THE illicit economy is costing South Africa 10 percent of its GDP at about R178 billion, Minister of State Security Siyabonga Cwele says

Cwele said the GDP effect came from a study his department presented to the cabinet last year on illegal gold mining. He said the illicit economy posed a threat to the national interest.

“In 2010 we reported the loss in the gold industry amounting to R6.7 billion,” he told the National Assembly during debate on his budget vote.

“We have, with the co-operation and collaboration of other government departments, subsequently scoped the extent of the illicit economy which is estimated to be about 10% of our GDP, quantified to a loss of about R178bn to the economy,” he said.

The illicit economy had the potential to seriously compromise the new economic growth path and was costing South Africa hundreds of thousands of jobs.

The scoping exercise revealed that this economic threat was rife  in the mining, textile and tobacco industries, he said.

“These illicit activities create unfair competition to legitimate businesses and industries, erode the corporate tax base,  distort trade, violate foreign exchange regulations, and create conducive conditions for espionage.

“This year, the security and economic clusters will focus on attracting and developing specialised skills and sophisticated technologies to counter this illicit economy,” Cwele said.

At a media briefing earlier, director general Jeff Maqetuka said  the illicit economy could be “even bigger than we think”, because investigations were still continuing.

SSA RESTRUCTURING GOING AHEAD

Restructuring of the civilian intelligence services into the State Security Agency (SSA) is progressing well following the appointment of Director General Jeff Maqetuka, Minister Cwele said.

“There is no going back to the duplication of the past,” he told  the National Assembly.

The process involves the integration of the different agencies, such as the National Intelligence Agency and the SA Secret Service.

Cwele said the SSA’s new structures had been concluded and approved, and the critical posts of chief financial officer, chief information officer, and head of internal audit had been filled.

“In addition, we have tightened up our regulatory mechanism by issuing a single ministerial powers delegation of payments directive and directives on the conditions of service for the agency.”   

Due to the different IT systems that were in place, the process of integrating the systems was taking longer than expected to ensure information was secured and migrated properly to maintain accuracy and integrity.

Efforts would focus on addressing the imbalance in gender and ageing personnel profile.

To codify the presidential proclamation of 2009 that created the  SSA, preliminary consultations on the State Security Bill were being completed. It would then go to Cabinet for consideration and tabling in Parliament later this year, Cwele said.

SSA FRAUD PROBE COMPLETED   

The State Security Agency and Financial Services Board have completed the fraud investigation relating to the management of the SSA’s group life scheme for members, Cwele said.

The investigation found

• there were cases of theft, fraud, and possible corruption by the insurance broker,
• negligence by the insurance company, and
• mismanagement by the intelligence management.

“The insurance company paid a significant ex gratia amount to compensate the fund,” he said.

At a media briefing earlier, he said the loss involved was estimated at about R3 million to R5m.

“Those who committed fraud, particularly the broker, have been referred to the police and National Prosecuting Authority for investigation and prosecution.”  In addition, the FSB had withdrawn the insurance broker’s licence and disbarred the owner for five years, Cwele said.