Hansard: Appropriation Bill : Debate on Budget Vote No 10 - National Treasury (including South African Revenue Service)

House: National Assembly

Date of Meeting: 06 Jun 2011

Summary

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Minutes

UNREVISED HANSARD

EPC – COMMITTEE ROOM: E249

Tuesday, 7 June 2011 Take: 118

TUESDAY, 7 JUNE 2011

PROCEEDINGS EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249

__________________

Members of the Extended Public Committee met in Committee Room E249 at 14:00.

House Chairperson Mr M B Skosana, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.

THE MINSITER OF FINANCE

The Start of Day

APPRORIATION BILL

(Debate)

Budget Vote No 10 - National Treasury (including South African Revenue Service):

The MINISTER OF FINANCE: Mr Chairperson, hon members, since the middle of last year our economy has grown strongly – driven by buoyant consumer spending, continuing high commodity prices and a recovery in the motor industry amongst others. The latest Growth Domestic Product, GDP, data for the first quarter of this year indicates growth of 4,8% on an annualised basis, with the manufacturing sector leading the recovery despite difficulties associated with the relative strength of the rand.

This is good news: We have moved out of recession, and the South African economy has responded well to the global economic recovery over the past year.

Employment growth though is far too slow; we face a very serious unemployment challenge, as you all know, particularly amongst our young people. This is the most important reason why we have adopted a New Growth Path – a set of policy measures and practical reforms that accelerates the creation of job opportunities and achieves an inclusive and durable transformation of our development trajectory.

I have had the privilege over the past few months, as I am sure that many of you have heard, during the Local Government Elections, of meeting and speaking with many South Africans of all walks of life about the progress we have made since 1994 and the problems that remain to be addressed. It has been an invigorating and humbling reminder of what we are here for.

I have spoken to hostel dwellers about why their toilets and cooking facilities that are not maintained. I have spoken to street traders and young township entrepreneurs about the opportunities and uncertainties they face in making a living outside of the security of paid employment. I have talked to businessmen and women about adapting to the volatility and strength of the rand, and about their frustrations in dealing with bureaucratic procedures that are often too slow.

We have all been reminded during this election process that service delivery is not a political slogan, that even a budget and a long term plan are not enough. Service delivery is the daily practical experience of 50 million South Africans, who either have running water or they don't, who either have electricity for cooking and warmth or they don't, who either have a bus or train service that works or they don't, who live in a house or do not, who may have food for their children or may not, who may have a job or may not.

The local elections have provided a reminder of what we are here for: not just to talk and hear reports, but to serve our people. To ensure that there is action, and that what we do is disciplined, is practical, and is implemented with urgency and determination. No doubt others in this House have had similar experiences.

At the same time, we are mindful of a global economic context that brings both opportunities and considerable risks. Last year, saw a broad-based global recovery from the 2009 Recession, fuelled in part by an enormous infusion of financial support by the central banks and governments of the world's major economies. But the recovery is now stalling in the United States, where home prices are still 30% below 2008 levels. In Europe, governments are being swept from office in countries that still face immense debt problems, rising unemployment and highly unpopular austerity measures. In China and other emerging economies, higher food prices and rising inflation are creating difficulties.

There are new forces driving democratic change in the Middle East and North Africa, and economic and financial trends are contributing to a rebalancing of power, influence and alliances. These are complex times, in which South Africa plays a special role – not by virtue of our power or wealth, but because there are principles of partnership, fair play, democratic participation, regional development and global solidarity that underpin our commitment to a better Africa and a better World.

The National Treasury's strategic plan for the period ahead, based on government's 12 outcomes, and under the leadership of a brand new Director-General, Mr Lungisa Fuzile, who is sitting behind me, takes forward our particular responsibilities related to macroeconomic and fiscal management, supporting investment in infrastructure, encouraging job creation and improving financial management and accountability across all three spheres of government.

Social security and health financing reforms are key priorities this year. The strategic plans and budgets of the National Treasury and the "finance family" cover a wide range of activities, Mr Chairperson. The detailed strategic plans have been tabled and we have benefited from constructive and very helpful discussion during hearings conducted by the Select Committee and the Standing Committee on Finance.

I particularly welcome, Mister Chair, the support that has been expressed by so many members of the House on the stance we have taken on the governance of multilateral financial institutions, like the International Monitory Fund, IMF, and World Bank drawing on the Pittsburgh Communiqué of the G20 leaders. We want to see open, merit-based appointments to the senior management positions of the IMF, the World Bank and other multilateral institutions. I should emphasise though that reform of the governance of global financial institutions needs to go much further than this – it is also about the ways in which consultation and joint decision-making are structured, and it is about rules of access to collective financial resources and how the interests of debtors and creditors are appropriately balanced, amongst many other challenges that the globe is facing today.

These issues are complex partly because they involve difficult trade-offs between national sovereignty and international co-operation. We are well aware, for example, of the difficulties we face because of the persistent strength and volatility of the rand – but improving the transparency and stability of global currency and capital markets has to be a multilateral project, involving clear guidelines for both "sending countries" and "receiving countries".

We have several specific international financial co-ordination issues to address in our own regional environment, which may lead to legislative and regulatory reforms in the near future.

Reform of the Southern African Customs Union has been under discussion for several years. The issue has become more pressing because the sharp deterioration in global trade impacted so severely on the revenue shares of Southern Africa Customs Union, Sacu, partners. This is an opportunity to take a longer term view on regional co-operation in both trade and financial arrangements, and joint investment in infrastructure across regional borders.

There is potential here for changes that will benefit the regional economy as a whole, and contribute to competitiveness of Southern African business and industry in the wider global economy. Our development finance institutions, including the Development Bank of Southern Africa, have a special role to play in constructing the partnerships across national boundaries that are required if we are to make expanded trade and investment a reality.

The issue of Fiscal Sustainability and the Budget Framework is equally crucial. Accelerated growth and development of our business sector is not only important for the jobs and income it delivers, Mr Chairperson, but it is also a pre-condition for revenue growth and the expansion and improvement in public services that rely on government revenue.

Preliminary revenue and spending estimates suggest that the consolidated budget deficit for last year was 5% of GDP. This is a pleasing outcome by comparison with the original budget estimate of 6,2% tabled in February last year, which mainly reflects the recovery in revenue associated with an improved economic growth performance.

But while government personnel expenditure exceeded the original budget estimate by nearly R20 billion last year, spending on maintenance of infrastructure and capital works fell short of the budget projection by about the same amount. This is not a satisfactory result. As several Cabinet colleagues have emphasised in recent weeks, we face immense backlogs in public infrastructure maintenance. Investment in infrastructure is central to improving household service delivery and overcoming the spatial imbalances of both our urban and rural landscapes. It is vital that we should make better progress in infrastructure maintenance and investment, and we need to take care that this is not crowded out by an unsustainable rise in personnel spending.

The 2011 Budget provides for consolidated personnel expenditure to rise from R314 billion last year, to R339 billion this year, which is an increase of just under 8%, including a moderate expansion in public service employment and improvements in conditions of service.

Under Minister Baloyi's guidance, negotiations are in progress aimed at a fair and balanced wage settlement this year, taking into account also the salary progression provided for in occupational service dispensations and notch adjustments.

It is important to understand this, hon members. When we talk about salary increases we are talking about and an increase in a basic salary; a pay progression of 1,5% that most of our servants get and notch adjustment depending upon their performance; and the OSD dispensation that flows through from the decisions that we have made over the last two or three years. As requested by Parliament last year, the national Treasury has proposed broad proposals for fiscal guidelines aimed at long-term sustainability in our public finances. The proposed principles, as you are aware, are counter-cyclicality; long-term debt sustainability; and intergenerational equity.

As economic growth improves this year and over the period ahead, we aim to lower the budget deficit to between 3 and 4% of GDP, thereby rebuilding fiscal space and allowing for the substantial borrowing requirements of Eskom, Transnet and other municipalities.

The Treasury will develop the fiscal guidelines further this year. Reporting on this framework will strengthen the ability of Parliament and the public to assess the long-term soundness of our fiscal stance.

