1% Tax! How does that work?
- The SA Reserve Bank, back in 2011 or earlier, believed the daily volume of money passing through the National Payment System averaged at about R275 Billion (currently (2017/18) said to be 350 Billion Daily), to which must be added 37% for internal settlements within banks. The NPS plus the internal settlement volumes are the sum of all the transactions through the banking system. From that it is easy to work out the annual volumes and the 1% expected to be levied by TEAL.
- From this exercise Expected National Income From TEAL to 2018 you can see there is a huge pool of money passing through the banking system on a daily basis, which easily equates to TEAL of R1.3 Trillion, or more, annually, which is a lot more than is collected by conventional tax systems.
- It is true that a significant portion of the daily flow of money through the payment system comes from the bond market and it may or may not make sense to apply 1% TEAL to those transactions. To counter that 1) the rate of TEAL might be adjusted overall, or for the bond transactions, or, another way of taxing the bond market need be devised. For example, one might tax the bond market 10% of all its trading profits. This would keep the taxes simple (one of the appeals of TEAL) while not levying a tax that is greater than the trading profits, or maybe there is need to combine the two approaches
- To make answers to the question of the bond markets more obscure, when approached by the DDF on the matter, the Reserve Bank and Bankserve (the body that operates the national payment system), the DDF was told that information regarding volumes attributable to bond market were ‘proprietary’ and are not available to the DDF, a registered South African political party. One day that may change. (See the proposed money and banking reforms)
- To be simple, 1% TEAL probably equals about 30% or more of the GDP.
76% of Parliament! Isn’t that a bit ambitious?
- 76% is the parliamentary support needed, with or without a coalition, to achieve our constitutional, tax, parliamentary and electoral reforms. It seems ambitious but that is the reality. If the electorate want what we are offering they need to provide that level of support at the ballot box. To suggest otherwise would be misleading.
Adult South African Citizens: Why the emphasis on Adult South African Citizens?
There are many reasons;
- An Adult South African Citizen is assumed to be a responsible member of society, his community and family.
- It means a degree of maturity that assumes the obligations and responsibilities required by the state and by society of its citizens.
- It means you are responsible for your obligations to your family, to protect, feed, cloth, educate and care for them without reservation.
- It means you will be responsible for your own behaviour in society.
- It means you will be responsible for contributing to society.
- It means that failure in any of these duties could result in a loss of the rights and privileges accorded those who uphold their responsibilities.
- It means that there is no such thing as a free lunch in South Africa.
- It is hoped that recognition as a South African Citizen will be ranked up with the most sought after citizenships in the world.
- It means that it needs to be earned by its youth through growing up to respect society, the economy, themselves and other South Africa Citizens, all equally, irrespective of race, colour or creed or their role in society.
- It means that until you attain adulthood you will be expected to learn and grow into adulthood when you will assume the mantle of responsibilities and the benefits that go with them.
- It means that Citizenship needs to be earned by immigrants who aspire to that with at least the same demands being made of them as are made of citizens born in South Africa.
- It means that South Africans will always cherish their country and their fellow citizens and be jealous of their citizenship and not just hand it out willy-nilly.
- That is why the rights and privileges acquired through citizenship and spoken of in this document are only available to Adult South African Citizens and why so much emphasis is made of that term.
Advancement Grant: What is an Advancement Grant
An Advancement Grant is a once in a lifetime grant to provide every citizen with an equal opportunity to advance and benefit their lives and can serve as many purposes as there are recipients;
- The idea of an advancement grant came from the need to fund tertiary education in a manner that was fair and equitable for all South African citizens
- Thus, it was reasoned, it would be unfair to fund only those who wanted a tertiary education and to not equally fund all others who do not want or cannot take on a tertiary education.
- In a spirit of fairness to all, it was felt that each and every citizen would receive the same grant and be able to apply it to whatever activity or endeavour is needed to best advance his or her life.
- possible uses would include funding tertiary education, saving for a rainy day, investing in assets of whatever type.
- As of 2017, the DDF think that an amount of R200 000 would suffice to pay for a professional degree, and using that as a base-line, suggest the advancement grant be R200 000.
Advancement Grant: Who receives an advancement grant?
It is intended that all Adult South African Citizens will receive an advancement grant;
- The advancement grant is paid directly to all adult school leavers in full or in instalments according to the needs of the recipient.
- The advancement grant will be paid out to all others (those who have already passed the school-leaving point in their lives – we refer to those folk as the left-behinds) in 240 equal instalments paid out over 20 years and bearing interest of 6%.
- These instalments will be added to their BIG payments.
- In the event of death before the full 240 instalment payments were complete, the remaining instalments will be paid to the deceased estate.
Advancement Grant: I am too wealthy and don’t want the advancement grant?
If you really do not want the advancement grant you can pay it on to a recipient of your choice, after you have received the grant. If you do not want to receive the grant it will be paid into the Sovereign Wealth Fund on your behalf. Any payments by you to third parties, or on your behalf to the Sovereign Wealth Fund, will be lost to you for ever
The exact means of how that is done is to be decided, but it will be fair and only done with your foreknowledge and consent, whether explicit or implicit.
