Hansard: Appropriation Bill : Debate on Vote No 7 National Treasury [including South African Revenue Service], and Vote No 11 – Statistics South Africa
House: National Assembly
Date of Meeting: 30 Jun 2009
Summary
No summary available.
Minutes
UNREVISED HANSARD
EPC – COMMITTEE ROOM: E249
Wednesday, 1 July 2009
WEDNESDAY, 1 JULY 2009
PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249
_______________________
Members of the Extended Public Committee met in Committee Room E249 at 14:02.
House Chairperson Mr M B Skosana, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.
APPROPRIATION BILL
Debate on Vote No 7 – National Treasury [including South African Revenue Service], and Vote No 11 – Statistics South Africa:
The MINISTER OF FINANCE: Chairperson, hon members and the Chairs of the portfolio and select committees, this is either a very difficult moment to become a finance Minister or a very opportune one, depending on one's perspective. [Laughter.]
It is a testing time because the world is facing its deepest economic crisis in decades. South Africa is in its first recession in 17 years. Our revenue collection has weakened significantly and spending pressures are mounting, on the one hand. On the other hand, a new administration, full of enthusiasm, has just taken office and will do more and will do better.
New structures and Ministries in government have been set up to enhance the performance of government. It is also important to point out the strengths that I have been fortunate enough to inherit. With a low debt-to-GDP ratio, the fiscal position is in a much better shape than at any point in our history. My predecessor built a solid foundation for public finances, and the institutions that report to the Ministry of Finance enjoy respect amongst their peers throughout the world, and I'm sure also in this House.
And so even though we find ourselves in very trying circumstances, we can take comfort in both our track record in fiscal and economic management and in the strong institutional base within which we have to find solutions to our critical challenges. Our task today is to outline the economic context in which we find ourselves and to set out the role that will be played by each of the key institutions that report to the Ministry of Finance over the course of this fiscal year. These include the National Treasury, the SA Revenue, Service, the Financial Intelligence Centre, the Public Investment Corporation, the Financial Services Board, the Development Bank of Southern Africa and the Land Bank – and many of these institutions' senior management are present today to witness this debate.
During this interim period, Statistics SA also falls under the ambit of the Ministry of Finance, as it has over the past years, and so I will also deal with its key strategic challenges here whilst I ask the House to note that Statistics SA will be moving over shortly to the Minister in the Presidency responsible for planning.
The global economy has deteriorated at a much faster pace than anyone anticipated. In the six-month period from October last year, industrial production declined by almost a quarter. Falling industrial production globally sent commodity prices plummeting and, as a result, our mining production is down sharply on a year ago.
Driven by lower mining and industrial production, South Africa's economy contracted in the last quarter of 2008, and in the first quarter of 2009 experienced an annualised 6,4% contraction. This is the worst quarterly performance since the early 1980s in South Africa.
Last week, Statistics SA announced that 179 000 South Africans in the formal sector lost their jobs in the first quarter of 2009 – again, the worst quarterly performance in the labour market for over a decade. The GDP growth forecasts by the World Bank, the OECD and the IMF for South Africa for this year range from -1,5% to -2%; quite far from the 1,2% growth we projected at the time of the Budget in February this year.
The consensus amongst governments at the G20 meeting in Switzerland last week is that the global economy will begin a slow recovery towards the end of the year; slow because governments will have to take steps to reduce their deficits and because households and corporates are still repairing their balance sheets. Given the information base today, it is highly unlikely that the world economy will return to growth rates of 4% or 5% in the next few years. Given the close relationship between our own growth and global growth, this outlook is worrying for our own growth prospects over the next few years.
Our economic response in the form of fiscal expansion, monetary easing, infrastructure expansion and public employment programmes is making a positive contribution to our economic performance, but cannot offset the loss of demand from the global economy and hence cannot prevent some of the job losses that we are experiencing.
After holding up reasonably well in the past year, our revenue collection has deteriorated in the first three months of this fiscal year. I suppose you are going to say that you want to redeploy me there. [Laughter.] At the moment, we are about R19 billion below our benchmark target for revenue for this part of the year. Let me repeat that: We are R19 billion below for this part of the year in our revenue collections.
If the present trend continues, we could be as much as R50 billion to R60 billion below our target by the end of the fiscal year. If we assume that spending will stay within budget, our deficit will be higher than we estimated in February. It is too early in the fiscal year to make a reliable prediction of the fiscal outcome, but it is already clear that spending will substantially exceed our revenue this year. We should remind ourselves that our fiscal position would have been far worse had we not had a surplus in 2007-08.
When a country faces a reduction in its revenue, it has limited options. It can either reduce public spending, or it can borrow more to maintain its spending growth. In many countries, even countries such as the US and the UK with budget deficits over 10% of GDP, deep cuts in spending have had to be effected.
Because of our low debt-to-GDP ratio and our strong fiscal position – notwithstanding the figures that I have given you - we can afford to maintain our present spending level and increase our borrowings to offset the revenue loss. We can maintain our spending level, but we have to spend differently.
We choose to do this because reducing our spending level now will add to the weakness in the economy and will impact to a greater degree on the poor and the vulnerable in our society. We have the fiscal space to maintain our spending by borrowing more today, but this space is not limitless and it has implications for how much room we have in the future.
There are several areas where government would like to maintain strong growth in spending. The key budget priorities outlined by the President in the MTEF include the creation of jobs, fighting crime, improving the quality of education and health, and investing in rural development.
We have also committed ourselves to finding more money for the occupation-specific dispensation for doctors. We are committed to increasing spending on public employment programmes to ensure that resources are not a constraint to reaching our targets for Public Works programmes. We will continue to provide adequate resources for our antiretroviral programmes and to improve the capacity of our health system.
Because we choose to protect spending on these key priority areas, it implies that we will have to find savings in other parts of the budget. Following a briefing to Cabinet this morning on the fiscal outlook, my Cabinet colleagues are determined to work collectively to review our spending plans, to reprioritise the budget, to reduce wastage and inefficiency and to get greater value for each rand we spend. Deputy Minister Nhlanhla Nene will deal in greater detail with our value-for-money agenda when he speaks later this afternoon.
Finding savings is not only about reducing budgets, it is also about combating corruption, wastage and leakage in government. In particular, corruption in our procurement system is of grave concern to us. Work is currently under way to establish a supply-chain management compliance monitoring unit in the National Treasury. We call on all honest public servants and the South African public to join us – and, I am sure, the people across the bench here as well, the hon members - in identifying and rooting out corruption.
Public sector employment is rising at a healthy pace, with over 45 000 additional people employed in the past two years, mainly in health and police. Designing and implementing occupation-specific salary dispensations for specific categories of public servants has been a challenge and has cost us more than originally budgeted for.
Government, led by my colleague, Minister Richard Baloyi, will endeavour to find the right balance between creating new jobs in the Public Service, appropriately remunerating skilled professionals, and general salary increases. We cannot borrow money to pay salaries and we cannot raise taxes in the present economic environment, you'll be happy to hear.
Increasing our deficit today as a result of falling revenue is a sensible economic strategy to cushion our economy from the effects of the downturn. Increasing spending further when revenue is falling, especially spending that cannot easily be reversed, cannot be justified.
Our fiscal response to the crisis constitutes a significant contribution to sustaining growth and investment in the economy. We have also had a significant degree of monetary easing, with lower interest rates helping households to repair their stressed finances.
Our infrastructure programme is well under way and we are actively engaged with our state-owned enterprises to ensure that they have access to the finances required to carry out their plans. Both the Department of Public Enterprises and the Department of Trade and Industry are taking steps to ensure that, over time, we can increase the local content of the purchases made by our state-owned enterprises.
The second phase of the Expanded Public Works Programme is being implemented and, in the case of the community works programme, some plans are being brought forward from next year so that we can absorb more people into public employment programmes.
Today is the start of the 2009 tax season for individual taxpayers and trusts. The deadline for the submission of manual tax returns is
18 September 2009, and 20 November 2009 for electronic submission. An informal request to all of you: If you think you are going to be owing Sars money, please submit your returns earlier! [Laughter.]
Sars has a highly capable team of professionals that will increase its focus on tax compliance by intensifying risk management and increasing its audit capacity. Sars will, over this financial year, employ an additional 1 000 auditors and specialists in finance and banking; intensify its focus on high-net-worth individuals and their tax behaviour; and focus on unravelling tax schemes aimed at aggressive tax avoidance.
Already last week, Sars issued over 7 000 letters of penalties to businesses that failed to comply with the PAYE filing requirements. This includes those companies who filed late. At the same time, a further 4 000 cases in which employers failed to submit tax have been referred for criminal investigation and prosecution.
This year Sars will introduce a range of enhancements to the filing process to improve its service to taxpayers. These enhancements will include, amongst other things, the following. Taxpayers will receive a tax return with a high level of accuracy of information which Sars will have prepopulated onto their returns. Sars will, for the first time this year, be validating bank accounts of taxpayers on an automatic basis to avoid delays in refunds which affected 400 000 taxpayers last year. Sars will provide taxpayers with a statement of account for the first time, which will have a history of the taxes that they have paid and the returns they have submitted as far back as 1999 – so that we can have more accuracy in these accounts. I trust that members of this House will lead from the front by filing their returns correctly and on time.
Our development finance institutions in general are playing an enhanced role during the present economic crisis through financing public investments and drawing private finance into public investment programmes. Most of our DFIs are in a sound financial position, and are well placed to play a greater role in providing loans or liquidity in support of government's economic objectives.
We also acknowledge that in the context of enhanced mandates, some DFIs might need support. In this regard, we are close to concluding the process of expanding the callable capital of the Development Bank of Southern Africa from R4,8 billion to R20 billion. This will enable the DBSA to expand its loan book with a further R108 billion over the next five years, focused mainly on poor municipalities that cannot access capital markets. In addition, the DBSA continues to provide technical and managerial support to municipalities through the Siyenza Manje programme.
The Land Bank, I am happy to report, is in a much better position now than the state in which the Treasury found it over a year ago, and has provided me with a comprehensive turnaround strategy and corporate plan. [Applause.] Various steps have been taken to improve governance and internal administrative and financial processes.
Evidence of success is the fact that a total of R560 million in previously nonperforming loans have been recovered. In addition, the turnaround strategy allows the Land Bank to focus on lending to the developmental segment of the agricultural sector. We are in the final stages of concluding a support package for the Land Bank that will go a long way to enhance the financial sustainability of the bank, and will give greater effect to the rural development agenda of our government.
The Government Employees Pension Fund is the custodian of the savings of public servants. In addition to providing fiduciary oversight over the savings of public servants, the GEPF administration will focus its efforts on improving its service towards its members and indeed to its pensioners.
Since the establishment of the Public Investment Corporation as a registered financial services provider, the PIC has substantially improved its operations, has deployed world-class asset management IT infrastructure, and has been on a drive to recruit the best people from the financial sector. We are happy to report that over the past three years the PIC has outperformed the benchmarks set for it by its clients.
The corporation also spearheaded the establishment of the Pan-African Infrastructure Development Fund, through which the trustees of the GEPF have agreed to support infrastructure development on the African continent. We are pleased to report that the fund has US$625 million under management currently. Going forward, the PIC will continue to contribute to the development of financial markets on the African continent.
Our financial institutions have not had to endure the kind of corrective processes that banks in other countries have had to undertake. The combination of prudential regulations, banking regulations and the introduction of the National Credit Act served to moderate the desire to indulge in risky business practices. Our key regulators, the Registrar of Banks, the Financial Services Board, the National Credit Regulator and the Bank Supervision Department in the SA Reserve Bank, have all served us extremely well.
We will continue to ensure that they work together more closely through the Financial Regulators Forum, which I have established. We are watching closely to see what is happening in the rest of the world so that we can continue to refine our regulatory regime, ensuring that it remains at the cutting edge. We will also review the current regulatory architecture to ensure that it remains robust and responsive.
