T Manuel: National Treasury, SARS & Stats SA Dept Budget Vote
2007/08

24 May 2007

In our consideration of the budget votes of the Finance Ministry, in both
the Portfolio Committee on Finance and the National Assembly, we are
unavoidably called upon to reflect on a wide array of subjects and
perspectives. What sense are we to make of the complex interplay between more
rapid economic growth and the challenges of poverty reduction and addressing
what appears to be a global trend towards widening income inequality and
wealth? Are we adequately engaging with the dramatic shifts in power and
economic influence associated with the rising strength of China and the new
momentum of international capital flows, and in particular their influence on
Africa and Southern Africa?

Have we found the right balance in our own financial and economic
development path between the forces of enterprise, trade and private initiative
and the regulatory constraint of the law, protection of consumers' rights,
assurance of institutional integrity and investment in public infrastructure
and services? In so far as our policies and programmes rely on evidence and
statistics and analysis, do we have sufficiently robust and regular data
collection systems, are our definitions of income and poverty and employment
appropriate for our circumstances, and are we asking the right questions and
using the right methodological tools?

Do we know what contribution our spending programmes are making to meeting
the needs of children or pensioners in the villages of Uthungulu or the
Bophirima district of North West do we understand the impact of our
micro-finance support programmes, can we quantify the contribution of
catchments management agencies to ensuring sustainable water services; have we
examined the long-term impact of climate change on our agricultural prospects
or energy sector plans?

These are not questions to be answered in today's debate, nor are they
issues that will be resolved through the work of the Ministry of Finance or
Government this year or next, these are not projects or case studies that we
can expect to complete, close and file away. But we have to keep asking
questions of this kind because we need to continuously make progress in
understanding and engaging with our long-term development challenges. In asking
this House to approve budget allocations for the National Treasury and
Statistics South Africa, I am mindful that the work of the Ministry of Finance
is in part about empowering Parliament and the people of South Africa to engage
more fully and actively in debate on our policies and programmes and to
exercise effectively the oversight role that democracy and progressive
governance requires.

I know that members of this House fully appreciate that these spending
commitments involve substantial practical and administrative responsibilities
and also profound and sometimes controversial questions of policy, strategic
intent, institutional design and management of change and complexity. These
departments and the Revenue Service and other agencies overseen by the Ministry
of Finance do many things and in presenting their plans for the year ahead
these activities are broken down into various discrete clusters, programmes and
sub-programmes. But it is in the inter-connectedness of these activities that
the challenges are to be found. By way of example, let me say a few things
about an important transaction that the Treasury debt management team completed
last week, seemingly a straightforward exercise in liability management, but
one that illustrates a range of overlapping responsibilities and
consequences.

We indicated in the Budget Review in February this year that we would not
need to raise additional finance in the international capital markets over the
next two years. However, active foreign debt management remains an integral
part of our financing strategy. On Wednesday, 16 May 2007, we announced a
buy-back of foreign debt amounting in total to US$1,217 billion, of which
US$217 million was financed from internal resources and US$1 billion has been
financed with the proceeds of a new bond maturing on 30 May 2022. Our aggregate
foreign debt has therefore been reduced, and its maturity considerably
extended, on terms that represent the lowest cost of capital that South Africa
has yet achieved in the dollar market.

As an exercise in active debt management, this brings about a further
lowering in the costs of our debt, and contributes to releasing resources for
spending on social and economic development. As a broader financial and foreign
exchange transaction, it provides a long-dated benchmark for the wider capital
market and contributes to reducing the economy's external vulnerability. But we
need to understand that there is much more to this than just a liability
restructuring in mid-2007. That we were able to conclude this deal is in part a
result of the macroeconomic and fiscal framework that has been in place since
1996. It is in part a consequence of the fact that we are now running a budget
surplus. It relies on the progress we have made in consolidating a solid
investor base in South African bonds and it reflects the confidence foreign and
domestic investors have in our consistent, forward-looking approach to
promoting economic growth and social development within a responsible and
sustainable fiscal envelope.

