## Section I. Detailed Technical Assessment and Recommendations

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### Summary of mission and scope
- Mission conducted in Pretoria, South Africa during October 7–18, 2024.
- Follow-up to an August 2023 mission that provided GFS and PSDS training and diagnostic TA to SARB ESD, STATS SA and NT.
- Hosted by SARB; participants included SARB, STATS SA and NT representatives.
- Main topics discussed:
  - Definition of general government and the public sector.
  - Reconciliation of fiscal data published by NT, SARB and STATS SA.
  - Recording of ESKOM debt relief operations.
  - Withdrawal and recording of funds from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
  - Transactions related to the Road Accident Fund (RAF).
  - Recording of interest on index-linked and discounted bonds.
  - Recording of statistical discrepancies in the Quarterly Bulletin (QB).
  - Other one-off fiscal events and technical issues.

### Major findings and technical assessments — institutional classification and coverage
- Recommended reclassifications by the Public Sector Classification Committee (PSCC):
  - Reclassify Passenger Rail Authority of South Africa (PRASA), Council for Mineral Technology (Mintek), Corporation for Deposit Insurance (CODI) and the Road Accident Fund (RAF) to the Extrabudgetary Institutions (EBI) sector.
  - Reclassify local government trading services to the nonfinancial corporations’ sector.
  - Review the classification of public universities.
- Implementation consistency:
  - These reclassifications should be implemented consistently across NT, SARB and STATS SA.
  - PSCC agreed on the reclassification of PRASA following the mission at the December 2024 PSCC meeting.
- Public schools:
  - Public schools are conceptually part of general government but are not included in fiscal data compiled by NT, SARB and STATS SA.
  - Teachers’ salaries are paid directly from provincial government budgets; other expenditures are mostly covered by provincial transfers.
  - Many public schools generate own revenues (school fees and donations); these own revenues and related expenditures are not currently captured in fiscal data.
  - STATS SA encouraged to liaise with the Department for Basic Education (DBE) to explore administrative data on own revenues and expenditures of public schools.
- Differences between NT, SARB and STATS SA coverage:
  - NT consolidates national and provincial government, and social security funds; excludes SOEs that provide goods at market prices and excludes municipalities from its data.
  - Examples of entities included by NT but excluded by STATS SA and SARB: PRASA; MINTEK; Trans Caledon Tunnel Authority (TCTA); the 7 Regional Water Boards; Nuclear Energy Corporation of South Africa (NECSA).
  - Significant entities excluded by NT but included by STATS SA and SARB: public universities and TVET Colleges.
  - STATS SA treats Municipal Trading Services as quasi-corporations; SARB includes them within local government data.
- Specific entity assessments:
  - PRASA: market sales never covered more than 35 percent of operating costs since 2008; generated around R23 billion from rail fares since 2008 versus R130 billion in operating subsidies and capital transfers from government.
  - Mintek: 2024 revenue R765 million; government-related revenues around 71 percent over the last 4 years per notes to recent accounts; superficial review shows government grants and subsidies averaging around 40 percent of revenue in 2023 and 2024.
  - CODI: mission position that CODI should be classified as an EBI; SARB previously agreed to implement classification as national EBI.
  - Regional Water Boards and WTE: most derive income from sales of water; WTE 2022–2023 figures (R’ millions): Revenue 16,867; Sales of Water Services 12,649; Interest revenue 1,692; Funds from the Department of Water & Sanitation 2,268; Expenditure 8,384; Surplus / Deficit for the year 7,516. Rand Water 2022–2023 (R’ millions): Revenue 19,578; Sales of potable water 19,345; Finance Income 973; Expenditure 17,655; Net income for the year 3,535.
  - NECSA: company primarily funded by government grants for decommissioning; subsidiaries engage in commercial activities. Mission priority relatively low.
  - TVET Colleges and Universities: TVETs classified as EBIs and included by STATS SA/SARB; universities require PSCC reconsideration given governance and autonomy indicators.

### Major findings and technical assessments — recording of transactions, revenue and SACU receipts
- Revenue alignment issues:
  - Small inconsistency: recording of taxes on property and taxes on goods and services — TABLE 6 (Taxes on Property – NT, SARB and STATS SA Data 2023 R’ millions):
    - NT Taxes on property 21,237.7
    - STATS SA Taxes on property 4,385
    - SARB Taxes on property 21,237.7
    - NT Domestic Taxes on goods and services 579,990.1
    - STATS SA Domestic Taxes on goods and services 596,846.9
    - SARB Domestic Taxes on goods and services 579,459.6
  - Mission view: discrepancy arises from recording of taxes on financial and capital transactions; SARB and NT should shift recording in line with STATS SA per GFSM 2014.
  - SARB had reclassified Universal Service Fund (USF) revenues from taxes to non-tax revenue; mission advised this is incorrect and SARB plans to reclassify.
- SACU receipts (treatment causing largest revenue discrepancy):
  - SACU members: South Africa, Botswana, Eswatini, Lesotho and Namibia.
  - SARB and STATS SA record all SACU receipts as South African government tax revenue with amounts shared to other members recorded as grants to foreign governments.
  - NT nets SACU receipts off gross tax revenue.
  - GFSM 2014 guidance applied: NT’s recording is correct for SACU; mission recommended SARB and STATS SA revise recording to align with NT.
  - Aligning recording with NT would substantially reduce the single biggest consistent source of discrepancy between NT, SARB and STATS SA data for National Government (NG).

### Major findings and technical assessments — ESKOM debt relief and SANRAL
- ESKOM debt relief operations:
  - Government payments to ESKOM over three years:
    - 2023/24 R76billion
    - 2024/25 R66billion (planned)
    - 2025/26 R40billion (planned)
  - In 2023/24 of the R76billion, some R16billion has been forgiven and converted to equity.
  - Original policy: interest free loans converting to equity; subsequent policy: interest being received on unconverted loan amounts.
  - Mission reiterated recommendation to record the ESKOM operation above the line as a capital transfer in line with GFSM 2014 guidance on support to SOEs.
  - Two recording options for interest/timing:
    - Option 1 (pure cash): capital transfer when money transferred; “interest” on unconverted loan amounts reclassified to other revenue type.
    - Option 2 (modified cash): record loan when money provided, record capital transfer when converted to equity; interest could continue to be recorded as interest.
  - Mission preference: record capital transfer at the time money is transferred to ESKOM given policy intention and observed conversions.
  - NT recorded ESKOM transactions below the line in financing in the budget presentation; mission encouraged NT to reconsider.
  - NT asked to provide detailed information on all ESKOM related flows to STATS SA / SARB and the IMF African Department.
- SANRAL:
  - Transfer from NG to SANRAL of R23.7 billion in 2022/23 due to policy removing tolls.
  - NT recorded this as part of transactions in financial assets and liabilities; mission view: in GFS framework this should be recorded as a capital transfer (expense).
  - SANRAL classified as an EBI; the transaction is eliminated in consolidated government data but correct recording in core NG and EBI accounts remains important.

### Major findings and technical assessments — GFECRA recording and transactions
- Legal and accounting status:
  - Section 28 requires transfers of revaluation balances to a Gold and Foreign Exchange Reserve Account (GFECRA) managed by SARB.
  - SARB records GFECRA as a liability to the government; by 31 March 2023 this was valued at R458.7 billion.
- Withdrawals and recordings:
  - Government withdrawals from GFECRA in 2024/25: R200 bllion (R180 billion in July 2024, and a further R20 billion in August 2024).
  - Further planned withdrawals: R25 billion planned in both 2025/26 and 2026/27.
  - Following discussions, R100billion of the R200 billion withdrawn was immediately returned to the SARB contingency reserve, leaving NT with a net increase in cash over July / August 2024 of R100 billion.
  - SARB recorded this as revenue (non-tax revenue) and expenditure (other expenditure) in the September 2024 QB and the monthly release; NT recorded adjustments so that only R100 billion was recorded as revenue affecting the budget balance.
- IMF-recommended recording approach:
  - Withdrawals from GFECRA are financial transactions (exchanging a loan asset for cash) and should be recorded below the line as part of financing in GFS and NT budget presentation.
  - Injections back to SARB’s contingency reserve should be recorded below the line as transactions in equity (government exchanging one financial asset for another).
  - SARB should modify how it recorded GFECRA transactions in the monthly release and QB, and provide explanatory metadata if table alignments with NT remain inconsistent.