Ensuring that expenditure is well-managed, and targeted at our social and development priorities, is clearly also a fundamental fiscal policy objective.

Once again, in this year's budget process, we will seek to improve the efficiency of public service delivery through savings and targeted cost-effectiveness measures. Now that performance targets and measures associated with the government's outcome priorities have been finalised, these will play an enhanced role in the assessment of spending plans and reprioritisation of resources.

Alongside these performance-related measures, several steps are being taken to tighten up financial management and improve government procurement processes. Following an extensive consultation process, revised regulations will be promulgated this week to align the preferential procurement system with the Broad-based Black Economic Empowerment Act and its associated Codes of Good Practice. This reform will further encourage the development of small enterprises and takes into account local content objectives associated with Government's Industrial Policy Action Plan, Ipap. In order to provide time for suppliers to be BEE-rated, a grace period of six months will be allowed and the current regulations will remain applicable until 7 December 2011.

To promote uniformity throughout the public sector procurement system, the revised regulations will also be applicable to schedule 2, 3B and 3D public entities, which are exempt from the current rules.

The revised preferential procurement regulations will assist in curtailing fronting, as it is known. Further preventative measures to counter supply chain management fraud and corruption, are detailed in a Treasury Instruction issued on 31 May 2011, which requires, amongst other things, that the requirements for tender programmes to be submitted to treasuries at the beginning of the financial year; and the publication of the names, preferences claimed and bid prices within 10 working days of the closure of a tender, amongst other measures.

Improved tax administration also contributes to sound financial management and good governance. Under Commissioner Magashula's leadership, we can again report on excellent progress in revenue systems development, and several initiatives to take this further over the period ahead.

Mr Chairperson, revenue performance is an instructive barometer of the broader economic trend and the uncertainty we confront. As a result of the recession, tax collections declined from a peak of 27,6% of GDP in 2007-08 to the trough of 24,5% over the past two fiscal years. Despite the year-on-year improvement of 12% in revenue collections, the tax to GDP ratio has yet to recover to the levels before the recession. In fact, it will take a few more years before we get there. The tax-to-GDP ratio is expected to remain below 25% for this year, though we expect to see growth of about 10%, including a strong recovery in company tax receipts.

Sars will continue its focus to improve the levels of tax compliance in the country. Last year, a record of more than four million individuals submitted their tax returns on time. We must thank the growing number of compliant taxpayers in the country, and I am happy to share with you advance notice that the 2011 Tax Season for individuals will start on 1 July this year. I thought you will applaud that, ladies and gentlemen. [Applaud.]

The 2011 Tax Season for employers closed this past week, with another record number of employers filing their annual payroll reconciliation timeously. So far 229 115 employers in the country have filed their reconciliations compared with 195 856 last year. These declarations have been accompanied by over 13 million IRP5 certificates issued to employees. This is a phenomenal achievements, hon members, because the foundation of our tax and our compliance system depends on this level of co-operation from both the employers and the individual taxpayers.

Again, we would like to thank those employers that have made every effort to submit their payroll data on time. This will now enable SARS to prepare a unique income tax return for most working individuals in the country who will be required to submit a tax return after 1 July 2011.

Employers who have not yet submitted their payroll information to SARS are encouraged to do so as soon as possible in order to avoid penalties. Good progress has also been made in pursuing non-compliant taxpayers who have outstanding income tax obligations. Following the despatch of over 230 000 penalty notices in January last year, 81 866 individual taxpayers approximately have submitted returns and over 50 000 have paid penalties amounting to R189 billion. The new penalty regime, in which penalties range between R250 and R16 000 in proportions to the severity of the transgression, has proved to be effective in encouraging better compliance.

Parliament will have a change from the usual consideration of amendment Bills in the tax arena this year. The Tax Administration Bill will be introduced later this month. The Bill will consolidate generic administrative provisions in different tax Acts, update them in line with modern thinking and Sars's modernisation agenda and serve as a preliminary step to the re-write of the Income Tax Act, 1962.

In the arena of revenue administration, we are already able to take advantage of South Africa's inclusion in the so-called BRICS grouping of emerging economies. Building on work of the India, Brazil and South Africa, IBSA, grouping, progress has been made in sharing tax and customs information and bringing greater pressure to bear on nearby offshore financial centres such as Mauritius. The visit last month of the Chinese Vice-Minister responsible for Customs provided an opportunity to engage on the possibility of closer cooperation between Sars and China Customs on issues such as the under-valuation of goods and measures to combat counterfeit and illicit trade.

Financial regulation will be another important focus area for the Treasury in the coming year. Mr Chairperson, I am pleased to report that the preliminary comment on the government's proposals set out in the policy document published at the time of the Budget, titled A Safer Financial Sector to Serve South Africa Better, has been positive and encouraging. One of our key announcements was the gradual shift to a "twin peaks" model of financial regulation. This approach envisages the separation of prudential regulation of financial institutions and locates it within the South African Reserve Bank; while locating responsibility for market conduct regulation at the Financial Services Board. National Treasury has met with the Reserve Bank and a joint task team has been established with the Financial Services Board to guide the implementation of these reforms.

Since the Budget, the new Consumer Protection Act has also come into effect and care will need to be taken to ensure that there is alignment of objectives and that we minimise duplication. The financial sector must be held to the highest standards of market conduct and consumer protection, and for this reason requires unique legislation and associated support initiatives.

With regard to the provincial and local service delivery, although not codified in quite the same regulatory framework, these principles of financial trusteeship also apply to public service delivery and financial management across the national, provincial and local government spheres.

There is still more to be done, and I wish to record my appreciation for the efforts of the provincial finance MECs and their treasury departments in supporting financial management improvements in provincial departments over the past year. Of the 122 provincial departments, only seven departments overspent their budgets for the 2010-11 financial year, compared with 31 departments in 2008-09.

Active steps have been taken to improve resource allocation efficiencies and there is better alignment between national identified priorities and funding at the provincial level.

However, the slow pace of capital spending as a result of poor planning, weak supply chain management and poor contract management must be dealt with. Further work is in progress, drawing on capacity of the Development Bank of Southern Africa, to dramatically change the pace of delivery of infrastructure in this country.

At the local government level, we have also seen progress in stabilising finances. However, the composition of spending needs further refinement. Capital spending and infrastructure maintenance have slowed significantly while operational spending, including personnel costs, is growing rapidly.

We have noted that Parliament has requested that the provincial and local equitable share allocations should be put under scrutiny over the year ahead. The local government equitable share is designed to assist municipalities in meeting the national government policy imperative of providing free basic services. On average, municipalities receive over R500 per month per poor household to provide for free basic services. Future years will see the share for poorer more rural municipalities growing. This is accompanied by rapid increases in Municipal Infrastructure Grant allocations to poorly resourced municipalities. These arrangements will be re-examined this year, in consultation with all stakeholders, with a view to phasing in reforms from 2012 onwards.

Mr Chairperson, you will recall that President Zuma announced the establishment of a new Jobs Fund in the state of the nation address this year, and a total of R9 billion was set aside over the MTEF period for this initiative in the February Budget.

Drawing in part on experience of the Business Trust and other such programmes in supporting innovative enterprise development projects in recent years, the Jobs Fund will operate as a competitive "challenge fund", supported by a technical appraisal and project management team based at the Development Bank of Southern Africa.

Mr Frans Baleni, Deputy Chairperson of the DBSA Board, and Mr Brian Whittaker, CEO of the Business Trust, have agreed to serve as the chair and deputy chair of the Fund's Investment Committee. An advisory committee will also be appointed, drawing on appropriate expertise in both the public and the private sectors. The Jobs Fund will initially seek project proposals in four broad areas: Enterprise development; infrastructure investment; support for work seekers; and overcoming institutional barriers to job creation.

