quarterly update reports on the implementation of audit action plans by these entities to the Committee.
19 22 8.3.The Committee notes that the overall audit outcomes of the finance portfolio regressed in 2021/22 when compared to the previous year.

Only six (38%) entities (DBSA, FSCA, LBIC, LBLIC, LB and IRBA) obtained clean audits, compared to 44% the previous year.

Other entities (FIC, OPFA and the FAIS Ombud) regressed from a clean opinion the previous year to unqualified audit opinion with findings.
The Committee further notes that most of the entities in the portfolio, especially the large ones such as NT, SARS and the PIC, continued to struggle to achieve clean audit outcomes.

The Committee is obviously disappointed with the regression but also notes that some entities within the portfolio improved, such as IRBA and the LB.
The Committee further notes that 56% of entities in the portfolio (CBDA, FAIS, FFC, FIC, OPFA, SARS, GTAC, GPAA, and PIC) received unqualified audit opinions, although with findings.

8.4.The Committee notes the message from AGSA that entities that managed to maintain clean audit outcomes have a strong leadership culture, sound financial and performance management processes, and effective governance.
On the other hand, entities that did not do well continued to struggle with compliance with legislation and prior year action plans appeared to have failed to adequately address significant internal control deficiencies.
AGSA said that the prevalent instances of non-compliance were in the areas of expenditure management (GPAA, NT, FFC, OPFA), supply chain management (GPAA, FIC, FAIS, FFC, OPFA), consequence management (GPAA, FFC) and material misstatements identified in the financial statements submitted for auditing (GPAA, SARS, NT, PIC, CBDA, FFC, OPFA).
The Committee agrees with AGSA that entities that did not do well could learn from the good practices implemented by entities that achieved clean audits to improve their audit outcomes in the future.

The Committee further agrees that clean audit outcomes should be accompanied by effective and efficient delivery of services in line with the entities’ respective mandates.

20 23 8.5.
20 23 8.5.

The Committee notes the audit outcomes and their drivers as presented by AGSA in key nine focus areas which are: performance against Medium Term Strategic Framework (MTSF) targets and annual performance, governance and stability, expenditure management, material irregularities, consequence management, quality of submitted financial statements and annual performance reports, financial health, and information technology.

8.6.
8.6.

The Committee notes that the finance portfolio entities play a direct role in all seven priority areas of the MTSF.
The MTSF targets for the portfolio are to: strengthen Municipal Financial System by 2023; implement the IFMS in the public sector by 2021; 100% elimination of wasteful expenditure in the public sector institutions by 2024; 75% reduction of irregular expenditure in public sector institutions by 2024; 75% reduction of qualified audits in the public sector by 2024; illicit economy established and fully functional at SARS and; Infrastructure Fund established and operationalised with R1 trillion invested by 2024.
The Committee will actively monitor the achievement of these targets through its oversight programme and welcomes that AGSA will now evaluate in its audits the achievement of these MTSF targets, most of which are due next year, and those in the NDP.

8.7.

The Committee further welcomes that most of the strategic and annual performance plans (APPs) of the entities in the portfolio are aligned with government priorities as contained in MTSF and the National Development Plan (NDP) 2030.
It also welcomes and commends that six entities in the portfolio achieved more than 80% of their targets (NT, FFC, FIC, GTAC, FAIS, FSCA).

Eight of the entities achieved more than 60% of their targets (SARS, PIC, IRBA, GPAA, CBDA, LBLIC, LBIC, DBSA) and only one (OFPA) achieved less than 60%.
The Committee is concerned that OPFA achieved only 33.3% of its annual targets and calls upon the Ministry of Finance to heighten oversight over the entity and the 21 24 management of OPFA to ensure that the office is capacitated with enough resources to deal with the volume of complaints that the entity receives.

8.8.

The Committee further notes that the performance indicators in the FFC strategic plan were found by AGSA to be not aligned with its core mandate.
The Committee urges that FFC’s leadership to pay attention to its strategic and annual performance plans to ensure that they are aligned with its core mandate and hopes that it did so when it reviewed its strategic plan in January this year.
8.9.On governance and stability, the Committee notes that although the portfolio is stable as most of the entities have fully constituted boards/accounting authorities and key positions at executive level are filled, there are still vacancies in critical positions in the portfolio which impact the overall audit outcomes.

The Committee notes that vacancies are one of the key root causes of the overall stagnation of audit outcomes as they impacted on the effectiveness of the developed action plans.
When the Committee meets with the finance portfolio entities on its oversight visit later this month, it requires reports of all vacant critical positions in the portfolio and deadlines on when they will be filled.

8.10.

The Committee notes, on expenditure management, that although there were some improvements in the levels of irregular expenditure over the past two years, it remained high at R122 million (2020/21: R171 million).
The Committee further notes that fruitless and wasteful expenditure remained unchanged at R73 million and could have been higher if NT correctly classified the IFMS payments on technical support and licenses.

8.11.

