GUARANTEES, LOANS AND TRANSFERS ISSUED TO SCHEDULE 2 AND 3B PUBLIC ENTITIES IN YEAR 2008/ /11 PRESENTATION STANDING COMMITTEE ON PUBLIC ACCOUNTS

2 INTRODUCTION ON GUARANTEES, LOANS AND TRANSFERS ISSUED TO SCHEDULE 2 AND 3B PUBLIC ENTITIES IN YEAR 2008/09 Loans and transfer payments to Schedule 2 and 3B Public Entities are appropriated in the Appropriation Act for each respective financial year as approved by Parliament. The expenditure is reflected on the Budget Vote of the relevant Departments to whom the Public Entity is accountable Guarantees are issued in terms of Section 70 of the Public Finance Management Act by the Executive Authority (Responsible Minister) of the relevant Public Entity, in concurrence with the Minister of Finance Of the Public Entities listed in Table 1 that received financial support, the Minister of Finance and the National Treasury accountable for the Land and Agricultural Development Bank of South Africa (transferred to the Minister of Finance from 1 July 2008), the Development Bank of Southern Africa. Should further information be required regarding the other Public Entities, it is recommended that the Honourable Member approach the Executive Authority accountable for the relevant Public Entity

3 STRICT CONDITIONS FOR GOVERNMENT GUARANTEES Public Entities should operate on the strength of their Balance Sheets. However, in case of a clear need for shareholder support a guarantee may be considered The Guarantee Certification Committee (GCC) in National Treasury considers guarantee applications and makes recommendations to the Minister of Finance with the following typical conditions: –Annual guarantee fees of 0.30% and a once off administration fee of up to R75, 000 per guarantee –A public entity in financial difficulty must prepare a detailed plan to return the business to financial sustainability without government support –Period turnaround reports must be submitted to the executive authority and National Treasury The National Treasury closely monitors guarantees issued and takes remedial action when required

4 GUARANTEES, LOANS AND TRANSFERS ISSUED TO SCHEDULE 2 AND 3B PUBLIC ENTITIES IN YEAR 2008/09

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