That we have not had major difficulties in the financial sector in South Africa is not cause for complacency, however. News of the latest Ponzi scheme to defraud our citizens is a reminder that there remain risks in the financial sector. I have called upon regulators to join a task team, together with the law-enforcement authorities in South Africa, to make sense of the media stories and to separate fact from fiction related to this matter. While the losses have been severe, various media estimations of the extent of the scheme have alleged amounts of between R5 billion and R18 billion. Current indications, however, are that the scheme amounts to approximately R2 billion.
The Financial Intelligence Centre has co-ordinated the overall functioning of a legal and administrative framework for ant-imoney laundering and terror financing in South Africa. This system was subjected to a rigorous audit last year by the Financial Action Task Force, the international standards-setting body, with very positive results for South Africa. The report reinforces the integrity of our financial system and it will have a positive impact on the credit ratings for our financial sector institutions.
Allow me to turn to the postrecession environment. Let's remind ourselves that whilst it is important to have a stimulus package for the crisis that we face today, it is equally important to have a plan to exit the crisis and to exit the stimulus package. Just as responding to the crisis is important, it is equally important to start planning for the postcrisis period, as I have just said. Our view is that the economic recovery will start later this year, but it will be slow, it will be gradual, with employment growth lagging behind the economic recovery.
Global growth of about 2% to 3% a year is projected for the next two to three years following this recession. Given our close correlation with global growth, this probably implies that we are likely to grow by about 2,5% to 3,5% a year for several years following this recession. Growth is likely to come from a recovery in global industrial production and in higher demand for commodities as fixed investment rises in China and India. Households are likely to gradually increase spending again next year, but consumption growth is likely to lag GDP growth for a period as household savings rise.
The past year has shown us that capitalism is prone to periods of excess and exuberance – to bust and boom, if you like. Going forward, one of the roles of public policy is that we have to protect the poor and vulnerable from the effect of these boom-bust cycles; and economists are increasingly of the view that public policy has a greater role to play in the regulation of markets to prevent such excesses and exuberance.
Reducing unemployment and poverty is likely to be much harder in the period ahead. The pro-poor nature of the budget will have to be enhanced further to ensure that we continue to expand the social wage that goes to poor households in South Africa. We will have to continue to act to reduce inflation as this undermines our competitiveness, making it harder to grow employment. We will also have to take further steps to improve our competitiveness through reducing the burden on small business, enhancing competition in our economy and improving the performance of the public sector. The Treasury will work closely with other economic departments and the Presidency to deliver on these key objectives.
As the economy recovers, revenues are likely to rise, providing the space to reduce our deficit. However, because of our higher borrowings now, our interest costs will be much higher and so the postrecession period will have to be characterised by a period of fiscal consolidation. This does not mean that budgets will have to be cut. It does mean that spending growth will be more moderate than during the previous seven years. This is the price we will all have to pay so that we can maintain our spending levels now during the crisis.
The President has announced significant changes to the structure of government. The intention is for government to operate differently, and to reorientate government towards delivering better service in a more integrated and focused way. This is to be driven by a planning process that is more coherent and a centre of government that is more adept at intervening to resolve delivery pitfalls. In addition, Parliament has passed legislation that has implications for the budget process. We look forward to interacting with both the Presidency and Parliament to explore what needs to change in the budget process and how the Treasury can support better oversight and governance.
One of the changes made to the workings of government is that Statistics SA will shift, as I mentioned earlier, from the Finance Ministry to report to Parliament through the new Minister in the Presidency responsible for planning. Because these changes are still under way, it remains my task to introduce Budget Vote No Vote 11: Statistics South Africa.
In the year ahead Statistics SA will report on economic growth as it usually does. Additionally, the GDP will be benchmarked and rebased to a reference year of 2005, drawing on the results of the 2005 Income and Expenditure Survey.
To contribute to a greater understanding of poverty, Statistics SA will conclude the Living Conditions Survey by October this year and release the results by April next year. The next five-yearly survey of income and expenditure is due in 2010 and a pilot will be conducted in this fiscal year. After a number of false starts on the Producer Price Index, the organisation has decided to give as much attention to the PPI as it did the CPI. Starting in this year, Statistics SA will initiate a fully fledged revamp of the PPI. In October 2010, Statistics SA will pilot Census 2011, surveying a sample of 480 enumeration areas covering approximately 60 000 households.
The departments and agencies that report to the Ministry of Finance are geared up to contribute towards government's objectives and, in particular, to respond appropriately to the present global economic crisis. In spite of a worrying fiscal outlook, our strong public finance track record will enable us to continue to spend on those services that create jobs and impact positively on the poor and the vulnerable in our society.
Significant reprioritisation of the budget is required and government, collectively, will work with Parliament and civil society to ensure that we are spending more on our priorities. We want to encourage greater oversight by Parliament and by Parliament's committees, and we are looking forward to robust engagement with the legislature. These are difficult times that will require a unity of purpose in all of government to meet our objectives. We are prepared, I assure you, for this challenge.
In conclusion, I want to thank Mr Mr Thaba Mufamadi, the chair of the Standing Committee on Finance; Ms Mmathulare Coleman, the chair of the Portfolio Committee on Economic Development; and Mr Elliot Sogoni, the chair of the Standing Committee on Appropriation, for their initial co-operation. I can assure them that we will work with them in the next five years to strengthen parliamentary oversight. Thank you very much. [Applause.]
Mr A T MUFAMADI
THE MINISTER OF FINANCE (Mr P Gordhan)
Mr T A MUFAMADI: Hon Chairperson, hon Minister of Finance, Deputy Ministers of Finance, hon members and colleagues, heads of divisions of the Finance family present here and distinguished guests, on behalf of the Standing Committee on Finance, I would like to take this opportunity to congratulate the hon Minister and his Deputy on their respective responsibilities and appointment to serve our nation.
Furthermore, may the Minister of Finance assume office with our commendation for the sterling work done during his time as the Commissioner of Sars. We would like to wish him well in these trying times, which continue to present endless opportunities at the same time.
The challenges before us, hon members, have created unique grounds, as well as an opportunity for new ideas not only to emerge, but to be embraced. Indeed the time for a new generation of economists, scholars and intellectuals has arrived; we are not confined as a country to following previously carved out patterns of what has been said and done.
It is not only about what has failed in the recent and not-so-recent past, but a time to explore beyond what has been experimented. It is about putting to work devices of our own making, in order to realise a developmental state informed by our own practical experiences as a nation.
Much has been said, and many a speculation made about the ups and downs, born of the current recession parading on our market shores. I would like to remind this House that we are not strangers to this precarious situation as a country. Lest we forget, albeit the much deserved celebration of the 1994 moment of victory, one of the stinging realities that came with us assuming responsibility, as a democratic government, was the negative economic growth we inherited. In 1997 and 1998, because of the synergy which characterised our leadership, implementation of the growth and development strategy saw us safely on the other side of the Asian financial meltdown crisis.
Of course, many changes may have altered our situation since then, but we still have the capacity to withstand and rise above the storm, as we have never abandoned our right to grow the economy of the people for the people. In this strength, I reiterate that the time for regurgitation has come and gone, because that which comes, must pass and make way for the new. It is my fervent belief, hon Chairperson, that the same will be said of this recession in years to come. Hon members, growth and sustainability are not foreign concepts to our ability; the nation and the solution are in our hands.
The National Economic Development and Labour Council's framework for South Africa's response to the downturn, in which government is a core participant, is beginning to address core issues, in a compact manner which requires all role players, that is, Labour, business, civil society and the actively participating general public, to carry their weight.
We dare not fail! Our commitment to the nation is irrevocable, no matter how difficult it may appear. We will, therefore, be required to do more than is expected. We are in agreement with you, hon Minister, that more can be achieved with what is already available.
Prudence and discipline in the management of fiscal policies is required more today than ever before as the days of the public spending boom are over. We need to bear in mind that leadership is about taking responsibility for good and bad, even if it means taking unpopular decisions.
We have taken note as a committee that the fiscal policy framework, as outlined in the MTEF, presented by the previous Minister of Finance, Minister Manuel, in February this year, has since been drastically altered by the new economic realities prevailing in the world today.
There is no doubt that this change has had a serious and adverse impact on our situation, as it is the case with almost all developed and emerging economies around the globe. As a country, we have already started feeling the impact and consequences of unquenchable capital greed of the so called free market economy, marking the worst economic recession ever experienced, in the last seventy years.
The most acute task facing policymakers is not to admit or deny the reality of the current downturn, but to look at what measures and tools are available to avoid what might become a socioeconomic crisis. We are beginning to see the levels of joblessness and poverty increasing, which has a direct consequence on our revenue base. This poses a challenge to Sars in particular, to attain revenue projections as outlined in the MTEF. The Minister has already informed this House that we are down by almost R20 billion.
Nonetheless our commitment to the creation of decent jobs should be underpinned by a clear understanding by all in the labour market that job retention is an integral part of sustaining livelihoods in our communities.
In the public sector, to avoid the social crisis, we require a civil service cadreship which will place millions of our people at the centre of its thought process; thinking of their welfare, their future and their right for self-realisation.
This nation requires a management cadreship whose focus is on the broader development of its constituency – the people; a management which can be trusted and counted on to look after public resources as their own, because nobody uses somebody else's resources as carefully as he uses his own; a management that will not create a personalised future base by allocating huge tender contracts to companies with which they have a personal relationship and where seats are reserved for them when they leave their jobs. [Applause.]
This behaviour is, in fact, a criminal offence, because in reality it is stealing from the state, depriving ordinary people of a share in what rightfully belongs to them. This nation requires a management in the Public Service and parastatals who will not compete with SMMEs for tenders; and lastly, a management in the supply chain who will root out corruption and collusion between state officials and the private sector.
This is the essence of the efficiency and effectiveness required of our service and the management process today.
The hon President of the Republic in his reply to the Vote No 1, reminded us that whilst he is President of the Republic, his government derives its mandate from the ANC Polokwane resolutions.
Therefore, coupled with the fact that the ANC lives, the ANC leads and the ANC rules, there is no need to debate that obvious reality. Everybody in the public service and parastatals must understand that people have always been, still are and always will be, our primary objective - Bathopele. [Applause.]
In its Polokwane conference, the ANC resolved to build a strong developmental state which puts matters of health, education, rural development, job creation and sustainable livelihoods at the helm of its programme. We strongly believe that the fiscal framework, providing guidance to the allocation of resources, addresses these priorities.
In the health sector, for example, the ANC believes that the demonstration of concern on the part of the state is its ability to care for the health needs of its citizens, saving them from death. Hon members, we need to understand that the availability of state resources cannot address this problem in isolation. There is a paradigm shift in mindsets which needs to take place on the part of our service providers in the health sector, who, in addition, must adopt an attitude which seeks to divorce health care matters from questions of personal means or factors irrelevant to it. Medical care must be equally available to all in need, regardless of income, and health workers should be there at all times to serve the most vulnerable and the sick people in particular.
With regard to the economic transformation, hon Chairperson, the National Treasury's legislative mandate is based on Chapter 13 of the Constitution, and other laws governing the financial and fiscal affairs of the Republic. It is mandated amongst many other responsibilities to promote government's fiscal policy as well as the co-ordination of macroeconomic policies.
It is clear that whilst our economy has not only shown signs of resilience in the current global economic downturn, it has also in the past managed to register significant positive growth, which has not been matched by an accompanying number of jobs.
Therefore, growth has not yet translated into real and meaningful change for the poor. We view the Treasury's Budget as a catalyst for government to realise its stated objectives and priorities, as outlined in the state of the nation address.
