WEBVTT - Mid-Term Budget (minus the GNU drama)

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<v Speaker 1>On the line now to the Director General of the

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<v Speaker 1>National Treasury, Doctor Duncan Peter So, Duncan, good evening, Good

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<v Speaker 1>to talk to you tonight. What work's been done in

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<v Speaker 1>the last few months that led us the National Treasury

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<v Speaker 1>to make the announcements to lower the inflation target.

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<v Speaker 2>Now, good evening, Stephen, and good evening to your listeners. Well,

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<v Speaker 2>as the Minister indicated earlier today, there's been actually more

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<v Speaker 2>than a year's worth of work between ourselves and the

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<v Speaker 2>Reserve Bank. You'll recall that a few years ago we

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<v Speaker 2>commissioned a paper by two former central bankers to review

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<v Speaker 2>our inflation targeting regime and they in fact said at

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<v Speaker 2>the time that we were out of step with the

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<v Speaker 2>rest of the world. That review then culminated in our

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<v Speaker 2>Macroeconomic Review, where we assessed this further. That was then

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<v Speaker 2>followed by a joint research program between the South African

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<v Speaker 2>Reserve Bank and the National Treasury through the Macro Standing Committee,

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<v Speaker 2>which is a committee of officials from both institutions. They

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<v Speaker 2>didn't finalized that work about a month or so ago

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<v Speaker 2>and made a recommendation to the Minister and the Governor

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<v Speaker 2>for a point target of three percent with a one

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<v Speaker 2>percentage point tolerance band, there.

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<v Speaker 1>Will obviously be a little bit of pain in some

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<v Speaker 1>ways before we see the long term benefits, and we

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<v Speaker 1>would expect quite substantial longer term benefits. Has there been

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<v Speaker 1>any modeling on how much longer interest rates will have

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<v Speaker 1>to stay slightly higher to get us to three percent?

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<v Speaker 2>So, Stephen, if you look at what's happened, for example,

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<v Speaker 2>to bond yields over the last few months, and that

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<v Speaker 2>is of course the interest rate that government pays on

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<v Speaker 2>its bonds that we issue in order to finance our

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<v Speaker 2>budget deficit, those bond yields have already come down, and

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<v Speaker 2>they've come down by almost two percentage points over the

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<v Speaker 2>last few months. That's two hundred basis points. And the

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<v Speaker 2>reason those bond yields have come down is in part

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<v Speaker 2>because of the lower inflation environment that has contributed to

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<v Speaker 2>lower bond yields. Now that means that interst rates have

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<v Speaker 2>already started coming down because bond yields set a lot

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<v Speaker 2>of the other interest rates in our economy. So some

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<v Speaker 2>of the benefits we have already seen. Certainly, if we

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<v Speaker 2>are able to anchor inflation at three percent, which is

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<v Speaker 2>where it already is currently and maintain that over the

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<v Speaker 2>longer term, as well as continue to bold the fiscal

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<v Speaker 2>credibility that we've been able to do over the last

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<v Speaker 2>few months, and that culminated in today's mtbnds. Certainly, interest

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<v Speaker 2>rates should come down now. The reason that's important is

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<v Speaker 2>because the cost of credit it comes down for household

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<v Speaker 2>it interestrates for lower and over sixty percent of our

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<v Speaker 2>GDP is linked to household consumption. And then secondly, the

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<v Speaker 2>cost of capital come down, comes down, so we can

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<v Speaker 2>invest more and we can deliver higher growth outcomes.

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<v Speaker 1>There are other big announcements that were made today as well.

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<v Speaker 1>You have i think it's between eighteen and nineteen billion

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<v Speaker 1>round more than you expected to have. At the same time,

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<v Speaker 1>there are some cutbacks that you're making. Some projects are

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<v Speaker 1>being cut in an environment where I'm sure everybody's knocking

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<v Speaker 1>on your door asking for more money, how did you

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<v Speaker 1>decide what to cut?

