Minister of Finance 2013 Budget Speech and Responses by ANC and DA

Minister of Finance, Mr Pravin Gordhan, gave his Budget Vote Speech on the 21 May 2013

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Honourable chairperson, in presenting the National Treasury’s 2013 Budget Vote for the consideration of the House, allow me to reflect briefly on where we stand in meeting our longer term social and economic development objectives.

The global economic outlook is still depressed, and so our own efforts to strengthen economic performance remain critically important. I will say a few things about this challenge shortly.

But even in the currently depressed environment, in which growth is lower than we would like and the revenue outlook leaves little room for fiscal expansion, we are continuing to make progress in the service delivery programmes that are central to development and transformation.

Social and economic progress is best measured, Honourable chairperson, over the long term, and in the past nineteen years we have seen substantial advances on several fronts.

Let's reflect on some of these:

• Our economy has grown by over 80 per cent since 1993. National income per capita has increased by 40 per cent in real terms.
• Total employment has increased by more than 3.5 million since 1994.
• Gross fixed capital formation increased from 15 per cent of GDP in 1993 to an average of 20 per cent over the past five years.
• Our social grants system now reaches over 15 million beneficiaries.
• Over 3 million housing units have been built.
• Access to electricity has increased from 50 per cent to over 80 per cent of the population; access to water and sanitation has similarly improved.
• Over 1.6 million work opportunities were created in phase 1 of the expanded public works programme. For the period ahead, it aims to achieve over 500 000 fulltime employment opportunities.
• A new tax administration has been established since 1994 in the South African Revenue Service, and an overhaul and modernisation of the tax structure and administration which allowed tax rates to be lowered alongside broadening of the tax base.
• Over R600 billion in Black Economic Empowerment (BEE) transactions has been recorded since 1995.
• We have demonstrated our capacity to host major global sporting events, and South Africa remains a favoured destination for conferences and events. We continue to see strong growth in tourism.
• Major public infrastructure projects include our partnership with Lesotho in building the Highlands Water Project, completion of the Gautrain rapid rail link, expansion and rehabilitation of our main airports, major national road improvements and the expansion of power generation capacity and rail transport that is now in progress. The total value of infrastructure projects currently under way and in planning amounts to over R3.6 trillion.
• We also had to restructure the fragmented public administration system inherited from the apartheid era (which we tend to forget) while restoring order to the overall public finances.
• Public debt was reduced from nearly 50 per cent of GDP in 1994 to 23 per cent in 2008. Main budget revenue increased from R112 billion in 1994 to over R800 billion last year, while expenditure increased from R135 billion to around R1 trillion.

Honourable chairperson, you will recall that in tabling the 2013 Budget in February I drew attention to the National Development Plan (NDP) which was published last year, and the contribution that it has made to focus our policies and programmes on long-term growth and development challenges. In a sense, the NDP builds on the foundation that I have briefly outlined.

We need the National Development Plan to be a catalyst of ideas, and a spur to further action in addressing the challenges of growth, employment, environmental sustainability, redistribution, social cohesion, education, universal health coverage, social protection and regional economic development.

On infrastructure investment, we also have the work of the Presidential Infrastructure Coordinating Commission. On industrial development, we have the Industrial Policy Action Plan. On environmental protection, we also have the biodiversity and sustainable development strategies. All of these plans complement each other.

Much of the work of the National Treasury, Honourable chairperson, is directed at understanding and reviewing the fiscal and financial implications of these strategies and plans. And this is a job that is getting more demanding every year. We have many policies, many strategies, many action plans.

We now need to do better in converting these plans into actions and implementation. And so the House will welcome, I know, the new emphasis on performance, and measuring results, in our budget documentation and also in the Treasury planning documents and the strategic plans of the South African Revenue Service (SARS), the Development Bank of Southern Africa, the Land Bank, the Government Pension Administration Agency, and the other institutions in this ministry.

The plans for 2013/14 of both the Treasury and the Revenue Service were discussed by the Portfolio Committee on Finance last week.

• The Finance Committee has rightly emphasised in its report to the House that not enough is being done to strengthen municipal governance and financial management. We agree. The Treasury has placed 1800 interns in municipalities this year, and we aim to expand further on this programme in the year ahead. As the Committee report says, “National Treasury cannot manage municipalities from Pretoria, as municipalities were responsible and accountable for running their own affairs.”
• The Finance Committee has requested a progress report on the establishment of the Chief Procurement Office and steps taken to improve supply chain management processes and combat corruption. This is indeed a top priority, and a new organisational structure for this office has been agreed, new procurement rules will be implemented this year and steps are being taken to improve the capacity of procurement officials and modernise systems and increase accountability and transparency.
• The Finance Committee has also requested a progress report on provincial financial management interventions. The outcomes for the 2012/13 year show marked improvements in financial performance of provinces in which the National Treasury has been active.
• The Committee has asked for reports on the new automated tax clearance certificate system, the single business registration project, trends in the cost of tax compliance for business and progress with one-stop border posts in Lebombo.

On all of these issues, Honourable Speaker, we are no longer in the policy and planning phase: the tax clearance system gets under way this year; compliance costs are being reduced through simplified systems and new facilities at border posts have been constructed.

Let me turn to the outlook for the economy. Honourable chairperson, we have to face the reality of slow growth internationally, and difficult challenges in our own economy. But it is time to construct a positive narrative, and to work together to implement it. There are many countries that have greater instability, but their economic narrative is extremely positive. South Africans want to focus only on the negative and yet what is needed urgently is to focus on the positive.

In the words of JM Keynes, “The future never resembles the past – as we well know. But, generally speaking, our imagination and our knowledge are too weak to tell us what particular changes to expect. We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act.”

The burning question for South Africans is not only how we navigate through global uncertainty and risks but can we become more resilient and globally competitive. What will it take and can we up our game? In all the cacophony of the present can we build a common purpose among all of us? That’s what 50 million South Africans demand of us.

We have to build on our strengths:

• good infrastructure
• institutions that work
• robust democracy
• a dynamic private sector
• strong public finances and healthy financial institutions.

Honourable chairperson,

• South Africa’s GDP growth was 2.5 per cent in 2012. Our Budget forecasts project growth of 2.7 per cent in 2013, accelerating to 3.5 per cent next year.
• Overall investment spending remained robust last year, growing by 5.7 per cent. Strong capital investment by the public sector, the addition of electricity-generating capacity, relatively stable inflation and low interest rates are expected to support improved growth rates over the medium term.
• Consumer confidence remains weak, and business surveys also suggest fragile levels of confidence in the economic outlook. This is likely to constrain private household consumption and business investment during 2013.
• Formal sector non-agricultural employment has slowed in tandem with the slowdown in growth, with just 83 000 jobs created in 2012, up 1 per cent on an annual basis.

Labour unrest and stoppages in the mining sector contributed to a much weaker economic performance in 2012. Mining and quarrying subtracted 0.5 percentage points from fourth quarter growth in 2012 and a cumulative 1.2 percentage points from GDP growth in the second half of 2012.

The outlook for the mining sector has been weakened by continued labour unrest and production stoppages, as well as markedly lower commodity prices. In part, slower growth in South Africa reflects a weak global environment.

The International Monetary Fund has downgraded global GDP growth outlook for 2013 to 3.3 per cent from 3.5 per cent previously, although it kept its 2014 estimate unchanged at 4.0 per cent. The IMF sees a three-speed global economy with emerging markets continuing to lead the recovery, and a growing divergence between resilient growth in the US and contraction or sluggish growth in the euro area.

While global financial conditions have improved, the outlook remains weak with downside risks emanating from the Eurozone debt crisis, US fiscal policy challenges, and slower growth in major emerging markets, including China, India and Brazil.

These are clearly circumstances, Honourable chairperson, in which we need to take bold steps to strengthen economic performance.

