Hansard: Appropriation Bill : Debate on Vote No 9 - National Treasury
House: National Assembly
Date of Meeting: 10 May 2010
Summary
No summary available.
Minutes
TUESDAY, 11 MAY 2010
PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – OLD ASSEMBLY CHAMBER
Members of the Extended Public Committee met in the Old Assembly Chamber at 09:05.
House Chairperson Mr M B Skosana, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.
START OF DAY
APPROPRIATION BILL
Debate on Vote No 9 - National Treasury:
The MINISTER OF FINANCE: Chairperson, hon members, we thank you for being here on this cold morning in Cape Town. It has been exactly one year since the appointment of the new government and nearly three months since this year's budget has been presented to the House.
Last year's financial accounts are now closed. Allow me to begin with a word of appreciation for the many thousands of public servants who have quietly and diligently kept orderly books of account over the past year, contributing to sound audit reports and measurable value for money in government expenditure. The heroes of good governance are these honest, hard-working officials, and we should never forget them. The revenue at our disposal and effective stewardship of our public resources would not be possible without their ordinary and disciplined patience with double-entry record-keeping in the public accounts. Yes, I know there is much to be done to improve public accounting, but the fact that we can meet today, six weeks after the close of the financial year, and comment on the fiscal outcome with confidence, that we have the numbers at our disposal, is testament to the sound foundations that are in place, and we must compliment the work of the Accountant-General, the Auditor-General and our Accounting Standards Board. Chairperson, the books have been closed – yes, please, applaud, them, as small a number as we are. [Applause.] The books have been closed, indeed. Revenue was about R8 billion more than we expected, and expenditure a bit less. The budget deficit was 6,7% of gross domestic product, GDP, rather than 7,3% that was anticipated, though considerably wider, as we have explained many times, than 1% of GDP recorded in 2008-09.
The Ministers' Committee on the Budget and the Treasury has begun work on next year's Budget. Preliminary data suggest that we will see moderate economic growth this year, perhaps somewhat higher than we projected in February, but last week's employment statistics from South Africa were a sobering reminder that more must be done, more urgently, to restructure our economy and create jobs, particularly for young people. Nationally and internationally, economic and financial developments continue to present formidable challenges both to our understanding of the growth and development process and to the practical implementation of policy and government programmes.
We have been witness to some extraordinary events unfolding in Europe over the past weeks. In fact, we should be very proud about South Africa's agility, compared to the very slow responses that we have seen in Europe over the past weeks. After months of uncertainty and inaction, the European Union, EU, has taken action to ward off a further crisis in the financial markets. Despite immense public anger and protest action, the government of Greece has been obliged to enact a 30 billion euro fiscal curtailment programme, while negotiating a 110 billion euro debt restructuring arrangement with member countries of the EU and multilateral financial institutions. Several other European economies face the possibility of similar difficulties, and questions are being asked about the sustainability of the European Union itself. Late on Sunday, the EU and the International Monetary Fund, IMF, agreed to a historically unprecedented almost one trillion euro financial support programme.
So, on the one hand, the global recession of 2008-09 appears to be over. Many economies, including our own, have experienced encouraging growth, since then, in trade and activity over the past six months. Yet, on the other hand, there is widespread concern that the fiscal debt problems of the Organisation for Economic Co-operation and Development, OECD, countries will spill over into another financial crisis and a second wave of trade and employment cutbacks might follow. The problems are most severe for countries that entered the recession with high levels of public debt, in several cases in excess of 100% of GDP. Between 2004 and 2007, at the height of the global boom, Greece was running a budget deficit of 6,5% of GDP, with debt averaging 106% of GDP. Today, Greece's debt is 140% of GDP, and the budget deficit was 13% of GDP last year. Compare our numbers, ladies and gentlemen, and you can proudly beat your chests.
Though we are not in this position, we need to take a closer look at the current turbulence in global finances, because the underlying trends may hold lessons for our own development path. How did the other countries get into such difficulties? The immediate crisis is typically straightforward: It is a story that has taken many forms, in many countries, over many centuries. Unsustainable borrowing is the mirror-image of imprudent lending, both fuelled by an unrealistic expectation that good times will last forever. When the bubble bursts, borrowers pull back their plans and lenders withdraw credit, trade declines, unemployment rises and businesses come under stress.
But this cycle of market euphoria and disillusion is just the surface manifestation of underlying structural imbalances. In the United States, for too long, consumption spending ran ahead of production, and American consumers relied on foreign savers. The party came to an end, most dramatically in the collapse of the sub-prime housing credits. In many European countries, the underlying problems are rather different, embedded in difficult to change social institutions: pension systems that are unsustainable because life expectancy is now much higher than it was when these benefit schemes were designed; public sector wage and employment trends that are unaffordable; tax systems that have failed to keep pace with business modernisation; and industries that have been left behind by global trends in trade and technology.
By contrast, the South African overall fiscal position is in good health, and we must emphasise that. Consistent with our countercyclical stance, we were running a fiscal surplus before the crisis broke, as we've told you many times, and debt was 27% of GDP. We can therefore respond to the crisis – and have responded to the crisis – with a wider deficit for several years, without threatening the integrity of the public finances. We will maintain our fiscal strategy and, at the same time, address some key development challenges that lie ahead.
We have not yet made enough progress in our social security and retirement reform agenda, for instance. We also need to give attention to public sector employment, where we have made substantial improvements to remuneration and career progression in recent years. Over the period ahead, we need to ensure that we keep the right balance between paying better wages and salaries, investing in productivity improvements and employing more public servants in front-line services.
Thirdly, in growing the wider economy, broadening participation in deepening trade and strengthening our revenue base, we have recognised that a new growth path is needed, that industrial policy has to be founded on a well-considered action plan, which we now have, and that we need to do more to promote a dynamic economy, capable of responding both to domestic demand and international opportunities. What we must emphasise, ladies and gentlemen, is that there is no short cuts to job creation. We have to work harder, more intensively, and focus on the right issues in order to create jobs, particularly for our young people and develop a new level of creativity if we are going to position South Africa in the new global context.
So, there is much to be learnt from the international experience, and I hope that this committee and members will keep a watchful eye on Europe and the developments over the next few months. We will no doubt feel some of the effects of the uncertainty in financial markets and possible downturn in trade again over the period ahead. However, the primary lesson is that we must remain focused on our own long-term structural growth and development challenges. These are different in very important respects from the European or Asian situation, and we have to construct a development path that is suited to our own circumstances, taking into account our commitment to and shared interest in Africa and the region around us.
As many commentators have noted, while we have become a more integrated community over the past sixteen years, we remain a profoundly unequal society. There are too many have-nots and too few haves. What must we do to become more equal? This is the question that all of us need to take on more assertively. How do we overcome the economic gulf between rich and poor? How do we give practical meaning to our commitment to a South Africa that, indeed, belongs to all? We should not fall into the trap of thinking that there is an easy road to this goal. Economic history is littered with examples of interventions that were short-sighted and self-defeating, policy measures that ignored their unintended negative effects. Even successful and necessary interventions require careful balancing, but there are clear signposts we need to follow, I would submit.
One is that employment is a key success factor. Income support and welfare services can contribute to poverty reduction and education is an important enabling condition, but if work seekers cannot find jobs, then the unemployment fault line remains a formidable dividing line between opportunity and vulnerability, between progress and despair. Similarly, the review of our further education institutions and the Sector Education and Training Authorities that my colleague Minister Nzimande has undertaken is a necessary and critical reform programme, for long-run growth and development has to be accompanied by more effective and better targeted skills development, training and vocational education.
A range of fiscal interventions is also needed, some new and some reinforcements of existing programmes. These include a countercyclical policy stance, focused especially on infrastructure investment, strengthening of the Expanded Public Works Programme, EPWP, targeted relief and income support programmes, trade promotion, capacity-building and infrastructure investment in municipalities and, more importantly, as we have said on many occasions, measures focused on youth employment. Responsibility for these and other initiatives is now explicitly set out in the performance agreements of the economic cluster Ministers with the President, whose mandate President Zuma has rightly determined, is firmly focused on job creation challenges.
I have already pointed to another signpost – you see what the cold weather in Cape Town does – with important implications for both fiscal sustainability and the long-term trend in income distribution. I refer to the still outstanding work shared amongst several Ministers and departments for social security reform and the financing of health services, but income distribution is not only an outcome of public policy and programmes; it is also shaped by social norms, remuneration practices and the exercise of power and privilege. Extreme earnings disparities cause offence not just when they are associated with profiteering or financial malfeasance, but also when the reward for honest work seems disproportionate or weakly aligned with incentives. There is a national discourse needed, aimed at moderating high-earning remuneration levels within our large corporations, including state-owned enterprises, for the social dimensions of earnings trends can surely not be ignored in the economic calculus of risk and rewards. We are creating a dangerous culture in South Africa, and the divide between the have-nots and the haves will only grow, much to our detriment.
Alongside the economic policy responsibilities we share with several other Ministries, much of the Treasury's work is focused on integrity, accountability and value for money in the use of public funds. This is an especially difficult challenge in times of economic stringency. President Zuma has called for all of us to do things differently, to ensure that we bring better services to South Africans, efficiently and effectively. This is the central aim of our budget process. In the period ahead, there will be further reforms to the budgeting system, taking into account the new performance mandates of Ministers and with a special focus on monitoring and measuring performance and progress against identified targets.
We are also mindful of the need for further progress in financial management, supply chain management, human resource management and governance of public entities. I need to express my appreciation for the work of Parliamentary committees in strengthening oversight of government spending and, in particular, for the diligence of the Standing Committee on Public Accounts. We must also thank our trade unions and other organisations for their support in our call to fight corruption. We must intensify our efforts to root out this culture of easy money. Instead, we must surely aim to be able to say: I've worked hard, done creative things, saved and invested, and made this money myself, rather than taking it from the public purse. [Applause.]
Under this spotlight is a very considerable share of national income. In the current financial year, national and provincial government will spend R907 billion, 33,6% of the GDP – up from 28% just five years ago. That is a lot of money, and if we can't look after it, then we are in trouble. Of course, the institution that really looks after our money is the SA Revenue Service that provides government with funds to finance public services that requires that sufficient resources be raised from the economy to pay for these services. In this respect, the SA Revenue Service, Sars, has provided a sure foundation to our fiscus by raising the financial resources for expanded and accelerated service delivery.
