New finance laws for South Africa – changing pensions and targeting auditors
The Financial Matters Amendment Bill (FMAB) is currently undergoing the parliamentary process, with officials recently deliberating on a committee report made on the bill.
In broad terms, the bill aims to amend various other pieces of legislation related to pensions, the Land Bank, the auditing profession and the Financial Commission.
The Acts set for amendments include:
- Associated Institutions Pension Fund Act
- Temporary Employees Pension Fund Act
- Military Pensions Act
- Government Employees Pension Law
- Financial and Fiscal Commission Act
- Land and Agricultural Development Bank Act (Land Bank Act)
- Auditing Profession Act
- Auditing Profession Amendment Act
The FMAB was initially introduced to the National Assembly in early September last year and has undergone various deliberations and policy considerations before reaching its current state.
On Wednesday (14 June), during a parliamentary committee on finance hosted virtually by Yunus Carrim, the chairperson of the Standing Committee on Finance, the select committee on finance reported and reacted to certain contentions with the bill.
The committee noted that the FMAB proposes amendments in eight different pieces of legislation; however, the Minister of Finance, Enoch Godongwana, requested that the Committee rejects the amendments proposed to the Financial and Fiscal Commission Act as well as the other two relating to the auditing profession.
Responding to this, the committee said that the proposed changes to the three Acts are largely technical in nature and seek to align provisions and are still relevant.
Pensions
Regarding pensions, the bill seeks to amend certain definitions and other provisions within the Associated Institutions Pension Fund Act and the Temporary Employees Pension Fund Act to align them with the sole administration of the Minister responsible for finance and to update references to other ministers.
The Military Pensions Act is expected to see pension benefits extended to life partners for members in an update that would get rid of a discriminatory provision. The committee noted that there are no envisaged material financial implications on the state as a result of these proposed amendments.
Other amendments relating to pensions deal specifically with government employees in an attempt to amalgamate the associated institution’s pension fund into the government employees’ pension fund. The purpose of the amendment to the Government Employees Pension Law is to facilitate administration and make “clean-break” principle apply to members of the Associated Institutions Pension Fund (AIPF) by amalgamation into the Government Employees Pension Fund (GEPF).
Auditing profession
Under the bill, the Auditing Profession Act would be changed to enable the enforcement committee admissions of guilt to refer instances of seriously improper conduct to the disciplinary committee for sanctioning.
According to the Parliamentary Monitoring Group (PMG), planned amendments to the Auditing Profession Act are contained in Clause 21 of the bill and propose to: “adjust the powers of the enforcement committee where the auditor admits guilt if the enforcement committee’s view is that conduct does not warrant the sanction of deregistration or disqualification from registration as auditor, it must follow the admission of guilt process or warrant such sanction, it must refer the matter to the disciplinary committee for sanctioning.”
“The amendment to the Auditing Profession Amendment Act, 2021 is contained in clause 22. The amendment aims to provide that the same processes apply to alleged improper conduct of auditors whether committed before or after the Auditing Profession Amendment Act, 2021 (Amendment Act),” the PMG added.
During the meeting, the committee noted that the sanctions imposed against people transgressing the law were far too mild, and it further noted that the Enforcement Committee may only introduce certain types of sanctions, and in instances where the transgress warrants a more serious sanction, it will be referred to the Disciplinary Committee.
The committee further stated that recommendations that the time limits for auditing contracts should be entrenched in law.
Land Bank
Amendments to the Land Bank include the substitution of the definition of Minister and replacing the provision for judicial management with business rescue in terms of the Companies Act.
Before the latest select committee meeting, there was growing tension around amendments to the Land Bank, with some officials arguing that all proposed amendments dealing with the Land Bank should be removed until further policy discussions on how to repurpose the land bank were undertaken – it was further argued that provisions relating to the Land Bank be dealt with separately.
The committee has now noted that the amendments to the Land Bank are largely technical and seek to align the provisions with administration by the Minister of Finance. The committee further noted that while the proposed amendment to the Land Bank Act is technical in nature, it might assist the Bank with its liability solution and enable it to better fulfil its mandate of supporting the agricultural sector.
See the full bill below: