Hansard: EPC: Debate on Vote No 10 – National Treasury
House: National Assembly
Date of Meeting: 21 Jul 2014
Summary
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Minutes
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 1
MONDAY, 21 JULY 2014
PROCEEDINGS OF EXTENDED PUBLIC COMMITTEE – COMMITTEE ROOM E249
Members of the Extended Public Committee met in Committee Room E249 at 10:03.
The House Chairperson Ms A T Didiza, as Chairperson, took the Chair and requested members to observe a moment of silence for prayer or meditation.
APPROPRIATION BILL
Debate on Vote No 10 – National Treasury:
The MINISTER OF FINANCE: Thank you, House Chair. I had to wait until you called me to the podium. I notice that I do not have the time in front of me to monitor myself. So please advise me when I am getting closer to the end.
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Thank you. I will advise you when you are left with two minutes.
The MINISTER OF FINANCE: Chairperson and hon members, I present National Treasury's Budget Vote for the consideration by this House. It is a Vote that builds on the enduring achievements of the first 20 years of our democratic dispensation but also lays the building blocks of faster progress over the decades ahead.
The National Development Plan, NDP, reminds us, quite rightly so, that our development objectives cannot be achieved in a few years.
Cable News Network, CNN, anchor Richard Quest could not have put it better when he said on Radio 702 in May this year that 20 years is a pinprick on the skin of democracy; however, that is no comfort to fellow South Africans, who are unemployed, who are poor and live in less than ideal conditions. To those fellow South Africans, we can only offer the comfort that while many of the initiatives will take time to be felt in their lives, there are immediate things that can be done to alleviate their plight.
As we knuckle down to implement the National Development Plan, we should also remember that precisely because national development is a long-term project, it should thus be sustainably financed. Our pressures today, for example, should not blind us to the burden our decisions may impose on children born this year, in 2024, 2034, or down the line.
Hon members, these are the issues - a sustainable fiscus and a stable macroeconomic environment - that this Budget Vote is taking into consideration. Before I walk you through some of the details of the Vote, allow me to set out the economic context in which South Africa finds itself today. While the global economic environment is showing signs of improvement, it remains below optimal levels. South Africa is not an island, which is cut off from the rest of the global economy. So, our economy is performing below its potential and certainly way below the level of growth that is required to deal with the country's triple challenges of unemployment, poverty, and inequality.
However, the biggest constraints to a faster growth rate are domestic factors, in other words, things that are within our power to fix. The NDP places us in a stronger position to address these factors, and so does the announcement of the various measures that have to be taken to jump-start our economy in our President's state of the nation address in June. Over the period ahead, new power plants and transport infrastructure will lift constraints with regard to output; a stronger global recovery will support exports; and growth in sub-Saharan Africa will promote expanded trade and investment.
However, to grow the economy, at a faster rate that can rapidly reduce unemployment and poverty, requires bold decisions to increase competitiveness and innovation in a fast-changing world. South Africa's Budget supports the implementation of the National Development Plan. Government has ensured that the priority programmes identified in the manifesto of the ANC, which are now being translated into a medium-term strategic plan, are funded. Nevertheless, economic weakness and the rising burden of economic debt reinforce the importance of ensuring the sustainability of fiscal policy over the period ahead.
The changing global economic climate is providing new challenges to the fiscal outlook. When the economy was faced with a recession in 2009, prudent fiscal management in preceding years meant that we were better able to use our fiscal space to respond to the crisis. Low international interest rates helped government to finance its borrowing requirement; inflation was moderate; and high commodity prices buoyed the tax revenues. Now we are entering a new environment - rising global interest rates have increased the cost of servicing our debt; commodity prices have declined; and the depreciation of our currency has pushed up inflation. The fiscal space built up in the 2000s has diminished.
The period ahead will not be easy, hon members. To ensure that the fiscus remains sustainable, the three principles that are the backbone of our fiscal stance remain in place; these are: counter cyclicality; debt sustainability; and intergenerational fairness. Over the next three years, government will stabilise the growth of public debt, and then begin to rebuild fiscal space. This will be achieved by remaining within the expenditure limits we have set in the medium-term framework. This ceiling means that expenditure will continue to grow and the real value of our social spending will be maintained.
However, the fiscal limits will be far stronger, and the need to ensure value for money and effective allocation of resources are more paramount. Despite the constrained growth in expenditure, government's budget deficit has remained elevated. In aggregate, the final outcome of tax revenue for the 2013-14 fiscal year was R899,8 billion, in line with the target we set in the Budget.
However, over the last few years weaker economic growth has meant lower than anticipated revenue. The situation is expected to improve over the period ahead, with the budget deficit projected to narrow from 4% in 2014-15 to 2,8% of gross domestic product, GDP, in 2016-17. If growth outcomes continue to disappoint, achieving this objective will be much more difficult. However, government remains committed to the sustainability of the fiscus, and, if necessary, further measures will be taken to achieve our objectives.
Prior to the global crisis the stock of public debt stood at R525 billion. It has now risen to R1,590 billion. By the end of the current Medium-Term Expenditure Framework, we expect the net debt of government to reach more than R2 trillion. Government continues to manage this portfolio in a prudent and farsighted manner. Recently, we approached strategic benchmarks that set guidelines for exposure to various categories of debt portfolio risks. These benchmarks are consistent with government's objectives to raise cash in a cost-effective manner, while managing risks prudently.
The country's credit rating is currently under pressure due to a combination of domestic and global challenges. There is very little we can do about the global environment, but there is a lot we can do about our domestic challenges. So, let us demonstrate a greater sense of urgency in the implementation of our policies, acting with speed to remove constraints to economic growth and therefore job creation. We will act decisively to avoid further downgrades as these will result in a significantly higher cost of borrowing, both for government and state-owned companies, and the cost of financing infrastructure programmes will also increase.
In support of the infrastructure roll-out by state-owned entities, government exposure to public entities through debt guarantees has increased to R209,2 billion in 2013-14, from R180,2 billion the previous year, with Eskom making up 58,5% of the total government guarantee portfolio. If we add debt provisions and contingent liabilities to our stock of debt, government's liabilities are forecast to peak at 57,1% of GDP in 2015-16.
In the current financial year, the government will recapitalise the Land Bank with R500 million, and the Development Bank of Southern Africa, DBSA, with R2,5 billion. The recapitalisation of the Land Bank forms part of the 2009 recapitalisation programme of R3,5 billion, which is meant to increase the Land Bank's focus on developing farmers and addressing its declining capital adequacy ratio. The recapitalisation of the DBSA is mainly to enhance the DBSA's capital base, allowing the DBSA to expand its lending to local government in order to address its broader mandate. The Deputy Minister will be talking more about this.
Regarding the SA Post Office, during the 2013 Medium-Term Expenditure Framework, MTEF, Cabinet approved an amount of R481 million to the SA Post Office. This is earmarked for the corporatisation costs of the Postbank, which is subject to certain conditions including the provision of a comprehensive project plan.