In a very practical and measurable way, the issue yield of 5,912 percent
achieving in pricing this new foreign bond is a simple indicator, a temperature
gauge, in our much more complex and multi-faceted partnership with the global
community and the investment markets. A sovereign bond is in one sense a very
definite and contractually precise public-private agreement, but there is
another sense in which its terms are not limited to its legal and financial
fine print but also connects with the wider growth and development project, the
entire transformation charter that describes our economic and social objectives
and programmes.

Members of the House will understand that there are both explicit and
implicit dimensions to these linkages, that our social contract is partly about
practical things that we do and partly about shared values and beliefs, partly
about things that we agree on and partly about a diversity that we acknowledge
and respect.

Members of the House will appreciate also that our social trajectory is not
a simple linear progression: economic growth has its costs, its congested roads
and its complications; some businesses prosper, others decline; new systems
sometimes fail; there are setbacks in the fight against crime; there are
failures of governance and inadequacies in our regulatory vigilance. There is
much to be done to strengthen our social and economic development path, and
there is much to be done to improve the terms and conditions, the
countervailing management of risks and responsibilities, of our partnerships
with industry and the international community.

International responsibilities

Some of these issues will come under special review under the theme
'Sharing: Influence, Responsibility, Knowledge' which has been adopted for the
meetings of the G20 finance ministers and heads of central banks to take place
in South Africa in November this year. I know that Members of Parliament and of
the Portfolio Committee on Finance in particular share a keen interest in
issues that will be on the agenda of the G20 consultations, and indeed our
preparation for hosting the meetings has already benefited from the views and
concerns on international co-operation and development that have been ably
articulated in the House in recent times. Let me share with you a few thoughts
on the challenges that the international financial community currently
faces.

The G20 is a body that promotes open and constructive discussion between
industrial and emerging-market countries on key issues related to global
economic stability. By contributing to the strengthening of the international
financial architecture and providing opportunities for dialogue on national
policies, international co-operation, and international economic and financial
institutions, the G20 consultations help to support growth and development
across the globe.

South Africa has already launched a vigorous and detailed work programme for
our year as chair. It focuses on three major policy objectives: firstly, to
make progress in reforming the International Monetary Fund (IMF) and World
Bank, so that we are able to enhance the representation and voice of emerging
markets and developing countries in these institutions; secondly, to develop a
framework for analysing the impact of global commodity price booms on financial
stability and thirdly, to develop a better understanding of how advanced and
emerging market economies in the G20 can create the fiscal space needed for
greater social and economic investment, co-operation in addressing global
public goods and more effective public service delivery.

South Africa is the only African member in the G20 and in line with our
commitment to the development of our continent, we added to the work programme
two workshop themes of significance to the continent. This is to ensure that
the chairing of this prestigious forum by an African country brings lasting
benefits, by bringing together African policy-makers and G20 officials.

Thus far, excellent progress has been made with the G20 work programme for
2007. In early-March, South Africa and Brazil co-hosted a G20 workshop on
Bretton Woods Reform in Rio de Janeiro. Participants included officials from
G20 countries, representatives from the IMF and World Bank and several academic
specialists. The objective of the workshop was to discuss the ongoing process
of reform at the Bretton Woods Institutions, and to build consensus towards the
completion of the second phase of reform at the International Monetary Fund
(IMF) by the Annual Meetings of the IMF and World Bank in 2007.

On 23 March, we hosted a seminar in Pretoria to offer a fresh look by
African and G20 policy makers at ways of improving the effectiveness of aid in
the context of the current broader global dialogue and the existing global
commitments such as the Paris Declaration of 2005. The discussion highlighted
the challenges, gaps and innovative approaches needed to take the aid
effectiveness debate forward.

Also in March, the South African Reserve Bank hosted the Meeting of G20
Deputies. The Deputies met to discuss a range of policy issues of ongoing
interest to the G20, including the reform of Bretton Woods Institutions. More
recently, as part of our 2007 work programme, South Africa contributed to a
workshop held in Washington DC on commodity cycles and financial stability.