### Major findings and technical assessments — Road Accident Fund (RAF) recording and basis
- Classification and rationale:
  - Current ISCG classification: general government sector, within the SSFs subsector — mission considers this wrong and strongly recommended reclassifying RAF as an EBI.
  - Rationale: RAF principally funded by a levy on petrol (an excise tax) not social security contributions; pays social assistance benefits, not social security benefits.
- Cash vs modified cash/accrual impacts:
  - On a cash basis over 2016–2023 RAF has an accumulated deficit of R439 million.
  - On an accrual basis RAF has an accumulated deficit of R364 billion; annual accrual deficits averaged around R45 billion.
  - Prior to accounting changes in 2021, RAF showed accumulated liabilities in unpaid claims of R331 billion.
  - Switching to a modified cash basis for RAF’s claims expenditures would increase annual expenditure by ~R45 billion, increasing general government net lending/net borrowing.
- Mission recommendations:
  - Strong recommendation to reclassify RAF to EBI and adopt a modified cash basis for recording claims expenditures (i.e., accrual or accrual-like recording).
  - Data for RAF on cash and modified cash / accrual basis for 2008–2023 included in Appendix D; mission shared an excel file with methods and estimated accrued claims expenditures from 2021 onwards.
  - NT indicated recent court cases may require RAF to reverse 2021 accounting changes and restate accounts since 2021; if restated in 2024–25 accounts, consistent data would be available without estimations.

### Major findings and technical assessments — interest recording on index-linked and discounted bonds
- Conceptual issue and current practice:
  - Bonds issued at a discount or CPI-linked bonds: differences between issue price and redemption value represent interest under GFSM 2014 and should be recorded as interest.
  - Current practice: NT records repayments of CPI-linked bonds or bonds issued at a discount as amortization below the line, not as interest; neither discount nor CPI uplift recorded as interest.
- Examples and magnitudes:
  - Discounts on bonds issued in 2023/24: R66 billion.
  - Stock of index-linked bonds at start of fiscal 2024/25: over R1 trillion.
  - December 2023: NT redeemed R197 CPI linked bonds for R90 billion; total cash received at original sale was less than R30 billion.
  - Example inflation assumption: 4.5 percent → interest around R45 billion accruing on the index-linked bonds alone.
- Mission estimates (Table 7 — Estimated Interest Arising on Index Linked Bonds, 2020/21 to 2023/24 R ’billions):
  - Estimated Interest: 2020/21 = 55.6; 2021/22 = 69.4; 2022/23 = 89.8; 2023/24 = 78.1
  - Stock of CPI Linked debt: 2020/21 = 787.2; 2021/22 = 853.5; 2022/23 = 992.2; 2023/24 = 1027.5
- Recommendations:
  - Strong recommendation that SARB, STATS SA and NT agree to record discounts and CPI uplifts as interest.
  - Preference for recording on a modified cash basis during the life of the instrument rather than deferring to maturity.
  - SARB and STATS SA should adjust interest revenue where other government units hold these instruments so that modified cash interest is consolidated.

### Major findings and technical assessments — reconciliation and statistical discrepancies
- Conceptual check:
  - Net lending / net borrowing should reconcile when calculated from above-the-line and below-the-line; discrepancies indicate compilation issues.
- Current practices and concerns:
  - In the QB, SARB currently shows statistical discrepancy as zero for each sector and subsector, achieved using below-the-line residuals and ad hoc adjustments.
- Specific findings and recommended corrections:
  - National Government (NG): SARB NG data includes a sometimes large ad hoc adjustment in financing. Mission identified ambiguous labelling of debt-related flows in NT source data as main source of imbalance; correcting these largely eliminated the ad hoc adjustment in some periods. Recommendation for SARB to repeat correction over longer periods and investigate remaining small discrepancies with NT.
  - Provinces: NT provides only above-the-line data; SARB calculates change in currency and deposits as residual. Mission replaced that residual with amounts from SARB MFS (KB407), resulting in some small discrepancies. Recommendation to repeat exercise over longer period and for NT to expand reporting to include below-the-line data.
  - Other subsectors (Provincial EBIs, National EBIs, PFCs, PNFCs, Local Government and SSFs): balancing item currently used is transactions in liabilities in the form of equity and investment fund shares, sometimes yielding large implausible values. Mission strongly recommends against using this line to eliminate discrepancies.
  - Short-term approach: limited value in extensive compilation changes now because sector compositions will change as entities are reclassified; recommend small improvements to source data (e.g., EBI-by-EBI grant data from NT) and better understanding of key entities reporting (ESKOM, Transnet).

### Major findings and technical assessments — free basic services and municipal trading services
- Current provision and recording issue:
  - Free basic services to indigent households: refuse collection; free basic water (six kiloliters per poor household per month); energy (50 kilowatt-hours per month). Financed from the equitable share funding from NT to municipalities.
  - These services should be recorded as social assistance benefits to households but are not currently recorded this way.
- Data source constraints and next steps:
  - STATS SA previously recorded these benefits but stopped due to insufficiently granular Municipal Standard Chart of Accounts data.
  - Recording is linked to separation of trading services from local government data; further work in a follow-up TA mission is needed.

### Quarterly Bulletin (QB) presentation improvements and public financial corporations coverage
- Social Security Funds — Balance Sheet (KB450 and KB451) recommended changes:
  - On liabilities, stock of outstanding claims for RAF currently recorded as liabilities in equity and investment fund shares but should be classified under other accounts payable (likely provisions for outstanding claims).
  - SSF subsector should not have liabilities in equity and investment fund shares; balancing item should be net worth.
  - Remove the large synthetic accounts receivable asset included by SARB to force assets and liabilities to balance.
- Public Financial Corporations (KB425, KB426, KB446, KB447) recommendations:
  - Expand coverage to include all public financial corporations conceptually including public deposit-taking corporations (SARB, CPD, Landbank, Postbank), public pension funds (e.g. GEPF), public insurance corporations (e.g. SASRIA) and public financial auxiliaries (e.g. Public Investment Corporation).
- Short-term operational recommendation:
  - Expand the table to include public deposit taking corporations; SARB already has balance sheet and income statement data for these four entities.
- Medium/longer-term:
  - Inclusion of pension funds and insurance corporations is a longer-term goal.
  - Suggested long-term publication structure: three separate tables — (1) expanded table covering public sector “banks”, (2) table covering public sector pension funds and insurance companies, (3) final table including total public financial corporations.

### Priority recommendations — narrative highlights
- Six priority recommendations identified as carrying particular weight to materially improve GFS:
  - Revise recording of SACU Receipts to be in line with NT approach and GFSM 2014 guidance.
  - Implement reclassifications in the ISCG – RAF, Municipal Trading Services, Mintek.
  - Record ESKOM transfer above the line, and reclassify “interest” as other type of revenue / provide detailed information on ESKOM flows to SARB / STATS SA and IMF.
  - Review recording of RAF in GFS data and adopt modified cash/accrual method for RAF expenditures.
  - Implement modified cash basis of recording interest in GFS data.
  - Record GFECRA transactions below the line in Monthly Release and December QB and GFS data.

