Medium Term Budget Policy Statement hearings: Employment and Economic Growth

Meeting report

JOINT BUDGET COMMITTEE
18 November, 2003
MEDIUM TERM BUDGET POLICY STATEMENT HEARINGS: EMPLOYMENT AND ECONOMIC GROWTH

Chairperson: Mr. N M Nene (ANC) (NA)

Documents handed out
Department of Agriculture submission
Department of Environmental Affairs & Tourism submission (part 1, part2)
Department of Minerals and Energy submission
Trade and Industry submission
Department of Labour submission
CHAMSA submission
FEDUSA submission
Department of Education submission
Department of Public Works submission
Department of Transport submission
People's Budget (COSATU, SACC, SANGOCO) submission

SUMMARY
Various departments and other organisations continued to give their response to the Medium Term Budget Policy Statement with its increased support for targeted poverty reduction programmes and continuing focus on public sector delivery.

The Department of Agriculture highlighted community co-operatives, where people were organising themselves in entrepreneurial ventures that were bearing fruit. The Dept of Environmental Affairs and Tourism's submission focused on the improvement of the tourism industry, and on promoting conservation and the protection of the country natural resources, in order to attract more tourists. There was also discussion on improving the capacity of smaller, rural areas to attract tourists, as opposed to the more popular tourist venues. The Department of Minerals and Energy identified challenges which the Department faced, and said that they would require much more finance in order to be capacitated to deliver quality service. The Committee received an update on electrification targets achieved by the Department.

The DTI stated it does not have the level of capacity it desires but that over the years there has been tremendous improvement in output and the Department is beginning to make a great impact in the market and that capacity takes time to build. The Department has forged meaningful partnerships with all stakeholders to deepen and widen the effect of its programs. The achievement gains made so far include, industrial peace and stability, social dialogue and marginal improvement in equity ratios.

Business as represented by CHAMSA recognised the value of the MTBPS. It did not support the argument for the raising of the inflation target range as this would create uncertainty for business, consumers and investors. The Peoples Budget as represented by COSATU, SA Council of Churches and SANGOCO, welcomed the idea of reforming the budget process noting that the Committee's role would become increasingly important in the years to come. This measure would go along way to capacitate the parliamentary oversight function. FEDUSA commended government's steps to increase sustainable job-creating growth, without forfeiting economic stability.

The Minister of Education noted that gains made in the education sector cannot be sustained without first attending to the critical question of economic growth and increased employment. He noted that access to education in South Africa is relatively good by international standards. However, there is a strong need to improve access to certain sectors of the education system, in particular vocational Further Education and Training (FET).

The Department of Public Works noted total government expenditure on infrastructure over the next five years is R150 billion. Of the R45 billion conditional infrastructure grants to the provinces and municipalities over the next five years, R15 billion would be earmarked for labour intensive construction under the Expanded Public Works Programme (EPWP)

MINUTES
Dept of Agriculture submission
Ms Bongiwe Njobe, Director General for the Department of Agriculture, presented the Department's submission, which dealt specifically with (1) agricultural interventions into rural development and urban renewal, and (2) employment and economic growth.

The Department's key interventions into the first area, were: (1) the development of a National Food Security Policy discussion document, which was currently being revised, based on the Department's previous experience of food security challenges; (2) an Integrated Food Security and Nutrition Programme, an programme approved by Government; (3) a technical planning guide on agricultural development, to deal with tensions between land use planning at the local government level, and scarce agricultural land, which often had to compete with more modern developments of housing, tourism, and more; (4) the Land Care Programme.

New areas of focus which the Department would be phasing in, or upscaling, were: (1) rural finance support, to include village banks, and agricultural co-operatives; and (2) agro-tourism, over which the Department was co-operating with the Department of Environmental Affairs and Tourism, agri-business (stretching the focus of agriculture), and food safety.

With regard to agriculture's contribution towards employment and economic growth, Ms Njobe said that recent trends were that, unlike the gloomy picture presented in the budget's Policy Statement, agriculture's economic performance had been quite good. There had been increases in prices received by farmers, in net farm incomes, and in exports of agricultural products. In addition to that, there had been a reduction in agricultural debt.

Discussion
Dr S Cwele (ANC) asked to what extent it was becoming apparent that previously disadvantaged individuals were beginning to benefit from the transformation at the Land Bank and village banks. Secondly, what kind of support was being given by the Department to empowerment initiatives, where farmers and farm-workers were getting together to decide on a particular programme to increase participation?

