WHY THE SA PENSION SYSTEM IS DOOMED

SA’s pensioners on average receive the lowest income of all countries that have a functioning pension system, according to the 2018 Mercer Melbourne Global Pension Index. 

Mercer, the global consulting firm whose index measures the retirement income systems for 34 countries, says SA’s system is not sustainable because it does not cover enough people or pay a decent income. 

The average net pension replacement rate — which measures the percentage of income that a working individual will get when they retire — sits at just 17% of their current earnings. SA is the worst performer on this indicator. 

Mercer  recommends that to build a world-class pension system, countries must “ensure the right balance between adequacy and sustainability”.

So what could the solution be for a country like SA that does not have enough of both? Mercer says its researchers recommend that, among other things, the country introduces a minimum level of mandatory retirement contributions or increase the level of preservation of benefits when people change jobs.

There are already moves afoot to prevent provident fund members withdrawing all their savings in cash at retirement. 

The Treasury’s retirement reform regulation will come into effect on March 1 2019, to ensure that provident fund members preserve their cash at retirement. 

 However, given the increasing unemployment rate and contracting economic activity, is SA ready for mandatory retirement contributions?

“Ideally, the best time to introduce mandatory contributions is when there is strong economic growth. However, when this is not occurring, it comes down to a judgment call by government as to what is most important and what the right balance is between the short term and the longer term,” says Mercer SA CEO Nicolette Hendricks.

The other challenge when looking at setting a minimum level of mandatory retirement contributions is that of the more than 56.2-million people in SA , only 16.1-million are formally employed. Of this, less than half  (48.2%) had access to retirement benefits in 2017, Sanlam’s 2018 Retirement Benchmark Survey shows.

So how do you improve a country’s pension system with a solution that targets less than half of the workforce?

Mercer recommends increasing the minimum level of support for the poorest aged individuals. The country’s retirement industry, on the other hand, has suggested that mandatory membership, or auto-enrollment, of employed people to retirement funds could be a game changer for the country’s pension system if accompanied by prescribed maximum fees.

The Treasury’s retirement reform discussion paper revealed a few years ago that the average fee paid by people saving in defined contribution retirement funds offered by commercial players was 2.5% a year. A lot has changed since, with players like 10X and Sygnia promising less than 1% in fees.

It is therefore strange that Mercer’s report did not tackle the issue of fees in SA when it made recommendations on how to make the country’s pension system sustainable in the long term.

The firm said comparing fees across different countries’ systems would have been difficult as obtaining comparable objective data of each system is virtually impossible. So, as a proxy for fees, it used the last questions in the integrity subindex to consider the various types of funds in each system. “SA scored 7.4 for this question, which was broadly in the middle of the pack,” said Hendricks.

 However, one cannot look at costs without considering investment returns as investment companies often defend high fees by advancing evidence of their good performance. As a proxy for real investment returns, Mercer considered the level of growth assets held within each country’s pension system. Here, Hendricks said “SA scores full marks, a very good indicator”.

Mercer’s 2018 index showed a slight improvement in SA’s overall standing, rising from 48.9 in 2017 to 52.7 this year. This rating fell within the range of comparable developing countries, including Brazil, Indonesia and Malaysia as well as some developed nations like the US, Austria, Spain and Italy.

But this improvement was not because of improved savings. Instead, Mercer broadened its criteria for measuring adequacy of the pension system this year and included household debt as one of the determinants of adequacy.

While many of the studies that look at the adequacy of retirement incomes only consider the savings levels, Mercer has a different view. It looks at government debt, economic growth, tax treatments to encourage saving for retirement, home ownership as of late and household debt as additional factors that affect countries’ pension systems.

SA, says Hendricks, scores poorly when only the level of household savings is considered.  So how is the inclusion of household debt contributing to an improvement in the country’s pension system?

Mercer’s take is that because the level of household debt represents financial liabilities that must be paid by households in the future using accumulated benefits from the pension system, higher household debt therefore reduces the adequacy of the remaining pension benefits.

Collapse of Sars’s digital platform is ‘imminent’‚ after Moyane’s interference

The digital infrastructure at the SA Revenue Service (Sars) may be on the verge of collapse following the halting of a modernisation programme four years ago.

This was according to Sars acting group executive for IT strategy and architecture Andre Rabie‚ who was testifying at the commission of inquiry into tax administration and governance at Sars, on Monday.

According to Rabie‚ Sars was “far behind” in updating its digital infrastructure after now-suspended commissioner Tom Moyane carried out his new operating model‚ which saw the total overhaul of various structures‚ including IT.

Rabie said an almost decade-long programme to modernise the revenue service was brought to a halt when Moyane took over. Rabie‚ who joined Sars midway into the modernisation programme in 2011‚ said by the time Moyane started as commissioner in 2014‚ Sars had created a digital “platform on which to build on”.