• The present uncertainty in the labour relations environment in mining and other sectors requires concerted action by organised labour, business, civic leaders and government. There is no room for complacency here: we are all in this together. If we do not resolve our labour relations challenges, we will all be losers, we will see deteriorating confidence, job losses and business failures. But if we find balanced, fair and socially responsible solutions, we all stand to gain: we will see higher investment, higher employment and improvements in living conditions.
• Infrastructure investment is also an arena in which more concerted action is underway. This is not just about building and maintaining the energy, water and transport networks we need for faster growth, but is also about raising our savings performance so that we can finance more rapid investment and growth.
• In urban development, with the city support program we will see more investment in housing and more rapid industrial growth and job creation.
• In rural development and agriculture, we are addressing constraints to land reform and improve support for emerging farmers.
• In further education and skills development, there is greater alignment between the skills that businesses need and the curricula that our colleges offer.
• In regional development and trade, we are beginning to build infrastructure and institutions across national borders that promote more rapid growth, investment and job creation.

I need to stress, Honourable chairperson, that economic growth in our times requires new ideas and a diversity of approaches. In the words of renowned economist Michael Spence, "No one has a complete formula for restoring growth. We will have to be persistent, determined, pragmatic and experimental - a mindset familiar to policy makers in emerging economies where these complex issues are being dealt with on a regular basis."

As part of strengthening our economic performance, a sustainable fiscal policy stance remains critical. Owing to sound management of the fiscus when economic growth was strong, government was able to enter the 2008-2009 recession with healthy public finances and a comparatively low level of debt. This enabled a flexible response to deteriorating economic conditions.

Spending growth reinforced the social security net during a period of declining employment, and provided an economic stimulus through rising allocations towards infrastructure, and programmes aimed at business support and increasing employment. Going forward, the deficit level will moderate through a combination of revenue growth in line with the economic recovery, and disciplined real growth in spending.

The countercyclical response to the downturn in economic conditions has been substantial and by various measures was amongst the largest in the world. From the peak of the economic cycle in 2007/08, the budget balance swung from a surplus of nearly 2 per cent of gross domestic product (GDP) to a deficit of 6.5 per cent by 2009/10.

This increase in the deficit was not just the result of slowing revenue, as government’s efforts to support the public service delivery and the economy also resulted in expenditure increasing from 28.5 per cent of GDP to 33.6 per cent over the same period.

In aggregate, the final outcome of tax revenue for the 2012/13 fiscal year amounted to R813.8 billion, a 9.6 per cent increase or R71.2 billion higher than actual collections in 2011/12 fiscal year.

The persistence of economic weakness since 2009 has meant that government’s share of the economy has remained substantial and the deficit has remained high. Counter-cyclicality is not just about supporting the economy and sustaining government spending when revenue declines due to economic conditions. It is also about reversing the accumulation of debt built up during difficult times when economic conditions improve.

At the same time, Honourable chairperson, we need to enhance our capacity to finance long-term infrastructure investments and municipal capacity. I am pleased to report that the Corporate Plan of the Development Bank of Southern Africa (DBSA) outlines a concerted effort to support basic and economic infrastructure development in South Africa and the region. Government will, over the next three years, invest R827 billion in the building of new and the upgrading of existing infrastructure.

These investments will improve access by South Africans to healthcare facilities, schools, water, sanitation, housing and electrification. Simultaneously, investment in the construction of ports, roads, railway systems, electricity plants and bulk water schemes will contribute to faster economic growth. The DBSA has been asked to support government in these critical development areas.

Honourable chairperson, the past year has been a busy one in respect of financial sector reform. A wide range of measures are being taken to improve the environment for retirement savings and reduce the costs and risks associated with financial services. The 2013 Budget Speech announced refined proposals for further consultations with the public.

A central proposal is that pension funds should transfer members’ balances into a preservation fund when they change employer, as the default option, and should also identify suitable retirement annuity products for the years beyond retirement. A harmonised tax treatment of pension and provident fund contributions and benefits is also proposed, together with higher caps on contributions.

We have also proposed steps to enhance the governance of pension funds. I will shortly meet with business leaders in the life insurance industry to discuss costs. A first draft of legislation dealing with these proposals will be published towards the end of the year.

We have taken a number of steps to improve our already world-class financial system. This includes complete overhaul of our securities legislation. Parliament passed the Financial Markets Act last year, and the President has agreed to it coming into operation on the 3 June 2013.

In addition, a comprehensive new set of banking regulations were passed in November 2012, and a new law to oversee Credit Ratings Agencies was passed. In addition, over the past year I have initiated a comprehensive process to deal with abuses in unsecured lending.

In October last year, banks agreed to put in place measures to curb excessive lending to vulnerable households and selling of inappropriate products. On-going monitoring of this is crucial, and the new market conduct regulator will play a critical role.

The National Treasury is involved in a number of areas:

• Infrastructure investment that supports regional integration, including road, rail, and port facilities
• Reducing red tape, corruption and delays at border posts
• Using our financial institutions to partner with businesses wanting to expand into the continent
• Developing regional markets for food, energy and water.

Our participation in Africa-wide and regional bodies also contributes to regional cooperation:

• The Southrn African Development Community (SADC) Finance and Investment Protocol is assisting in bringing about macro-economic, monetary and financial sector convergence, as well as fostering a conducive regulatory and legislative environment to facilitate investments and their financing.
• Reform of the Southern African Customs Union Agreement remains a priority, to improve its contribution to trade promotion and development finance as well as fiscal sustainability for our neighbours.
• Progress is being made in trade facilitation through the creation of one-stop border posts and improved customs legislation to increase border efficiency.
• In addition to the role of the Development Bank of Southern Africa, we are working with our BRICS partners to establish a new development finance institution focused on the needs of emerging economies and African infrastructure investment.

Honourable chairperson, the strategic plan of the National Treasury covers two changes to the organisational structure of the departments: the creation of a fully-fledged Chief Procurement Office (CPO) and the Government Technical and Advisory Services Centre (GTAC).

The CPO is created in response to the need to improve public sector supply chain management processes to curb fraud and corruption, and to derive maximum value for every rand that we spend of taxpayers’ money.

The strategic objectives of the Office include:

• Modernising state procurement by taking advantage of information technology
• Improving compliance with relevant legislative frameworks
• Enhancing governance, and increasing accountability and transparency in state procurement
• Improving capability and performance of supply chain management practitioners.

Honourable chairperson I table Budget Vote 10 for the consideration of the House.

National Treasury Budget Vote 10 speech by Nhlanhla Nene (MP), Deputy Minister of Finance

21 May 2013

Honourable members.

It is my honour to present to you the overview of the work of the finance family, a number of institutions whose activities underpin our political economy. In closing the debate on the State of the Nation address in February 1999, Nelson Mandela had this to say: "We are a democracy - young and fledgling, but one which can boast of firm institutions and a culture that no force can take from the people of South Africa."

We are today a 19-year-old teenager, but one which can boast of the calibre of institutions such as the South African Revenue Services (SARS), the Public Investment Corporation (PIC), the Financial Intelligence Centre (FIC), the Financial Services Board (FSB), and the Government Pensions Administration Agency (GPAA).

These institutions are among the pillars of our economic and political order. Nobel laureate Douglas North defines institutions thus: "Institutions are the humanly devised constraints that structure human interaction. They are made up of formal constraints (rules, laws, constitutions), informal constraints (norms of behaviour, conventions, and self-imposed codes of conduct), and their enforcement characteristics."

The finance family is therefore one of the constraints that structure human interaction within our borders. The FIC and the FSB ensure the integrity, security and strength of our financial system. SARS collects the revenue that makes it possible for government to pay for our collective ambitions as a nation. The GPAA looks after the retirement needs of our civil servants. And the PIC, on the other hand, ensures that the Government Employees Pension Fund (GEPF) and social security funds have sufficient funds to meet their obligations.

In their most recent paper, Taxation and Development, Professors Timothy Besley and Torsten Persson make the point that "the power to tax lies at the heart of state development".

Besley and Persson take their lead from Nicholas Kaldor who said: “It is shortage of resources, and not inadequate incentives, which limits the pace of economic development. Indeed the importance of public revenue from the point of view of accelerated economic development could hardly be exaggerated.”

SARS has played a crucial role in ensuring that successive ANC administrations have had the revenue to fund our collective ambitions as a nation. For the 2013/14 fiscal year, SARS is required to collect R898 billion of revenue, which is nearly 10 per cent or R84 billion more than the previous year. Over the same period our economy is expected to grow at 2.7%.

