Good evening, and thank you for the invitation to address you. As you are aware today marks a big change in the exchange control regime that has characterised this economy for more decades than is worth remembering. As from today private citizens are allowed to invest up to R200 000 of their savings in foreign assets.
The significance of this change cannot be underestimated. Exchange controls were introduced on the 16 June 1961 in an attempt to stem the flight of capital which followed in the wake of the Sharpeville uprising. They were part of a plethora of policies and instruments used by the apartheid government to shield itself from the outside world and, through the manipulation of the economy, its resources and people, postpone the inevitable dawn of democracy. In line with our new democracy and in fulfilling our mandate and commitment to create a competitive, growing and job absorbing economy, the steps taken today bear testimony to our growing sense of confidence.
Clearly new rights and freedoms bring with them responsibilities and obligations. As part of our drive to develop a culture of tax morality individuals wanting to avail of this facility will have to declare that their tax affairs are in order.
The relaxation of exchange controls is, however, only one of a series of institutional reforms which underpin the transformation process. We understand only too well that sustainable growth and development requires the support of strong institutions if we are to succeed.
Improved public services and increased government spending on infrastructure and development initiatives may well be important elements of our growth strategy. But in the same way as the best efforts of government will be wasted if they are not contained in a sound and sustainable macroeconomic and fiscal framework, they will also be wasted if they are not supported by substantial institutional reform.
To secure the macroeconomic environment required for the implementation of the Reconstruction and Development Programme, government introduced the strategy for Growth, Employment and Redistribution (GEAR) on 14 June 1996. We have set ourselves ambitious growth targets, we need to accelerate employment creation dramatically and we aim to reverse the income and wealth inequalities which characterised the apartheid economy. These goals are the bedrock of the GEAR strategy and one year after its introduction there is much progress to be reported.
A brief review of the key numbers shows that we are on track · higher export figures – R12,32 bn in May, a surplus of R1bn up on April ; · inflation figures that appear to have stabilised (now 9,5%) and early indications are that the trend is once again downwards; · falling money supply and credit growth figures (MS from 15,44% to 15,40% and credit growth 17,40% to 16,57%); · a lower total population figure than was expected; (37,9 million) · manufacturing output which remains strong; · reserve figures (R22,1 billion, up from R21,8 billion) announced this evening that reflect increasing confidence in our economy - a factor that was also apparent in our recent roadshows to the US and Japan. For the first time in decades South Africa has been able to raise long-term finance in the private capital markets internationally at competitive interest rates. Earlier I pointed to the fact that key to the sustainability of the transformation process is building strong institutions capable of adapting successfully to changing circumstances. Much of this transformation is now taking place within government. On the fiscal side we are in the process of radically improving the budget process and will with next year’s Budget be presenting a three year expenditure plan. We are introducing a Medium Term Expenditure Framework which will allow for better articulation between policy priorities and expenditure. The focus is on the relationship between inputs and outputs and the efficiency of government spending. Our ultimate goal is to improve the quality and availability of social services within a sound fiscal framework. However, our focus is not solely on the expenditure side of the Budget. Not much has been written about the South African Revenue Service Bill that was tabled in Parliament on 19 June 1997. Certain impressions of the Bill have been widely reported, but it is important to spell out what the Bill actually contains, especially in view of the importance that Tax and Customs issues hold for business people. This is a Bill that will effect changes to the Revenue Service and will put it in a position to become the strong and sustainable institution that this country needs in a revenue collecting agency. The Bill is revolutionary in terms of South African public administration - for the first time, a Government department will be established as an organ of state within the broad public administration, but as an institution outside the public service. SARS will be given a wide range of powers to enable it to perform these functions, such as the appointment of employees and the acquisition of property within guidelines set by the Ministry. The Bill establishes a SARS Advisory Board to act as an advisory and consultative body for the Minister and the Commissioner on various issues including - · the management of SARS; · the improvement of efficiency and performance and revenue collecting efforts; · the terms and conditions of employment of employees of SARS; · the budget of SARS; and · the implementation of the proposed Act.
Much progress has been made in laying the foundations for a stronger institution even before the new legislation comes into force. South Africa’s revenue collecting agencies, and particularly Customs and Excise, have been sorely neglected over the past 40 years. They are having to manage systems which have been allowed to run into a state of disrepair, trying to combat increasingly sophisticated criminal activities on the basis of archaic systems. For the first time, resources are now being channelled to install new systems.
In Customs and Excise there have also been significant strides in respect of information technology. One particular area is that of Electronic Data Release, which will go a long way to eradicating the problem of fraudulent release documents - one of the major areas where fraud currently occurs. Instead of releasing cargo on the basis of a hard copy manifest, goods will only be allowed to move from depots on an electronic instruction from Customs. This system has already been implemented in Johannesburg, and will soon be rolled out at other major centres. Together with Home Affairs and the South African Police Service, SARS is involved in the National Inter-Departmental Structure on Border Control, part of the National Crime Prevention Strategy. One of the first initiatives of this programme has been to secure Cabinet approval to reduce the number of land border posts through which bulk commercial goods may be imported or exported from 52 to 19. The number of airports will be reduced from 36 to 8. To end the current fragmented approach to border control, a unified inter-departmental command structure is being created. From a situation where 17 committees and bodies addressed various aspects of border control, we will now have a single integrated mechanism responsible for controlling our borders. Some of the initial successes of this co-operation have been in a number of swoops at border posts. In a blitz in Durban on 14 May, goods worth R4,3 million were seized, with a Customs/VAT value of R900 000. Four kilograms of gold was recently recovered at Durban International Airport, with a value of R2 million.
We recognise our responsibility to create an institution which facilitates and promotes tax compliance. One of the recommendations in the Katz Commission’s First Interim Report was that the basic rights of taxpayers should be articulated in a clear, public statement. A draft Client Charter has been prepared for SARS, which commits the Service to courteous treatment of taxpayers, fairness, impartiality and due regard for the rights of the taxpayer, while also stating the obligations of taxpayers. Government recognises that the present tax system needs attention. People need to perceive that the system is fair and equitable; sound and efficient. In order to alleviate the unfair burden on middle income earners particularly, we are committed to bringing more taxpayers into the net.
The reform and restructuring of the revenue collection services which has culminated in the establishment of SARS is key to the transformation process. Improving the efficiency of tax collection, and broadening the tax base will enhance our ability to deliver the social services which lie at the core of the RDP and which democracy demands. In addition it will create the necessary conditions for lower tax rates.
In conclusion, sustainable development and job-creating growth requires sound macro-economic and fiscal policies which are supported by strong and dynamic institutions focused on the delivery of quality social services and value for money. As a government committed to improving of the quality of life of all South Africans, we believe that our economic policies and the institutions that support their implementation provide the necessary means to achieve these goals. Collectively our role is to ensure that we succeed.
Thank you.