Looking to the future, we are working with the government of Turkey to bring
together some of the world's leading policy makers and practitioners on the
subject of fiscal elements of growth and development, for a workshop to be held
in early July. Preparations for the second G20 Deputies' Meeting, as well as a
second high-level African policy seminar, both scheduled for early-September in
Durban are ongoing. The African policy seminar will focus on fiscal elements of
growth and development. We are also working with the World Economic Forum and
the Reinventing Bretton Woods Committee, to include a special workshop to
coincide with the September meetings of the G20.

We are engaging extensively with the advanced countries and emerging market
economies in the forum to ensure that a fairer and more balanced set of
representation arrangements can be achieved by the time of the 2007 Annual
Meetings. These include a new quota formula, an increase in basic votes for the
poorest economies and a second ad hoc quota increase for the dynamic emerging
markets.

More broadly, there is work in progress on the challenges of regional
integration in the Southern African Development Community (SADC), and the
related need to review the South African Customs Union (SACU) revenue-sharing
formula. We have recognised the need to develop a better understanding of the
economic links between African countries and to give greater impetus to shared
efforts to achieve the Millennium Development Goals.

National Treasury

Let me turn to the particular roles and responsibilities of the National
Treasury. Members of Parliament need no reminding of the role of sound
financial management, the role of oversight and accountability, as a foundation
of public service delivery and in providing checks and balances against abuse
of public resources. Improved public financial management has a central part to
play in our commitment to fighting poverty and vulnerability, in accelerating
investment and economic growth, in creating functional courts and effective
protection services.

The activities and financial responsibilities of the National Treasury are
organised into nine programmes for the 2007/08 year, as set out in the
estimates of national expenditure. Alongside a core administrative programme,
there are five programmes dedicated to operational and policy responsibilities
and three that provide for transfers to provinces and municipalities, specific
grants, pensions and post-retirement benefits, international obligations and
funding for various agencies and institutions.

Operational and policy responsibilities

The Treasury's Economic Planning and Budget Management programme brings
together policy-related work, planning, expenditure monitoring, financial
management support and intergovernmental fiscal responsibilities broadly
related to the preparation and implementation of the annual budget. There are
several key focus areas for the period ahead.

Projects such as the infrastructure delivery improvement programme (IDIP),
the Siyenza Manje initiative and the mobilisation of both public and private
investment in areas such as housing, hospital revitalisation and the
development of residential neighbourhoods will contribute to the acceleration
of infrastructure delivery. Other priorities include monitoring the various
projects involved in preparing to host the 2010 Fifa World Cup, contributing to
transport planning and the development of bus rapid transit projects in major
cities, accelerated investment in road and rail infrastructure, improving our
understanding of the long-term development of the energy, transport and
communications industries, better public sector infrastructure and buildings
management and assessment of various sectoral and industrial development
strategies.

The Asset and Liability Management programme involves government's cash
management framework, domestic and foreign debt management, governance and
oversight of public entities and their financial obligations and management of
guarantees and other contingent liabilities. As members will be aware, our
costs of borrowing have been significantly reduced through sound fiscal
management and a forward-looking borrowing strategy, contributing to steady
improvements in South Africa's financial standing and associated benefits to
both public and private sector borrowers. In the coming year, further
reductions in short-term debt will be sought, as part of a broader strategy
aimed at lowering annual debt costs and providing appropriate protection
against possible financial shocks.

A review of the treasury operations of several public entities has been
conducted, and a review of South Africa's development finance institutions is
under way in co-operation with other departments. Our aim is to clarify the
appropriate role of government lending agencies as part of the institutional
architecture of a developmental state and in the context of the shared
responsibilities for broadening access to finance and deepening social
infrastructure investment envisaged in the Financial Sector Charter.

The Financial Management and Systems programme includes important
responsibilities related to public sector supply-chain management,
co-ordination of government procurement arrangements with the requirements of
the broad-based black economic empowerment policy framework, development of
improved financial systems for national and provincial government and
co-ordination of the implementation of the Public Finance Management Act of
1999. Development work on the new integrated financial management system is
reflected in marked increases in spending on this programme over the MTEF
cycle.