Fifty-four years after the congress of the people outlined their perspective and vision of a new South Africa-to-be and made a clarion call that people must share in the country's wealth, to date, 15 years into the new political dispensation and the fourth democratically elected Parliament, this nation still rates as one of the countries with the highest Gini coefficient in the world. This means that whilst we have made some progress in terms of economic transformation, our policies have not yet addressed the intended objectives. Thus, the levels of disparities between the rich and the poor continue to grow.
At this point, this House may want to ask: What has this economic growth achieved in the past? Hon members, I have no hesitation in responding as follows: Macroeconomic fundamentals over the past 15 years have placed South Africa in a position to reduce its debt-to- GDP ratio. That has increased our positive standing internationally, and our market rating which has resulted to a certain ... [Interjections.] [Laughter.]
The HOUSE CHAIRPERSON (Mr M B Skhosana): You have two minutes.
Mr T A MUFAMADI: Yes, thank you.
With regard to economic empowerment, the ANC affirmed its commitment to the transformation of our economy and implementation of BEE and affirmative action policies. In reviewing our transformation in and around BEE, we have come to the conclusion that BEE, as it stands, was a minimalist programme reflective of the constraints posed on the democratic government by the sunset clauses. As we reviewed economic empowerment, we factored in elements which move beyond the narrow definition of equity ownership. It is about the empowerment of the people, leading to ownership, through various programmes like skills development, entrepreneurship and the constitution of various agencies to facilitate funding in support of these initiatives.
The joint committees have considered the strategic plans of both the Department of National Treasury, including Sars, and Statistics SA, respectively. We hereby recommend to the House that the Vote under consideration be approved. It is important to note that the DA, in our committee deliberations, indicated that in principle they will support the budget although a formal decision still had to be taken by their caucus.
We wish to thank the hon Minister and Finance family for their constructive and purposeful engagement with the committee. We look forward to a constructive but robust relationship moving forward. I thank you. [Applause.]
Mr D T GEORGE
Mr A T MUFAMADI
Mr D T GEORGE: Thank you, Chairperson. Government exists to deliver services to the people. It collects tax generated from economic activity to do this. After 1994, South Africa enjoyed the dual benefits of being fully integrated into the global economy and the rising tide of global economic growth. Under these conditions, the National Treasury was able to pursue prudent macroeconomic policies that eventually resulted in the budget surplus and relatively low levels of debt that existed before the global economic crisis hit home.
During this time of relative plenty the opportunity arose for government to apply our money to develop effective people-centred departments that would focus on service delivery. But the opportunity was lost. A recurring theme during the current budget debates is government's failure to deliver service and the need for departments to be turned around, for public enterprises to be rescued and for a renewed commitment by public servants to actually service the public. The people have not received value for their money.
As economic activity reverses into recession, so too does the tax revenue stream. Under these conditions, National Treasury must ensure that government departments understand the need for appropriate austerity budgets that should be reflected in the adjusted estimates of national expenditure in October.
National Treasury aims to promote economic development. To appease its alliance partners, government has now established an entire Ministry of Economic Development, but without a budget, without resources and with a duplicate mandate. At a time when the national Budget is already in deficit, that is likely to widen …
Prof B TUROK: Chairperson, on a point of order: I really think the member is in the wrong committee. You know, this is finance, and we are dealing with the Treasury. We are not dealing with the Public Service. Could we correct the gentleman?
The HOUSE CHAIRPERSON (Mr M B Skhosana): Hon member, proceed, please.
Mr I O DAVIDSON: I suggest you try joining the dots; you might understand.
The HOUSE CHAIRPERSON (Mr M B Skhosana): Can you let the hon member proceed, please?
Mr D T GEORGE: Thank you, Chairperson.
At a time when the national Budget is already in deficit, which is likely to widen, the question must arise of why this additional expense is required and how it will be funded. The impact on the National Treasury must also be clarified.
National Treasury has already raised its concern that skilled resources are in limited supply and that the remuneration of its technical experts does not match that offered in the private sector. Despite this, and unlike many other government departments, the team is functional and ably led. Destabilising the National Treasury team at a time when extreme pressure exists in the wake of the recession must be avoided. National Treasury needs to provide a reality check in terms of public spending. It cannot do this as a weak and fragmented unit.
It also needs to focus on accurately modelling the likely impact of the recession on our economy and the most appropriate fiscal response, and not be distracted by having to negotiate in-built structural tensions.
Uncertainty is not good for our economy and clarity is required on the unfolding experiment of the developmental state. In response to the DA's questions on the nature of the developmental state, former Minister Fraser-Moleketi responded that, and I quote:
There is no simple plan that delineates progress towards the attainment of the "developmental state" and South Africa cannot be said to base its approach on any existing model.
At the heart of the concept lies a belief that developmental goals will be driven by the Public Service under the commanding hand of the state. [Interjections.]
The HOUSE CHAIRPERSON (Mr M B Skhosana): Order, hon members!
Mr D T GEORGE: The response goes on to say:
The state therefore requires a capable and effective public service in order to plan and guide the implementation of the national developmental plan.
We have already experienced the inefficiency of the Public Service. We just need to visit a public hospital or Home Affairs office to see the consequences of dysfunctional public service delivery. Our public enterprises lurch from on financial crisis to another, draining our scarce financial resources, yet they are viewed as entities through which the developmental agenda will be driven. The last thing our economy needs is the creeping hand of public service inefficiency clutching at its throat.
South Africa cannot afford to experiment with its economic freedom. A model that places the state at the centre of the economy as a controller of resources and a dispenser of patronage denies the economic freedom that should follow from the long and painful struggle for political freedom. Command economies across the world did not work because they denied this human right.
Policy choices must focus on unlocking the opportunities for all members of our society. The DA's vision of an open opportunity society remains rooted in an unwavering belief in the empowerment of the individual, through a focus on boosting the economic engine room that delivers the revenue for government to function. This is where government should focus its intervention.
Following the global economic crisis, governments across the world have been scrambling to put in place rescue packages to bail out industries and even whole banking groups. There is, however, a very clear understanding that when this crisis passes, as it most certainly will, the hand of government intervention will retract so that the real drivers of economic growth and revenue generation, that is, business and entrepreneurs, can thrive.
The South African response to the crisis is complicated by the outdated view that government can centrally command an economy. There remains a strong belief in government and amongst its alliance partners that, following intervention, the hand of government must remain firmly in command of the economy. Thus, under the guise of being a response to the recession, there exists a danger that government will command a far greater role for itself and never ease its hand.
This will have consequences when the recession eases and economic growth returns to our economy. We know that our economy will recover, we just don't know when and by how much. If the poison of government paralysis is injected too far into the veins of our economy, our ability to survive the recession, the possibility of an early recovery and the hope of a significant upturn will be severely constrained.
When economies contract and households experience financial pressure, their attention often turns to investment schemes that promise to deliver them from their financial hardship. This is fertile hunting ground for predators and the Financial Services Board needs to become more vigilant over unregulated activities in the nonbanking financial services industry. In particular, it needs to educate consumers that when returns appear too good to be true, they are. The FSB also needs to respond more rapidly when alerted to potential scams.
The SA Revenue Service plays a crucial role in ensuring that revenue required for government activity is collected. It does need to align its operation to the complexity of our economy. At the one extreme, it needs to ensure that the so-called informal economy is included in the tax net. To do this, it needs to have a clear understanding of what economic activity is taking place and ensure that the registration process is easy and cost-effective, and that the activity is appropriately taxed. At the other extreme, it needs to ensure that sophisticated schemes do not exist to deprive the Treasury of the tax revenue to which it is legally entitled.
Tax practitioners have for some time commented that our tax regime is overly complicated, and that amendments on amendments have created uncertainty to the extent that taxpayers are noncompliant through misinterpretation rather than mischief. A conversation on the increasing complexity of our tax regime is required and should be initiated to ensure that the social contract between the taxpayer and Sars does not become unnecessarily strained. Sars has successfully streamlined its revenue collection from salaried employees and can now focus on less captive taxpayers.
Information creates certainty. The role of Statistics SA is to provide information to all participants in the economy. Questions raised regarding its active role in the pursuit of job creation and poverty alleviation indicate that it is viewed by some as a participant in, rather than as a recorder of, economic activity. In the future, Statistics SA will report to the Minister of National Planning. It is not clear how Parliament will hold it to account within this reporting structure, under conditions of relentless centralisation. It is, however, vital that Statistics SA does account to Parliament, given its crucial role in providing the information that informs the allocation of available resources. Census 2011 is an expensive and time-consuming exercise, and we cannot accept an undercount of between 10% and 17%, as previously experienced.
Statistics SA must be permitted to report its findings without political manipulation of the results. It also needs to focus on how it presents its findings to ensure that its message and methodology are properly understood. The uproar following the release of unemployment statistics in March this year demonstrates this need.
Macroeconomic indicators point to the fault lines now evident in our economy. Economic activity is receding, unemployment is climbing, prices continue to increase, our current account deficit is widening, the rand is volatile, and poverty levels remain unacceptably high. Last year the International Panel on Growth made numerous workable suggestions on how to eliminate the binding constraints on growth. Unfortunately their message was drowned in the noise following Polokwane. There is no reason why the findings cannot be properly considered now. [Interjections.]
The National Treasury, Sars and Statistics SA perform a valuable role in our economy and their efforts are appreciated.
In conclusion, hon Minister Gordhan, hon Deputy Minister Nene and committee chairperson hon Mr Mufamadi, congratulations on your appointments. With our economy in recession, your jobs are much more difficult than they would be under more favourable circumstances. The DA wishes you wisdom and strength, and assures you of our support and rigorous participation in the process of guiding our economic recovery through the most appropriate macroeconomic policies.
Mr Micawber, in Charles Dickens' David Copperfield, summed it up in his observation:
Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.
We can't avoid a miserable result now, but our actions can determine whether happiness returns. The DA remains focused on this outcome. Thank you, Chairperson. [Applause.]
The HOUSE CHAIRPERSON (Mr M B Skhosana): Thank you, hon member. Hon Prof Turok, it would be difficult for me to confine the hon member as you raised in your point of order, because, as I was listening to the hon Minister, and indeed the hon Mr Mufamadi, they touched on various issues, financial, economic, political, developmental. So I think it was proper for the hon member to respond, and I am sure the hon Minister wanted to hear that too.
Mr N J J R KOORNHOF
Mr D T GEORGE
Mr N J J Van R KOORNHOF: Chairperson, today, in the absence of the former Minister of Finance, Trevor Manuel, I would like to pay tribute to him. He made us all proud of the manner in which he conducted his duties as Minister of Finance and will go down as one of the most successful in our history. We wish him well and hope he will offer his heart and expertise to all those who are in need of it in government.
To the new hon Minister, you are taking over at a very challenging time, and we wish you all the best. Let me comfort you with a quote from Madiba: "A good head and a good heart are always a formidable combination." I think you have both. [Applause.] Mr Chair, all indications are that we are building up a huge overdraft as the current recession is undermining Sars' ability to hold on to the projected revenue collection targets. In a recent Nedbank analysis, it is forecasted that the budget deficit will grow between 5% and 6% of GDP - almost double the figure predicted earlier this year.
What is the possible reaction by a government to such a scenario? Hamish McRae, an article published in The Independent, offered two possible reactions: One is, according to him, a horror story reaction, with sharp increases in taxation and sharp cuts on spending programmes – no nice-to-do spending anymore. The other possibility is to approach the deficit problem as an opportunity and to reshape government and do a better job.
There is a clear attempt by the new government to try to do a better job. It is, however, sad that it was necessary to increase the size of government to almost the second largest in the world, in an effort to do better. In COPE we believe that a leaner government with a strong professional Public Service would have been a better option. If government is not successful in better managing the Public Service at all three levels in future, we are back at the horror story option, and that does not augur well for the future.