“We understood that we needed to take Sars to the next level and it was basically to modernise processes and procedures. It was very well understood that if you make it as easy as possible for people to comply‚ they probably would. We already created a platform to build on, and the trajectory was basically to continue improving on that. We understood what needed to be done next‚” Rabie said.

Shortly after his arrival‚ Moyane appointed global consultancy Gartner to assess Sars’s IT system and strategy — which came at a cost of about R200m. The role of Gartner’s report and recommendations in the restructuring of Sars will come under the spotlight at the inquiry this week. 

“The modernisation programme was suddenly stopped. The reason cited was there was a requirement to review the structure and the IT landscape. We got word of this via a corporate communication and we basically stopped the process. There was basically no change control. It was a shock and it was not great for the moral‚” Rabie said.

He said Gartner‚ in carrying out its assessment‚ had only consulted him and his team through assessments and questionnaires‚ which were “not necessarily detailed”.

“What suddenly started to happen is our support functions started to run autonomously and it was centralised. There was no consideration for the digitised specific requirements. Effectively‚ infrastructure is far behind. It’s pointing to the imminent collapse of the digital infrastructure at Sars‚” Rabie said.

“One of the things is that modernisation was stopped. In the world of technology‚ if you lose years‚ you typically have to restart.”

Where the Jobs Summit fell short

President Cyril Ramaphosa admits SA will not achieve the unemployment target in the National Development Plan “unless we do something extraordinary”. And yet, by outsourcing such a fundamentally important project as the jobs summit to the National Economic Development and Labour Council (Nedlac) and its by-invitation-only participants, the president condemned it to the ordinary.

Where were the big ideas? Where were the best and the brightest minds from SA, the continent, the world? Where was the hard discussion about the future of work, AI (artificial intelligence) and the sharing economy? Where was the understanding — humbling as it may be — that big government, big labour and big business have too many vested interests and are too far removed from what it takes to create a job in a market economy?

Instead, we’re told that among other things, the government will  “identify existing interventions across government and the private sector and create a coherent platform to enhance access and coordination of SMME (small and medium enterprises)  support.” Isn’t this what the Department of Small Business Development was meant to be doing these past four years?

Many of the summit's proposals noted in the 84-page agreement (which, by its length, invites people not to read it) are extremely well-intentioned, and some may succeed in having an impact. The main point of departure is that we’re not short on small scale, imaginative interventions but the solution actually requires a larger-scale fundamental shift in government policy and mindset. The paucity of vision about how we tackle the gushing wound of unemployment makes it difficult to praise band-aid solutions, particularly when there was no voice for the unemployed in the room and no voice for the segment of the economy most likely to create jobs for them:(SMMEs).

The Small Business Institute's research shows that 98.5% of the economy — of all formal, formally employing business — are SMMEs. So while the agreement has a good number of pages devoted to discussions about how to support them, the assumptions underpinning the ideas are based on erroneous facts.

The Department of Trade and Industry’s estimates that 2,8-million SMMEs contribute 60% of SA's employment guide the interventions. It’s possible that this figure includes some back-of-matchbox calculation in respect of the informal sector (no details about the calculations were offered), but research we released in July, using National Treasury and South African Revenue Service data, confirmed that there  are only 267,959 formal SMME companies that provide formal employment.

While they are the majority of companies in the economy,  they only account for 28% of jobs.

A single-minded approach to making it easy for SMMEs to start, run and grow to create the millions of jobs we need would be extraordinary. It doesn’t have to be complicated.

In the UK, as part of its government’s growth initiative, the Red Tape Challenge crowd-sourced thousands of responses through a focused web-based campaign, slashing a record number of regulations, yielding a £10bn cumulative net saving to business between 2010 and 2015.

The South Korean government reduced data usage costs and offers young entrepreneurs the free use of dormant or unused public patents; and they are exempted from income tax for three years. Estonia offers an online service to register a business in three hours (it takes 47 days in SA).

The minister of small business development refreshingly acknowledges that red tape has encumbered small businesses in SA,  yet the jobs summit agreement refers only three times to red tape, offering no plan to address it.

Small business owners can spend nine working days (equivalent to 75 hours) a month dealing with unnecessary forms and bureaucracy. This can equate to 8% of turnover. It is one of the most frequently-cited reasons for early-stage business failure.

Regulatory reform must be retrospective and proactive and it is within the minister’s power to act proactively by focusing on regulatory governance. She could immediately table guidelines for giving force to Section 18 of the Small Business Act. This would require every cabinet minister to "think small first" by assessing the impact of any law or regulation or policy on SMEs. The EU considers SMEs "prime customers" for business regulation and red tape.

Late payments to small companies came up at the summit, with the government re-committing to paying invoices within 30 days and Business Leadership SA urging its members to do so. Far more constructively, and on the same day, the UK government announced plans to pay SME suppliers within five days to alleviate the cash flow trouble which they estimate causes 50,000 SMEs to fail each year.

