Hansard: First Order: Appropriation Bill: Debate on Vote 7: National Treasury [including SARS] & Vote No 11- Statistics South Africa
House: National Assembly
Date of Meeting: 29 May 2008
No summary available.
UNREVISED HANSARD EPC – COMMITTEE ROOM: E249
Thursday, 29 May 2008
THURSDAY, 29 MAY 2008
PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249
Members of the Extended Public Committee met in the Committee Room E249 at 15:02.
The HOUSE CHAIRPERSON Mr M B Skosana, as Chairperson, took the Chair and requested members to observe a moment of silence for prayer or meditation.
The MINISTER OF FINANCE: Chairperson, hon members and dear friends, today is "Taking a Girl-child to Work" day and I would like to introduce a girl-child who has joined me. She flew down from Johannesburg on the first flight this morning. Her name is Treasure Dibotelo. She applied two months ago to join us and she has really been wonderful today. [Applause.]
Deputy Minister Van der Merwe has also been joined by someone, but perhaps more importantly, as you can see, the Deputy President has been joined by a whole bevy of girl-children today and I think we really want to welcome all of them to the House. [Applause.] We hope that they will be aspire to become members like us!
Today we bring no fireworks and no surprises. We see this as an exercise in accountability. We have asked Parliament through the Portfolio Committee on Finance, through three presentations last week to evaluate our strategic plans. We have indicated in both Votes 7 and 11 that we pledge to meet our commitments that are set out in the Estimates of National Revenue. And today is essentially a debate around that; around accountability and the view that we take on this matter that all else will be bells and whistles.
As we indicated earlier in response to the hon Singh in the NA downstairs, the context is very important because we haven't lived through a more complex period since democracy in respect of the economy - certainly not in respect of the weight of global factors bearing down on us. I think it is very important to recognise that, and as one newspaper recorded this morning, ``the good news is that South Africa is not alone''.
New terms have been generated, and just a few weeks ago the focus was largely on global inflation. It has moved in some countries to stagflation, and more recently taking account of food prices,
agflation. So, by the end of this period I am sure that we will all have a dictionary of new terms that apply to the circumstances that we are living through. I am sure there will be one for Opec-generated inflation as well!
But all of us as members of this House are policy makers, so we need and we must offer a very honest assessment of the environment that we are operating in. I think it is important to start by recognising that price instability causes hardship. It is a hardship that is felt by ordinary people everywhere when they reach a check-out counter in the supermarket or get to the petrol pump. That is a very real hardship.
There is a hardship that is felt also when families are trying to make ends meet, trying to budget over the month or a week, trying to stretch the wages and finding that it doesn't even cover the basics. Price instability introduces hardships into the lives of working people.
Price instability risks become even harder if the wage demands drive us into a new inflationary spiral that results in distorted prices and consequent job losses. It is very important that in dealing with the situation we are mindful of all of these risks. Our responsibility, yours and mine, as members of this House is to analyse the situation and communicate.
It is important also to recognise that the complexity and the pressures of the present shouldn't surprise us. Colleagues will remember that during the Budget Speech in February this year we focused on the weather report and drew attention to the storm clouds gathering. That is why, difficult as this period is, I think it is important that we understand that it doesn't come as surprise elements that we have to deal with and engage with. In broad terms a trend doesn't come as a surprise.
There are two interrelated and very important questions that we need to draw attention to because this is what ought to shape our response. As we deal with the storm of the present, the first question is how much shelter can we provide? The second and interlinked question is: Where are we as a country when the storm clouds have lifted? Because there are many things and many calls - you only have to listen to radio talk shows to hear just how easy the solutions to all of these problems are - but all of them tend to be quite short term. We, as policy makers, have to understand the pain and hardship of the here and the now but also understand the interconnectedness also with tomorrow.
Rising food prices have increased the hardships faced by many people, impacting most severely on the poor who spend a disproportionately large share of their income on food.
The rising cost of food is a global phenomenon with global causes. But in saying this, we cannot be blind to the pain and hardship that poor people are experiencing. The price of maize has increased by 69% in the past two years, rice by 131%, wheat by 71% and soybeans by 100%. Most of these increases have occurred in the past six months. Rising oil prices are also a significant contributor to high food prices as diesel and fertilizer costs and so on increase.
In setting out a response, government has prioritised short-term relief through our social grants system, the school feeding scheme and transfers to welfare organisations. The Department of Social Development has begun using the social relief of distress grants to provide those in need with short-term financial relief. The financial implications of these measures will be accommodated in the Adjustments Budget and we are working with the national and provincial governments to ensure that the spending takes place as soon as possible so as to make a meaningful impact on those most severely affected. The same is true for the relief efforts for people recently displaced by xenophobic violence.
In the medium to longer term, it is agricultural production that has to be the central focus of our food security efforts. Government must increase the support it provides to the agricultural sector, particularly to resettled communities and emerging farmers. The National Treasury is working under the leadership of the Department of Agriculture to ensure that these short- and medium-term interventions are funded adequately and that these measures benefit the poor in the shortest possible period.
When I was appointed Minister of Finance, the oil price was about US$20 a barrel and then fell to about US$10 a few years thereafter. When we tabled the 2007 Budget, the oil price was US$58 a barrel. When we tabled the 2008 Budget, the price was US$99. Yesterday the price was US$130 and today when I last checked it was US$131 a barrel. The world has not seen an increase of this magnitude since the 1970s. It is very important that we understand this and that governments everywhere appear to be powerless in the face of these rising prices. Economists are baffled because there is no immediate correlation between the supply and demand factors that are driving these prices in the way that they are.
Oil is a major component of our modern economy and affects the price of almost every other product in some way. Rising oil prices have pushed our petrol price up to just below R10 a litre and there is no sign that petrol prices are likely to fall anytime soon. These price changes stress every sinew in our policy framework.
As I have already indicated, the key is the interlinkage between decisions now and in the future and to understand that we are dealing with the lives of people and not merely with econometric equations. Our introduction of inflation targeting in February 2000 was neither an accident nor a fashion statement. It was introduced against the backdrop of interest rate increases of 700 basis points in 1998; some of which were caused by global factors and some by domestic circumstances arising from the absence of an anchor for monetary policy.
I want to share with you a quote from Governor of the Reserve Bank, Mr Mboweni. He said:
Inflation targeting is a framework, it is not an instrument, it is not a policy and it is not a dogma. Take away inflation targeting and we will still have monetary policy, we will still have the same instruments of monetary policy, and the Bank will still have a constitutional mandate to maintain low inflation.
I concur fully with those views. Against that backdrop, I know that if our monetary policy was not anchored, interest rate increases would probably be considerably higher and also less understood because opacity doesn't help in these circumstances. The context is to focus on competitiveness to inform decision-making and to train our crosshairs on job creation and job retention. It is not a target in and of itself, but it's a target towards something else.
But turning then to economic policy and outlook, as reported this week, growth in the first quarter slowed to 2,1%, largely as a result of that 22% drop in mining output – the consequence of the electricity crisis. How ever we believe firmly that the slowdown is of short-term duration and we remain of the view that our growth is both dynamic and robust. I have to remind this House that the economy has grown by 5% a year since 2003. And while we've seen very strong consumption, the driver remains investment, both public and private. Our export performance is strong. Unlike other some countries, growth in India and China actually supports growth in South Africa. We must recognise that that is a very strong linkage.
The context of our policy discussion is important. I would like to turn to two pieces of policy work that is current. Firstly we discussed this in the Portfolio Committee on Finance last week, and it will still be discussed, led by this committee – I think on 18 June, Mr Nene. There are 20 papers developed by a group of economists called the "International Growth Advisory Panel", sometimes it is spelled H-a-r-v-a-r-d. I am not quite show how this works, but we sometimes misspell and misstate it. [Laughter.] But it is called the "International Growth Advisory Panel".
I think it is important to lift from that panel that the two focal areas are employment and sustainable growth. If we want to deal with this, it is necessary that we understand that there would have to be some controversial proposals. We have to put them on the table and talk about them. If you try and shove them off the table before you've discussed them, you wouldn't have made any progress; and in a moment I will turn to why this is so fundamentally important.
The second one, which was released last week, was a growth report. Let me quote from that report:
Policy makers have to choose a growth strategy, communicate their goals to the public, and convince people that the future rewards are worth the effort, thrift and economic upheaval. They will succeed only if their promises are credible and inclusive, reassuring people that they or their children will enjoy the full share of the fruits of growth.
There is another very important thread that runs through that growth report and that says that growth is not an end but a means to doing a whole series of other things. Those other things include, fundamentally, lifting people out of poverty, creating jobs, giving opportunities and creating the sense that people can be creative. To that list I would like to add "hope".
I would like to digress for a moment to express my horror at the heinous behaviour that took place in townships in different parts of the country, primarily in Gauteng and the Western Cape, last week. Beyond our collective shame, we will extend report and support to the families displaced by these acts of cruelty. Even beyond that, we must pay attention to the need to intensify job creation amongst young South Africans. Young people who are marginalised and alienated to the point that they see no hope for themselves would always be at risk of visiting their frustration on others in different kinds of ways.
The discussions on employment must be brought back into the centre. It will be necessary to lower the noise levels; but to increase the content of the debate, my pleading is that no idea in this regard be too crazy to consider. I know that I will have the support of the Deputy President as we deal with these kinds of issues. How are positioned to deal with these matters? The first of the issues that springs to mind is that of stewardship. Over the past few weeks, a number of officials appeared before portfolio committees to argue that the Treasury is too tough on them and that they even had to submit business plans and, and, and ...
My response to this is fairly simply. Whatever people do with their own personal inheritance is their own Indaba. What they do with public finances must be accounted for in detail. [Applause.] Secondly, it is important that as people motivate for resources, they must willing to explain how they have spent previously – not just that they've spent the money but how they spent it. What the money has bought becomes fundamental in the developmental context. Thirdly, yes, as these two reports indicate, we must be prepared to experiment in order to drive change.
I think that in motivating for experimentation, those asking for the resources must be able to convince the rest that they truly have applied their minds. That shouldn't be too difficult. The question then is whether the three departments, and there are three departments plus … We are dealing with two Votes: Treasury Vote 7 covers the National Treasury and SARS as a transfer and the Financial Intelligence Centre; Statistics SA is a standalone independent body. We have to take account also of the Public Investment Corporation. The Deputy Minister will say something on that, amongst other things, in a short while.
I would like to assume that hon members of the Portfolio Committee on Finance would have sat through three detailed presentations last week. They would have drilled the departments on the measurable objectives set out in the estimates of National Expenditure. I would prefer not to have to cover that ground again, unless of course there are questions then and we can come back to that.
Let me deal with the bare bones of what we need to do. The National Treasury has set as its objectives the promotion of economic development, good governance, social progress and raising living standards through the sound management of public finances. Every aspect of what I have said is covered by the work of the Treasury in some way.
The big programmes would include economic policy. That includes growth, macro primarily, but also increasingly, the micro-economic issues. It also includes the need to synthesise budgets and interrogate departments requesting resources, evaluating the public finance options, transferring resources to other spheres of government, managing assets and liabilities, and very importantly, understanding the debt portfolio and how we raise resources at any given point.
Then there is developing government systems for procurement and financial information, developing accounting systems for all of government, managing our huge African and international responsibilities, financial regulation and, of course, the tenth programme, which doesn't actually have measurable objectives, but is taking the blame for all of what goes wrong in other departments. It is part of what the National Treasury has to do and we just assume that it will always be there. And hon members in dealing with all these budget debates, know that that is part of it.
There is just an additional responsibility that we have now, and that is that the Treasury has been accredited by the SA Institute of Chartered Accountants to take people into articles through the Training Outside Private Practice, TOPP. I think this will be a great attribute. I was with Saica abroad early in the week, and they are very excited about this new intake of people and what they will achieve. I'm saying that the Treasury is there. The record is well understood, and my invitation to this House, Chairperson, is that members be the judge of their performance.
In respect of Statistics South Africa, the second Vote, Vote 11, if we want to take the correct policies, then, we need reliable statistics. They must be reliable so that at any given point we can look at the evidence that informed the choices that we made. And I think that also assists the quality of debate that we need to have in Parliament and elsewhere. I think that one of the features of the statistics is that they allow government to better anticipate the prospects for economic growth, price stability, employment trends, life circumstances, and very importantly also demographic trends. That is the daily bread of Statistics SA.
The key priority that we have for Statistic SA - and I want to invite members not just to take a snap shot of the present but to look back - has been constant improvement. Yes, there have been glitches and one of the more recent glitches has been on the Producer Price Index but that has been explained; and I think the fact that Statistics SA had the courage to explain it, speaks volumes about that commitment to constant improvement. But I think the message is very strong, and it's important, Chairperson, that all of Parliament, all decision-makers in this country, must have the fullest confidence in the quality of the outputs of Statistics SA.