Nonperformance means higher taxes or huge cuts in the spending programme. The COPE will support the Treasury in its efforts to make sure that government is getting better value for the money it spends. It is not business as usual in a recession, and that includes government business. So even the smallest gesture from government that it is serious about saving taxpayers money will assist to create the right attitude amongst South Africans that we are together in this financial crisis.
The public is suffering; domestic spending patterns are falling; jobs are being lost; poverty is growing. The public would like to see a government also addressing spending patterns. Even the smallest cuts will help the psychology of this recession. So it would have been good public relations to cut the luxury cars. Just one notch down, hon Minister, would have done the trick, or maybe smaller delegations to travel overseas and to Cape Town for briefings, or, perhaps, fewer cocktail parties. It is all part of managing the psychology of the recession. Look after the pennies, and the pounds will look after themselves. Pick 'n Pay has just cut meeting expenses by 23% by using television conference facilities instead of flying to meetings.
It is important that all South Africans understand that we are together in this crisis, and everyone should contribute to get us out of it. Working together, we can save more. [Applause.] By joining this gesture of savings, government will build credibility amongst taxpayers to show that they are serious about spending less with more impact.
Sars has, over the years, built a good, reliable image as a well-oiled government agency with integrity. That is what tax-collecting agencies need if they want to be successful at collecting taxes. The recession has changed the ball game. It will be tougher now for Sars to collect. Maybe they should embark on a public relations exercise to convince taxpayers to pay their taxes on time and with a generous attitude.
It is beneficial to the economy to pay taxes to avoid any surprises of tax increases in future. We must always remember that the goal of tax policy is to maximise economic growth, not to maximise tax revenues. The way Sars and the Treasury are going to manage the fall-out from this recession will be vital in how we will perform after this recession.
Afrikaans:
Voorsitter, in moeilike ekonomiese tye begin die ekonomie die waarde en die afhanklikheid van die primêre sektore besef. 'n Belangrike primêre sektor is die landbou. Nou is die tyd om na daardie sektor te kyk. Belastingbeleid ten opsigte van landbou moet 'n ondersteunende rol speel om ekonomiese groei te bevorder en seker te maak dat die landbou daarin slaag om al Suid-Afrika se kos self te produseer sodat dit nie nodig is om in te voer nie.
Miskien moet die agb Minister dit oorweeg om indringend met landbouleiers te gaan sit om te sien waar die nodige belastingaanpassings gemaak kan word om die sektor vir eens en altyd op die wenpad te plaas.
English:
Mr Chairman, households currently hold debt worth about 76% of disposable income. It is shockingly high. This debt burden is hitting the core of society, functional families, very hard. Government should take the initiative to make sure that the reaction by banks will not destroy families and the social fibre of our country. We all know how handling debt can break up marriages and, eventually, families.
South Africa is going to need a different approach from the banks to assist us to come out of this recession. The banks have definitely played its part, contributing to this recession. The irresponsible credit offerings, before the implementation of the National Credit Act, were greedy and wrong by anyone's standards. Now we see draconian credit requirements knocking the property and car sales markets to a complete standstill and hitting those, who have been lured to accept cheap credit, hard.
Can I propose to the hon Minister that they sit down with the banks to work out a programme in an effort to save our debt-ridden families from falling apart. We will need these families to assist us to turn the tide on the recession. The recession has pushed many previously financially sound individuals into poverty, contributing to the devastating spiral of poverty. Let's unite to fight poverty. Former President Nelson Mandela reminds us so beautifully, and I quote:
Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right: the right to dignity and a decent life.
The COPE will support this Budget Vote. [Applause.]
Mr N SINGH
Mr N J J Van R KOORNHOF
Mr N SINGH: Chairperson, I was going to use the adage, "Look after the pennies, and the pounds will take care of themselves," but I see hon Koornhof has already used that. Just in response, Minister, I do, however, hope we are having a cocktail after the budget! [Laughter.]
I would like to take this opportunity firstly to congratulate the hon Minister, whom I have known for many years as a fellow KwaZulu-Natalian, on his appointment, and I do hope that he captains the ship with as much energy, verve, and vigour as he did Sars. He did a very good job in collecting revenue; now he has a great responsibility of ensuring that that hard-earned taxpayers' money is spent effectively and efficiently. I also want to congratulate hon Mr Nene on his reappointment. He was our former chairperson of finance.
Chairperson, I am going to be focusing on value for money, which the hon Minister referred to, and touch on four areas, one being provincial spending, over which Treasury has an oversight role; municipalities and the monitoring of municipalities; the Land Bank, which the hon Minister has touched on; and bus transport subsidies and the relationship with the Department of Transport.
The spending habits of some government institutions and departments leave much to be desired and definitely do not give the taxpayers value for their money. The IFP has, therefore, taken note of the hon Minister's comments where he stated, inter alia, that the department has set itself bold targets, such as investigating and monitoring corruption in public procurement processes. We will be monitoring these bold targets closely to ascertain whether they have the intended effect.
A legislative mandate of National Treasury, as contained in the Public Management Finance Act, is to monitor the implementation of provincial budgets. However, it is very surprising that KwaZulu-Natal, with an overdraft of R3 billion, has not, as yet, faced the wrath of Treasury in terms of section 100. I remember very clearly, when I was MEC in KwaZulu-Natal in 1997 and the province had an overdraft of R500 million, where Treasury intervened and took over the administration of KwaZulu-Natal; and yet we now have an overdraft of six times that amount.
However, Chairperson, and who caused it now? Who caused the R3 billion overdraft now? It is mainly the Departments of Education and Health. What makes matters worse is that we went through a report of the Auditor-General yesterday, and I am glad the Deputy Auditor-General is here, and this was a special report and a performance audit of entities that are connected with government employees and doing business with national departments. A number of employees have been cited as doing business either through their spouses, directly or indirectly.
All provinces have responded to what was called an exception report, except KwaZulu-Natal. For the last six months, they have not responded to a single query of the Auditor-General, asking them for reasons why these officials were engaged in businesses, either with their own departments or with other departments. Something is wrong there. What has happened with the R3 billion overdraft, hon Minister, is that every department in KwaZulu-Natal has had to face a budget cut of 7,5% in the MTEF for the next three years. Now the people of KwaZulu-Natal are going to suffer because of some irresponsible directors-general, officials and probably political heads. We would like Treasury to look into that.
I want to turn to municipalities. Municipalities are the level of government which is closest to the people and, therefore, have the best knowledge of the specific needs of people in surrounding communities. Here my point is that whilst we have the Standing Committee on Public Accounts, Scopa, at national level and provincial accounts committees at provincial level, there is no obligation on municipalities to have public accounts committees.
I do understand that in terms of Treasury guidelines - I think it is section 121 and 124 - Treasury may provide guidelines in that respect, although it is not binding on municipalities. I think we need to reach a stage where even at municipalities there is monitoring and evaluation of the spending.
That is where a lot of corruption is taking place. That is where, hon Chairperson, people are being killed. Councillors kill councillors, not along political lines but even in the same political party because of business interests that they have. We really need to look into the formation of municipal public accounts committees.
Chairperson, I want to turn to the Land Bank, and I am glad that the hon Minister has informed us in this House that there is a turnaround in the administration of the Land Bank. That is remarkable, because we know what the Land Bank was; we know how terrible the administration was; we know about loans that were granted to certain people to buy golf estates and residential property. Referring to that, a few years ago there was a report on certain officials in the Land Bank who were involved in these shenanigans. We haven't seen that report yet, and we want the people who were granting those loans and those who received those loans to be arrested and put behind bars.
We also want Treasury to inform us what the relationship is now with the Department of Transport, vis-à-vis the bus subsidies and what is happening in Durban where hundreds of thousands of commuters are left stranded and have to pay exorbitant fees to travel to work. Thank you, Chairperson. [Time expired.]
Ms Z S DLAMINI-DUBAZANA
Mr N SINGH
Ms Z S DLAMINI-DUBAZANA: Chairperson, hon Minister of Finance, Deputy Minister of Finance in absentia, heads of departments, officials, sanibonani, dumelang, avuxeni. [Good afternoon.] The 52nd national conference of the ANC, which was held in Polokwane looked at the extremes of an emergent nation, I quote:
From the earliest manifestations of intellectual activity; the settlements of pastoral communities characterised by foundries, artisanship and trade across oceans; colonisation by Europeans; the slave trade and indentured labour - South Africa has emerged as one of the most diverse nations across the globe.
With that in mind, irrespective of what the country is facing, we will cross the bridge because we are a nation and that is what the ANC believes in.
Statistics SA is a national government department regulated in terms of the Statistics Act; as a result of that it then distances itself from political interference.
The period immediately following 1994 was characterised by internal transformation within Statistics SA. During that time we then saw the appointment of the Statistician–General for the first time in South Africa. The department then underwent transformation and restructuring which led to the new vision of the department.
The Statistician-General and his team presented a work programme to the Standing Committee on Finance, and thanks for that effort. The programme that was presented to the committee was divided into two priorities - the internal and the external.
I am not going to bore members with the details of that. But amongst those key priorities there were two important areas of concern which were raised by the department: the preparation for Census 2011 and the undercounting.
The ANC acknowledges and appreciates the positive contributions made by the Statistics SA department towards the improvements and looking at or honestly evaluating their weaknesses. However, the Statistician-General and the hon Minister for Planning in the Presidency still need to seek solutions to serious outstanding issues regarding official statistics.
There are various challenges that are facing the department. The public trust needs to be restored with regards to the official database of statistics.
We also looked at the statistics skills within the country and saw that those skills were quite scarce and the department needs to look at how it can deepen the skills base whilst engaging in a process of realistically determining the work that could be undertaken.
We also looked at the language that is being used. Because of what the system has done to our people, the majority of the people fail to understand the language that is being used. We made suggestions, unlike our friends in the opposition, who only look at the problems and don't provide solutions to the problems.
We suggested that the language must be simple for the media and the general public and that there should be an interaction between Statistics SA and the other relevant departments. Here we are referring to departments like Home Affairs and the others.
Yes, the ANC does agree with the DA when it comes to the challenges of undercounting. However, as I said, the ANC is different from the other parties in that it gives solutions.
We propose that what the department needs to do, hon Minister, is to look at the rural development and come up with a better system. If one looks at the rural development, one finds that there are no physical addresses and the majority of South Africans are, in fact, living in rural areas. So there must be a better system in the preparation for Census 2011 for the collection of data.
We also suggested that within the piloting programme there must be public awareness. Let the people understand what statistics is. Hon members, as we are sitting here very few of us understand the correlations, the histograms and the other things that are being used by statisticians. How about our own constituencies that are sitting there and not understanding a thing? So we then thought the awareness programme towards the upcoming Census 2011 will be much better.
Having said that, as the ANC we thought we cannot actually bombard the department with all the proposals because of the capacity that they have. We then said the capacity-building and the filling of the vacant posts within the department need to be done.
Hon Minister and the Deputy Minister, the ANC realises that it is true that undercounting has caused serious problems and its consequences have somehow affected the service delivery in the provinces. This is because of the allocations based on the numbers given to the department. As a result, if we improve the collections then there would be some improvement.
We also proposed that tertiary education and Fet colleges must be well funded so as to ensure human capacity development. Within the co-ordination of the departments the Minister for Planning in the Presidency needs also to look at the project or hold discussions with the Minister of Higher Education and Training regarding the curriculum as to how they could fit in other projects like census at schools which focus... [Interjections.]
The HOUSE CHAIRPERSON (Mr M B Skhosana): Hon member, you have two minutes left.
Ms Z S DLAMINI-DUBAZANA: Oh! [Laughter.]
In conclusion, hon Minister, I would like to congratulate and welcome the hon Minister, the Deputy Minister and the heads of departments to the new era where the departments need to be separated to go to the Presidency.