The UK government also proposes that corporates appoint independent directors to oversee prompt and fair payment, promote innovative technologies to help small companies manage their payments processes, and work with their supply chains to identify best and worst practices in payment behaviour.

Another glaring omission in the jobs summit agreement is any suggestion that SA’s labour legislation undergo review.  In the face of the sharing economy and artificial intelligence, the nature of work requires a new flexibility.

One example of how far SA lags behind the times is our fixation on the notion of "permanent" jobs.

Section 189 of the Labour Relations Act Amendments stipulates that after three months a temporary job becomes permanent. Internationally the trend is 12 months before job protection applies.

Germany is now looking to extend “temporary” work from 12 to 18 months.

In 2011, 25% of manufacturing companies employing 10 to 49 employees and based in Gauteng sampled in the SME Growth Index employed temporary workers. That fell to 6% in 2017.

Labour laws need to be efficient, flexible and responsive. The world of work is changing and the gig economy is fast translating into an increasingly dynamic workforce. Internationally, temporary workers are acknowledged as “agency workers” or independent contractors. Yet in SA “temporary work” is seen as unattractive and pejorative.

Unless and until the government is able to reverse its antipathy to business, acknowledge the dynamic forces of entrepreneurial innovation and accept the disciplining forces of the free market and competition, SA will never achieve transformative, inclusive economic growth.

The government remains wedded to certain cornerstones of policy and expanding them rather than reducing its role in the economy. Re-thinking this approach could dramatically change the business environment.

Without an ideological acceptance that SA needs enterprises and that they need all the freedom required to start, run and grow, there is little chance of solving the unemployment crisis.

Interventions are required that nurture SMEs to allow them to do what they do best: create jobs.

Newpark Reit disappoints as weak economy bites

Newpark Reit, the property company that owns the JSE’s office building, has released one of this reporting season’s worst set of financial results, with its dividend falling 6.4% in the six months to August as the company struggled to fill vacancies.

Newpark is one of the smallest specialist property companies listed on the JSE with a market capitalisation of about R600m and four real estate assets worth about R1.38bn. It was listed with the aim of providing investors with consistent dividend growth.

Distributable earnings for the reporting period declined 6.4% to 24.95c per share for the first half of the 2019 financial year compared with 26.65c per share for the comparative 2018 period.

The board declared an interim dividend of 24.94859c per share.

The company owns the JSE’s Sandton head office; retail centre 24 Central which lies next to it; a property in Linbro Business Park; and another in Crown Mines. It blamed weak economic growth and a lack of demand for space at 24 Central for its poor performance. It also said a major office tenant had left one of its office buildings. 

“The vacancies, which started to increase during the six months to February 28 2018, continued further with a large tenant deciding to consolidate its office footprint into their main office space.

Expense controls were applied to mitigate the impact of this loss of revenue but could not compensate entirely for the impact on distributable earnings,” the company said.

The group said overall group vacancies had increased significantly during the period to 17.4% from 11.2% at the end of February 2018, and it made no acquisitions during the reporting period but was considering ways of expanding in SA and abroad.

“The strategy is to seek well-positioned prime commercial and industrial properties which provide quality cash flows with the potential of upward rating on lease renewals and/or redevelopment opportunities within the medium to long term.”

Irregular government spending continues to rise, says AG

Irregular spending by the national and provincial governments is continuing to rise‚ albeit at just 1%‚ from R45.3bn in March 2017 to R45.5bn in March this year.

This is according to a report presented to a joint meeting of the standing committees on public accounts and appropriation on Wednesday by Auditor-General Kimi Makwetu‚ in which he detailed the audit outcomes of more than 434 government entities for the 2017-2018 financial year.

Makwetu reported that the number that received clean audit outcomes — those who accounted properly for public funds — had declined during the period under review and had been doing so for the past four years.

The AG told MPs that of the 295 departments and entities that received unqualified audits‚ only 99 (or 25%) obtained such audits with no findings, while 196 were unqualified audits with findings.

“The current year‚ in terms of clean audits‚ has shown an all-time low in terms of which we have only 99 from 129 departments that have clean audits‚ so the level of clean audits has unfortunately regressed‚” said Makwetu.

“There are reversals of audits outcomes that were achieved in the previous year as well as the year before. So we’ve got a whole 75% of departments and entities that still need to do a significant amount of work to be able to produce reliable financial statements that are without qualifications.”

Makwetu said the bulk of the R45bn irregular expenditure was incurred by departments such as water and sanitation‚ correctional services‚ provincial departments of health in KwaZulu-Natal and Gauteng; and roads and public works in the North West and the Free State.

The SABC (R571m)‚ Airports Company SA (R544m), and arms maker Armscor (R12m) contributed to the irregular expenditures incurred by state-owned enterprises (SOEs).

Makwetu said the figures were likely to rise and that the financial statements of other SOEs, such as SAA and its subsidiaries, and Denel have still not been filed. He did not expect them to paint a rosy picture, saying poor procurement management and the submission of erroneous financial statements were the root causes of irregular expenditure.