Meeting this target will not be easy. Not only because of the tough economic environment in which South Africa and the rest of the world find themselves, but also because of corporates and wealthy individuals who organise their affairs in such a way that they do not pay their fair share of tax. They achieve this through sophisticated tax avoidance and evasion schemes.

South Africa is not alone in this. The Group of 20 nations, of which South Africa is a member, has picked up the cudgels against this scourge. At the G20 summit last month, the erosion of sovereign tax bases and the shifting of profit by corporates from jurisdictions where it is generated to those where they can pay the least tax were key topics of discussion based on an OECD report which highlighted the potentially crippling effects this can have on the fiscal sustainability of nations.

The shifting around of profits is justified on the basis that companies have a duty to maximise the wealth of their shareholders by paying as little tax as loopholes between jurisdictions and the ambiguity the letter of the law allows. This includes setting up subsidiary companies in tax haven as conduits for the transfer of profits from where they are generated.

This is not only unjustifiable, but immoral. South Africa has its fair share of multinational companies who rack up billions of rands in revenues and yet pay almost no tax here because they use transfer pricing, profit shifting, other forms of tax evasion and aggressive tax avoidance schemes which denude our fiscus. This at a time when governments are being forced by circumstances to support economic activity as the private sector has withdrawn to the sidelines.

Among the tools at SARS’s disposal are global agreements on the exchange of information which we must extend to more jurisdictions, and the powers granted to SARS in the new Tax Administration Act to detect and deter non-compliance, including stiff penalties for those who are wilfully non-compliant.

SARS will continue its work to improve the levels of tax compliance in the country and it will apply the benefits of a modernised and increasingly automated tax system. In order to improve access and availability of its services to all citizens, SARS will focus on the following:

• Increase the use of mobile technology to allow taxpayers easy and convenient access to services wherever they are;
• Review its branch footprint to better reach taxpayers and traders;
• Develop a single registration process for businesses and traders to reduce the costs of compliance. This will reduce the administrative burden for businesses in terms of tax and customs registration;
• Increase the presence of mobile offices and shared locations for those who do not have access to such technology or choose to interact face-to-face;
• Bring all economic activity within its purview even when there is no revenue to be derived. This includes having sight of all informal businesses;
• Increase collaboration with other government departments, including the Departments of Home Affairs and Social Development;
• Increase education and engagement with taxpayers and traders throughout their lifetime; and
• Modernise the Corporate Income Tax (CIT) system for companies and automating the process. A new income tax return for companies – ITR14 – was released two weeks ago.

SARS is well advanced with the transformation of the Tax Clearance Certificate (TCC) system as announced by the Minister in the February budget speech. The new process will address a number of shortcomings of the current TCC, namely that taxpayers need to collect their printed TCC at a branch, that it is susceptible to forgery, and that it does not monitor on-going compliance of a business for the duration of a contract.

Financial Intelligence Centre (FIC)

Money laundering and the financing of terrorist activities pose a serious threat to the integrity and stability of financial markets and institutions. These activities can discourage foreign direct investment and distort capital flows. Money laundering, in particular, can also be a conduit for through which unscrupulous taxpayers hide their income from the revenue collection agencies. It is for these reasons that the international community has made the fight against these activities a priority.

So, the FIC plays an important role in ensuring the integrity and stability of our financial system. Through ever-closer working relationships with the law enforcement authorities and the South African Revenue Service, the FIC provides the financial intelligence which is increasingly being used in the investigation of priority crimes in South Africa.

In February this year, the Minister of Finance announced that he had requested the FIC to explore how we might bring South Africa in line with international anti-corruption and anti-money laundering standards in so far as Politically Exposed Persons (PEPs) are concerned.

The FIC has re-issued guidelines to all accountable and reporting financial and other institutions on how they should treat clients who qualify as PEPs. In addition, the FIC has begun a process of amending the FIC Act to include explicit provisions to deal with PEPs.

The extent of reporting to the FIC and the referrals of matters to the law enforcement authorities continues to grow. Over the past year the FIC referred 883 matters to law enforcement agencies for investigation. The FIC estimates that the value of these referrals for the past year amounted to R76 billion. Many of these matters involve lengthy and complex analysis and often run over multiple years. Last year, the FIC froze R334 million which had been derived through fraud. At the request of law enforcement agencies, the FIC also helped in the investigation of an additional 1 445 matters.

Financial Services Board (FSB)

The recent financial crisis and subsequent events have been yet another reminder of the importance of sound financial institutions and the fair treat by these institutions and their intermediaries of the people who buy financial services and products. The financial crisis and the scandals such as the LIBOR fixing case have also been a reminder of the importance of integrity and stability of financial markets and institutions. Without strong regulators, we can have neither sound financial institutions nor financial markets with integrity.

So it is against this backdrop that the Financial Service Board (FSB) is girding its loins to promote the soundness of insurers and reinsurers through the effective application of international regulatory and supervisory standards. The FSB is developing a new risk-based solvency regime for the South African long and short-term insurance industries, namely the Solvency Assessment and Management (SAM) regime.

The SAM regime will be based on the principles of the Solvency II Directive, as adopted by the European Parliament, but adapted where necessary to suit South African circumstances.

The Solvency II is based on three pillars:

• Quantitative requirements, dealing with issues such as the valuation of assets and liabilities and the setting of capital requirements. This can be based on a standardised model, prescribed by the supervisor, or an insurer’s own internal model, approved by the supervisor.
• Qualitative requirements, including standards and guidance on governance, internal controls, risk management and supervisory processes.
• Reporting and disclosure - The proposed implementation date for SAM is 01 January 2016. However, interim transition mechanisms will be put into place in respect of Governance, Internal Controls and Risk Management. Before then, there will be a number of other changes to regulation of insurance companies and these will come into effect from January next year.

Twin Peaks Regulatory System

The FSB has been working together with the South African Reserve Bank and National Treasury on the preparation for the implementation of the Twin Peaks model of regulation. This work will continue and is expected to intensify as we come closer and closer to the implementation stage.

The FSB has established a Twin Peaks Implementation Steering Committee which will make recommendations regarding the practical steps that must be taken for a successful implementation of Twin Peaks.

Public Investment Corporation (PIC)

For the period of 2013-16, the PIC has the following areas of strategic focus:

(a) Contribute to education, health, housing, infrastructure and environmental projects

GEPF has set aside 5 per cent of its total assets, equivalent to R62.5 billion, for investment in these types of projects. As at 31 March 2013, 46% of this has already been committed and / or invested (R28.8 billion). In the year ahead, PIC will continue to implement the developmental investment policy of the GEPF.

(b) Continued investment in Africa

South Africa's future economic growth and prosperity is tied to that of the African continent. It is for this reason that five per cent of GEPF assets have also been set aside for investment in Africa. These investments will be particularly focused on private equity and developmental-type projects. This will be a key complementary intervention in the development of Africa’s infrastructure, with long-term benefit of a more productive continental economy.

(c) BEE and transformation

The PIC has been, and will continue to focus, in the year going forward on aiding BEE and transformation in a number of sectors.

The PIC will:

• Contribute to enterprise development in the asset management and broker sectors;
• Develop SMMEs and private equity; and
• Promote transformation in the property sector by allocating assets to Black entrepreneurs who demonstrate an ability to perform and meet the PIC’s due diligence and investment criteria.

Government Pensions Administration Agency (GPAA)

We continue to reiterate the importance of household savings to ensure that fellow South Africans retire comfortably. From Government’s side, we are continuing to invest in pensions to ensure that the loyal service of government employees is rewarded when they retire.

In this regard, honourable members, we are modernising our systems to ensure that we pay benefits accurately and on time. To date, the Western Cape has been piloting the use of GPAA's electronic document submission system. This will allow us to reduce the time taken to make payments. For documents submitted using our traditional submission channels, during the 2012/13 financial year more than 80% of benefits were paid on time. To improve further on this performance, GPAA is also encouraging department and entities to expedite the submission of information to the GPAA. Some of the delays in processing retirement benefits are due to the late submission by departments of information to the GPAA, or the submission of incomplete information.