Part of the changes of the next period includes moving the labour force survey to a quarterly survey so that we better understand employment trends; secondly, a living condition survey; thirdly, the Consumer Price Index, CPI, will be reweighted and I assume that there will be a big debate about this when it happens because I think we need to recalibrate what actually goes into the basket for inflation; fourthly, the Producer Price Index will be revisited. And then there's a big project on dwelling frames; and I think it's borne from the principle that part of our entitlement, rights, and strength should be that every South African ought to be entitled to an address that is theirs. We must enfold this national strategy for the collection and the development of standards for statistics.
Statistics around the world have been subject to very hot debate and very interestingly there have been questions about the fidelity, as some people would call it, of statistics in many countries. However, South Africa is not raised amongst those countries where there is concern about the quality work.
Next year Statistics SA will be host to the International Statistical Institute conference in Durban. It's a once-in-four-years conference and it's the first time it's taking place on the African continent, and that's a big tribute. [Applause.] Thank you, somebody is awake!
One of the issues that is proving to be quite difficult is the poverty study, and I've made commitments about this certainly in the Budget Speech in February this year. We announced that work is advance in the poverty line. What we've discovered, and we've pursued this, is that there's a very detailed technical examination methodology. The Statistician General travelled to different parts of the world to speak with experts about just the technical side of it. But that's only one side; when you are through with that there's an immensely complex political debate that you need to have.
What do you want this poverty line for? Do you want it as an instrument for development, something that you aspire to; do you want it as a measure of the levels of absolute poverty in the country? Or do you want it as a weapon to beat everybody else with? And we need some maturity; you almost need to get through those parts of the debate before you put numbers on the table.
There was a detailed article published about the same issue in the Economist, earlier this week which draws attention to just how difficult it is. One of the questions is what is it that you want to measure? If you want to measure absolute poverty, then, you must look at the basket of goods and evaluate whether people can afford access to those very basic things; and that then becomes a line.
There's another part of poverty and that is relative poverty - as Adam Smith put it: whether he can appear in public without shame -because we have to distinguish between relative poverty and absolute poverty, really, as we take this debate forth. What I want to ask this House to support is that we have some discussions on how we take this thing forward because if Statistics SA is caught up in this political maelstrom the chances are that their credibility may actually suffer a lot because people won't respect them for the numbers they produce. But it's our responsibility to set the frame of the debate before the numbers are on the table.
Turning to the Revenue Service, Chairperson, two weeks before the end of the financial year in March, the Commissioner was very worried and when he is stressed, everybody knows he is stressed. He was deeply concerned because the Revenue Service wouldn't meet the revised the target, because the target we set in February was a very stiff one. So then each one of the 11 000 members of staff in SARS had their job descriptions changed for few weeks and they set out to collect that money. They worked effectively around the clock. They made half a million calls to urban tax payers. And I trust that hon members who received those phone calls would have received them respectfully because they were made in our collective interest, and that you wouldn't have chased those SARS staff away! They continued with this and within hours of the end of the financial year in the early hours of 1 April, they were able to announce that they had collected R571,8 billion. That is almost R800 million above the revised target that had been set for them for mid-February. So there's great spirit, a great esprit de corps; there's a great desire to want to deliver for democracy in that organisation. For us, I think all of us, it's a great story of pride and poses the question, Deputy President, if SARS did it, why can't the rest of government, but we leave that for now. [Applause.]
Last year there was, of course, a big focus on the simplification of the returns. This year that the whole approach is being advanced further and I'm sure in the briefing on Thursday last week there would have been detailed discussions on the new dates.
Their are five priorities for this year: developing integrated risk management and enforcement systems; improving the customer service, outreach and education; enhancing core operations and capabilities; strengthening border control; and strengthening core support systems.
All of this deals with income tax reform but SARS has to do more than income tax; it is also responsible for customs. So, the customs administration work which includes border control - I should emphasise in this hotbed not "borderline" control but "border post" control – is very important. [Laughter.] The deployment of X-ray scanners, the strengthening of the border control units and the detailed plan of the World Customs Organisation Framework of Standards and Resources will very much be the focus of customs during this years. And we will happily discuss this with Parliament at any given time.
I didn't think I'd raise these numbers in context but the mandate that we've given SARS is to collect R2,1 trillion over the next three years. This is R2,1 trillion that can be spent wisely by government and it has to be collected by organisation that is capable of doing it; so the focus on capabilities within the organisation is very much the preparedness to deliver so that we can improve on the quality of democracy.
Then there is the Financial Intelligent Centre; last year we indicated in this debate that we need a greater co-ordination between the relevant supervisory bodies. It's premised on the reality that the proceeds of crime need to find some home and you need to snuff this out; you need to be able to follow the money and deal with crime in that way.
There were very intensive debates in the Portfolio Committee on Finance about the legislative amendments and very long hearings about this. And after the debate on this matter on Thursday I know that members support this and will be watching it to ensure that we don't load the administrative burden. We can be more efficient and bring together the supervisory bodies in a way that makes sense, and rational sense, so that we can at any given time follow the money.
Amongst the things that the Financial Intelligence Centre will have to do in the next months is to prepare for a mutual evaluation by the Financial Action task Force later in this year. A second issue and a very important one, is to look at the issue of financial crime with the South African Police Service so that you can twin the administrative and the criminal arrangements and ensure that we march in step regarding these kinds of things because the Fica is not set up as the body that does it's own arrests and enforcement and so on. We need to be working very closely with the South African Police on these issues. The system in South Africa is, of course, still in its infancy and will be resisted, and I think we must understand that and march together a cheer.
As I conclude, I want to express the hope that we have been able to share with you, not just today but over the period and certainly in the detail of the hearings last week, the complexities of the environment that we are operating in - not in order to hide them but to bring Parliament into play as we deal with these issues. I also hope this holdstrue as regards the factors we consider every single day in our decision-making, separating those over which we have immediate control and those that are outside of our sphere of control. Then there is our pledge of accountability to Parliament. This is not an optional extra but it's quite fundamental to how we approach the relationship that we have in the executive with you in the legislature.
Chair, the load we can carry is because of the departmental heads we have in the department. I should say men and women but I can't say women yet, so let me save myself the gender embarrassment for now. In the departmental heads we have individuals who are competent, dedicated, empathetic and uncompromising in their determination to be the best at what they do. I think democracy should treasure these individuals and the teams who support them. They make a considerable difference.
Finally, let me express my appreciation to the members of both the Portfolio Committee on Finance and the Joint Budget Committee. We know that we load them with a lot more work than their peer committees have, but we are greatly appreciative of the kind of engagement we are able to have. We deal with this in a very professional way without histrionics. We try and understand each other and I really treasure the professionalism of the relationship that we share. Lastly, to the Deputy Minister of Finance and all of the staff involved, thank you very much and thank you for your time this afternoon. [Applause.]
Mr M J NENE / END OF TAKE
END OF TAKE
THE MINISTER OF FINANCE
Mnu N M NENE: Ngiyabonga Sihlalo namalungu ahloniphekile ePhalamende, ngibingelele iPhini likaMongameli, ikakhulukazi nabantwana laba esinabo namhlanje abakanye nathi ukuzozibonela mathupha ukusebenza kwePhalamende.
Chairperson the National Treasury tabled its strategic plan before the Portfolio Committee on Finance on 20 May 2008 in terms of the Public Finance Management Act. In terms of Chapter 2 of this Act, the legislative mandate of the department among other things is to promote government's fiscal policy framework; to co-ordinate macroeconomic policy and intergovernmental financial and fiscal relations; to manage the budget preparation process which includes revenue expenditure, assets and liability management; to control the implementation of the national budget including any adjustment budgets; to facilitate the implementation of the Annual Division of Revenue Act; and to monitor the implementation of the provincial budgets.
This mandate places this department at the centre of our government's development agenda and it is therefore the touch-bearer of the developmental state that the ANC seeks to augment.
This therefore begs the question: What is the absolute measure of the country's progress other than the living standards of its citizens and a change in material conditions for the better. For purposes of this Budget Vote debate I am going to focus on a few aspects that make up the tapestry of our socioeconomic landscape and the leave the rest to my other colleagues.
South Africa is a player in a complex global economic village that has been experiencing tumultuous and challenging times in the recent months. In its strategic plan presentation to the portfolio committee, National Treasury drew our attention to what the Minister calls the triple f's and these were the financial market turmoil, the sharp rise in global food prices and the oil prices that result in fuel cost increases. How then do all these global factors impact on South Africa?
The financial market turmoil characterised by the subprime crisis has threatened the global financial stability and increased risk aversion resulting in reduced liquidity in the financial markets. This further results in slowing global demand that weighs on exports growth while risk aversion impacts negatively on the financing of the current account deficit. Reduced credit availability also impacts on household consumption and their ability to finance investment.
The exchange rate markets also experienced increased volatility. And as can be expected, the impact of high food prices has seen the erosion of purchasing power of households, particularly amongst the poorest of the poor. The most disturbing thing is that this has also impacted on agricultural products as a result of rising input costs. High oil prices have also put pressure on inflation and raised the cost of doing business, and so does high energy prices.
South Africa has not been immune to these outside factors but to some extent has weathered the storm and continues to maintain a macroeconomic policy stance that keeps it afloat for a considerable period of time.
Our balance of payment position has remained positive in 2007, despite the significant mismatch between savings and investments. According to the 2008 budget review at the beginning of this year, however, the international financial contagion has contributed to some unwinding of nonresident positions in rand-denominated assets. South Africa's floating exchange rate is expected to help to cushion the impact of volatile capital flows on the real economy over the short to medium term.
Of particular concern has been the widening of the current account deficit which reached 7,1% of gross domestic product during the first three quarters of 2007 from 6,5% in 2006. However our terms of trade, which is the ratio of export to import prices, continue to benefit from high commodity prices and increased by 2,9% in the first three quarters of 2007 compared with the same period in 2006.
Even though exports have increased they have not been able to offset the rising imports. Robust growth in fixed investment spending has boosted demand for capital goods imports and because of domestic capacity constraints it has been necessary to import some intermediate goods such as cement and steel.
Electricity shortages have also impacted quite negatively on export production and it is unlikely to abate soon. In seeking these answers the Minister has indicated to us that the National Treasury then appointed an international advisory panel to, among other things, help identify the binding constraint to shared growth and to proposed policies to overcome them.
The final report has since been tabled and is now the subject of discussion; and the committee will also be engaging with the panel on 18 June, as the Minister has also indicated, so that we can inform ourselves of the contents of the report and that which informs also the findings and the recommendations of the panel.
This report makes a number of observations some of which I would like to share with this House without pretending that this report is the gospel truth rather than a discussion document. The report observes that, and I quote:
The sector that has grown less and that has suffered the biggest employment losses has been the tradable sector. This is expressed in the dismal long-term growth in per capita real exports and in the massive job losses in the sector.
It then continues to identify some characteristics of this sector that make it vulnerable, key among them being the level and the volatility of the real exchange rate.
The report says that –
… the tradable sector is particularly sensitive to the level of volatility of the real exchange rate. The real exchange rate is the relative price of tradables to nontradables and thus its level affects the relative profitability of the two sectors. In addition, its volatility tends to cause a rise in the instability of profits and hence increase the riskiness of investment. But the impact is greater in the tradable sector because in the non-tradable sector, prices and wages usually move in tandem …
… which means in good times wages are high and so are prices and vice versa. This tends to stabilise profits as revenues and costs move in the same direction.
By contrast, in the tradable sector, when the currency is strong, which is usually in good times, export prices in Rand are low because of the strong currency, but wages are high. Hence revenues and costs tend to move in opposite directions making profits more volatile.
In the light of the above the panel recommends that government should maintain the main features of its macroeconomic strategy in terms of fiscal prudence and inflation targeting but recommends some additional measures that need to be taken. These are:
The fiscal policy should be set with the aim of increasing savings so as to make a significant contribution to funding the ASGI-SA public investment objectives. Secondly, the target fiscal policy should not be the actual deficit but the structural deficit, i e, a concept of deficit that takes into account the expected levels of the terms of trade and the cyclical conditions of the country.
While the South African Reserve Bank should maintain the inflation targeting, it should also be responsive to deviations of the real exchange rate by intervening in the currency when it deems necessary in order to prevent excessive appreciation.
We look forward to engaging with the panel in order for us to be able to ask questions, one of them being whether it is possible to target both the inflation and the exchange rate simultaneously and successfully, and whether our projected budget surplus goes far enough to cushion the economy against future cyclical exogenous shocks.
The Reserve Bank has also continued to strengthen South Africa's reserve positions in 2007, further improving external liquidity. According to the 2008 Budget review, gross gold and other foreign exchange reserve reached US$33,6 billion at the end of January 2008, which is US$8 billion higher than the previous year. And the net reserves increased from the US$23 billion at the end of 2006 to US$32,1 billion at the end of January 2008.