Makwetu also revealed that they could not conduct an audit of government tenders to the tune of R6.4bn due to missing or incomplete documents‚ while tenders amounting to R265m were related to government employees‚ in breach of legislation.

The AG also reported to parliament that there was an increasing tendency among government departments to squabble with his staff about their audit findings.

“The audit environment has become one of major contestation‚ and we do not shy away from those contestations because they enrich the final outcome. But there are those outliers who are contesting the audit because they don’t like [the results]‚ not because they’ve got evidence to support their assertions. Sometimes people can’t live with the fact that one plus one is two‚ sometimes they want it to be a different answer.”

Committee chair Themba Godi said the state of financial management in the government would not improve until cabinet ministers started taking action against errant officials. He said this was the reason why the Public Audit Act had been amended: to make the recommendations of the AG legally binding in the same way those of the Public Protector are.

“We seem to be running away from the real culprits‚ the ministers and the directors-general. Those are people who must act‚ and we are always moving around them,” said Godi. “The reason we have this amendment to the audit act is an admission that the ministers and the directors-general are not doing their work as per the Public Finance Management Act.” 

Probe finds R1.9bn looted from VBS Mutual Bank

A probe into the failure of VBS Mutual Bank found that at least 53 people and companies may have benefited from the looting of R1.9 billion ($130 million) from the South African lender before its collapse.

Terry Motau, who was appointed by the central bank to lead the investigation, is calling for arrests to be made and for tax authorities to swoop on those identified in his 139-page report, titled “The Great Bank Heist.” He also recommends an auditor’s liability claim be brought against the company’s auditor, KPMG South Africa, and that VBS be wound up.

“There is no prospect of saving VBS,” Motau said in the report, which was posted on the central bank’s website on Wednesday. “It is corrupt and rotten to the core. Indeed, there is hardly a person in its employ in any position of authority who is not, in some way or other, complicit.”

Motau’s report described a bank that extended overdrafts to favoured clients’ accounts that had no deposits, and that issued payments to individuals in exchange for massive deposits from various state entities and municipalities.

Before being taken over by an administrator in March, the bank caught public attention in 2016 when it gave former President Jacob Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence.

According to the report, Andile Ramavhunga, former chief executive officer of VBS, said he oversaw the payment of R1.5 million to what he called the Dudu Myeni Foundation in order to secure a R1 billion  deposit from a state-owned rail agency.

This foundation didn’t exist under that name, and may have been a reference to Zuma’s own foundation, which is chaired by Myeni, Motau alleged. Myeni, was ousted as chairwoman of South African Airways last year, having served on the board of the unprofitable airline in various capacities since 2009.

WhatsApp messages showed that SAA and state-owned ports and freight-rail operator Transnet were among Ramavhunga’s targets for deposits. Investigators also heard testimony claiming that VBS sought R2 billion of funding from the Public Investment Corp., Motau said. Ramavhunga “steadfastly denied that he was in any way involved in any unlawful conduct,” his report showed.

There were many examples of loans extended by the bank where “few, if any, monthly instalments were honoured,” the report said. “There are also very large overdraft facilities where no amounts were ever paid into the accounts and the facility limits simply increased to permit the escalating outflows.”

Why precisely formulated laws regulating racist speech are needed

Society is becoming increasingly polarised by racist speech, with fresh cases involving racial slurs occurring weekly.

Kessie Nair recently used the “k-word” to label President Cyril Ramaphosa and has been charged with crimen injuria. In August, Adam Catzavelos posted a Facebook video (strangely reminiscent of Penny Sparrow’s 2015 “beach monkey” post), using the “k-word” to describe the demographics of a Greek beach.

Last week, a Hot91.9fm DJ, Sasha Martinengo, was fired for referring to Julius Malema as a monkey during a broadcast. Martinengo has apologised but has since tweeted: “I’m sorry … but … Anyone, irrespective of their race … who disrespects a woman is a monkey.” The EFF has retaliated. It will be pursuing a criminal case against Martinengo, because “racists belong in jail”.

Most of those who use racist language face criminal charges or lose their jobs. They generally apologise. Some do so unreservedly; others add the “I’m not a racist” rider. But these apologies have little impact. The damage is done.

The public reaction has been interesting. We have witnessed widespread condemnation. This is indicative of a society maturing and beginning to appreciate the harm caused by racist speech — to the victims and the constitutional vision of a united and diverse nation. We haven’t reached a stage, however, where public condemnation is sufficient to censor racist speech. A legal response is required.

Confusion is also a common reaction. Many people fail to appreciate that it is deeply offensive to refer to an African person as a “monkey”. Lack of exposure to sensitisation initiatives exacerbate the problem. The policymakers and the law are partly to blame. The Promotion of Equality and Prevention of Unfair Discrimination Act, 2000 (the Equality Act) contains a chapter obliging promotional and educational measures to overcome hate speech and discrimination. Government hasn’t enacted this chapter, despite calls for it to do so.