The Committee further notes that the FFC and OPFA had material non-compliance findings on expenditure management, which were driven by irregular expenditure incurred from non-compliance with procurement prescripts.
The Committee calls on all the entities that had issues with irregular and fruitless and wasteful expenditure, particularly the FFC and OPFA, to strengthen their preventative controls.

22 25 8.12.

The Committee notes that consequence management remained a challenge at the FFC and GPAA as material non-compliance findings were raised relating to the lack of investigations or evidence to support such investigations.
The Committee agrees with AGSA that failure to implement consequence management encourages a culture of disregard for legislation, policies, and procedures.

The Committee recommends that all entities in the portfolio conduct investigations timeously and ensure that there is disciplinary action against those found wanting.

8.13.
8.13.

The Committee notes that the quality of submitted financial statements regressed from three entities the previous year (NT, CBDA and PIC) to seven (GPAA, SARS, FFC, CBDA, NT, PIC, OPFA) in the current year.

The Committee will closely monitor that the action plans address the root causes.

When the Committee conducts its oversight over the audit action plans, it will invite AGSA’s officials that are responsible for the portfolio to assist the Committee in this regard.

8.14.
8.14.

The Committee further notes that most of the auditees in the portfolio maintained the quality of performance reporting during the year and had no material findings reported on the reliability and usefulness of the reported performance information.

The Committee calls on GTAC and CBDA to rectify the repeat material findings on the usefulness and reliability of reported performance information, as recommended by AGSA.

8.15.
8.15.

The Committee notes that most entities in the portfolio were in good financial health, except for NT, SASRIA and LB.

The major risk with NT is the financial guarantees that it provides when there is an event of default.

On LB, the issue is the cross-default position which started in April 2020 and failure to finalise a liability solution.

On SASRIA, the main issue it liquidity and solvency challenges following the July 2021 riots in KZN and parts of Gauteng.
The Committee called for heightened oversight over these issues by the Ministry, executive and accounting authorities.

23 26 8.16.

The Committee notes, on information technology, that the finance portfolio has effective IT management processes in place and that the entities in the portfolio have improved on the IT general and application controls.
The Committee calls on the DBSA management to enhance the processes in relation to the approval of IT governance policies and procedure documents, in particular IT governance framework, IT disaster recovery plan, cyber security management and user access administration.

8.17.
8.17.

The Committee further recommends that the LB, LBIC and LBLIC ensure that the Information and Communication Technology (ICT) management policies and procedures are adequately documented, approved, implemented, and monitored to ensure adherence.

8.18.

The Committee further calls on the FSCA management to attend to the issues raised by AGSA regarding its user and administrative access on the payroll system.
It further calls on SARS, GPAA and NT to attend to the specific issues raised by AGSA regarding their IT systems.

NATIONAL TREASURY 8.19.

The Committee notes that the National Treasury achieved about 80% of its performance targets and spent 98% of its budget in the 2021/22 financial year.

The Committee commends NT for this achievement and believes that there is room for improvement in ensuring that NT’s expenditure aligns with performance targets across its programmes.

8.20.
8.20.

The Committee notes that the reasons for non-achievement of targets related to the Municipal Finance Improvement Programme, the non-implementation of the IFMS project due to procurement delays, and the Jobs Fund where grant funding disbursement was less than the projected amount.

8.21.
8.21.

On the MFIP, the Committee notes that AGSA highlighted the ineffectiveness of interventions by NT and provincial treasuries which led to little improvement in the audit 24 27 outcomes, internal control environment and overall governance of struggling municipalities.

AGSA also noted that there was also no improvement in the financial affairs of municipalities who are in financial distress and that section 139 intervention had not improved the overall running of municipalities, among others.
The Committee will soon request a full briefing on the effectiveness of the MFIP and related interventions from NT and other relevant stakeholders.

8.22.

On the IFMS, the Committee notes that NT regressed from an unqualified audit opinion with findings to a qualified auditing opinion because of it.

NT’s qualified audit findings resulted from an incomplete disclosure of fruitless and wasteful expenditure relating to the IFMS project expenditure.
AGSA reported that NT lodged a formal dispute on the classification of the IFMS technical support and maintenance as fruitless and wasteful expenditure and removed the disclosure of fruitless and wasteful expenditure on the revised annual financial statements (submitted on 20 October 2022) and instead disclosed the previous fruitless and wasteful expenditure as a prior period error on an incorrect basis that such a determination can only be concluded once the system is fully rolled out and the licenses were reclassified as capital work in progress.
AGSA disagreed and as a result, this resulted in a modification (qualification) of the 2021/22 audit report of National Treasury.

8.23.

The Committee notes further that NT was last year included for the implementation of the material irregularity in terms of the Public Audit Act because of the IFMS project expenditure.
The formal material irregularity notification was issued to the accounting officer of NT, as required by Material Irregularity Regulation 3(2), and the accounting officer had responded to the notification.

AGSA also decided to refer the matter to the Special Investigation Unit (SIU) for further investigation in January 2022 and the investigation is still in progress.
It must also be noted that there is an ongoing Public Protector investigation on the IFMS into alleged mismanagement, irregular and wasteful 25 28 expenditure.