The ANC government's resolve of building a national democratic society proceeds from the understanding that economic transformation cannot emerge spontaneously from the "invisible hand" of the market. It requires a developmental state that is capable of leading in the definition of a common national agenda of mobilising the entire society to participate in the implementation and to direct its resources towards a common programme.
In the ANC's current strategy and tactics document, we are reminded that –
a national democratic society should use the redistributive mechanism of the fiscus to provided a safety net for the poor. As such, built into its social policy should be a comprehensive social security system which includes various elements of the social wage ...
In 2007 government announced that it would prepare proposals for significant reform of the social security system that would provide a measure of security for all South Africans. The committee awaits a full report on the progress of this initiative in the not so distant future from the department.
In terms of the Budget review of 2008 the department says, and I quote:
The basic social security arrangements under consideration and reform of the retirement funding environment are components of government's broader anti-poverty strategy and comprehensive security programme. Social health insurance, reform of the retirement annuity funds and reform of the occupational health and safety and compensation benefits are also substantial and important reform challenges. A constructive and challenging dialogue between stakeholders on these and related reforms is anticipated over the year ahead under the auspices of Nadlec and other consultative forums.
We trust that all stakeholders realise and appreciate the urgency of these matters.
The other critical area of National Treasury's mandate is that of the financial sector policy. In terms of the strategic plan the department has set itself a target of two research and concept papers to support retirement reform and to table legislation on pensions and insurance. The two pieces of legislation are already before the committee while research and concept papers are also going to be the subject of the committee's oversight during the current year.
In the area of financial stability the committee has just recently passed a Financial Intelligence Centre Amendment Bill and continues to work with the Financial Services Board and National Treasury to ensure that the regulators are adequately empowered to deal with any activity that might threaten this area.
The financial sector is also undergoing transformation with a view to broadening access particularly to the poor. Last year the committee passed legislation that made it possible to establish the Co-operative Banks Act and in terms of this Act a development agency for co-operative banks needed to be established. National Treasury reported that the agency has been established and the deposit insurance for these banks is envisaged to be in place during the 2009-10 financial year.
The committee therefore reports to this House that we are satisfied that National Treasury has complied with the Public Finance Management Act with regards to the tabling of its strategic plan for 2008-11 and has also complied with its own regulations as far as the contents are concerned. The committee undertakes to fulfil its mandate to monitor the implementation of this plan. The ANC supports this Budget Vote and I thank you Chairperson. [Applause.].
Mr S J F MARAIS / END OF TAKE
Mr N M NENE
Mnr S J F MARAIS: Voorsitter, ek glo die Minister en sy adjunk is seker baie tevrede vandag om betrokke te wees by departemente wat onder die omstandighede baie goed presteer. Ek glo hulle is baie bevoorreg ook.
Beide Nasionale Tesourie, wat die Finansiële Intelligensie Sentrum insluit, asook Sars, het daarin geslaag om nog meer effektief en doeltreffend te word en was Sars, met effektiewe belastinginvordering, instrumenteel gewees vir 'n groter begrotingsurplus, terwyl daarin ook geslaag is om nog meer verbruikersvriendelik te raak.
Die enigste waarskuwing, Minister, wat ons moet rig, is in terme van die uitdaging wat vir Sars gestel is. Ons moet natuurlik die ekonomiese groei hê, sodat hulle daardie R2,1 triljard oor drie jaar kan insamel.
Hoewel ons nie onsensitief is vir die struikelblokke wat Statistiek SA ervaar nie, is dit 'n realiteit dat die data vanaf die liggam kom 'n noemenswaardige ekonomiese beleidsinvloed het op die gedrag en die uitkomste van verbruikers, die brieë besigheidsektor en beleggers. Dis veral relevant in die huidige hoë inflasieregime. Dis daarom noodsaaklik dat alle moontlike stappe gedoen moet word om geloofwaardigheid in Statistiek SA en sy gepubliseerde data, onverpoos te herstel
Die enigste bietjie kritiek wat ek het, is miskien dat ons nog steeds sien dat daar baie vakante poste is en dat daar 'n relatiewe swak prestasie is met die indiensname van persone met gestremdhede. Sars is die enigste een in hierdie stadium wat die uitdaging aanvaar het om dramaties daarop te verbeter.
Die Minister is bewus dat bellegerssentiment, wat net op persepsies gegrond kan wees - waar of onwaar – vinnig kan verander, wat die vertroue in ons ekonomie en Suid-Afrika as 'n beleggersland, erg kan skaad. Die oorwegend kwesbare en vloeibare korttermyn deel van ons buitelandse beleggings kan maklik onttrek word, wat ons handelsbalans, en dus ons vermoë om ons buitelandse verpligtinge te kan nakom, meer kwesbaar sal laat.
Dit is van die redes waarom die DA, asook verskeie akademici en ekonome, vir lank reeds propageer het dat daar baie meer prioriteit aan die werwing van buitelandse vaste kapitaal investerings geskenk moet word.
Minister, during your budget speech, you compared our economy to one caught in a storm. I will use a similar analogy. It is evident that the winds of change are upon us. The winds of change are blowing through South Africa amid the dawning of a leftist political era and the rise of an interventionist state.
Let me say, Minister, that we applaud your conviction in the merits of inflation targeting and price stability and the wisdom in prudent fiscal policy to weather the economic storms.
The DA has long promoted an economic policy that puts job creation and job-creating growth at its centre. Without the growth in prosperity created through the exercise of the market economy, there can be no opportunity, and alternatives become increasingly limited.
As the Tripartite Alliance prepares for its economic summit, the future of our economic policy strategy is up for grabs by the left-leaning post-Mbeki ANC leadership. The ANC president, Mr Jacob Zuma, has gone on a much-publicised charm offensive, both locally and internationally, to reassure business and to woo potential investors. It is rapidly becoming clear, however, that despite these reassurances, political continuity is not a foregone conclusion, should Mr Zuma land up in the Union Buildings.
Cosatu's general secretary, when responding to a question of whether Zuma's assertion of policy continuity worried him, was quoted as saying:
... no leader on the eve of highly contested elections, would want to multiply the number of people who would object to his being elected. I've always understood Zuma's assurances to investors to mean that he wants to multiply his friends and the friends of the ANC.
Cosatu and the SACP have called Mr Zuma sharply in line over certain issues, most notably his comments in support of a more flexible labour policy, whose comments were widely welcomed by both business and us. The ANC secretary general has clearly stated that our future economic policy strategy will be a consensus of the resolutions of the ANC, the SACP and Cosatu.
Policies mooted at the recent Tripartite Alliance Summit included an urgent review of the appropriateness of inflation targeting, enabling Parliament to amend money Bills and imposing a moratorium on privatisation. Alarmingly, a little more than two weeks ago, we sat and listened to public enterprises Minister, Alex Erwin, outlining his vision of the multiplication of state-owned enterprises, SOEs.
Such policies have no place in a modern enterprise-driven economy which subscribes to the precepts advocated by the DA, namely price stability, fiscal responsibility, lower taxation, a deregulated labour market and privatisation. The force behind the DA's vision of an open–opportunity society for all is a socially responsible market-driven economy driven by choice, as was stated in our alternative budget earlier this year; one where citizens are encouraged to seize opportunities. By way of example, we have long advocated the provision of opportunity vouchers to finance tertiary education, apprenticeships or small enterprises for school leavers.
With respect to declaring a moratorium on privatisation, I would have thought that by now our mishandled electricity monopoly would serve as a stark example of the dangers of hedging all our bets on the current administration. Over the past decade, the government's initial firm commitment to privatisation and public-private partnerships has become far more ambiguous. Some of the industries that were initially targeted have instead been kept under firm state control. Although privatisation is not an economic elixir for SOEs, global experience shows that it enhances the efficiency and financial performance of utilities and leads to service expansion.
While the alliance and Minister Erwin, in particular, see a pivotal role for the state in the economy, time and time again the state has shown that it doesn't have the capacity to deliver.
Confidence in our economy can be both fickle and fleeting. Minister, conviction in price stability, fiscal prudence, inflation targeting and the precepts governing a market-driven economy, inspires investor confidence. The vacuum surrounding Mr Zuma's economic policy suasion certainly does not. We need to know who will be the force behind Zuma's mantra on economic policy, and what exactly that mantra will be.
It is my hope that the current power play within the ranks of the ANC is not allowed to overshadow the valuable recommendations of the Harvard Group and the Growth Report by the Commission on Growth and Development, and derail the national debate. These findings cite, amongst other things, slowing export growth, high unemployment and rigid labour laws as stumbling blocks to growth and employment. The DA has, for instance, long advocated that the state should focus on boosting labour-intensive, export-orientated manufacturing industries.
In the context of, amongst other things, chronic unemployment and the urgent need for especially fixed foreign investment, the recommendations must be brought to the forefront as the basis for a nationwide economic policy debate. We agree that all the recommendations do not necessarily comply with all our unique economic requirements, but that they need to be debated further as a departure point to design a unique African developmental economic regime.
Suid-Afrika moet en kan 'n leidende rol in die Suid-Afrikaanse ontwikkelengsgemeenskap en die res van Afrika speel, om 'n ekonomiese herlewing te laat gedy as ons relevant in die globale ekonomiese omgewing wil wees. Die tyd is egter min en die nood raak elke dag groter.
Die DA steun die aanvaarding van Begrotingsposte 7 en 11. Ek dank u. [Aplous.]
The HOUSE CHAIRPERSON (Mr M B Skosana): Thank you, hon member. Before I call the next speaker, I have been requested to appeal to members to switch off their devices if they are not using them to listen to the interpretation as they interfere with the sound system. I think these are the kinds of instruments they are talking about.
Mr N SINGH / END OF TAKE
Mr S J F MARAIS
Mr N SINGH: Chairperson, hon Minister, Deputy Minister, hon members. Firstly, I would like to thank the hon Minister and Deputy Minister for being present at the briefings. I think their presence there did a lot of good and we were able to get a lot of our questions answered. I would also like to thank the hon Chairperson for the manner in which he allows a free flow of debate so that we can engage with the officials and the Minister.
I will use these eight minutes or so to re-emphasise some of the issues that I raised when the Minister was there and we will see how it goes from there.
The IFP has always been a champion of a free-market economy that enables the provision of services, goods and jobs to the greatest number of citizens possible. That is not to say that we support an unfettered capitalist system, but what we do know is that the creation of an enabling environment for economic growth is a vital function of governments everywhere.
The hon Minister of Finance has been a successful custodian of government's progrowth economic policies that have created stability, predictability and an enabling environment for the market to function at its best. I agree with the hon Minister that even this government is not immune to extraneous shocks to the economy in the form of global fiscal turmoil, high oil prices and international food inflation.
We are now seeing what some call the first indications of a recession, as figures released yesterday show that our economy grew by only 2,1% in the first quarter of 2008, making it very difficult to reach the annual growth figures reached in previous years or the 4% prediction for this year.
Although the agricultural sector performed well, mining and manufacturing were hard hit by power cuts. The Minister always uses weather – he has spoken of the storms and clouds – well, let us all hope that every cloud has a silver lining, especially for us patriotic South Africans. [Interjections.] Yes, a platinum lining; we are going on to platinum now! [Laughter.]
Just as the economy has taken a hit, consumers have been very hard hit by rapidly rising fuel and food prices. I want to turn to fuel taxes. The hon Minister referred to oil prices rising from US$20 to US$130-odd today.
We have little choice but to acknowledge that external factors are driving fuel price increases and that we have little or very limited control over these factors. However, as the IFP, we believe that it is time for our government to tackle the factors that contribute to the fuel price that it does have control over. Mostly these are the taxes that are added to the basic fuel price to make up the pump price.
Hon Minister, South African fuel, I am told, is among the most heavily taxed in the world and if there is one lever that government can use to soften the global effect of the oil price on local motorists, it is to investigate, and I emphasise "to investigate", whether some of the taxes cannot be scrapped or at least lowered.
Having said that, we do realise that many of these taxes are, of course, dedicated levies to fund for instance the Road Accident Fund and one would have to look at alternative sources of revenue, should government agree to lower some of these levies. But government must also take a long and hard look at whether the RAF levy is in fact being used effectively by a fund that we in Parliament are continuously told is, and appears to be, in a constant state of shambles.
Another measure that we want to put on the table could be the reactivation of the equalisation fund, which previously was used to smooth out price fluctuations and lessen the immediate shock to the economy and the public at large. Government has done so in the past - used this fund.
I know that the hon Minister indicated to us in the committee that in a climate of rising oil prices it would not make much sense to replace the current monthly adjustments with the three-month adjustment, as the shock effect would not be lessened, but would rather be too much at one time.
