Minister Manuel on Medium Term Strategic Framework

Q: A journalist noted that the global economic crisis had created challenging circumstances. The Minister of Finance had recently stated that financial growth would average at approximately 2.5% to 3% for the next few years. He asked whether the MTSF had any strategy for bringing South Africa towards the 6% growth target, whether this 6% was still considered to be a sustainable growth figure for South Africa, and how could this be achieved. He further questioned if Government believed that halving unemployment by 2014 could be achieved.

A: The Minister responded that, apart form China and India, most countries were currently battling to achieve growth. Some attention was given to industrial policy action in the document. Work was needed to deal with the issue of job creation, so a major issue was the creation of decent work and sustainable employment. The President had, in his State of the Nation Address, used the term "job opportunities". These tended to be short term, and the remark was made in the context of the kind of job opportunities created by the Extended Public Works Programme (EPWP). This form of employment was in fact a very important step to achieving sustainability for families. This should be considered together with the issues of the global meltdown.

Mr Joel Netshitenze, Head of Policy Unit: Presidency, added that that global economic crisis was acknowledged in the MTSF, in paragraphs 15, 16, and 17. The global economic downturn concerned the environment that surrounded South Africa. The MTSF also spoke to the kinds of things that needed to be done so that people could achieve more than the environment would suggest. This was made particularly clear in paragraphs 30 and 31. In short, the realities were acknowledged and could be defied if the proper focus was asserted.

Q: A journalist noted that the MTSF mentioned that all social partners should be on board. This was a hard sell when it came to trade unions, specifically on education reform, where unions had generally resisted performance appraisals of teachers. The Minister was asked what strategy was in place to get unions on board.

A: The Minister responded that there was a strong commitment to what was termed the "non-negotiables of education". These included the facts that teachers should be in class teaching, that they should not neglect their duties, and there should be no abuse of children. There had been a tendency to resist evaluation. However, his understanding was that the system of appraisal would include monitoring the performance of educators. In this regard, school governance was very important. It was not spelled out here, but it was important to take into account the differences between suburban and rural schools. Parents of learners in suburban schools were generally well resourced to bring about effective school governance. Parents in rural areas often felt powerless to interfere in school governance. These inequalities had to be addressed to ensure more equity in the education system.

Mr Netshitenze added that performance appraisals had been agreed to in principle. Debates on the subject would be useful to discuss the detail of putting the systems in place.

Q: The Minister was asked to comment on the MTSF planning for food security in South Africa.

A: The Minister replied that there was investigation under way by the Competition Commission into the levels of food prices. There would be a strategic focus on production in rural areas and there was a need to examine how to support newly settled farmers, and how people could use the land. South Africa's need to import food had subjected South Africans to higher prices and volatility in these prices, especially where maize was concerned. The focus was on agricultural production, the need to turn the productive asset  of land into actual production, and how to support that by using Development Finance Institutions (DFIs) and agricultural extension offices.

Mr Netshitenze said that recent reports had pointed to pricing practices being a major contributor to increased food prices. He referred s to paragraph 36.2 - particularly the section that referred to "Counteracting the lack of competition in some key sectors in South Africa by deploying a range of strategies, including strengthening sector regulators, strengthening implementation of competition law, seeking mutual solutions with powerful upstream companies and, where appropriate, removing remaining tariff protection on these goods". This related specifically to enhancing the capacity of competition authorities.

Q: A journalist pointed to land reform as the third priority area highlighted to give effect to the strategic objectives. This was discussed in the context of rural development and communal land ownership. The journalist opined that if the State did not give the land to communities, this posed the danger of creating a new black bourgeois class. Given the communal sense that prevailed, he asked if there was not a discrepancy between land reform and food security.

A: The Minister responded that the question of whether communal land restitution would counteract agricultural production was an untested area. Not all restitution focused on communal ownership. The challenge currently was contained in the fact that people were too often settled, but no support was given. It was recognised that these people had control over a productive asset but it was also important to recognise that inputs and support were necessary for actual production to occur. This was a hard call to make, and one that the new Minister of Rural Development and Land Reform, Hon Gugile Nkwinti, would have to respond to by using his experience. Government did recognise the sub-optimal performance of the agricultural sector, and that fact  that change was necessary.