Ms Njobe replied that the Department had increased the portfolio of black farmers who were accessing grants through the Land Bank. That action had served to raise the matter of Government's full commitment to the implementation of the Strauss Commission's recommendations. One recommendation had been that if Government were to position the Land Bank as a development finance institution, then they should become involved as well to the Land Bank. This would be a visible demonstration of Government sharing development risks. The Department was in discussion with Treasury, to determine how best to approach the issue, since this would be done via the Agricultural Debt Management Act. In addition, the Land Bank was looking more creatively at how to deal with targeted interventions, where success was assured.

The Land Bank was supporting some empowerment initiatives. However, many of the farm-worker equity schemes were performed under the previous phase of the land reform programme. This entailed land grants of R16 000 per individual, and people often grouped together to receive those grants. Although the Department had made a preliminary review of the Land and Redistribution for Agricultural Development Programme (LRAD), the focus of the report had been largely on the availability of land, since in Phase 1, the Department had distributed state land.

There emerged a need to look at farm-worker equity schemes, of which there were some success stories, and also some problem stories. Now, the Department was in the process of concluding an empowerment audit. This audit looked at what black economic empowerment initiatives were in place, and what the experiences had been. The Department had looked more closely at the wine industry, and found that in many cases, the equity benefits had not been transferred to the farm-workers. There were some cases of amazing successes, which still required a lot of hard work. She mentioned that there were black wine farmers emerging. Black people were going into cellar production and ownership structures, and having their own brands. It was clear, however, that the investment costs of entering into the wine industry should be shared between Government and the private sector, and to that end, the Department had started a process of engaging the banks, who would be returning with some long-term perspectives.

Ms J Fubbs, Chairperson: Gauteng Standing Committee on Finance, asked if their submission was suggesting the allocation of conditional grants or direct transfers, as in transport and housing, to provinces.

Ms Njobe stated that one of the biggest challenges in agriculture, was the interpretation of concurrence, which was written in two forms in the Constitution. Over the last number of years, the Department had been able to negotiate with the provinces an arrangement to agree on common deliverables. LRAD was a nationally-driven programme, which ensured that the various provinces were bought into the programme. However, sometimes a breakdown occurred in the planning processes. Some of the earlier LRAD programmes did not have direct support. The Department had attempted, through the inter-governmental fiscal review, to convince Treasury to take the route of a national allocation which would filter through to the provinces through some form of conditional grants. In their dialogue with the provinces, they were told that if the money was available, the provinces would buy in. However, if the money came from elsewhere, their commitment would lie at that source. The Department was happy with the fact that there had been an increase in allocation farmer support services. However, their concern was in having consistency in terms of how the norms and standards, including report-backs, were implemented at the provincial level. She added that an agreement with the provinces entailed the Comprehensive Agricultural Support Programme, which had identified four groups of clients. However, the Programme required investment for it to succeed.

Mr G Schneeman (ANC) asked, in terms of agricultural land that had been transferred, if the Department had established if those farms were impacting on local communities surrounding those farms. The Chair also asked about the successes of the community banks and agricultural co-operatives.

Ms Njobe reported that there were some success stories around the village and financial co-operatives. She mentioned a group of farmers from Limpopo Province who started off as a co-operative, and ended up becoming a commodity association. The Department had pooled together four predominantly black co-operatives in the tomato industry, who were now studying the set of issues that affected their commodity, to make them more geared towards profit-making. The co-operatives, therefore, were serving as a useful platform where people were able to organise themselves around very clear economic and profit intent.

The Chair thanked Ms Njobe for her clear and useful analysis of the Medium Term Budget Policy Statement.

Department of Environmental Affairs and Tourism (DEAT) submission
Dr Crispian Olver, Director General, briefed the Committee on the options which the Department had submitted to Treasury, and Treasury's final allocation against those options which, although it was gratefully received, fell far short of the funds requested.

The DEAT had five key focus areas, which were: (1) creating conditions for sustainable tourism growth and development; (2) promoting conservation and sustainable development of the country's natural resources; (3) protecting and improving the quality and safety of the environment; (4) promoting a global sustainable development agenda; and (5) transformation in the Department, in public entities, and sectors under the Department's responsibility.

Some of the Department's achievements over the last year included: (1) the completion of a Tourism Growth Strategy and market segmentation, where they had analysed the international markets; (2) a 20% increase in overseas arrivals in 2002; (3) an 11% increase in overseas arrivals for the first quarter of 2003; (4) the meetings and centres, conferences and exhibitions (MICE) industry had been firmly established; (4) through the Tourism Enterprise Programme, they had assisted 1200 Small, Medium and Micro Enterprises (SMMEs), and created 10 000 jobs; and (6) took 263 emerging black-owned SMMEs to Tourism Indaba 2003, a premiere event in tourism.