We have begun a Retiring Member Campaign which ensures that public servants receive their pension in the same month that they retire.

We continue to take services to pensioners and members through our outreach programmes through our Community Roadshow and mobile offices initiatives and in doing this we are bringing services to the people, even those living in deep rural areas, providing them with opportunities to have their concerns addressed on the spot.

For the first time in the history of GEPF and the GPAA, about 751 637 members have received benefit statements outlining the benefits they are entitled to from GEPF. This will be increased in the next year and adopted as an annual practice going forward to assist members planning and managing their retirement savings.

We are also continuing to be plagued by unclaimed benefits. This is an area of deep concern and we have worked to reduce unclaimed benefits by 19, 3% from baseline of over R606 million at the end of 2011/12 to R489 million at the end of 2012/13.

I thank you.

Speech by Hon Zukile Luyenge during the National Assembly Budget Vote Debate on Treasury

Topic : Civil and Military Pensions
Honourable Chairperson
Honourable Minister Gordhan
Honourable Deputy-Minister Nene
Honourable Members

The National Treasury provides for the government`s pension and post-retirement medical benefit obligations to former employees of state departments and bodies, as well as retired members of the military.

Programme 7 of the Treasury`s budget provides policy analysis and advice on an ongoing basis by completing annual reviews and implementing recommendations in accordance with stakeholder agreements reached on pension reforms, post-retirement medical benefits, political office bearers and pension legislation.

The objectives and measures are

to pay pensions to people who made sacrifices or served the public interest in the democratisation of South Africa through full implementation of the Special Pensions Amendment Act ;
to improve the turnaround time for pension payments by reviewing special pensions, medical pensions, military pensions and injury on duty processes and procedures ;
to alleviate poverty by ensuring timely and accurate monthly payments of military pension funds, contributions to medical aid schemes, and risk and administrative fees on behalf of members of the Political Office Bearers Pension Fund.
The Civil Pensions and Contributions Fund provides for the processing and payment of pensions and medical subsidies to retired civil servants; and pension payments to the injured, disabled and the dependants of deceased civil servants and to former struggle veterans in terms of various statutes, collective bargaining agreements and other commitments.

The Military Pensions and Other Benefits Fund makes provision for the processing and payment of military pension benefits and medical claims arising from injuries sustained during various wars, including South Africa`s liberation wars.

Chairperson, before the integration of the forces, Statutory Force members were contributing to the Government Employees Pension Fund and stood to receive pension benefits on termination of their service. The former Non-Statutory Forces members on the other hand did not have the opportunity to contribute to any pension fund. This created a disparity between the former NSF members and the former Statutory Forces members in as far as pension benefits were concerned.

The ANC, as champion for social transformation and human development, noted at its Polokwane Conference that many former MK members remained destitute, unemployed, poor, and did not receive much assistance from the state and that some of these former members were demobilised from the SANDF with little safety nets for their survival. Conference therefore resolved that direct interest must be taken in the MK military veterans.

The Statutory Forces consisted mainly of the former homeland defence forces that were contributing to the Government Employees Pension Fund and stood to receive their benefits on termination of their benefits, while on the other hand the members of the two liberation movements, Umkhonto we Sizwe, APLA and AZANLA could not contribute to any pension fund.

In 2010 the revised Non-statutory Forces Pension Dispensation was approved by Cabinet at its meeting of 24 November 2010 which made provision for 100 per cent recognition of the service period of former Non Statutory Force members. This report followed Cabinet`s decision in 2009 to create a new service dispensation for the Defence Force.

The revised dispensation also brought about equity amongst members with more or less than 10 years` service, to the extent that the 50 per cent recognition for members with less than 10 years` service in the previous dispensation was cancelled. The Government Employees Pension Fund rules for the revised dispensation were approved, paving the way for the implementation.

In March last year it was reported that the Non-statutory Forces pension dispensation was in full operation, as the Department of Defence NSF Project Office in Pretoria continued to receive and process applications. Invited applications come from the former members or their beneficiaries of the five statutory forces and two liberation armed wing movements or NSF that were integrated during the formation of the South African National Defence Force in April 1994.

Qualification criteria apply to all former MK or APLA members who entered into an employment agreement with the Department of Defence or any other state department, either as Public Servant Act Personnel or as uniformed Defence Act Personnel member on 31 March 2002 and for National Intelligence Agency before 31 March 2004 through integration, or the normal personnel acquisition process.

Members who do not qualify are former members of both MK and APLA who demobilised and did not take up employment with any state department that participated in the GEPF prior the scheduled cut-off date for the integration in 31March 2002.

In 2012/13, more than half of the Military Pensions and Other Benefits Fund`s allocation was for the new R200 million non-statutory forces transfer payment, and 32.9 per cent of the allocation was for the South African citizen force.

Chairperson, the spending focus over the medium term - that is over the period 2013 to 2017 - will be on providing administrative support to the Treasury in terms of managing the post-retirement pension pay- out, medical subsidies and other benefits, including special pensions.

The support will be provided through the automation of core processes to enhance service delivery and, concurrently, the reduction of backlogs on the different benefits such as the injury on duty and special pensions.

Ninety-eight point six per cent of this programme`s expenditure over the seven-year period is in the form of transfer payments to households, 46.2 per cent of which goes towards post-retirement medical scheme contributions, 15 per cent for the political office bearers pension fund, 13.8 per cent for injury on duty payments and 12.8 per cent for special pensions.

Over the medium term, expenditure is expected to increase by R622 million due to additional allocations of R300 million for implementing the benefit equalisation for political office bearers and the eradication of the backlog on injury on duty claims. The backlog has thus far been reduced from 700 to 329 cases, and steps are being taken to appoint a client liaison officer to follow up on documents that employers had not yet submitted, and to develop a system to reduce the processing time of finalised claims payments.

Up until 2008/09, payment of benefits to former employees for civil and military pensions and contributions to medical funds were classified as compensation of employees and transfers to households respectively. In 2009/10, in line with the international standard for classification, it was determined that payment for medical benefits to former employees should also be classified as transfers to households.
 

Speech by Hon Thaba Mufamadi during the National Assembly Budget Vote Debate on National Treasury

Honourable Chairperson,
Honourable Members, Minister, Deputy Minister,
Director General, Commissioner of SARS
Comrades and Distinguished guests,

Honorable members, let us join millions of fellow citizens in paying tribute to an outstanding son and a patriot of our nation, Bra-Vuyo Mbuli as he was affectionately known, whose mortal remains will be interred this week.

His story of life, will forever remain a lesson about what it means to be a true South African, a true African; an apogee of what it means to be human.

With all the pain visited upon his family, colleagues and the many followers of Morning Live Programme, let us all say: May his Soul Rest in Peace.

Ndaa... Mudzula – tshidulu, mirado ya palamende na vhueni ho ri kandaho duvha la namusi. Riri mukosi wo pfala, kha la Afrika – Tshipempe lothe na kha manwe mashango.

Naho zwi tshi konda kha ri tende ri dovhe ri tanganedze zwe mudzimu ari nea zwone, ri takalela vhusthilo na maduvha e mudzimu a munea one na mishumo mivhuya yea ri itela yone.

Honourable Members, In the preface of our Reconstruction and Development Programme, the first democratically elected President, Nelson Mandela reminded us that: "we are building on the tradition of the Freedom Charter. In 1955, we actively involved people and their organisations in articulating their needs and aspirations."

"In 1994 we are about to assume the responsibilities of government and must go beyond the Charter to an actual programme of government and that the RDP is a vital step in that process.

Furthermore, he said: From 26-28 April (1994) each of us has a right to exercise a choice - without doubt one of the most important choices any of us will ever make. That choice will determine our socio-economic future and that of our children. Join us in the patriotic endeavour to ensure that all our people share in that future."

The RDP further says: "Democracy will have little content, and indeed, will be short lived if we cannot address our socioeconomic problems within an expanding and growing economy. The ANC is committed to carrying out these programmes with the support of its allies and our people."

As we debate Vote 10 today, and its Medium Term Strategic Objectives, it is important to highlight and report how far and what progress have we made towards addressing the socio-economic challenges to-date (nineteen years of democracy). The story of our journey, a reflection of the progress and the daunting challenges that constitute the immediate and remaining task of our government and its people.