This is an exciting and bold initiative, in which we will in some respects be treading new ground. The Jobs Fund is founded on the recognition that we don't yet know enough about how to address our unemployment challenges. We, therefore, need to encourage innovation and learn from the experience of our business sector, nongovernmental and civil society organisations, in addition to public sector agencies and development finance institutions. But as Minister Nkwinti advised me last week, we are not looking for men in suits with briefcases here, but for partners with practical ideas and mud on their shoes. I am sure you will join me in wishing the DBSA and the Fund's Investment Committee well in taking this initiative forward, recognising that we want to know, in a year's time, not just how the funds have been allocated, but more importantly what we have learnt about the process and dynamics of job creation.

Equally the Land Bank has done excellent work over the past year and will continue to do so in the next year. I am sure that members of the House will already have noted the impressive turnaround that has been achieved in both the financial health of the institution and its effectiveness in supporting transformation in the farming sector. Capital adequacy is now well above the level set as a condition for the government guarantee, and liquidity levels have significantly improved.

The focus for the year in progress is on increasing the development impact of the Bank, working with government to find suitable financing solutions for emerging farmers, growing the loan book while reducing the cost of funding, and establishing a wholesale finance facility for strategic partners to on-lend to qualifying participants.

Equally excellent work has been done in the Government Employees Pension Fund and Public Investment Corporation, PIC, and similarly the restructuring of the Government Pensions Administration Agency is moving well ahead.

This commitment, Mister Chairperson – to objectively measure the impact of what we do, against goals we have agreed on – is the hallmark of our approach and we hope to prosecute our promises in the coming year. Thank you. [Applause.]

Mr A T MUFAMADI / VM/ END OF TAKE

THE MINISTER OF FINANCE

Mr T A MUFAMADI: Hon Chairperson, hon members, comrades and distinguished guests, it is my great pleasure to once more participate in the deliberations of Budget Vote 10 with specific reference to National Treasury and the South African Revenue Services.

Tshivenda:

Ndaa! mirado ya phalamennde na vhaeni vhare hone fhano vha bvaho kule na tsini. Kha vha ntendele ndi fhirise langa la vhusiwana na ndiliso uya kha muta wa ha Sisulu, riri mukosi wo pfala hu si fhano kha la Afurika Tshipembe fhedzi, na kha manwe mashanho a nnda mukosi wo swika.

Zwine ra nga amba zwone ndi zwa uri kha ri tanganedze zwe mudzimu a rinea zwone, na uri tshino a si tshifhinga tsha zwililo na mitodzi lini. Ndi tshifhingas tsha u takalela mishumo mivhuya ya nnthesa ye mmeashu Vho- Albertina Sisulu vha ri itela yone. Ro vhona udinetisa havho kha u disa mbofholowo ya vhathu vha Afurika Tshipembe lothe. Ro vha na mbveledziso khulwane siani la zwa mutakalo, pfunzo, u fhungudza vhushai, na kha manwe masia, nga maanda siani la u fhatela vhathu dzinndu.

Zwo salaho ndi u vhudzisa uri naa mishumo ya havha mukegulu ya u nakelela ri do i bveledza hani phanda. Vho bveledza tshipida tshavho, kha ri vha tendele vha awele.

English:

The context within which this debate is taking place is informed by our understanding of powers and functions of National Treasury as contained in chapter 2 of the Public Finance Management Act which outlines the following as National Treasury's core mandate. It is important to repeat so that we understand the context within which we are engaging with Vote number 10. It has to develop fiscal policy framework and co-ordinate macroeconomic policy; it must prepare a sound and sustainable national budget and equitable division of resources; equitably and efficiently raise fiscal revenue, while enhancing efficiency and competitiveness of the South African economy; sustainably manage and make effective of government's financial asserts and liabilities; and promote transparency to improve financial accountability and enforce effective financial management.

Furthermore, National Treasury has a direct contribution to make in the 12 government outcomes particularly in the following areas, firstly in the area of decent employment through inclusive economic growth; secondly, a responsive, accountable, effective and efficient local government system; and thirdly, an efficient, effective, development oriented public service and an empowered society.

However, we should at all times be mindful of the fact that the Constitution of the republic enjoins National Treasury to ensure both transparency and expenditure controls in each sphere of government and most importantly it must develop Fiscal and National Macro–Economic Policy Framework.

Therefore, with the above understanding, the task is clearly defined and set for committee's of Parliament to do oversight role in the implementations of the department's strategic plans.

However, it is not what is in the plan that matters, but the will to implement the plan in order to achieve the objectives of a developmental state. The plan should be about placing at the centre of government programmes of decent job creations, access by all in terms of health, education, sustainable and rural development, the creation of better and integrated communities to fight corruption.

Let me venture into what constituted the immediate task of the Soviet Government, namely the Task of Organisation which was clearly set before all the working and oppressed people in a resolution adopted at the extraordinary Congress of Soviets in Moscow on 15 March 1918, which also paid specific attention to the self discipline of the working people and ruthless struggle against chaos and disorganisation, a point of which I would return to later in my presentation.

We should be happy that we are deliberating this Budget Vote at a time when our economy is showing some positive signs of recovery and we can safely say we have transited from the economic crisis that characterise most of the developed and developing world economies in the past two years.

Therefore, it is my considered view that the developed economies, as they continue to page on an era of irresponsibility, they should learn from emerging market and continue to sustain the recovery process and adopt new sets of policies, regulations and reforms to meet the needs of the 21st country global economy.

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

Let me return to my earlier point about the Task of Organisation. What are the immediate challenges in transforming our economy as South Africans? What it should mean is that we should shift the centre of gravity of our economic and political focus from narrow Black Economic Empowerment to Broad Based Black Economic Empowerment, an inclusive growth and wealth redistribution; we need to deal decisively with the cancer of corruption which is creeping in at all levels of our society not only in government; to this extent I wish to welcome the pronouncement and the resolution of Business Unity South Africa, BUSA, that they are prepared and they are going to name and shame those who seek to corrupt our government officials by pushing brown envelopes in order to influence procurement outcomes. We should congratulate and appreciate the stance. [Applause.] As part of our immediate challenges and tasks we should at all times as Parliament to ensure that government departments focus on job creation and it must remain top on the agenda; and we must therefore encourage the resources that they have been allocated to ensure that access to health and education are properly spent.

To achieve the above, the nation as a whole, including ourselves as public representatives, needs to be part of a mobilising effort to champion the new form of ruthless struggles against chaos and disorganisation. What do I mean by this? We have to, therefore, pay particular attention to greed, conspicuous consumption and opulence and the creation of few rich individuals and therefore increase the levels of disparity between the poor and the rich. Research has shown that South Africa is one of the countries with the highest Gini coefficient. We need to enforce a culture of discipline within the working and poor people; have an all round programme to engage civil society to discourage our people from aimless despair and bitterness that leads to destruction of public property in the name of service delivery protest and better working conditions.

As we note the positive signs of an economy recovery, there are equally worrying signs that the policy of Inflation Targeting of

3-6% bent may not be sustainable as a result of high oil prices, transportation costs and food prices.

Let me take this opportunity to remind hon members of what the Minister said on the mandate of the Reserve Bank:

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

The current budget for the first time in many years is deficit financed and the concern we should have as Parliament and its people is where and how the resources should be deployed. We have been assured that borrowing will be directed to real investments particularly in the productive sector of our economy of high propensity for jobs and poverty reduction and stimulate growth.

Critics of deficit financed expansionary macroeconomic planning argue that borrowing always results in a heavy tax burden on future generation, while some argue that deficit have no long run impact on output.

A deficit financed economy must however avoid deficit spending on current costs. Thus both in times of recession and upswings South Africa needs to give more consideration to deficit financed expansionary fiscal policy in order to accelerate spending on development and infrastructure.

We must congratulate the commissioner of SARS for keeping the home fires burning under very difficult circumstances, they exceeded the revenue target and therefore impacted positively on our deficit spending. Whilst we appreciate their success and their strategic plans, we also think it's important for their tax regime to address the peculiar circumstances of the SMME'S in order to encourage job creation and entrepreneurship

The Financial Service Board has continued to grapple with difficult but important matters that if not properly handled may result in negative consequences for the Pension Funds. We have urged the FSB to quickly address the issue of Pension Fund Surpluses which in many ways than one has disadvantaged poor families but also pay a particular attention to the fiduciary powers and responsibilities of pension fund trustees.