### Priority recommendations — targeted actions and dates (selected)
- Selected entries from mission action plan and Tables 1 and 2:
  - December 2025: Revise recording of SACU Receipts – to be in line with NT approach and GFSM 2014 guidance. Responsible: SARB / STATS SA.
  - TBD: Implement reclassifications in the ISCG – RAF, Municipal Trading Services, Mintek. Responsible: PSCC.
  - December 2026: Record ESKOM Transfer above the line, and reclassify “interest” as other type of revenue / provide detailed information on ESKOM flows to SARB / STATS SA and IMF. Responsible: SARB / NT.
  - TBD: Review recording of RAF in GFS data, and adopt modified cash / accrual method for RAF expenditures. Responsible: SARB / STATS SA / NT.
  - TBD: Implement modified cash basis of recording interest in GFS data. Responsible: SARB / NT.
- Selected Table 2 completion targets and priorities:
  - High priority: Implement reclassifications in the ISCG – RAF, Municipal Trading Services, Mintek. Responsible: PSCC. Target: After September 2025.
  - High priority: Implement reclassifications in QB and GFS data. Responsible: SARB. Target: December 2025*.
  - Medium: Expand coverage of consolidated government accounts to include TVET colleges, universities in line with STATS SA and SARB. Responsible: NT. Target: TBD.
  - Medium: Review classification of universities as government-controlled institutions. Responsible: PSCC. Target: April 2025.
  - Low: Investigate availability of data on own revenues and expenditures of government-controlled schools. Responsible: STATS SA. Target: June 2025.
  - High (Recording of Transactions): Revise recording of SACU Receipts – to be in line with NT approach and GFSM 2014 guidance. Responsible: SARB / STATS SA. Target: December 2025.
  - High: Record ESKOM Transfer above the line, and reclassify “interest” as other type of revenue / provide detailed information on ESKOM flows to SARB / STATS SA and IMF. Responsible: SARB / NT. Target: December 2026.
  - High: Record GFECRA transactions below the line in Monthly Release and December QB and GFS data. Responsible: SARB / NT / STATS SA. Target: ASAP.
  - Medium: Align recording of transfers to private schools according to approach taken to Stats SA. Responsible: SARB / NT. Target: December 2025.
  - Medium: Record NSFAS transfers as social assistance benefits. Responsible: SARB / STATS SA / NT. Target: December 2025.
  - High (Alignment with GFSM 2014): Review recording of RAF in GFS data, and adopt modified cash / accrual method for RAF expenditures. Responsible: SARB / NT. Target: TBD.
  - High: Implement modified cash basis of recording interest in GFS data. Responsible: NT / SARB. Target: April 2026.
  - Medium (Reconciliation of Data): Further test adjustments to National Government data (removing ad hoc revaluation adjustments) and investigate other ambiguous items in NT source data. Responsible: SARB / NT. Target: April 2026.
  - Medium: Follow up with ESKOM and Transnet to understand precise nature of transactions recorded in quarterly survey forms. Responsible: SARB. Target: December 2024.
  - Low: Replace provincial government currency and deposit calculations with actual data from MFS survey, and identify scope of resulting statistical discrepancies. Responsible: SARB. Target: March 2025.
  - Low: Ask NT to provide EBI by EBI grant data and additional below the line data for Provincial Governments. Responsible: SARB / NT. Target: April 2026.
  - Low: Revise recording of the SSFs balance sheet data in QB. Responsible: SARB. Target: June 2025.
  - Medium: Expand coverage of public financial corporations’ tables in QB to include SARB, CPD, Landbank and Postbank. Responsible: SARB. Target: June 2025.
  - Low: Expand coverage of public financial corporations to include non-bank public financial corporations. Responsible: SARB. Target: June 2026.

### Compilation and recording technical notes — selected magnitudes and examples
- RAF:
  - Switching to a modified cash basis for RAF’s claims expenditures would increase annual expenditure by ~R45 billion.
  - RAF cash basis accumulated deficit (2016–2023): R439 million.
  - RAF accrual basis accumulated deficit (2016–2023): R364 billion; annual accrual deficits averaged around R45 billion.
  - Prior unpaid claims liabilities prior to 2021 accounting change: R331 billion.
- Index-linked and discounted bonds:
  - Discounts on bonds issued in 2023/24: R66 billion.
  - Stock of index-linked bonds at the start of fiscal 2024/25: over R1 trillion.
  - Example inflation assumption: 4.5 percent → interest around R45 billion accruing on index-linked bonds.
  - Table 7 estimates (R ’billions):
    - Estimated Interest: 2020/21 = 55.6; 2021/22 = 69.4; 2022/23 = 89.8; 2023/24 = 78.1
    - Stock of CPI Linked debt: 2020/21 = 787.2; 2021/22 = 853.5; 2022/23 = 992.2; 2023/24 = 1027.5
- GFECRA:
  - GFECRA liability value by 31 March 2023: R458.7 billion.
  - Government withdrawals from GFECRA in 2024/25: R200 bllion (R180 billion in July 2024, and R20 billion in August 2024).
  - R100billion of the R200 billion withdrawn was immediately returned to the SARB contingency reserve; net increase in cash to NT over July/August 2024: R100 billion.
  - Further planned withdrawals: R25 billion planned in both 2025/26 and 2026/27.
- ESKOM payments:
  - 2023/24 R76billion; 2024/25 R66billion (planned); 2025/26 R40billion (planned). In 2023/24 of the R76billion, R16billion forgiven and converted to equity.
- SANRAL:
  - Transfer from NG to SANRAL R23.7 billion in 2022/23 recorded by NT as transactions in financial assets and liabilities; mission recommends capital transfer treatment.

### Next steps and action planning
- Short-, medium- and longer-term recommendations provided in the mission action plan.
- Six priority recommendations highlighted for material revisions to fiscal data compiled by SARB, STATS SA and/or NT.
- STATS SA plans to implement recording of net SACU receipts in the 2023/24 publication to be published in June 2025.

*IMF | AFRITAC South Technical Report – South Africa Government Finance Statistics — Section I. Detailed Technical Assessment and Recommendations*

### Section I. Detailed Technical Assessment and Recommendations ...................................................... 9

### Section I. Detailed Technical Assessment and Recommendations

### Summary of mission and scope
- Mission conducted in Pretoria, South Africa during October 7–18, 2024.
- Follow-up to an August 2023 mission that provided GFS and PSDS training and diagnostic TA to SARB ESD, STATS SA and NT.
- Hosted by SARB; participants included SARB, STATS SA and NT representatives.
- Main topics discussed:
  - Definition of general government and the public sector.
  - Reconciliation of fiscal data published by NT, SARB and STATS SA.
  - Recording of ESKOM debt relief operations.
  - Withdrawal and recording of funds from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).
  - Transactions related to the Road Accident Fund (RAF).
  - Recording of interest on index-linked and discounted bonds.
  - Recording of statistical discrepancies in the Quarterly Bulletin (QB).
  - Other one-off fiscal events and technical issues.

### Major findings and technical assessments
- Institutional classification and coverage
  - Recommended reclassifications by the Public Sector Classification Committee (PSCC):
    - Reclassify Passenger Rail Authority of South Africa (PRASA), Council for Mineral Technology (Mintek), Corporation for Deposit Insurance (CODI) and the Road Accident Fund (RAF) to the Extrabudgetary Institutions (EBI) sector.
    - Reclassify local government trading services to the nonfinancial corporations’ sector.
    - Review the classification of public universities.
  - These reclassifications should be implemented consistently across NT, SARB and STATS SA.
  - PSCC agreed on the reclassification of PRASA following the mission at the December 2024 PSCC meeting.
- Public schools
  - Public schools are not included in fiscal data compiled by NT, SARB and STATS SA despite being conceptually part of general government.
  - Impact limited because teachers’ salaries are paid directly from provincial government budgets and other expenditures are mostly covered by provincial transfers.
  - Many public schools generate additional revenues (school fees and donations); these own revenues and related expenditures are not currently captured in fiscal data.
  - STATS SA encouraged to liaise with the Department for Basic Education (DBE) to explore administrative data on own revenues and expenditures of public schools.
- SACU receipts
  - Differences in recording SACU receipts cause discrepancies between NT, STATS SA and SARB.
  - STATS SA and SARB record SACU receipts as payments to foreign governments; NT nets SACU receipts off gross tax revenue.
  - Mission recommended all three institutions record net SACU receipts, aligning with NT and other SACU countries.
- ESKOM debt relief operation
  - Mission reiterated recommendation to record the ESKOM operation above the line in line with GFSM 2014 guidance.
  - Although policy design changed (initially bearing interest), main policy remains that “loans” will be converted to equity once conditions are met.
  - Mission view: very unlikely government has an effective claim on ESKOM or will earn sufficient return to justify below-the-line recording.
  - Budget presentation shows recording the ESKOM bailout in financing without justification given GFSM 2014 definitions for above-the-line financial assets.
- GFECRA withdrawals
  - GFECRA correctly recorded as a liability by SARB in financial statements and as a loan asset/liability between SARB and government in the Integrated Economic Accounts (IEA).
  - Withdrawals from GFECRA are financial transactions (exchanging a loan for cash) and should be recorded below the line in GFS data and as part of financing in the NT budget presentation.
- Road Accident Fund (RAF)
  - Recommended reclassification of RAF from the social security funds (SSFs) subsector to the EBI sector.
  - Recommended changing recording of RAF operations from a cash to a modified cash basis.
  - Current cash recording masks large accrual deficits previously recorded in RAF financial statements (until a recent disputed accounting change).
  - Switching to a modified cash basis for RAF’s claims expenditures would increase annual expenditure by ~R45 billion, increasing general government net lending/net borrowing.
- Interest recording on index-linked and discounted bonds
  - Interest on index-linked and discounted bonds is not currently recorded correctly.
  - Contrary to GFSM 2014 guidance, neither the discount nor the uplift due to inflation is recorded as interest; instead, amortization is recorded below-the-line at maturity.
  - Mission strongly recommended changing this in all three institutions to record interest either at maturity or on an ongoing basis through the life of the instrument.
  - Stock and flow figures cited:
    - In 2023/24 the discount on bonds issued was R66 billion.
    - Stock of index-linked bonds was over R1 trillion at the start of fiscal 2024/25.
    - An inflation rate of 4.5 percent would result in interest of around R45 billion accruing on the index-linked bonds alone.
- Reconciliation and statistical discrepancies
  - Discussed improvements to reconciliation of GFS above- and below-the-line data by SARB.
  - Identified correction in compilation of financing data for National Government to remove large ad hoc adjustments used to eliminate statistical discrepancies.
  - Suggested marginal improvements to compilation procedures and additional work on data sources for other subsectors (general government and nonfinancial public corporations).
- Free basic services
  - Further work required to understand flows financing free electricity, water and refuse collection to indigent households and ensure correct recording in GFS.
  - To be discussed further in a future TA mission.
- Quarterly Bulletin (QB) presentation improvements
  - Presentational and compilation changes recommended for SSF balance sheet data.
  - Expand coverage of data for public financial corporations.