Chairperson and hon members, all economic activity is local. It happens in factories and other centres of commerce that are based on municipal soil. Workers and consumers live and work in areas that fall under municipalities. So, well-functioning municipalities are crucial to accelerating national economic growth. Therefore, improved service delivery at local government level is a critical government objective.
To this end, the total share to local government continues to be the fastest growth element in the division of revenue. Nevertheless, it is common knowledge that municipalities are facing challenges in delivering public services to our people. It has been suggested that the local government fiscal framework is not responding sufficiently to this objective. Given these concerns, National Treasury, in collaboration with sector departments and stakeholders, is reviewing the local government fiscal framework focusing on both national transfers to municipalities and the revenue municipalities generate on their own.
National Treasury is also making certain interventions pertaining to financial management skills. As the National Development Plan, NDP, points out, the key to an effective and a capable state is to have employees at all levels who do not only have the authority, but also the experience and competence to do their jobs. In this regard, financial management skills are critical. National Treasury is implementing a number of initiatives to address the shortage of financial management skills.
With regard to retirement reforms, in order to encourage South Africans to save for their retirement, National Treasury has proposed a number of reforms. I will continue to engage with the various unions and stakeholders to explain further what we as government are trying to do with regard to an enabling retirement system that offers good value and protection for retirement savings.
We will continue with our efforts to reform procurement with a view to minimising corruption and making it easier to detect. We will also render the system of supply chain management in government more accessible and innovative. The Chief Procurement Office will, among many other projects, enhance the existing system of price referencing in order to set fair value prices for certain goods and services. It will also pilot procurement transformation programmes in the Departments of Health and Public Works, nationally and in the provinces.
In conclusion, hon members, let me borrow the words of Nelson Mandela who said in his last state of the nation address in 1999: "The foundation has been laid – the building is in progress." So let us all - government, private sector, labour, and civil society at large - roll up our sleeves in partnerships for change, and build the country of our dreams. On that note, hon Chairperson, again, I table Budget Vote No 10 for consideration by this House. Thank you. [Applause.]
Mr Y I Carrim
THE MINISTER OF FINANCE
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 2
Mr Y I CARRIM: Madam Chair, Minister Deputy Minister, comrades and friends, perhaps, more than at any other time since 1994, we are currently facing major challenges in economic growth and job creation. Just now, the Minister has set out some of the very difficult circumstances the country has to confront.
As difficult as it is, we, as a committee, feel that we need to be far more decisive in addressing these challenges. A crucial part of doing this is, of course, to more actively identify the structural constraints of our economy and tackle them in a coherent, phased, and strategic manner.
The focus during this fifth term of Parliament - as the ANC's Mangaung policy resolutions, the ANC's election manifesto, the President, and government have made clear - is on a radical second phase of transition with its emphasis on socioeconomic transformation.
In our report to Parliament on the Budget Vote of National Treasury, and I will largely deal with that, this is what the Standing Committee on Finance has to say:
While welcoming National Treasury's proposals on addressing the economic growth challenges, the committee believes that National Treasury needs to give more attention to the structural constraints to economic growth and job creation. This has in any case been put firmly on the agenda by President Jacob Zuma in his references to the need for a more radical, second phase of the transition, with an emphasis on socioeconomic transformation. There needs to be greater clarity on what radical transformation means and how it is to be given effect to.
Obviously, this is not a task for National Treasury alone, but for government as a whole. And not just for government, but for Parliament too. In addition to this, the private sector, trade unions, academic and other experts, other civil society stakeholders, and the public all have roles to play in both shaping the content of the second phase and implementing it in their different ways.
We will have our differences, of course; that's inevitable. But, we can and we have to forge enough of a national consensus over time to implement major socioeconomic reforms that serve the interests of the country as a whole, if mainly the poor and disadvantaged. Only a moment ago, the Minister set out that, as much as we have international challenges, our primary challenges are domestic, and our primary difficulties in securing the necessary growth rates and job-creation targets are domestic. So we have to forge that national consensus, as difficult as it may be.
The National Development Plan, NDP - contested as it is, though parts of it are complemented by the New Growth Path, NGP, and the Industrial Action Policy Plan, Ipap - needs to provide a major reference point as we shape the second phase of our transition. In our report to Parliament, the committee observed, and I quote:
The committee understands that it is an evolving process, but it is keen to see greater synergy between the NDP, strategic plans, and the allocation of budgets to departments. The committee feels that National Treasury has a crucial role to play in this regard, and will be keenly monitoring this.
Again, of course, we understand that this synergy is not the responsibility of National Treasury alone, but of government as a whole. But, within this, there is no doubt that the department itself has to play its most effective role possible.
We welcome National Treasury's establishment of the Government Technical Advisory Centre, and hope that it will contribute to the NDP's goal of an increasingly capable developmental state. We also welcome the establishment of the office of the Chief Procurement Officer, which we expect will reduce corruption, produce better outcomes from expenditure, and also contribute to the efficiency and capability of the state.
However, as a member of our committee pointed out, there may be challenges, we are not sure, around managing procurement at local government level, given the fact that it is a sphere of government with its own powers and functions set out in the Constitution. Another member expressed concern that this process of a national procurement office should not undermine local entrepreneurs. We were assured by Treasury that this will not happen.
By the way, we welcome the National Education Collaboration Trust initiative that is aimed at supporting the reform of basic education by establishing partnerships among business, civil society, government, and labour sectors. But, of course, we need to see effective outcomes from this. We also welcome the Minister's statement that significant progress is being made and reports will be issued in the public domain, and no doubt before our committee, on retirement reform, which is an issue we are raising in our committee report.
Furthermore, the Neighbourhood Development Partnership Grant and the Integrated City Development Grant are important in dealing with the persistence of spatial apartheid that the NDP points out needs to be addressed. National Treasury needs to effectively monitor how these grants are being used, and its precise outcomes. The NDP states that government should "reduce the cost of living for poor households" and "develop proposals for an acceptable minimum standard of living and proposals on how to achieve this over time". Treasury, together with other relevant departments, needs to give attention to this. The state-owned companies, we all acknowledge, are crucial to the implementation of the NDP.
In our report to Parliament, the committee expressed "its concerns about the stresses placed on the national Budget by the constant recapitalisation of state-owned entities, SOEs, and their inability to meet the goals they set for improvements in their financial position and capacity to deliver."
That's a clumsy sentence ... [Laughter.] ... for which I take full responsibility. So it's self-critique. I don't know what the members were doing. I have written it very badly, but I think you know what I am trying to say. At least, I know what I am trying to say.
The committee feels that, while recognising the important role of many of the state-owned entities, SOEs, to the country's developmental goals, National Treasury needs to be more stringent in its engagement with the SOEs, even if they fall within the responsibility of other departments. The NDP notes ... How many minutes have I got left?
