News in South Africa 28th February:
1. SA patching up relations with Russia:
South Africa has scrambled to patch up relations with Russia after International Relations and Cooperation Minister Naledi Pandor issued an unusually strong statement calling on Russia to withdraw from Ukraine.
President Cyril Ramaphosa was reported by the Sunday Times to be unhappy with the statement because he felt it contradicted South Africa’s policy.
A day after the statement from the Department of International Relations and Cooperation (Dirco) — apparently cleared by Pandor — which called for Russia to respect Ukraine’s sovereignty and territorial integrity, Ramaphosa seemed instead to blame US President Joe Biden for the invasion. He suggested that if Biden had agreed to meet Russian President Vladimir Putin unconditionally days before Moscow’s attack on Ukraine, it would have been averted.
He was apparently referring to Biden’s statement of 21 February that he would only meet Putin if the Russian president agreed in advance not to invade Ukraine.
The Sunday Times quoted unnamed sources in the Union Buildings as saying that Ramaphosa understood the history of the conflict. This seemed to suggest that Ramaphosa shared the view that Putin had been provoked to invade by broken Western promises in the 1990s not to extend membership of Nato up to Russia’s frontiers. In the runup to the invasion, Putin demanded that Nato guarantee that it would never allow Ukraine to join the intergovernmental military alliance, but Nato would not provide that guarantee.
South Africa and Russia are both members of the BRICS bloc, which also includes Brazil, India and China, and which regards itself as a counter to what it sees as Western dominance of the world security order. The other BRICS members have refrained from criticising Putin’s invasion of Ukraine.
On Sunday, Ramaphosa indirectly intervened to reassure Russia that South Africa was on its side. Ramaphosa’s acting spokesperson, Tyrone Seale, told Daily Maverick that Minister in the Presidency Mondli Gungubele had resolved the issue when he was asked about it at a briefing of the Cabinet security cluster on Sunday.
2. EU sanctions against Russia:
The European Union on Sunday said it will purchase and deliver weapons to Ukraine, while also strengthening sanctions against Russia including closing its airspace to Russian planes and banning state-owned Russian media.
Ursula von der Leyen, president of the European Union Commission, called the effort a “watershed moment” in an announcement on Sunday.
“The European Union steps up once more its support for Ukraine and the sanctions against the aggressor that is Putin’s Russia,” Leyen said. “For the first time ever, the European Union will finance the purchase and delivery of weapons and other equipment to a country that is under attack.”
The bans and strengthened sanctions come as global support for Ukraine intensifies in response to ongoing attacks following Russia’s invasion of the country on Thursday.
On Sunday, Russian President Vladimir Putin put Russia’s nuclear deterrent forces on high alert in response to “illegitimate Western sanctions.”
Leyen further explained the details for the EU’s airspace ban, which will include a “prohibition on all Russian-owned, Russian-registered, and Russian-controlled aircraft” from taking off, landing, or flying over the territory.
“This will apply to any plane, owned, chartered, or otherwise controlled by a Russian legal or natural person,” she said. “Let me be very clear, our airspace will be closed to every Russian plane and that includes the private jets of oligarchs, too.”
3. SARS targeting the wealthy:
South African Revenue Service (SARS) Commissioner Edward Kieswetter and his team at SARS have been hard at work rebuilding to improve revenue collection and widen the taxpayer net, bringing a surplus R189-billion to the budget at a time when South Africa has never needed it more.
Over the past year alone, SARS recruited an additional 490 staff (also contributing to sorely needed job creation) and invested R430-million in its information and communications technology infrastructure.
New unit for the ‘superwealthy’
A key part of the SARS renewal has been the setting up of a new unit specifically to focus on wealthy individuals.
The definition of “wealthy” for this division has not been firmed up yet but SARS is starting at the top and the first tranche of taxpayers to come under scrutiny will be those with a net asset value of R75-million and higher, Kieswetter stated.
This will be reviewed as the division scales up.
According to the Tax Statistics 2021 report released by SARS, just 0.6% of individuals fell into the taxable income group of R1.5-million and higher, with a taxable income share of 10.7% and a tax liability share of 22.4%.
Kieswetter says there are three issues that the “superwealthy” unit will be investigating:
- The nature of income: “In most of these cases, a balance sheet reveals more than a salary slip.” He points out that, whereas ordinary South Africans have a single salary slip, these superwealthy individuals derive income from salaries, investments and assets, and their income is structured differently.