I also wish to congratulate Mr Gordham for hitting the ground running. The ANC hopes that the relationship between the department and the committee will remain amicable for the survival of the whole - the people. The ANC supports the Budget Vote. Thank you. [Applause.]
THE DEPUTY MINISTER OF FINANCE
Ms Z S DLAMINI-DUBAZANA
The DEPUTY MINISTER OF FINANCE: Chairperson, hon members, what we faced yesterday is different from what confronts us today. In the context of the economic storm that has struck the global community over the past year, the public finance management responsibilities of the National Treasury are more challenging than ever before. In the National Treasury's updated strategic plan, tabled before this House, we said:
Ensuring that government provides and receives value for money will be a greater area of focus in these tough times. A comprehensive expenditure review will be conducted jointly with the Presidency to identify opportunities for future improvements in public spending. Achieving value for money also demands stronger financial management ... and a focus on implementation of procurement policy and standards.
I'm glad that that has actually been the running theme today – value for money. In short, if we are to succeed in pushing back the frontiers of poverty, if we are to continue to broaden participation in our economy, if we are to give practical effect to the development and transformation goals we have set ourselves, we have some hard work to do in strengthening the culture of service delivery and accountability across the whole of government.
Allow me to remind the House once again of the extensive documentation on government programmes, spending allocations, trends in service delivery and plans for the period ahead that are set out in the Estimates of National Expenditure, the Budget Review and corresponding budget documents.
We have at our disposal an encyclopaedic database, a comprehensive review of the activities of government departments and their agencies, and projections of the growing envelope of expenditure that makes these activities possible. But these thousands of pages of budget documentation count for nothing if they are not put to use as instruments of accountability and trusteeship.
Confronted with the economic shock of a collapse in global trade, declines in employment and a sharp reversal in government revenue trends, as we have heard, we need to ask ourselves what value for money means in these circumstances. What are the special fiscal challenges of our times?
On the one hand, we know that our spending plans have to compensate, at least in part, for the deterioration in employment and business conditions.
The Department of Labour is already reporting an increase in unemployment claimants. We have announced that there is acceleration in allocations for the EPWP. The budget provides for continuing growth in social assistance grants, which now go to 13 million beneficiaries a month. There are larger numbers of young people seeking further education and training opportunities.
The budget provides for strong growth in spending on housing, water services and municipal infrastructure over the period ahead. These are critical investments in public services, and they also contribute to job creation and creating economic opportunities. So our spending programmes are, quite rightly, expansionary in these times, and are part of our response to the economic crisis that surrounds us.
It is not just the direct effect of government employment and income transfers that contributes to moderating the impact of the recession. Government spending on goods and services - on supplies from the business sector - is also a substantial contribution to the momentum of economic activity. So we need to remind office bearers and administrators once again that the Public Finance Management Act obliges government to pay its bills on time – within 30 days. This is also important in assisting small businesses in these difficult times.
While our spending programmes will remain expansionary over the period ahead, however, we cannot ignore the reality that our revenue is sharply down, as the Minister has indicated, and the sustainability of our public finances sets the limits to what we can afford.
This adds a special burden to our duty of financial oversight, a duty that rests on Parliament and our provincial legislatures, a duty that falls also on every municipal council and on the boards and governing bodies of several hundred public entities and over 25 000 public schools. Mr Singh will recall that the Local Government: Municipal Finance Management Act also sets out such parameters. In brief, it is our duty to ensure that government services are rendered efficiently and effectively.
This means that the funds appropriated by Parliament must be used for the purposes intended. It means that competitive tender procedures must be followed to ensure that value for money is obtained from the supply of goods and services. It means that the abuse of government contracts to reward friends and enrich family members must be exposed as a fraud against taxpayers and citizens. [Applause.] And it is also an offence; it is also a criminal offence, I must say.
It means that extravagant entertainment and excessive foreign travel is illegal. I agree with Mr Koornhof on that. This means that there has to be better control of consultancy contracts, better management of IT and communication services, and curtailment of ineffective or wasteful programmes and projects. These principles apply to public entities and government departments alike.
We also have to recognise that good governance requires that special care and attention be devoted to the salaries and remuneration of executive managers, of professional and skilled employees, of interns and recruits, or administrative staff and production workers right across the Public Service. The general government wage bill was R271 billion in 2008, which is over 28% of all salaries and wages paid throughout the economy; and it was up 17% by comparison with the previous year.
If we are to succeed in expanding and improving public services, if we are to fill the vacancies that have been widely reported in health departments and our courts of law, if we are to fight crime through a stronger Police Service, if we are to put more money into housing and sanitation and rural development, then we need a responsible and considered approach to managing Public Service remuneration.
Our approach has to balance the decent wage that we owe to workers, whose duties are often arduous though they may be unskilled, alongside the career progression that is appropriate for professional expertise and management competence. We have to reward the diligence of teachers in our classrooms, the attention to detail of our accountants, the technical capabilities of our engineers and technicians. We have to take into account the long hours and exposure to danger of our security personnel. And it should not be forgotten that we offer our Public Service security of income at retirement, access to health insurance and assistance with meeting housing costs.
Our President has rightly challenged us to put job creation at the centre of our economic development strategy, which means we must exercise discipline over higher remuneration settlements. So we have to caution that wildcat strikes and unreasonable pay demands will not take us forward.
Members of the House, we also need to insist that service delivery standards, administrative responsibility and professionalism are non-negotiable. Whether in classrooms, magistrates' courts, hospitals or Home Affairs offices, South Africans are entitled to expect orderliness, courteous service, commitment and competence. There is an important sense in which value for money simply means doing the job properly.
When new programmes are introduced, of course, capacity has to be built to ensure that implementation is done properly. Last year Parliament amended the Special Pensions Act, Act 69 of 1996, effectively extending the pension to people who were 30 but not yet 35 years old on 1 December 1996. In the coming weeks we will be fully engaged with the public, explaining to them how to apply for the pension, who qualifies and where they can get more information. I plead with the people to understand that this is a pension and not a grant, and as government we have other projects that can assist people who may not qualify for the special pension.
Allow me to comment also on the challenge of planning and scheduling major infrastructure projects in the present circumstances. We can all take pride in the performance of our construction sector in completing several stadium projects in time for the Confederations Cup, and next year we will showcase 10 magnificent stadiums on an even larger world stage. An important phase of the Gautrain project will be completed for 2010, and a number of major road network improvements and hotel expansions will also be completed in time for the increased visitor and traffic flow in a year's time.
There will be a brief lull in construction in the middle of next year in order for us to watch the World Cup, but we will get back to work immediately after that. The next phase of Gautrain and the Gauteng Freeway Improvement Programmes will continue. Major electricity supply construction projects are already scheduled for the next five years and beyond.
The rail freight and passenger service rehabilitation programmes have just begun. The momentum of investments in water infrastructure and reticulation needs to gain further impetus. There is still much to be done in improving rural roads and land conservation works.
Under the stress of current economic and financial circumstances some projects may need to be deferred, while others may be brought forward. Demand for electricity over the next two or three years is likely to be somewhat lower than was projected a few years ago; it seems clear, on the other hand, that we need to accelerate investment in housing and rural infrastructure associated with agricultural development opportunities.
I know that this House is ready to play a constructive role in ensuring better oversight of our public finances, and I would like to give the assurance that the National Treasury will continue to provide budget information, analysis, financial reports and strategic insight aimed at strengthening accountability and ensuring better value for money in our quest for sustainable growth.
As long as there are patients sharing beds, as long as there are children who go to bed hungry, as long as there are learners who attend school in overcrowded classrooms and as long as there are small businesses that go under because government has not paid on time, our work and your oversight role must continue.
So, in deriving value for money, we need to understand the delicate balancing act required from our side – there are choices and as tough as some may be, we must make them. We will cut down on those items that do not translate into tangible results for the poor because, how can we continue to have expensive Budget Vote dinners, Mr Singh, when our people crave just a slice of bread? [Applause.] So for your information, Mr Singh, we will lead by example. No cocktails! [Laughter.]
I repeat, Mr Singh: how can we afford expensive Budget Vote cocktails when our people crave just a slice of bread? How we can spend billions on marketing and advertising when children sleep in cardboard boxes in the cold and when our hospitals are under-resourced? As public representatives, once again, we have a duty to ensure service delivery and trust that we will take our responsibilities seriously and not ask National Treasury to do this on our behalf. Thank you. [Applause.]
Mr S N SWART
THE DEPUTY MINISTER OF FINANCE
THE DEPUTY MINISTER OF FINANCE
Mr S N SWART: Chairperson, one of the outstanding features of the previous administration was the strong performance of the economy and the sustained growth over a 10-year period with a strict fiscal and monetary policy that positioned us well to face the rigours of the present economic downturn; and commendations were attributed to the previous Finance Minister, who is here now. I just want to say to you, as well as to the former commissioner of Sars, thank you for your hard work.
However, the economic crisis has hit us and a number of productive sectors very hard, slowing growth and affecting jobs dramatically, and clearly government intervention was necessary. One can have a debate as to how long it should be, whether it is temporary or permanent, but that is an issue for another debate. In this regard, the ACDP supports the Nedlac framework response with government adapting to industrial financing and incentive instruments, and development finance institutions assisting firms in distress.
The public sector infrastructure programme of R787 billion over the next three years remains a hugely important fiscal stimulus package to deal with the recession, which the ACDP supports. We also appreciate the countercyclical stance that has assisted us with dealing with the crisis. However, we are extremely concerned and share the concerns expressed about revenue projections. During the finance briefing it was indicated that it would be R10 billion, today we hear that it is R19 billion, so it is obviously a very large area of concern.
Our GDP, growth has, again, been revised downwards and we will undoubtedly exceed the announced budget deficit of 3,8% of the GDP. If our debt service costs rise, clearly, as has been indicated, this will mean that we have less money to spend on government programmes. In view of this, there is an urgency to recognise and address the problem of wasteful and ineffective expenditure, as pointed out by the Deputy Minister.
The ACDP shares concerns about the fact that there is insufficient control of foreign travel, advertising, PRO activities and consultancy services. We also share the view that there must be stricter oversight of the activities of and executive remuneration in agencies and government enterprises. We, as MPs, need to take up the challenge issued during the February Budget Speech that we should play a more active role in challenging accounting officers to plan the efficiency saving initiatives upfront and report regularly on progress.
In conclusion, the ACDP wishes to congratulate the Minister and Deputy Minister on their appointments, and thanks all officials for their commitment and dedicated service. The ACDP will support this Budget Vote. I thank you. [Applause.]
Mr Z LUYENGE
Mr S N SWART
Mr Z LUYENGE: Chairperson, Minister and Deputy Minister, chairperson of the committee, members of the committee under the leadership of the Whip, members of this House, I greet you all this afternoon.
The Freedom Charter, which states that the people shall govern, as adopted in 1955 by the real Congress of the People, was never taken seriously by the masters of oppression, suppression and segregation of the masses of South Africa, especially the poor.
The shedding of the blood of the fallen heroes and heroines of the struggle culminated in the bloodlessly attained democracy for all the people of South Africa, under the banner of the ANC and the ANC alone. This was in 1994 under the leadership of the struggle icon, Dr Nelson Rolihlahla Mandela, and many more tried and tested men and women, leaders of the struggle.
The current President of both the ANC and the Republic of South Africa ...
IsiXhosa:
...umhlanganyelwa uNxamalala, nditsho yena yedwa uMongameli uJacob Zuma...
English:
... was part of that diligent leadership core. Yes, the only tried and tested leader in both the apartheid and the democratic eras respectively. As a result of that ANC victory in 1994, the world-renowned Constitution of the Republic of South Africa was adopted in 1996 and other critical pieces of legislation established thereafter, in concurrence with the Constitution.