The priorities for this three-year cycle included: (1) focusing international marketing efforts to bring South Africa in line with its major competitors, and to continue to increase its tourist arrivals, spend, job creation; (2) roll-out of the Tourism Growth Strategy with all major role-players; and (3) the transformation of the tour guiding sector, for which the growth pace had been disappointingly slow.

Discussion
Mr P Rabie (DA) asked if the Department would involve the private sector in development of the the twelve new fisheries over the next five years. What would that initiative cost, what species of fish would they concentrate on, and would shellfish, such as abalone, be included?

Dr Olver responded that the Department was working in close consultation with the private sector in developing the twelve new fisheries. The octopus fishery was already in operation, and public comment on its formal policy had been invited. The Department had requested R10 million in funding for the development of these new fisheries, but were allocated R5 million from Treasury. Thus they would manage only to develop three new fisheries in the coming year. He could supply the Committee with the entire list of fish species in the future but they would include mackerel, and some shellfish.

Mr Rabie asked where the new fisheries would be located, and if it were at all possible to locate some of them in the severely unemployed line fishing communities of the Southern Cape.

Dr Olver replied that although the locations would vary according to the location of the species, their bias would be towards poorer communities with high unemployment rates.

Mr Schneeman asked what role tourism played in impacting upon economic growth in rural areas. He commented that tour buses often drove straight through small, struggling towns en route to the more popular tourist destinations. Were any initiatives being taken about this? While some form of economic activity often did occur in those towns, the vast majority of communities living around the towns were extremely poor.

Dr Olver replied that one of the Department's objectives in tourism growth, was to increase geographic spread. With that in mind, they were deliberating how to extend traditional tourism corridors like the Garden Route into poorer areas. To that end, they had developed the National Infrastructure Investment Plan, where they identified preferential tourism areas for tourism infrastructure investment. The steering of traditional tourist corridors towards poorer areas would accordingly be linked to a product development focus, where much of the Department's poverty relief funds would be invested. The building of the Hector Petersen Memorial, or the Shebeen Trail, both in Soweto, were two cases in point. The building of new destinations, such as the Oliver Tambo Rural Development Node, and St Lucia in Northern Kwazulu-Natal, were all priority nodes for the integrated rural development strategy.

He continued that although the Department had enjoyed good success in some areas, other areas were more difficult to work with, and he did not think that they would be able to bring the benefits of tourism to every part of the country yet. He assured the Committee that the issue was one which the Department thought and planned about a lot. He was able to show the Committee some of the plans surrounding infrastructure investment and the tourism corridors.

Mr Cwele commented that the expansion of learnerships required more focus. The submission had mentioned fifty-two interns taken in by the Department. Were there further plans to increase learnerships as these could go a long way towards improving local economies in struggling rural areas?

Dr Olver responded that those fifty-two learnerships were simply for those interns which had been brought into the Department for internal training. The broader focus on learnerships was being taken up through the Tourism and Hospitality SETA (Sector Education & Training Authority). As part of the Growth and Development Summit Agreement, they had set an ambitious target of 8000 learnerships coming through the SETA, and those learnerships were placed right across the tourism, hospitality and conservation industries.

Mr Zita thanked Dr Olver for explaining exactly how the funds allocated to the Department were being spent. Did the Department have a mechanism by which to evaluate the Rand value of their budget allocation, against the results achievable? Also did the Department have any links with the members of the old anti-apartheid movement? What was the Department's strategy for getting ordinary South Africans to visit their own country? Lastly, he asked if there were any benefits emerging from the fact that many South Africans had rural roots, and moved "in two different worlds". To what extent people were being encouraged to return to the place of their roots, in order to make some sort of contribution there?

In terms of evaluating the Rand value of the Department's budget, Dr Olver responded that in certain areas, that could be done. For instance, he could determine how many additional tourists would enter the country, and how many Rands or Dollars that would bring into the country, in relation to the marketing budget allocation. That had been the basis on which the Department's motivation for their proposed budget had been made to Treasury.

Links with the anti-apartheid movement did exist, although following on the London Conference, the Department planned to extend its links. Both Minister Valli Moosa and Ms Cheryl Carolus (CEO of Tourism in London) returned from the London Conference quite enthused by their experiences, and with plans to deepen links.

In terms of people visiting their own country, he reported that the Welcome Campaign was aimed at building South Africa as a tourism nation. They believed that in order to be truly successful globally, all of South Africa's people should be part of the tourism strategy, buying into the concept, and feeling that they had ownershop of it. At the end of the day, that meant that they had to benefit from tourism. The Welcome Campaign was designed to achieve that at a general level.