However, if increases or decreases were only brought into effect every three months, we believe it would provide companies that rely heavily on fuel and diesel to better plan and budget for their future operations. It would provide predictability and a large measure of certainty for their operations; both of which are conditions that all private companies require to operate optimally. Also, consumers would as a result not be exposed to monthly price increases of consumable goods.
I want to turn to another hobby horse of mine, which is VAT and zero rating: For more than a year now, food price inflation has outstripped headline inflation by a significant margin, leading to all food products becoming much more expensive and out of the reach of the public. The hon Minister referred to this in his opening address. The IFP has previously called on the Minister to consider zero rating more basic food items, including chicken, a very valuable source of protein for the masses of our country.
The Minister has argued that sometimes it is not possible to disaggregate the effect this would have on the poor and the rich. The point is not that a few rich people might also benefit from the zero rating, but that millions of poor people will definitely benefit.
The IFP calls on you to look at the bigger picture and investigate this matter seriously. If we are worried about the rich benefiting in any way from zero rating more food items, then push up the VAT rate on luxury items that only they can afford to make up any revenue shortfall.
The National Treasury informed us that it would be difficult to realign the system, but we are pleased that the honourable Commissioner of SARS indicated that SARS will rise to the occasion, if there is a policy on the table to get things sorted out.
South Africa is indeed fortunate that we have such a professional, talented and dedicated team at National Treasury and at statistics and SARS. Their efforts have created stability, predictability and certainty – essential factors for a successful economy.
I now want to turn to another hobby horse of mine. The IFP have long held the view that taxpayers deserve value for money. In other words, they deserve a government that effectively spends their funding of the fiscus in providing goods and services for all, without wastage or inadequate budgeting, planning and execution. The hon Minister used a figure which we don't use in this House, "trillion", and that's why my hon colleague was confused – R2,1 trillion is what SARS has been targeted to raise in the next three years. Here I want to refer to what has happened in the Eastern Cape, where the Auditor–General has said that 39 of the 40 municipalities' finances are in a shambles.
Another case crying out for National Treasury intervention is the R1,2 billion that has been overspent by the KwaZulu-Natal Department of Health. Clearly this department lacks adequate planning and budgeting skills, not to mention proper financial management skills. Perhaps if the MEC spent less time in the papers or on road shows and more time doing her job, this situation could have been avoided.
The overspending, we are told, is having a detrimental impact on service delivery at institutional level, for instance hospitals and clinics, and service providers are not being paid. Let's not forget, this is the same MEC who suspended a doctor for removing a picture from her office. I am not surprised - maybe the wrong person was suspended!
SARS is the jewel in your crown and I think they are doing excellent work. With regard to statistics, we believe they have come a long way in ensuring credibility. We will support the votes with our comments being noted. Thank you. [Time expired.] [Applause.]
Mr K A MOLOTO / END OF TAKE
Mr N SINGH
Mr K A MOLOTO: Chairperson, hon members, several countries that have adopted an inflation-targeting framework have recently been missing their inflation targets. Naturally, this has to raise critical questions about the success of the inflation-targeting framework.
The Bloomberg news agency made this observation:
Jean-Claude Trichet's European Central Bank hasn't had much success beating its inflation target. The Frankfurt-based central bank, marking its 10th Anniversary on June 1, has failed in each of the last eight years to achieve its aim of bringing inflation below 2%.
South Africa is not alone in having an inflation rate above its target range. The data shows that four out of seven industrial countries and 12 out of 16 emerging-market economies currently have inflation rates above their targets.
An article in The Economist of this week indicates that five of the 10 biggest emerging economies could have inflation rates of 10% or more in the coming few months. It also indicated that by mid-year, two thirds of the world's population may be struggling with double-digit inflation. The South African CPIX for April is 10,4%. Clearly, this is way above the target. These are serious developments that require adequate explanation.
Section 224(1) of the Constitution states that the primary objective of the SA Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in South Africa. This statement could be interpreted to be saying that low and sustainable levels of inflation are critical to achieving strong and sustainable economic growth.
The government introduced the inflation-targeting framework in 2000, with a target range of 3% to 6%. The critical question that needs to be posed is whether National Treasury and the SA Reserve Bank are succeeding in achieving the constitutional mandate and the target set.
The second question we need to ask is whether we could have adopted alternatives to the inflation-targeting framework, such as exchange-rate targeting and monetary aggregates targeting. Empirical evidence does show that the so-called alternatives have lost credibility. Exchange rate targeting has to be defended by the aggressive buying and selling of foreign currency. That is a very costly and unsustainable exercise. Students of economics in this room will attest to the fact that targeting monetary aggregates has long fallen into disrepute.
Let me come back to the first question that I posed earlier. The question is whether National Treasury and the SA Reserve Bank are achieving the constitutional mandate given to them and the inflation target set. It is evident from available data that the main risks to the inflation outlook continue to be sustained increases in oil and food prices. South Africa is not alone in having an inflation rate above the 3% to 6% target. This is a global problem.
According to data provided by the SA Reserve Bank, Brent Crude oil was trading around US US$78 per barrel in October 2007. Today the price is hovering around US$130 per barrel. Food prices increased sharply in 2006 and 2007. The price of dairy products increased by nearly 80% in 2007. The price of rice had doubled by the end of March 2008.
Several supply and demand-side factors had a major influence on food prices. Petroleum prices have raised the cost of production and transportation of agricultural products. Freight rates doubled due to stretched shipping capacity and port congestion. Energy prices led to an increase in the price of fertilisers. The problem has also been exacerbated by the fact that food inventories have been kept at low levels.
The major challenge that we are facing is the fact that South Africa is a net importer of most foods, including basic food items. This House need not be reminded that the poor spend a large portion of their income on food. The US biofuel strategy has influenced the pricing of maize. The putting of food in fuel tanks in the midst of these challenges has exacerbated the problems. This is an area that requires urgent attention and well-considered measures.
There are those who are calling for price controls and subsidies. The problem with price controls is that they lower production in the long run. In the short run they may succeed in containing inflation, but they engineer shortages in the long run. Price controls encourage the development of a parallel market.
The problem with subsidies is that uncompetitive stakeholders in the supply chain can capture a large share of the subsidy and consumers may not benefit from such subsidies. We need to avoid addressing short-term problems with measures that will prove to be unsustainable in the long run.
However, I need to stress that we urgently need measures that will provide relief to the poor in the short term. In the medium to long term, we need to increase agricultural food production. There is data that indicates that since 2001 agricultural food production has been falling.
Let me come back to the debate on inflation targeting. There is a view among certain interest groups that the SA Reserve Bank should not raise interest rates when there is an increase in oil and food prices, as these are external factors. Nobody is disputing this fact. Indeed, there is very little monetary policy can do to avoid the first-round effects of supply-side shocks.
In fact, the Reserve Bank only reacts to any second-round or generalised effects that pass through the whole economy. Currently, if you remove food and petrol prices from the calculation, you would notice that the inflation rate is still above the target. Failure to act on the part of the Reserve Bank will have disastrous consequences. Inflation expectation will then rise, forcing the Reserve Bank to increase interest rates sharply in the future to contain inflation. Such steep increases in interest rates will have a negative impact on economic output.
This brings me to the next point of whether the Reserve Bank adopst a flexible approach to inflation targeting or a strict approach. A flexible approach to inflation targeting involves considering other variables like economic output when making decisions. A strict inflation-targeting approach focuses narrowly on inflation, disregarding other variables like economic output.
Evidence does indicate that the Reserve Bank has been flexible in its approach to inflation targeting. A flexible approach involves a gradual and measured increase in interest rates with the view to gradually bringing the inflation rate to within the target. This gradual approach minimises the impact on economic output.
We need to acknowledge that central bankers globally are faced with the challenge of bringing inflation to within their respective tolerance level. The point is that whether you have adopted inflation targeting or not, inflation pressures are staring us in the face. You either allow monetary policy to respond to the threat, or you accommodate it at your own peril. An inflation-targeting framework ensures that the Reserve Bank is transparent and accountable about its decisions.
Allow me to focus on the need to speed up macroeconomic policy convergence in SADC. Macroeconomic policy convergence in SADC is a key precondition for regional integration. We either swim together or sink together. We cannot afford to be marginalised by globalisation. We need to gain economic bargaining power.
South Africa, as an economic powerhouse in SADC, needs to give sufficient attention to this matter. We owe it to our neighbouring countries. Workers from Mozambique, Lesotho and Malawi made an immense contribution to the building of the mining industry in South Africa. South Africans need to appreciate the contribution made by workers from our neighbouring countries in the development of this country.
SADC needs to assist Zimbabwe to achieve the macroeconomic policy convergence targets set in the protocol. Zimbabwe is supposed to be the second largest economy in SADC. We dare not let Zimbabwe experience economic collapse. However, we need to stress that there should be respect for human rights and allow Zimbabweans to freely express their choice in a candidate of their own liking without beatings, torture and intimidation. We swim together or we sink together. We dare not fail. The ANC supports this Budget Vote. Ke a leboga. [Applause.]
Mr J BICI / LB/ END OF TAKE
Mr K A MOLOTO
Mr J BICI: Chairperson, Minister we are debating these Budget Votes at a time when the economic and financial environment looks worse than it has in years. The economy is in decline, inflation is on the rise.
We are perched ominously on the verge of a potential economic disaster that could have devastating effects on the poor as well as on the working and middle classes. Fuel and energy prices are shooting through the roof and obliterating household budgets among the poor and the working class. The credit bonanza of the past few years fuelled by irresponsible lending practices and the property boom is now coming back to haunt many people as interest rates climb ever higher.
In this ominous climate we would like to see budgets and fiscal policies that demonstrate an awareness of the hard times that lie ahead. Government must acknowledge the impending crisis and indicate to us how the shocks will be absorbed and dealt with.
For a decade now a conservative fiscal policy stance has been justified on the grounds that we need to save in times of plenty and prepare for the lean years. It is up to the government to now demonstrate how their economic and fiscal policies will protect millions of South Africans who continue to live in poverty or on the verge of poverty. Hon Minister may I request you: Please pay attention to the Eastern Cape. [Laughter]
The Premier there has lost her footing. One municipality has prepared its budget and IDP using census figures for 2001 and the National Treasury is aware of that, they've got a letter from eNgcobo and there is today an interdict to stop that Municipality from passing the budget which must start on 1 July. This means things are not very good in the Eastern Cape. We appeal to you, Mr Minister, to assist those people as they don't know what is happening. The UDM supports the budget. Thank you. [Applause.]
Ms N R MOKOTO / END OF TAKE
Mr J BICI
Ms N R MOKOTO: Chairperson, I want to welcome, in absentia, those young women together with that young director who visited us during the Budget Vote today. It's very encouraging. I want to urge them to take advantage of the opportunities of democracy; there are plenty.
Chairperson, Minister, Deputy Minister, hon members and members in the gallery, quite recently South Africa became a ratified member of the Collaborative Africa Budget Reform Initiative, known as Cabri. Cabri is a self-organising learning network of senior budget officials in Africa. The core objective of Cabri is the improvement of public expenditure effectiveness through the improved Public Finance Management System. It aims to achieve this through peer exchange, and the development of common resources that speak to African priorities.
This forum represents a positive move from the past, where the developmental agenda and priorities of most African countries used to be trampled upon by donor countries, irrespective of their urgency or level of need. For us as South Africa, with the dawn of the democratic era in 1994, the state of the nation address together with the Budget Speech have been very explicit in shaping and giving direction to the broader government programme of action and its stated priorities, with regard to achieving the national obligations and goals for the Reconstruction and Development Programme and building a national democratic society.
As we debate the Budget Vote for the National Treasury, it still remains an indisputable fact that the allocation of public resources and budgets presents a correct reflection of the government's true intentions about its citizens. The context of this Budget Vote, therefore, assists us to understand the significant role played by the budget in the endeavour to achieve the developmental objective.
Our Constitution directs that all spheres of government and all organs of state must secure the wellbeing of the people of the Republic. It is therefore important to note that the wellbeing of individual departments or municipalities cannot be regarded as whole, unless it captures their positive contribution to the lives of the people.
A famous author once said that –
… the thrust of the budget of a developmental state must be on how much the state spends on poverty and deprivation, and how much of the country's resources go towards expanding economic opportunities for all its citizens.
In dealing with these matters we have to recognise the role played by National Treasury to support the broader National Democratic Revolution programme.
The current global economic crisis and the credit crunch had a massive impact on many economies across the world, especially those that were wholly dependent on the United States economy; most of whom are in the developing world.
There is a strong need for us to applaud the government, in particular the National Treasury, on its boldness and ability to take deliberate risks by adopting a fiscal stance that has enabled our economy to remain resilient and competitive at all times. Today as we speak, we are confident enough to mention that such bold efforts have strengthened the government's case to raise public spending to further improve the living conditions of the people. We have to acknowledge that whilst the fruits of the economic growth are gradually being shared by many more than it was the case previously, millions of South Africans still remain marginalised, entrapped in poverty and fail to access the opportunities of democracy.