In this respect, we must all thank the millions of honest taxpayers who continue to contribute to the growth and development of our country, especially in these most difficult economic conditions. It remains a central focus of Sars's work that all taxpayers should pay their fair share. This, regrettably, is still not the case; otherwise I suppose Sars wouldn't have a job. Several further steps will be taken to improve compliance in the year ahead. Third party data from employers and financial institutions has proved highly effective in identifying cases of tax evasion, including employers withholding pay as you earn, PAYE, deductions and taxpayers failing to disclose interest and other income. Other sources of data, including the stock exchange data and registration data from other government departments, such as Home Affairs and Companies and Intellectual Properties Registration Office, Cipro, provide further scope for closing the net on the noncompliant.
Using data from the Department of Social Development, the National Prosecuting Authority, the Special Investigation Unit, and Sars, we have been able to identify 200 000 individuals who appear to be collecting social service grants unlawfully. Through verification activities countrywide, the authorities will now be in a position to not only collect taxes due from such individuals and apply the relevant punitive measures, but also be in a position to ensure that continued payments to such persons be discontinued with immediate effect, with the co-operation of the Department of Social Development.
From September this year, Sars will require all those receiving any form of employment income, including those below the tax threshold, to be registered with Sars to help reduce the scope for noncompliance. The net is also closing in on those who have sought refuge in tax havens. In the aftermath of the global financial crisis, there has been a welcome acceptance of the need for greater transparency of financial dealings. In the tax arena, a number of jurisdictions that have previously been unwilling to share information with Sars have now instead signalled their willingness to do so.
The success of collaboration between tax, financial and enforcement agencies in the broader financial and justice systems is also evident from significant progress made in the early identification and more efficient dismantling of complex fraudulent schemes aimed at abusing the trust of citizens. I can today report that further evidence of such collaboration was demonstrated in the early hours of this morning in Durban and Pretoria where Sars investigators, assisted by the South African Police, clamped down on a company listed on the Johannesburg Alternative Stock Exchange, suspected to be involved in another multimillion rand suspected fraudulent investment scheme, involving the abuse of the trust of vulnerable citizens. This time the product is a so-called immune booster pack for HIV/Aids sufferers.
Those who seek to abuse the value added tax, VAT, system to defraud the fiscus will also be pursued intensely, as recent arrests have shown. Increased export controls, as part of the customs modernisation programme, will assist Sars in identifying fraudulent VAT refunds linked to exports. Sars and the Department of Home Affairs have developed a real-time risk-based movement control system which significantly enhances our capability to streamline the movement of goods and persons through our ports, while, at the same time, stopping unwanted goods and people. Both Home Affairs and Sars are to be complimented on this development. It is a perfect example of co-operative governance in action. The system is currently being implemented in all key ports of entry ahead of the 2010 Fifa Soccer World Cup.
At the same time, continued enforcement actions by customs and enforcement units in Sars, in conjunction with the SA Police Service, the Directorate of Priority Crimes and a number of external stakeholders, have already made a major impact in the smuggling, manufacturing and distribution of counterfeit goods.
The Financial Intelligence Centre continues to play an important role in assisting to identify the proceeds of crime, money laundering and the financing of terrorism. In the past year, the Centre identified R66 billion that passed through bank accounts in South Africa last year as suspicious transactions, requiring further investigation by South African law enforcement agencies.
Equally important is the work of the Public Investment Corporation, PIC, and the Government Employees Pension Fund, GEPF. The GEPF is governed by a board on which members and the state as employer are equally represented. The funds of the GEPF are invested by the PIC and during the year up to March 2009, the PIC's assets under management declined from R786 billion to R739 billion, largely as a result of what we see in the markets. In the written speech, you will see a number of examples of the excellent work that the PIC has done.
Chairperson, thank you very much for this opportunity to present some elements of what we will do in the year ahead, and I look forward to the debate. Thank you very much. [Applause.]
The HOUSE CHAIRPERSON (Mr M B Skosana): Thank you very much, hon Minister. Let me just say briefly that to chase away your cold, there was a time in the House of Commons when the Chancellor of the Exchequer was allowed to take his brand of – some took whisky, some took gin and tonic, some brandy, but unfortunately we don't have that custom here.
The MINISTER OF FINANCE: Here's my brand. [Laughter.]
The HOUSE CHAIRPERSON (Mr M B Skosana): Cheers!
Mr T A MUFAMADI
The MINISTER OF FINANCE
Mr T A MUFAMADI: Chairperson, hon Minister, hon members, and distinguished guests in absentia ... [Laughter.] ... let me say that it is always important to restate what we normally consider to be obvious when we debate matters of this nature. That is to say, a budget is both a political and a financial instrument used to ensure that the policies and programmes of government are brought into effect through the allocation of financial resources in all three spheres of government. Therefore, the prosperity of the 2010 budget lies in addressing the key priorities as outlined in the ANC election manifesto and the state of the nation address.
It is important to note that several changes have occurred in the world economy since the tabling of the budget early in the year. The volatility of the markets is but an indication of unstable and unsustainable economic policies, particularly from the developed countries.
The consequences of these rampant changes have brought about a great deal of unpredictability in the whole world economic system. However, for us the key issue is not just to understand and characterise the phenomena behind the ongoing economic challenges whose end, none of us, seem to be in a position to predict, but of primary concern to us is to measure its impact on the pace and sequence of our delivery programmes so that we can take bold decisions to ameliorate or mitigate the negative consequences it will have on ordinary citizens.
It is now a known fact and universally accepted that the unfettered so-called free market economic system has failed dismally to address and respond to social and economic inequalities that continue to ravage poor nations. It is from this experience that we must forge a new economic growth path that is inclusive and state-led, because the invisible hand has forever remained illusive and a dangerous path to follow. The consequences of which only the poor and the working people can better explain to some of us who live in comfort.
Clearly, the need for active state participation in the economy is beyond debate. No government in the world today can afford the luxury of relegating itself and limit its role to that of a regulator and only become active when it is time for bailouts of failing policies. It is not just important but critical that the prosperity of the Budget Vote No 9 of the National Treasury should enhance the following: It must engender the social ownership of the country's wealth, not as a face-saving formula but a well reasoned economic strategy to address the imbalances of the past that continue to bedevil our people. The need to foster a thriving an integrated economy, which draws on the creativity and skills that South Africans can offer and build on South African economy endowments to create decent work for all as well as eliminate poverty. It must increase social equality and a growing economy, which reinforces each other and constitutes a positive cycle of development that improves the quality of life for all people. It should also contribute to and advance national prosperity through a mixed economy path where the state, private capital, co-operative and other forms of social ownership complement each other in an integrated way to eliminate poverty and foster shared economic growth. It must ensure national prosperity through rising productivity brought about by innovation and cutting edge technology, labour absorbing industries, growth, competitive markets and thriving small businesses and co-operative sector.
In the regulatory environment, the current ongoing economic crises is, to a very large extent, due to ineffective regulatory institutions that have been neglecting their responsibilities, either due to lack of capacity or because they do not share common objectives that constitute the national priorities of our government. It therefore requires serious attention from National Treasury to pay specific attention to financial institutions and regulatory entities such as the Financial Services Board, FSB, the Public Investment Corporation, PIC, and the Government Employee Pension Fund, GEPF. Equal priorities should be given to all these institutions so that the necessary capacities are developed to execute their mandates just like the SA Revenue Service and a few others have managed to do.
The strategic goal of economic transformation is the material response to the clarion call of the Freedom Charter that "the people shall share in the country's wealth."
In recognising our successes since 1994, in responding to this call, we are deeply mindful of three fundamental challenges, which remain as hurdles along the road to substantive economic transformation. These are unemployment, poverty and inequality. Economic transformation in our country must ensure that a national democratic society characterised by a thriving and integrated economy, an increasing social equality, national prosperity, socioeconomic rights and a mixed and sustainable economy is achieved.
For this to happen, the state must play a central role by directing investment in underdeveloped areas and directing private sector investment in the area of productive sectors. An undertaking is a mandate to halve the unemployment rate and poverty from the 2004 levels, and to substantially reduce social and economic inequalities. Binding constraints to meaningful economic transformations, inter alia, skewed patterns of ownership, production, dualism and marginalisation were identified as needing decisive action for their elimination.
We have to deal with monopoly domination of the economy as it is seen as an obstacle to the goals of economic transformation, growth and development, and as such needs to be addressed. The understanding of a developmental state is that it is located at the centre of a mixed economy as a state that leads and guides that economy, which intervenes in the interest of the people as a whole.
The key questions that need to be asked when considering the Budget Vote of the National Treasury are the following: Does the appropriated Vote before us respond to the respective programmes that seek to improve the quality of life, and the socioeconomic conditions of the marginalised people? Does it support poverty alleviation and job creation? In answering these questions, we need to trace the ANC Medium-Term Policy Priorities development in 2008, which influenced the manifesto policy framework, and what relationship this had with Medium-Term Budget Policy Statement of October 2009.
The Medium-Term Budget Policy Statement clearly indicates that there will be a substantial adjustment that would have to be made in order to meet the medium-term policy directives of the ANC for the five-year period, which started in 2009. The 2009 Medium-Term Budget Policy Statement indicates that the greatest dangers are to be found in the effects of a shrinking manufacturing base resulting in a negative impact upon the domestic economy.
The 2010 budget was delivered in the midst of an ongoing global economic crisis where millions of jobs had been lost domestically. In 2009 about 870 000 jobs were lost, and as we speak right now, we are saying almost one million jobs have been lost mainly in the manufacturing sector. Whilst there were initial signs domestically, those might be bottoming out and indicators, which reflect growth in the last quarter of 2009, for the first time since 2008, this recovery will be slow. The loss of jobs and growing levels of inequality and indebtedness do not suggest that because of the growth recorded in the last quarter that this will automatically have an immediate knock-on effect on job creation.
Thisin turn has an impact on revenue income, and early thoughts that we may be officially out of recession were dealt a blow when the first quarter of 2010 unemployment figures from Statistics SA, which reflected a further 171 000 job loses. The current European crisis generated by Greece's economy, which has now impacted on one of the top five trading partners in the UK, must clearly and continuously remain under the radar of the National Treasury and ourselves as Parliament.