People complain that only the white racists are exposed. They forget, however, that the SA Human Rights Commission has referred BLF leader Andile Mngxitama’s use of slogans such as “land or death” to the Equality Court. Similarly, last week Velaphi Khumalo was found to have engaged in hate speech targeting white people.

Part of the problem may be that the media reports focus on racist slurs targeting African people. But context is an important factor here. The legacy of apartheid as a “racially charged present” cannot be ignored by those who complain that white racists face a raw deal.

At the same time, the overregulation of racist speech must not erode the guarantee to freedom of expression. How should the law treat racist speech? The Constitutional Court has recently addressed two incidents where it condemned racism and undertook to eliminate this scourge. But this is a reactionary role and is a limited legal response.

The first case involved the term “swart man”. According to the court the mere utterance of such words isn’t racist. The test is whether a reasonable, objective and informed person would consider the words to be racist. The court stressed, however, that it is incorrect to assume that terms such as “swart man” are automatically neutral as this fails to reflect the impact of apartheid’s legacy. We cannot allow the past’s predominant racist view to distort the objective enquiry.

The court ultimately found that the words were used in a “derogatorily subordinating” sense and not merely to identify an African person. So the employee’s dismissal was confirmed — he had breached the disciplinary code and didn’t demonstrate remorse.

The other Constitutional Court case concerned the dismissal of workers for singing struggle songs during a strike. The lyrics included the line “Climb on top of the roof and tell them that my mother is rejoicing when we hit the boer”. The Commission for Conciliation, Mediation and Arbitration arbitrator found that although the singing of the song was inappropriate, it was not racism, and that a dismissal was unfitting. She ordered a final written warning, reasoning that a distinction should be drawn between struggle songs and racist terms. The Constitutional Court held that the arbitrator’s award was reasonable. She balanced the interests of both parties and considered the context.

Unfortunately, many media reports failed to explain the context in which these cases were decided. These inaccuracies included reports that the court had found that the “hit the boer” song wasn’t racially offensive, resulting in claims that the court treats white racists more severely. This is untrue. The court wasn’t asked to decide whether the song constituted racist speech. It was confined to the question of whether the arbitrator’s decision was reasonable.

These cases demonstrate the limited ambit in which the courts operate when confronted with racist speech. Courts must resolve disputes within the boundaries of the facts before them. It isn’t the courts’ role to make laws setting the appropriate behavioural standards. The legislature must recognise that SA doesn’t have an appropriate legal mechanism to regulate racist slurs and therefore it should initiate legal reform.

Most incidents are decided in terms of the common law crime, crimen iniuria, defined as the unlawful, intentional and serious violation of the dignity of another. While there have been successful crimen iniuria cases involving the “k-word”, this isn’t a suitable legal remedy. Firstly, the harm caused by racial slurs causes more than individual distress. It violates the group targeted and undermines the societal well-being. Secondly, intention to harm the victim’s dignity is an element that is difficult to prove. This is why the Equality Act doesn’t require intention for discrimination and hate speech — the impact of the conduct is critical. Thirdly, it is debatable whether the criminal law should be used to regulate racist speech.

Crimen injuria wasn’t designed to overcome intergroup intolerance. An outdated (colonial) legal solution to fix a modern (African) problem won’t work. Precisely formulated laws regulating racist speech are needed. These create certainty. They inform us of the required behavioural standard and the consequences of infringement. It is therefore unfortunate that the legislature has failed to enact the promised Prevention and Combating of Hate Crimes and Hate Speech Bill.

It is even more worrying that the bill contains a poorly drafted hate speech offence. This is aggravated by the failure to enact the promotional measures in the Equality Act. It is true that the act prohibits hate speech as a human rights measure. However, this provision is also imprecisely drafted. A prior draft of the Equality Act prohibited the use of specific forms of abusive language, including the “k-word”, as a type of racism. This prohibition wasn’t retained, but its reintroduction could be beneficial. If many European countries have laws banning Holocaust denial, then it makes sense for SA to enact laws that regulate specific types of racist speech.

Finally, it’s alarming that despite an increase in racial slurs and the polarisation of society, the legislature has remained inactive and left the problem to the courts without giving them the appropriate tools to resolve such disputes. Government must accept that the ongoing use of racial epithets in SA reinforces patterns of prejudice and harms the constitutional mandate. It must take charge by using the law to set the appropriate standard.

ANC’s Jessie Duarte ‘keen’ to appear before Zondo commission

ANC deputy secretary-general Jessie Duarte said on Wednesday that she was “very keen” to appear before the Zondo commission into state capture herself to answer on matters related to her interaction with ANN7 and The New Age newspaper, which were owned by the Guptas.