The issues around the IFMS project payments have become complicated and seem to have worsened as they have led to a qualified audit opinion and the formal notification of a material irregularity.
The Committee will conduct its own oversight visit to NT on the IFMS project on 28 March 2023, as it planned oversight last year was indefinitely postponed due to non-availability of the Minister and the accounting officer.

The Committee will also seek to understand if the matters that have led to the audit qualification and material irregularity will not recur in future audits.
It is not clear to the Committee whether not declaring the payments as fruitless and wasteful in the previous years resolve the disputes between AGSA and NT.

8.24.

The Committee is concerned by the failure to achieve targets by the Jobs Fund, in a country with such high levels of unemployment.

The Committee will in the next quarter request a full presentation from NT on the impact and effectiveness of the Jobs Fund, plans for its recapitalisation and future contribution.

8.25.
8.25.

The Committee is concerned with the risk posed by the increasing financial guarantees.

The Committee has already expressed itself on these issues in its 2023 report on the Fiscal Framework and Revenue Proposals.

SARS 8.26.

The Committee notes that SARS achieved an overall performance of 68.75 over its targets and received a transfer of R11.2 billion and spent all it (100%).
The Committee commends SARS for these achieves and believes that there is room for improvement in ensuring that its expenditure aligns with its performance targets.

8.27.

The Committee notes that SARS collected 1.56 trillion net revenue, compared to R1.24 trillion the previous year.

The gross revenue collected was R1.8 trillion, offset by refunds of R321.1 billion.
The Committee further notes that Personal Income Tax (PIT-35.5%), 26 29 Value Added Tax (VAT-25%), and Corporate Income Tax (CIT-20%) contributed over 80% of the revenue collected in 2021/22.

8.28.

The Committee notes the achievements on compliance-related revenue collection, which is revenue that was collected through compliance interventions by SARS, contributed 13.8% (R215.4 billion, that is R43.5 billion more than in 2020/21) to the overall revenue in 2021/22.

8.29.
8.29.

The Committee notes that SARS received an unqualified audit opinion with no material findings raised on fruitless and wasteful and irregular expenditure.

8.30.

The Committee further notes the update report on the implementation of the Nugent and the Zondo Commissions of Inquiry recommendations.

SARS reported that it has finalised the implementation of 13 of the 17 sub-recommendations directed to it by the Nugent Report.
SARS further reported that it had finalised the implementation of 8 of the 12 SARS specific recommendations on the Zondo Commission of Inquiry report, and 4 were work in progress.

The Committee will schedule a full detailed briefing on the implementation of the Zondo Commission of Inquiry report in the next quarter.

The Democratic Alliance (DA) reserve their position.

Report to be considered.

27 30 2.
SUBMISSION OF A LEGISLATIVE PROPOSAL TO AMEND THE NATIONAL SMALL ENTERPRISE ACT, 1998 (Act 102 of 1996): MEMORANDUM IN TERMS OF RULE 273 OF THE RULES OF THE NATIONAL ASSEMBLY BY THE PORTFOLIO COMMITTEE ON SMALL BUSINESS DEVELOPMENT, DATED 22 FEBRUARY 2023 The Portfolio Committee on Small Business Development (“the Committee") hereby requests permission of the House in terms of National Assembly Rule 273(1) to institute and introduce the bill, namely, National Small Enterprise Amendment Bill, 2023 (“the Bill”).
Particulars of the Bill 1.

The Bill seeks to strengthen the small, medium and micro enterprises and co-operative (“SMME”) ecosystem, which is regarded across the world as the engine for economic development.

It is estimated that SMMEs generate half of gross domestic product and nearly 60 percent of employment in South Africa.

A large and growing set of challenges is facing SMMEs.

New business risks and threats choking the fluidity and growth of this sector are emerging.
The Committee intends to amend and amplify the National Small Enterprise Act, 1998 (Act 102 of 1996) through the creation of a Small Enterprise Commission (“the Commission”) to be responsible for, inter alia: 1.1 the provision of dispute resolution service which will deals with business to business and supplier-contractor disputes; 1.2 the receipt and administration of complaints made by or on behalf of SMMEs regarding their dealings with other businesses and government agencies; 1.3 the investigation of complaints and referring any such complaints to another appropriate person or body; 1.4 making representations or taking any action on behalf of SMMEs; 1.5 conducting investigations into the way in which SMMEs are treated by other businesses or government; 1.6 facilitating the development of codes of good practice by industry that deal with issues concerning the SMME sector, and 1 31 1.7 considering complaints by SMME suppliers about payment issues with larger businesses and the state sector in particular.
2.

The proposed Bill shall further explore the establishment of a Small Enterprise Appeals Tribunal (“the Appeals Tribunal”) to adjudicate and mediate on matters referred to it by the aggrieved or disgruntled parties.

The role of the Appeals Tribunal would be, among others, to conduct an independent review of the decisions or awards made by the Commission.

3.
3.

It is envisaged that these amendments should be effected through the insertion of new definitions and new sections into the National Small Enterprise Act, 1996 (Act No.

102 of 1996) as well as any consequential amendments that may be necessary.