Certainly, the South African people have a proud story to tell.

Budget Vote 10 and its debate is about:

The sustainability of our Fiscal Framework.
Macro-economic policy Co-ordination.
Sound and sustainable National Budget.
Equitable division of resources.
Raising Fiscal Revenue.
Competitiveness of our economy.
Promote transparency financial accountability.
Decent employment through inclusive economic growth.
However, Mr Chairperson, it is not what is in the Plan that matters, but the will to implement the plan in order to achieve the objectives of a developmental state. The plan should be about placing at the centre of government programmes (people’s entitlements), decent jobs, access to health, education, sustainable and rural development – the creation of better and integrated communities and sustainable programme to fight the scourge corruption.

I am proud to pronounce that significant progress has been made in all of the above and other areas of focus for National Treasury.

POLICIES

Through counter–cyclical policy a healthy balance between social and economic expansion in budgets were sustained even under the most difficult and volatile global economic environment.

Secondly, through our macroeconomic policies we have realised expanded sustained average Economic Expanssion of 83% over nineteen years. Of course the key challenge remains how inclusive and redistributive is this expansion given the high levels of inequalities and poverty in our societies.

We have successively managed to established a robust resilient and sound economic financial system that plays an important role in shaping and reconfigurating the world economic system as part of the family of key emerging economies in the world today (BRICS).

Secondly, through social grants system we have also seen a significant reduction of poverty in household living conditions.

UNEMPLOYMENT

Honourable Members, the scourge of high levels of unemployment in our country is a serious matter of concern. It is important to note that the situation could have been worse than it is if it was not due to sustained increased employment of more than 3.5 million since 1994.

On youth unemployment, we support and appreciate all efforts that support youth employment particularly the initiatives by National Treasury that triggered a national debate to tackle youth unemployment at all levels and sectors of our economy to create decent job opportunities. The Youth Employment Accord Agreement entered into by all role players must be seen as a decisive and final step in addressing the Youth Wage Subsidy initiatives.

AN INTEGRATED AND SUSTAINABLE PROGRAMME

Once again, lets revert to our base programme. The RDP tells us that:

"The legacy of apartheid cannot be overcome with piecemeal and uncoordinated policies. The RDP brings together strategies to harness all our resources in a coherent and purposeful effort that can be sustained into the future."

The ANC 53rd National Conference in Mangauang adopted the National Development Plan precisely because it is in line with the injunction of the RDP because it provides a common vision for South Africa. The need to build the capacity of a developmental state.

RDP: "The ANC and its Alliance partners have principles and policies to which we are deeply committed, but we will not close our ears to other viewpoints. The ANC is committed to carrying out these programmes with the support of its allies and our people." Therefore, with the above understanding, the debate around this plan is not a counter productive effort but part of the process to enrich the plan as we continue to implement.

GLOBAL ECONOMY

Honourable Members, the global economic environment is showing some positive signs of recovery due to the concerted effort by all global players including the US positive though sluggish signs of recovery and we can safely say that the economy has transited from the 2008 crisis that characterised most of the developed economies.

However, the sense of normalcy should not lead us to complacency because the European economy is still very much fragile and in that context the process of recovery remains incomplete.

Domestically, we continue to see warning signs in the mining sector which has a potential to can undermine investor confidence, internal revenue generation, credit ratings and the most worrying is the negative talk by ourselves that continues to create great levels of uncertainty and undermines all the positive efforts we have made.

To cement our place as a destiny of choice, not only for investors but for tourists, the nation as a whole must be champion new forms of ruthless struggle against chaos and disorganisation.

Therefore we must pay attention to:

Greed, conspicuous consumption and opulence of the elite.
Enforce a culture of discipline within the working people and the private sector (and a high level of discipline) particularly the civil service.
Have an all round programme to engage civil society to desist from aimless despair and bitterness that leads to the destruction of public property in the name of service delivery protest and better working conditions.
Honourable Chairperson, as we note the positive signs of an economy recovery, there are equally worrying signs that the policy of Inflation Targetting of 3-6% bent may not be sustainable as a result of high oil prices, transportation costs and food prices and administered prices. Despite these concerns, it is important to note that we have to-date experienced a thirty year low interest rate and perhaps we can remind ourselves of what the Minister said on the mandate of the Reserve Bank and I quote:

"It is clear I have expanded the mandate of the Reserve Bank. It says here’s the target but it`s flexible." In implementing the policy, the bank must be mindful of global circumstances, and of SA`s own growth and employment needs, as well as of the need to preserve financial stability and avoid creating asset bubbles."

The current budget indicates that it will be deficit financed and the concern we should continue to raise as parliament is how and where the resources should be deployed, and continue to support that:

Borrowing should be directed to real investments in the productive sector of our economy where there is high propensity of jobs and poverty reductions such as agriculture, tourism and land reform to stimulate growth.
Avoid deficit spending on recurrent costs. Thus both in times of recession and upswings South African needs to give more consideration to deficit financed expansionary fiscal policy in order to accelerate spending on development and infrastructure.
We must congratulate the commissioner of SARS for keeping the home-fires burning under very difficult global and domestic economic environment they exceeded the revised revenue target and therefore impacted positively on our deficit spending.

Whilst we appreciate their success and their strategic plans, we also think it’s important for their tax regime to address the peculiar circumstances of SMME sector to encourage job creation and entrepreneurship development.

The Financial Service Board, just like SARS has continued to grapple with difficult white collar crimes that constitute the highest level of corrupt activities that impact on hard earned savings of poor people and pension funds.

We have noted with sadness in the past few years the extent to which pension funds have been abused for self enrichment and urged the FSB to quickly address this matter and also look seriously into issue of Pension Fund Surpluses which in many ways than one, continues to disadvantage poor and needy families.

The recent Fidentia Court case outcome and penalty meted against those allegedly involved, leaves a bitter taste for those who have lost their life-long savings. It is a matter that our committee will be calling for a proper briefing and whether there will be a legal follow-up on the matter. Lastly, but not least important, pay serious attention to the fiduciary powers and responsibilities of pension fund trustees.

In the 2011 SONA, the President of the Republic, Pres. Jacob Zuma, outlined the challenges ahead of us and directed that all South Africans must rally and unite behind one common objective.

"Our shared commitment is to put South Africans to work. They must find work in the fields and factories, in repairing roads and building houses, in caring for children and protecting the environment. We must create jobs in every possible way that we can. 2011 must be a year of action."1

Honourable Members, over 1.6 million work opportunities were created in phase one of the Expanded Public Works programme and now aims to achieve over 500 000 fulltime employment opportunities.

Halala Public Works! Halala Public Works!

Let me take this opportunity to thank the Committee members for their hard work and Minister and Deputy Minister, National Treasury management under the leadership of the new DG, Lungisa Fuzile for their commitment and patriotic spirit in executing their work.

Honourable Chairperson, the ANC supports Budget Vote: 10.

THANK YOU
Speech by Hon Sizani Dlamini-Dubazana during the Budget Vote Debate on National Treasury

21 May 2013

Topic: "Public Finance and Budget Management"

Honourable Chairperson
Honourable Minister Gordhan
Honourable Deputy-Minister Nene
Honourable Members

The budget vote of the National Treasury is a living example of the manner in which the ANC government is applying the constitutional principle of co-operative governance and intergovernmental relations amongst the three spheres of government.

This Budget Vote practically assists the National Treasury in providing support to all three spheres of government so as to ensure the building of effective and efficient public finance and budget management.

The Constitutional principle of interrelated governance between the spheres means that there is a duty on each sphere to co-operate with one another for the greater good of the country as a whole. Whilst respecting the distinctiveness of each sphere the relationship is one of relative equity within the spirit and duty of co-operative government.

Our intergovernmental fiscal system is based on a revenue sharing model with provinces largely dependent on transfers from the national government while local government partially dependent on such transfers.

The main National Government`s role is policy making ,and ,the provinces and local government perform the major roles of provision of social and basic services. Then what does treasury do? It provides public finance and budget management.