### Priority recommendations (narrative highlights)
- Six priority recommendations identified as carrying particular weight to materially improve GFS:
  - Revise recording of SACU Receipts to be in line with NT approach and GFSM 2014 guidance.
  - Implement reclassifications in the ISCG – RAF, Municipal Trading Services, Mintek.
  - Record ESKOM transfer above the line, and reclassify “interest” as other type of revenue / provide detailed information on ESKOM flows to SARB / STATS SA and IMF.
  - Review recording of RAF in GFS data and adopt modified cash/accrual method for RAF expenditures.
  - Implement modified cash basis of recording interest in GFS data.
  - Record GFECRA transactions below the line in Monthly Release and December QB and GFS data.

### Priority recommendations (table summary items preserved)
- Targeted priority actions and dates (selected entries from Table 1 and Table 2):
  - December 2025: Revise recording of SACU Receipts – to be in line with NT approach and GFSM 2014 guidance. Responsible: SARB / STATS SA.
  - TBD: Implement reclassifications in the ISCG – RAF, Municipal Trading Services, Mintek. Responsible: PSCC.
  - December 2026: Record ESKOM Transfer above the line, and reclassify “interest” as other type of revenue / provide detailed information on ESKOM flows to SARB / STATS SA and IMF. Responsible: SARB / NT.
  - TBD: Review recording of RAF in GFS data, and adopt modified cash / accrual method for RAF expenditures. Responsible: SARB / STATS SA / NT.
  - TBD: Implement modified cash basis of recording interest in GFS data. Responsible: SARB / NT.
- From Table 2 (selected priority actions and completion targets):
  - High priority: Implement reclassifications in the ISCG – RAF, Municipal Trading Services, Mintek. Responsible: PSCC. Target: After September 2025.
  - High priority: Implement reclassifications in QB and GFS data. Responsible: SARB. Target: December 2025*.
  - Medium: Expand coverage of consolidated government accounts to include TVET colleges, universities in line with STATS SA and SARB. Responsible: NT. Target: TBD.
  - Medium: Review classification of universities as government-controlled institutions. Responsible: PSCC. Target: April 2025.
  - Low: Investigate availability of data on own revenues and expenditures of government-controlled schools. Responsible: STATS SA. Target: June 2025.
  - High (Recording of Transactions): Revise recording of SACU Receipts – to be in line with NT approach and GFSM 2014 guidance. Responsible: SARB / STATS SA. Target: December 2025.
  - High: Record ESKOM Transfer above the line, and reclassify “interest” as other type of revenue / provide detailed information on ESKOM flows to SARB / STATS SA and IMF. Responsible: SARB / NT. Target: December 2026.
  - High: Record GFECRA transactions below the line in Monthly Release and December QB and GFS data. Responsible: SARB / NT / STATS SA. Target: ASAP.
  - Medium: Align recording of transfers to private schools according to approach taken to Stats SA. Responsible: SARB / NT. Target: December 2025.
  - Medium: Record NSFAS transfers as social assistance benefits. Responsible: SARB / STATS SA / NT. Target: December 2025.
  - High (Alignment with GFSM 2014): Review recording of RAF in GFS data, and adopt modified cash / accrual method for RAF expenditures. Responsible: SARB / NT. Target: TBD.
  - High: Implement modified cash basis of recording interest in GFS data. Responsible: NT / SARB. Target: April 2026.
  - Medium (Reconciliation of Data): Further test adjustments to National Government data (removing ad hoc revaluation adjustments) and investigate other ambiguous items in NT source data. Responsible: SARB / NT. Target: April 2026.
  - Medium: Follow up with ESKOM and Transnet to understand precise nature of transactions recorded in quarterly survey forms. Responsible: SARB. Target: December 2024.
  - Low: Replace provincial government currency and deposit calculations with actual data from MFS survey, and identify scope of resulting statistical discrepancies. Responsible: SARB. Target: March 2025.
  - Low: Ask NT to provide EBI by EBI grant data and additional below the line data for Provincial Governments. Responsible: SARB / NT. Target: April 2026.
  - Low: Revise recording of the SSFs balance sheet data in QB. Responsible: SARB. Target: June 2025.
  - Medium: Expand coverage of public financial corporations’ tables in QB to include SARB, CPD, Landbank and Postbank. Responsible: SARB. Target: June 2025.
  - Low: Expand coverage of public financial corporations to include non-bank public financial corporations. Responsible: SARB. Target: June 2026.

### Compilation and recording technical notes
- Recording changes and basis:
  - RAF: recommended shift from cash to modified cash basis for claims expenditures; estimated increase in annual expenditure ~R45 billion.
  - Index-linked and discounted bonds:
    - 2023/24 discount on bonds issued: R66 billion.
    - Stock of index-linked bonds at start of fiscal 2024/25: over R1 trillion.
    - Example inflation assumption: 4.5 percent → interest around R45 billion on index-linked bonds.
  - GFECRA withdrawals: record as below-the-line financial transactions.
  - ESKOM debt relief: record above the line in GFS; reclassify “interest” component as other revenue or provide detailed ESKOM flow information.

### Next steps and action planning
- Short-, medium- and longer-term recommendations provided in the mission action plan.
- Six priority recommendations highlighted for material revisions to fiscal data compiled by SARB, STATS SA and/or NT.
- STATS SA plans to implement recording of net SACU receipts in the 2023/24 publication to be published in June 2025.