Advancement Grant: How are the advancement grants paid for?
Advancement grants are paid for by a TEAL levy.
- This is illustrated on the page TEAL – The Big Picture
BEE: Do the DDF support Black Economic Empowerment?
The Direct Democracy Forum believe BEE has been applied for the benefit of the political elite and largely excludes the general population.
- The Direct Democracy Forum do not support the economic empowerment of any particular elite at the expense of other communities or individuals.
- Do we want the black community to be economically empowered?
- Yes. We do! We also want every other community and every individual in the land to be economically empowered. Our Policies focus on that empowerment.
BIG/UBI: What is a Basic Income Grant or Universal Basic Income?
A Basic Income Grant (aka a UBI or Universal Basic Income) is a monthly grant made by a state to its citizens. The BIG/UBI proposed by the Direct Democracy Forum (DDF) is intended to be Universal and Unconditional and be paid to all Adult South African Citizens and serves many functions
- A BIG/UBI is seen as an investment in the demand side of the economy and in South Africa’s case will release something like 35 Million times whatever the grant is into the economy every month.
- The BIG/UBI will place funds in the hands of many who have no other or very little income (some 53% of the population) and will advance the fight against poverty and income and wealth inequality.
- For those whose basic needs are already met it will enable savings and investment in a wide range of activities which otherwise would not be available to them.
- By investing in the demand side of the economy the supply side will be encouraged to expand the available goods and services to meet the increased demand.
- to put it in it’s simplest terms, everyone will want a bigger slice of the bigger economic pie that will come about from a BIG/UBI, and if the only way they can earn that bigger slice is to expand their businesses or create new businesses, creating jobs while they are about it, that is what they will do.
- Thus one of the principle benefits of a BIG/UBI will be to create jobs and business opportunities at all levels.
- The BIG/UBI will be paid to every living adult South African citizen recorded on S.A’s national population register at the time of each payment.
- The correctness of the content of the national population register, while not guaranteed, will be subject to ongoing verification and audit and any criminal abuse of the system discovered will be severely punished following the DDF goal of making all crime unprofitable.
- The DDF are suggesting a BIG/UBI of R5000 a month. This was based on half the US$ amount proposed for a UBI in the US of A, probably on or around 2015.
- The BIG/UBI will be paid by a payment agency (probably owned by the Sovereign Wealth Fund) directly into the bank account of every adult South African citizen.
- Except for a deduction for a National Health Insurance Scheme and possibly a further deduction for the Sovereign Wealth Fund, the payment will be free of deduction and charges.
BIG/UBI: How do you pay for a Basic Income Grant / Universal Basic Income?
A Basic Income Grant / Universal Basic Income can be paid for by many means, including printing money or increasing the credit supply or even using pseudo currencies like Bitcoin.
- The Direct Democracy Forum would use TEAL to levy the funds needed. This is illustrated on the page TEAL, the big picture.
- TEAL takes funds that are already in the system and uses them to reinvest in the same system, so TEAL does not print money nor mess with the credit supply and is not inherently inflationary.
BIG/UBI: Isn’t a Basic Income Grant / Universal Basic Income inflationary?
No, not in itself, as long as you don’t print money to pay for a BIG/UBI or hobble the supply side, a BIG/UBI should not cause inflation.
- Inflationary pressures may arise from an initial increase in demand for goods and services but if the supply side matches the demand side those pressures won’t happen.
- From an economic viewpoint, this stimulus should be used to develop local service and manufacturing industries rather than imports. The DDF believe South Africa to almost needs to adopt an embargo’d mentality and become self sufficient in every good and service possible, in short, to re-industrialise the nation.
- This latter point goes far beyond a need for self sufficiency and extends itself into education and training at the most basic of levels so that every student and aspirant citizen grows up to or develops an understanding that every right needs to be supported by a whole series of responsibilities and obligations, not only to one’s self, but to one’s family and community and to society as a whole.
- So this is not the application of a band-aid or some other simple and facile token, but rather is part of a very much larger endeavour to forge a cohesive and ongoing society and economy based on general wealth and productivity rather than general poverty, observing mutual respect and support for the economy as a whole and everyone who is a part of that economy.
BIG/UBI: Isn’t a Basic Income Grant / Universal Basic Income going to encourage people not to work?
No, also not in itself.
- Some may be satisfied with what a BIG/UBI provides but most we speak with would rather earn say R10 000 (5 from a BIG/UBI and 5 from a job) than just earn the 5 from a BIG/UBI.
- Some unskilled workers may leave their jobs and use a BIG/UBI to up-skill themselves so they can earn more in the future. Thus has happened in BIG/UBI pilot projects. People who previously were forced to get a basic job for a basic remuneration now had the means to go back to school. They finished school and re-entered the job market with improved skills and improved earning capacity. Everyone benefited. The BIG/UBI recipient, his or her family, the community they were a part of and the economy as a whole.