The global standing of South Africa has proved to be of a high calibre. The Public Finance Management Act, as established in 1999, in concurrence with the Constitution of the Republic of South, section 16, put the responsibility uncategorically and clearly upon the shoulders of the Treasurer, the hon Minister of Finance, Comrade Gordhan. If I may quote the struggle veteran, Comrade Oom Ray Mhlaba, "The ANC culture is built on collectivity with specialisation", meaning that, yes, the usage of public funds is the collective responsibility of the Cabinet, as led by President Zuma, but the sole responsibility of the Treasurer, in terms of accountability.
It is so humbling for one to articulate an ANC position on a particular matter. It is because the ANC, as a movement, not a party, remains too sophisticated even to the extent of mesmerising the so-called intellectuals of this world, who are in any case self-acclaimed. That is why even with the issue relating to the manner in which state assets and liabilities should be managed, one has to refer to what the latest conference of the ANC has resolved, being the Polokwane conference in this case.
The Polokwane Conference, the President's 8January statement; his state of the nation address; the inauguration speech; and of course the Treasury, the hon Minister's Budget Speech all have the Freedom Charter as a basis as well as the ANC manifesto of the 2009 general elections that took place on 22April that says, "Together we can do more."
The ANC will justify the reasoning behind its support in this House for the passing of the Treasury Budget of 2009-10, focusing on asset management and liabilities with definitions, explanations and applications with legal and intellectual panache.
An asset is a broad term that can refer to anything that is used by an organisation in order for it to achieve its function. It will include a number of different types of assets, some being more obvious than others: financial assets such as investments and cash on hand, for example, a community that has saved about 30 000 from water payments which has been invested with the local bank for suspended accounts; movable assets, such as vehicles and office furniture; fixed assets, such as land, buildings, pipes and pumps; software and information stored in the organisation's computers; and knowledge and expertise developed by the organisation.
If people attend formal training for six months, the knowledge they acquire, both from the training and on-the-job experience, is an asset to the government as an institution as well as the customers whose needs are being met by the organisation. All these things can help government to work better, if they are well managed. Good management of assets enhances community life and increases the usefulness of available resources. If, then, this does not happen, there will be chaos. Treasury has transversal functions as outlined in the Intergovernmental Fiscal Relations Act in the spirit of co-operative governance.
The ANC seeks to achieve effective and efficient service delivery with the establishment of the National Planning Ministry. It is, therefore, emphasising uniformity with regard to how the resources at government's disposal are managed. Asset management can be broken down into two main components: firstly, a register or inventory of assets; and secondly, a plan setting out what the asset management should achieve and how it will work.
The ANC is convinced that this department will definitely rise to the occasion, if its plans and explanations, as presented by the Minister, are anything to go by - but only time will tell. We all need to assist members, and not just be merely spectators only carrying red pens, especially the so-called opposition. Let us all be responsible. As the poet Rudyard Kipling said in his poem If,and I quote:
If you can keep your head while all around you are losing theirs, you'll be a man, my son.
[Laughter.]
Liabilities refer to redundant or unusable assets. The department needs to have a clear mechanism to address that in all forms of assets, people included.
IsiXhosa:
Nabo abantu aba bakwa zizo izixhobo zikarhulumente, ngoko ke bengawenzi umsebenzi wabo, mabaqhutywe nje ngezinye izixhobo ezingasafanelanga kusetyenziswa.
English:
To avoid such a risk, the Minister must have a clear policy that will guide the process of dealing with laxity among such officials and other assets by assessing, treating, avoiding, reducing, retraining, retaining, transferring them or disposing of them. The training of public officials on official management is welcomed by the ANC, instead of too much spending on computers. Congratulations, hon Minister.
That practice, however, must cut across all spheres of government. Because of the IT equipment depreciating on a yearly basis, really, hats off to Treasury as that is an investment at its best. The decrease in the asset management and liability allocation by 53,4% is a manifestation of how progressive the department is in terms of its measurable objectives for its financial year.
In conclusion, allow me, on behalf of the ANC, to call upon the hon Minister to ensure that provinces and municipalities adhere to the conditions attached to conditional grant allocations like the MIG, where local authorities tend to construct roads and sport facilities or simply return the allocations unspent.
IsiXhosa:
U-AG ke ukhona apha angayingqina into yokokuba uba nayo ingxaki yokuba abantu bangazisebenzisi iimali.
English:
The hon Minister must now consider ring-fencing those funds, or completely redirecting the MIG fund to sport and recreation for facility development, as stated at the ANC's 52nd national conference in Polokwane, hon Singh. Liabilities that are neglected need special attention. The hon Minister has an obligation to convince all of us that in the light of the current economic recession, new debts emanating from guarantees to the public entities such as Eskom, the SABC and others, who, at the end of the day, require bailouts from government, will be managed.
Their independence tends to guard against interference and they seek government intervention as and when it suits them. No government can just service debts without establishing how such debts emerged in the first place. Asset registers need to be updated periodically and a clear policy must determine such periods.
There is a need for this department to draft a policy that will guide a procurement strategy with an element of cost effectiveness. It is the responsibility of all stakeholders, including the community, to report the misuse of state property. The department must take action on reported cases. The 2010 legacy projects must be managed intensively, now and beyond 2010, as government has invested hugely in stadiums and other facilities. Government is not and will never ever be a profit-making organisation, but the modernised management mechanisms seek to produce cost beneficial outcomes where it is possible
The Chairperson: Hon member, you are left with two minutes.
Mr Z LUYENGE: That's too much! [Laughter.] ... to do more with little money without compromising quality. Working together we can do more in the fight against corruption and the decay of our moral fibre.
IsiXhosa:
Egameni lombutho wesizwe, sicebisa umgcini wamafa nonongxowa karhulumente ukuba anikeze iinkonzo zakowethu imali yokuqinisa iinkqubo zokubuyiswa nokwakhiwa kwezimilo; nanje ngoko oko kungancedisa ekulungiseni izimo zabanye babasebenzi nabanye oosopolitiki abantliziyo zingcolileyo, abangakwaziyo ukugada imali karhulumente, koko bazame indlela yokuzityebisa.
Siyithethe ke lento yokuba kwakuthiwa kuyaxokwa ke ngabaya baphaya ngaphesheya xa sithetha ezi nyaniso, kuba kugekudalanga nje iNkulumbuso yephondo laseFreystata, obekekileyo uMagashule, unqande konke ukuxhatshazwa kweemali zikarhulumente xa engena. Loo nto ibisenziwa ngabom ngabasebenzi befuna into yokuba urhulumente wakhe angakwazi ukusebenza. Kodwa xa kusithiwa mazingenziwa ezoo zinto, mhlonipheki Singh nawe mhlonipheki Koornhof ababekekileyo, ibangathi...
English:
... this sensational and unscrupulous reporting by the media and the opposition ...
IsiXhosa:
... ibe yinto ejoliswe kwamaye amalungu e-ANC.
English:
In which the ANC is responsible enough to take whatever blame that has been created...
IsiXhosa:
... ngoba abantu balapha kweli lizwe abanakukhalaza kwenye indawo, bazakukhalaza kurhulumente wabo abambeka ngokwabo, ngesininzi, ngowama2009. Amandla. [Kwaqhwatywa.]
Mr K B MANAMELA
Mr Z LUYENGE
Mr K B MANAMELA: Chairperson, the Minister of Finance, the Deputy Minister of Finance, the Director‑General of National Treasury and the former Minister of Finance, and now Minister in the Presidency, in the words of the President of the country in his state of the nation address, "We are in a recession."
As was the case in many historical economic crunches, there has been a potpourri of analysis as to what the cause of the current crisis is. We hold the view that this is a crisis of production of distribution of resources in our economy, and also a crisis of profit maximisation.
We are reminded of the words of Winston Churchill when he said that a particular economist was looking at an economic policy from the wrong side of the municipality's sewerage system. I was reminded of those sentiments when I was listening to hon Member George, who was going on and on and basically almost denouncing the free‑market economy, as afree‑market fundamentalist in the DA, on the one hand, while on the other, urging government to ready itself to move out when we are in the postrecession period. Yet, in actual fact, they are not even saying what needs to be done by the very same people who caused this mess that we are in at this particular economic recession. I think that we should not look at the economic policy from the wrong side of the municipal sewerage system because we know what the consequences will be! [Laughter.]
The Framework for South Africa's Response to the International Economic Crisis, itself a product of all role-players in our economy through the National Economic Development and Labour Council, Nedlac, asserts that this crisis is as a result of –
… gross imbalances and inequities in the global economic system, the impact of the financialisation of our economies, ineffectual regulation in several of the major world economies and poor business practises …
The framework further asserts that this has resulted in significant asset depreciation, closure of companies, rising unemployment and a sharp slowing down of economic growth, with most highly industrialised countries entering a recession.
The framework goes on to instruct us to use our strength in fiscal space, the financial regulatory framework, and the resourcefulness of our people in order to respond to this crisis. It further identifies a role for development finance institutions, DFIs, as significant instruments to intervene especially in sectors of the economy that are in distress.
It specifically suggests that DFIs will provide financial and technical support for public sector investment projects, taking into account both the immediate and long‑term needs of our economy.
The role of DFIs, both nationally and provincially, has been to support economic initiatives that are meant to stimulate the productive capacity of our economy, create jobs, and facilitate domestic and international investments in the local and regional economies. All of these things are part of the collective state-led effort of ensuring that where private finance institutions fail, DFIs are the means by which to fill in the gap.
Clearly, a lot has been done by these institutions in supporting the state to provide the necessary finance for sustainable development, employment creation and economic empowerment. These institutions played a significant role in the creation and success of the many black companies and entities which ordinarily would not have had access to financial facilities in order to be active in the economy. They have also contributed heavily to projects that relate to job creation, industrial innovation and attracting foreign direct investment.
This was done through direct partnerships with foreign investors or by supporting local entities as partners. However, there is also the ugly side of many of our DFIs that can be summerised as follows. Some of them have mainly focused on supporting narrow BEE initiatives that did not yield any jobs and merely served as a springboard for quick‑buck millionaires. Some of them do not support SMMEs or co-operatives, and have basically passed the buck to the Department of Trade and Industry - and of course they can cite legislation as they do so.
There are gaps in terms of the provision of development finance – and we will talk about this when the Chair says we've got two minutes remaining! [LAGHTER.] there is also no co-ordination between DFIs at a national level, and equally poor co-ordination between DFIs at a provincial level and between them and their national counterparts. There have been serious questions about governance, with some DFIs being accused of serious corruption, cronyism and a disregard for the conventional ethics of governance.
In its 2009 election manifesto, the ANC promised the people of South Africa that it would create more jobs, decent work and sustainable livelihoods. In living up to this promise, the government is committed to taking the creation of decent work opportunities and sustainable livelihoods as its primary focus, including the focus of economic policies.
The government is also making maximum use of all the means at its disposal to achieve these twin goals, and one of the areas where this objective should be reflected is in the orientation and programme of our DFIs. We have learnt today that part of the other things we need to do, regrettably Comrade Trevor, is that we are not going to have a cocktail. If we do have a cocktail, I propose it should be at a cash bar. [Laughter.] It should be a cash bar so that we don't really have to forfeit the cocktail component.
But we also have some valuable advice from Mr Koornhof that we need to run our country like a supermarket. I don't know if we really should be doing that, following the guidelines of Pick ʼn Pay – this is government and not a food chain store.
In order to achieve this goal, the ANC government must ensure that the mandates of DFIs, like the Industrial Development Corporation, IDC, the Development Bank of Southern Africa, DBSA, the National Empowerment Fund, NEF, and the Land Bank, are clear and truly developmental. These institutions and related DFIs, including the various provincial development agencies, have an important role to play in development. It is imperative that their programmes should contribute to decent work outcomes, the achievement of our developmental needs and sustainable livelihoods.