Last year we announced that work was in progress on a framework of formal
qualifications for municipal financial management from entry-level to
post-graduate standards. I am pleased to report that draft regulations were
published in February this year and introduced to municipalities through a
programme of workshops throughout the country over a two-month period. These
regulations were published with detailed accompanying guidelines for each
category of financial manager. We must also at this point thank the Portfolio
Committees on Finance and Provincial and Local Government for their
contributions to the draft regulations and this important capacity building
process.

The core function of the Financial Accounting and Reporting programme is to
assist Parliament in exercising its oversight over public financial management
in the broader public service. The quality and coverage of the consolidated
public sector accounts has again been extended and improved this year. A
further reform over the period ahead is the development of a framework for
performance information to provide clear definitions and techniques for
departments to identify more accurate performance measures, and to report in
relation to these measures in a timely and consistent way.

The Economic Policy and International Financial Relations programme focuses
on economic policy analysis and advisory services in the areas of
macroeconomics, regulatory reform and microeconomic analysis, tax policy,
financial and banking sector policy, and regional integration and international
financial relations. Over the period ahead, the design and sequencing of reform
initiatives in the system of retirement funding and social security
arrangements will enjoy special priority.

This is an area of considerable complexity and I am pleased to be able to
report that good progress has been made in reviewing international experience
and developing more detailed plans based on the broad principles indicated by
President Mbeki in the State of the Nation Address earlier this year. The
National Treasury published a second discussion paper on social security and
retirement reform shortly after the February Budget and an interdepartmental
task team has been established to prepare detailed proposals and an
implementation plan for the intended contributory earnings-related social
security system.

Accelerated and shared economic growth is the central focus of our
macro-economic work. This has several aspects effective co-ordination between
fiscal and monetary policy, for example, infrastructure investment targeted at
the logistical and technological requirements of more rapid trade and
industrial development, better spatial planning, housing and investment in
marginalised communities, small business development and easier access to
finance by small enterprises and poor households. Drawing in part on
international experience, we are exploring options for strengthening
export-oriented industrial policies and improving the targeting of skills
investment and infrastructure investment. Economic growth is a shared outcome
of private sector investment and skills development and direct government
initiatives, but we need to understand also the role of public policies and
sectoral regulation in shaping an environment that supports business investment
and most critically in our context encourages job creation.

Provincial and municipal grants and other fiscal transfers

The Treasury vote also includes, as in the past, substantial transfers to
provinces and municipalities, in support of both infrastructure investment and
institutional capacity-building. These conditional grant programmes are
steadily contributing to improved programme design and contract management,
supported by both the Infrastructure Development Improvement Programme and
Siyenza Manje. Particularly pleasing over the past year has been the response
of municipalities to the new neighbourhood development partnership grant. The
second round of grants for project design and development will be concluded
shortly and from next year we will see joint public and private sector
investment projects getting under way.

We have put considerable work into regular reporting and monitoring of the
various provincial and municipal grant programmes. The National Council of
Provinces and in particular the Select Committee on Finance are making
excellent use of this information, and there are lessons for all of us in the
way in which accountability and transparency have been enhanced by the
oversight role that Parliament is increasingly playing over these grants and
the associated services and investment programmes.

The Treasury has responsibility for several specific civil and military
pension obligations, contributions to medical schemes on behalf of retired
civil servants and other pension and benefit arrangements. Provision has been
made in these budget estimates to expand benefits to widows and orphans in
terms of the Special Pensions dispensation. The final programme on the Treasury
vote provides for various fiscal transfers. These agencies or organisations,
including the various secret service agencies, the Development Bank of Southern
Africa (for the Siyenza Manje project), the South African Revenue Service, the
Financial Intelligence Centre and the Financial and Fiscal Commission, are
accountable directly to Parliament.

Statistics South Africa

Turning now to the work of Statistics South Africa, I am pleased to note
that good progress has been made in processing the results of the Community
Survey conducted in February this year, which involved some 284 000 households
in a carefully constructed census replacement survey. The results of the
Community Survey will be released in November 2007.