- So rather than a losing proposition where folk just give up working, experience shows that a BIG becomes a win-win proposition for everyone.
BIG/UBI: Everyone else will abuse a Basic Income Grant / Universal Basic Income and not use it for what is intended, not so?
Some will, some won’t and anyway, what is a BIG intended for?
- Nearly everyone we speak to believe that they will use a BIG wisely and all others will use it unwisely and otherwise abuse the grant.
- As noted in the preceding Q & A, some will and some won’t use it wisely.
- All one can do is mentor and support recipients, and that in itself will provide many job opportunities, mainly in the financial and allied industries and services, and hope that recipients will heed good advice.
- As the system takes root and communities become more stable and wealthy, what best to do with money will become embedded in lifestyles and societal ethos. So the real benefits will really only come into being in the medium to long term.
- A BIG/UBI is intended to uplift all in society equally, to give recipients greater choices in life than they had pre-BIG/UBI. The BIG/UBI the DDF propose is intended to be universal and unconditional and may be used for whatever a recipient chooses.
BIG/UBI: How will a Basic Income Grant / Universal Basic Income Grant effect other social welfare grants?
You will not receive a social welfare grant in addition to an equivalent BIG/UBI.
- It is intended that each social welfare grant with an equivalent BIG/UBI payment will end
- Child support grant will no longer apply to the children of mothers who conceive after an equivalent BIG/UBI is paid and will cease for the children of mothers who receive an equivalent BIG/UBI on attainment of adulthood.
- Old age pensions will no longer be paid after an equivalent BIG/UBI is paid to the population.
- This will mean that existing benefits will continue until they are replaced by an equivalent BIG/UBI.
BIG/UBI: Won’t a Basic Income Grant / Universal Basic Income make South Africa the destination of choice for every economic migrant in the world?
That is probably true, until the rest of the world catches up with South Africa and install their own BIG/UBIs. So how would a DDF administration deal with this pressure?
- First and foremost, a DDF administration would be vehemently pro South African. South Africa’s best interests would always be placed first ahead of any other consideration in migrant policy.
- Second, but of equal importance, a DDF administration would be pro-immigration, as long as it complies with the foregoing “best interest” policy.
- As a basic requirement, with the exception of political refugees which South Africa may take responsibility for, all other immigrants will need to:
- serve a term of 5 years probationary residence before being able to apply for South African citizenship.
- Thereafter, serve an additional term of 18 years probation before acquiring South African citizenship.
- For both periods of probation immigrants must 1) find gainful employment in morally acceptable sectors of the economy which are skills deficient and 2) not fall foul of national or local legal or administrative systems; that is, their compliance records must be squeaky clean.
- Any immigrant who fails in these requirements may become ineligible for South African citizenship and may be repatriated to his country of origin.
- Credits against the obligatory probationary periods can be granted for immigrants who have skills, qualifications or other assets which are particularly in demand in South Africa and who South Africa wish to attract and retain as part of South Africa’s national resources profile and skills sets.
BIG/UBI: I am too wealthy and don’t want the Basic Income Grant/Universal Basic Income?
If you really do not want the BIG/UBI you can pay it on to a recipient/s of your choice, after you have received the grant, or, if you do not want to receive the grant at all, it can be paid into the Sovereign Wealth Fund on your behalf.
Any grants paid by you to third parties or into the Sovereign Wealth Fund on your behalf, will be lost to you for ever, but future grant moneys can be paid to you on request.
The exact means of how this is done is to be decided, but it will be fair and only done with your foreknowledge and consent, whether explicit or implicit.
CHAPTER 9 OF THE CONSTITUTION: Why is that so important to the Senate?
- Chapter 9 of the constitution guarantees institutions established under chapter 9 freedom from interference from anyone or any body.
- Such an institution is that of the Public Protector. Anyone who has read the news in South Africa over the past few years regarding the work of the Public Protector will be aware of the importance of that protection.
- It is important that the Senate has the protection afforded under Chapter 9 of the constitution.
- To achieve that the constitution needs to be amended to establish the Senate under Chapter 9 of the constitution.
COMMUNISM: Are the DDF thinly disguised Communists?
- No! Not even close!
- Economically the Direct Democracy Forum are capitalist, believing in private ownership of capital, private ownership of the means of production, equal access to the market place, merit and the free market system. What we do not believe in is that all capital and all means of production should be owned by just a few individuals or corporations, but rather these should be owned by as many persons as possible who are sufficiently interested in such ownership to acquire such ownership.
- Politically the DDF are more libertarian than anything else, believing in individual freedom, individual responsibility, individual empowerment, individual merit and the absolute minimum level of government required to support a functioning society.
- From a practical perspective, a DDF administration would do all in its power to empower ordinary citizens, which explains the DDF‘s focus on delivering affordable and quality services encompassing the basic needs of society, including but not limited to full range education, health-care and transport and a functioning economy, from which all will benefit, including but not limited to the capital/labour partnership.