Dr Olver acknowledged that one of South Africa's biggest historical problems, was that black people had been denied opportunities to explore the country. Before 1994, most national parks had been closed to black people. The Department planned, as part of the 10-year freedom celebrations, to take busloads of school learners to national parks as part of their learning experience, in order to given young people a sense of identity with the country's heritage and natural spaces.

The Department was investing a huge amount of resources into training tour guides. The problem which they now had, was not a lack of sufficiently trained black tour guides, but that the industry would not employ them. The guides currently employed generally did not reflect the diversity of South Africa, and often gave misleading and negative reports to tourists.

The Chairperson thanked Dr Olver for appearing before the Committee. He was sure that the presentation had added value to the hearings. He wished the Director General well in his task of putting South Africa into the spotlight, and of dealing with environmental issues. He also thanked the Department for supporting the Committee's theme for the day, that being job creation and economic growth.

Department of Mineral and Energy submission
This submission was presented by Ms T Zungu, Acting Chief Financial Officer. She said that the Department's vision was to ensure sustainable development and growth through minerals and energy resources for the benefit of all South Africans.

The Committee was told that the Department's key strategic Medium Term objectives, as taken from the Department's broader overview, included:
- the development and maintenance of appropriate administrative measures and systems to enhance efficiency and productivity, to ensure the attainment of targets set by the Charter, and effectively monitor the systems.
- to contribute towards the effectual and sustainable development of minerals and energy resources.
- to govern the minerals and energy industries, so that they are safe and healthy working environments.
- the implementation of mineral and energy policies to ensure optimum utilisation of minerals and energy resources.

Ms Zungu identified the following challenges faced by the Department, in which they planned to engage:
- participation in the expanded public works programme
- plans towards improving the regulatory environment
- the acceleration of learnerships and skills development within the industry
- the Department's broad-based black economic empowerment strategy
- the establishment of partnerships (encouraging sectoral and local development)

Discussion
Mr Zita observed that the submission stated that the Department now wanted to focus on the implementation and monitoring of the many pieces of new legislation it had introduced over the past ten years. He asked if the implication would be that more funds would be required.

Ms Zungu replied that this was the case. She reported that the mining industry had done a complete about turn, and for that reason, it was in need of resources in information technology, human resources, keeping of records and more, in order to keep up with the processes which the Department had begun in implementing world class standards. It was becoming increasingly difficult to determine the amounts of royalties that had been collected by the industry, because their records were as old as the industry itself. The records they had been struggling over the years to maintain, would only be addressing a portion of the mining industry. In terms of structural requirements, for the MTEF period 2004/5, and 2006/7, they had requested R36 million, R43 million, and R46 million. In response to those requests, the approved allocations were R5 million, R10 million, and R15 million.

Mr Zita asked, in the light of the Mining Charter, if there would be scope for workers to own mining shares.

Mr Jocinta Rocha, Chief Director: Minerals Development, said that mineworkers acquiring shares was one of the pillars of the Mining Charter. The Department was considering a scheme which could be used by workers to acquire shares.

Dr Odendaal noted the Department's plans for a programme to create 10 779 job opportunities, which meant there should be skills transfers occurring, to empower people to successfully enter the labour market. He felt the programme would achieve true success, if some of those people were to emerge as entrepreneurs who would create new businesses and job opportunities, thereby enhancing economic growth in South Africa. He asked how future entrepreneurs would be empowered through that programme.

Mr Cwele thanked the Department for a very focused presentation. Although he was grateful for the reports on how much finance had been spent on national electrification programmes, the outcomes of those presentations were, however, missing from the presentation. He wanted information on how many homes had been electrified, and what progress had been made in the electrification of schools, and public facilities.

With regard to the National Electrification Programme, Dr Izak Kotzé explained that the Department itself was not an implementer. The implementation of the National Electrification Programme was performed by municipalities who had distribution licences, or by ESKOM, who could be in possession of distribution licences in complementary areas. The role of the Department was to initiate the planning process, and to act as grant funders to the implementers. They had only taken over the role of grant funder from the 2001/ 2 financial year. Prior to that, electrification was funded directly by the industry, with funds largely raised by ESKOM. From 1994 to end 2002, they had been able to connect just under 3.8 million households, which brought the level of electrification up from just over 30% at the household level in 1994, to nearly 70% at end 2002.

The current backlog, according to the latest census, was about 3 million households which still needed electrification. The Treasury allocation for electrification was R600 million for 2001, R950 million for 2002, and R1, 062 billion. They connected about 280 000 new households per year, about 1260 schools per year, mainly in rural areas, and about 40 clinics per year. Unless the allocation increased, those were more or less the number of allocations which the Department would be able to handle, bearing in mind that in rural areas, infrastructure such as substations and feeder lines would have to be installed. At the current rate, the completion of the electrification process for schools that have not yet been electrified, will be completed within about six or seven years.