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<v Speaker 2>Well, what this budget actually does, Steven, relative to the

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<v Speaker 2>budget that was announced a few months ago. What the

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<v Speaker 2>MTBPS actually does is it actually takes the eighteen to

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<v Speaker 2>nineteen billion in additional revenue that we received this year

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<v Speaker 2>and allocates about fifteen billion of that. So in fact

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<v Speaker 2>that expenditure goes up in this budget relative to the

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<v Speaker 2>one that was tabled a few months ago, and the

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<v Speaker 2>main additional expenditure that we've decided to allocate is for infrastructure,

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<v Speaker 2>and that is for transnet. And part of that is

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<v Speaker 2>because we believe that a transnet that invests in the

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<v Speaker 2>iron Ore Corridor and invests in the North Corridor, which

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<v Speaker 2>is the corridor that transports coal, is a TRANSNIT that

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<v Speaker 2>will have a healthier balance sheet and that will generate

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<v Speaker 2>more revenue for the fiscus. So the bulk of the

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<v Speaker 2>additional revenue that was gained this year actually when to

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<v Speaker 2>support infrastructure projects. So overall we believe that that all

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<v Speaker 2>have a positive revenue and growth impact for the economy.

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<v Speaker 1>There are some plans to cut back a little bit

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<v Speaker 1>on civil servants benefits early retirement issue as well. Do

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<v Speaker 1>you think that's going to lead to tangible results? Wouldn't

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<v Speaker 1>there be a bit of opposition to that perhaps.

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<v Speaker 2>Well, what this MTVPS does, Stephen, is that it already

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<v Speaker 2>announces six point seven billion in savings over the next

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<v Speaker 2>three years, and that was really about rescaling down programs

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<v Speaker 2>that are not working, in this case, the public Transport

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<v Speaker 2>Network grant as well as efficiencies from eliminating double dipping

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<v Speaker 2>and other fraud in social grants. We are going to

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<v Speaker 2>bold on that work through the ghost work or audit

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<v Speaker 2>that we are currently doing through the review of other

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<v Speaker 2>grants within the system. Early retirement helps because we are

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<v Speaker 2>through early retirement making some funds available to exit workers

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<v Speaker 2>to rejuvenate the civil service and replace those with younger

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<v Speaker 2>workers that are often paid lower wages as well. All

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<v Speaker 2>of these initiatives will over time create much more efficient spending,

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<v Speaker 2>and that is really what the Targeted and Responsible Savings

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<v Speaker 2>Initiative tries to do. We were able to get some

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<v Speaker 2>gains in this MTVPS in the form of the six

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<v Speaker 2>point seven billion, and certainly the Minister of Finance plans

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<v Speaker 2>to make further announcements in this regard at the time

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<v Speaker 2>of the budget next year.

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<v Speaker 1>As I understand it, the Minister in Iguana was asked

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<v Speaker 1>today about the plan by the Health Department and the

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<v Speaker 1>medical aid tax credit. I wasn't in the room, but

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<v Speaker 1>I've seen various reporting that he said, that's an attack

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<v Speaker 1>on the middle class. As the Treasury opposed to that idea.

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<v Speaker 1>Are you going to tell the Health Department no, well, what.

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<v Speaker 2>The Minister confirmed today Stephen was that there is no

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<v Speaker 2>announcement on medical tax credits currently and the Minister also

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<v Speaker 2>said that at the moment he has no plans to

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<v Speaker 2>make any announcements in this regard. Of course, we will

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<v Speaker 2>continue to evaluate all all different tax options and typically

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<v Speaker 2>we advise on the future of tax policy at the

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<v Speaker 2>time of the budget, and we will continue to have

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<v Speaker 2>engagements with the Department of Health. But as of this moment,

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<v Speaker 2>there are no plans to do away with medical tax credits.

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<v Speaker 1>Doctor Duncan. Peter Seip, thank you so much for the time,

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<v Speaker 1>Director General of the National Treasury. Twenty one minutes after

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<v Speaker 1>sixty with the money show. Edward Kisvetter is the commissioner

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<v Speaker 1>at SARAS. Mister Commissioner, good evening. You were able to

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<v Speaker 1>get around eighteen nineteen billion round more than was originally estimated.

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<v Speaker 1>Where did most of that money come from? Was it

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<v Speaker 1>mostly the elicit economy?

