MEMORANDUM ON THE OBJECTS OF THE SPECIAL ADJUSTMENTS APPROPRIATION Bill, 2007

1. BACKGROUND TO Bill

1.1 The purpose of this Bill is to provide for additional funding requirements and interim funding arrangements with regard to the Departments of Sport and Recreation South Africa, Agriculture, Communications and Public Enterprises.

1.2 In terms of section 30 of the PFMA, the Minister of Finance may table an adjustment budget in the National Assembly as and when necessary. In terms of section 30(2)(b) and section 30(2)(d) of the PFMA a National Adjustment budget may provide respectively for:

· unforeseeable and unavoidable expenditure recommended by the national executive or any committee of Cabinet members to whom this task has been assigned, and

· money to be appropriated for expenditure already announced by the Minister during the tabling of the annual budget.

1.3 The Minister of Finance indicated in the 2007 Budget Speech that the 2007/08 contingency reserve of R3 billion included provision for "allocations to several state-owned enterprises that are not yet finalized." This was elaborated as follows: "Our commitment to finance 51 per cent of the capital requirements of the Pebble Bed Modular Reactor project over the next three years amounts to R6 billion. An allocation to settle the land claim and other obligations relating to Alexkor mine has yet to be finalized and will be provided for in the Adjustments Budget, which will also include further equity contributions for. the InfraCo telecommunications initiative and Sentech's investment requirements, contingent on the approval of business plans and resolution of outstanding regulatory requirements. "

1.4 The normal yearly Adjustments Appropriation Bill introduced into Parliament in October 2007 will be too late to deal with the current financial pressures experienced by the land Bank, Denel, Alexkor, PBMR, Sentech and the 2010 FIFA World Cup Development. The funds have already been announced previously or are required due to a new liability in terms of a binding commitment.

2. OBJECTS OF Bill

The objects of the B ill are to

2.1 Allocate funds to the Departments of Public Enterprises and Communications for transfer to state-owned enterprises already announced by the Minister during the tabling of the annual budget and

2.2 Provide additional funding to the Department 'of Public Enterprises, Sport and Recreation South Africa 'and Agriculture for unavoidable expenditure.

3. SUMMARY OF BILL

3.1 The Bill addresses the following areas:

3.1.1 The allocation of additional funds and funds already announced by the Minister during the tabling of the annual budget in terms of section 30(2)(b) and (d) of the PFMA according to the following schedule:

LIST OF FUNDING REQUIREMENTS
VOTE	DEPARTMENT	SOE/ CONSITIONAL GRANT	AMOUNT R'000	EXPLANATION
18	Sport and Recreation South Africa	2010 FIFA World Cup Stadiums Development Grant	1,905,000	To ensure that stadium construction programmes are not constrained by cash flow shortages.
24	Agriculture	Land Bank	700,000	To address liquidity shortfall and capital adequacy ratio of the Bank.
25	Communications	Sentech	500,000	Initial funding of Sentech as contribution to the capital requirements associated with establishing a broadband wireless telecommunications network.
30	Public Enterprises	Alexkor	44,700	Operational expenses until 31 March 2008 when agreement on the recapitalisation of the Joint Venture with the community has been finalised.
30	Public Enterprises	Denel	222,000	A payment as a result of a claim against the government guarantee granted to SAAB/Denel in respect of Airbus.
30	Public Enterprises	PBMR	1,823,573	Cash flow for operational expenses and contracts.
TOTAL			5,195,273

4. ORGANISATIONS AND INSTITUTIONS CONSULTED

4.1 Requests for special funding arrangements were received from' the Departments of Sport and Recreation South Africa, Agriculture, Communications and Public Enterprises to alleviate cash flow restraints. Discussions with responsible ministers followed where all possible alternatives and risks were discussed and decided upon.

5. FINANCIAL IMPLICATIONS TO STATE

5.1 The total financial implication is R5, 195 billion of which R3 billion has been provided for in the contingency reserve, for allocation in the Adjustments Appropriation Bill, during the tabling of the main appropriation bill.

6. CONSTITUTIONAL IMPLICATIONS

None.

7. PARLIAMENTARY PROCEDURE

7.1 The State Law Advisers and the National Treasury are of the opinion that this Bill must be dealt with in accordance with the procedure prescribed by section 77 of the Constitution since it contains no provision to which the procedure set out in section 74 or 76 of the Constitution applies.