The lessons we have to learn are that South Africa has been at the front of this and that the global financial architecture has to be rapidly reformed. The ANC-led government has actively been at the forefront of this for many years, and will continue to strive for the necessary radical reform of the Bretton Woods institutions, because the International Monetary Fund, IMF, and the World Bank and their subsidiaries cannot continue to claim that the festival of reconstructing the economy is a festival of rich nations.
The actions and economic policies of developed nations underpinned by their narrow and selfish interests have proven to be more detrimental and negative to the poor nations, particularly Africa as a continent. Developing countries were affected by the collapse of the financial institutions and have been badly economically and socially hurt in spite of their prudent economic policies. We have noted that the crisis is associated with inadequate regulation and supervision of banks and other financial institutions, as I have already mentioned.
In conclusion, we need to say, as the ANC supports this budget, it is based on the fact that this budget will be used to monitor the programmes of government in its entirety, and Parliament will support that so that all government departments have the necessary capacity to keep regular and honest account of the public purse. It would be in the interest of government as a whole to manage the resources of the state in a manner that it would tolerate no corruption and no laziness, as the President of the Republic has said. Thank you. [Applause.]
Mr D T GEORGE
Mr T A MUFAMADI
Mr D T GEORGE: Chairperson, I would like to thank the Minister and his team for the good news on revenue collection and his successful pursuit of VAT criminals. The second of May was Tax Freedom Day. The average South African taxpayer worked for 121 days to settle their annual tax obligations. This is a long time and a lot of money for people who are getting less and less in return. The social contract between taxpayers and government is fairly simple. The people should pay their taxes and government should deliver efficient and effective, value for money services. The National Treasury, as custodian of the people's money, must ensure that the social contract is maintained and strengthened.
Although government talks about rooting out waste and promoting cost efficiency, it fails to act. The DA's wasteful expenditure monitor has already breached R1 billion in one year. This only includes wasteful expenditure that we have uncovered by digging through piles of paperwork, often intended to hide the most basic financial details.
In my recent interaction with a major international bank, I was informed by their economists of their view that actual wasteful expenditure by the ANC government in South Africa is at least 20 times higher than our monitor suggests. This does not inspire investor confidence, especially when our debt requirements are rapidly increasing. In assessing the effectiveness of government spending, we need to look at various macroeconomic indicators and activity in the micro economy.
Our Gross Domestic Product, GDP, growth lags behind that forecast for the global economy. We also lag behind growth forecasts for the emerging markets and other African economies. Although the deficit on the current account of the balance of payments improved in 2009, we are still not exporting enough, given our capabilities.
Unemployment remains on the increase, and the income gap is continuing to widen. All this, despite one grand economic plan after another, compounded by the dismal failure of so-called black economic empowerment to reach the broad-base of people that it was intended to uplift into economic activity. We are still waiting for the poverty line index and for decisive action on dismantling the barriers that have left millions of our young people out of employment, education and hope. We are also waiting for detail on the wage subsidy for new entrants to the labour market and action to promote literacy.
The so-called developmental state lurks ominously as it waits in vain for the state-owned enterprises to energise our economy. Eskom and the Land Bank's raid on the people's money has impacted heavily on the national budget. Just imagine how much service could have been delivered to the people with just a fraction of R43 billion. For how long are the people expected to wait for service delivery, while the ANC government pours the people's money into the trough so that its cadres can feast while the people become more and more restless and impatient? They will not wait forever. Fortunately they have a viable alternative in the DA, achievable through the ballot box.
The National Treasury also needs to explain to hard-working taxpayers why extremely beneficial electricity pricing arrangements are permitted for some, while the average South African household struggles with the double burden of spiralling tariff increases and tax payments to finance transfers to Eskom.
More than a year has elapsed since the 2009 national election and we are still not having clarity on the direction of economic policy. The Minister of Economic Development has established an advisory panel to produce papers on micro and macroeconomic matters. The Minister of National Planning has established a National Planning Commission to develop a long-term economic plan.
The Minister of Economic Development claims that his advisory panel will make recommendations to the National Planning Commission. This seems to ignore the fact that the purpose of the National Treasury's programme 6 is to provide specialist policy analysis and advisory services in several areas including micro and macroeconomics. This is not cost-effectiveness.
My parliamentary question on the cost of the so-called Harvard Papers, commissioned in 2008 and largely ignored, was never answered. Why is it so difficult to understand that economic stability is strongly influenced by sentiment and that positive sentiment needs certainty? The ANC government talks about the need for consensus on a long-term economic prosperity plan, but then it sends out mixed and confusing signals. Obviously, this is a reflection of the confusion in the ANC about what its various factions want to achieve.
A clear example is that of nationalisation. President Zuma told the world and Parliament that nationalisation is not ANC government policy. He was directly contradicted, without correction, by the ANC Youth League President, Julius Malema, who calls for the nationalisation of everything, from mines to banks, without any understanding of what this does to investor confidence, let alone any understanding of the public financial implications.
These contradictions are like a virus infecting our economic growth prospects and are playing directly into the hands of those who do not have the interests of ordinary South Africans at heart. The noise around proposed improvements to governance structures at the South African Reserve Bank is far louder than it would have been had calls for its nationalisation not been made. Parties intent on raiding our 40 billion US dollar national reserves, the people's assets, have their case strengthened by the noise on nationalisation, generated by fools who have no understanding of even the most basic principles of economics and finance.
The Minister of Economic Development has proposed that pension funds should be forced into apartheid-era prescribed assets in the form of development bonds. The Minister of Finance said that those bonds were not necessary. Pension fund members need clarity on what is actually intended. They also need to know progress on long-awaited social security and retirement reform, especially on plans for a National Retirement Fund and whether this will be another pot for government to underwrite its wasteful spending.
Billions of rands were stolen from pension fund members when the Financial Services Board, FSB, failed to properly govern surplus apportionments during pension fund transfers in the 1980s and 1990s. The FSB needs to be strengthened to ensure that it can properly protect pension fund members and other investors. The National Treasury must ensure transparency, accountability and sound financial controls in the management of the country's public finances.
Approximately 60% of the people's money is spent on procurement of goods and services through the tender process. The rise of the so-called tenderpreneur clearly demonstrates how badly the procurement process is broken. Tenders worth hundreds of millions are awarded to tenderpreneurs who then outsource the work at a fraction of the amount awarded and steal the difference.
National Treasury does not have this problem under control. The database for tenders awarded is not maintained, nor is it audited. The register for tender defaults is empty. In our report to Parliament, the Standing Committee on Finance undertook to engage with National Treasury on the procurement and tendering reform process.
In particular, the Prevention and Combating of Corrupt Activities Act needs to be amended to state that parties found guilty of tender default must, not may, be named in the register, to prevent them from perpetuating their crimes as they are doing now. A fairly simple way to apprehend those who steal the people's money is to subject known tenderpreneurs to lifestyle audits.
A fairly simple way to apprehend those who are stealing the people's money is to subject known tenderpreneurs to lifestyle audits. Our committee has recommended that Sars should put a programme in place to identify the mismatch between declared income and actual income of individuals in the economy who do not pay their taxes.
Al Capone, the notorious American criminal, guilty of many offences, was finally brought to book on charges of tax evasion. This is a very powerful tool and Sars must not be inhibited from its ruthless pursuit of economic criminals, irrespective of their political affiliation. We will never know whether a report, circulated in the media and detailing a so-called ghost unit at Sars established to place various ANC politicians under surveillance for tax evasion, has any substance in reality. But we do know that ANC politicians have benefitted from the abuse of the tender process and have lifestyles that do not match their incomes. Those parasites must be identified and stopped.
Sars is often accused of bullying law-abiding tax payers whose cash flow sometimes inhibits their ability to settle their tax obligations. This is misguided, because payment arrangements can usually be agreed upon. Sars has much, necessary, power, but must not forget that it is a servant to the people. Sars needs to listen more carefully to its customers when it consolidates its services. Our committee has recommended that Sars should provide it with its consolidation strategy so that we can ensure that effective communication takes place before its office consolidations are implemented.
Government has committed itself to a review of the business and funding models applicable to the state-owned enterprises. Hopefully, this will be completed honestly and realistically to ensure that the drain on the public finances can be plugged. It is only a matter of time, hon Mufamadi, before the ANC realises that the so-called developmental state model cannot work and that government's role is to facilitate economic activity and not to control it. The economic model, as envisaged by the DA's open opportunity society for all, can create a virtuous cycle of prosperity for all and is the only, viable, alternative.
In conclusion, the DA would like to thank the National Treasury and Sars for their service to the people of South Africa. Your contribution to the well-being of our economy is noted and greatly appreciated. I thank you. [Applause.]
Mr N J J van R KOORNHOF
Mr D T GEORGE
Mr N J J van R KOORNHOF: Chairperson, the recent financial crisis has demonstrated to us the interconnectedness of financial markets and instruments. This time everyone was correct to blame it on greedy Wall Street operators exposing and exploiting the free market system.
To no surprise the weakness of markets around the world, and now governments, were exposed and it was over to the models of John Keynes to be hastily reintroduced to rescue and stabilise markets. At that moment everything has changed and the free market will never be the same again.
Let me remind this House, how deep the recession was – we still feel aftershocks and economies are hesitant to react over-positively. Strangely, this recession, like those in the previous 30 years, did not originate in emerging markets, but in the most powerful country in the world, the USA and then it spread fast to Europe and Asia. The USA lost $250 billion worth of loans. In 16 months stock markets in the USA lost $26 400 billion. The capital loss was 95 times the gross domestic product, GDP, of this country.
In other words, it wiped out the wealth equal to the annual produce of 95 countries the size of South Africa. South Africa was a little better off because of conservative financial regulations but was nevertheless hit hard, and it will take us another five to six years to regain heavy losses according to Clem Sunter.
Prof Estian Calitz wrote a good perspective in the publication discourse on the recession stating that "the fallibility of markets had required government intervention to restore confidence". This recession has exposed the shortcomings of human knowledge about human behaviour.
According to Calitz, we have witnessed:
The inadequacy of our economists understanding of how economies function and their ability to credibly predict and prevent major crises!
He concludes by saying:
The fact is, we as humans still do not know how to protect ourselves against harmful collective behaviour in its unpredictability.
In the words of the Pogo Principle, "we have met the enemy, and it is us!"