Building on the results of this survey, Stats SA is planning a more focused
collection of statistical information on poverty over the medium term. A pilot
poverty survey will be conducted during 2007/08. Discussions on proposed
approaches to poverty measurement will be conducted later this year.

Data collection for the most recent Income and Expenditure Survey began in
September 2005 and was finalised in September 2006. The data processing and
editing was finalised in December 2006 and the analysis of the datasets is
currently in progress. We are expecting statistical information on the spending
patterns of South Africa households to be published by November 2007.

Reform of the producer price index is under consideration for the period
ahead, in recognition of the importance of the Production Price Index (PPI) as
an index of the underlying cost trends in the South African economy and as a
deflator in the national accounts. Extensive consultations were conducted with
key stakeholders as part of the review of the current PPI basket. A new PPI
basket is being developed and the re-weighted index will be published from
February 2008.

It should also be noted that Stats SA has embarked on a process to
re-engineer the Labour Force Survey (LFS). The questionnaire design is now
finalised and fieldwork procedures have been tested. The new quarterly LFS will
be launched in January 2008 and the first published data will be available in
August 2008.

Stats SA will continue to play an active role in the harmonisation of
statistical indicators on the African continent, especially ensuring that the
three Pan African institutions, the Economic Commission for Africa, the African
Development Bank and the African Union Commission, work on an agreed work
programme on statistical development. Stats SA is advocating that the African
Union Commission should play an advocacy role at the highest political level,
while the Economic Commission for Africa deals with the technical issues
related to statistical development and the African Development Bank provides
the necessary financial resources.

Stats SA will continue to support the initiatives of the Africa Symposia on
Statistical Development. High on the agenda is statistical capacity building in
countries that are emerging out of conflict or still experiencing conflict,
countries such as Angola, Democratic Republic Congo (DRC), Somalia, Guinea
Bissau, etc.

Members of the House will also share with me in congratulating the
Statistician-General on his appointment to chair the UN Statistics Commission
next year, a responsibility that will include, among other things, the 2010
Round of Population and Housing Censuses, statistical capacity building and
measuring the knowledge economy.

Stats SA is also preparing to host the International Statistical Institute
(ISI) in 2009 and will be heavily engaged with the international community to
make the ISI an African success. This organisation seeks to develop and improve
statistical methods and their application through the promotion of
international activity and co-operation.

South African Revenue Service

This year the South African Revenue Service (SARS) celebrates ten years as
an integrated, administratively autonomous Customs and Revenue Administration.
Commissioner Gordhan, in recognising the role of the people that account for
the success of our extraordinary revenue service, has declared this the 'year
of the people.'

The deadline for the Small Business Tax Amnesty expires exactly one week
from today. SARS officials have been hard at work to assist small businesses
and taxi operators to encourage them to apply for amnesty.

However, it is time that organisations who represent small business
constituencies demonstrate leadership and persuade their members to make use of
this unique opportunity to regularise their tax affairs. The risk non-compliant
small business owners face after Thursday, 31 May 2007 is prosecution. SARS is
currently processing 60 000 applications of which 6 862 are taxi operators and
expects to receive a lot more over this final week.

Those businesses including the thousands of Taxi Operators who have applied
will experience the benefits of operating in an environment where they are tax
compliant and qualify to do business freely, on the right side of the law.
Those who choose not to make use of this unique window period will have to face
the consequences of losing their businesses and face up to five years in
jail.

Public Benefits Organisations such as schools, welfare and religious
organisations should also make sure that their applications are in.