The 2008 Budget continues to fund specific programmes to target more rapid job creation, improved education, broader access to public transport and to strengthen the social security safety net. These measures as clarified will continue to underpin the government's antipoverty strategy and its broad-based black economic empowerment programme.
As we progress with the various interventions within the context of the government's antipoverty strategy, we must remain mindful of the fact that strong growth has not matched the concomitant improvement in service delivery.
In exercising our oversight role with regard to the issue of value for money, as the Portfolio Committee of Finance we are very much disturbed by the high rate of virements, roll-overs and unspent money in the various national and provincial departments, and even in municipalities.
Our government's attempts to eradicate poverty through spending more money on services shows that committing more money alone is not enough to get the results.
On an annual basis government allocates more money in the form of grants, which are also supplemented by conditional grants, to local government. These grants are administered at provincial level and are aimed at halving poverty and unemployment by 2012. Yet a large part of these funds go unspent. It has become the norm that in a particular year more than half of the Municipal Infrastructure Grants allocated remain unspent. Even at national level many departments fail to spend all the funds allocated to them. Moreover, some donor funds also go unspent.
In 2004, when addressing a conference of Senior Management Services in Cape Town, the Minister of Finance raised the following questions, which I believe are still relevant even today: Do we all share one understanding of what a developmental state is; do we have one view of the developmental mandate; are we all galvanised by a single vision for our country underpinned by a common set of values?
Government has acknowledged human resource problems and the need for better-skilled staff with specialised skills and technical know-how, especially in municipalities. The Siyenza Manje project and other skills development initiatives initiated by the department are welcome initiatives. As a Portfolio Committee we want to call for National Treasury to ensure that these initiatives remain a permanent feature in all municipalities.
While government has been able to move the resources to the political priorities, it is very important for us to understand that budgets are inherently political processes. To pretend that they are merely technical processes will be a mistake.
As Parliament we need to ensure that we play a very meaningful role in terms of our monitoring and oversight of the allocated funds. Each and every rand or cent spent or unspent should be accounted for.
We want to call upon the National Treasury to further intensify its programme of bringing into compliance all spheres of government in line with the correct accounting norms, reporting standards and procedures contained in the Integrated Financial Management System, which is now in its third phase of implementation.
We trust that this measure will enhance the oversight of different portfolio committees over the budget so that we, as parliamentarians will not serve a role of merely passing or rubber-stamping the budget. The ANC supports the budget. I thank you. [Applause.]
THE DEPUTY MINISTER OF FINANCE / END OF TAKE
Ms N R MOKOTO
The DEPUTY MINISTER OF FINANCE: Chairperson, hon Minister, hon members, just to warm up let's begin by stating the obvious. The obvious thing is that the ANC has never been rightist. It has never even been centre-rightist. The ANC has never been a champion of free market fundamentalism. The ANC has advocated a programme that we all know is popular, the Reconstruction and Development Programme. That programme speaks for itself in terms of where the ANC stands. And I think it is important to make that point.
The second area, I should also state, is that the whole concept of a leftist shift, both politically and economically, is nothing else than the language or jargon of the propagandists, the naive and those who want to simplify a very, very complex process in South Africa - the process of transformation.
I know that the popular example that is cited is an example, as articulated by my comrade, of a developmental state - that because we advocate the concept of a developmental state or an interventionist state, by so doing, therefore this ANC has shifted to the left.
I am not sure if as Members of Parliament we are required also to basically begin to have comparative studies. The concept of a developmental state, I have stated before, is not necessarily a leftist concept.
It is a concept that was used in South Korea and by no stretch of the imagination can one state that South Korea is leftist. It is a concept that was used when Japan emerged from the ravages of the Second World War to develop its capacity economically and to become the second most powerful economic centre in the world. And by no stretch of the imagination would one say Japan was indeed leftist.
So let's avoid scarecrows. Let's talk about what South Africa needs. Let's talk about where we stand in South Africa in order to deal with the socioeconomic challenges that confront us. I hope in future we would understand that the ANC has a legacy, a legacy of 14 years of stewardship of this country and its economy. This legacy of prudent and efficient economic management of the past 14 years is nothing else but a legacy of the ANC. It cannot be attributed to an individual. [Applause.]
I know we are getting into election mode where people want to a large extent for this ANC to wither and be turned into what it is not. It is this ANC government that has been able to ensure that unlike before we have been able to have a continuous growth and a programme that alleviates the plight of the people of South Africa. It is the ANC policy; it is the ANC government articulated and led by ANC members such as our competent Minister of Finance.
I think that is one of the things that we need to understand. So, let's not play games and try to come up with scarecrows that now that the president of the ANC, Jacob Zuma, is taking over, all of a sudden this ANC is going to emerge as something that it has never been before. These are the policies of the ANC. If there is any drama that occurred in Polokwane it is the fact that I was not re-elected onto the NEC. That's the only drama! In terms of policies, we are still where we were and committed to the policies that will alleviate and improve the lives of the people of South Africa.
So, yes, indeed, we find ourselves, as articulated by a number of members, in an economic environment where financial markets in several parts of the world have come under pressure from losses registered in the subprime market and from rising energy and food prices. Although the South African financial sector displayed dramatic resilience against the subprime crises, it has nonetheless had to endure the rising interest rates following an appropriate – I underline "appropriate" - monetary policy stance that seeks to contain domestic inflationary pressures. Hon member Comrade Moloto has basically articulated the reasons why.
During the past year there have been a number of legislative amendments seeking to further enhance the prudential and administrative regulatory framework for our otherwise strong, sophisticated and sound financial sector.
My input today will cover some of the initiatives that seek to enhance financial stability, access to finance, etc, through a whole range of measures such as the Co-operative Banks Act, the Financial Sector Charter, reform of the retirement fund industry, the Public Investment Corporation and the Special Pensions Act.
The global financial markets have seen large write-downs and credit losses since the beginning of 2007 due to the collapse, as we indicated earlier, of the US subprime industry. We know that in rand terms an estimated R3 trillion – we are talking trillions today -worth of assets have been written off by major banks around the world. However, South African banks have fared much better, largely due to existing regulations on foreign exposures and the prudent investment approaches adopted by all the South African banks.
This does not, however, mean that we should be complacent, given that there are some domestic risks which need to be monitored. Rising domestic interest rates have seen a 56% increase in nonperforming bank loans from December 2006 to December 2007. What is comforting, however, is that these nonperforming loans only made up about 1,4% of the total gross loans of the banking industry.
It should be noted that the various stress tests conducted by the authorities also show that South African banks will be able to survive the major economic shocks, as we have all seen. This is quite clearly indicated by the fact that currently the capital adequacy ratios enjoyed by our banks is at an average of 12,65% as basically compared to the minimum statutory requirement of about 10%.
To protect our banks, South Africa continues to adopt best international practices in terms of prudential regulation. In 2007, thanks to the hard work of Parliament, the Banks Amendment Bill of 2007 was passed and signed into law. This paved the way for the adoption of the Basel II Capital Accord in South Africa from 1 January 2008. We should be proud indeed that we are currently one of the few countries to have adopted this extensive and enhanced banking regulatory framework. The adoption of the Basel II Capital Accord will go a long way to ensure that our banks apply advanced risk management tools, which will in turn enable better loss-provisioning and capital allocation.
In the 2008 Budget, Government also took a bold step by fully phasing in prudential regulation on institutional investors' foreign exposures, and further refining the macroprudential foreign exposure allowances on banks. We are on course to finalise the various reporting requirements and foreign exposure allowances by the end of this year. These regulatory reforms will enable South African financial institutions to prudently diversify their exposures and risks globally since these reforms acknowledge both the benefits and risk associated with being part of the global economy.
In addition, in a few weeks time, the National Assembly will be debating the Financial Services Laws General Amendment Bill which is currently before the Portfolio Committee on Finance. This Bill is an outcome of a collective effort by the National Treasury, the South African Reserve Bank and the Financial Services Board to identify weaknesses in our financial regulatory system and methods by which to address them.
This Bill proposes to amend, among other things, the Pension Funds Act, the Financial Services Board Act, the Financial Institutions Act, the Financial Advisory and Intermediary Services Act, the National Payment Systems Act and the Co-operative Banks Act. Most of the proposed amendments seek to either enhance the enforcement regime for the regulatory authorities in line with international best practice or to provide for technical clarity in the meaning of certain provisions. These measures are designed to ensure that the consumers and clients of financial products and services are indeed protected.
One of these deals particularly with the amendment to the National Payment System Act. Although the national payment system has traditionally been the domain of the commercial banks, recently there has been increased participation of nonbanks in the clearing environment. It has, therefore, become necessary to create an enabling environment that regulates the participation of such entities in the National Payment System. In doing so, it is crucial to keep the stability of the system as the key imperative and to ensure that participants conduct themselves with integrity, given the interlinked nature of the system.
With regard to other insurance issues and safeguarding consumers, the enactment of the Financial Advisory and Intermediary Services Act was welcomed as it has led to an improvement in market conduct and also greater consumer protection. We have also found that much progress has been made with respect to contractual savings in terms of improving value to consumers.
There is, however, a need to look specifically at market practices across the insurance sector by paying particular attention to potential conflicts of interest and poorly aligned incentives between insurers, administrators, intermediaries and other sector participants that result in insurance products that, in addition to being unfriendly, are sold at prices that are too high.
The previous financial year also saw the promulgation of the Co-operative Banks Act which seeks to encourage a developmental strategy and establish a regulatory framework for deposit-taking and financial services co-operatives such as village banks, savings and credit co-operatives.
To assist with the implementation of the legislation, National Treasury, together with the South African Reserve Bank, is in the process of finalising draft regulations which will soon be published for public comment.
The Co-operative Banks Act also establishes the Co-operative Banks Development Agency, whose primary functions include the provision of the support for co-operative banks; the supervision of primary co-operative banks and the implementation and management of the deposit insurance fund for co-operative banks.
While efforts are being made to enhance financial stability in South Africa, great strides have also been made in advancing transformation in the financial sector and promoting access to financial services. Through the Financial Sector Charter over R200 billion has been invested in the South African economy in various sectors of our economy since 2005.
The underlying principle of the Financial Sector Charter, which prescribes that transactions be carried out on a commercial basis and that they also pass the stringent risk management tests, has proved extremely useful in the context of prevailing conditions in the global credit market.
As a result, South Africa's low-income housing finance market has shown tremendous resilience in the context of the global subprime crises. Stringent, responsible lending rules were applied as contained in the National Credit Act and its regulations.
Under the Financial Sector Charter, the credit profile of the target market is not necessarily "below prime". The criteria is simply that the household has to earn below R9 000. In essence, low income households earning between R3 500 to R9 000 with an acceptable credit risk profile were the largest beneficiaries of the R25 billion low-income housing financing under the Financial Sector Charter.
It is also worth noting that over 4 million people in the Living Standard Measure between 1 and 5 who previously did not have access to basic banking services have now been included in the formal banking system through the Mzansi Bank account. The Financial Sector Charter Council has recently adopted two standards for retail products intended for low-income people: the Zimele standards for life insurance and the Fundisa Fund for collective investment products.
As the chairperson of the Board of the Public Investment Corporation Limited, I am pleased to note that as at 31 March 2007, the Public Investment Corporation, PIC, manages assets valued at round R719,8 billion. This makes it one of the largest investment managers on the African continent. Their clients, as we all know, are public sector entities, most of which are pension, provident, social security or guardian funds and the PIC's role is to invest funds on behalf of these clients. This is based on the investment mandates set by each client and approved by the Financial Services Board.
I want to remind the hon members that the PIC is wholly owned by the South African government and was established as a corporation on 1 April 2005 in accordance with the Public Investment Corporation Act of 2004.
More than a year ago, the corporate governance policy was made public. This policy is based on international best practice and was widely discussed with leaders in this field. It spells out quite clearly what the PIC stands for- - these are the principles that we will embrace as the PIC as far as our activities and as well as our engagement with a whole range of companies.
From the point of view of black economic empowerment transactions, we recognise that the majority of businesses in South Africa have embraced the transformation agenda that is required to move us away from our beleaguered past. However, transformation is still lagging in the boardrooms and the latter is equally critical to our longer term economic success. This issue has been placed high up on the PIC's corporate governance agenda to ensure that boardrooms become a true reflection of the demographics of our country.
Since April this year the PIC has started to publish its voting records at annual general meetings and other meetings of companies. The purpose of publishing these records is not to name and shame companies, but is intended to get companies and other asset managers to focus more on governance issues. The publishing of these records ushers in a new era of transparency in South Africa and it is hoped that other big asset managers will follow suit.