This brings us to a sensitive topic, and I would like a response from the hon Minister. According to a report compiled by Dr Phillip Theunissen of Computus, he has studied and surveyed 326 companies in this country, and he found that the salaries of CEOs in South Africa are out of control.
Despite the recession South African CEOs were still able to double their normal annual earnings. It takes the average CEO three months to earn more than R1 million. Chief Executive Officers still earn twice as much on average as the President of the country, and three times more than the Cabinet Ministers – only salary wise.
They earned ten times more than a director-general in 2009, while they earned 106 times more than a cleaner in the public service for the same year. Seventy eight percent of the CEOs earned more in a month than what the average worker earns in a year. All of this put pressure on the ever-increasing State Wage Bill, and it is setting a bad example in terms of expectations.
Banks in South Africa, like in the UK and the USA are paying their CEOs higher than normal salary packages. Bloomberg has reported that Nedbank's CEO earned R43 million in 2009, Standard Bank's CEO earned R18,2 million and ABSA's CEO earned R13,5 million.
In all three examples their salaries were just below R5 million, but add the rest, the bonuses and the share options, and then it becomes ridiculous. Dr Theunissen has further found that neither the performance of the individual companies, nor the size of the company, influence the size of the salaries. No single business factor has emerged in his study as a main factor for the determination of salaries.
Why does someone who earns more than R5 million only in salaries want more when he or she is already working in a stable bank low risk environment? When a company is listed on the JSE there should be some sort of a cap on remuneration packages. I do not have the time to argue the case for or against share options, but there are some ridiculous examples in our economy.
Hon Minister, the remuneration committees of companies are not doing their jobs and they are not sensitive to the wide gap between CEO's salaries and that of workers. They are also not sensitive towards the poverty gap in South Africa. And if boards of directors are not responding to this challenge, is it not fair to pose a question: Who do they want to do the job? Do they really want government to step in?
This greed and sickness of high salaries has been contagious – state-owned enterprises are being paid, salary wise, even more on average than their counterparts in companies! Let us not even talk about deputy CEOs and other top management officials or municipal managers. Something is wrong and may be the hon Minister Hogan will set the example with her investigation about these SOE salaries; this might just become a guiding principle for JSE-linked companies.
In conclusion, we have seen that unchecked building up of debt levels is not sustainable in either the private sector or the public sector. Most countries will have to reduce their debt at least to levels prior to the crisis. According to JAC Laubscher of Sanlam, South Africa shall need a required adjustment in the structural primary Budge balance, between now and 2030 of 3,8% of GDP to make sure that our debt level will be around 40% of GDP.
In the new book recently published about Barack Obama, Race of a Lifetime: How Barack Obama Won the White House. There is a lovely story there when fellow Senators asked Hillary Clinton why she's attending so many fundraising events and other commitments in Chicago - that was in 2004 when Barack Obama was still a Junior Senator - she replied "didn't you know there is a superstar in Chicago?"
Minister, we wish you many superstars in the Treasury with the big fiscal challenge ahead of you and to keep our debt levels under control. We also wish Bafana Bafana lots of super goals. [Time expired.] [Applause.]
Mr M G ORIANI-AMBROSINI
Mr N J J van R KOORNHOF
Mr M G ORIANI-AMBROSINI: House Chairperson, we wish to thank Minister Gordhan for having heard us in respect of the perverted nature of the Reserve Bank. His draft Bill is a small step in the wrong direction, but, at least, for the right reasons. The Reserve Bank remains a fiefdom, acting in the interest of a few. The strength of the rand, in spite of both the Minister of Finance and that of Trade and Industry agreeing on the rand having been devalued, proves it.
We will engage the Minister more on this issue as the Bill gets discussed. I now wish to point out that the scope of these discussions must be broadened to consider a reform of the monetary system, failing which, we will have not even begun dealing with the root causes of inequality and poverty.
I suspect that in Minister Gordhan's chest, a socialist heart beats hard, as does in mine. But I am also a libertarian. We must grow out of the nineteenth century model and define a 21st century path towards the emancipation of the socially oppressed. This path is not about creating a proletariat state, but rather a state of bourgeois citizens with descent and dignifying sources of employment - a very large bell-curved middle class with small fringes of poverty and extreme wealth at its ends.
Yet, the Minister told me in the committee that the priority is to take care of the poor and not the middle class. Where is the poor going to grow into, if not into the middle class? Looking at where we are currently at and where we are moving towards, one almost suspect that, in adherence to a nineteenth century strategy, the conditions for a popular uprising are progressively being created.
We have more than 25% unemployment rate, which will grow dramatically after this opium-like soccer extravaganza is finished. It has dislocated so much of our scarce resources with little or no compounding long-term financial benefits. The nation's debt is being raised from R526 billion to 1,3 trillion by 2013 in the hope of stabilising it by 2015 on a deficit of revenue over expenses limited to 4% of Gross Domestic Product, GDP.
If growing at the same rate, by 2015 the debt will rise to R1,7 trillion, with the possible annual debt servicing cost nearing the budget of education. These figures do not include the explosive and skyrocketing municipal debt. The only way of servicing this stabilised budget with a deficit of 4% of GDP or begin repaying the debt is through raising taxes; cutting expenditure; and hyperinflation, unless we believe in a miraculous vast broadening of the tax basis flowing from a not foreseeable period of immediate economic prosperity.
We are heading for higher taxes and inflation, no matter how strongly one denies it. Eskom has told us that it still requires an additional R200 billion in funding, and has no plan to meet its costs beyond 2017. There was no reason for us to borrow from the World Bank for the present financing, but it was expedient for the fiscus to keep this as a merely contingent liability. The next financing will undoubtedly be done through taxes. Eskom will also require additional inflationary tariff increases over and above the absurdly high one it has just received.
Minister, there are about five million income taxpayers - this includes all the members of this House - who support a population of 50 million, most of whom receive one or more items of social assistance.
Proportionally, we are one of the largest welfare states on the planet. According to a recent KPMG report, we are subjected to some of the highest personal income and corporate taxes in the developed and semideveloped world. Even Sweden has a corporate tax lower than ours to balance its high personal income tax. Being at the top of both such tax categories is unheard of.
Rightly or wrongly, the five million taxpayers have to use the after-tax money on private security; private schools; private retirement fund; and private hospitals. Their tax money doesn't provide them with satisfactory policing, education, social security and health care. We parliamentarians have even passed a law to make sure that we do not go to public health facilities for which we will not need medical insurance.
The present fiscal policies will push vast segments of the middle class into poverty or conditions at which there will not be a significant disposable income. [Time expired.]
Mr Z LUYENGE
Mr M G ORIANI-AMBROSINI
IsiXhosa:
Mnu Z LUYENGE: Sihlalo mandikhahlele kuwe, kwiinkokheli ezisuka kwiSebe lezeMali ezikhokelwe nguMphathiswa uGordhan neSekela lakhe uMnu Nene, kuMlawuli-jikelele weli sebe, nakuwo onke amagosa eli sebe kunye neendwendwe - ukuba sele zifikile kuba ingathi bezingekabonakali ngokuya bekuthetha usihlalo wekomiti.
Ezinye zezinto eziza kwenziwa nguNondyebo weSizwe, njengoko zicacisiwe kwisahluko sesi-2 soMthetho woLawulo lweMali yoLuntu, kukuqinisekisa ukuba imali kunye nezixhobo zaseburhulumenteni ziphathwa ze zisetyenziswe ngendlela efanelekileyo.
Indlela ekuphathwa ngayo izixhobo zikarhulumente ixhomekeke kwizinto ezininzi ezifana nezoqoqosho, imithetho yezoqoqosho nenkcitho-mali. NgokukaNondyebo weSizwe uqoqosho luza kukhula ngomyinge oyi-2,3% kulo nyaka, lusiya phaya kwi-3,2% ngowama-2011. Iziqhamo zokunyuka kwamaxabiso zikwizinga elifanelekileyo. Ezoqoqosho nezorhwebo zomhlaba ziyonyuka kwaye ezemisebenzi zikwizinga elingaxhalabisiyo noko. Inyala ngoku kwingxowa-mali yesizwe likwimo ezinzileyo, kwaye kulindeleke ukuba libe ku-4,9% ngowama-2010 xa silithelekisa no-7,1% kunyaka wama-2008.
Iinzame zikaSars zineziqhamo ezihle. Iibhiliyoni ezisi-8 ezilityala kwingxowa-mali yesizwe yi-6,8% ye-GDP ngeli thuba. Kuza kuchitwha ngaphezulu kwemali engama-R845 eebhiliyoni ukugcina izinga lezinto eziphethwe ngurhulumente lisemgangathweni. Olo lutyalo-mali kwizixhobo eziluncedo zikarhulumente.
Ngokubhekisele kwizivumelwano zikarhulumente malunga nokudala amathuba emisebenzi kunye nemfuneko yokwakha ngokutsha ezoqoqosho, ezi zinto zilandelayo zibonisa ubungozi obunokuthi bubekhona kwezoqoqosho: ukonyuka kwemirholo namaxabiso e-oli; ukugcina impahla karhulumente isemgangathweni; iimveliso ezingasetyenziswanga ziza kugcinwa zikwizinga elizinzileyo kulo nyaka uzayo; ukukhula kancinane koqoqosho lwezomhlaba kuthetha ukuba kufuneka sigcine ityala kwingxowa-mali yesizwe lingaphezulu kwe-MTEF. Ukongeza apho amatyala akhule ukusuka ku-2,4% ngowama-2009-10 ukuya ku-3,2% ngowama-2012-13 kwaye oku kuza kuba nesiphumo esibi kwingxowa-mali yesizwe.
English:
In terms of its strategy, National Treasury will focus on the following areas: It will provide the appropriate support to the economy as the global economy recovers, while reducing government borrowing over the Medium-Term Expenditure Framework, MTEF, period; support aggregate demand through its monetary and fiscal policy stance, while foreign demand recovers; have a fiscal exit strategy to prudently reduce the impact of high borrowing on future growth prospects to derive the value for money in all public expenditures and enhance control measures in awarding tenders; provide sustainable long-term public finance support to critical needs such as electricity supply, public transport, community development and regional development; ensure that the new budget process with Parliament works effectively; support labour-intensive industries through industrial policy, investment in and improved maintenance of network industries; raise productivity and competitiveness by reducing the regulatory hurdles and red tape; increase access for private investment and participation in critical input markets; and raise savings and investments through responsible fiscal management.