Continuing to fund narrow BEE deals is not contributing to these needs or to our goal of eradicating poverty for national or provincial DFIs. In fact, by giving interest‑free loans of R100 million and more to their own directors, DFIs, such as the IDC, bring the entire DFI sector into disrepute. And that is not the only case. There have been reports of some DFIs in Mpumalanga which have given their directors interest‑free loans, and we think that we really need to look into this and reverse the situation. Such practises and conduct may have been tolerated or overlooked in the past, but they have no place in our future development agenda.
This raises the question of governance of the more than 50 DFIs funded by the government. The ANC's renewed commitment to clean government and rooting out corruption extends not only to reviewing the mandates of the DFIs, but also to reviewing the composition of their boards of directors and assessing the performance of their managers.
In order for the DFIs to carry out the role we expect of them, they cannot be directed or managed by individuals who sit on the boards to promote their own financial interests.
In the framework agreement that I alluded to earlier, and in support of the ANC's election manifesto priority areas, the social partners who are party to this agreement indicate that –
Developmental Finance Institutions need to place the promotion of productive employment and decent work opportunities at the centre of their investment mandates and to mobilise their available funds for the retention of employment and the creation of the largest number of jobs per unit of capital invested. DFIs could provide preferential funding to firms under distress to offset short‑term funding pressures that are the result of the global economic context, for instance through working‑capital solutions.
The partners further agreed that –
A significant part of the national response to the global economic slowdown should be to rebuild local industrial capacity and avoid deindustrialisation during the period ahead. Critical to such a strategy is the need to improve the competitiveness and the performance of key local industries, particularly vulnerable sectors and small businesses.
The framework goes further to identify which sectors need to be prioritised, and we support that. They have also further agreed that the IDC needs to urgently come up with measures that will increase the level of its equity exposure in this sector and where possible making increased working capital available. We are quite disappointed that we have not yet had the details of how these agreements will be realised, and we hope that in the coming few days we will be hearing those details in order to ensure that we realise progress and also ensure that we save the many jobs that could potentially be lost in those identified sectors.
The current focus of DFIs needs to be reviewed in order to ensure that their role moves away from supporting shareholder BEE and moves towards supporting the productive capacity of our economy. This situation obviously requires urgent attention also on the part of the Ministry and the Department of Economic Development to ensure that DFIs are brought into line with the national developmental goals as identified by the ANC in its election manifesto.
We also need to indicate that as the IDC and the various DSIs move ahead to provide stimulus packages and intervention to the sectors that are in distress, part of the things that we really need to look into is their capacity to monitor and discipline those particular sectors and companies that would have been provided with that intervention. We think that suggesting to government that it intervenes now and later on withdraws, as hon Member George would want us to believe in and do, is like asking a victim of crime to remove the burglar‑proofing and alarm system immediately after the insurance company has paid.
The government has an equal responsibility, if it has to intervene, of ensuring that intervention is monitored. And that's the case even in the biggest economies of them all; even in the USA, the government is making interventions with a lot of conditions. We are not going to pour public resources into private entities which will later on become the private profits of certain individuals and then just fold our arms and not say to these companies, "This is how we expect you to conduct yourselves in the future."
In conclusion, we also want to say that the role of the DBSA – and I think as the hon Minister has announced an injection … [Interjections.]
The HOUSE CHAIRPERSON: Hon member, you are now left with two minutes. {Laughter.]
Mr K B MANAMELA: The role of the DBSA is going to be very important in ensuring that we support municipalities in order for them to be able to invest in the public sector infrastructure development which, in our view, will lead to job creation, improved household incomes and also stimulate growth.
They are also going to have an important role in ensuring that local economic development strategies are being supported, that the needs and interests of our people are taken into account and that they assist in building capacity for those particular municipalities because we believe that they are going to be playing an important role.
The other critical point which we would also want to mention is the role of local, provincial and national development finance institutions. We believe these institutions need to be under the leadership of a national DFI council which will basically monitor and ensure that all of these DFIs meet their mandate and vision as stipulated in the ANC's election manifesto. Thank you. [Applause.]
Mr M SWART
Mr K B MANAMELA
Mr M SWART: Chairperson, I would like to start by congratulating the hon Minister on his appointment. He did sterling work in Sars, and I'm sure will continue to do so in Treasury. We are looking forward to a good working relationship with the Minister and we wish him every success in the difficult task ahead. To the Deputy Minister Nene, congratulations on your appointment, I was most impressed with the contentS of your speech this afternoon. We also congratulate our new Chairperson, Mr Mufamadi.
In his State of the Nation Address, the hon State President said, inter alia, and I quote:
The fight against poverty remains the corner stone of our government's focus …
He continued -
… for as long as there are workers who struggle to feed their families and who battle to find work; we shall not rest and we dare not falter in our drive to eradicate poverty.
Later in his speech when he highlighted the key elements of the government's programme of action, the hon President stated and stressed that the creation of decent work will be at the centre of government economic policies and will influence their decisions in respect of the attraction of investments and job creation initiatives.
The Democratic Alliance supports the principle of job creation and we agree with the government's realisation that the attraction of investments to achieve this goal is of paramount importance. This will be particularly true of investments in the manufacturing industry and small businesses where jobs are of a more sustainable nature compared to the EPWP, of government which by the very nature are less sustainable and where little training and skills transfer take place.
Investments in the JSE are welcomed as they assist in the reduction of the current account deficit, but such investments are much more volatile and they do not necessarily contribute directly to job creation. We have seen recently that investors in the stock exchange are more likely to withdraw investments if they lose confidence in the company or country of investment, or if they merely wish to revert to foreign cash holdings.
In the current recessionary economic climate in South Africa with a negative growth rate and where we have a high current account deficit, falling employment rates, exports dropping by 55% in the first quarter of the financial year and the sharp decline in the private investments, the achievement of the goal of attracting more investments to South Africa, particularly for the manufacturing industry, will be difficult.
Over and above this, overseas investors will be loathe to invest in long-term manufacturing projects and small businesses in South Africa due to the stringent industrial legislation in this country; the major red tape obstacles to do business; the difficult and expense of obtaining work permits in South Africa; the poor education systems; the high incidents of corruption; low productivity; high crime levels and the tendency of government to move more and more towards centralisation; the undermining of the judiciary; threats of expropriation of assets and property without a applying the willing buyer, willing seller principle; a lack of clear distinction between party and state; and the undermining of the Constitution. Who feels safe in a business environment where the country's solitary electricity supplier can hit you with a sudden 31,3% increase in tariffs!
The DA believes that the matters I have highlighted need urgent attention so as to achieve a reversal of our economic fortunes, the procurement of investments and the consequent creation of jobs.
We must provide tax incentives for new investments in the manufacturing industry, particularly in rural areas; abolish Setas; introduce training incentives for businesses; reconsider the current unworkable and expensive BEE and affirmative action policies as is currently applied, and where the main aim appears to create jobs for pals; and introduce opportunity vouchers for school leavers. More encouragement should also be forthcoming from government for the formation of small businesses, as they have an equally important role to play in job creation.
The tendency of our government to want to get involved in the business of business has shown without doubt that governments are incapable of running businesses successfully. In South Africa we need only to look at entities such as SAA, Alexkor, Eskom, the SABC, Denel and the Land Bank to prove the point. We are pleased to hear about the turnaround strategy of the Land Bank but, unfortunately, Mr Minister, it comes at a cost to the taxpayer. Equally, the large number of qualified audit reports of government departments bear testimony to this statement.
We agree that job creation is of the utmost importance as is the procurement of investment towards that end. The government's responsibility is to ensure an enabling, open opportunity society environment where business can be done freely and with minimum interference and where individuals can be trained to achieve to the best of their abilities. Focus on the procurement of investments must, however, always lean heavily towards the manufacturing and small business sectors.
In the final analysis – I'm sorry that the hon Prof Turrok has left because I would have liked to suggest to him that he attends an upcoming lecture on economics and finance, which I believe is going to be presented by Julius Malema. [Laughter.]
Adv T M MASUTHA: Chairperson, I rise on a point of order! May I request theat the Chair advise the speaker to stick to the Vote this afternoon. I'm representing Professor Turok in his absence.
Mr M SWART: Thank you, but that isn't a point of order. Finally, I would like to thank the staff members of Treasury and Sars. I think you are a tribute to the public service and set an example to other public servants in this country. [Applause.]
Ms T D CHILOANE
Mr M SWART
Ms T D CHILOANE: Thank you, Chairperson, the Minister and Deputy Minister of Finance, the former Minister of Finance, who is now the Minister in the Presidency, the Director-General, the Acting Commissioner of Sars and other commissioners, officials from the department, honourable guests, friends and colleagues.
In view of the very serious challenges faced by Sars, it is very important for us to congratulate this very important unit of government for having done so well, in spite of the downturn in tax revenue collected in 2007-08 and the emergence of the international economic recession.
We are aware of the fact that tax revenue due depends directly on the profits of companies, the salary level of individuals together with the employment levels and VAT. We are also aware that for the past six years, that is from 2003-08, Sars's collection of revenue has been growing faster than the national economy with an increase from 23,6% to 27,7% of the GDP, while at the same time tax rates were reduced.
South Africa entered the recession phase in the second quarter of this year. Huge impacts are expected on the country's economic growth that will have a spiral effect on many sectors and on the lives of the general public.
The output of South Africa will decrease and as a result of this collectables will be affected. In simple terms, consumption will be reduced because of reduced productivity, employment and disposable income. This reduction will no doubt result in a serious reduction in the revenue collected by Sars from both individuals and companies.
It is, therefore, very important for us to improve and entrench the culture of compliance in the collection of revenue in all sectors of our community. This can only be done through awareness campaigns at work places and companies, institutions of higher learning and primary and high schools where learners will be taught the need and importance of complying with tax collections by Sars. We must also improve our service by simplifying procedures and processes we put in place for tax collection. This will in turn make compliance to tax collection faster and easier.
We must further go more deeply into our rural areas using our own rural languages to reach all our people. Our technologies must be made available and simpler in indigenous languages to ensure that everyone feels a part of the bigger South Africa. We must also continue to develop our staff through education, uproot corruption and instil a culture of integrity and professionalism in this organisation.
The regulatory framework, good governance and good administration will also be of immediate concern to Sars. All these, together with all other factors and commitments I have mentioned, contribute to good governance and administration of the regulatory framework.
Security and broader controls must be intensified and further improved in order to curb tax evasion and corrupt practices in these areas. Our country is losing huge amounts of money through corrupt officials who took bribes from those who are hell-bent on evading taxes and those who are not yet ready to pay tax.
It has become very important to us to mention some of illegal activities taking place in our mainstream economy. The manufacturing of illegal drugs costs our economy millions and contributes immensely to the drug addiction of our own children. The black market and selling of fake goods at very cheap prices further destroys the greater part of the economy in this country. Our laws must be made to be more efficient to successfully deal with these corrupt practices which deprive us of the freedom and democracy that we fought for. It further costs the country millions in loss of revenue tax collection and results in the unemployment of our people.
We are completely aware of the devastating results of the economic recession ahead of us. This in turn must not be a stumbling block to achieve the efforts made by this important unit of our economy. It must not be a reason for us to fail to deliver on our promises made to our electorate during the elections on 22 April 2009.
We must further intensify our efforts to deliver on promises given to us by the electorate. Sars must also improve on all its working methods to deal face to face with this monster called "world economic recession" and emerge victoriously.
We must also strengthen compliance by welcoming the Sars approach to promoting compliance that entails the use of education, outreach services and responsible enforcement. This approach will increase the level of awareness and understanding amongst various segments of tax payers. The interaction between Sars and these various segments of tax payers will encourage compliance.
We further encourage Sars to continue to draw in new tax payers. We hope that the new system for administrative penalties will be vigorously implemented to ensure greater compliance. A focus on the management of debts, reduction of outstanding returns and the improved detection, a response to commercial fraud and many other systems will ensure extra revenue collection that will go a long way in providing most-needed funds to create jobs through the infrastructural projects.