The HOUSE CHAIRPERSON: We will remind you when you are left with two minutes.
Mr Y I CARRIM: It just helps. Madam Chair, there used to be a monitor ticking clock here last year. We seem to be going backwards. This year we don't have it!
The HOUSE CHAIRPERSON: It's a budget constraint.
Mr Y I CARRIM: Budget constraint! [Laughter.] That's a good one!
I am now referring to the Presidential Review Committee, PRC, and, Minister, I don't know how far that has gone. However, we believe that it should be moved up faster since it is making a whole lot of proposals and recommendations that are important to consider. What we are basically saying, Minister and members, is that we don't want the national Budget to rescue poor performance by state-owned entities. What we are saying is that if the state-owned entities have an explicit social mandate, or there are inherited undercapitalisation issues, or they are funding infrastructure with broader social benefits, then it is fine. But, we don't want National Treasury or government to just rescue state-owned entities because they are underperforming with the resources they already have.
As we implement the NDP and forge a developmental state, the role of state-owned entities will come under increasing scrutiny, and it is vitally important that National Treasury works closely with the Department of Public Enterprises, DPE, and other relevant departments in ensuring that state-owned entities are strong and effective.
In our report we are also raising the issue of the Financial and Fiscal Commission, FFC, which we think needs to be looked at some 20 years later - or is it short of 20 years - but, for the last period since its existence. Some of the questions that arise are: Exactly how valuable is it at the moment? What should its role be? Should we - all of us in Parliament, government, civil society experts, and so on, together with the FFC - not look at its role and make it more relevant, if it has a role to play? This is a debate that we believe should be held in a temperate, moderate, sensible, and sensitive manner - we accept.
I want to say that we recognise the fact that National Treasury carries a huge burden. The committee has noted that, despite its many challenges, it has done well overall in these past 20 years. Among its achievements, firstly, we have noted a successful transition from an apartheid-era institution to a modern, transformed, accountable, and technically very competent Treasury.
Secondly, we have noted the development of an efficient, well-structured budget process and world-leading levels of budget transparency. In fact, in the Open Budget Index of the International Budget Partnership's ranking of 100 countries, South Africa has been placed first or second in recent years and is the only developing country to appear in the top five.
Thirdly, we have noted stabilising debt levels and that relatively low exposure to foreign debt has been maintained. Fourthly, we have also noted the use of counter-cyclical policies to reduce or smooth the impact of external shocks and crises in the South African economy. Moreover, a progressive and efficient revenue collection system was also noted. One of the other speakers from the ANC will comment on Sars later this morning. We have also noted oversight and the development of a modern, independent, national statistical agency, Statistics SA, with its three very successful national censuses.
Minister, we have noted that, in fact, Treasury provides forecasts of revenue and expenditure, but like other forecasts these are subject to uncertainty. It will be useful for the committee if, as part of its strategic plan, National Treasury could consider to, in future, include information about the uncertainty of its projections to the extent possible in the same way that the Reserve Bank provides such information on forecasted inflation.
Minister, only a moment ago, you said that given the challenges we have at local government level - and I think that's something that most, if not all, members in this House will agree with - national and provincial government need to do far more to assist local government to become more effective.
In our report to Parliament, we talk of the need for National Treasury to work closer with the Department of Co-Operative Governance and Traditional Affairs, Cogta, in order to significantly improve the capacity of municipalities to spend the funds allocated to them by the national Budget and the revenue they raise themselves. Close Co-operation between these two departments would also assist with monitoring the financial performance of municipalities against the background of the NDP and the Medium-Term Strategic Framework of national government. Furthermore, these departments need to contribute to ensuring that the Integrated Development Plans, IDPs, of the municipalities are consistent with the NDP. A member of the committee also noted that the Property Rates Act is administered by Cogta, and National Treasury therefore needs to work with Cogta to ensure that the increasing number of people who owns huge properties in the rural areas is also subject to rates.
We also noted, Minister, that ... I think I can skip this. [Interjections.] [Laughter.] Yes, I know. So was I, actually. Except, when I look at what I have here; it's pretty banal really. You have heard this before, so I will skip it.
I want to say that we are acutely aware that National Treasury has huge challenges, but we think it has the foundation to attend to these challenges. We would like to congratulate the Minister and the Deputy Minister on their appointments, and wish them and the Department well.
As a committee, we have committed ourselves to playing our role as effectively as we can. In our report to Parliament we stressed that "it was also in the interests of the executive that the committee is active and effective in its oversight and other roles. This is particularly the case, given the major challenges being experienced in respect of economic growth, job creation and development."
We also noted that the consideration of the Budget and the processing of the report, which you presented to Parliament, have been finalised in exceptional circumstances, mainly due to the dates of the general elections and the convening of the fifth term of Parliament.
The onerous legal and other deadlines for the adoption of the overall Budget by Parliament meant that the committee had to process the department's budget very quickly. Moreover, the committee has just been constituted, with almost all new members, and is still finding its collective feet as it were. Also, there has not been time or space to engage sufficiently with key stakeholders and the public on the Budget. The committee has, in the circumstances, not been able to be as rigorous and effective as it would have liked to have been. We will certainly be rigorous next year. Leading up to next year, we will engage with National Treasury in different ways and forms.
In fact, Minister, we are currently in the phase of finding our feet and understanding the landscape. [Laughter.] Last week, we met the Independent Regulatory Board for Auditors, IRBA, and the Accounting Standards Board, ASB. Minister, we were very impressed. They want to engage more with Parliament. We understand that we have a huge load. We may not be able to do all that we want to do.
But, what we are saying is that, while we will be rigorous and effective in our oversight role, it is not enough for Parliament to say we are going to hold the executive to account. We must hold ourselves to account too; we have a role as well. We must also do what we are required to do to compliment the executive where it is doing well, but also to engage with the executive where it is not performing the way it should. We are going to hold ourselves to account. We are going have an education programme, training ourselves, and we hope to be as effective as Parliament and the people out there require us to be. We wish the Minister and the Deputy Minister and the department well. Thank you. [Applause.]
MR D T GEORGE
MR Y I CARRIM
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 3
Dr D T GEORGE: Chairperson, we congratulate the hon Minister and the Deputy Minister on their appointments and look forward to robust and constructive interactions with them. National Treasury is the custodian of the people's money and oversees more than a trillion rand in government expenditure. It borrows from investors and collects revenues from taxpayers to pay for programmes that are set out under government policy priorities.
There will never be enough money in Treasury to satisfy all of our needs. So, difficult choices have to be made, and available funds have to be spent as efficiently and effectively as possible. One of the most important choices that government makes is deciding when to increase its spending and when to restrain it. When our economy slows down, government spends more to stimulate activity, and when our economy recovers, government cuts back on its spending. When times are good, it builds reserves to spend when times get bad.