Mr Rabie drew attention to the claim by the submission that in the period 2000 to 2002, 4520 jobs had been saved. He requested clarity on the nature of those jobs.

Mr Rocha explained that from the year 2000 to 2002, there was a gold crisis, where foreign banks wanted to sell gold. Under the leadership of the South African Government, they were able to convince foreign banks not to do that, as it would have an extremely negative impact on South Africa. In the process, they had managed to save mostly unskilled and skilled jobs.

The Chairperson thanked the team for their appearance before the Committee, adding that their presentation had enriched the hearing process.

Department of Trade and Industry submission
Mr. Moosa Ebraham, Chief Director DTI, briefed members on how the budget supports the DTI's development strategy. He pointed out that R2.844 billion is allocated to support among other things; policy formulation and advocacy, coordination and leadership, trade negotiations, management of incentive schemes and marking. Other areas supported by the budget are incentives to address market failures, efficient regulatory services, and state financing to address market failures, specialist services such as technology development and innovation and small business. He unveiled the adjusted estimates and noted that there were no changes to the DTI programme and objectives. The new line items for transfer purposes are Regional Spatial Development initiatives, Black Business Supplier Development Program, Youth Internship Program, Export consultancy trust fund and International Finance Corporation. He noted that no additional appropriation has been requested to support the adjusted estimates and this was due to the fact that focus has been directed on strategic planning and reprioritization for synergies where scarce resources has been allocated to priorities.

Discussion
Dr. Theron wanted to know why the Department was putting too much emphasis on diversifying the export sector while nothing is done to upgrade the manufacturing sector which feeds into the former.

Mr. Ebrahim explained that all that the Department does is to offer support to industry players who show keen interest in the export market noting that it is important to diverse the export portfolio in order to hedge against the disruptive effects of price shifts on the global market. He added that a diversified export regime has substantial spin-offs for the manufacturing industry.

Mr. Zita (ANC) wanted to know whether the DTI has enough capacity to conduct an in-depth appraisal of the country's economic performance.

Mr. Ebrahim replied that the Department does not have the level of capacity it desires but that over the years there has been tremendous improvement especially going by the amount of publications that have been circulated. He noted that the Department is beginning to make a great impact in the market and that capacity takes time to build. The Department has forged meaningful partnerships with all stakeholders to deepen and widen the effect of its programs.

Mr. Zita wanted to know whether the Department is in a position to evaluate Rand to Rand performance indicators.

Mr. Ebrahim admitted that the Rand issue was not a simple matter and that the Department had no mandate to address this specific issue noting that the government has a policy not to intervene in the matter of the Rand valuation.

Mr. Mahlangu observed that the DTI has always maintained the position that it is not within its mandate to create jobs yet its presentation suggests that it is moving towards this direction. He sought to know whether there has been a strategic shift in the Department's priorities.

Mr. Ebrahim noted that the general view has always been that it is not the task of government to create jobs but to nature a business atmosphere where the private sector would flourish and thereby create jobs.

The Chair sought clarity on the huge rollovers the Department has experienced in the current financial year.

Mr. Ebrahim said that there were all sorts of explanations for the rollovers most of which were technical. Some of the rollovers relate to the late membership in various international organizations, which happens to take time to get the necessary approval before operations can be funded..

Dr. Theron asked the Department to supply members with more information on the work around creating an enabling environment for business people.

Mr. Ebrahim said expenditure toward support for enterprise is mostly done after careful assessment and research. Financial support is given to nascent enterprise to built and put them to the competitive level. Regulatory measures are put in place to remove bureaucratic fetters to the growth of businesses.

Department of Labour submission
Adv. Ram Ramashia, Director General: Department of Labour, outlined the characteristics of the labour market in South Africa, which he noted, consists of structural unemployment, large supply of unskilled labour and race and gender inequality. There is inadequate protection for workers, high levels of adversarialism and unprotected and violent strikes. The economic objectives of the Reconstruction and Development Plan (RDP) are job creation, elimination of poverty, reduction of inequalities, overall growth of the country and human resource development. The achievement gained so far is; industrial peace and stability, social dialogue and marginal improvement in equity ratios. There is also an emerging training culture through the establishment of SETAs, establishment by the National Skills Fund and measures to improve transition from school to work. The persisting challenges in relation to employment are the shift to tertiary/service labour, which has displaced the unskilled labour, and that the economy is not growing at a rate that absorbs new entrants timeously. Other challenges are that young people are graduating with degrees that do not prepare them for the labour market in addition to structural barriers to entry and the phenomenon of casualisation of workers.