On the improvement of Border Protection and Management, as the Committee we acknowledge the complexities of work that goes with the hosting of large international events this year and in 2010. Sars must not tire of facilitating trade and their relationship with other departments. It must further protect South Africa's ports of entry to respect the transit of goods. It must ensure tighter security systems to cut illicit goods from entering and leaving through our ports. These major international soccer events will no doubt pose a real threat of druglords that will smuggle in their illegal goods.
To conclude, we call for the enhancement of human capacity. As the Minister was just saying, they are planning to employ 1 000 highly qualified professionals in Sars. The Committee welcomes that and we hope and wish that the management will implement this in a very expeditious manner.
As we have this beautiful and hopeful plan, it also calls for the enhancement of human capacity at Sars in critical areas and the development of customs core technical skills. It will, therefore, be necessary for Sars to consider scouting for learners at the secondary level to ensure that they train more young people who will be able to understand and be equipped with the latest technologies as a remedy to address the issue of scarce skills.
We also need to acknowledge and give thanks to all economically active people of our country, business communities, management and staff of Sars and whoever is contributing economically to the smooth running and the success of this unit. Credit must also be given to all the systems which were put in place to make the work simpler and clearer so it could be understood by a layman in the street. The ANC supports the Budget Vote. I thank you. [Applause.]
Dr W G JAMES
Ms T D CHILOANE
Dr W G JAMES: On a point of order, Chairperson, clause 50 of Chapter 5 of the Rules reads as follows:
That the Presiding Officer, …
which is you, sir -
after having called attention to the conduct of a member who persists in irrelevant or the repetition of arguments, may direct the member to discontinue his or her speech.
Except for the Minister and Deputy Minister of Finance, all of the hon ANC speakers have made repetitive or irrelevant speeches and I ask why you have not called on them. [Interjections.]
The HOUSE CHAIRPERSON (Mr M B Skhosana): Hon member, you should have raised that point of order at the time when this was taking place.
Mr B K MANAMELA: On a point of order: Chairperson, I would just like to bring to your attention to the fact that the proceedings are moving faster than the thinking capacity of that member. [Laughter.]
The HOUSE CHAIRPERSON (Mr M B Skhosana): Hon member, that is not a point of order. On Minister, I see that four minutes have been added to your speaking time.
The MINISTER OF FINANCE
The HOUSE CHAIRPERSON (Mr M B Skhosana
The MINISTER OF FINANCE: Chairperson, I am not sure whether it is Prof or Dr James, but he is still finding his feet. I am sure he will get used to the rules as we go. May I also, on behalf of the Ministry and the accounting officers of the Treasury and Sars, invite you to a cocktail of water later on? [Laughter.]
In responding to all of the contributions, we thank both colleagues on the ANC side and the various opposition parties for their contributions. I think that all of us, if we hear each other properly, will begin to make contributions that will help South Africa out of what we all clearly agree is a difficult time that the country finds itself in.
Whichever political party we belong to, I think it requires extraordinary leadership, as the chairperson of the committee, Mr Mufamadi, pointed out, to look beyond the necessities of this environment and ask ourselves what extra can we contribute in terms of the way in which this country works its way out of a crisis that is not only affecting this country.
It is going to take, as Mr Mufamadi pointed out, a great deal of resilience. It is going to take a lot of decisiveness and, clearly, as some of you have said, this is not business as usual. We have to learn to do things differently, we've got to reshape the state, reshape the way the Budget and its expenditure works and the way in which this government works generally.
I hope that all of us will listen to Mr Koornhof when he says that we require, not only on this side, but on all sides, good heads and hearts if we are to put our efforts together in working our way out of this crisis. Indeed, Dr George, happiness will then return, sooner rather than later.
If we look at the points we agree on, apart from the banter we engage in, there are many. The counter-cyclical approach of this government is absolutely necessary, the infrastructure expenditure is necessary, government spending must continue, albeit on a more careful basis, on a different basis, and a more value-added basis. We need to create not less, but more public sector jobs through the EPWP, if we are to help large sections of our population to cope with the current crisis. There is no way in which we can reduce social security. We need to enhance it in the various forms in which we provide it to the South African population.
We must also, as the hon Chiloane pointed out a few minutes ago, help Sars to collect more revenue. Hopefully they will give you a hotline number where you can report where additional taxes can be collected on the basis of information you picked up at the last cocktail party you went to! That will certainly help us to widen the tax base.
The improvement of tax compliance is a national function - it's not a government function - and one which all of us can share responsibility for, particularly in the kind of times we live in. we can also agree that, whether it's a developmental state or whatever state we want to agree on and the description we want to agree on, we want an efficient and effective state. We want a state that is able to deliver; we want a state that is able to be responsive and is able to intervene in an appropriate way, given the context in which we find ourselves. We might well disagree about the extent of that intervention.
As Mr Manamela pointed out, over the last 18 months or so, if the state was not there, if government didn't have the resources that it had around the world, this world would have been in a huge crisis – much bigger and severer than the crisis that we find ourselves in currently. If the banking system wasn't saved in the US and partly nationalised - virtually all the banks in the UK that are of any significant order are nationalised – we would have seen a crisis of major proportions, which we would have deeply regretted.
I think it is time to go beyond our ideological barriers and ask ourselves whether the experiences of the last 18 months or so have certainly demonstrated that there is a role for government of a very different order. I think we need to be gracious to one another and be able to conceive that, apart from the debating and scoring points. And we must ask ourselves how this state can become more effective and how does the state play a developmental role – however you want to actually describe it.
There is no doubt that had the state and its various machineries, particularly the Competition Commission more recently, not intervened on behalf of public interest, the bread cartel would have continued to operate. We don't know what the investigation into the retail cartel is actually going to show and the petroleum industry has been exposed and has paid huge fines. On a number of other fronts the Competition Commission has, on behalf of the state and for the sake of fairness, made interventions that are crucially important.
I appreciate the point that Mr Koornhof made about the role of banks and the necessity to review whether their approach to credit and assistance to firms and individuals that is currently being practised is something that they actually need to review. The Treasury will certainly look into this and if there is cause for it, we will meet with the chief executives of the banks to establish whether the kind of approach they are using is a justifiable one.
Regarding state-owned enterprises, a number of us have made contributions and they certainly have an important role to play. Government is mindful of the fact that we need to align what they do, what they spend money on and the way in which they're governed with government's priorities and objectives. My colleague, Minister Hogan, is certainly willing to work with us in that particular regard to ensure that that alignment takes place.
Similarly, on the DFIs, prior to the election a review was undertaken; Minister Manual was overseeing that. Various strengths and weaknesses and gaps in the DFIs have, in fact, been identified.
A DFI council is to be established, chaired by the Minister of Finance, to improve governance within DFIs and certainly, from the Treasury point of view, we will do all that is necessary to ensure that they are properly capitalised; that they have the appropriate credibility to go into the market to borrow money; but also, as many of you have pointed out, ensure that that money is spent wisely and correctly. There is a lot of work to do in that particular area.
Certainly with regard to the two DFIs that report to the Ministry, the Landbank and the DBSA, one is going through a significant turnaround and the other is very well managed and, as I said in the speech, is going to be increasingly capitalised in order to perform the developmental role that it has performed.
Mr Singh raised questions about the Landbank. I can assure him that my colleagues have looked carefully at the report that investigated the Landbank and the various entities associated with it. That report was handed to the former Minister of Agriculture and Land Affairs and was used as a basis to devise the turnaround strategy. Action has been taken against several officials who were suspended initially and some have been found guilty and fired through the necessary disciplinary processes and other have had their cases handed over to law enforcement agencies. The debtors have been pursued – that is where that R500 million odd has, in fact, been recouped – so there is more work going on in that particular area.
The numbers I have indicate that five officials have been fired and six have been suspended. So this is a work in progress, as far as Treasury is concerned. I have every confidence in the board and in the management of the Landbank that they will help us to turn this around.
Dr George raised some concerns, and I am glad Minister Manuel is here to hear this out, about whether the transference of Statistics SA to the Minister in the Presidency is going to result in what he called "political manipulation" and threaten the independence of Statistics SA. On behalf of Minister Manuel, I want to assure you that he has no such intentions, that's not our way of doing business and if you look at records of many of us, we have specialised not in destroying institutions, but in building them and making them a lot more effective. [Laughter.]
Concerns have been raised about the events in KwaZulu-Natal and Treasury has been in touch with the Premier and the MEC of Finance in KwaZulu-Natal. It is true; a R2,3 billion overexpenditure did take place. Treasury officials are aware of what is going on and are managing that on a day-to-day basis. Overspending and cost-cutting measures have been put in place and we are ensuring that the money that we spend is spent on core pro-poor functions and not on any wastage that they might want to actually engage in.
The overdraft has been reduced from R2,1 billion to R1,3 billion as of yesterday, so this is certainly work that we intend to do in collaboration with the province and under the leadership of the Premier. I am confident that what we might have seen as lack of control in that particular area will be sorted out.
I agree with all of you who have raised concerns about bills being paid on time by national departments, provinces and municipalities. Particularly for small business, this is crucial to their cash flow and we have also had discussions with Cabinet colleagues on this. We will support that 100% and Treasury will add its weight to that as well.
As far as municipalities are concerned, let's be frank: Our municipalities are about ten years old in terms of their current institutional form. They have a long way to go in most instances for them to develop the right kind of capacity, capability and the technical expertise. This is not going to be done overnight, but what you can be assured of is that, whether it is from the Treasury, the DBSA or my colleague in Co-operative Governance and Traditional Affairs, we are putting in immense efforts to make sure that municipalities get the capacity, either in the form of financial managers or engineers or planners.
We are trying to ensure that we monitor their finances more carefully. We are very aware of where the deficiencies are in the municipalities. I agree with you fully, being aware of it is one thing, putting a process in place that will cure some of these problems is quite another; but that is not going to happen overnight. We don't want to say that we refer back to the past, but certainly, legacies of the sort that we have inherited aren't going to be cured in 10, 15 or 20 years.
At the same time, I will join you in expressing impatience at the fact that we could do better, that we could get better political leadership in all of these structures, and, more importantly, better administrative leadership that is going to be committed, as all of us appear to be, to ensure good governance in provinces, in municipalities and indeed in national entities.
There was a question raised about bus subsidies in the last moments of Mr Singh's speech and I am told that if he talks to the Treasury officials, there is an answer for him. But I am not going to give it to him in detail, since he didn't give me the question in detail, but he is welcome. I hope you don't have anything to do with the bus industry anymore!
An UNIDENTIFIED MEMBER: He does. [Laughter.]
The MINISTER OF FINANCE: Oh no! I sort of lost track of his business enterprises.
I want to agree with Mr Swart that red tape in any form is something that we need to get rid of. I think South Africa has made some progress, but I will also agree that a lot more progress needs to be made in order to create conditions for business to thrive. Red tape, however, is not the only problem that we have. There are many challenges in respect of creating entrepreneurship and enterprise-mindedness among our population. Other departments have that as their brief to ensure that they meet those challenges.
I would like to thank the Deputy Minister for his support in the few weeks that we have been in this job and I look forward to working with the various parliamentary committees under Mr Mufamadi's leadership and, indeed, with all of you, to ensure that we can both discuss frankly the challenges that we face, the answers that we have, as well as the answers that we don't have. And all of us may contribute to this process if we want to. That is the open invitation that I put to you, to find those answers where we lack them.
I would like to thank the officials of the Treasury, Sars, the various financial regulatory bodies and DFIs that report to the Ministry. There is a wonderful spirit of energy, innovation and dedication that I hope you will applaud when I finish my speech. Thank you very much. [Applause.]
Debate concluded.
The Committee rose at 16:30.
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