“I’m very keen to go. It is important that we all understand the role played by the ANC in the establishment of ANN7 and The New Age,” she said at a media briefing in Cape Town.  “By the time I got there [in 2012] they were already in place. But I’m happy to discuss meetings I had with Moegsien Williams [editor of The New Age]. I am not afraid to say that we did discuss a media that would give the ANC unmitigated space for its views.”

Duarte said that she was pleased the editors had given their explicit support to the ANC. “They were the only newspaper that ever said that they would support the ANC. Whatever happened after that was something else.” 

The New Age and ANN7 went on to play an overtly factional role in the ANC’s internal battles, providing disinformation on detractors of former president Jacob Zuma and putting out a narrative that certain people in the ANC were involved in a conspiracy against Zuma to preserve the dominance of “white monopoly capital”.

Duarte also repeated the ANC’s commitment made a week ago that it will give evidence to the commission of inquiry on the meetings it held with banks following the closure of the Gupta bank accounts. The commission is chaired by deputy chief justice Raymond Zondo. 

Both the ANC and a ministerial delegation held meetings with the banks in the wake of the closure of the Guptas’ accounts. The accounts were closed towards the end of 2016 on the grounds of numerous suspicious transactions that could not be explained, indicating possible money laundering or criminal activity. Duarte, who took part in the meetings for the ANC, said that no specific clients were discussed at any point. “We had to understand what the banking laws were,” she said.

The party has come under public pressure to appear before the commission as the perception grows that it is the ANC that, in fact, should be on trial, given the involvement of its leadership in corrupt dealings with the Guptas.

Duarte said that the ANC’s top six officials had decided that it must disclose the details about its meetings with the banks as these were held in the ANC’s official capacity. The involvement of ANC leaders in dealings with the Guptas that were not on behalf of the ANC was something those individuals must answer for at the commission.

“Perceptions are that the ANC is on trial and we are concerned about that. However, we are much more concerned that general perceptions that arise from the Zondo commission must be based on facts. It should not be the perspective or view of an individual. Zondo must make findings … The fact that a person’s name is mentioned does not mean they are corrupt,” she said.

Former ANC MP Vytjie Mentor, who was one of the first witnesses to appear at the commission, gave evidence that she had told then ANC secretary-general Gwede Mantashe and Duarte in 2010 that a Gupta brother had offered her a ministerial job. However, Duarte only became ANC deputy general-secretary in 2012.

Said Duarte, “The fact that Vytjie Mentor mentioned my name does not mean I am corrupt. I never met Vytjie before, other than to speak to her when she broke her leg.”

European equities slump to more than an 18-month low

European stocks slumped to a more than an 18-month low on Thursday after Wall Street’s worst losses in eight months triggered a surge of global selling that knocked over Asia too.

Losses in London, Paris and Milan were already climbing towards 2% in early trading, although the sell-off was not quite as dramatic as the overnight session in Asia.

MSCI’s broadest index of Asian shares not including Japan ended down 3.6%, having struck its lowest level since March 2017. China’s main indices had slumped more than 5%.

It meant MSCI’s 24-country emerging-market index was having its worst day since early 2016, after Wall Street’s swoon had given the 47-country world index equivalent its worst day since February.

“Equity markets are locked in a sharp sell-off, with concern around how far yields will rise, warnings from the IMF about financial stability risks and continued trade tension all driving uncertainty,” ANZ analysts said.

The sell-off, which came as International Monetary Fund (IMF) MD  Christine Lagarde said stock market valuations have been “extremely high”, erased hundreds of billions of dollars of global wealth .

Japan’s Nikkei ended down 3.9%, its steepest daily drop since March. The broader Topix lost about $207bn in market value, falling 3.5%.

Shanghai’s drop was its most severe since February 2016 and left it at its lowest level since late 2014. Shares in Taiwan were even harder hit, losing 6.3%. Seoul’s Kospi index dropped 3.8%.

“I think what happened was that we were a maximum elevation of risk appetite and maximum valuation of [US] large caps and tech, so when you have that situation you are always vulnerable,” said UBP macro and forex strategist Koon Chow.

Europe’s traders retreated to the safety of German and other higher-rated government bonds.

Italian bonds are not on that list, and they saw more selling before a key set of auctions, amid concern about the country’s financial health.

“It remains to be seen whether the accelerating equity plunge is a healthy correction or the tip of the iceberg,” Commerzbank analysts said in a note. “For sure it creates a more challenging environment for today’s [Italian] auctions.”

Sinking global shares have raised the stakes for US inflation figures due later on Thursday. High inflation would only stoke speculation of more aggressive rate hikes from the Federal Reserve.

On Wall Street, the S&P500’s sharpest one-day fall since February wiped out around $850bn of wealth as technology shares tumbled on fears of slowing demand.

The S&P 500 ended Wednesday down 3.29%, the Nasdaq Composite 4.08% and the Dow 2.2%.

The bloodletting attracted the attention of US President Donald Trump, who pointed an accusing finger at the Fed for raising interest rates.

“I really disagree with what the Fed is doing,” Trump told reporters before a political rally in Pennsylvania. “I think the Fed has gone crazy.”