We have noted with sadness in the past few years the extent to which pension funds are invested/ mismanaged.

Lastly, the allocation of job creation funds to various institutions will need clear inter-ministerial co-ordination particularly the R9 billion for job funds, R10 billion in ITC and R40 billion rand in ISIBAYA.

In his state of the nation address, President of the Republic, President Jacob Zuma outlined the challenges ahead of us and directed that all South Africa must rally and unite behind one common objective in 2011.

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

This was a direct quote injunction to the South African citizens that their government, business, labour and the entire civil society to respond directly to the clarion call made by the masses of our people as captured in our Reconstruction and Development Programme, RDP, that laid the foundation for an integrated and coherent social economic policy framework that seeks to mobilise all our people and country resources towards the final eradication of apartheid legacy.

Let me take this opportunity to thank the committee members for their hard work and Minister and Deputy Minister, National Tresury management under the leadership of the new Director-General Lungisa Fuzile for their commitment and patriotic spirit in executing their work. The ANC supports the budget.

Dr D T GEORGE / Mpho/ END OF TAKE

Mr A T MUFAMADI

Dr D T GEORGE: Thank you, Chairperson, the National Treasury is the custodian of the people's money and is located at the centre of our public financial system. It must ensure that our public finances are efficiently and effectively managed and, according to its strategic plan, must promote economic development, good governance, social progress and rising living standards and endeavour to advance economic growth, broad based empowerment, and progressive realisation of human rights and elimination of poverty.

There is no doubt that the National Treasury's job is the difficult. It is difficult because government has forgotten that it doesn't have any money of its own, that it all belongs to the people and the people expect their money to deliver tangible results that will have a meaningful impact on their lives. It is difficult because government's economic policy is not coherent and permits uncertainly over the possibility of nationalisation of mines, banks and other industries, expropriation without compensation and so-called broad basic economic empowerment that made billionaires out of a few and left the vast majority behind, hon Mufamadi mentioned this perversity.

In a closed crony society, economic liberation is only for the very well-connected few. The Democratic Alliance believes that economic liberation is for everyone and that an open opportunity society for all can be achieved. To do this, we must redress the structural or defects inherited from the apartheid economy. The DA believes that we can build a path out of poverty and that government intervention is required to carve that pathway through the barriers to economic growth and development that constrain our hopes and dreams of our people.

There is much debate about the lessons that have been learned from the great recession, from which our economy is slowing recovering Bob Garratt, who authors The Fish Rots from the Head, suggests that one of the positives from the crisis is:

The final awakening in the public's mind that there is a strong possibility that those elected or selected to guide our organisations in the private and public sectors may not be very good at the job.

Our National Treasury is considered to be one of the best fiscal units in the world. This did not happen by accident. The previous Minister of Finance, Trevor Manuel, was a primary architect in building the institution as it exists today. It is, therefore, unthinkable that our government has not endorsed him as a candidate for Managing Director of the International Monetary Fund, IMF. South Africa has an opportunity right now to exercise its muscle as a new member of the Brazil, Russia, India and China, Brics; to test the IMF's stated commitment to reform and the other Brics' commitment to issues concerning Africa.

An African appointment to the IMF can contribute significantly to our international financial relations and deepen our role in regional and international economic integration. There is no secret about the disjointed economic policy positions of the partners within the tripartite alliance. The R16 million work of the International Panel on Growth is now a distant memory and we await output from the National Planning Commission and wonder how, or if, it will interface with the so-called New Growth Path. It has been suggested that our economy needs tighter fiscal policy and looser monetary policy. Government appears not to know what it wants and it is unclear whether the National Treasury inputs to economic policy are taken seriously, as evidenced by the Youth Wage Subsidy that remains merely a proposal.

The fastest growing expenditure item in the national Budget is on the public sector wage bill. This was responsible for the higher than expected deficit. Government's policy to directly create jobs itself is not sustainable. The DA believes that government's excessive focus on the consumption side of balance sheet crowds out opportunities to improve our productive capacity and constrains our future economic growth potential. The net results to the DA's alternative Budget was a larger deficit than that of the national Budget and we believe that an overly conservative stance in the Budget process should be avoided especially under global circumstances where economic recovery remains precarious and a double dip recession remains possible in several developed economies.

One of the primary lessons from the great recession is that markets do not always self-correct and that asymmetrical information can have devastating consequences. We support the proposed shift to a twin peaks approach to regulation, that separates prudential and market conduct regulators, and agree that the Reserve Bank is best placed to play the role of macro-prudential supervisor. We understand that the former Director-General of the National Treasury, Lesetja Kganyago will be tasked with this function in his new position as Deputy Governor of the Reserve Bank. The DA wishes him great success in his new role and would like to thank him for his outstanding performance at the National Treasury. We have no doubt that the successor, Lungisa Fuzile, will make us equally proud and we look forward to working with him.

The DA welcomes tender reform and the news that the tender default register is finally being updated so that tenderpreneurs who don't deliver can be excluded from the process, and prevented from stealing more of the people's money. Steps should be taken to recover what has already been stolen. The Auditor-General is a key institution to ensure that the public finances are properly accounted for. During my visit to the Auditor-General earlier this year, as a member of the Standing Committee on the Auditor-General, it became clear that the financial model applicable to the Auditor-General doesn't work and this compromises its ability to function effectively. In January 2011, R63,9 million was outstanding over 120 days in audit fees for municipalities alone.

This compromises effective public financial management and the National Treasury should consider amending the funding model to ensure that the Auditor-General receives funds due to it before other appropriations are processed. This will ensure that the Auditor-General remains financially viable and can fulfil its constitutional mandate. The promised review of the financial model applicable to the state owned enterprises remains outstanding. A private sector investment into these entities would enhance their efficiency and provide capital for the establishment of a Sovereign Wealth Fund that could be utilised to seed new industries especially in the Green Economy. We also await further detail on the long awaited Retirement Fund Reform and estimated costs of the proposed National Health Insurance Scheme.

We hope to see progress on this in the near future. Pension funds need assurance that government will not break what is fixed and rather focus on fixing what is broken. Hardworking taxpayers need to know if they will be expected to pay even more for a new healthcare system when the current system is very expensive and barely functional. The South African Revenue Services, SArs, performs the vital function of ensuring that government can fund its programmes by collecting tax revenues, ensuring tax compliance and providing a customs service to facilitate trade

SArs has again collected more taxation than was projected. This has been a recurring theme over several years, with one notable exception. Although we are grateful, the question that must come to mind is whether the projections are understated so that the result looks impressive, or whether the financial forecasting behind the projections requires improvement. For SArs to accurately determine which revenue flows are temporary and which are permanent within the framework of our counter-cyclical fiscal policy, we need to understand why revenue collected exceeds expectation.

Although SArs has made significant progress in improving the way we work, several problems remain. SArs has not been spared the scourge of fraud and corruption and this has resulted in substantial delays in the processing of value added tax, VAT, refunds. Although we agree that addition audits are necessary to ensure that fraudulent refunds are not processed, it is unfair to subject law abiding taxpayers to delays that can place their viability as a business at risk. SArs needs to find a more efficient way of balancing the fraud risk with their obligation to provide quality customer service.

I am impressed at the response from SArs in resolving enquiries that have escalated to them from sometimes desperate taxpayers. Whistleblowers at Oliver Tambo International Airport recently highlighted widespread irregularities in the performance of customs inspections, either the result of corruption or lack of training. In either event, the situation is not acceptable and needs to resolve.

The DA believes that access to development finances is a vital component in the construction of a pathway out of poverty in South Africa, in our region and further to the north. The Land Bank appears to have emerged from its near collapse at the hands of incompetent and dishonest, some of whom, we are pleased to note, have been criminally prosecuted. A crucial lesson for the bank is that it must develop a more robust model that will support emerging farmers to ensure that our agricultural and rural development is stable and sustainable over the long term. The Development Bank of Southern Africa can play a far wider role in ensuring that the regional of development can assist in lifting our neighbours out of poverty and into markets for our goods and services.