An assessment of these focus areas shows consistency with the overall government priorities as defined in the President's state of the nation address of 2010. They must, however, be looked at against the ANC's priorities as the ruling party for the next 5 years, in particular how these affect the management of the country's assets and liabilities.
The ANC's priorities within the management of assets and liabilities and Treasury's focus on an assessment of the management of these assets have to be done by looking at the extent to which they support the ANC's agenda within a developmental state.
The ANC's key priorities are the creation of decent work and sustainable livelihoods, education, health, rural development, food security and land reform as well as the fight against corruption. Achievement of these priorities will require massive resources which will result in an expansion of public spending by the state.
The expansion of public spending does not contradict our new economic growth path approach embedded in the understanding of a developmental state. It is a state that will guide national economic development and mobilise domestic and foreign capital and other social partners to achieve the goal of ensuring that all South Africans, especially the poor, experience an improvement in their quality of life. This view is entailed in Building a National Democratic Society, in Strategy and Tactics of the ANC 2007.
One of its key attributes relevant to the management of our assets and liabilities is its capacity to intervene in the economy in the interest of higher rates growth and sustainable development.
The Budget Review of 2010 shows an expansion in public expenditure in support of the ANC's priority areas. These are: Improving the quality of basic education and skills training - spending in education is set to rise from R148,9 billion in 2009-10 to R165 billion in 2010-11; upgrading health care and increasing life expectancy - spending increases from R98 billion in 2009-10 to R104,6 billion in 2010-11; building a safer country - spending increases from R78,4 billion in 2009-10 to R85,6 billion in 2010-11; developing equitable and sustainable rural communities – an additional R860 million is allocated for a comprehensive rural development programme of research, planning, design and development of rural development projects; an amount of R1,2 billion is allocated to Human Settlements for water and sanitation infrastructure associated with rural housing; the Land Bank gets a R1, 5 billion capital injection to improve its liquidity and its ability to support emerging farmers.
By building a more inclusive economy, creating jobs and developing a network infrastructure over the 2009 to 2014 period, the second Expanded Public Works Programme aims to create 4,4 million short-term jobs lasting an average duration of 100 days. Allocations for rail infrastructure are increased by R497 million, of which R103 million is cost increases on the Gautrain and R394 million for the Passenger Rail Agency of South Africa.
The public spending expansion in these areas supports the ANC's agenda of addressing the key challenges of poverty and inequality, the economy and employment and service delivery as identified in the manifesto of the ANC.
According to National Treasury, although South Africa was also affected by the worldwide financial crisis, it was in a much better position because of its past prudent fiscal and debt management. This would allow the government to finance higher borrowing to invest in high priority goals that will drive economic growth, especially in labour-intensive areas of the economy, where job creation can be achieved.
In building a developmental state, there has been a shift away from a narrow emphasis on inflation control in our fiscal policy towards a growth and employment creation stance. Spending on these priorities would provide a lever for the take-off of new economic paths. For those priorities that cannot be financed through the budget because of the deficit, it may be important to use our fiscal policy as a tool.
The Budget Review indicates that government's net debt is expected to increase from R690 billion in 2009-10 to R1,3 trillion in 2012-13, and as a result, debt service costs are budgeted to increase from R57,6 billion to R104 billion over this period. The net debt and debt service costs as a percentage of Gross Domestic Product, GDP, will increase to 40% and 3,2%, respectively, over the next three years. The national government debt is projected to peak at about 44% of GDP in 2015-16, before stabilising.
In conclusion, the conclusions reached by National Treasury with regard to the management of assets and liabilities, is that the deficit will fall from R177 billion this fiscal year to R156,4 billion by 2012-13. The debts levels and debts service costs are expected to stabilise, of course, and moderate once again after 2015-16.
During this period, infrastructure investment will be a key feature of economic stimulus while investment by state-owned entities and targeted lending by development finance institutions will be stepped up as critical components of economic recovery.
These conclusions, showing the implications of an expansionary public spending stance, show that it is still an appropriate policy decision, even under the present climate. To deal with some of the negative risks of rising debts and associated costs will require a balancing act.
As a result of contraction in the economy and lower economic output generally, there is a great deal of debate regarding fiscal policy. Raising taxes to finance increased public spending may not be a viable option at this stage. Debt financing would be an option to consider. This is dependent on the capacity of the South African financial market to absorb the required amount of debt to finance fiscal expansion. Should this be insufficient, foreign sources of finance would have to be sought.
In order to pursue these most important ANC priorities which will, in the end, result in a job-creating economic growth, there is a need to increase our investment and spending, even if it is within the environment of a rising deficit as a percentage of GDP.
IsiXhosa:
Ndiyarhalela ke ukuba ndikhe ndirhabulise kancinci malunga nalo mcimbi wezinto ezilulutho kunye namatyala. Njengorhulumente okhokelwa yi-ANC kufuneka siyithethe singenazintloni into yokuba xa sithetha ngempahla karhulumente siqala apha emntwini lo kanye ulapha ngaphakathi esebeni. Umntu, okokuqala, ubalulutho xa efuna ukusebenze ezijule ijacu emsebenzini wakhe. Kodwa kwalo mntu mnye xa elivila, elinqenerha, erhwaphiliza, uphela elityala, abe luxanduva kulo rhulumente.
The HOUSE CHAIRPERSON (Mr M B SKOSANA): Ndiyabulela mhlekazi, ixesha lakho liphelile.
Mr Z LUYENGE: Enkosi. [Kwaqwatywa.]
The DEPUTY MINISTER OF FINANCE
Mr Z LUYENGE
The DEPUTY MINISTER OF FINANCE: Chairperson, hon members, our government has set itself a clear vision for the next five years. Its vision is embodied in the Medium-Term Strategic Framework, derived from the ruling party's manifesto, and finds expression in the 12 outcomes which government intends achieving over the medium term. The Medium-Term Strategic Framework and these outcomes are the guiding principles that inform the work of National Treasury. They are in line with its strategic focus areas of promoting economic growth and work opportunities, reducing poverty, promoting the optimal allocation and utilisation of resources, ensuring good governance and accountability, and maintaining macroeconomic stability. That is why, Chairperson, we present our Budget Vote for consideration by this House today, and we ask the House to approve our allocation so that we are able to deliver on these imperatives.
National Treasury's resolve to improve financial management and ensure that funds are spent effectively remains unwavering. The Office of the Accountant-General and the Specialist Functions are to accelerate current efforts targeted at rooting out wastage, corruption, and promoting cost efficiency, as opposed to the narrow politically-motivated campaign of the DA with its monitor. Ours will be judged by what comes out of the Auditor-General's report, and this House will engage on such findings.
Procurement reforms are now currently underway to address the current supply chain management challenges and at the same time align procurement to government's broader economic objectives. Some of the interventions being explored include analysis of the market, benchmarking of prices, determining the most appropriate method of procurement, and due diligence audits on information provided by bidders prior to the awarding of contracts. This may also result in the centralisation of bids for strategic commodities. Oversight in respect of procurement planning and the auditing of the processes of adjudication and selection of suppliers before the awarding of large contracts is also to be strengthened.
Turning to the Integrated Financial Management Systems, National Treasury will maintain government's current financial management system at a level of 98% availability to users by implementing the third phase of the Integrated Financial Management System, which will focus on rolling out the completed procurement, human resource and asset management modules in 2010-11 and fast-tracking the development and implementation of the remaining modules in the 2011-12 financial year.
The period ahead will also see a further strengthening of the country's intergovernmental fiscal system. In line with some of the proposals made in the relevant parliamentary committees when the Division of Revenue Bill was processed, National Treasury is reviewing the fiscal system for provincial and local government. Specifically, the provincial equitable share formula is reviewed to improve targeting and to ensure alignment between the delivery agreements signed between the President and Ministers responsible for concurrent functions like education and health.
Chair, members will appreciate the vast fiscal differences that exist between the country's municipalities. Therefore the review of the local government fiscal system will attempt to align this fiscal system to these differences without compromising local accountability. In addition, a process is currently underway to review all conditional grants with the aim of rationalising them to ensure that the sphere of government that is closer to the people is funded directly to accelerate the delivery of quality basic services. The reforms will be phased in from the next financial year.
Steps to improve the quality of local government budgets are at an advanced stage. The quality of municipal budget information has improved considerably following the implementation of the new Municipal Budget and Reporting Regulations, which prescribe norms and standards for the preparation and format of municipal budgets. As from the 2010-11 municipal financial year, all 283 municipalities are required to prepare their budgets, adjustment budgets and in-year financial reports in a uniform, prescribed format. This will greatly facilitate transparency and understanding of municipal budgets by councils, communities and other stakeholders, and thus, enhance oversight.
The Siyenza Manje programme, currently administered by the Development Bank of Southern Africa, seeks to build capacity in the municipalities. In the past financial year, the programme succeeded in unlocking capital spending of R8,2 billion. Government is currently reviewing the programme to improve its targeting and to ensure its impact is sustainable. Part of the review would look at options to strengthen local government governance, infrastructure delivery and financial management. It is expected that that these interventions, together with the review of the local government fiscal framework, will put government in a better position to attain a responsive, accountable, effective and efficient local government system. This intervention speaks directly to outcome number 9; and also to sustainable human settlements, which is outcome 8; and to vibrant, equitable and sustainable rural communities, which is outcome number 7.
As government, we are also continuously confronted with the question of how best to position our Development Finance Institutions, DFIs, in order to enhance their capacity to effectively and efficiently deliver significant and tangible developmental results to all the qualifying needy individuals and institutions of South Africa. This means that contributions of the DFIs must be measured, not by meaningless statistical numbers, but by their direct impact on the lives of the ordinary people of South Africa, observable through sustained improvements in incomes and standards of living as a result of access to DFI funding, the projects that they deliver, facilities and the infrastructure base.
In spite of government's concerted efforts, there are still some very significant challenges facing our DFIs. These include the sheer quantum and volume of underdevelopment, especially in provinces such as the Eastern Cape and Limpopo, as well as several places even within the metro areas. Our DFIs have limited capacity in terms of a financial resource base to satisfy these needs. The impact of these constraints is further aggravated by lack of institutional capacity in most implementing institutions such as municipalities, beneficiary contractors, emerging farmers and small, medium and micro enterprises, SMMEs.