Hawkish commentary from Fed policymakers triggered the sell- off in treasuries last week and sent long-term yields to their highest in seven years.

The surge made stocks look less attractive compared with bonds while also threatening to curb economic activity and profits.

“The rise in treasury yields has been the primary catalyst for the sell-off in equities, since higher yields suggest a lower present value of future dividend streams, assuming an unchanged economic outlook,” said Steven Friedman, senior economist at BNP Paribas Asset Management.

“It is also possible that equity investors are growing concerned that the Federal Reserve’s projected rate path will choke off the expansion.”

The shift in yields is also sucking funds out of emerging markets, putting particular pressure on the Chinese yuan as Beijing fights a protracted trade battle with the US.

China’s central bank has been allowing the yuan to gradually decline, breaking the 6.9000 barrier and leading speculators to push the dollar up to 6.9377 at 6.02am GMT.

China’s move has forced other emerging-market currencies to weaken to stay competitive and drawn the ire of the US, which sees it as an unfair devaluation.

“The yuan has already weakened significantly, to offset the tariffs announced so far,” said Alan Ruskin, Deutsche’s global head of G10 forex strategy. “Further weakness could exacerbate concerns of a self-fulfilling flight of capital and a loss of control.”

The dollar was already losing ground to both the yen and the euro, as investors favoured currencies of countries that boasted large current account surpluses.

The euro was at $1.1550, up from a low of $1.1429 early in the week. The dollar lapsed to ¥112.17, a retreat from last week’s ¥114.54 peak.

That left the dollar at 95.263 against a basket of currencies.

In commodity markets, gold struggled to get any safety bid and edged down to $1,192.77/oz.

Oil prices skidded in line with US equity markets, even though energy traders worried about shrinking Iranian supply from US sanctions and kept an eye on Hurricane Michael, which shut down some US Gulf of Mexico oil output. Brent crude fell 1.6% to $81.75 a barrel. US crude dropped 1.5% to $72.07.

Approach of Hurricane Michael supports oil price

Oil prices slipped in London on Wednesday after the International Monetary Fund (IMF) lowered its global growth forecasts, but markets were supported as Hurricane Michael moved towards Florida causing the shutdown of nearly 40% of US Gulf of Mexico crude production.

Brent crude was down 20 US cents at $84.80 a barrel by 9.15am GMT after a 1.3% gain on Tuesday. US light crude was down 15c at $74.81.

"Oil prices have stabilised for the moment — between a real and a metaphorical storm," said Fiona Cincotta, senior market analyst at City Index.

"Hurricane Michael is powering ahead toward the Gulf of Mexico but it now seems likely to miss the main production areas there. On the other hand, Iran sanctions are only weeks away."

The IMF cut its global economic growth forecasts for 2018 and 2019 on Tuesday, raising concerns that demand for oil may also slump.

Trade wars and rising import tariffs are taking a toll on commerce, while emerging markets struggle with tighter financial conditions and capital outflows, the IMF said.

But supply concerns are keeping the market on edge.

In the US, nearly 40% of daily crude oil production was lost from offshore US Gulf of Mexico wells on Tuesday because of platform evacuations and shut-ins ahead of Hurricane Michael.

Michael has strengthened into an "extremely dangerous" category 4 hurricane, according to the latest advisory from the US National Hurricane Center.

Oil producers evacuated personnel from 75 platforms as the storm made its way through the central Gulf on the way to landfall on Wednesday in Florida.

Companies turned off daily production of about 670,800 barrels of oil and 726-million cubic feet of natural gas by midday on Tuesday, according to offshore regulator the Bureau of Safety and Environmental Enforcement.

Crude supply is also a concern in the Middle East.

Iran's crude exports fell further in the first week of October, according to tanker data and an industry source, as buyers sought alternatives ahead of US sanctions that take effect on November 4.

Industry and government data on US crude inventories will be delayed by one day this week because of Monday’s public holiday. The American Petroleum Institute is due to release data on Wednesday, while the US Energy Information Administration is due to publish on Thursday.

Two ministers have testimony delayed as Zondo state-capture inquiry postponed

Former and current public enterprise ministers, Barbara Hogan and Pravin Gordhan, will only take the stand at commission of inquiry into state capture in November.

The commission’s legal team applied for a postponement on Wednesday morning and proceedings were adjourned by the commission’s chair, deputy chief justice Raymond Zondo, to November 12 when Hogan will testify.

Hogan was expected to give evidence about the events building up to former president Jacob Zuma’s 2010 cabinet reshuffle and her knowledge of the reasons she was fired. She was one of seven ministers removed during the first of Zuma’s 11 cabinet reshuffles.

Gordhan was axed as finance minister in March 2017, together with his then deputy Mcebisi Jonas. Jonas has already testified at the commission, saying the two were isolated and operated in a hostile political environment as allegations of state capture surfaced.