Over the past two months SARS has continued to intensify its enforcement
action against tax defaulters:

* 186 warrants of arrests were executed with the help of the South African
Police Service
* 939 summonses to appear in court for various tax offences were issued
* 21 Writs were executed

A total value of R36,6 million worth of assets was attached during this
period from tax defaulters who demonstrated no willingness to settle their
affairs or engage SARS. SARS has outlined its plan for a three-phase
modernisation agenda beginning with a two-year phase beginning in 2007. This
stage includes capacity-building, design and preparation for modernisation. The
main focus is to align the organisation for its main strategic choices and
direction. The central elements are the following:

* Improve customer service, outreach and education: SARS seeks to
acknowledge and boost the strategic role of practitioners, intermediaries,
professionals and agents in the broader tax system, enhance the functioning of
the Large Business Centre and improve our taxpayer outreach model.
* Design national social security tax and wage subsidy: While still in the
policy formulation stage both of these reforms will require significant effort
to ensure alignment across stakeholders as well as allocation of resources for
implementation. Where possible, existing infrastructure, resources and
capabilities will be leveraged.
* Create a differentiated operating model: The current operating model does not
sufficiently cater for the existing taxpayer and trader base. The new model
will take into account three primary taxpayer/trader clusters: Small numbers of
large corporate and individuals with high average tax revenues; a growing
number of small, medium and micro enterprises (SMMEs) and middle class and a
large micro-informal business base with low average tax avenues. The new model
will enable SARS to better target its education, service and enforcement
initiatives at these segments.

Improved border control and streamlined flow of people and goods through
border posts have been identified as core government objectives. SARS has been
made the lead agency for this responsibility and chairs the interdepartmental
control committee. SARS has established the Customs Border Control Unit which
is tasked with ensuring the free flow of people and goods at the borders while
through enhanced anti-risk measures protecting the country and economy from
dangerous and illicit goods.

SARS last week announced the outcome of the revised tender processes for the
provision of scanners and related services to ensure security of trade with
South and Southern Africa and to improve customs control capacity. A shortlist
of preferred bidders has been issued for each of the seven types of scanners.
SARS will now determine the precise timing and quantities of the scanners to be
acquired over time.

SARS has unveiled the new tax assessment process which has entailed
automating significant steps in the process through the use of technology such
as scanners and "intelligent" bar codes. This will allow processing of large
volumes of low risk assessments quickly and more efficiently while specialised
efforts can be concentrated on the more high- risk areas.

Members of the House will by now have been exposed to the extensive
marketing and education campaign that has been launched to inform taxpayers and
stakeholders of the new returns process and what is expected of taxpayers and
the new deadlines. eFiling will be promoted more aggressively to ensure an
uptake in registration this year in a further drive towards a future paperless
environment.

Financial Intelligence Centre

Allow me to add a few remarks on the Financial Intelligence Centre (FIC).
The Centre has made significant progress since its establishment in 2003. We
can see the increased levels of interaction between accountable institutions,
supervisory bodies and the FIC and the positive effects of this. Reporting to
the centre has improved consistently, while the centre itself has continuously
enhanced the quality of its referrals to the competent authorities for
investigation.

However, when we in Parliament passed the Financial Intelligence Centre
(FIC) Act in November 2001 we did not fully appreciate the future roles and
responsibilities of the various supervisory bodies, as scheduled in the Act or
the Centre. My intention is to introduce into Parliament this year a first
round of amendments to the FIC Act to remedy this situation. The amendments
will seek to make explicit the roles and responsibilities of the various
supervisory bodies, as well as give the Centre responsibilities where there is
no supervision.

The way in which the Act is presently formulated does not provide either the
designated supervisory bodies or the Centre express provisions to enable
administrative enforcement of the Act. This has undermined efforts to properly
administer the Act and the effectiveness of the anti-money laundering and
financing of terrorism regime, especially in the areas of compliance and
enforcement.

The draft Amendment Bill will further entrench the responsibility of
supervisory bodies to supervise compliance with the FIC Act by expressly adding
this to their functions. This will remove any uncertainty that presently
exists. It will oblige supervisory bodies to include supervision of compliance
with the Act in their objectives and in the structuring of their functions. It
will also empower them with particular powers in order to assist them in the
carrying out their supervisory functions for example, to inspect the affairs of
accountable institutions.