The global financial crisis followed by the great recession of 2008 impacted on economies across the globe, including our own, and our subsequent economic slowdown was inevitable. Treasury did spend; our debt did rise; and our growth did decline as would be expected. Unlike other economies that have started to recover, ours has not because government had incoherent economic policies that were slowing our economy before the storm began, and still has not done anything to restore confidence in our economic policy direction after the storm.
The so-called developmental state model prescribes a central role for government in our economy. It is based on an assumption that government can drive economic growth. Yes, it can do so under the right circumstances. If government did not waste over R30 billion per annum and did not have a Nkandla village as a monument to corruption, then it could be trusted to serve as a catalyst in the engine room of economic growth. [Interjections.]
In the Western Cape, we have demonstrated that this is possible. Growth and job creation in the automotive industry, business services, tourism, wholesale, retail, catering and accommodation sectors are accelerating, and investor confidence, especially in key financial and manufacturing sectors, remains high.
In its presentation to the committee, National Treasury said it is committed to the National Developmental Plan, NDP, the Industrial Policy Action Plan, Ipap, and the New Growth Path, NGP. The NGP and the NDP are not compatible, and it now seems that the NDP is the policy of choice but without any signs of commitment to its implementation.
When the NDP diagnostic was first tabled in the National Assembly, the DA welcomed the candid outcome. The hon Minister at the time put the possible future scenario as one where we would be heading for disaster should we continue our economic growth without social equity. We agreed that we needed to grow our economy and broaden social equity at the same time. When the plan was released, we agreed with many of its findings and proposed solutions, and we still do. That was two and a half years ago.
The hon Minister should outline steps on how National Treasury would contribute to ensuring that the NDP is rolled into action. The Minister should also tell us what National Treasury is doing to ensure that the people's money is properly managed by the ever-expanding number of departments in state-owned enterprises, SOEs, which the people's money bankrolls. The Standing Committee on Public Accounts, Scopa, has reported year after year that departments and entities have wastefully and irregularly spent billions of rands of the people's money. Over time, these hundreds of billions of rands could have been better spent on delivering services that government keeps promising to deliver and never does.
We will be watching the establishment of the Office of the Chief Procurement Officer with interest for signs of improvement in the broken and corrupted procurement process that has leaked relentlessly, spawned extremely wealthy tenderpreneurs, and even fractured off a new political party – let's never forget where it came from.
The hon Minister should explain what steps would be taken to hold the SOEs to account for the never-ending bailouts, and draw a line under the amount of people's money that would be thrown as bonuses into the pockets of the crony executives who mismanaged them. The Development Bank of Southern Africa, DBSA, is now seeking an additional R15 billion underwrite from government so that it can expand its mandate. The people apparently need to fund the share of the new Brazil, Russia, India, China, Brics, Bank at $10 billion.
Hon Minister, will the DBSA rival the Brics Bank in what seems to be an overlapping mandate? Hon Minister, it is your job to protect the most vulnerable members of our society by ensuring that money, which could create an environment where individuals can climb out of poverty, inequality, and unemployment, is not used to fund the opulent lifestyles of politically connected cronies who do nothing but feed the anger of those who have been left behind and have nothing to lose should our economy fail.
The hon Minister should clarify what is going on at the Financial Services Board. Its CFO got caught with his fingers in someone's cash register; and curators and their fees are out of control and not submitting reports as they should. Yet, progress on financial regulation dithers. Where is the progress on the twin-peaks model with regard to the financial regulatory framework? Hon Minister, we seem to be falling behind the curve in the financial regulatory environment.
Retirement reform has been on the table for over 10 years, yet fees on annuity products remain unacceptably high and the majority of South Africans face bleak circumstances in old age. We need clarity on the state of governance at the Government Employees Pension Fund, GEPF, and an explanation of why the CEO of the Public Investment Corporation, PIC, suddenly stepped down. Was he unhappy with the investments that he was being pressured to make?
The hon Minister should explain why the SA Revenue Service, Sars, commissioner's post has been vacant for a year. Sars is a vital component of our public financial system and its effective operation must not be neglected. We welcomed the Davis Tax Committee when it was announced a year ago, and we look forward to its recommendations. It is clear that National Treasury and Sars have worked on closing loopholes in the taxation laws that permit wealthy individuals ... [Interjections.]
Mr Y I CARRIM: Will the hon member take a question?
Dr D T GEORGE: No, he won't [Laughter.] ... and multinational corporations to pay less than their appropriate share. In this process care must be taken to ensure that our taxation framework is attractive enough to local and international participants in our economy.
In her announcement last week, the Governor of the SA Reserve Bank warned of deteriorating local economic conditions. The hon Minister told the committee that our economy is performing below expectation. The Medium-Term Budget Policy Statement is due in October. We expect the hon Minister to offer a realistic assessment of our economic growth prospects, the tax revenue that this can generate, and the levels of debt that can be sustained. The more government borrows for consumption expenditure, the more it crowds out wealth-creating expenditure on longer-term human capital and infrastructure investments. National Treasury says that a stable and enabling macroeconomic platform is required to action sustainable growth and employment creation. We agree.
South African households know that their expenditure can exceed their income if they incur debt, and they also know that the party stops when there is no more borrowing space as interest payments start to bite and crowd out other items on their shopping list. Government must keep this lesson in mind. Debt servicing costs are amongst the highest growing expenditure item on the Budget and R5 billion more than projected.
We agree that government must do something and do it now. We need to activate the so-called radical transformation that it claims our economy needs. However, it doesn't act because it is stuck. It is stuck in the mindset that was discredited a long time ago. That mindset ignored the fundamental principle that human beings are individuals, and given an opportunity to become everything that they are capable of being, they will do so, and in the process they will generate economic activity beyond the wildest dreams of any government bureaucracy.
The role of government is to intervene where the market fails, and should be to provide the basic services that lead individuals out of poverty and on a pathway to prosperity. Our government is stuck between a policy that could work, the NDP, and the internal vested interest of cronies who seek to exercise power over the people by ensuring their dependence on the state. Individuals in pursuit of their dreams are not likely to elect a government that seeks to crush them under its heavy hand.
Government can radically transform our economy by opening the space for entrepreneurs, small businesses, and investors with capital to participate in our economy. This will strengthen the tax base, enable less borrowing, and return our economy to the fiscal health that the people who entrust their money to government expect.
Government must never forget that it does not have any money of its own. It all belongs to the people, and perceptions do matter. Government's mismanagement of the people's money erodes the culture of tax compliance and offers a justification to those who seek to evade it.
In conclusion, no matter how much money is poured into a broken system, it remains broken. Urgent action is needed to liberate our economy from a stranglehold of incoherent economic policy. Our economy must generate jobs. The clock is ticking. Thank you. [Applause.]