*IMF | AFRITAC South Technical Report – South Africa Government Finance Statistics — Section I. Detailed Technical Assessment and Recommendations*

### 16. The mission had in depth discussions on a broad range of GFS topics. Each of these topics is

### 16. The mission had in depth discussions on a broad range of GFS topics. Each of these topics is

### B. COVERAGE AND DEFINITIONS OF THE PUBLIC SECTOR — Introduction
- Starting point: classification of institutional units as part of the public sector and delineation between general government and public corporations.
- South Africa process: Public Sector Classification Committee (PSCC) jointly agrees classifications; list published in the Institutional Sector Classification Guide (ISCG), last updated in July 2024.
- In practice coverage inconsistencies exist between NT, SARB and STATS SA.
- SARB and STATS SA aim to apply GFSM 2014 guidance, including non-market producers in general government and market producers as public nonfinancial or public financial corporations.
- NT applies a different concept from GFSM 2014 in the Budget Review W2 Annexure:
  - NT consolidates national and provincial government, and social security funds; in 2023 Budget Review, "162 national and provincial departments, and 186 central government entities, classified as extra-budgetary entities, are included."
  - NT excludes SOEs that provide goods at market prices (example: ESKOM and Transnet) and excludes municipalities from its data.
  - NT includes some entities listed as non-financial corporations in the ISCG, and excludes some units listed as EBIs.
- Examples of entities included by NT but excluded by STATS SA and SARB: PRASA; MINTEK; Trans Caledon Tunnel Authority (TCTA); the 7 Regional Water Boards; Nuclear Energy Corporation of South Africa (NECSA).
- Significant entities excluded by NT but included by STATS SA and SARB: public universities and Technical Vocational Education and Training (TVET) Colleges.
- Difference between SARB and STATS SA: treatment of Municipal Trading Services and municipal-established companies (e.g., City Power Johannesburg and Johannesburg Water):
  - STATS SA treats Trading Services accounts and separate companies (excluding the balance sheet and capital expenditures) as public nonfinancial corporations and public nonfinancial quasi-corporations.
  - SARB includes Municipal Trading Services within their local government data.
- PSCC convened an informal meeting during the mission to discuss classifications, notably PRASA, RAF and CODI.

### Road Accident Fund (RAF)
- Current ISCG classification: general government sector, within the SSFs subsector — mission considers this wrong.
- Rationale for reclassification to an EBI:
  - SSFs should be primarily funded by social security contributions and primarily pay social security benefits.
  - RAF’s principal source of funding is a levy on petrol (an excise tax), not a social security contribution.
  - RAF pays social assistance benefits, not social security benefits.
- Mission recommendation: strong recommendation to reclassify RAF as an EBI.

### Passenger Rail Authority of South Africa (PRASA)
- Previous mission (2018–2022 review) concluded PRASA was wrongly classified as a public nonfinancial corporation and should be an EBI.
- PRASA dependence on subsidies:
  - Since 2008, PRASA market sales have never covered more than 35 percent of its operating costs and have never reached 50 percent threshold to be considered a market producer.
  - PRASA has generated around R23 billion from rail fares since 2008, compared to receiving R130 billion in operating subsidies and capital transfers from the government.
- Follow-up: PSCC agreed to reclassify PRASA at their December 2024 meeting.

### Mintek
- 2024 revenue: R765 million.
- ISCG classification: public nonfinancial corporation — mission views this as likely wrong; probably should be an EBI.
- Revenue analysis:
  - Superficial review: government grants and subsidies averaging around 40 percent of revenue in 2023 and 2024.
  - Notes to recent accounts: over the last 4 years, DMRE or other EBIs accounted for 71 percent of Mintek’s revenues, with the vast majority from DMRE.
- Mission view: skeptical that these payments are market revenue; conservative market test sees Mintek fail.
- Appendix B contains breakdown of revenues, expenditures and the market test for 2020–2024.

### Corporation for Deposit Insurance (CODI)
- Previous mission recommended CODI be classified as general government; SARB agreed to implement this and CODI is listed in ISCG as a national EBI.
- PSCC plan: review classification once CODI’s first financial statements are available.
- Mission position: review unnecessary — classification guidance for financial protection schemes in GFSM 2014 depends on nature of the scheme rather than financial statements.
- Mission reiterated that CODI should be classified as an EBI.

### Trading Services (Municipal water, electricity, refuse)
- Municipalities provide electricity, water and refuse services through Trading Services departments or stand-alone companies.
- Trading Services are ring-fenced with different revenue/expenditure patterns from other municipal functions.
- Funding distinction:
  - Trading Services: typically funded by “exchange transactions” (sales of goods and services).
  - Other municipal functions: funded by taxes, levies and grants from national and provincial governments.
- If incorporated as companies, these would be market producers and classified as public nonfinancial corporations.
- GFSM 2014 and SNA 2008 allow recognition as quasi-corporations if separate financial statements including a balance sheet could be compiled.
- STATS SA treats Municipal Trading Services as quasi-corporations; mission recommends the same treatment.

### Regional Water Boards and the Water Trading Entity (WTE)
- SARB and STATS SA include Regional Water Boards in consolidated government accounts; NT does not dispute ISCG classification as public nonfinancial corporations.
- Mission recommendation: NT consider removing Regional Water Boards from consolidated government accounts to align with EBIs subsector coverage used by STATS SA and SARB.
- Overview of water industry structure: municipal-level water trading services; Regional Water Boards; national-level TCTA and Water Trading Entity (WTE).
- Most entities derive income from selling water and receive little or no government subsidies (WTE receives some transfers from the Department of Water and Sanitation).
- ISCG classifications: Regional Water Boards and TCTA listed as nonfinancial corporations; WTE classified as an EBI despite similar accounts to Regional Water Boards.
- Table 3 — WTE and Rand Water revenue and expenditure 2022-2023 (R’ millions):
  - Water Trading Entity — Revenue 16,867; Sales of Water Services 12,649; Interest revenue 1,692; Funds from the Department of Water & Sanitation 2,268; Expenditure 8,384; Employee costs 1,797; Operating expenditure 4,314; Depreciation 350; Finance Cost 1,748; Other 175; Surplus / Deficit for the year 7,516.
  - Rand Water — Revenue 19,578; Sales of potable water 19,345; Finance Income 973; Other 340; Expenditure 17,655; Employee costs 1,990; Operating costs and costs of sales 14,940; Depreciation 644; Finance cost 81; Net income for the year 3,535.
- Mission suggestion: PSCC reconsider classification of WTE to potentially reclassify it as a public nonfinancial corporation; however, recent legislation (South Africa National Water Resources Infrastructure Agency Act) will merge some/all WTE functions with TCTA (which will be abolished). Mission recommends considering classification of the new entity once established rather than reclassifying WTE immediately.

### Nuclear Energy Corporation of South Africa (NECSA)
- ISCG classification: public non-financial corporation; NT includes NECSA in consolidated government accounts.
- NECSA structure: company NECSA and two subsidiaries Pelchem SOC and NTP Radioisotopes SOC (both listed as public nonfinancial corporations).
- Activities:
  - NECSA company: primarily funded by government grants to handle nuclear decommissioning.
  - Subsidiaries: commercial activities (Pelchem sells fluorine and other products; NTP produces radioisotopes).
- Accounts perspective:
  - NECSA company and NECSA Group accounts differ; classifying NECSA company separately would likely see it classified as an EBI, while the group could pass the market test.
- Mission priority: relatively low — NECSA is small and changes would have little impact on SARB/STATS SA GFS or NT consolidated government data.

### Technical Vocational Education and Training (TVET) Colleges and Universities
- Major coverage difference between NT consolidated general government account and STATS SA / SARB GFS: TVET Colleges and especially Universities.
- NT records government funding to these institutions, but NT omits the institutions themselves; STATS SA and SARB include wages paid by these institutions.
- TVET Colleges:
  - Operate under Continuing Education and Training Act 2006.
  - Council governance includes a large share of government appointees; government selects management staff.
  - Employees are accountable to the Council and the Department of Higher Education and Training.
  - Rely on government grants for majority of funding.
  - Mission conclusion: ISCG classification of TVET Colleges as EBIs is correct.
- Public Universities:
  - Operate under Higher Education Act 1997.
  - Governing Councils include a minority of government appointees; councils dominated by staff, students and alumni representatives.
  - Management selected by the Council, not by government.
  - Likely considerable day-to-day autonomy; classification merits closer review.
  - August 2023 mission noted governance arrangements resemble UK universities, which the UK Office for National Statistics classifies as private (not public sector).

*IMF | AFRITAC South Technical Report – South Africa Government Finance Statistics*

### 42. The mission therefore recommended that PSCC reconsider the classification of public

### 42. The mission therefore recommended that PSCC reconsider the classification of public universities, and especially carefully consider whether and by what mechanisms they are controlled by the government.