The total combined balance sheet of all our national DFIs put together was approximately R142 billion in 2009. A strategic partnership with banks and capital markets is going to be key to leveraging development finance to ensure greater impact in the future. Approximately 98%, which is R139 billion, of the total assets of South Africa's DFIs is concentrated in just four major DFIs, that is the Development Bank of Southern Africa, DBSA, the Industrial Development Corporation, IDC, the Land Bank, the National Empowerment Fund, NEF, and the National Housing Finance Corporation, NHFC. The IDC constitutes 52% of the total DFI asset base, whilst the DBSA constitutes 28%. National Treasury has two of these DFIs reporting to it - the DBSA and the Land Bank.
A cursory look at the DBSA, Chairperson and members, reveals that, currently, the DBSA's geographical spread of its developmental loans exhibit a bias towards resourceful metros – Gauteng, KwaZulu-Natal and the Western Cape. This is followed by a significant presence in the Southern African Development Community, SADC, and multinational investments. Owing to this bias, government challenged the DBSA to deepen its development impact and, in particular, to increase its support to poorer municipalities in the following manner: Firstly, to assist weaker municipalities with project identification, preparation and implementation to enhance service delivery, growth and improved revenues.
Secondly, to assist the capacity of municipalities through improved access to appropriate funding, including securing the participation of appropriate private sector partners for enhanced project quality and risk mitigation in project delivery.
Thirdly, to assist the administrative systems, management quality and operational processes of municipalities through the Siyenza Manje Programme in order to ensure their diversified revenue streams.
Lastly, to assist with the eradication of classroom backlogs in some provinces.
To achieve this, the current budget includes measures intended to enhance the DBSA's capital nature by increasing its callable capital by R15,2 billion from R4,8 billion resulting in a total of R20 billion. This will effectively increase the DBSA's lending capacity from R38 billion currently to R140 billion. Since the increase of the DBSA's callable capital requires the amendment of the DBSA Act, which normally takes time for Parliament to approve, the Minister of Finance has, in the interim, provided a guarantee of R15,2 billion to the DBSA.
In order to allow the Land Bank to effectively implement its turnaround strategy, the Minister of Finance announced support for the Land Bank with a guarantee of R3,5 billion which will be converted into a capital injection over the Medium-Term Expenditure Framework, MTEF, period. In December 2009, the Land Bank received R1 billion from the Adjustments Appropriation Act of 2009, reducing the guarantee to R2,5 billion. It has been allocated R750 million in the current financial year, a further R750 million in the next financial year and in the last year of the MTEF, R1 billion.
Chair, I would like to take this opportunity to congratulate the board of the Land Bank under the leadership of Dr Ben Ngubane and the Chief Executive Officer, Phakamani Hadebe, for the good work they have done in turning this institution around.
The 2010 Fifa World Cup is an African event. Africa is the theatre and South Africa is the stage. The awarding of the right to host the 2010 Fifa World Cup to South Africa in 2004 was a great achievement in itself. Through television, radio, the internet and the print media, a further opportunity exists between 11 June and 11 July to showcase the country to billions of people all over the globe, including the key decision-makers in the global investment community. Even beyond this event, we will continue to work with the global investment community to attract the much-needed funding for further economic growth.
Hosting the event also contributes to the development of skills, enhanced construction capacity, the creation of employment, and economic growth. For example, construction of the stadiums has sustained over 130 000 direct and indirect jobs between 2007 and 2010. Direct jobs accounted for the majority of jobs and was sustained at 66 800. Stadium construction had a R15 billion direct, indirect and induced economic impact.
It is 30 days before the kick-off, and we want to thank those who have worked diligently to make the hosting of this event a reality. We are, indeed, ready to host this event.
Let me take this opportunity to thank Minister Gordhan for his steady hand in the Ministry of Finance, and officials from departments and entities reporting to this Ministry for the way they have demonstrated what public service means – working without expecting undue reward. We thank members of the Standing Committee on Finance and the Committee on Appropriations under the leadership of hon Thaba Mufamadi and hon Sogoni. We thank you for your valuable contribution. [Applause.]
Mr S N SWART
The DEPUTY MINISTER OF FINANCE
Mr S N SWART: Chairperson, the ACDP has already joined others in expressing concern with our rising public service debt levels, albeit that South Africa is in a better position than many other countries, as indicated by the Minister.
In this regard Sars is to be commended for collecting R8,1 billion more revenue than anticipated by the end of the previous year, resulting in the reduction of the budget deficit to 6,8% of Growth Domestic Product, GDP. We commend them and we trust that they will have even greater success in the present financial year, particularly, and hopefully, in an environment of continuing growing economy.
Whilst the budgeted economic growth forecast is 2,3% of GDP for this year, rising to 3,2% in 2011, much will depend upon the unravelling crisis in the Eurozone, as alluded to by other speakers including the Minister. Whilst the €100 billion bailout has been given to Greece, fiscal concerns about Portugal and Spain remain. European banks hold significant Greek, Portuguese and Spanish debt. A sovereign default by a European member could undermine the viability of European banks, creating another banking and credit crisis as severe that caused by the subprime mortgages.
The hon Minister has already expressed concerns regarding the time that it has taken the Europeans to deal with the Greek sovereign debt crisis. The question is, how will it impact emerging markets like South Africa?
Thankfully, we have not experienced much fallout. Stock exchanges have bounced back since last week following the news that the European Union, EU, had moved to stabilise the euro and prevent the Greek debt crisis from affecting other member countries. South Africa's situation is also different. It is characterised by improving real growth and tax revenues with lower inflation rates.
We also do not have sky-high public debt and low economic growth, which is plaguing certain European countries. However, were double debt recession in the euro area to materialise, it would undoubtedly impact on our markets due to investor risk aversion and impacting our export to the EU.
We trust that this will not occur, particularly as we have now this unprecedented package of support with the International Monetary Fund, IMF, and US Federal Reserve, USFR, saying that they are also there to support.
These crises, however, illustrates the need to bring our public debt levels down to manageable levels. Thus, the ACDP supports the finance committee's recommendation that Members of Parliament, MPs, should engage in more detail on the fiscal exit strategy which seeks to reduce the impact of high borrowing on future growth prospects.
The ACDP remains positive on our economic growth prospects. However, it is crucial that National Treasury works closely with other departments, particularly the Department of Economic Development and the private sector to achieve job creation, economic growth and poverty reduction. The ACDP wishes to thank the staff members of Treasury, the commission and Sars in their hard work and commitment. We will support this Budget Vote. I thank you.
Ms Z S DUBAZANA
Mr S N SWART
Ms Z S DUBAZANA: Chairperson, Minister and Deputy Minister, hon members, finance family, sanibonani [Good Morning.], it is my privilege to present the debate on the public finance and budget management.
This is programme 2 of the National Treasury. It consists of three divisions, namely the budget office; public finance; and intergovernmental relations. Within it there is also a subprogramme which is the technical and management subprogramme.
Let me quote from section 215 clause 1 of the Constitution of the Republic of South Africa:
National, provincial and municipal budget and budgetary processes must promote transparency, accountability and effective management of the economy, debt and public sector.
Let me congratulate the finance family for ensuring that the vision of our forbearers is achieved and maintained. On 17 February 2010, hon Minister Pravin Gordhan delivered his speech and said:
Through a combination of corrupt practice, inefficient procurements, poor planning and, in some instances, collusion by the private sector, we cannot get the kind the value from our purchases that our people deserve.
This is so true. Indeed, this indicates that the ANC-led government is transparent and accountable, hon George, because you wouldn't know about this corruption or understand what hon Gordhan said on 17 February.
Let me illustrate the three elements or divisions that I highlighted earlier on. Let me start with the budget office. The budget office, according to ANC, co-ordinates the national budget process and ensures prudent resource allocation. The process improves value for money in spending across government.
We see this process as the critical reason for the establishment of the budget office, especially during the fiscal recession which is a global cancer. The ANC finds it right to call upon all government departments to be able to deliver services within the available scarce resources.
We request that National Treasury facilitates the efficient commissioning of the budget office. It should give a clear structure of the roles because they are the fundamental requirements for the existence of the budget office. It is critical for this budget office to exist, and we would request that its functions be well detailed and understood by all relevant stakeholders. A structured awareness programme will be appreciated if it is put in place to assist understanding and community participation.
We also request objective and amicable participation from the opposition, especially the DA, to ensure effective oversight by Parliament since they complain rather than give solutions.
The ANC understands that one of the functions of the budget office is to enhance the quality of performance information as contained in the finance document. We are therefore interested in seeing how this function will unfold. If this function unfolds effectively, the ANC will rest ensure that the community participates and that Parliament gives proper and effective participation in budget allocation and debates.
The ANC also noted that there was poor attendance during the Budget Votes. We hope that this document will improve that.
The ANC is aware that the establishment of the budget office will be like the milestones of an infant. Therefore, we are not requesting the impossible from the departments; however, targets and deadlines should be met.
Public finance is the second division which the ANC sees as a link with all national departments and other government entities. As a result, its function is to improve alignment between the policy framework and public spending. The ANC will appreciate the alignment of the budget allocation with the priorities that were set in the manifesto and also set the timeframes for monitoring, whether it be quarterly or otherwise, so that, at the end of the day, we are able to identify any weakness and improve the implementation thereof.
Intergovernmental relations is the third division which we see as the link between the provinces and the municipalities. We request the department to speed up the restructuring of procurement. We are aware that the department is trying, but, as the ANC, we are concerned about the pace at which we are moving towards this restructuring.
We are not too sure whether or not the Broad-Based Black Economic Empowerment, BBBEE, does have teeth. The participation of the historically disadvantaged individuals towards the growing economy is still questionable. Unlike the DA, the ANC always comes with proposals. The hon George always complains about procurement without giving solutions.
We also request the department to ensure that there is an efficient implementation of the Money Bills Amendment Procedure and Related Matters Act. Hon George, it is unfortunate that when you decided to go out and collect the information about the wastage from the international bank, you only focused on South Africa. It would have been far better if, while collecting information, your report was comprehensive. You would have assisted this House with awareness of what other countries are doing. However, I am not surprised because the DA has neither policies nor programmes to talk about other than complaining about the ANC. The ANC has never said that it is easy to govern. The ANC said they are ready to govern. Therefore, we are ready to govern.