MR F N SHIVAMBU
MR D T GEORGE
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 4
Mr N F SHIVAMBU: Chairperson, I would appreciate it if you would not remind me when my time expires; I will time myself. Also, I will not interrupt myself like the Chairperson of the Standing Committee on Finance has done, so that we can deal with some of the issues more clearly. [Interjections.]
The EFF does not agree with the Budget Vote as presented by the Minister of Finance. Firstly, the Budget Vote is based on the National Development Plan, which is a repetition of all the economic policies that have been in existence since 1994 - all of them saying that we should pursue growth first and the rest would follow. Trickle-down economics does not work anywhere in the world. It is a fallacy that we can pursue growth first and that the rest would follow afterwards.
Secondly, we are rejecting Treasury's Budget on the basis of it being part a poorly conceptualised radical economic transformation phase, which the ANC is claiming to pursue. Different ANC members have different things to say with regard to what economic transformation is. So, we really cannot take that seriously because it will lead nowhere since there is no clear direction and vision of what that means. [Interjections.]
Despite all these issues, there is only one issue that we want to deal with more clearly: a phenomenon called transfer pricing. I wish for even the top brass from the right-wing political parties to, at least, comprehend what is happening in South Africa. We have a phenomenon called transfer pricing, which is a reality not only in South Africa but in all resource-producing countries. What happens is that multinational companies that produce natural resources sell to their own subsidiary companies in other parts of the world that are tax havens.
For example, if platinum is R1 700 per ounce, these companies would sell it to their subsidiary companies at R300 per ounce so that the tax that they pay is only on that R300, and this phenomenon occurs in South Africa. It explains the fact that the contribution of mining into the national fiscus is R25 billion or less. This cannot even finance eThekwini Municipality whose budget is more than R35 billion. These are some of the issues we have to investigate with regard to how we deal with the mining sector's contribution to the national fiscus because all of these companies are involved in transfer pricing practices.
Our concrete proposal is that we need to conduct a parliamentary commission of inquiry that will embark on a forensic investigation of the occurrences of transfer pricing, particularly at Glencore, BHP Billiton, Shanduka, and African Rainbow Minerals – all these mining companies that we all celebrate, and of which the majority of the politicians in the ANC are board members. South Africa is being robbed of potential resources that could be utilised more successfully for local beneficiation and industrialisation. However, the politicians are in the pockets of these mining companies. They cannot say anything, even in the case of theft taking place. This is an issue one should pay attention to irrespective of political party membership, and then one would realise that something much better could be done.
The second component that you would have to deal with, Deputy Minister Mcebisi Skwatsha, is the issue of the co-ordination of economic policies, given the fact that monetary policy resides with the Reserve Bank, microeconomic policy is primarily dealt with by Trade and Industry, and fiscal policy is dealt with by Treasury. These policies are not aligned to the pursuit of a radical industrial expansion programme. If one speaks about development, one speaks about industrial expansion.
That is how we characterise all the countries which are now called the developed nations of the world. If you have not aligned your policy instruments and capacity to deal with these issues, South Africa is not going anywhere. We are just going to be shifting the goal posts year after year. We had said that 2014 would be the year by which we would have halved poverty and unemployment; it has not happened. Now the goal posts have been shifted to 2030. Still, it will not happen because there is no proper co-ordination of economic policies with regard to what happens here in South Africa.
These are some of the structural issues that you need to consider. I think the Chairperson of the Standing Committee on Finance agrees that there are structural dynamics that we have to deal with, as he comes from a relatively leftist background. The semicolonial character of the South African economy as an exporter of mineral resources and importer of finished goods and services should be discontinued. [Time expired.] Thank you very much.
MS S J NKOMO
MR F N SHIVAMBU
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 4
Ms S J NKOMO: Chairperson, Minister, Deputy Minister, members, ladies and gentlemen, firstly, the IFP would like to congratulate the Minister and the Deputy Minister on their appointments.
Our Treasury is the fulcrum on which the business of government rests. It is tasked with supporting economic growth and promoting good governance by fostering equitable, accountable, and sustainable management of our public finances, notwithstanding members' oversight, particularly in relation to the role of fiscal oversight. Minister Nene has extremely large shoes to fill in this portfolio, noting the role that was played by his predecessor, hon Pravin Gordhan. However, we have no doubt that Minister Nene is equal to the task, and the IFP offers him our support as he manages and directs both the income and expenditure of this government.
With projected real GDP growth at 2,7% in 2014 and 3,4% in 2015, we will still find ourselves falling way below the growth rate required in order to reduce our high unemployment rate, which is caused by national and international trends. In fact, last week, the Reserve Bank revised our growth forecast down to 1,7%, mostly because of prevailing uncertainty in the energy sector. In such a period of contraction, we can ill afford the additional burden of labour unrest such as we have recently seen in the mining and public sectors, or continuous service delivery protests, which continue to occur throughout our country. The IFP would like to state that the best way to avert these strikes is by listening to the people.
The department's underspending remains a constant cause for concern because of the dire opportunity costs it involves. We can ill afford for our finite fiscal resources to remain idle when we have such huge socioeconomic disparities still remaining in this country. Ministers and their heads of department must take ultimate responsibility for their budget allocations and see to it that they are utilised with maximum efficacy. If the money is not spent effectively, we, the IFP, would like to recommend that sanctions need to be imposed on all of those who are supposed to be spending the budgets, and that these culprits should even be fired because they are taking public funds, keeping it, and then masquerading it as savings.
The Department of Home Affairs, for instance, presented its underspent funds as savings. I am still not sure what they were saving for since they did not achieve all their strategic goals in the past financial year. The department's financial reporting template should be changed. In fact, the financial reporting template of most departments should be changed because most departments still masquerade underspending as savings. So, we need an understanding of exactly what should form part of the template.
The supply chain management across the board leaves a great deal to be desired. We continue to call for increased oversight by Treasury on the way government conducts this aspect of its business. This increased oversight should include provincial and local governments. I noted that the Minister and the committee's report stated the oversight role that has to be played, even in respect of local authorities, when it comes to supply chain management. It is important that we need to acknowledge ... [Time expired.] The IFP supports this Vote. Thank you. [Applause.]
THE DEPUTY MINISTER OF FINANCE
MS S J NKOMO
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 5
The DEPUTY MINISTER OF FINANCE: Madam House Chairperson, hon members, let me acknowledge the presence of the Auditor-General of South Africa. As National Treasury, it is my honour to present an overview of the work of our entities, because we believe that most of them are key pillars of South Africa's political economy. We make this presentation because we genuinely and sincerely believe that the stability, strength, and sustainability of our public institutions and their credibility are critical, if we are to confront some of the challenges we face as an economy.
I will focus on a couple of these public institutions and give a quick overview of what they do. I will focus on the SA Revenue Service, Sars, the Development Bank of Southern Africa, DBSA, the Public Investment Corporation, PIC, the Financial Intelligence Centre, FIC, and probably also the Government Pensions Administration Agency, GPAA, in order to demonstrate the importance of strengthening these entities within the broader framework of development.