- If you want a convenient lable to attach to the DDF, we could be called libertarians with a social conscience.
CORPORATE SECTOR: How does the DDF view the corporate sector? Is the DDF Business Friendly?
- We base state income collected by TEAL largely on the economic activity generated by the corporate sector. How else can we be anything but business friendly?
- But importantly we stand for ethical business practices in all sectors of the market place, so we would be looking for unethical business practices and where found, we would want them curbed.
COST OF THE SENATE: How much will the senate cost the taxpayer?
- The cost of running the Senate is estimated at present to be in the order of R300 Million rands per year (See Estimated Senate costs).
- This would be about R12 per taxpayer per year (based on an estimated 25 million taxpayers under a system of TEAL) or about R6 per head of population per year.
- While this may not seem excessive, R6 or R11 per year is still R6 or R11 per year.
- The cost of the Senate is justified as a desirable cost of democracy in action.
- By comparison, the cheapest form of government would be an autocracy (such as presently exists in effect in Zimbabwe and Syria, for example) where the cost of government may be less (other than the costs of the trappings of a democracy) but the hidden costs to the country probably exceed any costs an effective democracy would generate.
- The good news is that hand-in-glove with the Senate would come TEAL. The costs of collecting TEAL would probably be less than 10% of the costs of collecting taxes under the current tax system (reported here by SARS at about R8.697 Billion for 2012/13), a saving of about R7.827 Billion.
- Do the arithmetic. Senate Costs R300 Million, SARS Savings R7.827 Billion. Net Savings to the taxpayer, R7.527 Billion per year.
- That would represent a saving of about R348 per taxpayer or R174 per head of population, per year.
DIRECT DEMOCRACY: What is it?
- Representative Democracy is where you appoint others to decide what is good for you and empower them to represent you and to make and approve laws on your behalf. South Africa’s present system is a representative democracy.
- Direct Democracy is where you retain the right to decide for yourself.
- In practice this can be by referendum, where an issue such as E-Tolling is put to all the voters in the nation for the nation to vote on.
- The DDF believe this is impractical as a norm for present-day South Africa and are proposing a compromise where a nearly random cross-section of your society is canvassed on issues, instead of all of society, as in a referendum.
- The DDF compromise is achieved through the use of a process called Deliberative Democracy.
- Deliberative Democracy would be the function of the proposed Senate at national level and the proposed Municipal Forums at local levels.
- Full scale referendums would then be possible for really big issues, such as but not necessarily limited to changes to the constitution.
DIRECT DEMOCRACY: Why?
- R2 Billion spent on upgrading the Nkandla Presidential compound and the surrounding infrastructure approved under the present representative system but probably contrary to popular opinion and almost certainly without popular support.
- E-Tolling, legislated under the existing representative system would almost certainly be rejected if put to a referendum or subjected to a process of deliberative democracy.
- and so on.
Electoral Reforms: Why bother?
- DDF electoral proposals will enable the electorate to express their dissatisfaction with what the political system is offering, in a meaningful and ongoing manner. So, if the electorate are unhappy with all the offers proposed by all the candidates and their political parties, the voter can choose a vote of no confidence instead of a candidate. This means that the resulting parliament will have to operate with the burden of negative votes (from all the no-confidence votes) on all bills before them, and will have to overcome that burden to pass a bill.
- So, if 25% of the voters cast no confidence votes, parliament will only represent 75% of the electorate, and, counting the no confidence vote, Parliament will have to muster at least 66% of the 75% approved votes to gain 50%+1 votes to pass a bill. It is like a handicap system. You enter parliament with a 25% handicap you have to overcome in order to do anything.
- In addition, there is the recall vote, so if, after a year, the voters are unhappy with a Member of Parliament, they can initiate a recall vote and have the MP removed from parliament, thus triggering a by-election.
- What does this mean to voters? It means that they do not have to put up with whatever nonsense parliamentarians and political parties are feeding them. They can protest meaningfully and punish the players in the system they see as irrelevant or inadequate.
- What does this mean for political parties and candidates? It means they need to respond to voter needs so as to avoid the burden of negative votes in parliament (from the no confidence votes) and avoid the possibility of recall votes. One would hope that the parliamentary players will opt for more relevant policies with which to gain the approval of the electorate and generally honour their election promises and behave in an ethical manner while in parliament.
E-TOLLS: Where do the Direct Democracy Forum stand on E-Tolls?
- National and Provincial Road Systems are already largely bought and paid for and to whatever extent that is unpaid it will be paid for by the state from the fiscus, as will any maintenance and development needed to keep the national roads system to international standards.
- Future maintenance and development will be done under a strictly regulated tender system.
- The fiscus will be funded by TEAL. No other levies or road tolls of any description need to be collected in order to meet the commitments of the state so all other levies, tolls and taxes will be cancelled.
- A Direct Democracy Forum administration will therefor legislate an end to all tolling of South Africa’s roads.