It must not become a cash cow for failing government programmes. The Government's Employees Pension Fund, GEPF, underwritten by taxpayers must not be a source of funds for risky so-called empowerment deals. The Public Investment Cooperation's, PIC, loan of billions to AfriSam, where capital and interest is only required to be serviced in 2015 and 2018 is a prime example. We trust the newly appointed Chief Executive Officer, CEO, of the PIC, Elias Masilela will manage the people's money in their best interests and ensure that the money works for them and not for the enrichment of a the privileged few.

The DA is focused on the future, and though we do not believe that the national government policy programme will resolve our inherited problems of poverty and unemployment, we do believe that our National Treasury and SArs serve our country well, have delivered on their mandates and will continue to outperform their counterparts. Thank you, your efforts are greatly appreciated and thank you, Minister for restraining the size of your delegation here today. Thank you, Chairperson.

N J J v R KOORNHOF /NN / END OF TAKE

Dr D T GEORGE

**incomplete**

Mr N J J VAN R KOORNHOF:

Dr M G ORIANI-AMBROSINI:

Dr Z LUYENGE

Dr M G ORIANI-AMBROSINI

Dr Z LUYENGE: Hon Chairperson, hon Minister, the Chairperson of the Portfolio Committee on Finance, officials from the department, and hon Members of this August House; allow me Chair to precisely deal and respond to the issues that were raised by hon Koornhof. I'm offering free Adult Basic Education and Training, Abet; I invite your attention as I'm going through my presentation.

The objective of the Asset and Liability Management Programme of the Treasury Budget Vote is to exercise shareholder oversight over these entities to ensure that they promote government's policy objective while remaining finically sound institutions. Optimal allocation and use of financial resources and sound corporate governance in the state-owned entities through financial oversight in accordance with government policy is promoted by the state-owned entity Financial Management and Governance subprogramme.

The Land Bank – a schedule 3(b) National Government Business Enterprise – is an agricultural development finance institution whose mission is to support developing and resource poor farmers by providing them with retail, wholesale, project and microfinance. As a specialist agricultural financier with a mandate to address agricultural and rural development in South Africa, the bank's aim is to improve the sector by providing the necessary support, especially for training and capacity building of developmental farmers and sustainability of sectors.

The African National Congress in its 52nd National Conference resolved that greater resources must be devoted to challenges of rural development, land reform and agrarian change, in particular to the mandate capacity and operations of institutions such as the Land Bank in order to ensure that the state is able to provide directed credit and capital for investment in support of a transformed agricultural sector and rural economy.

At the ANC's third general council meeting, matters related to rural development and agricultural support systems were discussed. It was agreed that these matters must be pursued with greater vigour; and that the obstacles to progress must be enunciated and acted upon. The Land Bank operates in the agricultural and agribusiness sectors and is regulated by the Land and Agricultural Development Bank as entailed in the Act of 2002 as well as the Public Finance Management Act. It is keen to resume the development component of its mandate, which is evident in the projects that are moving through the pipeline.

In 2008-09 financial years, the bank recorded a positive profit and received an unqualified audit report. This marked the beginning of the more stable period that is evidence of the turnaround strategy implemented by the incumbent board of directors and the new executive management which involved three phases of clean up, stabilisation and sustainability. It is currently working on the sustainability phase of the turnaround strategy which should the bank entrenched its strategic position in the agricultural finance sector and pursue its mandate more robustly.

The bank made a profit of R379 million in 2009-10 compared to R168 million in 2008-09, and also received an unqualified audit report. The bank is also reviewing its pricing and funding models. The parliamentary speech as presented by the Minister Patel in the debate on the state of the nation address in the National Assembly on 15 February 2011. I quote:

"Over the four years to 2014, our infrastructure expenditure estimates provide for more than a quarter trillion rand a year. The accession by the said Minister insinuates that money is not all that we need. It also requires careful planning and execution to ensure we achieve the largest number of jobs and promote economic sustainability. To give effect to this, national departments, state-owned enterprises and development finance institutions are beginning to work in a much more strategically co-ordinated way."

A key recent achievement was the diversification of investors to fund the growing loan book. In 2010-11, the bank launched the domestic medium-term note and secured additional loan capital of R1,1 billion, raised in bank bonds that are subscribed to by investors in the private sector.

In 2009, the National Treasury increased the guarantee to the bank from R1,5 billion to R3,5 billion to put it in good standing with existing and potential creditors. This guarantee is being reduced progressively through periodic cash injections into the bank, which will be continuously included until R3,5 billion has been transferred.

In December 2009 and October 2010, the bank received R1 billion and R746 million as part of the recapitalisation programme, reducing the government guarantee to R1,8 billion. The recapitalisation funding for the Land Bank will end in 2011-12.

As the bank liquidity stabilises, it is in a position to embark on the next phase of its development plan, including addressing information technology, IT, deficiencies in procurement, payroll and banking; intensifying efforts to recover nonperforming loans and improve the balance sheet; managing an acceptable cost to income ratio; and implementing a divesting strategy of the land for development finance unit's portfolio.

Through the Fit for the Future Project, the bank seeks to address operational efficiencies by reviewing the way its business is conducted. This allows the bank to respond competitively and in good time to business demands as well as to optimise the use of its resources. The bank's aim, Land Bank Finance Programme provides long-term mortgage loans or fixed instalment loans for capital expenditure. It strives to be a provider of world class agricultural financial services with part of its mandate contributing to rural development and stability, social upliftment and job creation. Congratulations, hon Minister Gordan.

The Land Bank's spending focus over the medium-term will be on financing developing farmers. Over the Medium-Term Expenditure Framework, MTEF, period, expenditure is expected to increase from R1,4 billion in 2010-11 to R1,8 billion in 2013-14, mainly driven by interest paid on funding liabilities.

The Development Bank of Southern Africa - DBSA as it is more generally known – is a schedule two major public entity which was reconstituted in terms of the Development Bank of South Africa Act of 1997 as a development finance institution with the primary purpose of promoting sustainable economic development and growth, and human resource development, and institutional capacity building. It does this by mobilising financial and other resources from the national and international private and public sectors for sustainable development projects and programmes.

Given the scope of the development challenge, the DBSA aims to proactively broaden and deepen its development impact to support government in accelerating service delivery, job creation, integrated spatial development and regional integration. Over the medium-term, the DBSA's strategic goals are to catalyse, expand and enable delivery of basic and social services; to provide and build human and institutional capacity; to promote broad-based economic growth, job creation, efficiency, fixed capital formation, and regional integration; and to engender sustainability, internally and externally, in financial , environmental, institutional and social terms.

The Development Bank of Southern Africa has a total budget of R3,4 billion in 2010-11, which is used mainly in the Siyenza Manje and Vulindlela Academy programmes. Siyenza Manje improved the capacity of municipalities to mitigate performance constraints that hamper sustained service delivery. It entails focus on unlocking and implementing mainly municipal infrastructure grants; assisting municipalities to improve their financial management. We have a role to play as Members of this House to be responsible enough and to ensure that the communities that we lead access opportunities that exist in government. Thank you.

Mr S N SWART

Dr Z LUYENGE

Mr S N SWART: Chairperson; the ACDP commends the Minister and the National Treasury for prudently handling the public finances during the last financial year.TheSouth African Revenue Service, Sars, is also to be commended for collecting R2 billion more revenue than anticipated by 31 March, this year.

While the economy is forecast to grow at 3,2% of Gross Domestic Product, GDP, for this year, much will depend upon the slowing economic growth in developed countries. We are, however, particularly encouraged that South Africa's first quarter growth rate was 4,8%. However, weak United States, US, job and house price data, last week, sparked fears again of a double dip recession, particularly for developed countries. The question is whether these are justified, Minister. Stock markets around the world are already reversing their gradual gains as economic growth slows.