Background and Objects of the Bill 4.

The Committee has received several complaints from SMMEs concerning the behavior of its customers, mainly regarding business with the State and larger businesses.
Most of the complaints received vary from non-payment to late payment of services rendered, product delivery issues, contractual disputes, and uncompetitive behavior of big businesses (i.e.

business practices aimed at eliminating competition by driving SMMEs out of business).

The late payments, in particular, are at an all-time high as SMMEs wait too long to be paid.

This phenomenon is not only rampant in government but in the private sector as well.
SMMEs often do not have adequate resources to afford the high cost of litigation and therefore succumb to the dictates of big businesses or the government itself.

5.
5.

It is imperative to note that during the fifth Parliament, the predecessor of this Committee held several sessions with SMMEs following numerous complaints from the sector, ranging from allegations of corporate bullying, non-payment of services rendered, price discrimination, unfair terms of trade, red tape, to deliberate supply chain harassment often used by big conglomerates to stamp out competition.
That Committee had then concluded that the practice was widespread to the degree that it deemed it appropriate to adopt a 2 32 resolution to pursue a legislative response.

The delayed action in executing that resolution brought forth the Private Members Bill sponsored by then Member of Parliament, Honorable Toby Chance, the Small Enterprises Ombud Service Bill [B14-2018].
The motion of desirability on that Bill was not adopted as that Committee was of the view that the Bill would duplicate what the Department was already working on both in terms of National Small Business Amendment Act and the Co-operative Amendment Act.

6.

Now in this sixth Parliament, the Committee continues to receive complaints relating to unethical behavior by big businesses, and public sector conduct, especially in the area of supply chain management and disputes among small enterprises themselves.
With the SMME sector projected to create more than 11 million jobs by 2030, a favorable environment must be created for that goal to be achieved.

The Committee remains of the view that pursuance of lawsuits to resolve disputes can be costly and SMMEs require mechanisms that are accessible and affordable to smaller business concerns.

Commercial disputes suppress the sector's vibrancy and ability to create jobs.
Messy and drawn-out litigations stifle growth, drain resources and require experience that most small businesses do not have.

The importance of putting in place a dedicated dispute resolution mechanism cannot, therefore, be overemphasized.

There is a reasonable expectation from the general public that Parliament, as the people's representative, has to tackle these issues.

However, Parliament, or Committees of Parliament, are unable to exercise powers they do not enjoy.
Hence, once more, this Committee has overwhelmingly resolved that amendment to the National Small Enterprise Act is necessary and should be expedited.

The Committee is convinced, especially after having consulted extensively, that this phenomenon is indicative of a market failure that calls for a statutory response.

Objects of the Bill 7.

The primary aim of the Bill is to guarantee that a beneficial environment for the SMME sector exists.
The proposed amendments strive to pursue the creation of a Small Enterprise 3 33 Commission and a Small Enterprise Appeals Tribunal with powers to investigate, improve the operating environment, issue sanctions against unscrupulous businesses, penalize unethical behavior, investigate unfair terms of trade, set aside unfair and unreasonable contracts and act as a voice for small business concerns against costly red tape and excessive enforcement.
Lastly, the Bill shall provide supplementary layer of quality assurance for reconsideration and review of certain decisions or sanctions made by the Commission, through the creation of a Small Enterprise Appeals Tribunal.
The draft Bill will therefore provide: Part A – Small Enterprise Commission o Establishment of the Small Enterprise Commission; o Receipt of complaints, prescription, jurisdiction, and investigation; o Enforcement, functions and powers of the Small Enterprise Commission; o Relations with other regulatory authorities; o Reporting requirements of the Small Enterprise Commission; o Governance of the Small Enterprise Commission; o Appointment of the Commissioner, Deputy Commissioner, and Commissioners; o Qualifications for Commissioners; o Term of office; o Conflicting interests of the Commissioners; o Resignation, removal from office and vacancies; o The functions, mandate, staff and funding of the Small Enterprise Commission; Part B – Small Enterprise Appeals Tribunal o Establishment of the Appeals Tribunal; o Functions of the Appeals Tribunal; o Qualifications of members of the Appeals Tribunal; o Term of office of members of the Appeals Tribunal; o Chairperson and Deputy Chairperson of Tribunal; o Tribunal proceedings; o Conflicts and disclosure of interest; o Acting by a member of the Tribunal after the expiry of the term of office; 4 34 o Remuneration and benefits.
8.

During the Budget Review and Recommendation Report (BRRR: 2022), the Committee noted that the Department of Small Business Development (‘the Department”) had struggled to refer the National Small Enterprise Amendment Bill to Parliament as pledged in its consecutive annual performance plans since 2015.

Several reasons have been cited.
The Department reported in its annual report (DSBD Annual Report: 2021/22) that the reason for yet another postponement in tabling the Bill was due to the pending incorporation of the Small Enterprise Finance Agency (“Sefa”) and Co-operatives Banks Development Agency (“CBDA”) into Small Enterprise Development Agency (“Seda”) – and for that reason, Cabinet had approved a 20-month extension to give the Department leeway to include a chapter or section on the merger in the Bill.
As a result, it has been made clear to the Committee that the earliest the Bill may be referred to Parliament is only in December 2023.