Hon. Chairperson

Let me take this time and provide clarity on the matter that I have just said, DA expects National Treasury to micro-managed the provinces and municipalities. While ANC says provide capacity where it is necessary. Chairperson ANC led-government has responded to the mandate by providing constructive interventions to the provinces like Limpopo and municipalities e.g. Umsunduzi at KZN.

Chairperson,

ANC is aware that DA in particular will not support this budget vote, the reason being they are not honest to their electorate. How do you complain about poor service delivery at the provinces and local government and do not support resources to correct the wrong. Indeed chairperson ANC has made it clear that corruption and fraud are serious bad practiceses as a results National Treasury has appointed a chief Procurement Officer. Therefore where the standards in both instances are not adhered to National Treasury act accordingly and this Budget Vote makes provision for this.

The level of sophistication of the Legislative Framework and Governance Frameworks for financial reporting and accountability has won South Africa acclaim globally. Chairperson this does not mean that ANC has turned a blind eye on the service delivery and financial management that is taking place at the Local government ANC led-government has established a In-Year Management, Monitoring and Reporting System for Local Government. This system enables provincial and national government to exercise oversight over municipalities and identify possible problems in implementing municipal budgets and conditional grants. The reporting facilitates transparency.

Hon. Chairperson, I am sure that by now you realized that ANC debate on its policies While opposition focus on minor issue

The "state of local government finances and financial management" which is released annually at the end of June each year, provides a regular overview of the state of municipal finances that can be used to:

(a) Identify areas of risk in local government finances so that appropriate system-wide responses can be investigated and developed; and
(b) Identify those municipalities who are in financial distress so that processes can be initiated to determine the full extent of their financial problems with a view to determining whether a municipality requires support and what support should be provided, or an intervention is required in a municipality due to a crisis in its finances (as provided for in section 139 of the Constitution).

The thrust of the programme on Public Finance and Budget Management is to ensure on a consistent basis sound financial management practices to strengthen transparency, accountability and improve service delivery. This lies at the heart of both strengthening and deepening our democracy.

Local government is at the coalface of the delivery of public services and the success or failure of municipalities in delivering services. It shapes public opinions about the ANC government, both at administrative and political level. More importantly, the success or failure of local government determines whether millions of poor and marginalised people live in decent conditions, have a dignified life, and are able to enjoy a decent life.

Section 153 of the Constitution requires that "a municipality must structure and manage its administration and budgeting and planning processes to give priority to the basic needs of the community and to promote the social and economic development of the community".

When we speak of a capable state and a developmental state, what we mean is, first and foremost, a capable local government. Ethical leadership in the management of local government finances is absolutely crucial to achieve both proper development and sound financial management. Municipal financial management is about:

Enhancing the developmental mandate of local government
Planning and budgeting and ensuring that this happens in a transparent and participatory way together with the community that the budget will serve
Ensuring a continuous capital investment flow into the municipality
Maintenance and repair of existing infrastructure
Generating revenue and debt collection
The political leadership of municipalities must take responsibility where acts of fraud, corruption, and the interference with tender processes have been proven. Councillors cannot hide behind ignorance of what is required of them. The Municipal Systems Act clearly articulates the Code of Conduct for Councillors. National Treasury has undertaken councillor training sessions throughout the country with the intention to equip Councillors with the necessary information to guide them in executing their responsibilities.

The root cause of many public finance and budget management problems are to be found in poor planning, poor leadership, poor implementation, not hiring the right people and not having the right determination to ensure that the services we are supposed to provide and investments we are supposed to make are actually being made.

In order to address these challenges, National Treasury provides support at all spheres of government to improve performance in infrastructure delivery and support programmes.

It is common cause that many municipalities have backlogs running into billions of rands. To address the challenges of inadequate investment in the building of new infrastructure and investing adequately in the maintenance and renewal of existing infrastructure, National Treasury has recommended that each municipality set aside no less than 40 per cent of its capital expenditure budget for the renewal of existing assets.

In addition, no less than 8 per cent of the written down value of a municipality`s plant, property and equipment should be set aside for repairs and maintenance.

For the ANC poor social and economic infrastructure will over time constrain the growth of our economy since all economic activity takes place within the geographic boundaries of municipalities.

In dealing with the challenges of the management of public finances and how this budget vote plays a direct role in developing capacity across the spheres of government, it would be important to speak to the work of the Technical Assistance Unit of the National Treasury. This support facility provides the technical assistance through a wide range of process management, advisory support, and knowledge management services along the project and programme management cycles, to all the national, provincial and local government departments.

As a Technical Unit it provides excellence in public sector management assistance, which promotes learning and co-operation for improved service delivery and sustainability. As a support facility it provides management and technical assistance to government initiatives with the aim of improving the quality of spend in the public sector.

With such assistance on hand no public service institution should be in a position to claim that it lacks the technical capacity to manage public finances. The mid- term review of the Unit highlighted the high level of efficacy and user satisfaction with the service and its key role as a first responder to solving managerial issues, problems and challenges for its clients, and is capable of quickly addressing their needs and expectations.

Technical Unit has traditionally serviced government departments based on the fact that departments have a mandate to fulfill all national priorities, the assumption being that none of these priorities have preference. Increasingly, the programmes supported by the Unit are aligned with major government priorities or are amongst those initiatives where National Treasury has identified risks in terms of spending and/or ineffective or poor service delivery. The Unit offers a wide range of technical assistance services in programme and project management, organizational development, and procurement management, to all national and provincial departments and some municipalities.

The relevance of the role of this Budget Vote to the management of Public Finances is echoed in the ANC`s Economic Transformation discussion document that was tabled to its National Policy Conference in June 2012, where it states:

"The pathway of economic transformation necessitates an energised, coherent and effective approach, working together in partnership, and will therefore need a major up-scaling of our efforts towards economic emancipation, consistent with our vision of a better life for all".

This can only happen if take care of our financial resources so that our people benefit from the allocation of these resources for the ANC policy reasons and purposes they were appropriated for.

The ANC supports budget vote 10 - National Treasury
Speech by Hon Patricia Adams during the National Assembly Budget Vote Debate on National Treasury

21 May 2013

Topic: International Finance Relations

Honourable Chairperson
Honourable Minister Gordhan
Honourable Deputy-Minister Nene
Honourable Members

In global terms, South Africa`s international financial policy must be shaped by the interplay between diplomatic, political, environmental, economic and regional co-operative dynamics that define early 21st century international relations.

South Africa`s foreign policy is, therefore, driven by a clear and critical understanding of our national, regional and continental priorities in a multi-polar world where the geo-strategic politics of the African Continent is, once again, becoming increasingly central to global political economic competition for natural resources and market share.

In order for South Africa to achieve its national goals of eradicating poverty, lowering inequality and creating employment opportunities, foreign financial relations must be driven by our domestic economic and social demands, as well as our regional, continental and global obligations.

Chairperson, this goal is driven by the Treasury`s programme for International Financial Relations. Work in the programme is given effect by the International and Regional Economic Policy division which facilitates the deepening of South Africa`s role in regional and international economic integration.

The strategic objectives are

to advance South Africa`s interests specifically, and those of Africa more generally, through regular strategic analysis, engagement and negotiation at financial and economic fora;
to actively promote South Africa`s financial and economic relations in bilateral and multilateral fora;
to formalise the process in which South Africa disseminates knowledge on regional financial and economic developments to key regional and national stakeholders; and
to participate in bilateral and multilateral forums and informal consultations with key regional and national stakeholders
Agbare Voorsitter, die Komitee van Tien Afrika Finansministers en Sentrale Bank Goewerneurs ontmoet gereeld met die hoofde van die Afrika Ontwikkelingsbank, die Afrika-Unie Kommissie en die VN Ekonomiese Kommissie vir Afrika waar onderwerpe soos ondermeer die G20 agenda , sake van prioriteit vir Afrika, die rol van finansiële regulasies en Afrika se stem en verteenwoordiging in internasionale finansiële instellings, bspreek word.