There is also an increased prospect that Greece may default on its debt, which could lead to a downturn in Europe considering that European banks hold significant Greek debt. As we know, a sovereign default by euro member could undermine the viability of European banks, creating another banking and credit crisis as that caused by the subprime mortgages.

How does South Africa compare? South Africa's situation is clearly different and is characterised by improving growth and tax revenues. We also do not have the sky-high public debt and negligible economic growth rates, plaguing certain European countries. However, where the double dip recession in the euro areas materialise it will, undoubtedly impact emerging markets, including South Africa due both to investor risk aversion as well as impact in export to the European Union, EU. We trust that this will not occur.

The question was posed in the committee as to what benefit accession to Brazil, Russia, India, China and South Africa, Brics, will hold to South Africa. Hopefully, it will result in greater market access to Brics countries. We also look forward to seeing much more beneficiation of raw materials taking place. We need to be mindful that the Brics countries are also competitors for capital and resources required to drive growth and economic development.

It is crucial, then, for South Africa to position itself appropriately to benefit from capital flows and investor attention. The perception exist that South Africa is becoming less competitive as the place to establish and do business, while other African hubs such as Nigeria, Kenya and Angola are becoming increasingly easier to operate in. This, hon Minister, must be addressed to attract foreign direct investment which is set to reach R150 billion in four years for Africa.

To conclude, the ACDP remains positive on our economic growth prospects and it is crucial that National Treasury works close with other departments and the private sector to achieve job creation, economic growth and poverty reduction.

We wish to thank all the officials in the National Treasury and Sars and other state organs for their handwork and commitment. I thank you.

Ms Z S DUBAZANA / MS / END OF TAKE

Mr S N SWART

Ms Z S DUBAZANA: Chairperson, the ANC is overcome with a deep sense of sadness on the sudden passing on of the ANC stalwart mama Albertina Sisulu, ulale ngoxolo mama.

Chairperson, allow me to pay tribute to the continued support received from millions of honest taxpayers. Their contributions are reflected in the recovery of taxi revenue this year.

However, hon Minister, the ANC is concerned about the taxi and the customs evasions. That remains a serious threat. On the same breadth we are not really looking at the bad side, we also appreciate the working together of the police, the prosecuting authority, financial intelligence and Sars that they ensured that 200 taxpayers were convicted of fraud and taxi evasion between September 2010 and February 2011.

The scars and the bruises inflicted by the Apartheid system in our country cannot be ignored or forgotten. Indeed, we have forgiven but the scars have caused an indelible mark. The majority of our people fail to understand the most important matters of our country due to poor literacy level.Sars is perceived as a cruel and unfairly institution. Due to this knowledge deficit, people fail to understand what their responsibility is towards Sars.

Without the revenue from the taxi, the government cannot do its job. The state needs your taxi rents to fund social and economic programmes, so as to provide the public goods services such as schools universities, hospitals, clinics and roads, as well as defence and security.

ANC has acknowledged the hard work that has been done by Sars to turn and entrench the culture of noncompliance into one of voluntary compliance, increasing the tax base while reducing the cost of collection. Improve service delivery and more effective enforcement of taxi legislation are two pillars of SARS compliance strategy.

The ultimate goal is to reduce the tax gap which is the difference between the tax collected and the tax due. The ANC calls to all parties to ensure that, we educate our constituencies towards the responsibilities and the roles of Sars, and also the companies to develop a function of behavioural culture and values. There is a saying which says that; Nika uKhesara okuka Khesara, so we need to do so.

SARS as an institution is an important capacity for the building an efficient and effective developmental state envisaged by the ANC.Central to a developmental state is a capacity and ability to intervene in the economy using a strategic policy and institutional livers at its disposal to effect the change. The ANC 's conceptualisation of a developmental state is that, and I quote:

It will guide the national economic development and mobilise the domestic and the foreign capital and other social partners to achieve the goal of ensuring that every South African especially the poor experience an improving quality of live

Within this context therefore Sars has to play an important

role in the mobilisation of the resources that will enable a

developmental states achieve its goals.

In conclusion, every citizen meets their commitment to democracy by obliging to pay their fare share of taxes as and when they fall due. This new morality symbolise a commitment to democratic governance to which every South Africans must voluntarily subscribe.

Revenue collection is frontier which enables the ANC government to implement its programme of national building and to implement the agenda of national democratic state within a developmental state.

ANC supports Budget Vote number 10.

Mr N T GODI

Ms Z S DUBAZANA

Mr N T GODI: Chairperson, comrade Minister, comrades and hon members, the APC affirms its support for this Budget vote. We also like to congratulate the new accounting officer Mr Fuzile; we wish him well and hope that he will sustain and advance the cordial working relations between National Treasury and Parliament, especially those committees charged with oversight on compliance with the Public Financial Management Act, PFMA and Treasury Regulations.

Comrade Minister, the APC believes that the long awaited and much spoken about amendments to the PFMA should happen sooner than later. This important tool or financial management has been in operation for years and it might be time to sum up experiences from its implementation. On the probably private partnership, we believe that, there is a need to fast track the development of government wide policy, because bruising encounter we had last week about the building of four new prisons for correctional services raise the question of the role of National Treasurer, whether is one of advocacy or advisory.

We were left unconvinced that it is the appropriate approach supported by the political and administrative leadership of correctional services. We have just come from the local government elections and the immediate questions that the APC believes is that, National Treasury should be able to attend to are the issues around the grants that are given to municipalities .What mechanisms are in place to ensure that money is not just sent as a yellow routine. Even though it is not spent, and also the oversight structure and capacities on financial expenditure.

As things stand there is no consistency on the composition powers and functions of municipal public accounts committees. Without capacity at municipal level to properly monitor financial expenditure, wastage, abuse, corruption and primitive accumulation will persist.

The APC wishes to salute you comrade Minister for consistently calling for responsibility in the management of public resources.

The fight against abuse, misuse, corruption and theft of public funds must be intensified. Corruption is counter revolutionary. The call must be consistently made for the observance of revolutionary morality.

Before I sit down, I think it would be amiss for me not to also acknowledge the good work at the land bank done especially by the CEO Mr Phakamani Hadebe.It would be noted that in the past that the land bank was a constant visitor to the Public Account's Committee, But that since he took over they are conspicuous by their absence.

Mr D D van ROOYEN / END OF TAKE

Mr N T GODI

Mr D D VAN ROOYEN: Chairperson, hon Minister, our committee Chairperson, as well as my comrades and distinguished guests that are here, and members of the National Treasury, as we are all aware the annual process of dealing with Budget Votes is a time where accountability is demanded and expected. In the tabling of Budget Votes, we seek to ensure that the votes that are being appropriated do in fact speak to the policy priorities and imperatives of the governing party.

In consideration of the Budget Votes of the National treasury we are unavoidably called upon to reflect on a wide array of subjects and perspectives. What sense are we to make of the complex interplay between more rapid economic growth and the challenges of eradicating poverty and creating jobs; and decent work is our central question.

The political context in which the Budget Vote is delivered is necessary as a background. This vote of funds needs to provide an understanding of how the National Treasury is reversing past imbalances and creating a better life for all using its vote of funds. However, the National Treasury is unique in that it also has the responsibility of management of funds within the legislative and policy framework of government. The critical question at the completion of today's debate will be, has this particular vote given effect to what has been politically agreed by the executive within the context of the mandate of the National Treasury.

This vote far from being an administrative one, it is both a political and financial instrument to finance the government's programmes in amongst others, the financial sector. Therefore, it should reflect an outcome centred public spending. Chairperson, this vote must be measured against the ANC policy and priorities. We are the governing party. Legislation like budgets reflect policy and this Budget Vote should likewise reflect this.

Chairperson, allow me to pay attention, firstly to the Special Pensions Dispensation, and secondly, the Financial Services Board as catered for in programme seven of our National Treasury. The fight for a democratic South Africa led to many people sacrificing their lives, livelihoods and families.

The Special Pensions Act was enacted in 1996 in order to address the plight of those who had made these sacrifices, and in the process lost an opportunity to provide for their livelihood while in the pursuit of freedom and just society. The challenges that have arisen in the application of this Act led to an Amendment that was introduced in 2008. Chairperson, not withstanding all these amendments, huge challenges remained.