Considering the period that has lapsed since the bill had been in the drafting phase, the Committee is adamant that a staggered approach to the development of the Bill should be considered.

There is a precedent already set by the Department of Trade and Industry when it successively amended the National Small Enterprise Business Act, 1996 (Act No.
102 of 1996) in 2003 and 2004.

9.

The Committee was and remain of the view that in light of a variety of challenges besetting the sector, and hundreds of complaints from small business owners before the Committee, a segmented approach should indeed be given primacy.
Therefore, in its meeting on 9 November 2022, wherein the petition report concerning complaints against Telkom Openserve was adopted, the Committee resolved as follows: 9.1 Having noted the growth in the number of grievances, disputes, and one petition referred to the Committee since its inauguration, the Committee supports the fifth Parliament’s recommendation that the Small Enterprise Commission created through an Act of Parliament be considered; 9.2 As envisioned during the fifth Parliament when sessions between big and small businesses were conducted to ascertain the extent of victimization of small 5 35 businesses, the Committee is of the opinion that a Committee Bill should be pursued.
The process may include synthesizing elements of the Private Members Bill (Small Enterprises Ombud Service Bill) and components of the National Small Enterprise Amendment Bill - specific propositions that dealt with the creation of the Small Enterprise Ombud Service.

10.

The Committee is resolute that this process cannot wait for the review of the Small Enterprise Act in its entirety.
It is accordingly requesting permission to introduce a Committee Bill in terms of Rule 271 that will address this gap in the law.

Financial Implications for the State 11.

There will be costs involved in the implementation of the Bill.

But this can only be determined once the Bill has been finalised.

Determinations proposed by the Department in this regard, and considered by the Committee, will be presented to the House with the draft Bill.
Views of the Executive on the objects of the proposed legislation 12.

The Committee has had several discussions with the Department concerning policies and legislations due for referral to Parliament.

The proposed Bill will consist of measures that have already been discussed and agreed with the Department during Committee meetings.

The Department has indicated that it is in agreement with these measures.

Report to be considered.

6 36 3.


Report of the Portfolio Committees on Communications and Digital Technologies on the Report of the Auditor-General of South Africa on the Material Irregularities in National, Provincial and Local Governments dated 14 March 2023 1.

Introduction On Tuesday, 13 September 2022, the Announcements, Tablings and Committee (ATC) ATC No.
137— 2022 referred to the Portfolio Committee on Communications and Digital Technologies (and other Committees) the Report of the Auditor-General of South Africa (AGSA) on the Material Irregularities (MIs) in National, Provincial and Local Governments.

2.

Discussion The AGSA briefed the Committee on MIs in the Department of Communications and Digital Technologies (Department) as well as in its Entities, on 21 February 2023.
The AGSA presented the MIs of the following Entities reporting to the Department: (i) South African Broadcasting Corporation (SABC): The Accounting Authority (AA) is dealing with both MIs appropriately and is awaiting the finalisation of the court proceedings; (ii) State Information Technology Agency (SITA): The AA is dealing with both MIs appropriately, as the arbitration process and court proceedings have been initiated; (iii) South African Post Office (SAPO): Referral to the Directorate for Priority Crime Investigation (DPCI) on fraud committed on the SASSA grant payment process (2021); and (iv) Postbank: Both MIs are in the process of being referred to the MI Committee.
Further actions might be taken based on the submission made by the AA.

For both the SABC and the SITA, the Accounting Authority was still dealing with the MIs.

AGSA is now awaiting court proceedings and arbitration processes to conclude.

Referrals were made to the DPCI regarding the South African Post Office’s fraud cases committed during the COVID-19 relief grant payment process in 2021.
For the Post Bank, both irregularities were still in a referral process, and further action might be taken based on the submissions by the Accounting Authority.

(The presentation of the Auditor-General is available upon request) 3.
Committee Deliberations Having met with both the Department and AGSA, the Committee noted: a) its appreciation for the presentation made by the Office of AGSA; b) that it welcomed the recommendations of AGSA; 37 c) it appreciated that the introduction of the concept of MIs had given more power to the AGSA to ensure that common errors or deficiencies are isolated, and that those activities putting the public purse at risk of financial loss, are identified and pursued; d) that it required clarity on the arrests made in respect of transgressions; e) that it needed clarity in respect of the certificate of debt.
AGSA noted this would be a last resort after those who are accountable have failed to enforce Consequence Management; f) when remedial action is not implemented, then the certificate of debt kicks in.
The certificate would be made out in the name of the Accounting Officer as it implies that the Accounting Officer was not doing his/her work; g) that legal consequences regarding the MIs would only occur once all steps of internal controls were not implemented; h) its concerns that monies for medical aid of Post Office employees were deducted and not paid over to the medical aid.

This amounted to fraud and must be investigated.


The Committee wanted to know if AGSA has instituted any investigation on the matter.