A well-functioning and stable financial sector is the lifeblood of a modern economy like ours. The Ministry oversees a range of institutions – the finance family - that are critical and strategic to the regulation, functioning, and stability of the financial sector. The global financial crisis of 2008-09 demonstrated how regulatory failure could create a disaster in many parts of the world.
Notwithstanding the fact that the effectiveness of our regulators was found to be strong and the best when tested during the recent crisis, we cannot afford to be complacent. The reference to the Financial Services Board, FSB, is probably one of the things that we have ... [Inaudible.] ... but I think we have presented a report on the matter, and have taken swift action to resolve some of the challenges and problems that we have. This again demonstrates how seriously we take these regulators.
We will continue to work very hard to review and strengthen the regulatory frameworks that are the basis for the supervision of our financial sector. We will be approaching this House with a few pieces of legislation that are aimed at establishing the twin-peaks model. These and other reforms will ensure that our financial institutions remain credible and sustainable, so that we can support a vibrant and fast-growing economy as envisaged in the National Development Plan, NDP.
Due to some of the utterances that have been made, I want to make the assertion that the NDP has been endorsed as a broad framework towards economic and social transformation. Hon Shivambu, we probably need a very intense engagement, if not an education ... [Applause.] ... just to demonstrate how the NDP seeks to integrate economic growth, and social and economic transformation – if you read it thoroughly. Sometimes people talk about the NDP but they have never actually looked at the document. I would advise you to do that, and then maybe come back and have a discussion. [Applause.]
National Treasury and its group of entities will no doubt continue to play a key strategic role in our attempts to attain the objectives of the NDP. The NDP is a long-term project. I do understand that sometimes our problems are urgent and critical, and we think that many of those things we talked about should have happened yesterday. It is a long-term project that must be financed sustainably. This requires a fair and equitable tax system that balances a nation's economic growth and socioeconomic development objectives.
Let me very quickly focus on Sars. Sars, as the manager of our tax and customs system, will: continue to improve tax and customs compliance; protect South Africa's tax base; play its part in enhancing regional integration by facilitating trade; do its bit in reducing the cost of doing business in South Africa – that is a critical element; and continue to improve customer service by, among other things, expanding its network of offices and infrastructure.
As its contribution to ease the doing of business in South Africa, Sars has begun the implementation of the first phase of the project to improve the processing of tax clearance certificates. In May this year, Sars introduced the first phase of the single registration process. This will consolidate the registration of taxpayers and traders for their tax and custom products under one single entity. This initiative will also reduce the administrative burden on taxpayers.
The one-stop border post arrangement will reduce the compliance burden on taxpayers, traders, and travellers at our ports of entry. Sars and the relevant authorities in Mozambique are at an advanced stage of implementing this project. The new customs system will, over time, include all the elements of the supply chain.
Sars is aiming at improving its points of service within reasonable reach of every taxpayer. In this regard, Sars will build additional branches, and increase its number of mobile tax units. Sars is also implementing an important complaints management system and will work closely with the Office of the Tax Ombudsman to ensure the efficient and effective resolution of complaints.
To protect the South African economy from the erosion of its tax base – again, I hope hon Shivambu is listening - Sars will continue to work with other tax agencies and international organisations on global tax compliance and enforcement issues. South Africa participates in the Organisation for Economic Co-operation and Development, OECD, initiatives on base erosion and profit shifting, known as Beps.
Hon Shivambu, with regard to the debate on transfer pricing, I would suggest that you look very closely at what South Africa is doing in that area. There is a lot that is happening in order to deal with that issue. [Applause.] Again, there could probably be a conceptual problem with regard to understanding what is transfer pricing in the real sense.
The efforts to combat tax base erosion are underpinned by access to tax information held in other jurisdictions. In this regard, South Africa is participating in a pilot project, together with 40 other jurisdictions, to implement the automated exchange of tax information by 2017. All of these efforts are to ensure that we continue to grow our revenue, so that we can finance the development projects and programmes that are envisaged in the next couple of years.
The second area that I will broadly refer to is the financial sector. It is very clear that South Africa's financial sector is very strong, and many commentators and researchers have commented in this regard. I have mentioned that it is important that we don't become complacent. As we move forward, we should continue to strengthen it through stronger regulations.
I will focus mainly on the Financial Intelligence Centre, FIC, whose mandate is to help protect the integrity of South Africa's financial system, by keeping it safe from abuse by criminals. Owing to the nature of the FIC's work and the specialised technical skills it employs, the FIC also contributes greatly to the work of the justice, crime prevention, and security sector. It is a very critical component of that family.
Suspicious transaction reports, STRs, which are submitted to the FIC by accountable and reporting institutions, are markers that may indicate the presence of illegally generated funds. During 2013-14, the FIC received 355 or probably 356 STRs, an increase of 141% from 2012-13, and a total cost of R623 000.
The FIC intelligence products spotlighted a range of suspected criminal activities, led by tax-related crime, fraud and money laundering. Although investigations and subsequent action flowing from these referrals remain the domain of law enforcement authorities, the FIC has directly contributed to approximately 5 000 investigations over the past five years, and has supported numerous court applications brought by the state against various criminal syndicates.
The FIC is contributing to the Asset Forfeiture Unit's success and has assisted in attaching more than R1,1 billion in assets. During this year, the Minister shall be introducing amendments to the Financial Intelligence Centre Act, to bring it up to speed with changing situations and international standards. It is proposed that the amendments should allow accountable institutions – our designated businesses subject to the Financial Intelligence Centre Act – such as banks, financial service providers, and others to adopt a risk-based approach towards meeting the Act's obligations, which will make it easier for banks and others when taking on new customers. In addition, special measures have been taken by countries worldwide to identify and oversee the accounts of those who have become politically exposed persons, commonly called Peps, as well as the natural beneficiary owners behind companies.
Both of these measures will greatly assist in the fight against corruption, as well as introduce new levels of transparency in the financial system.
Hon members, National Treasury has three development finance institutions, namely the Development Bank of Southern Africa, DBSA, the Land Bank, and the Public Investment Corporation, PIC. These institutions will play a critical role in the implementation of the NDP. The DBSA will continue to contribute to the government's efforts to improve the standard of living of our people through the development of social and economic infrastructure, and generally to support growth within the economy. The promotion of regional integration also remains the focus of the bank. The recapitalisation of the bank – that the Minister referred to – is particularly intended to strengthen this agenda.
The Land Bank continues to ensure that development remains at the centre of its business activities. The launch of the Retail Emerging Markets division in 2011 and the implementation of the wholesale finance facility are the drivers of the bank's development mandate. The Land Bank is now implementing the final stage of its turnaround strategy, which is focused on sustainability. The bank's sustainability business model encapsulates three core business areas: Retail Banking, and Business, and Corporate Banking, which generates income that is used to contribute towards sustaining the Retail Emerging Markets division. Government funding and multilateral funding are also used to supplement all of these programmes.