REPRESENTATIVE AND DELIBERATIVE DEMOCRACY BOTH INVOLVE REPRESENTATION: What is the difference?
- Our present representative parliament legislates and approves our laws.
- The deliberative democracy process splits the parliamentary process into two separate processes; a legislative process undertaken by the Legislative Assembly and an approval process undertaken by the Senate.
- Parliament will be populated by career legislators and party politicians and the Senate will be populated by a randomly selected cross-section of ordinary citizens which changes each year.
- Remember the Deliberative Democratic process is a compromise between the present representative system and the “ideal” of Direct Democracy.
LAND REFORM: How do the Direct Democracy Forum propose to resolve land claims and restitution?
- The Direct Democracy Forum believe it has been in the reach of successive South African governments to resolve the land reform issue but it has been politically expedient not to do so. It suits these governments to leave the matter unresolved to use as a political decoy to draw attention from their failures elsewhere.
- The DDF believe it will be in the DDF‘s power to resolve all outstanding land issues to the benefit of all the communities involved because the DDF will have both the means and the political will to do so, so we can then focus on S A’s future instead her past.
MERITOCRACY: What do the DDF feel about meritocracy?
- The Direct Democracy Forum favour a political and economic system based on merit.
- The ANC’s policy of cadre appointments have led them to a situation where they have been unable to meet their promises to their own supporters, which we believe has left them politically vulnerable, as well as having done the country untold harm.
MERITOCRACY: Does support of a meritocracy mean cadre appointments will be reversed by a DDF administration?
- No, not blindly so. Any appointment which works, where the incumbent is effective and competent, would be retained. Why change something that is working? However, appointments that are ineffective and are not working will have to be changed, but that will not result in a a new round of party political (or cadre) appointments, it will result in appointments based on merit.
- Where the democratic processes have been bypassed in order to implement cadre appointments, the democratic process will be re-instituted and existing cadre appointments will be tested democratically.
MONEY AND BANKING REFORMS – The Banking System works. Why reform something that works? Isn’t that a bit stupid?
- Historically, in South Africa and around the world, the banking system focused on both profit making and community service. During the post-war rush for privatisation, many community banking services (for example the Building Society movement) were absorbed in the name of profits, into the commercial banking and financial services sector, a sector which is exclusively profit oriented, and the DDF believe the community service element of the banking industry has been lost to blatant profit seeking.
- Anyone who wants to understand why the DDF believe this should read the paper by John Barrington, current leader of the DDF, on Democracy at Risk, available here.
- The paper summarises three works published in the late 20th and early 21st Centuries, which trace the development of Democracy and the Banking Sector, world-wide, and their role in the development of Western Liberal Democracy and the Capitalist System. It is not a pretty tale and has left the democracies and the financial markets of the world wounded and endangered.
- DDF Money and Banking reforms seek to:
- Restore control of the money creation and banking system to the people by bringing the South African Reserve Bank under the control of the Sovereign Wealth fund, with a remit to serve the greater society rather than just serve a thin slice (the oligarchical elites) of society, by controlling the money supply, maximum interest rates and service charges these institutes may levy on their clients.
- Through the Sovereign Wealth Fund having substantial stakes in some (but not all) players in the Commercial and Industrial Banking sectors and the Financial Services sector, influence the thrust of those sectors, not away from making profits, but doing so with due consideration of the needs of the greater society. This it will do by trading for profit, in competition with other players in those market sectors.
- The intention is to restore the banking sector to the state it was post World-War ll where the banking sector was the instrument of economic recovery in many post-war economies, so that it benefits all of society by making money generally available rather than using money scarcity as a means of blatant profiteering. We don’t object to profits, so long as all of society gains and financial profiteering is not at the expense of the greater society.
RELIGION: Given the recognition of religion in populating the proposed Senate, does this mean religion has a role in government?
- Using religion as a category for populating the proposed Senate is intended to ensure that the principle religious groups have equal representation in the Senate and to prevent any religion or religions being discriminated against in favour of another or others.
- It also helps to ensure the widest possible representation in the Senate.
- It is not an indicator of a religious role in government.
- Because of the differing nature of religions the DDF believe that no government can foster any particular religious belief because that would mean government would favour one belief system over another and it cannot rationally favour all belief systems.
- For the above reasons the DDF believe that government should be secular and religion should not have a role in government, nor in government institutions, nor should religion be practised or propagated in any form or manner in any institution funded or supported, in part or in whole, by government.
- The above is a simple response to a complex topic. More can be found on the topic here and here and at many other sources.
SECURITIZATION AND DERIVATIVE TRADING: Where does the DDF stand on these practices?
- We recognise private ownership of capital and other assets and the rights of individuals and collectives to trade in the assets they own, including negotiable instruments. We would however look carefully at what instruments were negotiable and to what extent they were negotiable.
- The drawer of a cheque who does not wish it to be negotiable can endorse the cheque ‘not negotiable’. We would support moves to extend this to all sorts of instruments of debt. Perhaps a legal presumption of non-negotiability would work.
