Financial authority in South Africa is vested in the National Government, which also provides most of the funds of the provincial governments. Local authorities receive grants from the National Government via the nine provincial governments.
The main sources of income for the Government are taxes, both direct and indirect, on companies and individuals, and various duties, such as customs and excise duties.
In South Africa, income tax is levied on income derived from sources within the country. customs duties are levied on a wide range of imports, while excise duties are collected on wine, beer, spirits, tobacco products, petrol and locally produced motor cars. The value-added tax (VAT) rate is 14 percent and a number of essential goods are zero-rated.
The Government of National Unity's (GNU) social and economic reconstruction goals were addressed in the 1994/95 Budget. The total consolidated estimate of revenue for the National Revenue Account amounted to R105824 million; 11,2 percent above the comparable figure for 1993/94. The estimate of total expenditure from this account totalled R135098 million, up 10,2 percent from 1993/94. The budget deficit for the 1994/95 fiscal year, after the new tax proposals had taken effect, was estimated to be 6,6 percent of gross domestic product (GDP) compared to 6,9 percent in the previous year. R2500 million was made available out of savings from other departments to kick-start the Reconstruction and Development Programme (RDP).
The Auditor-General is appointed statutorily by the President as the independent auditor of the executive authority.
The reform of the financial sector is identified in the RDP as an important step in building the economy.
The South African Reserve Bank, together with the Corporation for Public Deposits, form the monetary authority in South Africa. It formulates and implements monetary policy, and regulates the supply of money by influencing its cost.
Monetary policy is guided by the objectives of the Reserve Bank, which were formulated in 1990, to protect the domestic and external value of the rand.
The Reserve Bank issues bank notes, undertakes national and international transactions on behalf of the State, acts for the Government in transactions with the International Monetary Fund (IMF), advises on the floating of new government stock issues on the local money markets, and is involved in the buying and selling of government securities.
Furthermore, it is the custodian of all the gold and other foreign exchange reserves and of the statutory cash reserves.
The Government appointed a Policy Board for Financial Services and Regulation to establish mechanisms for coordinating and implementing financial regulation policy. The Policy Board interacts with the Financial Services Board, the Bank Supervision Department of the South African Reserve Bank and the Department of Trade and Industry.
Since 31 January 1991, building societies, commercial banks, discount houses, general banks and merchant banks have been grouped together to form banking institutions. At present, there are 40 banks which operate in the same financial markets. In the money and foreign exchange markets they are in competition with foreign exchange brokers.
Some of the other institutions and mechanisms that operate in South Africa include finance companies, participation mortgage bonds and unit trusts.
The Development Bank of Southern Africa (DBSA) is a multilateral institution, established in 1983, to support economic development in southern Africa. The Department of Finance is the sole shareholder.
The Land and Agricultural Bank of South Africa (Land Bank) mobilises and lends funds for assistance to the farming community, agricultural boards of control.
Stokvels are rotating credit associations where individuals can raise money without interest or a rigid repayment schedule. A stokvel consists of a group of about 12 members who pool their resources so that each member has access to a large amount of money should it be needed.
In the capital markets in 1994, trading activity reached new record highs. The annual turnover in public sector stock traded on the Johannesburg Stock Exchange (JSE) reached a record level of R968 billion. the value of shares traded on the JSE increased to R71,6 billion.
The tightening in money market conditions during the fourth quarter of 1994 could be attributed to an increase in notes and coins in circulation outside the Reserve Bank and the cash-draining effect of the decline in the bank's net gold and foreign exchange reserves.
The financial rand and dual exchange rate system were abolished on 13 March 1995. South Africa now has only one unitary exchange rate that applies to both current and capital transactions between residents and non-residents. The abolition of the dual exchange rate system was the first step taken by the GNU in its pursuit of financial liberalisation.
The exchange rate of the commercial rand is determined by market forces, although the Reserve Bank will continue to intervene in the foreign exchange market to smooth out undue short-term fluctuations in the exchange rate.
The JSE provides a market where securities can be traded freely under a regulated procedure. It not only channels funds into the economy, but also provides investors with returns on investments.
In 1989, major bond market participants formed the Bond Market Association (BMA) - a body of bond market participants whose aim it is to formulate a licensed bond market exchange making use of electronic settlement procedures for both cash and scrip.
Activity on the South African Futures Exchange (Safex), which
was licensed substantially. Transactions levels were boosted
by the lively local share market, uncertainty regarding political
developments and a high level of non-resident participation.
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