The PIC is a critical institution for increasing the rate of investment by both the public and private sectors, and transforming the financial services sector. The state, as a shareholder, will seek to leverage the R1,6 trillion assets managed by the PIC. The PIC will, in its work, attempt to reinforce government's objectives, as articulated in the NDP.
National Treasury and the Government Pensions Administration Agency, GPAA, will continue to work on strengthening the laws governing pensions. This is critical during this recovery phase in global financial systems.
On the other hand, the Financial Services Board, FSB, continues to prepare for a new ... [Interjections.]
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Hon Deputy Minister, you have two minutes left.
The DEPUTY MINISTER: Madam Chairperson, I hope that we, as National Treasury, have adequately demonstrated how critical its entities are for the development and implementation of the NDP. We hope that, moving forward, we will continue to strengthen them and make them as effective as we can. Thank you. [Applause.]
MS P KEKANA
THE DEPUTY MINISTER OF FINANCE
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 6
Ms P S KEKANA: Hon Chairperson, the hon Minister of Finance, Minister Nene, hon Deputy Minister, hon Jonas, the Chairperson of the Standing Committee on Finance, hon Yunus Carrim, and colleaques, director-general, and all officials present, stakeholders, and representatives of public entities, good morning.
Recently, the world has been celebrating the birthday of uMadiba Omde, Sopitsho, Yem Yem, Thole leduna. There are epochs in human history where the great lights of the aurora never go out. This is one of them.
There are those moments in the history of human affairs when there appears a giant who drastically leads the project of improving the lives of his people and impacts them with an everlasting magic; a Leviathan whose presence is a joy and inspiration to all who share it. Let me proceed to join all and sundry in the celebrations of this Leviathan's birthday.
To the world, he remains a special person, and to us as a country, he is the world; a gentle giant of the highest integrity who lived his life with great dignity and fortitude; a giant who made the world special by simply being in it; and a giant who awed the world with his tremendous capacity for great human achievements over impossible odds, until that day that the river that once gave us life was stolen by the elements of the tragedy.
Today, even in death, he remains so alive in our memory that there is no further high to climb, Sopitsho. Thank you for the amazing innings shared.
Duty calls that we continue his heritage and emulate his steadfastness of purpose. When the nation called, Madiba Omde answered, and so should we.
Duty calls that we seize his spear and take to the trenches and forests of the development challenge, until the day we put the smiles on the faces of all our people.
Hon Chair, to preserve the legacy of Madiba, the ANC-led government continues to listen to its people and respond by ensuring that resources allocated by National Treasury address the socioeconomic challenges of our country. The focus of my speech is on the strategic objectives of National Treasury's strategic plan on how to add value to the development agenda whilst ensuring a regime of cost containment that does not negate service delivery with reference to specific programmes.
The ANC-led government has adopted the National Development Plan as the country's framework for economic and social transformation. The plan's aim is to accelerate growth, eliminate poverty, and reduce inequality by 2020. National Treasury's strategic plan speaks directly to this and as the standing committee, hon Minister, through you, hon Chair, this is the step in the right direction.
Over the Medium-Term Expenditure Framework period, the ANC-led government will continue to increase the breadth and the quality of services, and will structure this in and through the Appropriation Bill and the Division of Revenue Act. The medium-term outlook is supported by investment in infrastructure, manufacturing, energy, and transport that will lift output constraints as outlined by the President of the country, Comrade Jacob Zuma, in his state of the nation address, and the National Treasury Appropriation Bill addresses this directly.
It is a fact that the economy is growing at a moderate pace but continues to perform below its potential. This department has, in response, kept to the countercyclical fiscal policy as the best mechanism to deal with stimulating growth in the economy, whilst being mindful of the fact that external forces and internal factors play a major role in influencing its growth.
The expenditure ceiling set out in the 2013-14 Budget and repeated in the 2014-15 Budget has been maintained for the Medium-Term Expenditure Framework and according to this plan the budget deficit will narrow from 4,0% in the current financial year to 2,8% in the 2016-17 financial year.
With regard to the Annual Performance Plans, APPs, and the strategic plan, this department continues to manage debt levels so that they remain sustainable. South Africa's debt has a long maturity structure, and its exposure to foreign currency liabilities has remained low, reducing the impact on the economy of global volatility.
The division of revenue is designed to help provinces and municipalities to expand investment in economic infrastructure and services that directly support economic activity. On this programme, the significant changes to the division of revenue, which Treasury announced this year, improves alignment of infrastructure spending in metros. All metros have to submit council-approved Built Environment Performance Plans, BEPPs, and all city infrastructure programmes have to support a more integrated and efficient city programme.
Hon Chair, the Minister of Finance introduced cost-containment measures in December 2013 to limit expenditure on conferences, travel, entertainment, consultants, etc. This must reflect the culture of striving to improve the financial management of funded resources in all three spheres of government, and the ANC is in full support of this intervention.
The committee commends National Treasury and Performance Monitoring and Evaluation in the Presidency for launching a series of expenditure reviews of which the initial findings are to be released in the 2014-15 financial year. This will greatly improve financial management of resource planning, going forward. Again, this will also highlight the impact of the implementation of cost-containment measures across the country.
National Treasury's programme that is working with provincial treasuries and local government to identify inefficiencies and improve both provincial and local government spending has assisted greatly in dealing with weaknesses in financial management, and has introduced a strict culture of resource planning and management, thus stemming adverse audits. This intervention is also applicable to public entities.
Hon Chair, the department, in its APP and strategic plan, reflects the progress made over the past 20 years as a result of conscious planning and management of the economy, which is informed by the ANC-led government's economic and appropriate fiscal and monetary policies, and that is a good story to tell. These financial principles have led to our international recognition for having one of the best managed financial sectors in the world, as well as a comprehensive and sophisticated legislative framework for financial management of the economy, and a comprehensive regulatory financial environment.
This financial system is underpinned by, amongst others, the ANC-led government and constitutional imperatives to achieve an inclusive society through an efficient developmental state that builds the capabilities of the society, and the economy. In doing so, the system robustly intervenes to redress the past imbalances. The measurable objective is to promote growth, social development, and poverty reduction through the effective, efficient, and appropriate allocation of public funds.
As the standing committee, we are confident that National Treasury has taken a lead in ensuring that improved planning for provincial infrastructure expenditure is taking place. The Division of Revenue Act, Dora, requires provinces to plan for infrastructure spending two years in advance in order to receive health and education infrastructure's transfers. This year, the Bill added further requirements for the 2nd year of planning in relation to allocations for the 2015-16 financial year.