As hon members would recall that the interim constitution gave effect to the Special Pensions Act, Act 69 of 1996 in that it provides for the payment of pensions to persons who made sacrifices or served the public interest by helping to establish our nonracial, democratic, constitutional order. These persons, as a result of their sacrifices, were therefore unable to provide for or were prevented from providing for pensions for a significant period of time. The legislation also makes provision for the payment of a lump sum to the eligible dependants.
Despite the various amendments to the Act in 1998, 2003 and 2005 to increase benefits, improve accessibility of benefits and address technical and implementation difficulties, we still had problems that remained to be dealt with. Furthermore, there was also the challenge of how to deal effectively with the plight of those individuals who did not qualify in terms of the age criteria, those referred to as the "under-35s".
In April this year, Cabinet approved amendments to the Special Pensions Act to be tabled in the National Assembly in a few weeks that will basically deal with these problems that I have raised.
In short, the amendments will extend the right to a pension to persons who were 30 on 1 December 1996. It will also extend the right to a spouse's or orphan's pension to surviving spouses or orphans of a person whom was 30 on 1 December 1996 and had died prior to the date on which the Amendment Act takes effect
It is our firm belief that the proposed amendments will go a long way to provide additional financial relief to those who valiantly fought for a nonracial democratic constitutional order and who in some instances paid dearly with their own lives.
It is also crucial that as policy-makers we continue to provide leadership in incentivising our financial sector to remain at the cutting edge of financial innovation while complying with international standards. Our regulatory authorities have to continually keep pace with private sector innovation and constantly seek to implement measures to close regulatory gaps which will constantly appear for as long as the dynamism and vibrancy that underpin our financial sector remain.
The current wave of the transformation imperatives and financial access initiatives within the Financial Sector Charter must be supported and indeed encouraged. Our Financial Sector Charter cannot be said to be fully efficient if a significant number of South Africans are excluded from financial services.
Every effort will be made to ensure that the effective and efficient implementation of the Special Pensions Amendment Act, once Parliament has approved it, is indeed put in place.
The Minister previously alluded to the important work being done by the entities that report to him. In this regard, I would like to express my appreciation for the manner in which the Portfolio Committee on Finance under the guidance of the hon Nene interrogated the strategic plans and budgets of the South Africa Revenue Services and Statistics SA.
Chairperson, we can't conclude without reflecting on the recent tragic events and disgraceful actions of some of our citizens. All political parties, all honourable men, women and even the children in our schools have condemned these cruel and unjustified attacks predominantly on foreigners by these callous criminal mobs. We as South Africans truly believe that South Africa belongs to all who live in it and that all human beings have equal worth.
This assertion must not be an empty, distant cry as author Philip Roth puts it, and I quote:
. . . of a distant place and time, a spectral residue of those rapturous revolutionary days when everyone craving for change programmatically, naively – madly unforgivable – underestimates how mankind mangles its noblest ideas and turns them into tragic farce. ... As though human wiliness, weakness, stupidity, and corruption didn't stand a chance against the collective, against the might of people pulling together to renew their lives and abolish injustice.
We should, as South Africans, continuously proclaim that South Africa belongs to all who live in it. Human life has equal worth.
As South Africans we must commit ourselves as, again,a writer has put it:
… I should suffer the misery of the devils, were I to make a whore of my soul by swearing allegiance to those who stand for …
… xenophobia in whatever guise, racism, tribalism, sexism and regional chauvinism.
Finally, I would like to thank the Minister of Finance, the Commissioner of the Sars, the Director-General of the National Treasury and the Statistician General of Statistics SA for their continued leadership and guidance in all our endeavours. Thank you very much. [Applause.]
Mr B A MNGUNI
END OF TAKE
The DEPUTY MINISTER OF FINANCE
Mnu B A MNGUNI: Mangiqale ngiyalele umngani wami ubaba uBici ukuthi akasezi ekomitini, yingakho ekhuluma lezi zinto azikhulumayo ngoba useyalahleka kancane, akazi ukuthi kuqhubekani.
Chairperson, managing the money we borrow, either from domestic or foreign market sources, and the servicing of the debt, is one of the critical functions of the National Treasury. Indeed, Programme 3 deals with developments in the domestic and international debt markets, government's debt portfolio, borrowing plans, contingent liabilities, credit risk and financial management of state-owned enterprises, SOEs. In the Reconstruction and Development Programme, RDP, we stated:
Business can profit hugely from the new opportunities offered by economic and social changes, especially the increased engagement with regional and international trade and the development of social and economic infrastructure.
This programme forms one of the cornerstones that instils confidence in the economic infrastructure of the country by sound management of the country's debts. Therefore, over the coming three years, the country will not have to borrow as much as it thought it would.
The Budget Review document states that of a total borrowing requirement of R67 billion over the Medium-Term Expenditure Framework, MTEF, only R3,6 billion will be borrowed from international markets. The Quarterly Bulletin of March 2008 reports that South Africa's total outstanding foreign debt increased by R5,8 billion from the end of the second quarter of 2007. Significantly, the increase in the country's external debt over the period was almost equally apportioned between foreign currency and rand-dominated debts.
Furthermore, over the medium term, government projects a negative borrowing requirement of R42,1 billion. The less the government borrows, the more it is able to reduce external vulnerability. What is of importance to our people is that the less the government borrows, the more it is able to invest in infrastructure and the more it is able to meet commitments to enhance a better life for all. This, of course, is what makes the international business community have confidence in doing business with our country. It can meet its commitments; hence we talk of business confidence. This is why business flourishes in South Africa because business is making a profit. Business must redistribute those profits by reinvesting in the economy which will create more job opportunities for the many who are unemployed and poor.
It is these economic opportunities that have led to the inflow of many foreign nationals into the country. We can never forget that the economy of this country was partly built on the backs, sweat and blood of foreign migrant workers with whom we toiled side by side on our knees, crawling on our stomachs in the pitch black bowels of the earth. We shared the dinky, funky and dirty cement beds in the compounds and ate isihlophoyi out of big, deep metal dishes. [Applause.]
The dawn of democracy was like a ray of light in those dark, dingy, dirty rooms we shared all those years. We cannot, in this age of hope, turn our backs against them. During apartheid days, every black person was treated with suspicion and dismay. We cannot treat every Nigerian, Mozambican or Somali as a criminal or a rapist.
Our economy makes our country a beacon of hope in the whole continent. Our political stability and fledging democracy make South Africa attractive to both investors and refugees. We therefore dare not make our neighbours and the world lose confidence in us through xenophobic attacks. [Applause.]
Through this programme, the department has created a healthy bond market that is internationally competitive. The proper management of domestic and foreign debt has led Moody's Investor Service and Fitch Ratings to revise South Africa's credit ratings from "stable" to "positive" last year. This was made possible by the prudent fiscal stance, the accumulation of reserves and the active management of external debt. In return, this has to some extent enhanced the resilience of the country's economy to external vulnerability.
The resilience of the economy to external shocks has been the co-ordinated work of the financial sector regulation division within the department and the SA Reserve Bank.
We advocated for an independent central bank in our RDP document and which is one of the reasons I insist that we are still on course, it has played a major role in building a sound and fairly deep capital market in South Africa. As the monetary policy tightened in the past couple of months bond yields increased. The global credit crunch does not appear to have much effect on the demand for South African bonds. This is an indication that foreign portfolio investors have confidence in our financial markets. It also makes room for corporate, municipal and SOEs to issue bonds in order to finance long-term investment projects and infrastructure for improved service delivery. Therefore, there is hope amid these global, volatile economic conditions. The ANC-led government, with its sound policies and visionary leadership, will weather the storms.
However, the National Treasury has been very slow in reviewing the Developmental Finance Institutions, DFIs. The current mandate of the DFIs does not address the objective and the desired outcomes of the state. Treasury has completed reviewing these entities according to strategic plans, yet, the committee has not seen the report. These financial institutions were serving about 1% of the targeted population, according to Statistics SA.
It was reported that most entrepreneurs - approximately 75% if my figures are still right - raise their start-up capital by borrowing from friends or family. The rest have no choice but to go to the loan sharks. The argument in this issue is: Do we have to put up with so much inefficiency; is it because the National Treasury does not have the insight of what is happening in these institutions or is it turf wars? Do the relevant line departments ensure that the leadership in these institutions understands the objective of government and have the necessary capacity to execute the mandate of the institutions - or is it an indictment against us as the people's representatives not playing our role by calling these institutions to come and account? It would surely be very interesting to get the report from the National Treasury and see where the problem lies or see the strategy that will be embarked on to reduce the number of entrepreneurs who commit financial suicide by resorting to bomashonisa [moneylenders] for start-up capital.
Many SOEs have had to be bailed out from year to year, yet there is supposed to be ongoing concerns. Worth mentioning here are cases like Alexkor or Sentech and Denel. A Special Adjustment Appropriation Bill had to be passed last year before the Medium Term Budget Policy Statement because some of these enterprises would not have been able to pay even their staff. This is an indictment of those companies because resources that could have been effectively used in the campaign against poverty, unemployment and diseases had to be used to prop up these institutions.
They are headed by individuals who have presumably signed performance contracts but can still keep their jobs. A looming danger is that some of these enterprises need to be classified under Schedule 2, which gives them a green light to borrow on the capital markets without consulting the Treasury. This holds the threat of plunging the country into long-term debts. With the current account deficit widening, ultimately the financial stability of the country is compromised. Under these conditions we will have no choice but to end up with a begging bowl at the door of the World Bank. Thank you, Chair. [Applause.]
Ms N N SIBHIDLA / END OF TAKE
Mr B A MNGUNI
Ms N N SIBHIDLA: Chairperson, hon members, ladies and gentlemen, the National Treasury's mandate is clearly outlined in the Constitution and other laws governing financial and fiscal affairs.
The Treasury is mandated to promote government's fiscal policy and co-ordinate macroeconomic policy. It is also mandated to ensure the stability and soundness of the financial and fiscal relations, manage the Budget preparation process and enforce transparency and effective management in respect of revenue and expenditure.
My input will focus mainly on the Sars as an organ of state, responsible for the collection of national revenue; improving tax compliance levels of South Africans; and providing a customs service that will maximise revenue collection, protect our borders and facilitate trade.
The President of the Republic, in his 2008 state of the nation address, outlined the priorities for this government. These priorities are the further acceleration and development of our economy, investment in health and education, and the fight against poverty, to mention a few.
From what the President outlined, it is clear that for government to be able to respond to these priorities, we will need fiscal capacity.
Lokhu ke kuyakusiza uhulumeni ukuthi akwazi ukubhekana nazo zonke izinkinga zabantu baleli lizwe. Kungaba yizinkinga zobubha, izinkinga zezifo noma izinkinga eziqondene ngqo nezomnotho. Lo msebenzi ke Sihlalo wokwakha isikhwama sikahulumeni waye wathwaliswa umnyango wezoqoqwa kwentela kahulumeni phecelezi I Sars.
Umongameli wezwe uphindile enkulumweni yakhe wanxusa zonke izakhiwo zikahulumeni ukuba zishintshe ebezenza ngayo izinto ukuze sikwazi ukubhekana ngqo nezidingo zabantu, "business unsual".
In responding to this call, and fulfilling its mandate, Sars launched a comprehensive modernisation agenda to transform the tax and customs administration. In its strategic plan presented to the committee, Sars identified five key priority areas which they hope to implement over the next 24 months.
These priorities are meant to improve compliance; encourage the use of sophisticated methods; enhance service processes and responses to queries; broaden the tax base; and prevent harm to South Africa's economy and environment resulting from the cross-border movement of noncompliant, illicit, or dangerous goods.
In the past few years we have noticed a number of improvements in relation to the work of Sars. Allow me to mention a few of these achievements. In the past two years we have seen an increase in the value of detentions of counterfeit and pirated goods. In 2007 alone, more than 700 counterfeit goods, valued at R40 million, were detained by Sars. I am trying to skip some of the issues that the Minister mentioned in his input. These goods included digital video disks, compact disks, clothing, footwear, cellular phones, vehicle parts and cosmetics. Sars has also detained counterfeit goods bearing the 2010 Fifa World Cup logo long before the event takes place.
The recent arrest of drug dealers is indeed a clear message that government is making progress in the fight against illicit trade. In responding to the challenges of border control, Sars has established a unit called the customs border control unit. The first 121 members of this unit graduated on 8 May 2008 and are deployed in various areas.
In his keynote address during the 2007 World Wide Web conference, WWW2007, the commissioner asked what the impact of technology on poverty was? Does it empower ordinary people? Another important question he asked was: How can Sars use technology to lower the cost of compliance and increase the incentive?
In response to his questions, Sars has rolled out the e-filing programme to improve service and educate South Africans about their obligations. Electronic filing does not only ensure that payments are validated prior, but also provides taxpayers and traders with the benefit of same-day processing.
Through the e-filing system government has collected more than
R50 billion in VAT revenue and R26 billion in PAYE revenue. There are about one million taxpayers who are using this system. The total revenue collected by Sars in 2007 was more than R400 billion and we are confident that more will be collected this year. Sars has also embarked on a programme to transform the personal income tax system process from a paper-based and labour-intensive process to a simplified, automated and electronic one.