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<v Speaker 3>So it's a number of things, but let me just

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<v Speaker 3>speak to of the economy previews. We under corporate taxes

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<v Speaker 3>routes saw high unexpected contributions in a corporate taxics, mainly

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<v Speaker 3>from the financials eleser sector. But also there were some

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<v Speaker 3>dividend taxes that produced a once round about one and

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<v Speaker 3>a half billion rand, but the most significant and then

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<v Speaker 3>there was domestic vats, which also indicates higher levels of consumption.

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<v Speaker 3>But about half of the eighteen billion, just more than

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<v Speaker 3>half of it actually came from our own from clients.

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<v Speaker 3>And that's what that could mean is the additional verifications

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<v Speaker 3>we do in customers when tax layers submit their returns

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<v Speaker 3>and flame that new funds. We were able to in

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<v Speaker 3>VQ prevent the outflow of about five point three billion

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<v Speaker 3>rounds of new funds, and in corporate taxes who were

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<v Speaker 3>able to collect from the refunds, but also in working

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<v Speaker 3>nineteen three about two and a half billion extra revenue.

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<v Speaker 3>And then there was other odds and ends from two

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<v Speaker 3>levels they will in't access, but collectively here for me,

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<v Speaker 3>I think a good data points. Firstly, we'll see we

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<v Speaker 3>see that Treasury has now revised the GDP nomenal leaf

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<v Speaker 3>from six point three to five point three. So what

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<v Speaker 3>explains a nine point three percent increase in revenue, Well,

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<v Speaker 3>that is a fourteen percent increase in compliance that yere

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<v Speaker 3>on you. It's still below our benchmark, our our training benchmark,

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<v Speaker 3>we would want to be in the band of about

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<v Speaker 3>sixteen to nineteen percent, and we think in the second

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<v Speaker 3>half of the year some momentum in the work that

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<v Speaker 3>we've done in the revenue recovery project will gain some

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<v Speaker 3>momentum and so we are confident. But I mean it's

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<v Speaker 3>not just line confidence. We have a significant machinery that

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<v Speaker 3>looks at at how we will every inch. It gets

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<v Speaker 3>us another bit closer to taking the pleasure of the

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<v Speaker 3>Minister in the future to look at taxes.

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<v Speaker 1>As I understand it, if we get another twenty billion

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<v Speaker 1>rand more than is currently estimated before February, we would

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<v Speaker 1>be saved another tax increase. Then are you confident you

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<v Speaker 1>can do that?

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<v Speaker 3>You certainly. We've committed Stephen that the infence amount of

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<v Speaker 3>two billion we want to yield at least between twenty

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<v Speaker 3>and fifty billion. But the debt that we are now

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<v Speaker 3>chasing a significant component of that becomes more complex. So

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<v Speaker 3>for example, in the first cohort the city five billion

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<v Speaker 3>were collected. Were debt that required a follow up call,

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<v Speaker 3>an SMS reminder, a gentle nudge here and there. The

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<v Speaker 3>debt we are getting into now are more complex debt.

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<v Speaker 3>It requires people with a high level skilled people who

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<v Speaker 3>can understand and analyze financial statements to look at whether

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<v Speaker 3>company is actually can afford the debt if we don't

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<v Speaker 3>dispute it. We've seen an increase in applications for debt deferment,

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<v Speaker 3>payment arrangements and for compromises. There's a fifty five percent

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<v Speaker 3>increase in civil judgments, for example. So the next chune

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<v Speaker 3>of debt will require high high levels of skills. So

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<v Speaker 3>we are meeting at litigation attorneys, we're looking at legal

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<v Speaker 3>debt collectors, and we've only begun to build that in

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<v Speaker 3>the second quarter of the first half, so from about

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<v Speaker 3>July to September we started gaining that. We've employed about

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<v Speaker 3>eighty people to look at more specialized debt collection and

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<v Speaker 3>we're hoping to RAMPLETT up to two hundred and fifty.

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<v Speaker 3>But we're also fishing in a market that doesn't always

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<v Speaker 3>produce the kind of skills for it.

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<v Speaker 1>Edith, thank you so much for the commissioner at SARZ