Let me applaud the ANC for setting up a government based on the will of the people and on the people-centred and people-driven principles as part of the process of deracialising the economy and society at large, thus ensuring the economic growth, development and redistribution for a better life for all. The ANC supports Budget Vote 9. I thank you. [Applause.]
Mr M SWART
Ms Z S DUBAZANA
Mr M SWART: Chairperson. Hon Minister, I just want to tell the hon Dubazana that if it weren't for the DA there would be no oversight, whatsoever. [Applause.] Secondly, the poor attendance, here, seems to me indicative of the fact that the departments do not know where money comes from, except the Department of Labour that adds R1 million to their own budget without reference to anybody.
But, hon Minister, on a more serious note, in your Policy Statement in the Strategic Plan of National Treasury, you commit yourself to ensuring the proper management of public finances and to step up efforts to fight the scourge of fraud and corruption.
In this regard, the Treasury Budget provides for the establishment during 2010-11 of a special audit unit to focus on developing fraud prevention guidelines for supply chain management processes and providing fraud awareness and investigative capacity to departments.
In this regard, the measurable outputs in the strategic plan, therefore, provides for the department committing itself to the implementation of audit committee guidelines; to conduct internal audit reviews at municipalities; to report on the status of internal auditing in national and provincial departments and in municipalities; to support the roll-out of the internal audit framework and guidelines; to develop fraud detection guidelines for supply change management processes; and to provide fraud awareness and investigative capacity to departments. The DA welcomes these objectives and they are crosscutting against all levels of government, but there are serious challenges in achieving them.
During an investigation by the Public Service Commission into supply chain management transgressions, for instance, it was found that the number of cases of financial misconduct in national and provincial departments reported to the Public Service Commission increased from 771 cases in the 2005-06 financial years to 1 042 in the 2006-07 financial years.
In parastatals the situation is equally bad. Consider, for instance, the awarding of a contract by Eskom to Hitachi, a company in which ANC Chancellor House holds shares. Not only was the contract awarded to Hitachi on very dubious grounds, but it was done under the, then, chairpersonship of Mr Valli Moosa, a National Executive Council, NEC, member of the ANC, at the time. The public protector on investigating the case quite correctly found a conflict of interest, but, as usual, no action was taken.
Municipalities are equally bad when it comes to fraud, supply chain management transgressions and perpetrators of unnecessary and wasteful expenditure. In the George municipality, for example, the Internal Audit Committee conducted investigations into wasteful expenditure incurred by the Speaker. They found him guilty and recommended that the monies concerned be recouped from him. When the report of the Internal Audit Committee served before Council, the ANC-ID-led Coalition Council reacted by firing the Chairperson of the Audit Committee, and they took no further action.
From the examples I have quoted, it becomes clear that there are two very important requirements to be met to eradicate fraud, corruption, wasteful expenditure and supply chain management transgressions. These are a clear distinction between party and state and the independence of audit committees at all levels of government to be guaranteed. Strengthening the independence of audit committees, in particular, at all levels of government, including parastatals, is therefore important.
Serious consideration should be given to delegate to the special audit unit which we are going to form; the responsibility for confirming the names of appointees to such audit committees, and for authorising the dismissal of any member of such a committee. The special audit unit should also be authorised to take the necessary action where a clear distinction between party and state has not been upheld in awarding of tenders.
National Treasury further remains responsible not only for its own budget but also for the compilation of the overall budget of government. In this regard, it is vitally important that Treasury ensures the optimum usage of funds available for distribution since choices are difficult when trying to balance the growing needs of the large number of people who have been, and are still waiting in vain for service delivery and jobs.
Whereas the DA supports the existence of a social security net for vulnerable members of society, danger signals are starting to develop in that the number of people dependent on the social security net is growing beyond the means of the taxpayers. The current annual budget of R89 billion has to be funded by only 5,8 million taxpayers. If public finances are to be sustainable and properly managed urgent steps must be taken to dismantle the barriers to job creation that government seems determined to maintain by way of a closed patronage society and at the expense of hardworking taxpayers. The budget should, in fact, be used to place emphasis on the creation of an environment conducive to job creation – as you said in speech, Minister - an open opportunity society where success is achieved through good skills development and hard work and where every citizen will have the opportunity to succeed, irrespective of race, religion or sex. Thank you. [Applause.]
Ms N N SIBHIDLA
Mr M SWART
Ms N N SIBHIDLA: Chairperson, hon Minister and Deputy Minister and hon members, the legislative mandate of the SA Revenue Service in terms of the South African Revenue Act No 34 of 1997 is to collect all revenue due and show maximum compliance with tax and customs legislation, to provide a custom service that will maximise revenue collection, protect our borders and facilitate trade. It is generally accepted that, as the result of its transformation, Sars has played a positive role towards the economic growth of the country. As some of its outputs Sars collects a variety of taxes such as personal tax, corporate, secondary tax and other taxes. Over the years great strides have been made in realising its legal mandate and achieving on its outputs.
Its successive reports have provided evidence showing a progressive increase in revenue collected, a general improvement in efficiencies and effectiveness in all areas relating to its mandate. An example of such evidence is indicated in their strategic plan 2010-13 that over the past six years the revenue collected by Sars has grown faster than the economy. From 2002-03 to 2007-08 Sars has increased collections while tax rates were reduced. As we go forward, this is indeed important for the country's development trajectory. In its medium-term expenditure framework 2010-11 to 2012-13 Sars has identified the following seven strategic priorities: to drive revenue realisation; to deliver now and ensure sustainability; to drive productivity, service quality and cost efficiency; to fully deliver on the customs mandate in a way that is aligned with government's stated intentions; to clarify the Sars operating model by streamlining governance and strengthen its leadership so as to implement segmentation and strengthen the business model; to enable Sars personnel to perform at their peak; and to deepen key external relationships to enhance reputation and results.
The Sars mandate and its medium-term expenditure framework priorities in particular as they relate to tax, trade policies, compliance models and customs have to be examined against the ANC's goal of a developmental state and its key priorities for the medium-term period.
The SA Revenue Services as an institution is an important capacity for the building of an efficient and effective developmental state envisaged by the ANC. Central to a developmental state is the capacity and ability to intervene, hon George, in the economy, using the strategic policy and institutional levers at its disposal to effect change. The ANC's conceptualisation of a developmental state is that it will guide national economic development and mobilise domestic and foreign capital and other social partners to achieve the goal of ensuring that every South African, especially the poor, experience an improving quality of life.
It will therefore have attributes that include, amongst others: the capacity to intervene in the economy in the interest of higher rates, growth and sustainable development; to have effective sustainable programmes that address the challenges of unemployment, poverty and underdevelopment with requisite emphasis on vulnerable groups; and mobilising people as a whole, especially the poor to act as their own liberators through a participatory and representative democracy. Within this context Sars therefore has to play an important role in the mobilisation of the resources that will enable a developmental state to achieve its goals.
These have guided the development of the ANC National Executive Committee's medium-term economic policy with the following priorities: accelerating growth and investment and improving productive capacity; strengthening rural development, land redistribution and agrarian reform; integrating the economy and redistributing resources more equitably; improving the national youth service and national youth development; expanding the Public Works Programme; improving and strengthening the education system by introducing a national health insurance system; and strengthening the social wage. Of fundamental importance is to ensure that the strategic objectives of Sars, as espoused in its medium-term expenditure framework, are consistent with the ANC priorities.
The achievement of these priorities is dependent on our ability to collect revenues and manage customs in a manner that promotes trade as well as protecting the country's borders. In support of the priority of growing the economy and creating decent jobs, it is important that Sars demonstrates through its programmes a new way of doing business. There has to be greater emphasis on better co-ordination with all other relevant stakeholders in the economic transformation cluster. This will ensure harmonisation between different economic policies and instruments in support of an integrated economic development approach.
The current progressive tax policies have to articulate the new growth path policy imperatives. We all agree that the 2010-11 tax proposals in their implementation, will support the ANC's agenda of stimulating the economy from the impact of recession and growing the economy, while at the same time addressing the plight of the poor majority.
Other measures to benefit the poor that have been outlined by the department are to treat all retirement and retrenchment lump sum payments equally. This will have an impact of increased cash in hand of retrenched workers for short-term relief and improve their potential to engage themselves in some income generating activities.
Greater impact of these proposals will however be realised if they are coupled with the management of inflation and interest rates. Therefore, it requires greater co-ordination between Treasury, Sars and the Reserve Bank together with the Ministry of Economic Development.
Although there is evidence of a recovery from the devastating recession that engulfed the world and our country, a positive impact on revenue collection is likely to take longer to realise, especially for corporate taxes. However, over the past years Treasury and Sars have become more effective in tax collection and administration, hence, over the years there has been an underestimation of revenue and overestimation of expenditure. While underspending may be the result of lack of capacity, constantly underestimating revenue leads both to signalling problems and opportunity costs to spending, borrowing and driving economic activity.
The ANC's call of working together is especially relevant in the area of revenue collection. For individuals and companies decisions to pay what is due in terms of taxes is not only a function of ability or inability to pay based on means, it is also a function of behavioural culture and values. Historically, South Africa has had a culture of noncompliance and avoidance when it comes to due tax payments. These behaviours, if not programmatically addressed within Sars strategies, will undermine our efforts to increase our revenue through tax collection and by expanding the revenue base.
The government's new measures to limit salary structuring opportunities, tightening company car fringe benefit rules, taxing employee deferred compensation and insurance packages as fringe benefits and enhancing anti avoidance schemes by closing some of identified sophisticated tax loopholes must be supported. Since some of these practices emanate from behavioural cultures, there will be a need to couple punitive measures with education and establishing closer contact with taxpayers by Sars as part of its plan of doing business differently.
The past few years have witnessed progressively lowered personal taxes, which has largely brought relief to the poor, whilst at the same time broadening the tax base and better revenue collection. It is expected that, even in the current global slow down, this trend should continue in order to cushion the poor even further.
In an environment where Foreign Direct Investment, FDI, is necessary for development, there has been an overreliance on competitive corporate tax cuts, rather than reliance on FDI tax incentives, property rights, institutional and political stability. While some argued that the best way to attract FDI is via lower corporate taxes revenues, this should be seen in the context of South Africa's development objectives and the fact that FDI is not only reliant on the presence of tax cuts.