The rationale behind this transformation is to reduce the costs to both Sars and taxpayers of meeting income tax obligations and to enhance the ability of Sars to effectively ensure compliance of taxpayers. There are more than 100 graduates that have been recruited under this programme. Again Sars is responding to one of the major priorities of our government: that of fighting poverty and creating jobs.
Mhlali ngaphambili ndivumele ndicacise kabanzi ngokubaluleka kwelicandelo likarhulumente. Ukuba eli candelo lingangakwazi ukuqokelela ezi ntywenka esinazo ngoku, nezo uMphathiswa wezeMali abike ukuthi siyakuzidinga kuleminyaka ezayo; loo nto ingathetha ukuthi lo rhulumente okhokelwa ngumbutho wabantu akayikukwazi ukufezekisa izithembiso zawo kuluntu lwazeMzantsi. Izithembiso ezo ziqukethe ukulwa indlala nokuqiniswa kwezoqoqosho ukuze kuxhamle uwonke-wonke. Sithi ke eli candelo maliqhubeke ukusebenzela ukuqinisa intando yesininzi ngokuthi lithi gqolo ukondla iingxowa zikarhulumente, ukwenzela ukuba akwazi ukuphendula kuluntu alukhokeleyo.
Lo rhulumente okhokelwa yintlangano kakhongolose uthi; njengoko wayetshilo uMphathiswa wezeMali; le ngxaki esikuyo sikuyo sonke ifuna ukuba sonke sibambisane. Unxusa lonke uluntu ukuba lungavumeli ukuthenga izinto ezingekho emthethweni njengamacwecwe omculo. Silapha singamalungu ePalamente siyanxuswa ukuba siqale kuthi ezindlini njengokuba sele eqalile umkhomishoni wakwa Sars ngokuvakalisa ukuba, ukuba uthe wahlangana necwecwe lomculo kwakhe uyakulikhupha ngefesile. Sithi wonke umntu waseMzantsi makenze ngokunjalo, angathengi izinto ezithengiswa ezitratweni ezingene ngomgunyathi kweli lizwe. Ezo zinto zibulala ezoqoqosho nenkqubela-phambili kuluntu lwaseMzantsi Afrika. Umbutho wabantu uyasisekela esi sabelo selicandelo ngenxa yezizathu esizibeke apha ngasentla. Ndiyabulela. [Kwaqhwatywa.]
Mr D T GEORGE / END OF TAKE
Ms N N SIBHIDLA
Mr D T GEORGE: Chairperson, to work effectively, our economic system needs to be stable and certain. It needs to be stable to absorb the shocks that it will experience over time. It needs to be certain for participants in the economy to understand and trust the rules of the game. This promotes the most efficient use of our limited resources.
We cannot afford to be complacent about the growth that we have experienced over the past number of years. Economies are dynamic and the winds of fortune can change very rapidly. Our economy has experienced several fundamental economic shocks. The process of black economic empowerment has substantially changed the rules of the game. The global economy is not charging forward anymore and we have had an outbreak of civil unrest.
Research indicates that it takes an economy 14 years to recover from disruptions resulting from violent episodes. The Human Rights Development Report released last week found that the number of South Africans living in poverty has substantially increased. Our economy is simply not growing fast enough to satisfy the economic aspirations of the majority of our population, nor can it absorb the reality of migration.
Countries throughout the world experience waves of migration that impact heavily on their economies. Conflict can arise in these circumstances where there is competition for limited resources. The scale of the recent attacks on migrants throughout the country sends a very loud and very clear message that there exists a view that the economic resource pool is a zero-sum game - one person's benefit means another person's loss. They do not believe that there is economic space for everyone. This is extremely sad, because it is not true.
Economies are not zero-sum games. It is possible for the economy to grow to the benefit of everyone, but for this to happen an environment conducive to economic growth needs to exist. This environment does not yet exist in South Africa. We are not on track to halve poverty by 2014, which requires a growth rate of at least 6% by 2010.
National Treasury is the custodian of the people's money and aims to promote economic development. It is fortunate enough to have access to the best economic researchers that the world has to offer. In its report on constraints on economic growth in South Africa the International Panel on Growth concluded that our current growth rate at well below 6% is not sustainable and that too few South Africans are gainfully employed. The Commission on Growth and Development concluded that resources, especially labour, must be mobile and that people cannot be lifted out of poverty in the absence of growth.
These research reports are rich in data and in-depth analysis, and dovetail very well. The International Panel on Growth identifies barriers to growth in South Africa and the Growth Report details what developing countries did right to grow their economies at accelerating rates on a sustainable basis. South Africa has the luxury of learning from the experience of others and we should grasp that opportunity while the window is open.
Although experience across the world has shown that economic freedom and political freedom are inseparable, the refrain that there should be more government intervention and planning continues. Economic freedom means that every individual has an open opportunity to participate in the economy, irrespective of their socioeconomic background, gender, age, political connectivity or any other irrelevant factor. Government's role is to facilitate this process.
After struggling for so long and sacrificing so much for political freedom, why should South Africans tolerate a secondary role in the economy as recipients of patronage from an increasingly interventionist state rather than a primary role as controller and decision-maker over their own resources.
To encourage debate on the recent research papers National Treasury should also promote research on clearly defining what the concept of a development state actually means in the South African context and exactly how it proposes to promote economic growth and deliver it. This is not South Korea!
Uncertainty over the future structure of our economic system does not promote macroeconomic stability, nor does it contribute to economic growth. National Treasury aims to promote and enforce effective management of the people's money. The public is outraged at the failure of government to provide the public goods that they are paid to deliver, despite having the necessary funds available. Government does not have any money of its own; it all belongs to the people and government should account for every cent that it spends.
Recent calls for state-owned enterprise to be set free of Treasury oversight and complaints from government departments over Treasury's apparent reluctance to release funds indicates that National Treasury is, in fact, doing its job as custodian of the people's money. National Treasury needs to ensure that its guidelines for access to funds are clearly understood and that the financial skills available in the various parts of the Public Sector are developed and improved.
For fiscal policy to be effective, government spending needs to be focused on appropriate microeconomic interventions that the private sector cannot provide.
Effective fiscal policy also requires effective tax collection. A good tax system requires informed taxpayers who understand how taxes are assessed, collected and complied with. Sars' education and outreach programme should achieve this.
The tax system should also be as simple as possible. Twenty-one types of taxes are levied in South Africa and nine different types of taxes are paid by the average company. There is room for rationalisation, and probably more. As the economy slows, tax compliance may recede. Sars needs to ensure its efforts to more effectively tax the informal economy to continue to broaden the tax base.
Research indicates that taxpayers believe that waste and corruption in government is high. It is important that taxpayers have information on how government spends their money and it is pleasing to note that Sars is making an effort to educate taxpayers on government spending patterns. A perceived link between moneys paid and benefits received will ensure that Sars continues to enjoy the people's consent and that the social contract between government and taxpayers is strengthened.
Information creates certainty. The role of Statistics SA is to provide information about the economic, demographic, social and environmental situation in the country. Economic participants use the information as part of the decision-making process. Output from Statistics SA should never, ever be wrong. Information disequilibrium can damage our economy.
Statistics SA does appear to be emerging from its credibility crisis, but this lingers in the minds of many and its key focus should be on demonstrating its reliability on an ongoing, sustainable basis.
The African continent began its migration away from the Gondwana mother mass 120 million years ago. Human migration began 200 000 years ago in Africa. It is not a new phenomenon. Statistics SA's work on demographic shifts in South Africa should inform the policy-making process and the application of resources. Nothing stays the same for ever, especially economic cycles and economic shocks. Our growth can surge, given the right policy choices.
The National Treasury, Sars and Statistics SA make a valuable and constructive contribution to the stability contribution to the stability and certainty of our economic system, and their efforts are greatly appreciated. Thank you, Chairperson. [Applause.]
Mr L JOHNSON / END OF TAKE
Mr D T GEORGE
Mr L JOHNSON: Chairperson, I want to say to you, Comrade Jabu, the fact that you are no longer on the National Executive Committee of the ANC does not make you any lesser an ANC cadre, and perhaps now you have more time than you would have had at the time. [Applause] I hear hon George seemingly has joined the ranks of the Communists! I hear him talking about nothing staying the same forever, and perhaps he understands a bit of dialectics in that context here.
Minister and Deputy Minister, leaders of various divisions reporting to the National Treasury -I hear a number of them out there – comrades and friends present here, this is our last Budget Vote debate of our third democratic Parliament. I hope I am using the correct English here without raising any eyebrows. It is fitting, therefore, that we salute ourselves during Africa month, that is May, after having just celebrated the 45th birthday since 25 May 1963.
As we continue celebrating Africa day and Africa month I dedicate this Budget Vote debate to those illiterate and innumerate, selfless brothers and sisters, some of whom gave their lives in South Africa and in their own respective countries for you and me today to enjoy and freedom – or to abuse it like some of us do, especially those from the other side of the room here.
A number of you African brothers and sisters are alive today, but continue to be marginalised, and have since been alienated by the very freedom you made sacrifices for. As we move with speed towards the next general election it becomes indeed business unusual, as enunciated in the 24 Apex Priorities by President Thabo Mbeki when he said, and I quote:
We speak of Business Unusual not referring to any challenges in our established policies but with regard to the speedy, efficient, and effective implementation of these policies and programmes, so that the lives of our people should change for the better, sooner rather than later.
Among the main categories of these Apex Priorities are the following: the further acceleration of our economic growth and development; improving effectiveness of our interventions directed at a second economy and poverty eradication; further strengthening the machinery of government to ensure that it has the capacity to respond to our development imperatives; and lastly, enhancing the focus on key areas in terms of our system of international relations with particular focus on some African issues and South-to-South relations.
Guiding us in the execution of these priorities will be the famous Statistics SA slogan, "If you cannot measure progress you cannot manage it". The main objects of the Vote concerned are administration and economic statistics, population and social statistics, methodology and standards, statistical support, informatics and corporate relations.
However, my debate will focus on population and social and economic statistics. I will also touch on poverty analysis and deal with the Consumer Price Index re-weighting.
The legislative mandate of Statistics SA remains that of –
… being a preferred supplier of quality statistics. Its mission, is to provide a relevant and accurate body of statistics to inform users on the dynamics in the economy and society through the application of internationally acclaimed practices.
In keeping with this object are the measurable fundamentals of transformation of society through reliable and quality statistics. They must be about measuring the impact these have on the poor.
One great philosopher put it better by proclaiming that all philosophers have interpreted the world, the point however is to change it for the better. I guess Dr George will know exactly what I am referring there.
As mentioned in published literature on statistics, the purpose is to assist organs of state, businesses, other organisations and the public in planning decision-making, monitoring, and assessment of policies.
Clearly, the impact and importance inflation has on end users are felt largely in the trends and movements in interest rates. The recently published quarterly figures of a rise to 11,1% in April, from 10,6% in March, do not point us to any brighter future at least, for now because of the spiralling effects these upward changes have in our economy.
Comrade Alec Erwin, the proposal of a 53% tariff hike by Eskom does not help our administrative prices component in the basket of consumer products. Perhaps think again, think McCain! [Laughter.] Together with oil and food prices, these will impact negatively when the Central Bank's Monetary Policy Committee meets on the second week of June 2008.
We must, however, warn mischievous industry players, who, when some of these goods are zero-rated by our caring ANC-led government, refuse to pass the savings on these zero-rated goods on to the end users, the consumers, but instead raise the prices instead of dropping them.
This practice cannot go unchallenged and must be attended to as a matter of urgency. Those industries that know that they are on the wrong side of the law must come forward before the anger of the people comes to them. We cannot accept these criminal acts - profiting from the poor - to continue illegally. We look forward to the published new weights in June 2008 and their release in February 2009.
Hon Minister, Statistics SA must be commended here on its quarterly labour force survey initiative. This measure when published in August 2008 will certainly place our country and its economy on a different pedestal as we plan and measure progress and achievements in the growth of our economy. On a quarterly basis, we shall now be able to measure growth or loss of jobs timeously. This will also help guide our policy-makers in the Eastern Cape and nationally on reported published figures that indicate an increase in the agricultural sector jobs.
Typically, agricultural sector jobs are by definition seasonal. Therefore, as this is unsustainable job growth, I submit that we need seriously to look again at the conclusion that had been arrived at when a 60% agricultural sector job growth was tabled. I am referring here to my constituency area, which is largely a farming area: Hankey, Patensie, and Loerie, amongst other places, where the agricultural sector employment is a seasonal employer offering no choice in this farming community.