In 2008, amendments - as we are all aware - made provision for surviving spouses or orphans of pensioners to receive a monthly pension in addition to the lump sum payment previously received. The Amendment Act further provides for a funeral benefit to be paid to the families of deceased pensioners.

It is trusted that this Bill, is going to enhance this purpose and honours the intent and spirit of the Interim Constitution that led to the enactment of the Special Pensions Act. In examining Programme 7 of this vote, civil and military pension's contributions to funds and other benefits, we are drawn to the objective of what this vote provides for in the previous financial year and the current financial year; which is the elimination of the backlog on implementing the Special Pensions Amendment Act of 2008, by the end of the financial year March 2012.

The programme critically calls for ensuring that the administration only deals with applications that are not older than 3 months, or are currently developing a policy to deal with applicants less than 35 years of age who applied before the amendment, and is sending them letters or what you referred to as application packs requesting them to reapply.

Chairperson, whilst we definitely welcome the reconfiguration within the Department of Defence which more emphatically and correctly established the Military Veterans Department, the National Treasury must move with the necessary speed to ensure that Programme 7 of the vote is carried out in the stipulated time.

We are dealing with a very sensitive area, the dislocation of so many of our combatants during the integration phase has left all of us with major obligations in ensuring that we do truly respect the sacrifice that the non-statutory forces made in liberating our country.

Our approach to this situation must continue to show how we value and treat our veterans. As those who were prepared to serve, and at times others like Solomon Mahlangu and many more, paid the supreme sacrifice in pursuit of a better future for all. It is more than a decade now Chairperson, into our democratic dispensation, this assignment is long overdue, hence our clarion call: "Mazilunge into Zamakhomanda".

Chairperson, as I turn into another sensitive matter that comes under the jurisdiction of this Budget Vote: "the Financial Services Board", this Budget Vote addresses the Financial Services Board, but if we are to agree to the vote then, we need to be frank about the challenges that must be addressed.

The National Treasury has not been a bystander in this matter, and has certainly exerted its influence in the retirement industry reforms. The absence of a statutory retirement fund means that worker's income in retirement comes from occupational schemes or individual savings arrangements.

The coverage of occupational funds in South Africa is high relative to other countries of similar income level, though coverage varies across sectors, households generally do not save adequately for retirement. Many low income workers rely only on the old age grant as a result.

A key reason for the disparity in the coverage levels and savings rates is the lack of preservation. Workers often liquidate their savings when they leave a job rather than transfer them to a new fund. The viability of mandating preservation upon change of jobs or in the event of divorce becomes a necessity.

The unification of administration in the absence of a statutory retirement fund leaves many workers relying on the state old age grant. Chairperson, transformation on the savings industry requires careful regulation. We welcome the proposed changes to Regulation 28 of the Pensions Fund Act which imposes limits on where funds can invest.

A retirement savings must be invested in a prudent manner that protects fund members, while promoting economic development. Chairperson, the long and outstanding discussion often with reservations have been expressed by organised labour to the Pensions Fund Act, needs to be concluded. Currently, it does not cover public sector funds. Discussions on this matter really do need to be driven, and we need to conclude as the result of this would lead substantially in enhancing our developmental programme.

Chairperson, when it comes to the Financial Services Board, we need to express our unhappiness and the need for deep seated reform. We are unhappy because of the question of surpluses. Historically this has been raised by organised labour, and again, we witness with the Financial Services Board that basic instruction of the Standing Committee are not being implemented.

The rightful holders of these surpluses, we are told cannot be found. Yet, we have been at pains to point out how this can be done. We are told that insurance companies cannot trace relevant beneficiaries. We are an interconnected as African families, we are an interconnected families living in interconnected communities, and I think FSB can go a long way by taking advantage of this reality.

Chairperson, clearly it is within this context that we need to debate the Financial Services Board. Chairperson, indeed, this Budget - as I have posed the question at the beginning – this budget gives effect to our developmental mandate. As the ANC, we support Budget Vote no: 10 on National Treasury/SARS. Thank you very much Chairperson. [Applause.]

Mr S J F MARAIS / C.I/Eng / END OF TAKE

Mr D D VAN ROOYEN

**incomplete**

Mr S J F MARAIS:

Ms N N SIBHIDA

Mr S J F MARIAS

Ms N N SIBHIDA: Chairperson, hon members, Minister and your delegation, today we are considering the Budget Vote of National Treasury within a given context that the Chairperson has talked to in his speech and I am not going to repeat that.

Hon Chairperson each year the budget speech deals with the global balance of economic forces. It is these global economic forces which have a direct bearing upon our ability to prosecute the developmental path we have set ourselves and how the budget should respond to that developmental path.

We are the markers of history but the terrain upon which we make this history is a contested one. Foreign economic policy must assist us to deal with the challenges of inequality and poverty in the world. In dealing with the international political economy the critical need for the reform of the international financial institutions and economic system arises sharply.

Many institutions controlling the global economy were developed during periods when colonialism held vast control over its colonies. These colonies which were held in political and economic bondage could not participate.

We have over the past decade and more been engaging in a battle of ideas in the attempt to transform the Bretton Woods institutions. We have been advocating for a more open, transparent and merit-based approach to choose the heads of the World Bank and the International Monetary Fund, IMF, not the secretive manner in which they are currently appointed

We have been mobilising the progressive forces in the world to continue advocating for the completion of the Doha Development Round of negotiations to ensure that the developing countries have favourable access to markets in the developed world without restrictive conditions.

Africa is particularly, is moving towards beneficiating its raw materials and this must become the decade in which new foreign investment must be forced on beneficiation so that our domestic markets can develop and grow.

It is, therefore, crucial that we harness and optimise these resources in the global community where there are limited trade barriers and protectionist policies. It is imperative that we achieve a just international financial and economical order.

Our National General Council in September 2010 underscored that the ANC continues to be the strategic centre of power, the leader of the Alliance, a disciplined force of the left, a mass movement, an internationalist movement with an anti-imperialist outlook.

Hon Chairperson, we have spoken a lot in the past about a need to speed up the reform of these international institutions. The initiative with regard to the reform of the IMF requires us to provide the necessary leadership and the political will to follow through with the IMF reform. The reform of the IMF is and demonstrating political means in ensuring that the necessary compromises are reached to deliver on the Pittsburgh commitments.

Failure to move regarding the IMF and other urgent reforms of the International Financial Institutions, IFIs, endangers the goodwill earned through the effective action of these institutions in response to the crisis.

The IMF is a quota-based institution. Quotas determine the amount of resources that could be made available by the IMF. Our strongly-held view is that quotas must shift to developing economies as their need for their IMF resources is higher. The shift must essentially be from developed countries to developing countries. We must ensure that no emerging and low-income countries lose quotas as a result of these reforms.

We must play a greater role in providing strategic direction to the IMF. We must also ensure that an equitable representation is achieved in the board of the IMF to reflect appropriate regional representation. This could be achieved through reforming the composition of the board as was done at the World Bank, to afford an additional chair for sub-Saharan Africa.

The appointment of the head of the IMF must be based on merit without regard to nationality or gender. These institutions belong to all of us. The appointment of the heads from Europe and the United State of America, USA, is a long-standing secret practice, but it has no basis in the Articles of Agreement.

Chairperson, Brazil, Russia, India, China and South Africa, Brics, sets in motion the construction of a new financial architecture and economic multilateralism, as a basis for world growth and prosperity. This demonstrates the absolute necessity that at regional level we ensure that economies of the Southern African Development Community, Sadc, countries are further integrated.

The global financial crisis, while it originated in rich countries, has meant a sudden and sharp increase in the borrowing costs of developing countries and in many cases their currencies have fallen dramatically.

The statement by African ministers noted that the global slowdown will diminish trade opportunities for Africa. They called on all countries to refrain from protectionist measures, and emphasised the need for a successful conclusion of the Doha Development Round of negotiations.