Discussion
Mr. Zita noted that there is an ongoing intense debate on the incident of unemployment at the international level and wondered why South Africa is not undertaking a similar dialogue within the labour cycles. He said that such dialogue is necessary to sensitize society on this crucial matter of bitting unemployment.

Adv. Ramashia noted that there were various debates that are ongoing around the issue of poverty alleviation and the nagging question of unemployment. He referred to the up and coming Growth and Development Summit as one such crucial fora at which these issues would be thrashed out.

Mr. Zita asked Adv. Ramashia whether he is comfortable with the budget as allocated to his Department.

Adv. Ramashia said that no DG in his/her right mind would concede that the budget allocation is adequate in the current economic dispensation. He noted that there are several crucial programs for which his Department sought for funding but did not secure the necessary vote.

Mr. Zita wanted to know how far the debate to increase black ownership of businesses has fared in the accelerated Black Economic Empowerment program.

Adv. Ramashia pointed out that the BEE policy carries aboard the strategy for workers to own shares as part and parcel of a deliberate measure to address historical inequalities.

Ms. Fubbs (ANC) referred to the ongoing debate around the Expanded Public Works Program (EPWP) and sought to know whether it is possible to link it to income generation.

Adv. Ramashia said that the Public Works programme is a temporary measures hence the need to link it to learnership programs through the money made available in the National Skills Fund.

Mr. Zita sought to know how the employment subsidy programme works.

Adv. Ramashia replied that the government pays the private sector for the employment of learners in which case it subsidies the learner's salary which intervention is useful in bringing the private sector aboard the skills development program.

Mr. Zita asked whether the Department is in a position to shed some light on the incident of bludgeoning unemployment in the country.

Adv. Ramashia said that a report that has been compiled by the ILO unveil a frightening data on job creation. He noted that the number of jobs being shed far outweighs those that are being created and hence unemployment was a global problem, which is not confined to South Africa alone.

Chamber of Commerce and Industry of South Africa (CHAMSA) submission
Mr. J Laubscher said that CHAMSA is an organization made up of major South African multi-sectoral bodies. Business acknowledges the importance that the government attaches to the containment of inflation. It supports the decision to continue with efforts to bring inflation down to within the 3-6% target range. Hopefully this determination will be more forcibly reflected in the setting of future administered prices. Business does not support the argument advanced for the raising of the inflation target range. Such a move would raise the level of uncertainty among both business and consumers discourage investors and prove counterproductive to sustained economic growth. CHAMSA recognizes the value of the MTBPS as a strategy that gives direction as to the route to be followed in the short term. It fully supports government in its efforts to promote economic growth and to alleviate poverty. Business has already committed itself through various initiatives, including specific sector charters, to attain these goals. Within these charters, the pursuit of the Black Economic Empowerment is set out.

Discussion
Ms Fubbs (ANC) queried CHAMSA's remark that South Africa's tax system is complicated noting that quite to the contrary this country's tax system is far simpler than that of developed economies.

Adv. Meiring - for CHAMSA - said that the presence of numerous tax advisory firms attests to the fact that South Africa's tax system is way far too complicated for the taxpayer. He made the point that simplicity has always been the clarion call by businesses noting that such measures go along way to increase compliance. He reiterated the fact that indeed the regime of retirement benefits was one of the most complicated areas of taxation. He added that the Organization for Economic Co-operation Development (OECD) modal seem to offer some help and called on South Africa to seriously consider adopting this modal.

Ms. Fubbs questioned CHAMSA's view that there are no significant reforms in the taxation of the retirement benefits and asked CHAMSA to acknowledge the recent reforms that sought to address equity concerns.

Adv. Meiring noted that the recent tax relieves for the lower income earners was most welcome but observed that it is not advisable to give a tax relief where there is no payment of tax in the first place. He cautioned the government against using taxation as a welfare intervention noting that Germany tried this route and is currently faced with a big dilemma on the question of sustainability.

People's Budget submission
Mr. Elroy Paulus of COSATU accompanied by representatives from the South African Council of Churches and the South African Non-Government Organisation Coalition, welcomed the idea of reforming the budget process noting that the Committee's role would become increasingly important in the years to come. This novel measure would go a long way to capacitate the parliamentary oversight function. The Joint Budget Committee must work to ensure that it creates enough capacity in order to be in a position to fully interrogate medium term budget reports. Public hearings have the added advantage of deepening democracy noting that the budget process was very difficult hence it called for greater and wider consultation. Tax cuts stimulate savings apart from bringing equity and broadening the tax base. People's Budget fully supports the EPWP but there was a need for a range of integrated and expanded programs to deal with the problem of poverty and unemployment.