- We would also look very carefully at what debt collection agencies could do and in whose name they can act and what fees they can charge and to whom they can charge those fees.
- We might favour collection fees as part of a creditor’s debt management costs rather than the present system where the debtor bears all the costs.
- Perhaps risks of predatory lending, that is, lending designed to fail, should be that of the creditor rather than the debtor.
- We might consider the reintroduction (or enforcement) of the principle of Quid Pro Quo as applied to the law of contract and the application of a ‘do no harm’ overriding presumption in the interpretation of law and contract. It is possible that many securitization, derivative trading and debt collection practices would fail these tests.
- In short, we would want to protect the consumer from predatory lending and collection practices whilst at the same time protect lenders engaged in legitimate and ethical commercial practices so there exists a healthy, ethical and secure market for both buyers and sellers of credit.
But all this requires some careful thought.
THE SENATE UNDERMINES THE DEMOCRATIC ELECTORAL AND REPRESENTATIVE PROCESS : Isn’t that bad for democracy?
- First the senate does not undermine the democratic and representative process.
- Voters will still vote for legislators (our parliamentarians) and the National Executive (our president & etc).
- What changes is the role of the Legislative assembly from one of legislator and approver to one only of legislator.
- The role of approving legislation and regulation, will be that of the Senate.
- As the Senate is the house of the people (as apposed to a house of political parties as the Legislative Assembly is) the DDF believe this enhances and strengthens the democratic process.
SWF: What is a Sovereign Wealth Fund?
Typically a Sovereign Wealth Fund (SWF) is a fund in which government assets are invested in national and international financial assets. It is a sort of savings and investment plan which can be used to bolster the economic well being of a nation and can be thought of as the opposite of Sovereign or National Debt. The DDF propose the establishment of a Sovereign Wealth Fund which falls under the protection of Chapter 9 of the South African Constitution and in which every Adult South African Citizen has an equal share.
- The goal of the SWF will be to acquire cash with which to purchase assets of a regional, national and global nature, for profit
- Particularly but not exclusively nor predominantly, the SWF will invest in the local economy, for profit, in order to stimulate the economy and local employment while making profit.
- Importantly, the SWF will not be a source of hand-outs or bail-outs for any class of investment and while it may invest in so called State Owned Enterprises it will do so only on terms and conditions which are absolutely favourable to the SWF and may, as an extreme act of self protection, involve taking over by default all the assets of any defaulting enterprise in which it has invested, which, in the opinion of the SWF and the courts, has been or is being mismanaged so as to place the SWF’s investment at risk.
- All of this would need to be contractually, legally and constitutionally binding.
SWF: How can you have a sovereign wealth fund and run a National or Sovereign Debt?
- Running a Sovereign Wealth Fund and a Sovereign Debt may seem contradictory but that sort of arrangement is quite common in the business world.
- For example a business will borrow at a cost of borrowing which is less than the profits gained from reinvesting the borrowings in their own or other’s activities.
However, the above is moot because:
- The Sovereign wealth fund envisioned will not be connected to any activities of the state which could result in, or be funded from, state debt.
- The investments of such a sovereign wealth fund will be independently funded and independently managed from all activities of the state.
- The State and the Sovereign Wealth Fund are separate entities and therefore there will be no connection between any Sovereign Debt and the Sovereign Wealth Fund.
SWF: How will a Sovereign Wealth Fund Acquire Cash?
There are a number of potential sources of cash revenue:
- First there is the possibility of a “for purpose” TEAL.
- There can be a deduction from the BIG much like the proposed National Health Insurance deduction. To be fair, everyone would need to contribute equally.
- All fines and penalties, national, regional and local could all accrue to the SWF.
- All sin taxes, for example taxes on tobacco and alcohol products, carbon taxes and sugar taxes could all accrue to the SWF.
- All asset forfeitures arising from criminal convictions could all accrue to the SWF.
- Charitable endeavours could be encouraged to contribute to the SWF.
- An SWF lottery could be run.
- Intestate estates which previously accrued to the state could accrue to the SWF.
- Profits from investments.
What all this would amount to we cannot say but imagine that it could be a considerable annual income.
SWF: What will the costs of running a Sovereign Wealth Fund be?
The DDF cannot predict the costs at present just as they cannot predict investments nor income but are of the opinion that costs should be severely restricted and have in mind the following:
- For local investments in private enterprises:
- Operating costs should be limited to 10% of the net operational income (that is investment income less investment losses)
- Investment losses should be limited to 10% of investments. So the trigger for foreclosure should be an investment loss of 10% of the amount invested in any given investment.
- For national and international investments in public entities, the same goals should be adhered to provided that one does not normally invest in publicly traded stocks and bonds with asset forfeiture clauses as part of the trade. So instead a 10% loss in investments should trigger disinvestment in the asset concerned.
- Of course setting these sorts of parameters does not guarantee a limitation of loss as might occur under adverse market conditions such as the 2008 property crash, non the less, the principle of conservative and prudent investment practices will need to be observed.