Taking a long-term perspective, South Africa needs a tax system that attracts the type of investment that leads to companies investing in productive infrastructure and is reliant on the stability of institutions and governance. This avoids short-term and speculative investment. The FDI by its nature is long-term and likely irreversible, thus a variety of factors such as a potential increases in the market size, wage rates, taxes, property rights and institutions affect the attraction of FDI. Therefore, policies need to focus on the state driving growth in the market, increasing social security, strategically directing an investment in labour intensive production. It has been shown that political stability and property rights are more likely to attract FDI than corporate tax cuts. Additionally corporate tax cuts could be avoided in favour of tax incentives and stability.
In-depth investigation is necessary to establish how to improve on these incentives, for example, FDI in South Africa has largely contributed to capital intensive industries which mean that FDI investment has been horizontal rather than vertical. Therefore, larger tax incentives towards labour intensive production methods with a range of interventions to change the variables mentioned above could lead to the type of FDI that meets South Africa's developmental objectives.
One of the key priorities of the ANC is to intensify the fight against crime and corruption, also to promote a better Africa and a better world. Most importantly, the ANC commits government to work towards regional economic integration in Southern Africa on a fair, equitable and developmental basis to promote SADC integration based on a developmental model that includes infrastructure development, co-operation in the real economy and development of regional supply chains.
To support these priorities Sars' systems need to be transformed in a manner that is consistent with what other institutions such as Home Affairs, Foreign Affairs, the Police, Justice and the Trade and Industry are doing in terms of policy changes. There needs to be greater co-ordination between all these role-players to deal with corruption and improvements in trade within the region and on the continent. The ANC supports the Budget Vote. I thank you. [Applause.]
THE MINISTER OF FINANCE
Ms N N SIBHIDLA
The MINISTER OF FINANCE: Chairperson, thank you to all the members for their contributions. Whether it came from the 21st century or the 19th century, it still was a very important contribution. Hon Oriani-Ambrosini and I will always have some differences about which century we live in and which philosophy is relevant. That is a fact of life that we have to live with.
The words, "the developmental state", have been used quite frequently today. I think it will be useful, as I said on 1 July 2009 to hon George, if we could build a few ideological or philosophical bridges amongst us. We can neither imagine that the ideological state is here because we proclaim it, nor imagine, certainly in the current context of the last two years, that it will disappear because we don't want it. The fact of the matter is that the nature of the state, market, multilateral institutions, financial regulators and the role of rating agencies are all up in the air, as hon Koornhof said.
If we stick to blinkered approaches to these questions, we might score political points. That I also said on 1 July 2009. It doesn't advance the argument. It doesn't enable us to get a better command of what the crises are that we are dealing with now and how we, as South Africans, approach these crises and create a basis for national consensus amongst us. None of the books that we have read and written until now, have any application today.
The new books are being written and the scripts are being retold in one way or another. The challenge for us is whether we will engage with these political exchanges that have no meaning or whether, through the political exchanges, we can enrich the kind of strategic direction the South African economy takes. That is the challenge that we have to take on.
We can spend two and a half hours here – with great respect – and go through the rituals that parliamentarians are required to go through. What value are we then adding to the very people, in whose name we say government must operate better, more efficiently, save more money, do procurement better, etc? We do little. I would seriously ask that we rethink the way in which we approach some of these questions.
Even the role of the advanced economies and of the emerging economies and what lessons they could teach each other, are changing.
Mr Robeni, who is called Dr Doom sometimes, in the Financial Times this weekend, says that the tables have turned in the last couples of months. The emerging market economies can teach the so-called emerged economies how to manage their fiscus; how not to get into debt traps; how to ensure that they get the right kind of assistance from the state and how to not overextend the kind of assistance they give to their citizens, so that they don't overreach themselves as societies. Today all of you should go and visit the Western world and tell them how we did it in South Africa. We should do so with pride. [Applause.]
We can score some cheap points, but it doesn't really advance the case in any way. Why can't we stand up as true patriotic South Africans and recognise that we do have some difficulties in our ranks. We will deal with those difficulties in time. Which country doesn't have difficulties?
Now, 30 days, as my colleague, the Deputy Minister said, away from the World Cup, it is time to put our shoulders back, hold our heads high and be proud of what we have achieved in this country, notwithstanding the debate, discourse and criticism that we might get, and more importantly the criticism that we have of ourselves.
It is in this context that I want to appeal to the Chairperson, Mr Mufamadi, that we need to work towards some consensus on how we approach key national issues. The Reserve Bank Bill shouldn't be made into a political football. We might disagree about Hitachi and the role of the ANC. I have said publically that the ANC will, in time, do the right thing concerning this matter, but the World Bank loan, should not have led to the kind of discourse that we had from certain parties. Parties were trying to shoot down $3,75 billion that we actually need, which we can't get at this stage from higher tariffs and which we can't and don't want to get from other forms of borrowing. We are trying to find a package solution to a problem that we have all inherited. We can't duck away from it now. Let's find the solutions and let's work together in order to find the solutions. The appeal, Mr Mufamadi, would be how we bring our act together and find some consensus around these issues.
Around tenderpreneurs, procurement, etc, we can today stand up with pride and say that we told you so. Nobody pointed this out. We, as the ANC and as the new administration pointed out the problems in local government, provincial government and national government. We said what the problems are and that we must confront it as a society and as a government. It is not a government problem. It is a social problem today. This social problem arises from our history, when we deprived millions of people of economic opportunities in our country for more than a century. Today we are paying the price for that. We must actually acknowledge it.
We don't have solutions. Black Economic Empowerment, BEE, and the other things we are doing are not providing all of the solutions. Do we now bash each other's heads in or do we find constructive solutions to some of these problems to approach things in a different way? My submission is that we work together to find a different way of handling this.
There was the question about the letter to procurement around the tender register. Some of those issues, Dr George, are legal procedural issues which require that the courts decide about a name and our court system doesn't work fast enough, regrettably.
You also made reference to bullying by Sars. As a former commissioner, I have to defend Sars. More importantly, we must be careful that we are not becoming a mini United States where it is possible for certain interest groups to now lobby Members of Parliament. I am not saying that this happens in this case. There is a big lobby out there which says: Leave us alone, give us freedom of operation on the tax side and whenever Sars catches us out, then it is one thing or another. On behalf of the Sars management, I can certainly say that they operate with the utmost of integrity. If there are problems, bring them to our attention and we will deal with them.
Mr Koornhof actually made some very important points in relation to the current crisis and I hinted at that earlier on. We should bring that on board, Mr Mufamadi, in the finance committee. We should ask what these crises actually mean and what it means for the establishment, as you pointed out, for the developmental state. I can't but fully endorse, as I have done in the original speech as well, the Tennyson study about CEOs and their salaries. I was a little bit more polite than Mr Koornhof, but let us confront the question. The divide between rich and poor in South Africa is unacceptable. The rate at which CEOs and others are awarding themselves is also unacceptable. We should say with one voice that this will be a recipe for a future disaster, not the current ones that we are facing now.
This is about making choices as a society in terms of what kind of society we want to be. You can't on the one hand say that we are coming from 19th century socialism if we ask for better equity in our society. We can't attach labels to one another if we are saying that the divide is an unjust divide. Without a focussed attention by all political parties, and society more generally, on how we produce a socially just society in South Africa, we are just exacerbating the inequality and that study just amplifies that particular question.
Mr Koornhof, you raised important questions about remuneration committees and the role of boards. I think they all work within a particular mindset and a particular paradigm. Unless they get kicked-out of that mindset and a new set of parameters are established, nothing will happen. We therefore have another challenge. If Government says too much about this, then we are interfering in the private sector. If we don't say enough, then we are not doing enough for the private sector. So, one can't win with this one. Thank you for raising this debate. I hope that other members of Parliament will join that debate and bring to the fore some of the challenges that we have.
We look forward to Mr Oriani-Ambrosini's vision realising itself at some stage somewhere. Like many other speakers, we talk about the imbalance between the five million taxpayers and the many millions that we have to support through that tax space. That is a product of our history. That is not a product of something that we whirled for ourselves. The challenge for us, when we talk about restructuring the economy and approaching job creation differently and not getting involved in rhetorical debates, from whichever direction the rhetorical debate comes, is to get serious about these issues and not score political points.
We are waiting for the formulae, wherever they might come from. Young people today desperately need jobs. Who has the formula? If we have it, we will put the state resources behind them and ensure that we can deliver the jobs that they required. Until then, I think we are scoring petty points if we keep pointing to this divide. That is the historical structure of our economy today and we have to work diligently with each other to ensure that we move in a different direction.
Hon Luyenge pointed out the many things that we need to do. I want to thank him for diligently going through all of the treasury material. The hon Dubazana also made some important points about the necessity to restructure procurement and to look at value for money in the way in which we actually operate.
The hon Swart raised the fraud issue and the role of audit committees as well as the importance of distinguishing between party and state. We agree with that. Let us make that a culture in South Africa. We are still 15 or 16 years old and we are not doing enough to embed the right kind of culture and practices in the South African society which will enable us to take some of those ideas further.
We agree on the need for job creation. We have all been saying it, but there is still a poverty of concrete ideas that can be implemented tomorrow, that will make an actual difference. There are lots of ideas, policies and papers, but what we do, is the challenge that we are face.
The honSibhidla raised some important questions. There is no deliberate overestimation or underestimation. I must tell her that respectfully. Estimation – as you can see all the economists are getting everything wrong - is a difficult science. I can't even call it science at point in time. If you look at the numbers, we are doing reasonably well in situations where there are no extraordinary events that intervene in our environment.
The emphasis that you place on the balance between education and enforcement is something that Sars had pioneered over the years. Your approach to the Foreign Direct Investment, FDI, and what we need to do to get the balance right in our own country is certainly a refreshing one.
In conclusion, I want to thank all the members and the parties for supporting this Budget Vote. I want to thank the chairperson, Mr Mufamadi and his committee and Mr Sogoni and his committee. I want to thank the leadership of the various institutions, some of whom are here on my left, not politically speaking, for their contribution to the kind of results that we get year in and out. Thank you. [Applause.]
The HOUSE CHAIRPERSON (Mr M B Skosana): Members are reminded that Parliament's Budget Vote will be held in the NA Chamber at 14h00 this afternoon.
Debate concluded.
The Committee rose at 11:06.
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