Q: A journalist pointed out that the 2014 goals of halving of unemployment and poverty were based on a 6% growth target. The question was asked if there was a sense that the goals were still realistic when considered in a 2% to 3% growth scenario.

A: The Minister responded that the global economy was going through a difficult period, as was previously acknowledged. South Africa had the challenge that it could not continue at the current high levels of unemployment. Pressure would have to be applied through micro-economic reforms. Changes would require detailed work with social partners.

Q: The Minister was asked for his view on the nationalisation of mines and mineral resources.

A: The Minister responded that he was not quite sure what the intention was behind this question. He was a Minister, and the President had already spoken on the issue.

Q: A journalist asked how the global economic turndown would impact on South Africa's responsibilities to its agreements.

A: The Minister responded that there was ongoing work with the National Economic Development and Labour Council (NEDLAC). He stated that the media might be dealing with questionable facts on the subject. The work was not progressing as speedily as they would have liked but was ongoing on those agreements.

Q: A journalist noted that paragraph 30 of the MTSF contained some powerful statements on public and private sector projects with low import content, such as housing construction. The Minister was asked to flesh this out more, in terms of what this would mean for the budget of the Department of Human Settlements, and what this would mean for "crowding in" manufacturing and banks around affordable housing and stimulating the economy.

A: The Minister referred the media to paragraph 36.2 of the MTSF. He stated that there was a need to "crowd in" manufacturing. Housing had been relatively free of imports. There were particular areas where there was a need for retrofitting for the suitable use of resources. He stated that opportunities to use solar powered water heaters had not been taken up by big manufacturers. The way forward was to bring industrial policy together with more suitable utilisation of resources.

Q: A journalist enquired if the MTSF would replace or supplement the Accelerated Shared Growth Initiative for South Africa (ASGISA).

Q: Another journalist noted, with relation to investor outlook, that the MTSF covered a period of five years, and the Minister of Finance needed to adopt a counter-cyclical approach in approximately two years. Bearing in mind this apparent difference in timelines, he asked how these plans would fit in with each other, and whether a budget deficit was likely in five years.

A: The Minister responded that that MTSF was not contradictory to ASGISA. He referred to the State of the Nation address, saying that this was premised on the MTSF. For planning purposes, the Government would develop longer time horizons for the MTSF. It would also endeavour to shift the Medium Term Expenditure Framework (MTEF) to a five-year rolling framework, in line with the MTSF. .Government was never locked into the MTEF and it was unlikely that it would be locked into the MTSF. The Public Finance Management Act (PFMA) still required Parliament to make appropriations for the fiscal year. The MTEF was a guide to the budget that resulted in those appropriations.

Mr Netshitenze referred to paragraphs 46 and 49, under the broad heading of Resource Allocation. These paragraphs outlined the fiscal posture over the five year period. This related to the review of expenditure for re-prioritisation, and the role of DFIs to avoid the use of the fiscus. He added that ASGISA was a methodology for identifying key constraints to growth and developing response to these constraints.

Q: A journalist referred to the target of 30% of land that had to be black-owned by 2014, and enquired whether this included the land that was set aside for blacks in terms of the 1913 and 1936 Native Land Acts. This already constituted 13% of land, and if it was included, then 17% needed to be added to reach the 30% target. The journalist also enquired whether an audit had been done on how much of the land targeted for restitution was actually arable or productive land.

A: The Minister responded that the pieces of legislation mentioned lapsed with the coming into effect of the new Constitution. The debate centered around the matter of arable land and, moreover, putting the land to good use. The Minister referred to the sense of community he had observed among farmers. Many farmers looked beyond colour lines in relation to their neighbours. Their commitment to output seemed more important. Across the farming sectors –whether commercial, cooperative, or individual - people wanted to farm and they wanted a sense of community to share issues specific to them, like farm security.