It is the world's common interest that countries pursue policies that do not provoke financial instability. This requires international cooperation by national authorities and strong multilateral bodies to organise and coordinate efforts to prevent and solve financial crises. The same applies in our region.

Our experience with Environmental Protection Agency, EPA, demonstrates how brilliant we have to be and how easy it is to undermine what we are trying to develop within the region when external interests feel threatened by regional unity. What so easily gets in the way of agreements is national sovereignty and a skewed rules-based system designed to protect national sovereignty.

At the heart of such a system we require well-resourced, inclusive and accountable institutions. The IMF and World Bank can play a central role, but must be comprehensively reformed to meet the challenges of the twenty-first century. This will mean a stronger voice and representation for developing countries.

The international financial institutions have a critical role to play standing behind the emerging economies that face the consequences of the international crisis. We must ensure adequate resources are available so that we avoid a downward spiral in economic activity.

The emerging markets can also be an important engine of global growth if they are properly supported to maintained well focused investment programmes, and make effective antipoverty interventions

Chairperson, the ANC supports Budget Vote number 10. I thank you.

The MINISTER OF FINANCE // NPM // END OF TAKE

Ms N N SIBHIDA

The MINISTER OF FINANCE: Chairperson, let me thank members of all the political parties both for their support for Budget Vote No 10 and their useful comments, some of which we will certainly take to heart and some of which I will respond to now. I want to apologise for the absence of the Deputy Minister as he is attending a meeting of the African Development Bank in Portugal at the moment.

Let me at the outset also thank the chair of the standing committee, Mr Mufamadi, for his leadership through this process, but also for his excellent reminder of what is supposed to be in the best tradition of the ANC and the struggle that we have fought against apartheid. The struggle today is that we need to fight against what he called opulence and conspicuous consumption amongst other things. Thank you for a good political reminder of where we come from.

As we mourn the loss of MaSisulu, let us also remember the legacy that she and her husband, the late Walter Sisulu left us behind. What it means to work with honesty, dedication, integrity and sacrifice. What it means to put people first and not self first. In many ways this is a very firm reminder to all of us that today Aluta Continua means the struggle for old discipline values of the ANC, and not the new ones that are taking us astray at this point in time.

Hon Koornhof has made some very useful 10 point plan for saving the globe and South Africa and certainly, we must take that to heart. The ANC government is not shy to say where it might have made political and policy mistakes. If there corrections required hon Koornhof, we will certainly undertake them. At no stage did we say that the public sector is a sole provider of employment.

We certainly agree with you that the balance between the salary package and employment is the balance that we need to carefully maintain. This also applies to the recognition of the role of agriculture, making sure that we have a stable currency and the lessons of Brazil as you correctly pointed out. But, let me make it very clear that we are not about manipulating currency. It is certainly about doing the things that are within the acceptable bounds of policy action such as accumulating reserves and taking those measures that can actually mitigate the worst effects of the impact of capital flows in our own economy.

The hon Ambrosini and the ANC have never got along. So, I don't expect that in a five-minute debate we're suddenly going to find each other. But, I think that he is unnecessarily alarmist and wants to import the tea party to South Africa and I will ask him to be fact based rather than engage in warped ideology. To say that taxation in the corporate world and personal income tax, PIT, are the highest in the world, has no foundation in fact whatsoever. Perhaps he should provide us with references and we can have a look at that.

Hon Chairperson, as I said earlier, you've given us some very useful political reminders. Your reminder about getting the balance right between recurrent expenditure and investment in growth is also extremely important. One would look to Parliament to raise this issue more forcefully to enquire about our expenditure patterns more vigorously and help the National Treasury and government more generally to re-balance – if you like - the way in which we are spending our money so that we get those balances absolutely right.

Hon George, when the DA eventually gets to government - and I'm not sure when - we can then talk about how you would have managed the fiscus as opposed to the ANC. Generally you are doing your job well as the opposition spokesperson but you can't deny the fact that the National Treasury and South African Revenue Services, SARS, manage this country's finances excellently and we thank you for the various compliments that you paid us during the course of your address.

On issues such as Value-Added Tax, VAT, for example, we've been through this many times and several of hon members have addressed this question. VAT is the biggest leakage point in any tax system. If we don't put the right kinds of measures we are becoming fare game to those who want to engage in corrupt practices. This is not unique to South Africa. There are VAT schemes of all sorts in Europe, the United States and elsewhere in the world.

All SARS is doing is ensuring that it puts in place measures that will ensure that we don't become fare game. If there are grievances that individual taxpayers have, I'm sure that the SARS doors are open and the commissioner will most welcome the kind of issues that concerned constituencies have and will address them in a vigorous way.

The hon Luyenge pays a correct tribute to Mr Phakamani Hadebe, the Land Bank and the chair of the Land Bank as well. This is a great story of turning around an institution. It is a great story of what not to do with institutions of the state, which is to put them in the wrong hands, but in management terms and in terms of appointment of boards, to wilfully spend money the wrong way. We hope that those who have engaged in this practice will indeed pay the price for that.

We agree with Mr Luyenge that the Land Bank, now that it is beginning to overcome the disabilities imposed upon it by the legacy that those that have passed left behind, will now look at a much more assertive and developmental role in terms of its mandate. Similarly, the Development Bank of Southern Africa, DBSA, is an institution that we should also be extremely proud of and one which the National Treasury has supported in many ways. It is a wonderful example of an institution that has, with the flexibility and capability, to implement government programmes, assist where it is possible and take on this new responsibility that we have given it of implementing the jobs fund and making it a success.

Hon Swart, you were right about your concerns around the double dip factor, but as we have already said, we're doing well, the world seems to be doing well but it will only last for a few days until the next result comes out. Uncertainty is a factor of life – if you like – and we have to learn to live with it on the one hand, guard against it on the other hand and keep our eyes on where we want to go.

The hon Dubazana pays appropriate tribute to SARS and its work. I suppose that when she used the word cruel she actually had it in inverted commas. But, she correctly points out that the development of the compliance culture in South Africa is a huge success factor for our country, one that many others in the world envy us of and many others in the world want to emulate as well. She is absolutely right when she says that revenue collection and the responsibility of citizens to pay their taxes is absolutely crucial to both current democracy and the future of our country.

We agree with you hon Godi that there needs to be greater oversight in terms expenditure at the municipal level and that we need far better oversight in respect of the spending of grants, infrastructure and other procurement efforts within municipalities as well. We share your delight that the Land Bank is not your constant visitor anymore.

The hon Van Rooyen raises many issues in respect of the political context, which we agree with and reminds us about why we created the special permissions provision, what the amendments of 2008 were about and why we have created the Department of Military Veterans. I can assure him that as our fiscal capability allows, we will meet our obligations to our military veterans and ensure that the right thing happens. We actually share his concerns about retirement reforms and the lack of preservation and we'll certainly take up some of the issues that you have raised with the Financial Services Board, FSB.

The hon Marais is a longstanding and firm advocate for the disabled and we accept that. He now raises a set of issues around certain changes that SARS wants to introduce. SARS efforts are doing two things. Firstly, to make sure that the way these provisions are formulated, there is absolute clarity as to what is allowed and what isn't. Secondly, like everything else in taxation, to ensure that the wrong opportunities are not taken by the wrong people and to cover the loopholes to the extent that we can. I can assure you that no list is going to be imposed retrospectively. If there are other issues Mr Marais, I - as I did the last time – appeal to you to talk to SARS and find some way of getting a common understanding.

Chairperson, the hon Sibhida makes very valuable points about global governance and institutions more generally and the events at the International Monetary Fund, IMF, to come in respect of the appointment of the managing director, MD, the transformation of the institution and the way in which its leadership generally is going to be appointed. This is going to be part of the Aluta Continua story. Once we have achieved democracy in one country, how do we get better democracy across the globe? She raises extremely important points in this regard as well.

Let me thank all of you for your support for Vote No 10 and for the valuable contributions that you have made. Thank you. [Applause.]

Debate concluded.

The Committee rose at 16:03

A N N / END OF TAKE


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