### Universities classification
- The mission recommended PSCC ask the Department of Higher Education and Training for more information on their relationship with universities and the powers they hold to control the general policy and program of the Universities.
- PSCC should give regard to the indicators of control in GFSM 2014 Box 2.1 Control of Non-Profit Institutions.

### Schools
- Public Schools are not currently mentioned at all in the ISCG, but SARB, NT and STATS SA recognize public schools as conceptually government units that should be included in the general government sector.
- Teacher’s salaries, the largest cost for most schools, are paid directly by South Africa’s 9 provincial governments, and so included in all three sets of fiscal data.
- Further government transfers to the schools are also captured in the data.
- Many public schools have some of their own revenues (most notably school fees); omission of these means some revenue and expenditure are missing from fiscal data.
- Short-term data gap: mission encouraged STATS SA to liaise with the DBE to see if administrative data exists that could form the basis for expanding GFS data to include estimates for public schools’ own revenues and the expenditure they finance.

### South African Airways (SAA)
- Currently classified as a public nonfinancial corporation.
- SAA was severely impacted by the Covid-19 pandemic with a dramatic drop in revenue.
- Mission shared high-level data on total income and operating costs from 2018–19 to 2021–22 and recommended PSCC seek the accounts for 2022/23 and 2023/24 to assess revenue recovery.
- TABLE 5. South African Airways – Income and Operating Costs 2019- 2023 R’ millions (Year ending March 31)
  - 2019 Total income 26,992
  - 2020 Total income 24,320
  - 2021 Total income 5,440
  - 2022 Total income 2,012
  - 2019 Total operating costs 29,943
  - 2020 Total operating costs 27,966
  - 2021 Total operating costs 11,828
  - 2022 Total operating costs 5,185
- Source: SAA Annual Reports

### C. RECORDING OF TRANSACTIONS — Introduction
- Differences in definitions of general government and the public sector used by NT, STATS SA and SARB cause differences in fiscal data published by the three institutions.
- Even controlling for sectoral coverage there are differences in fiscal data when coverage is the same.
- NT conducted an exercise to reconcile data for the National Government (NG) across the three institutions showing many aligned areas but also misalignments in revenue and expenditure.
- South Africa’s fiscal data is not always aligned with GFSM 2014; mission discussed areas for improving classification of transactions across all three institutions.
- Ultimate goal: align fiscal data as far as possible following GFSM 2014 guidance.

### Revenue
- NG revenue data is mostly consistent across the three institutions, apart from small inconsistencies and one very large one.
- Small inconsistency: recording of taxes on property and taxes on goods and services — STATS SA shows considerably lower taxes on property and higher domestic taxes on goods and services than SARB and NT.
- TABLE 6. Taxes on Property – NT, SARB and STATS SA Data 2023 R’ millions
  - NT Taxes on property 21,237.7
  - STATS SA Taxes on property 4,385
  - SARB Taxes on property 21,237.7
  - NT Domestic Taxes on goods and services 579,990.1
  - STATS SA Domestic Taxes on goods and services 596,846.9
  - SARB Domestic Taxes on goods and services 579,459.6
  - Source: NT
- Mission believes discrepancy arises from recording of taxes on financial and capital transactions: GFSM 2014 moved these taxes from taxes on property to taxes on goods and services; SARB and NT should shift recording in line with STATS SA.
- SARB reclassifies revenues of the Universal Service Fund (USF) from taxes to a non-tax revenue; mission advised this is incorrect and SARB plans to reclassify following the mission.
- The most significant difference in revenue arises from treatment of Southern Africa Customs Union (SACU) receipts causing NG revenue and expenditure to be around R45 billion per year lower than recorded in STATS SA and SARB.

### SACU Receipts
- SACU members: South Africa, Botswana, Eswatini, Lesotho and Namibia.
- SACU provides for a common external tariff and common excise tariff; all customs and excise collected in the common customs area (CCA) are collected by South Africa and revenue is shared among members according to a revenue-sharing formula (RSF) based on GDP.
- SARB and STATS SA record all SACU receipts as South African government tax revenue, with amounts shared to other members recorded as grants to foreign governments.
- NT does not record the gross amount of SACU receipts as revenue; NT nets off amounts transferred to Botswana, Eswatini, Lesotho and Namibia (BELN states) as negative revenue.
- 2007 workshop (STA involved) provided 3 options for recording SACU flows in GFS/BOP/NA statistics:
  - Option 1 – Record taxes as revenue collected by SACU (an international organization) and record each country’s share as grants received from an international organization.
  - Option 2 – Record taxes in each member country in proportion to the respective underlying economic activity that gave rise to levying the tax — any discrepancies between amount received and rightful share recorded as a grant from the losing country to the winners.
  - Option 3 – Record all taxes as revenue for the collecting government (i.e. South Africa) and then record grants to the other governments.
- GFSM 2014 Appendix 5 paragraph A5.8 identifies 4 possible types of regional arrangements; for SACU the mission considers the fourth option to be conceptually right.
- GFSM 2014 guidance excerpts:
  - A5.18: If member governments have collective rights to levy the duty, tax revenue is attributed according to underlying economic activity; if one member collects all customs revenue, recording as described in A5.16–A5.17 applies.
  - A5.16: If member governments have collective rights, custom duty revenue is attributed in proportion to underlying economic activity; if agreement provides for any member to receive a larger share than evidenced by underlying activities, a grant revenue (13)/expense (261) should be recorded between member governments.
- Applying this guidance, NT’s recording of SACU receipts is correct; SARB and STATS SA should revise their recording to align.
- NT approach is consistent with how SACU receipts are recorded in Botswana, Eswatini, Lesotho and Namibia in IMF GFS reporting.
- Aligning South Africa with NT approach would substantially reduce the single biggest consistent source of discrepancy between NT, SARB and STATS SA data for the NG.

### Expenditure
- Persistent discrepancies in expenditure data, especially recording of transfers.
- Examples of discrepancies:
  - Transfers to Universities and TVET colleges: recorded as transfers to NPISH by NT, but as grants to EBIs by SARB and STATS SA.
  - Transfers to Armscor: Armscor classified and treated as an EBI by all three institutions, but transfers are treated as a subsidy by NT, and as a grant by SARB and STATS SA.
  - Transfers to schools from provinces: recorded as transfer to NPISH by SARB and NT but reclassified by STATS SA as subsidies (when recipients are private schools) and purchases of goods and services (when recipients are public schools).
- Recording of transfers should be underpinned by purpose of the transfer and classification of receiving entity in the ISCG.
- Transfers to EBIs will, in most cases, be recorded as grants.
- Transfers to entities outside of the government sector, such as ESKOM, cannot be classified as grants in GFS because grants are transfers between general government units.
- Recording of student assistance grants by National Student Financial Aid Scheme (NSFAS) (~ R40 billion each year) is currently part of other expense / transfers to households by STATS SA, NT and SARB; mission recommends they should be recorded as social benefits.
- Mission revisited recording of once-off transactions: ESKOM debt relief, SANRAL debt relief, and transactions with respect to the Gold and Foreign Exchange Contingency Reserve Account (GFECRA).

### ESKOM Debt Relief Operations
- Government providing sizeable assistance to ESKOM over three years with payments:
  - 2023/24 R76billion
  - 2024/25 R66billion (planned)
  - 2025/26 R40billion (planned)
- Original plan: funds provided as interest free loans converting to equity once conditions met. In 2023/24 of the R76billion provided, some R16billion has been forgiven and converted to equity.
- Policy shifted since 2023: interest is being received on unconverted loan amounts, paid by ESKOM.
- Previous IMF advice: record operation in GFS above the line, as a capital transfer, applying GFSM 2014 guidance on support to SOEs (GFSM 2014 Chapter 6 Box 6.3).
- GFSM 2014 guidance: support to an SOE recorded as loan or acquisition of equity only if there is an effective claim (loans) or sufficient rate of return (equity).
- Given policy intention loans will be converted to equity and are unlikely to be repaid, mission advises recording the ESKOM bailout as a capital transfer above the line in GFS.
- Two main recording options for interest and timing of capital transfer:
  - Option 1: If NG records on pure cash basis, capital transfer recorded when money transferred to ESKOM. Under this scenario, with no loan asset, “interest” received on unconverted loan amounts should be reclassified to another revenue type (probably transfers not elsewhere classified).
  - Option 2: Modified cash approach: record a loan when money originally provided, then record the capital transfer when each tranche is converted to equity; interest could continue to be recorded as interest.
- Mission’s preference: record the capital transfer at the time money is transferred to ESKOM given policy intention and observed conversions.
- NT asked to provide detailed information on all ESKOM related flows to STATS SA / SARB and the IMF African Department to enable consistent recording in GFS.
- NT recorded the ESKOM transactions below the line in financing in the budget presentation, despite a budget item called transactions in financial assets and liabilities defined in the 2023 Budget Review Annexure W2 as including “lending to or making equity investments in public corporations as well as debt takeovers for policy purposes. Payments for financial assets are expensed rather than treated as financing because, unlike other financial transactions, the purpose of the transaction is not market oriented.” Mission encouraged NT to reconsider recording of ESKOM operations.