Whilst we encourage our dear farmers to create jobs for the desperate jobless in this neighbourhood, we say please stop exploiting and chasing these employees away from their houses. According to the living conditions survey South Africa is part of the UN's community of nations that has adopted the Millennium Development Goal targets, amongst other things, of halving poverty and unemployment by 2014. As we move towards poverty measures we need, as a nation, to open our houses and homes to our statisticians and provide them with the correct and reliable information they require. The aim is simple, as a nation we must measure the impact of poverty in order to manage interventions.
We must remind each other once again that we have defeated apartheid and that no one will arrest us or kill us anymore when we volunteer information about ourselves to the statisticians, as this information is about improving our own lives. We cannot continue to be a nation that brags about a 17% uncertainty in its statistics. You can imagine the impact this will have on planning and its ultimate outcomes if we have a 17% deficit in our results.
The data supplied by the July 2007 survey, however, gives us a breather. It shows that in the space of four years the proportion of households with children reportedly to have gone hungry in the previous year have almost halved from 31% in 2002 to 16% in 2006, according to a professor at Stellenbosch University.
At this juncture we should join in applauding the "national war room for a war against poverty" initiatives by national government and different departments working together with NGOs and business to identify interventions required for urgent implementation to attack poverty.
In conclusion, ,as we continue confronting challenges of transformation in various fields human capital remains one of the over-arching matters that Statistics SA is also seized with. The ANC must congratulate Statistics SA on the improvement it has registered both within its own operations and the outputs that are reliably used by all and sundry. The room for improvement has led you to intensify this training by establishing your own training institute for statisticians alongside your exchange programme with the Makerere University in Uganda.
We look forward to hosting the 57th session of the International Statistics Convention later in the next year. This, once again, demonstrates the level of confidence that the international community has bestowed upon us as a nation and as a continent.
One of the central projects towards the 57th session is the mobilisation of Africa's statistician cadreship ...
THE HOUSE CHAIRPERSON ( Mr M B Skosana): Hon member, I regret your time has expired.
MR L JOHNSON: In short the ANC supports Budget Vote No 11. [Time expired.] [Applause.]
THE MINISTER OF FINANCE / END OF TAKE
Mr L JOHNSON
The MINISTER OF FINANCE: Chairperson, may I express my appreciation firstly to all the members who participated in the debate and secondly to all the parties for their support.
Let me indicate that my attention has been drawn to the presence in the House of the honourable Thomas Isaac, the Finance Minister from the State of Kerala in India and I think we should welcome him here. [Applause.]
Let me try and deal with some of the issues that hon members have raised in their interventions. Let me start with the hon Marais: I don't know if "triljard" is a word, I will have to find out, but we allhave to learn!
I think the point about the dependence on R2,1 trillion and the need to ensure that we sustain growth is a point we will take. As for the issue relating to the procedure to amend money Bills, it is necessary firstly firstly indicate that this is a constitutional imperative and secondly the wriiten text of my speech would indicate that I had submitted to Parliament in 1997 a Draft Bill on the procedure to amend money Bills and Parliament was of the view that the executive shouldn't draft the legislation, and now Parliament has come back with a Bill that looks distinctly not very different to the one we submitted 11 years ago. But there you go!
It is thus not something that comes out of the Alliance Summit but is it within the Constitution - which Mr Trent has just grabbed to check whether I am telling truth. [Laughter.]
In respect of the matters relating to the inflation target as indicated, it wasn't a surprise package. It was a conscious choice to try to find an anchor for monetary policy; and having taken it, as I stated previously, you then have to stay the course. We have a responsibility to ensure that the message remains credible but the point raised by the hon Mnguni, and in some detail by the hon Moloto, about the centrality of monetary policy within our macroeconomic armoury is very important.
I think that as we deal with growth it is the interrelationship between the macro and micro that we have to continue to pay attention to it. Let me deal with that in a moment. In respect of the issue of electricity privatisation, I thought part of the difficulty that we are living through is because at some point the government had been convinced that the private sector would come into the generation process. But the private sector won't do it at the current prices!
Now in making that appeal, hon Marais, it is important that you go back to what hon Johnson said because if you think 54% is a price hike that we can't afford, if you want the private sector in and you want to privatise all of this, go and ask at what price they will raise the capital to purchase or invest a new-generation capacity. Also ask what that will do to consumers. So my pleading is a simple one.
In the history of Eskom, now approaching a hundred years, it has always been self-financing. That was the basis on which relationships were struck. Apart from a small loan for the acquisition of some small power plant on the Zambezi in the 1930s, Eskom has always been self-financing. However, for the private sector to take it over and to come in and to leverage off the asset base, you will have to deal with price hikes that this country couldn't countenance. So, I plead with you: Just pause and consider and do the numbers before making the plea that you do.
On the issue of invest the confidence, it is one of those funny things because it is not a tangible issue that you can measure. You say correctly that it is something that is driven by sentiments but there are many countries that have financial and economic policies that would appear strange, but those countries continue to attract large amounts of foreign direct investment. It is not about the policies in as much as it is about market size; and those are the issues that we need to consider clearly in the context also of Africa.
Turning to the hon Singh, he makes a very interesting claim. I would like to ask him for his sources. He says that South Africa is amongst those countries that have the highest taxation on fuel in the world. I would like to check his source. I think he saw it on the label of Chappies bubblegum because clearly it has no empirical bases at all. [Laughter.]
If one looks at the cost of fuel in this country, the tax incidence on fuel is 14,3%. That is a specific tax. In fact, it is converted into cents per litre but at the pump it is 14,3%. If you add in the Road Accident Fund it jumps to 19,1%.
If you look at the tax range by countries, we don't even make the middle. If you take out of play the countries that have very highly subsidised fuel like Turkmenistan and Iran and the oil rich countries, we are one of the oil-importing countries that happens to have amongst the lowest tax incidence in the world. I will supply you with the details. I think it is something that we clearly have to continue to engage with.
I know that many European countries have ad valorem rates, so it's always a percentage of the price and I looked at the situation in the UK where the diesel price is now £1,25 per litre. When you convert that to rands then you can understand just how vast the difference is. But across all the Europe, they use ad valorem duties and this is what makes their fuel prices so prohibitively expensive.
If you look at the United States where to all intents and purposes there has been a margin of subsidisation on the fuel price, the environmental costs have led to some crazy decision that you see coming through on bio-ethanol and so on.
There has to be a balance and I'm not closed to a discussion about it, but I want us to have balanced, informed and rational discussions about how we take this matter forward.
In respect of the issue of VAT, you made a very strong proposal on VAT on chicken. The way in which we disaggregate what we believe to be our tax take on chicken, it's something in the order of R3,5 billion. Over 10 years, of course, that's R35 to R40 billion. How would that best be spent because I think you have to recognise that if you are collecting then you need to be able to spend it and the hon Singh at one time used to work with farmers in KwaZulu-Natal. What could we do with that kind of money to encourage people to cultivate and husband animals and make the difference that will improve on food security because, again, the risk about focusing exclusively on VAT is that we might again become the dumping ground.
I think it is a very important issue; what we are saying is that we need to focus on food security. There was a time when we looked at only the tariffs and we dropped those on chicken. We then became a dumping ground for chicken pieces from both Brazil and the United States. The hon Bekker, who was much younger then used to rave about this issue quite a bit, correctly so.
What I am saying is that in dealing with these issues we must take a balanced view. I think we all have the responsibility to ensure that there is an adequate supply of food for people and that this will be available as cheaply as possibly without doing irrational things, because the decisions we take will have to be sustainable.
I will, however, also of course sit down with the Commissioner and find out about this agreement that he had with you at the committee. I thought he said to me that spilt VAT rates are very difficult to administer and if it is not broken right now don't fix it, because VAT is a very secure tax in our hands. That is what they told me, so we are all entitled to change our minds from time to time.
Now I need to check as to whether it was hon Bici or Madikiza who was speaking. [Interjections.] It was Bici - he accused me of confusing them all the time. He says "a decade of conservative fiscal policy". I think it must be only in the UDM where this view would be held, because by all accounts we have lived through eight years of significantly expansionary fiscal policy.
In fact, if you look at the growth of our expenditure averaging at 9,2% per annum and at the growth of the economy then, the lines are diverging at such a rate that unless you are turning the paper upside down, you cannot arrive at the conclusion that these are conservative fiscal policies.
The question is how to sustain the momentum of what we are doing, and very importantly within that context, not to look at the aggregate numbers but rather to try to understand, as many contributors to this debate have raised, how to get more bang for our buck.
I want to express appreciation for the way in which hon Mnguni communicated the antixenophobic message. I think it is very important that we remind ourselves of who we are, why we have become this country that we are, and why we have a responsibility to ensure that the messages is getting out to these marginalised young people who might not believe in the same value system that we have as a country and as a people, and a people familiar with their history.
I think in respect of the supervision of microfinance, there is a split and it is something that we clearly have to look at and I don't think it narrowly emerges from a turf war between the DTI and us. There are some funny reasons as to why what was the Usuary Act was taken out of the then Ministry of Finance in 1991 and taken to the Department of Trade and Industry; but one has to look at the completeness and seamlessness of supervision and that I think is an important task that we must give attention to.
There is one issue that you touched on tangentially and that would relate to development finance institutions because they also have a role in respect of supporting small and medium enterprises and a series of other enterprises including industrial development. The report has just been concluded and it is now being processed, but I would like to see it on the floor of Parliament for debate in the shortest space of time. In respect of the state-owned enterprises consider, hon Mnguni, that you were speaking for me on that matter.
The hon George, I haven't seen the HRC Report that you referred to. But I think we must be extremely careful when we deal with matters that require a great deal of sensitivity including the measurement of poverty. I referred in my speech to some of the challenges we're living through in respect of trying to draw a line. Statistics SA is the agency charged with collecting statistics. It is a charge and a mandate given to it by the statistics Act. It is only an agency capable of doing this.
I don't know where the HRC drew their sources from. There might be independent research; the hon Johnson referred to research by Prof Servaas Van der Berg that wouldn't accord with the HRC for instance. I think the broad trend emerging from research I have seen is that we are making very significant dents in alleviating poverty but inequality is growing in South Africa, and don't conflate the two.
I think one of the most important sources - and it is important because of the width of its sample population - was the community survey that looked at the impact of change and social grants in respect of deciles 1,2 and even leaning into decile 3. It is a very important data source for the measurement of this and I would appeal for us to those sources. On the issues of the intervention state, let me say that I was very privileged to have been one of the 19 commissioners who worked on that growth report that was released last week.
There are few observations. The first observation is that not one of the 13 countries that have grown sustainably, that is for more than 25 years at 7% or more, has been what you would call a free market country. And if you look at the list of countries coming behind them who may have reached the growth levels, but not sufficient time - and it would include countries like Vietnam, India and so on - you wouldn't find them there either. The idea that growth is something that happens automatically is not a message that you would find resonating anywhere in the growth report released last week.
In fact, you can look at some of the issues of intervention: almost all of the countries have had capital controls for one or other time, some of them for all of the time of high growth. All of the states had high levels of interventions peculiar to their own circumstances. So if there is a message that I would like people to have from that report, it is that if you want economic growth it is important to check out your ideology at the door and debate the issues for what they are.
In this country our big issues have to be inequality and one of the key measures of inequality has to be unemployment and the question then of how this market which has failed to generate employment will suddenly wake up tomorrow morning and automatically do it. Clearly, it needs a serious of stimuli, and amongst those stimuli would have to be what we do as a government, how we can crowd in a private sector investment and what the messaging is and how we will get there because there would have to be some very special measures to be able to do that.
Similarly, the issues of equity have been treated quite extensively in that short report. In South Africa the big issue, I think that is something that comes from different experiences, the reason why we've had to opt for measures such as black economic empowerment and employment equity is that the experience of apartheid has set us so far apart and unless you take decided measures, nothing changes. The path of least resistance means that you will always go to where you've been and then you will not be able to meet the objectives of nonracialism, nonsexism and true democracy in this country.
In respect of the very last point I would like to make, information disequilibrium is clearly a worrying thing when it happens. I think that the plea you make that this thing should never be wrong is not a bargain that I think Statistics SA or any other statistical agency anywhere in the world can meet. There are always difficulties.
Statistics are never absolutely correct because they are always the best estimates against the defined methodology, and that is the precept under which we work. We will continue to try and improve on the outputs and the outcomes and ensure that the levels of confidence grow in leaps and bounds.
Chairperson, to you and the hon members let me express my sincere appreciation for the support and as hon Johnson said that this is our last Budget Vote debate in the Third Parliament of the democratic South Africa. Let me express my deepest appreciation to everybody for the participation, not just today but throughout in the detailed work of the committees of Parliament. Thank you.
The HOUSE CHAIRPERSON (Mr M B Skosana): Hon Minister, I am sure all the members appreciate that. That concludes the debate on the Budget Votes and the business of the Extended Public Committee. The committee will now rise.
The House adjourned at 17:53.
END OF TAKE
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