Federation of Unions of South Africa (Fedusa) submission
Ms Gretchen Humphries said that the 2003/4 budget distinguished itself from previous budgets in that the growth and development role of government is spelled out in no uncertain terms. In the MTBPS actual steps are taken to give substance to this measures. Government was commended for its bold steps to step up sustainable job-creating growth, without forfeiting economic stability. The turn around in Government investment that had decreased in all spheres of government during the last couple of years, is welcomed. Fedusa was convinced that these steps will actually lead to a new era of higher growth and more employment. One aspect that should however never be underestimated is external factors. Government is urged to put in place innovative structures to soften the impact of these shocks on the economy. The amendment of the inflation targets is a step in the right direction.

There were no questions on the People's Budget and Fedusa submissions.

Afternoon session
The Chair welcomed members to the afternoon session. He recognised the presence of Education Minister Prof. Kadar Asmal and thanked him for taking the Committee's business seriously. He then invited the Minister to address the meeting.

Ministry for Education submission
Prof. Kadar Amal informed the Committee that the Department is convinced that the gains it has made in the education sector cannot be sustained without first attending to the critical question of economic growth and employment. The performance of these sectors is both a crucial and critical factor in achieving Government's key goals of increased employment, and stronger growth. The policies of the education sector are strongly geared towards these key objectives, as are the current priorities of the sector. In practice, there have been major strides in the right direction where skills have been provided to a considerable number of marginalised and unemployed women.

Prof. Asmal noted that access to education in South Africa is relatively good by international standards. However, there is a strong need to improve access to certain sectors of the education system, in particular vocational FET. Improvement of quality in the basic education system should be regarded as a priority, both as a prerequisite for effective FET and Higher Education, and in order to build a better society. Although the 2003 policy statement indicates a decline in education's share of Government expenditure on services, from 23.9% in 2002 to 22.0% in 2006, the expenditure trend is nonetheless one of real growth. The latest figures indicate that over the 2002 to 2006 period, the real increase for education is 35% which is a substantial increase over a four-year period. The policy statement figures also indicate that public education expenditure as a proportion of the GDP increases slightly, from 5.3% over the same period. This is encouraging, as some months back it had seemed that this ratio would actually decline.

Discussion
Mr. Rabie (DA) asked if the Minister had discussed with the Department of Public Service re-employing former educators many of whom are experienced in scarce subjects.

The Minister admitted that there was indeed scarcity in key subjects such as science, history and English but was quick to point out that the main problem was availability of funds to employ additional staff. He however noted that many retired educators have indicated a willingness to volunteer their time, which is indeed a very encouraging development.

Mr. Zita (ANC) noted that the bursary scheme was an enormously important dimension in the education sector but that accessibility has been a big challenge for the very deserving poor.

The Minister admitted that indeed access to the bursary by the poor of the poor was problematic especially given the fact that Universities normally insist on a deposit for registration purposes. He said there were no easy answers to this quagmire noting that ultimately it is the institutions that disburse bursaries and this is normally done in September.

Ms Tshoele (ANC) wanted to know how the Department could assist students who still owe money to institutions yet they are without jobs.

The Minister referred to the President's remark that there was no free ride and noted that where a student fails to perform he/ she forfeits their bursary. He was emphatic that there was no easy way out.

Ms Mahlangu (ANC) noted with appreciation that the Department recognizes the fact that education for the 21^st century should focus on efficiency and quality. She however pointed out that skills shortage was a big challenge to the economy. She asked the Department to concentrate resources at programs that were relevant for the economy.

The Minister acknowledged the importance of greater relevance in the education products and noted that the skills development programme is an important measure in this regard.

Mr. Moss (ANC) said that the market can supply the educators gap and that the question was how to breach this gap. He asked the Department to explain what it is doing to make a difference in this respect.

The Minister reported that distinguished academics have been tasked to work on a teacher development modal, which would look at the impact of disease among other things on the education sector. He noted that it is a matter of concern that teachers throughout the world have lost self-esteem and this phenomenon needs to be looked into critically.

Department of Public Works submission
Mr. Sam Phillips, the Chief Finance Officer,- outlined the achievements the Department had made in the area of job creation. Numerous rural infrastructure projects have been completed to speed up development for the poorest of the poor. There has been exponential growth and stimulation of broader participation of citizens in the construction and property industries. To date 79 construction related projects worth R 180 million have been awarded to women. More than 3250 emerging contractors have been registered on the Department's database. Since 1996/97 about 50,000 projects valued at around R400 million have been awarded to this group. In 2002/03 about R400 million worth of jobs have been awarded to the targeted businesses as part of the Department's BEE policy.