- The operational costs must include all management and directors’ emoluments so opportunities for high-rollers to fleece the SWF would be severely limited.
- This is obviously not a prospectus but is merely a proposal and a statement of principles.
SWF: How will profits be paid to shareholders of a Sovereign Wealth Fund?
This is a difficult question to answer as shares of a SWF would not be traded in any market place. So the question may be extended to include how will shares be valued and how will profits be distributed.
- Valuation of shares will be a relatively simple process, that is the shares will be valued at the net asset value of the SWF at any given time.
- This of course has its own difficulties, as is witnessed by the Steinhoff debacle. Numbers can be made to mislead, a fact said to be so ably demonstrated by Markus Jooste, Steinhoff’s ex CEO.
- The principle purpose of the SWF is to act as a store of wealth and as a capital investment vehicle and profit maker.
- The secondary purpose is to distribute profits by means of dividends which are ploughed back (re-invested) until such time as the profits suffice to provide a BIG in part or in full, eventually replacing the TEAL funded BIG/UBI.
- At that stage, it is hoped that any BIG/UBI TEAL would continue to be levied, but that the undistributed portion of a BIG/UBI would instead be invested in the SWF.
- In that way the SWF investment pool would grow more rapidly and become quite substantial. As they say, it takes money to make money.
- The ultimate purpose is to pay for the BIG/UBI, and pay dividends, and reinvest undistributed profits so as to continue growing the SWF investment pool.
SWF: A Sovereign Wealth Fund as outlined would be an enormous undertaking. How would it be managed?
To be honest, we are not too sure at the moment. The Steinhoff model did not work for the JSE and the PIC model did not work for the PIC (witness attempts to have the PIC bale out SAA, amongst other financial aberrations (eg R900 000 000 of public pension funds buy the Independent Newspapers for Iqbal Surve) and neither worked for the South African nation, so where do we go from there?
- First the SWF will be incorporated under the protection of chapter 9 of South Africa’s constitution. From that perspective, the SWF is a constitutional body.
- It makes sense that the SWF’s non executive board should include at least one member of the constitutional court, a government minister, a senior member of the legislative assembly, and a senior member of the Proposed Senate, who would all be empowered to report back to their respective bodies on the state of the SWF’s management, investments and profitability.
- It also makes sense that at least twice that number be appointed to the non executive board from the investment community.
- This could be done on a regional basis.
- It also makes sense that representatives of academia be appointed to the non-executive board in order to gain insights differing from that of a purely legalistic and management perspective.
- This could also be done on a regional basis.
- It could also be possible for non executive board members to sit regionally as well as sitting as part of a central non executive board to connect Regional and Central .
- The SWF will however be an active and hands-on investment vehicle that will require a full-time executive board and management body to run the day to day affairs of the SWF.
- The composition of that board must consist of qualified professionals experienced in the practice of investment and investment management.
- All of this may seem to be a bit over-the-top but it must be remembered that this is not a tuppenny-bit savings scheme but will without doubt become the largest investment fund in the nation and match many other global investment schemes and overshadow more than a few of its largest competitors. As such it will also be the core of many a South African’s investment portfolio and the non executive board and executive board together cannot afford to pull a Steinhoff on South Africa.
- To provide a bit of perspective, the PIC, which is wholly owned by the SA Government, is one of the largest investment managers in Africa today, managing assets of over R1.928 trillion (see here) and in time, the DDF fully expect the SWF to out invest and out perform the PIC.
SWF: What will a Sovereign Wealth Fund mean to the average South African?
Again, we are not sure at the moment, but if we take the PIC position and assume that in 5 years time a SWF will reach parity with the PIC of today, then each share in the SWF will equal about R55 000.00. Put another way, all other things being equal, every Adult South African Citizen (all 35 million of us) will be worth R55 000.00 more than he is worth today. That in itself will be some achievement.
- More so, every South African Citizen will have invested R55 000 in South Africa’s and the World’s economies, all of it profit sharing and growing.
- In 2016 it was reported in the Citizen that according to Stats SA, 36% of the population earn little or no income and 53% of the population is poor. Translated into numbers 12.6 million earn less than R1000 a month and a further 5.9 million earn less than R4000 a month.
- So if we meet that target of parity with the PIC in 5 years at least 18.5 million South African citizens would have gone from a zero net asset position to at least a R55 000 net asset position in 5 years, That is a net gain of R11 000 per year for 5 years or nearly R1000 per month over 60 months for 35 million South Africans. That is nothing to be sneezed at. We will not be there but we will be well on the way to being an investment centred society.
- What it will also mean is that all South Africans will become investors and will be watching for news of their net asset value on a daily basis.
- What it probably will also mean is that those same South Africans (all 35 million of us) will be more interested in supporting the economy than perverting or attacking it, and we can expect the incidence of strikes to diminish as the share value of the SWF goes up, and 35 million questions being asked if the share price ever goes down.