Die doel van dié samekomste is om druk uit te oefen vir groter deelname en inspraak vir Suid-Afrika en Afrika-lande, asook substansiële hervormings van die Bretton Woods instellings en prosesse. Dit verseker dat die stem van Afrika in die forums vir internasionale ekonomiese beleidformulerings gehoor word. Uitkomste in hierdie verband sluit in onderling ooreengekome response wat by die G20 ingevoer word, asook die ontwikkeling van toekomstige werkprogramme en geleenthede om Afrika se sienswyses oor te dra.

After the barriers to investment came down with the advent of democracy in South Africa, businesses moved quickly with the encouragement from the ANC government to take advantage of the market opportunities on the continent. The stock of South African direct investment in the rest of Africa equals approximately 5 percent of our GDP with a broad cross-section of the corporate community involved and South African banks appearing to be well positioned to take advantage of expanding financial services throughout Africa.

Chairperson, in this regard it is pleasing to note that South African financial institutions continue to consolidate their role as catalysts of finance development and regional integration within the Southern African Development Community and the Continent at large. The strategic emphasis on regional financial development in Africa presents South Africa with a challenge to redouble our efforts.

It is therefore not surprising that the Treasury`s programme for International Financial Relations also leads the reform of the governance and administration structures of African institutions which enhance South Africa`s shareholding and influence at the African Development Bank, working towards ensuring effective financial administration of the Southern African Development Community Finance Committee`s Secretariat, and contributing towards the review of the SADC`s Regional Indicative Strategic Development Plan.

On the international scene the IMF is committed to working with South Africa to provide the advice and analysis that can help address and unleash our own and the continent`s full economic capabilities. As a member of the G-20 and being the largest economy in sub-Saharan Africa, South Africa has a clear role to play in ensuring global economic stability and contributing to sustained and balanced economic growth. The mobilisation of support for the African Agenda is a key priority of South Africa`s international financial relations. South Africa`s accession to the increasingly influential BRICS formation, therefore, offers enormous opportunities, not only for the country, but also for our friends and neighbours in the Continent. Financial cooperation mechanisms established within the BRICS structure further enhances the potential to mobilise resources for development and regional integration within SADC.

Nader aan ons tuisfront bevorder die Tesourie se Internasionale Finansiële Verhoudingseenheid integrasie en versterk bande binne die substreek deur die skepping van `n klimaat wat dien as `n onderbou vir ekonomiese aktiwiteite met die lidlande van die Suider-Afrikaanse Doeane-Unie . Onderhandelings is aan die gang ten opsigte van `n nuwe inkomste verdelingsooreenkoms vir die doeane-unie wat bestaan uit Botswana, Lesotho, Namibië. Swaziland an Suid-Afrika. Die eenheid speel `n leidende rol tydens die onderhandelings van Suid-Afrika se voorstelle ten opsigte van die hersiening van die doeane-unie ooreenkoms. Die eenheid word ook deur die Department van Handel en Nywerheid bygestaan tydens multilaterale onderhandelings wat gerig is op die implementering van die doeane-unie se Finansies en Beleggingsprotokol. Dit gaan ook Suid-Afrika se moontlike lidmaatskap van die Afria Uitvoer- en Invoerbank en die Afrika Herversekeringskorporasie ondersoek.

Die ontwikkeling en vooruitgang van Afrika bly die sentrale doelstelling van die ANC se perspektiewe en beleidsrigtings vir die bevordering van die Afrika Renaissance en die transformasie van die instellings wat vir die globale finansiële bestuur verantwoordelik is. In hierdie verband het President Jacob Zuma die afgevaardigdes van 60 lande tydens die openingsessie van die 21ste Wêreld Ekonomiese Forum oor Afrika meegedeel dat die internasionale finansiële en ekonomiese wêreld nie meer na die “ou” Afrika kan verwys nie aangesien dit dringend nodig geword het om nuwe verhoudings te ontwikkel wat Afrika tot voordeel strek - verhoudings en vennootskappe wat verskil van dié wat tot dusver gegeld het.

Agbare Voorsitter, dit is ANC beleid dat verhoudings met internasionale finansiële instellings soos die Wêreldbank en die Internasionale Montêre Fonds op so `n wyse bedryf word dat dit die integriteit en die belange van die Suid-Afrikaanse ekonomie en bevolking bevorder. Maar boweal moet ons self `n beleid nastreef wat ons in staat stel om afhanklikheid van internasionale finansiële instellings te voorkom.

Chairperson, South Africa is very fortunate to have capable financial managers who maintain the prudent international financial policies that can create an economic climate conducive to growth and job creation. At the same time, the medium-term strategy, as outlined in the 2013 budget, is essential to rebuild fiscal buffers and reduce external vulnerabilities. These policies can provide the space to implement the reforms needed to increase growth and employment. These policies bring the most benefits to the entire population and continue building an inclusive country that can be a proud example to the international community.

The ANC supports budget vote 10.

I thank you.

David Ross, Shadow Deputy Minister of Finance

During her address to the Standing Committee of Finance in April Reserve Bank Governor Gill Marcus painted a concerning picture about the South African economy.

The governor warned that South Africa is confronted with a toxic mix of slow growth and high inflation and that the stagflation danger for SA needs urgent and thoughtful interventions.

No one in this House disputes the fact that South Africa’s economy is facing serious challenges: we have to to successfully accelerate growth whilst at the same time containing inflation. Our economy is expected to grow at a revised rate of 2.7% in the next year - lagging far behind our peers in Sub Saharan Africa, who are expected to grow at an average rate of 5.5%. The IMF has also slashed our growth forecast for 2014 from 4.1% to 3.3%.

Honorable Minister, noting Treasury’s commitment to the NDP and the achievement of decent employment through inclusive economic growth, the DA is very concerned about the official unemployment rate which has increased to 25.2% in the 1st Quarter of 2013.Even more alarming is the number of discouraged work-seekers which has increased to a staggering 2.33 million while the expanded definition unemployment rate peaked at 36.7% nationally.
Further statistics indicate that 2 out of every 3 South Africans under the age of 24 are unable to find and sustain a job.

Chair, by the end of this year our budget deficit will exceed 5% of GDP for the first time since 2009. The effect of this larger deficit will be to drive Government Debt higher over the Medium term topping 50% to GDP in 2016.  Debt levels (including contingent liabilities) extend beyond 50% indicating that debt levels could leave SA vulnerable if the economy declines.
Treasury’s projected reduction of the Budget deficit to 3.1% in 2015/16 may well be a very ambitious target at best, given South Africa’s slowing growth prospects.

Honorable Minister, with regards to the significant issue of inflation it is noted that food and fuel prices have pushed up headline inflation to 5.9%.
Currency weakness compounded these effects and is expected to place further upward pressure on inflation in 2013.

South Africans therefore continue to bear the burden of increasing costs. The increases in electricity, fuel, food and public transport have all made the cost of living more expensive.

Potential E-tolling, increases in rates and taxes in municipalities and increases in the cost of water are all further concerns in relation to rising prices.

ESKOM's second application to NERSA with regards to financing the building of 6 Nuclear Plants will result in a 20% increases in each year from 2013 to 2017 followed by 9% rises in each of the following five years. ESKOM's application should consider inflation related tariffs.
The reality is that the poorest are the ones hardest hit by these factors.

Chairperson, in order to address these challenges South Africa needs a clear plan to direct us towards economic growth and prosperity - a plan that will result in the achievement of job-creating economic growth and the elimination of poverty. 

We have just the right Plan and it is called the National Development Plan! The DA supports this plan with our own Growth and Jobs plan released last year making many of the same proposals as the NDP.
Chairperson National Treasury has a vital responsibility to ensure that the NDP is implemented across all departments in a coordinated manner. We need resolve in our policies and leadership when it comes to implementation.

It remains to be seen whether Treasury will have sufficient political capital to oversee the implementation of the NDP. COSATU’s stiff opposition to the proposed Youth Wage Subsidy and Treasury’s resultant hesitation in implementing the Youth Employment Tax Incentive is a prime example of successful policy blocking by the union federation.

What is really concerning about COSATU is that it has a history of blocking policies – policies aimed at tackling our greatest challenges and helping the poorest and most vulnerable. And now COSATU is growing ever-loader in its opposition to the NDP. Will Minister Gordhan and President Zuma be able to stand up, lead and implement the NDP or, like with the Youth Wage Subsidy, will we once again be held hostage by COSATU?