AGSA responded that the matter is receiving their attention to establish whether there are MIs and will report back to the Committee once the investigations are concluded; i) that it required clarity on the two fraud cards detected within the Postbank.
AGSA responded that when the contract moved over from the previous owner to the Post Office, the Postbank was still a subsidiary of the Post Office.

The Post Office did not ensure that they had sufficient controls, and that the safety and security of cards were not compromised; j) with concern that fraudulent transactions in the Post Office regarding the R350 grant were reported.
AGSA indicated that it was aware of all the fraud issues, including the R350 allocation, and that they are keeping track of all these fraud cases and that these are receiving the necessary attention; and k) that AGSA was aware of the issues at Postbank and that the key areas of concern are being investigated.

4.
4.

The Committee Resolved: a) that that the Department must ensure that the recommendations of AGSA were not ignored; b) that the Committee will give timeframes to the Entity oversight body on the resolutions of the AGSA’s recommendations; c) that AGSA come and present its latest PFMA report as much progress has been made on the recovery of monies lost due to corruption; and d) that AGSA updates the Committee on any MIs.

5.
Resolutions for the Committee are that it should: a) adopt the recommendations of AGSA; 2 38 b) provide a timeframe to the Executive Authority as the Entity Oversight to get the recommendations by AGSA resolved; c) ensure that its oversight responsibility was strengthened and that it monitors the Entities in accordance with the recommendations received by AGSA; d) ensure that a joint meeting with the Portfolio Committee on Social Development is arranged to clarify the issues of the grant and related matters; and e) undertake an international benchmarking study tour to learn and understand best practices from other countries on the oversight work of their respective Government Departments and the ICT sector.
f) continue to engage the Minister and AGSA on progress made to address AGSA’s concerns.

Report to be considered 3 39 4.

Report of the Portfolio Committee on Justice and Correctional Services on the draft Regulations, for approval, in terms of section 94(1) of the Legal Practice Act, 2014 (Act No.
28 of 2014), dated 15 March 2023 The Portfolio Committee on Justice and Correctional Services, having considered the Regulations (elections), for approval, in terms of section 94(1) of the Legal Practice Act, 2014 (Act No.

28 of 2014), reports as follows: 1.

Section 94(1) of the Legal Practice Act, 2014 (Act No.

28 of 2014) (“the Act), provides that the Minister may and, where required in the circumstances, must make regulations relating to several matters relating to the Act.

2.
2.

In terms of the section 94(3) of the Act, any regulation made must, before publication in the Gazette, be tabled in Parliament by the Minister for approval.

3.

Specifically, section 94(1)(c) of the Act provides that the Minister must make regulations relating to, among others, a procedure for the election of legal practitioners to the Legal Practice Council (“the Council”) as contemplated in section 7(1)(a) of the Act.

4.
4.

Section 7 of the Act provides for the composition of the Council and section 7(1)(a) provides that the Council consists of 16 legal practitioners, elected in accordance with the procedure prescribed by the Minister.

5.

Regulation 2 of the Regulations provides for the election procedure referred to in section 7(1)(a) of the Act but was drafted in a limited timeframe and was focused on the first election that was held in 2018.

The process prescribed by Regulation 2 is currently only paper-based.

6.
6.

The Council requested amendments to Regulation 2.

Amendment Regulations were tabled in 2021 but were subsequently withdrawn for technical reasons.

7.

The proposed amendments are intended to ensure a smooth continuous transition from an existing Council to another, without an overlap in administrative functions, 40 confusion and duplication of elected members.

Provision is also made for the option of electronic voting.

8.
8.

The proposed amendments do not change the structure or policy of Regulation 2.

Recommendation 9.

The Committee recommends that the National Assembly approve the draft Regulations submitted in terms of section 94(1) of the Legal Practice Act, 2014 (Act No.

28 of 2014).

Report to be considered.

41 5.

Report of the Portfolio Committee on Justice and Correctional Services on the Draft Regulations, for approval, submitted in terms of section 94(3) of the Legal Practice Act, 2014 (Act No.
28 of 2014), dated 15 March 2023 The Portfolio Committee on Justice and Correctional Services, having considered the Draft Regulations, for approval, submitted in terms of section 94(3) of the Legal Practice Act, 2014 (Act No.

28 of 2014), reports as follows: 1.

Section 94(1) of the Legal Practice Act, 2014 (Act No.

28 of 2014) (“the Act), provides that the Minister may and, where required in the circumstances, must make regulations relating to several matters relating to the Act.

2.
2.

In terms of section 94(3) of the Act, the Minister must table any regulations made in Parliament for approval before publication in the Gazette.

3.

Specifically, section 94(1)(j) of the Act provides for regulations regarding the rendering of community service as contemplated in section 29(1) of the Act.

4.

Section 29(1) of the Act provides that the Minister must, after consultation with the Legal Practice Council, prescribe the requirements for community service.
These requirements may include community service as a component of practical vocational training by candidate legal practitioners; or a minimum period of recurring community service by practising legal practitioners upon which continued enrolment as a legal practitioner is dependent.

5.

No Regulations have been made as yet regarding community service.

