Development Bank of South Africa; Government Employees Pension Fund; Financial & Fiscal Commission Annual Proposals; Municipal F

Meeting report

FINANCE SELECT COMMITTEE
23 September 2003
DEVELOPMENT BANK OF SOUTH AFRICA; RECOGNITION OF PENSIONABLE SERVICE FOR NON-STATUTORY FORCES INTEGRATED INTO SANDF; MUNICIPAL FINANCE MANAGEMENT BILL: BRIEFING

Chairperson: Ms Mahlangu (ANC)

Documents handed out:
Presentation by the DBSA: Local Government Resource Centre
Government Employees Pension Fund Presentation
Municipal Finance Management Bill Presentation

SUMMARY
The Development Bank of South Africa made their annual appearance before the committee. Members were impressed with the work the Bank had done in the last year. They introduced their Local Government Resource Centre to the Committee. The Department of Defence briefed them on the latest developments on the Pension Fund for Non-Statutory Members who are now SANDF members and there was a first briefing on the Municipal Finance Management Bill.

MINUTES
The Chair lamented the lack of members at the meeting. She remarked that it was not a good sign when public representatives behave like this. There were only four members present when the meeting started.

Development Bank of South Africa
Mr J Naidoo (Chairperson, DBSA) made a few introductory remarks. He stated that the financial year ending March 2003 was a landmark year for the bank. They had broken all previous performance records during this year. They had developed a quantum leap strategy which worked very well - based on thinking "outside the box". The major goal for management was sustained investments for maximum impact on the poor. They had to walk a fine line between balancing sustainability / commercial success while at the same time concentrating on development. They still have a long way to go but they currently have a very good team at the bank that is able to think innovatively. They also experienced great support from the government, especially from the Finance Minister, Trevor Manuel.

He explained that 50% of the DBSA's clients are local government institutions. They have especially targeted poor rural communities through their Development Fund which was started in 2001. Their big focus is on building capacity in the form of pilot projects to start processes in communities. They are currently working with 134 municipalities of which 74% are rural. Through the DBSA, 762 000 families have received basic services. They have created 42 000 jobs through their projects. The DBSA spent one third of its resources outside South Africa in line with NEPAD goals.

In his conclusion, Mr Naidoo reiterated that the bank had had a successful year and is well positioned.

DBSA's Local Government Resource Centre (LGRC)
The presentation was done by Mr JH de Villiers Botha (Executive Manager: Strategic Services).
The objective is to provide a one stop support service to municipalities to enable them to become better functioning entities. The LGRC will be carried to all municipalities and stake holders by the LGNet which is a local government private network using the internet and if digital exchanges are not available, satellite linkages will be provided. The LGNet will:
- Provide ICT infrastructure to local governments previously excluded
- Provide a framework for functional monitoring of municipalities
- Provide a centralised source of data and information
- Allow for a focused approach to capacity building and the measuring of the impact of interventions
- Provide for improved communication and sharing of information and experience
- Create a channel for training and development
- Allow for rational planning and policy formulation based on reliable data and information
- Improve coordination at all spheres of government

Discussion
Ms Mahlangu congratulated the DBSA on their good results and excellent report and presentation.

Mr Sogoni (UDM) asked about the Development Fund. He noted the 134 rural municipalities who had received assistance and asked what the criteria were for receiving assistance and whether there are specific requirements.

Mr Kolweni (ANC) asked for more clarity on their debt position.

Mr Naidoo replied that the Development Fund was created as an innovative instrument. The only criteria are that the funds should help the poorest of the poor. Their objective is the development of the poor and therefore they have a clear mandate. The DBSA understood that during the transitional period in government many of their clients transformed to become one big client. For the DBSA to help this transition along they had to adjust their risk analysis. They have identified the Limpopo, Eastern Cape and KwaZulu Natal provinces as priorities because of the 'poorness' in those areas. On their debt levels, he said that they are currently standing at 98% where their policy allows them to go to the 250% level. That means they have more than 150% to go before they would need a cash injection from shareholders. Their debt book is currently better than most commercial institutions.

The Chair asked what sort of interest rates they apply.

Mr Lucas (ANC) remarked that he had visited a DBSA project in the Limpopo province and it made a good impression on him. He received very positive feedback from farmers in the area as they could not get funding anywhere else. He asked how many of the 42 000 jobs that were created were long-term and how many were short term. He also enquired after the bank's commitment to the resolutions adopted at the Growth and Development Summit.

The Chair asked them if they follow the Preferential Procurement Policy Framework Act.

Mr Naidoo responded to the Growth and a Development Summit resolution by saying the bank has the role of investor, advisor and partner.

Mr de Villiers Botha said on interest rates, that because of the bank's good rating they can raise capital at very competitive rates. That helps a lot as they can pass this on. On the 42 000 jobs he clarified that they include both temporary and permanent jobs. He added that they are aligned with government policies and procurement and have a Procurement Policy Committee in the bank.

Pension for Non-Statutory Forces integrated into the SANDF
Mr G. Barnard, an actuary from Alexander Forbes, Brig-Gen. A de Wet (Director Human Resource and Planning, Department of Defence) gave a presentation on the proposed dispensation for the recognition of pensionable service for Non-Statutory Forces who were then integrated into the South African National Defence Force.

Ms Mahlangu asked whether all the previous non-statutory forces were part of this process.

Brig De Wet replied that the Department of Defence went through a long process. All former forces were represented in the Defence Council.

Ms Fubbs (Chairperson: Gauteng Finance Portfolio Committee) asked about former non-statutory forces members whose rank was lowered when they were integrated that South African National Defence Force (SANDF). Will their pensions be worked out on their former or new rank? She also asked what happened to those that were demobilised.

Mr Barnard replied that the Government Employees Pension Fund was only for members who integrated into the SANDF. Those who were demobilised were covered under the Demobilisation Act and Special Pensions. He also explained that the pension is based on years served and the salary levels for the last 2 years before retirement. That means that rank when joined did not matter.

The Bill was put before the committee for acceptance and members agreed on it.

Municipal Finance Management Bill
Mr Momoniat (Director-General, Treasury) briefed the Committee for the first time on this Bill. He stated that work on this Bill had started in 2000 and after a lengthy process the Bill had finally reached this committee. He did however expect them to want to make quite a few changes.

To quell members' misgivings about the constitutionality of this Bill he stressed that they have looked at the constitutional issues very thoroughly and that was part of the reason this process has taken so long.
Financial and Fiscal Commission annual proposals
The Chair urged the members to put pressure on their provinces to finish their reports. She has only received Gauteng's report thus far and time was running out.

The meeting was adjourned.