Advocate Thandi Norman, who made the application on behalf of the legal team, said they only received Hogan’s final statement on Monday, and did not have sufficient time to give adequate notice in terms of the commission’s rules to those who were implicated in her testimony.

She also said the legal team had not yet received Gordhan’s final statement, but expected to receive it on Thursday. Gordhan was initially scheduled to testify on Friday, but he will now be heard on November 15. 

In terms of the rules of the commission, implicated persons must be given two weeks notice and be furnished with the relevant portions of the statements in which they were implicated.

Daniel Mantsha, who acts for Zuma, who is implicated in Hogan’s testimony, raised issue with the fact that they were served with a notice based on an initial statement by Hogan months ago, but that they were only told on Monday that she would give testimony this week.

He said they did not know what the status of that first affidavit was. Norman then clarified that the final statement was based on the initial statement, which Hogan has now expanded on.

Zondo said the commission will ensure that implicated persons are dealt with fairly and that they will have a fair opportunity to give their versions before the commission, or explain their conduct when they act in a manner that is not acceptable.

He said it would ensure the final findings are seen as credible.

Malusi Gigaba tells Parliament he met Guptas in his professional capacity

Home affairs minister Malusi Gigaba has rubbished accusations that he had a corrupt relationship with the Guptas and that he was a key player in the state capture project.

Gigaba testified before parliament’s home affairs committee on Tuesday night.

The committee is investigating how members of the Gupta family, some of whom have close ties with former president Jacob Zuma, were granted citizenship even though they did not meet the requirements. Gigaba was home affairs minister from May 2014 to March 2017. He returned to the portfolio in 2018 after a stint as finance minister.

While he admitted to attending functions hosted by the Guptas, Gigaba said this was in his professional capacity.

“As I have said, as a public representative I attend many functions and interact with many stakeholders. It does not follow that I am beholden to them. I have done no favours for the Guptas; neither have I received any gratification from them.

"I attended the Diwali functions and wedding, with other cabinet members present at these functions …. As a public representative and a politician, it is inherent in my role to interact with as many stakeholders as possible, to be accessible to them and to hear their perspectives. It does not follow that I am beholden to someone because I have interacted with them in a space where there are many other people.

“I have been to [the Guptas'] home when invited to functions there in the presence of other public representatives and many other people including at their home. This is not evidence of some corrupt relationship, which I in any event deny,” Gigaba said.

Earlier on Tuesday, President Cyril Ramaphosa's announced that he had accepted the resignation of Nhlanhla Nene as finance minister and appointed former Reserve Bank governor Tito Mboweni to the post. 

Nene asked Ramaphosa to relieve him of his duties following public pressure over his testimony at the state capture inquiry, at which he admitted to meeting the Gupta family on numerous occasions, and at their private Saxonwold home.

The Guptas are accused of looting state-owned entities with the help of Zuma and cabinet ministers. The leaked Gupta e-mails suggest senior home affairs official Major Kobese was the Guptas’ point man in the home affairs foreign office in India. He is said to have received requests and instructions from Gupta lieutenant Ashu Chawla by e-mail to fast-track the Guptas’ permits and made sure that the requests were attended to.

In his 22-page detailed submission to parliament Gigaba said he was aware of four Gupta family members who were granted citizenship. He said there was no wrongdoing on his part.

“From the submission, which I approved of the naturalisation of Gupta family members, only four of them were granted early naturalisation, namely, Mr Ajay Gupta’s mother, his wife and his two sons. These four Gupta family members are thus not the only persons who have been granted early naturalisation upon my approval based on a recommendation by the department….

“The list of persons who were granted early naturalisation submitted to Parliament in terms of section 5(9)(b) of the Citizenship Act clearly demonstrates this. I am advised that this list was previously provided to this committee by the department,” said Gigaba.

He said the South African Citizenship Act, more specifically section 5(9)(a) thereof, provides that “notwithstanding anything to the contrary contained in subsection (1)(c), the minister may under exceptional circumstances grant a certificate of naturalisation as a South African citizen to an applicant who does not comply with the requirements of subsection (1)(c) relating to ordinary residence in the republic. I have interpreted this to mean in the national interest and or on humanitarian grounds". 

“Accordingly, I’m called upon to consider granting early naturalisation in terms of section 5(9)(a) of the Citizenship Act when the department recommends that an applicant will make a meaningful contribution to society. Very often this contribution is as an investor or business owner who contributes significantly to economic activity or employment in the country. In other instances, it has been for academics or sportspersons,” Gigaba said.

“I have also in the past approved early naturalisation on humanitarian grounds. The department has already shown an example where we granted early naturalisation to an American mother on the grounds that her only family is her adult South African daughter. She motivated to the department on this basis. Her case was compelling, and her early naturalisation was granted.

“It would be a pity if this committee allowed a negative perception to accrue to this power the minister has in terms of section 5(9)(a) of the Citizenship Act because of one high profile case,” Gigaba said.