The amendments will also enhance the centre's own monitoring powers,
enabling it to conduct inspections, especially in those instances where there
is no supervisory body – and here the motorcar retail industry or the legal
fraternity springs to mind. In the present situation, if accountable
institutions make small transgressions of the FIC Act, they need to be
criminally charged. This is particularly onerous and impractical and does not
foster the spirit of co-operation intrinsic to the Act. So the amendments will
also introduce an administrative enforcement framework within which
administrative penalties and remedial action under the Act can be applied in
deserving matters. The key feature of the proposed enforcement model is a set
of administrative penalties which may be imposed by supervisory bodies or the
Centre. An appeal procedure is also envisaged.

In this regard, I have in mind the appointment of an experienced person to
act as the chair of an Appeal Board who will adjudicate on the fairness of
administrative penalties.

These issues take me to another area which continues to concern me greatly
and this is the matter of compliance not only in terms of the FIC Act, more
generally as well. I believe that compliance should be understood in its
totality. I believe that all of us, in government and in business, wish to
comply with the norms of good governance, fairness and honesty which underpin
the values of our democratic society and express our human dignity. This
approach should lay the foundation for industry leaders to play a leadership
role, in which they voluntarily adopt an attitude in which they seek to
regulate themselves and their sector, but penalise those of their colleagues
who operate outside established and agreed forms of conduct. Failing this, the
state has to adopt a more aggressive stance.

We are all aware of the situation in which individuals, abusing financial
services and institutions, have undermined the established framework and the
law. They have deliberately and criminally decided to take a path of
non-compliance and have tested our resolve to come after them. I therefore see
urgency in the need for co-ordinated, co-operative and partnership efforts by
the relevant Supervisory bodies, such as the Banking Supervisor and the
Financial Services Board, working jointly with the FIC and the SARS. I expect
to see them co-ordinating their efforts with each other, actively sharing
information with the FIC and SARS and adopting an aggressive attitude to all
those who operate outside of the spirit and letter of the law.

We need this type of collaborative effort to ensure that organised crime
syndicates do not find in South Africa a safe haven to hide ill-gotten wealth.
We need to take joint action in situations when we come across fraudulent
schemes, such as the recent case of money skills, in which illegal proceeds are
alleged to have been generated and laundered. We need to ensure such schemes
are identified and nipped in the bud before they do the damage we have seen
recently.

I have also asked the FIC to consider how to enhance the capacity for
financial investigation and resulting in more successful prosecutions. We need
to send out a powerful message to all of those who wish to abuse our financial
sector that this will only be possible if they are prepared to pay the
consequences.

Conclusion

Let me return, in conclusion, to the theme we have adopted for this year's
G20 consultations: 'Sharing: Influence, Responsibility, Knowledge'. These are
challenges, indeed, on a global canvas, but in our engagement with
international partners, both the powerful and the vulnerable, we surely need to
proceed from a common understanding of our own approach to shared growth and
co-operative development. This understanding rests on principles set out in our
Constitution: recognition of the respective roles and influence of Parliament,
the executive and the judiciary, overlapping responsibilities of national,
provincial and local government; acknowledgement of the rights of all South
Africans to education and learning.

The National Treasury, the Revenue Service, Statistics South Africa, the
Financial Intelligence Centre, the Development Bank of Southern Africa, the
Financial Services Board, the Public Investment Commission and other
institutions and agencies associated with the Finance Ministry all have their
spheres of influence, all exercise responsibilities of distinct kinds, all
contribute to shared knowledge and understanding. But these clusters of
influence, responsibility and knowledge are neither absolute nor complete, and
we both welcome and value the oversight role of Parliament and the
accountability to the wider public that this entails as part of a
democratically shared trusteeship over the public finances, nationally
collected revenue, our financial institutions and the official records of
statistics.

Allow me to express particular thanks, in this regard, to the chair of the
Portfolio Committee of Finance, Mr Nhlanhla Nene, the chair of the Select
Committee of Finance, Mr Tutu Ralane and the co-chairs of the Joint Budget
Committee, Ms Louisa Mabe and Mr Buti Mkalipi, who have provided exemplary
leadership in these challenging positions.

Issued by: National Treasury
24 May 2007