### South African National Roads Agency Limited (SANRAL)
- SANRAL incurred debt to construct a new tolled highway; debt was guaranteed by government.
- Policy decision removed tolls, removing the income stream SANRAL expected to service the debt, resulting in a transfer from NG to SANRAL of R23.7 billion in 2022/23.
- NT recorded this as part of transactions in financial assets and liabilities; in GFS framework this should be recorded as a capital transfer (expense).
- SANRAL is classified as an EBI; in consolidated government data published by NT, and consolidated general government GFS data published by SARB and STATS SA this transaction is eliminated in consolidation, but correct recording in core NG and EBI accounts remains important.

*IMF | AFRITAC South Technical Report – South Africa Government Finance Statistics*

### 72. Section 28 of The South African Reserve Bank Act 1989 requires that any credit or debit

### tarea2025057-print-pdf - 72. Section 28 of The South African Reserve Bank Act 1989 requires that any credit or debit

### GFECRA (Gold and Foreign Exchange Reserve Account) recording and transactions
- Legal and accounting status:
  - Section 28 requires any credit or debit balance from revaluations of gold, foreign assets and forward exchange contracts be transferred to a Gold and Foreign Exchange Reserve Account (GFECRA) established and managed by SARB on behalf of the National Treasury.
  - SARB records this as a liability to the government in its financial statements. By 31 March 2023 this was valued at R458.7 billion.
- 2024–2026 withdrawals and recordings:
  - Government withdrawals from GFECRA in 2024/25: R200 bllion (R180 billion in July 2024, and a further R20 billion in August 2024).
  - Further planned withdrawals: R25 billion planned in both 2025/26 and 2026/27.
  - Following discussions, R100billion of the R200 billion withdrawn was immediately returned to the SARB contingency reserve, leaving NT with a net increase in cash over July / August 2024 of R100 billion.
  - SARB recorded this as revenue (non-tax revenue) and expenditure (other expenditure) in the September 2024 QB and the monthly release; NT recorded adjustments so that only R100 billion was recorded as revenue affecting the budget balance.
- IMF-recommended recording approach:
  - Withdrawals from GFECRA are financial transactions (exchanging a loan asset for cash) and should be recorded below the line as part of financing in GFS and NT budget presentation.
  - Injections back to SARB’s contingency reserve should be recorded below the line as transactions in equity (government exchanging one financial asset for another).
  - All GFECRA operations should be recorded below-the-line in SARB and STATS SA’s GFS data; NT should revise its recording accordingly.
  - SARB is recommended to modify how it recorded GFECRA transactions in the monthly release and QB, and provide explanatory metadata if table alignments with NT remain inconsistent.

### Recording operations of the Road Accident Fund (RAF)
- Classification and current accounting basis:
  - RAF is currently classified as a SSF but should be reclassified as an EBI.
  - All three institutions are recording RAF activities on a cash basis; the mission considers this misleading for RAF’s financial health.
- Cash vs accrual outcomes and magnitudes:
  - Over 2016–2023 (last 8 years to 2016), on a cash basis RAF has an accumulated deficit of R439 million.
  - On an accrual basis, RAF has an accumulated deficit of R364 billion; annual deficits on an accrual basis have averaged around R45 billion.
  - Prior to accounting changes in 2021, RAF showed accumulated liabilities in unpaid claims of R331 billion. NT and SARB continued to include estimates of large RAF liabilities rather than follow RAF’s modified 2021 accounting that reduced previously recorded liabilities by 90 percent.
- Mission recommendations and data actions:
  - Strong recommendation to record RAF’s activities in South Africa’s fiscal statistics on a modified cash basis (i.e., record claims expenditure on an accrual or accrual-like basis as prior to 2021).
  - This would significantly increase RAF’s expenditure and affect net lending/net borrowing of general government.
  - Data for RAF on cash and modified cash / accrual basis for 2008–2023 are included in Appendix D; mission shared an excel file with methods and estimated accrued claims expenditures from 2021 onwards.
  - NT indicated recent court cases may require RAF to reverse 2021 accounting changes and restate accounts since 2021; if restated in 2024–25 accounts, consistent data would be available without estimations and may inform timing of moving to modified cash/accrual recording in fiscal data.

### Recording of interest — index linked bonds and bonds issued at a discount
- Conceptual issue:
  - Bonds issued at a discount or CPI-linked bonds are substitutes for conventional bonds; differences between issue price and eventual redemption value represent interest under GFSM 2014 and should be recorded as interest.
  - Current practice: NT records repayments of CPI-linked bonds or bonds issued at a discount as amortization below the line, not as interest.
- Examples and magnitudes:
  - December 2023: NT redeemed R197 CPI linked bonds (first issued 2001, reopened multiple times) for R90 billion; total cash received at original sale was less than R30 billion.
  - Discounts on bonds issued in 2023/24: total discounts of bonds of R66billion.
  - Stock of CPI linked bonds at end-March 2024: more than R1 trillion.
  - If CPI was 4.5% in 2024, this implies the value of the CPI linked bonds will increase by R46 billion.
- Mission estimates (Table 7 — Estimated Interest Arising on Index Linked Bonds, 2020/21 to 2023/24 R ’billions):
  - Estimated Interest: 2020/21 = 55.6; 2021/22 = 69.4; 2022/23 = 89.8; 2023/24 = 78.1
  - Stock of CPI Linked debt: 2020/21 = 787.2; 2021/22 = 853.5; 2022/23 = 992.2; 2023/24 = 1027.5
  - Source: SARB and Mission Calculations
- Recommendations:
  - Strong recommendation that SARB, STATS SA and NT agree in principle to record discounts and CPI uplifts as interest.
  - Prefer recording on a modified cash basis (during the life of the instrument) rather than pure cash basis which would defer recognition to maturity.
  - SARB and STATS SA should adjust interest revenue where other government units hold these instruments so that modified cash interest is consolidated (issues observed in UIF and Compensation Fund financial statements).

### Reconciliation and statistical discrepancies
- Conceptual check:
  - Net lending / net borrowing should reconcile when calculated from above-the-line (revenue minus expenditure) and below-the-line (financing); discrepancies indicate compilation issues.
- Current practices and concerns:
  - In the QB, SARB currently shows statistical discrepancy as zero for each sector and subsector, achieved using below-the-line residuals and ad hoc adjustments; prior mission encouraged publishing actual discrepancies instead.
- Specific findings and recommended corrections:
  - NG: source data from NT are fully reconciled, but SARB NG data includes a sometimes large ad hoc adjustment in financing. Mission identified ambiguous labelling of some debt-related flows in NT source data as main source of imbalance; correcting these largely eliminated the ad hoc adjustment in some periods. Recommendation for SARB to repeat correction for longer periods and investigate remaining small discrepancies with NT.
  - Provinces: NT provides only above-the-line data; SARB calculates change in currency and deposits as residual. Mission replaced that residual with amounts from SARB MFS (KB407), resulting in some small discrepancies. Recommendation to repeat exercise over longer period and for NT to expand reporting to include below-the-line data (opening/closing cash balances and debt transactions).
  - Provincial EBIs, National EBIs, PFCs, PNFCs, Local Government and SSFs: balancing item currently used is transactions in liabilities in the form of equity and investment fund shares, sometimes requiring large implausible values. Mission strongly recommends against using this line to eliminate discrepancies.
  - Short-term approach: limited value in extensive compilation changes now because sector compositions will change as entities are reclassified; recommended small improvements to source data (e.g., EBI-by-EBI grant data from NT) and better understanding of key entities reporting (ESKOM, Transnet).