Mr. Phillips noted that increased investment in infrastructure delivery would thus have to be accompanied by extensive skills and enterprise development in both public and private sector. This skills development programme will provide direct support to the EPWP, the contractor incubation programme and other programs that support the beneficiation of communities in South Africa. The Department has carried out detailed research into government expenditure on infrastructure and it has been noted that total expenditure spend over the next five years is R150 billion. The total conditional infrastructure grants to the provinces and municipalities over the next five years would be R45 billion. A sum of R15 billion of the conditional grants would be earmarked for labour intensive construction under the EPWP.

Discussion
Mr. Hanekom (ANC) applauded the presentation which he said lays out a good framework for an accelerated public works programs. He however noted that these structures would depend on sectors that have no capacity and that most of them are plagued by managerial problems.

Mr. Phillips said that the Department of Labour would play key role in putting together the necessary training programs. He added that all workers would be entitled to two-day paid training leave.

Mr. Hanekom reiterated that the presentation was inspiring and re-assuring but asked the Department to explain the availability of work opportunities.

Mr. Phillips explained that the training was life skills based and would make information readily available for those looking forward to long term employment opportunities. He noted that environmental and infrastractural programs offer more long-term employment especially at the supervisory level.

Ms Tsheole was impressed by the presentation especially in the area of skills development programs but sought clarity on whether people would be trained on the job or by the SETAs.

Mr. Phillips pointed out that the EPWP would be labour intensive and that the constructions has already secured 500 offers by the construction SETAs which he said was a good indicator of the level of involvement by SETAs.

Mr. Mahlangu (ANC) wanted to know whether these EPWP programs are based on the KwaZulu-Natal and the Limpopo models, which the President had referred to recently.

Mr. Phillips said that the Department did carry an extensive research on various models internationally and socially and reached the conclusion that instead of settling on a specific model it would be better to look at the underlying set of broad framework which would adhere to the existing social structures.

Department of Transport submission
Mr. S. Khumalo, Deputy Director General, said that the key functions of the Department are to enhance public infrastructure capacity by creating transport linkages. The Expanded Public Works Programme extends job creation initiatives by channeling 10% of transport infrastructure investment to labour-based employment projects. The social security programme is deepened by restructuring of the Road Accident Fund into a comprehensive social benefit scheme. A broad based BEE strategy is developed through unbundling construction cartels to support the development of black construction firms. Growth is reinforced by investing in critical transport infrastructure links and other trade links like the Trans-Kalahari corridor; public transport investment and the development of tourism routes.

Mr. Khumalo outlined the Department's key interventions noting that growth in infrastructure investment should be most focused to service a multiplicity of strategic objectives. The role of parastatals like Transnet should be crystallized and that the EPWP should be built around specific strategic projects such as. expansion of public transport and tourism links. Infrastructure investment should be demand-driven and guided by other strategic priorities, for example, enhanced competitiveness; shorter trade routes; by investing in required public transport infrastructure. The skills development and training programme should be a constituent part of projects undertaken as part of the EPWP. Development of municipal infrastructure and services should also be informed by greater strategic demands

Discussion
Ms Mahlangu asked if the 10% labour creation is enough to cause a dent in the unemployment problem and if the EPWP would cover roads in the outlying rural areas and thereby ease transportation for the poor.

Mr. Phillips admitted that indeed the 10% labour creation in the construction sector would certainly not be adequate to reverse the bludgeoning unemployment problem but that this was a good start. He added that the possibility of an increase beyond the projected 10% would primarily depend on the type of road works carried out. He noted that what is needed is some creative initiatives from the policy markers.

Ms Mahlangu wanted to know which specific roads the Department was targeting and whether communities would be carried aboard at different levels.

Mr. Phillips clarified that the Department's mandate was not confined to road construction alone although this was its principal area of focus. The programme would target mainly national roads, which would hopefully begin to influence other stakeholders to move toward this end.

Mr. Hanekom noted that road construction was a capital-intensive activity and wanted to know the difficulty experienced by the Department in shifting to a labour intensive program.

Mr. Phillips agreed that most of what gets done is capital intensive noting that it was not easy to change mindsets but that the Department is determined to carry the programme through with a clear understanding that it was treading on an uncharted territory.

Mr. Hanekom sought to know how many jobs the Department envisaged to create through the EPWP.

Mr. Phillips said that it was difficult to come up with a specific figure on job creation at this very early stage noting that an indication would be made once the programme is up and running.

Meeting adjourned.