- The bottom line is that 35 million South Africans will have a meaningful stake in the South African economy, and heaven help anyone who attacks their stake in the economy.
SPLITTING THE OPPOSITION VOTE: Why split the opposition vote with another opposition party, instead of supporting the official opposition?
- For some years, the TEAL Foundation have been trying to talk to the Democratic Alliance (DA) and have them adopt TEAL, as the Direct Democracy Forum have done. The Teal foundation report the DA have been notably disinterested, and have not even entered into a debate on the merits or demerits of TEAL.
- The SENATE proposal of the DDF is as challenging to the status quo as is TEAL. We would categorise both as being politically risky. Perhaps the DA are not interested in political risk taking.
- For whatever reasons, the DA have their goals and we at the DDF have ours. The DA seem to focus on working within the existing political framework and the DDF are challenging that framework. We have different roles to play in South African politics.
- Far from splitting the opposition vote, we believe we will be strengthening it by bringing voters to the polling stations who previously felt alienated by existing choices.
TEAL WILL COST JOBS AT SARS: How will the DDF address SARS job losses?
- The DDF expect TEAL to reduce the costs of tax collection by up to 90%. That would imply an employee reduction of perhaps a similar percentage.
- The DDF are particularly mindful of the skills-sets SARS employees have and would not wish to lose one SARS employee but rather enhance those skills sets and re-deploy them elsewhere in the civil service, thus strengthening the civil service and service delivery.
- With the cost savings of about R8.27 Billion each year (see Cost of Senate (above)), supplemented, if needed, by additional income from TEAL, a DDF administration would re-skill and or re-educate SARS employees, and then re-deploy them elsewhere in the civil service, if they choose that option.
- As an alternative to re-deployment, SARS employees could opt for re-skilling and re-educating and then early retirement. They would then be free to use their new-found skills however they wish.
WEALTH DISTRIBUTION: How will the DDF deal with unequal wealth distribution.
- The DDF favour a merit system of economic wealth distribution. That is, we believe that wealth should flow to those who earn it.
- The DDF vehemently oppose any suggestion of equal distribution wealth by social engineering or any other means.
- The DDF are equally opposed to monopolization of wealth, that is, guaranteeing unfettered access to wealth for the few and denying access to wealth for the many, by any means whatsoever.
- Historically, most economies are viewed as being built on the poverty of the masses. Efforts to deal with these problems through socialism, communism and the welfare state have failed miserably. The problem remains and in fact is becoming bigger, and the DDF believe that they, the DDF, have solutions, not necessarily to all the problem but at least to some of the problem.
- Our solution is basically to encourage the wealth creation potential of capitalism (see here – DDF response to UBI podcasts and the podcasts themselves) in a free market system (competition in the market place) and capitalist economy (private ownership of wealth, the means of production and access to the market place) and for everyone to have a share in and contribute to that economy, by various strategies, applied to that profit making and wealth creation system.
- In short, we want an economy based on general wealth rather than general poverty.
- The DDF strategy for achieving a more equitable degree of wealth distribution is through the economic empowerment of the needy (and everyone else) through education, training, skills development and job creation and the overall development of the economy through the application of TEAL, BIG/UBI, Advancement Grants, a Sovereign Wealth Fund and other DDF policies.
- A DDF administration will not be an administration of hand-outs so much as an administration of empowerment and economic opportunities. The proposed BIG/UBI, Advancement Grant and Sovereign Wealth Funds are investment strategies applied to the human resources of the country and to the economy as a whole.
WHAT SORT OF GOVERNMENT DO THE DIRECT DEMOCRACY FORUM FAVOUR?
- The DDF favour a democratic system of collaborative government which merges elements of Representative Democracy and Direct Democracy in a process called Deliberative Democracy, at a national level in the proposed Senate and at a local level in the proposed Municipal Forums.
- The system uses direct representation (you vote for your candidates and not your party) for legislators at the national parliamentary elections and local municipal elections. Both national and local constituencies would have recall powers (constituents can fire elected representatives).
- The system also appoints by a semi-random process members to the parliamentary Senate and the Municipal Forums, both being the seats of Deliberative Democracy (see policies for Senate and Local Government).
- The DDF also propose direct elections of the President and Vice Presidents at national levels and of Mayors and Deputy Mayors at local levels (elected executives). Both have power of recall (constituents can fire elected executives).
- This will make for better government, and laws and regulations will be more carefully crafted to find approval in the Senate and the Municipal Forums.
THE SENATE UNDERMINES THE DEMOCRATIC ELECTORAL AND REPRESENTATIVE PROCESS : Isn’t that bad for democracy?
- First the senate does not undermine the democratic and representative process.
- Voters will still vote for legislators (our parliamentarians) and the National Executive (our president & etc).
- What changes is the role of the Legislative assembly from one of legislator and approver to one only of legislator.
- The role of approving legislation and regulation, will be that of the Senate.
As the Senate is the house of the people (as apposed to a house of political parties as the Legislative Assembly is) the DDF believe this enhances and strengthens the democratic process.