### Free basic services (municipal trading services)
- Current provision and recording issue:
  - Government provides free basic services to indigent households: refuse collection, free basic water (six kiloliters per poor household per month), and energy (50 kilowatt-hours per month), financed from the equitable share funding from NT to municipalities.
  - These services should be recorded as social assistance benefits to households but are not currently recorded this way.
- Data source constraints and next steps:
  - STATS SA previously recorded these benefits but stopped due to insufficiently granular Municipal Standard Chart of Accounts data.
  - Recording is linked to separation of trading services from local government data; further work in a follow-up TA mission is needed.

### Adjustments to the Quarterly Bulletin (QB) presentation
- Social Security Funds — Balance Sheet (KB450 and KB451):
  - Recommended major changes:
    - On liabilities, stock of outstanding claims for RAF is currently recorded as liabilities in equity and investment fund shares but should be classified under other accounts payable (likely in the column titled provisions for outstanding claims).
    - Social security funds subsector should not have liabilities in equity and investment fund shares; balancing item should be net worth (like local government).
    - Remove the large synthetic accounts receivable asset included by SARB to force assets and liabilities to balance.
- Public Financial Corporations (KB425, KB426, KB446, KB447):
  - Current QB data labelled for Financial public enterprises and corporations include only a subset of financial public corporations.
  - Recommendation to expand coverage to include all public financial corporations conceptually including public deposit-taking corporations (SARB, CPD, Landbank, Postbank), public pension funds (e.g. GEPF), public insurance corporations (e.g. SASRIA) and public financial auxiliaries (e.g. the Public Investment Corporation).

*IMF | AFRITAC South Technical Report – South Africa Government Finance Statistics (excerpts provided in content unit)*

### 106. In the short term, the mission recommended that the table be expanded to include public

### tarea2025057-print-pdf - 106. In the short term, the mission recommended that the table be expanded to include public

### Short-term operational recommendation
- Expand the table to include public deposit taking corporations.
- SARB already has balance sheet and income statement data for these four entities, (and cashflow may be easier to obtain).

### Medium-term / longer-term data coverage recommendations
- Inclusion of pension funds and insurance corporations is a longer-term goal.
- Expanding balance sheet data to include these items would be relatively easy, but compiling cash flow statements for these entities has conceptually trickier aspects.
- SARB’s Public finance division is encouraged to discuss data sources and data availability with SARB colleagues from the Capital markets and flow of funds division to understand what data is readily available on the transactions of these entities.

### Long-term publication structure suggested
- Publish three separate tables in the long term:
  - an initial expanded table covering all of the public sector “banks”,
  - a separate table covering the public sector pension funds and insurance companies,
  - a final table that would include total public financial corporations.

### Officials met (selected entries)
- Mr. Michael Manamela — Head of Department, Economic Statistics Department — South African Reserve Bank
- Ms. Susana Paulse — Senior Manager, Economic Statistics Department — South African Reserve Bank
- Mr. Hennie Swanepoel — Chief Director, Budget Office — National Treasury
- Ms. Lindy Bodewig — Chief Director, Office of the Accountant General — National Treasury
- Mr. Moses Mnyaka — Chief Director, Government Financial Statistics — Statistics South Africa
- (Additional officials listed in the source document)

### Passenger Rail Authority of South Africa — Market Test Analysis (selected indicators)
- Market Test (A+B+D) / (H+I+J+K+L) for years ending 31 March 2008–2015: 31% 28% 29% 31% 29% 29% 34% 29%
- Deficit / Surplus for years ending 31 March 2008–2015: (521) (1,066) (1,092) (767) 21 (147) 429 (1,032)
- Market Test (A+B+D) / (H+I+J+K+L) for years ending 31 March 2016–2023: 26% 20% 21% 16% 15% 7% 9% 7%
- Deficit / Surplus for years ending 31 March 2016–2023: (295) (1,550) 1,406 (2,142) 2,277 (3,129) 5,850 (3,585)

### Mintek Market Test Analysis 2021–2024 (selected rows)
- Total Revenue 2021 2022 2023 2024: 553 600 649 766
- From related parties (of which) 433 432 476 494
- From non-related parties 120 168 173 272
- Total Expenditure 545 592 641 760
- Operating Surplus for the year 8 8 8 6
- Market Test B/(C+D+H+J) 27% 33% 32% 44%

### Road Accident Fund (RAF) GFS Compilation — Cash Basis (selected rows 2016–2023)
- 1 Revenue 2016 2017 2018 2019 2020 2021 2022 2023: 31,527,870 33,658,521 36,139,562 41,990,522 42,699,184 40,701,320 47,275,363 48,765,392
- 11 Taxes 31,441,748 33,544,875 36,048,140 41,890,191 42,632,836 40,559,571 47,058,716 48,481,606
- 14 Other revenue 86,122 113,646 91,422 100,331 66,348 141,749 216,647 283,786
- 2 Expense 30,493,428 34,020,635 36,158,669 42,575,156 42,232,026 37,355,226 51,046,839 48,938,406
- Of which: 21 Compensation of employees 1,279,874 1,434,772 1,605,147 1,735,302 1,752,737 1,941,244 2,072,908 2,248,316
- 2M Expenditure 30,536,813 34,056,782 36,224,759 42,649,709 42,255,730 37,368,592 51,091,926 49,003,166
- NLB Net Lending Borrowing 991,057 (398,261) (85,197) (659,187) 443,454 3,332,728 (3,816,563) (237,774)

### Road Accident Fund (RAF) GFS Compilation — Modified Cash Basis (selected rows 2016–2023)
- 1 Revenue 2016 2017 2018 2019 2020 2021 2022 2023: 33,204,663 33,339,269 37,342,861 43,239,323 41,240,480 42,248,516 48,154,678 48,757,778
- 11 Taxes 33,113,056 33,229,532 37,250,841 43,138,770 41,177,671 42,088,592 47,931,888 48,471,534
- 14 Other revenue 91,607 109,737 92,020 100,553 62,809 159,924 222,790 286,244
- 2 Expense 68,117,341 68,040,467 63,650,213 98,968,206 100,812,100 88,819,172 101,019,659 102,585,665
- 2M Expenditure 68,160,726 68,076,614 63,716,303 99,042,759 100,835,816 88,832,538 101,064,746 102,650,425
- NLB Net Lending Borrowing (34,956,063) (34,737,345) (26,373,442) (55,803,436) (59,595,336) (46,584,022) (52,910,068) (53,892,647)

### GFSM 2014 guidance on interest (selected paragraphs and key technical points)
- Paragraph references included in source: 6.65, 6.66, 6.71, 6.75, 6.76, 6.77.
- 6.65: From a cash recording perspective, periodic debt service payments can be distinguished as interest payments (“coupons”) or principal payments; on the cash basis, interest payments are recorded as an expense when such cash flows occur.
- 6.66: In macroeconomic statistics, interest is calculated according to the debtor approach; for fixed rate instruments, interest accrual is determined by using the original yield-to-maturity and the accrual of interest should be calculated by the compound interest method.
- 6.71: Short-term bills and zero-coupon bonds discharge debtor liability by a single payment at maturity; on the accrual basis interest must be allocated over reporting periods; on the cash basis the full difference is recorded as interest when payment is made.
- 6.75–6.77: For index-linked securities, distinguish indexation of coupon payments only versus indexation of the amount to be paid at maturity:
  - When only coupon payments are index-linked, the full amount resulting from indexation is recorded as interest accruing during the coupon period (6.76).
  - When the amount to be paid at maturity is index-linked, two approaches depend on whether the index is broad or narrow: sum the indexation of coupon payments plus the change in the outstanding amount for broad-based indices; fix yield-to-maturity at issuance for narrow indices, treating deviations as holding gains or losses (6.77).

*IMF | AFRITAC South Technical Report – South Africa Government Finance Statistics — extracted content as provided*

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_Source: https://www.imf.org/-/media/files/publications/tar/2025/english/tarea2025057-print-pdf.pdf_