6.
6.

The proposed Regulations provide for the rendering of community service by candidate legal practitioners, who must undertake eight hours per annum community service, and by (practicing) legal practitioners, who must render 40 hours per annum community service.

42 Recommendation 7.

The Committee recommends that the National Assembly approve the draft Regulations submitted in terms of section 94(3) of the Legal Practice Act, 2014 (Act No.

28 of 2014).

Report to be considered.


43 National Council of Provinces 1.

REPORT OF THE JOINT PROACTIVE OVERSIGHT VISITS BY THE SELECT COMMITTEE ON SECURITY AND JUSTICE, AND THE SELECT COMMITTEE ON COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS (WATER, SANITATION AND HUMAN SETTLEMENTS) TO FREE STATE PROVINCE, DATED: 15 MARCH 2023 1.

Introduction and Background Military Veterans background meeting in Parliament.
1.1 The Select Committee on Security and Justice, together with the Select Committee on Cooperative Governance and Traditional Affairs (Water, Sanitation and Human Settlements), having conducted joint oversight visits to the Free State Province, from 16 to 19 August 2022, report to the National Council of Provinces (NCOP) as follows: 1.2 On 5 March 2021, the Select Committee on Security and Justice as part of the Committee’s strategic plan, hosted a joint meeting with the SC Cooperative Governance and Traditional Affairs, Water and Sanitation and Human Settlements Committee with the Department of Military Veterans.
1.3 The Committee’s engagement with the DMV was to gain a better understanding of the progress they have made, in particular, the Committee was interested in the distribution of houses, the illegal occupation of houses meant for military veterans and how this will be addressed.

At that meeting the Committees had undertaken to conduct an oversight visit to better understand the distribution of housing benefits.
1.4 The Committee was also interested in engaging the Department of Human Settlements who are responsible for the delivery of houses.

The primary aim of the oversight visit was therefore to understand the challenges encountered in the Free State Province in the distribution of housing benefits to military veterans 44 with a view to collectively addressing these challenges and to propose a way forward.
1.5 Therefore, on 17 August 2022, a joint delegation of both Select Committees engaged with the Free State Department of Human Settlements and the Department of Defence and Military Veterans, and also visited the housing projects in Hillside View, Riebeeckstad and Rheederspark, as part of the oversight inspection.

2.
2.

Objectives of the Proactive Oversight Visits 2.1 To interact with the Department Military Veterans (DMV) and the Department of Human Settlements (DHS), and asses housing delivery benefits in the Free State Province.

2.2 Conduct site visits to housing projects, and solicit the opinions of the beneficiaries on the standard and quality of housing projects.

3.
Delegation of the Select Committees 3.1 The delegation of the Select Committee was composed of the following Members of Parliament and officials: Hon BN Ndongeni (ANC) Eastern Cape; Hon EM Mthethwa (ANC) KwaZulu-Natal; Hon NH Hadebe (IFP) KwaZulu-Natal; Hon M Bartlett (ANC) Northern Cape; Hon IM Sileku (DA) Western Cape; Hon K Motsamai (EFF) Gauteng; Hon S Zandamela (EFF) Mpumalanga; Hon AD Maleka (ANC) Mpumalanga; Hon S Shaikh (ANC) Limpopo; Hon TSC Dodovu (ANC) North West; Mr TM Manele (Committee Secretary); Mr N Mfuku (Content Advisor); Adv M Mbebe (Procedural Officer); Mr G Dixon (Committee Secretary); Mr Z Rento (Committee Secretary) and Mr B Lwazi (Committee Assistant).
4.

General Overview of the Proactive Oversight Visits 4.1 During the period of the oversight visits, the joint delegation of both Select Committees interacted with the Free State MEC for Cooperative Governance, Human Settlements and Traditional Affairs, and senior officials from the Department of Defence and Military Veterans.
2 45 4.2 On 17 August 2022, the joint delegation of the Select Committees visited the Hillside View Military Veterans, Riebeeckstad Military Veterans, and Rheederspark Military Veterans.

5.

Briefing by the Department of Human Settlements and the Department of Defence and Military Veterans 5.1 The Free State MEC for Human Settlements and his team, jointly with the delegation from the Department of Defence and Military Veterans, briefed the joint delegation on the housing benefits for the Military Veterans.
5.2 The MEC in his opening remarks, mentioned that the main focus of the Military Veterans has been on housing, which was not supposed to be, since there are many other functions they could strategically undertake, as many of them are unemployed.

5.3 Many are not being able to take care for their families, and their children are not able to attend proper schools.

Unfortunately, Government has been unable to take care of them, but only when they are dead and then they are given dignified funerals.
Some are fortunate to be given farms to run, and are doing very well in that field.

5.4 The MEC reported that the Department is faced with a challenge of not having a proper database of the Military Veterans, and there is a challenge with some who are illegally occupying those houses, and would have to be evicted.

6.
6.

Sites Visit to Housing of Military Veterans (Hillside View) 6.1 The joint delegation conducted a site visit to Hillside View, and interacted with the group of Military Veterans, to solicit their views on the standard and quality of the provision of housing.