Mr Netshitenze responded that there were two dimensions to agriculture in South Africa. The first was the need to build productive capacity, and the second was household food security that would be achieved through small scale subsistence and kitchen gardens. More important than the level or form of ownership was the level of interest, activity, assistance and training for people to use the land productively. The various clusters of government were working on detailed programmes of action leading up to the next Cabinet Lekgotla in January 2010.

Q: A journalist noted the ideals set for the educations system. He stated that problem was often created when the larger trade unions prevented evaluations of teachers who were not conforming to these ideals. He asked for comment on whether this would change.

A: The Minister replied that the best weapon in this instance was school governance. He reiterated the differences in how school governance manifested itself in suburban and rural schools. There was a need to gather information as time went on. Important debates were planned on the trend of learner migration from rural to urban areas, language policy and other key issues in education. Emphasis was placed on achieving the improved outcomes that were needed from education. There was a need to focus on sought-after skills that would be needed in the economy. There would be more focus on issues such as the teaching of mathematics and science in schools, and the complementary issue of reskilling of teachers. The closing down of specialist teaching institutions, such as teaching and nursing colleges, would also be revisited.

Q: A journalist asked how important was the generation of new infrastructure projects to keep the country's economy going.

A: The Minister replied that infrastructure was going to be very important. The question was what the next phase of construction would be after 2010 construction was concluded. This presented the next challenge. It was thought that this infrastructure development should continue in waves.

Q: A journalist noted that the MTSF mentioned that Government would ensure price stability and a low inflation rate. That had been difficult to achieve for some time. The Minister was asked if it would remain difficult in the future.

A: The Minister replied that price stability was a constitutional imperative, and this was the mandate given by the Constitution to the South African Reserve Bank. The way the imperative had found resonance in real terms was inflation targeting. The objective remained, and the approach to price stability could not be abandoned because it became difficult to attain. At the same time, one could not ask the Reserve Bank to single-mindedly pursue the inflation target, if it would destroy the economy and deepen the recession. His experience had assured him that the Reserve Bank administration was reasonably- minded, and that the objectives would be considered with flexibility.

Q: A journalist asked if  South Africa would ratify the International Covenant on Social, Economic, and Cultural Rights before 24 September 2009, as this was the deadline.

A: The Minister responded that he did not have an answer to that question. He would refer that question to Dr Vusi Gumede in the Presidency.

Q: A journalist noted the State intervention emphasis as a single reference point of reference for Government. The journalist asked if the document spoke to capacity, and asked how the spheres of government would be strengthened to ensure delivery and get the State machinery ready to implement?

A: The Minister referred to paragraph 45.1,which dealt with what was needed to ensure the efficacy of the State. This was an area where ongoing pressure was needed. The emphasis here was on the quality of government service. If that quality was to be achieved, there would need to be improved monitoring and evaluation. This was why the Monitoring and Evaluation Ministry in the Presidency, headed by Hon Collins Chabane, was important. This Ministry was currently doing work on identifying problems in different spheres of government. The MTSF also spoke to these issues. The Minister concluded that in order to run complex institutions well, it was necessary to have people with the requisite skills. Getting this in place would change the way that public service was delivered.

Q: A journalist said that the MTSF document commented on the need to assess spending. Based on this, the journalist asked what areas were identified as not being fundamental, and where were the areas that held possibilities for spending cut-backs.

A: Mr Netshitenze responded that there had not yet been identification of the precise areas. The Budget speech in February did identify some areas provisionally. The expenditure review would be an extensive process, and areas for immediate cuts would be identified. In the medium term, the expenditure review would inform on how to move forward with expenditure reprioritisation. This process might be done by the time the Medium Term Budget Policy Statement (MTBPS) was tabled.
 
The Minister stated that the MTSF document was prepared as a continuous reference point for the media and interested parties to continually refer back in their coverage of Government, and to measure progress.

The media briefing was concluded.