- Onshore/offshore financial arrangements: These could include international bank accounts or assets held offshore. SARS wants to see a full statement of assets and liabilities.
- Ownership structures: Assets are often held via a legal structure such as a company or a trust or even a special-purpose vehicle (SPV). An SPV is a subsidiary company formed for a specific business purpose or activity.
Kieswetter says, for now, the new division will be focused on “improving visibility” and gaining a holistic view of these taxpayers’ assets and income. He says the intentions are threefold:
- To provide certainty and clarity so that taxpayers in this bracket fully understand their tax obligations.
- To ease compliance so that they are able to pay tax with the least amount of fuss.
- To strengthen SARS’s ability to respond and have a clear view of what we are dealing with.
“For honest taxpayers, this new division will help simplify their taxes and make things easier, but where we suspect dishonesty, SARS will come down hard and be vigilant for any potential corruption or attempts to hide assets,” he says.
SARS commissioner Edward Kieswetter says that the revenue service’s new unit for the super-wealthy is not there to ‘go after’ wealthy taxpayers but was established to provide clarity on the tax obligations this demographic has, to ease compliance, and assist them in their tax affairs with minimal fuss.
4. Vaccines not mandatory:
Acting director-general of the department of health, Nicholas Crisp, said government hasn’t made vaccinations mandatory because this would not be legal.
In an interview with the Sunday Times, Crisp explained that if the government was to try to make vaccinations mandatory, “it will be in the Constitutional Court and chucked out in five minutes.”
He also explained that while private businesses can impose mandatory vaccination policies, government could not impose such policies on public servants.
This is because “their employer is the department of public service and administration, and we have a complicated bargaining process where these things get thrashed out.”
Crisp also spoke about the country’s vaccination goals and said he would ultimately love to see everyone living in South Africa vaccinated.
However, he believes the responsibility to solve the country’s low vaccination problem does not rest exclusively on the health department.
“We would like to see the department of trade and industry, the department of sports, arts and culture, the department of water affairs, the department of agriculture doing more within their spheres of influence,” said Crisp.
“Social development, for instance, has more access to unemployed people than we do.”
However, Crisp said that many of these departments are “more passive” than the department of health would like them to be.
5. Infrastructure degrading:
South Africa is facing mounting problems emanating from the degradation of critical infrastructure due, to among other reasons, ageing, lack of maintenance, inadequate security to protect infrastructure, the lack of funding to stimulate investment in new infrastructure, and the slow pace of government approval of projects.
The National Development Plan target for capital investment as a percentage of GDP is 30%.
However, in 2020, capital investment by the private and public sectors amounted to only 13.7% of GDP.
Nadia Rawjee, managing director of Uzenzele Holdings, which advises on, and arranges structured funding for multimillion-rand industrial greenfield and brownfield expansion projects, says that if South Africa is serious about transforming the local economy, key issues regarding critical must be addressed.
Rawjee says there is a lack of public funds to improve critical infrastructure.
She provides examples of industrial projects that have been negatively impacted by problems with the provision of power, water, and cost-effective transport.
- A large R250 million mineral beneficiation processing facility has been delayed due to the unavailability of power, which dictates the capacity of the facility and project size.
- Mines in Limpopo have been unable to expand extraction capacity due to insufficient access to water due to limited water distribution networks from dams.
- Projects have been shelved due to inefficient and unreliable transport networks.
She adds that there is a lack of cooperation between the private and the public sector. She explains that the private sector must come to the party, and pay what is commercially feasible for the use of infrastructure. The local community should be given access to electricity and water.
Government’s infrastructure investment drive
The 2022 Budget estimates that government will spend some R812.5 billion on infrastructure over next three years, with:
- State-owned entities spending R251.7 billion;
- Provinces R185.5 billion;
- Municipalities R194.4 billion; and
- Public entities R108.4 billion.
Of this, 77.6% will go to economic infrastructure, such as power-generation capacity, upgrading and expanding the transport network, and improving sanitation and water services.
The value of public-private partnerships (PPPs) declined from R10.7 billion in 2011/12 to R5.6 billion in 2019/20, partly due to onerous approval processes, and poor capacity of departments to estimate risk-sharing with the private sector.
It is estimated that PPPs will spend R20.4 billion over the next three years.