Chair, the DA is concerned about comments made by Judge Dennis Davis, head of the tax review committee, regarding the Tax Administration Act which came into effect in October last year.

Judge Davis has raised alarm over the effects the act may have on small businesses and is quoted as saying “When it comes to small businesses we have to think very carefully if this Act has struck the balance properly between rights of the taxpayer and SARS powers”. Judge Davis then made specific reference to transactional costs and complexities of the legislation.

These are serious concerns when taking into account our objectives of making it easier, cheaper and faster for small business to start up, grow and create jobs. If necessary the Act should be amended to contribute towards creating an environment that facilitates growth and job creation. Increasing the burden of doing business in South Africa is not the way to reach the goals of the NDP.

Another potential deterrent to growth that will be closely monitored by the DA in the months to come is the proposed Carbon Tax with expected implementation in January 2015. In principle the DA is opposed to any tax increases that could stand in the way of stimulating growth. We believe that the proposal could result in unintended consequences that may have a negative impact on the economy. We believe that positive rather than punitive measures should be pursued to affect the behavioral changes required to build a green-economy.

We will be studying the detail of the proposals closely and submit our own comments for consideration in the drafting of the bill before the deadline is reached later this year.

With regards to the retirement reform legislation currently tabled in Parliament, we call on the Minister to note the valid arguments presented by the savings industry in opposition to the prescribed asset approach. These concerns include that prescribed assets could undermine the value of members’ and policy-holders’ savings.

Investments at market –competitive rates do not require prescription. The primary purpose of retirement savings should be to assist savers to achieve comfortable retirements

Chair, the DA’s top priority remains growing the economy and creating jobs. We congratulate the Honorable Minister in managing South Africa’s finances under difficult global economic circumstances.
The path ahead is riddled with new and old challenges. The map and compass to steer us towards prosperity is the NDP.
Where Treasury’s actions reveal a commitment to this plan we will support it. Where it doesn’t we will oppose it. 
Wilmot James, Shadow Minister of Trade and Industry
21 May 2013

The 1994 Reconstruction and Development Programme (RDP) was our inaugural democratic vision for economic growth. Fearing sovereignty compromising dependence on international capital, a macro-economic stabilisation effort - the Growth, Employment and Redistribution (GEAR) – came into being, which kept debt levels low and maintained our national integrity.

In the 2012 Medium Term Budget Policy Statement National Treasury said that we need to rebuild the narrow fiscal space that we have today by stabilising our worryingly high national debt, ruthlessly combating corruption and putting the economy on a growth trajectory with well-targeted reforms.

Both Treasury and the National Development Plan (NDP) talk about creating growth of between 5-7%. Left critics see the policy progression from the RDP to GEAR to the NDP as a narrative of betrayal, the story of how a pro-labour expansionary macroeconomic agenda of ‘growth through redistribution’ was hijacked by pro-business, fiscally orthodox ‘neo-liberal’ policies.

The NDP has also been rejected by some for its ‘neoliberal proposals’ and abandonment of the RDP. This battle reflects serious conflict between the ANC and its alliance partner, COSATU, over how to engage with global capitalism and the labour-market in particular. COSATU styles itself as a ‘class-oriented trade union federation whose strategic objective is to achieve socialism’. It favours economic policies that ‘discipline’ capital, promote collective bargaining and minimum-wage setting, and protect jobs from disruptive trade and capital flows.

For its part, the South African Communist Party (SACP) prevaricates in intellectually sterile repose. Like COSATU, the SACP is opposed in principle to ANC policies that have given more space to market forces, notably privatisation and trade- and capital-account liberalisation, and it has successfully opposed reforms to our wage-setting machinery.

This has effectively blocked various attempts to boost employment through labour-market reforms or to facilitate social accords between labour and capital that seek to restrain wage growth. Now we are stuck in a situation where NUM has effectively declared war on the mining sector making unreasonable wage claims, while company’s like Amplats are forced to restructure operations at the cost of thousands of jobs to our economy.

We are faced with an uncoordinated policy environment lacking in Presidential leadership and promoting rising labour costs in the face of tight fiscal and monetary policies and falling tariff protection. Other countries that liberalised their trade regimes under rigid labour-market conditions and fiscal austerity faced similar job loss problems. Facing prospects of stagflation and persistently high unemployment, the NDP has revived the call, first made by GEAR, for a social accord to restrain wage growth – and organised labour is once again mobilising against it.

One consequence is chronic youth unemployment. At 51.6%, youth unemployment is approximately double that of the general adult population. Indicators suggest that unemployment is generally higher among young women than young men. Most troubling is the number of young South Africans - 2.8 million – who are neither in work nor at places of learning.

But while the left has lots to answer for in keeping people out of jobs, the right cannot expect workers alone to swallow the bitter medicine of austerity. This government is fat with excess and rotten with corruption. The private sector has an artificially small market of CEOs that drive up executive pay. Universities and professional associations run cartels that restrict the number of medical doctors, engineers and other professionals educated.

Building fiscal space therefore requires that:

we swallow the medicine of austerity together,
consume less together,
save more together,
work harder together,
insist on quality education for our children together; and
sell our country proudly to investors locally and globally together.

In our Plan for Growth and Jobs the Democratic Alliance (DA) supports Treasury and the NDP’s insistence on rebalancing our economy to achieve macroeconomic stability once again, to check the slouching towards debt and to lay the foundations for economic growth and job creation.

Geordin Hill Lewis, Shadow Deputy Minister of Trade and Industry

It has been 1 195 days since President Jacob Zuma announced a plan to give young South Africans a chance to get their first job and start on the pathway out of poverty. 

Call it what you want, the Youth Wage Subsidy, the Youth Employment Tax Incentive, it is fundamentally a good idea that will help hundreds of thousands of young people get their first break in life, get a job, and begin building a better future. 

If it had been implemented when the President first said it would - the programme would have already benefitted 442 935 young people. 

Chairperson, where the DA governs, we did not need to have any paralysing internal political battle about an obviously sensible policy intervention. We saw the crisis of youth unemployment, we saw the urgent need for intervention, and we got behind the best policy idea on the table. 

Where the DA governs, we started to implement a version of the Youth Wage Subsidy as soon as we could. Thousands of young people have already benefitted, and they're starting to build a more prosperous future for themselves in sustainable, decent jobs. 

And I want to tell all young South Africans today - here's a commitment you can take to the bank - wherever the DA is elected to government in South Africa, we will implement the Youth Wage Subsidy immediately. If we are elected to government in Gauteng next year, we will implement the Youth Wage Subsidy on day one. 

But colleagues, provincial governments have limited budgets. What we need is a national Youth Employment Tax Incentive to be implemented, urgently. 

Where, then, is the Youth Wage Subsidy? What has happened to it? 

We seem no closer today, 1 195 days later, than we were in February 2010. 

The fact is that this policy intervention has been singled out by the Minister's unionist opponents, both inside and outside of the Cabinet, as the site of battle over who calls the shots in the ruling party, which everyone now must agree is an "alliance" in name only. 

It is not the best battleground they could have chosen - there are many other good policy debates where real ideological cleavages do exist, like industrial policy or tax policy. COSATU and Minister Patel's objection to the Youth Employment Tax Incentive revolve around a small technical concern which is more imagined than real, and which the Treasury has more than adequately responded to. 

And yet, COSATU and Minister Patel seem to be winning - 1 195 days delay so far confirms this impression. 

Instead of getting behind a genuinely decent and sensible policy proposal, we've been presented with a half-baked Youth Employment Accord that makes vague and oblique reference to "incentives", without any detail or timeline. 

The Minister is quick to point out that the Youth Employment Accord makes way for private sector measures for youth employment creation “approved by all constituencies”. 

So, in the mind of the Minister – more than three years after announcing the Youth Wage Subsidy, with more than 440,000 job opportunities foregone, does the signing of the Accord now mean that Treasury has sufficient approval of all constituencies to implement the tax incentive?

And if so, please tell us when? How much longer will young South Africans wait?

With respect, we are not holding our breaths. The fact is that this Minister, this President, has thrown in the cards.