7.

Key Challenges Identified Related to Housing Provision 7.1 The following challenges were identified in Hillside View: • The houses were not properly built, as they are leaking and have many structural defects.
The houses were not build at the same standard and quality with the ones in other areas.

3 46 • The beneficiaries were not happy at all with their houses, but are in a process of being provided with their title deeds.

The project has 50 units, but it took 7 years for the Department to build them.

• There are 4 units which are not connected to the main sewer pipe.

There is also a major challenge of not having even a single Military Veterans’ company that is subcontracted to build houses in the Province.
The houses are not properly fenced, as some are even built very close to each other.

8.

Observations of the Joint Delegation 8.1 The joint delegation was very concerned about the state and conditions that the Military Veterans were leaving under at the Hillside View Military Veterans, as opposed to what was presented by the two Departments.
8.2 The joint delegation was very disappointed that it took the Departments 7 years to build 50 units, and concerns were raised about the way in which the houses were being fenced, as some fencing crossed over one house carport.

9.
9.

Recommendations of the Joint Delegation 9.1 The following recommendations were made: 9.1.1 The Free State Department of Human Settlements, and the Department of Defence and Military Veterans, should engage the construction company that has built the Military Veterans houses, in order for it to rectify the major structural defects.
9.1.2 The Free State Department of Human Settlements, and the Department of Defence and Military Veterans, should provide the joint delegation with the exact funds that has been spent for the past 7 years in building the 50 units.

9.1.3 The Department of Human Settlements in Free State should speedy resolve the issue of the 4 units that are not connected to the main sewer pipe, as it is a health hazard to those beneficiaries.

4 47 10.
4 47 10.

Site Visits to Housing of Military Veterans (Riebeeckstad and Rheederspark) 10.1 The joint delegation visited the Riebeeckstad View Military Veterans and engaged with the contractor.

Members were very pleased with the quality of work that was done by the contractor, and hoped that he will finish all the 21 units that he was busy building.

10.2 The joint delegation also visited the Rheederspark View Military Veterans, and engaged with a group of Military Veterans.
A total of 20 units has been completed and occupied.

Only 4 Military Veterans were approved on the list of the Department of Military Veterans.

10.3 There were 16 Military Veterans who are not on the list of the Department of Military Veterans, but were occupying the houses.

The second phase has been implemented in Rheederspark, with 22 Military Veterans approved on the Department’s list.

11.
11.

Key Challenges Identified Related to Housing Provision (House no.1 of Mr Makhanda) 11.1 The following challenges were identified: • The Local Municipality was not involved in the planning phase of the Military Veteran’s houses.

• There was a challenge of the roof structure which was not properly done, as during windy days it is a major issue.

The main bedroom was leaking, (doors and floor tiles were not properly fitted).
• The blockage of sewer line, which was only attended to on Friday before the oversight visit by the joint delegation.

There are 7 houses without electricity for the past 3 years.

The Deputy President has visited the area and instructed the Premier to address the matter.

• There was a challenge of the provision of the bulk services to these houses, which still remains a major concern.

12.
12.

Key Challenges Related to Housing Provision (House no.2 of Mr Mokoena, who is a disabled occupant) 5 48 12.1 Mr Mokoena indicated that he was generally happy with the size of the house.

There are a lot of structural defects in his house.

The ceiling is about to collapse because of the leaking roof, as a result, the colour of the walls has changed (fungus).

There are no ventilations at these houses which is a health hazard / danger to the lives of the beneficiaries.
12.2 Sewer, which was running all over his yard, was identified as a challenge, and it has been reported to the Local Municipality, but he has not received any joy.

13.

Key Challenges Related to Housing Provision (House no.3 of Mr Depi) 13.1 The brickwork is substandard and it is easily scratched, and will deteriorate with wind and rain erosion.

It requires plastering.

13.2 The roof construction needed numerous repairs, but continues to leak.

The occupant has to move the bed around to avoid leaks.
13.3 There is no provision of electricity to this section of the site.

13.4 The tile work is running skew, indicating that the house is not built to square or up to standard.

14.

Observations of the Joint Delegation 14.1 The joint delegation was very concerned about the conduct of the Local Municipality, to only attend to the service delivery challenges due the oversight visit.
14.2 Furthermore, they were not satisfied with the work done by the construction company, as the work was of poor workmanship, and the conditions that Mr Mokoena lived under, and that his house should receive special attention.

15.

Recommendations of the Joint Delegation 15.1 The following recommendations were made: 15.1.1 The Free State Portfolio Committee on Human Settlements should conduct a follow-up oversight visit to these Military Veteran’s houses.
6 49 15.1.2 The Free State Department of Human Settlements should do an inspection of all the houses and engage the construction company and the NHBRC, in order to rectify all the structural defects.

15.1.3 The construction company, together with the Free State Department of Human Settlements, should as a matter of urgency, attend to the house of Mr Mokoena as he is disabled.

15.1.4 The Department of Cogta and the municipality must ensure electrical provision to the site.

Report to be considered.

7 50