We must take note and commend the hon Minister for increased transparency and accountability in grant administration. Receiving officers now have to include in their expenditure reports the reasons why a grant transfer has been withheld or stopped.
In conclusion - and I would like the DA to listen and receive free education in this regard - the ANC supports this Budget Vote, and we want to indicate that South Africa entered the global financial crisis with very strong macroeconomic fundamentals; thanks to the countercyclical macroeconomic policy and fiscal space it has provided.
This enabled the country to provide a fiscal stimulus in response to the generalised economic slowdown. The fiscal position moved from a budget surplus to a budget deficit of just under 7% of the gross domestic product, GDP, as support was provided to an economy that was in recession.
When times were good, we tightened fiscal policy, and when we were faced with a recession, we loosened fiscal policy. We provided a stimulus to the economy. This stimulus was underpinned by a massive infrastructure spending program by the public sector. And, yes, it was that stimulus that successfully took the economy out of the recession.
Thanks to globally accommodative monetary policies, we were able to finance the fiscal deficit at very attractive interest rates. We need to be alive though - as monetary policy returns to normal, capital flows that enabled us to finance the deficit at low rates are going to be reversed. This poses a challenge for us with regard to rebuilding our defences. In this context, our government adopted an expenditure ceiling as part of the process of fiscal consolidation. Put simply, we need to restore macroeconomic stability.
Countercyclical policies are by their very nature short term and are no substitute for fundamental structural reform; they complement it. We clearly need a long-term vision around which the nation can coalesce. In this regard, our fourth democratic Parliament unanimously adopted the National Development Plan, NDP. The Budget that was tabled in February began to express, in rands and cents, the implementation of the NDP over the Medium-Term Expenditure Framework period. We now need to implement the NDP with vigour and unity of purpose, and fundamentally transform our society. The NDP goals are the future we choose. Together, let's move South Africa forward. Thank you. [Applause.
MR N L S KWANKWA
MS P KEKANA
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 7
Mr N L S KWANKWA: Thank you very much, madam Chair. Chairperson, hon Minister, Deputy Minister, and hon members.
Tshivenda:
Ndo livhuwa.
IsiXhosa:
Mphathiswa mandiqale ndinihalalisele noSekela wakho ngokuba ninikwe esi sikhundla. Sithi, huntshu!
Once more Budget Vote No 10 is delivered against the backdrop of severe economic challenges facing the world today. It takes place at a time when some economies around the world are making slow economic recovery while others are still in an economic deep freeze.
We acknowledge that appropriate economic policy responses have been undertaken to place the country on a path to economic growth and prosperity. However, challenges remain. South Africa is still grappling with a chronic unemployment problem, especially among the youth.
The current economic growth rate of approximately 2% per annum is not nearly enough to save the poor from the yoke of poverty. The low economic growth does not only negatively affect job creation but it also means less money for government to delivery services to our people, hence the need for the 4% budget deficit.
To make matters worse, big businesses and wealthy individuals devise sophisticated strategies to both avoid and evade tax. This, needless to say, erodes the same tax base from which the revenue for service delivery comes. I am aware that plans are afoot to deal with this problem. However, we wish to add our voice in calling for tough sanctions to be imposed on those found guilty of this practice.
Hon Minister, it is going to be difficult to address spatial gaps and inequalities, when state-owned enterprises, SOEs, seem to lack the capacity to spend funds allocated for infrastructure development. You are aware that, over the past two years, SOEs have spent approximately 70% of the funds committed to infrastructure development. Furthermore, in far too many cases the quality of the basic human settlements infrastructure in particular leaves much to be desired.
Drastic steps should be taken to improve both the capacity of the departments responsible for implementing its growth strategy and service delivery in order to ensure that with increased budget allocations come commensurate rises in our people's standards of living.
Mister Minister, we are concerned that government's debt and deficit reduction programme seems to principally depend on optimistic economic growth forecasts. Output growth in South Africa has been sluggish for quite some time and judging by government's failure to achieve past targets, we are not convinced that the new targets will be achieved. The UDM believes that output growth forecasts should be realistic so that we can begin the process of setting the country's finances on a path to fiscal consolidation.
The UDM supports Budget Vote No 10. Thank you. [Applause.]
MR S N SWART
MR N L S KWANKWA
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 7
Mr S N SWART: Thank you, Chairperson, hon Minister, from the African Christian Democratic Party, ACDP, side we too would like to congratulate hon Minister and hon Deputy Minister on their appointments. We have worked very closely together previously, and we are looking forward to that relationship continuing.
Now, as many other speakers have said, and as we know as a reality, our domestic economic growth is down. Last week, the Reserve Bank revised its figures to 1,7%, and we know that this is a severe challenge that we need to address.
We are very grateful that the SA Revenue Service, Sars - and we wish to commend Sars for this - has reached its target of R899 billion for the past financial year. It will be hard-pressed to meet its next target, but we wish them well in that regard.
State expenditure will, for this financial year, reach R1,25 trillion. That's a massive figure. Budget revenue will be R1,99 billion with a budget deficit of 4% of gross domestic product, GDP. This, of course, depends on whether one can rely on the figures that National Treasury gives us. We need to get information as to what degree there is uncertainty about these figures, and, of course, the budget office in Parliament and the Reserve Bank helps us to assess these figures. We need to look at the degree to which these figures are accurate because all projections are reliant on net.
We, as the ACDP, have expressed our concern previously about the budget deficit, projected state debt stock, and spiralling debt service costs. The size of the budget deficit at present results in debt service costs rising, and so does every other category of spending over the medium term, which obviously crowds out our spending on developmental priorities. As we know, it is R5 billion higher than was initially indicated, and this, of course, raises the important question of whether our present fiscal path is sustainable.
Whilst we are in a better fiscal position than many other developed countries, it is crucial that our debt consolidation path is maintained - if I heard you correctly, hon Minister, you indicated 2,8% of GDP for the 2016-17 financial year - and I would urge that we ensure that this path is sustained.
Furthermore, it is imperative to consider our manufacturing and mining sectors when we look at real growth. We, as National Treasury, have pointed out, and the committee has also agreed, that we cannot afford the debilitating strikes experienced by the manufacturing and mining industries. And of course we also need to spend more on the productive side of the economy, and that is something that the National Development Plan, NDP, does focus on, and we broadly support that.
We have to look at spending more on the capital side as opposed to consumption, with salaries being 42%. This is something we definitely need to look at. So from our side we also need to make sure and recommend that there is value achieved for every rand that is spent. About R30 billion were wasted on procurement irregularities. Let's enhance our Special Investigating Unit, our Hawks, and Financial Intelligence Centre so that we can address this issue. The money is there.
We, as the ACDP, also supports the appointment of the Chief Procurement Officer, which will also assist in this regard, but it is a massive challenge, Minister, and we all need to come alongside you and assist with this whole issue. So we, as the ACDP, will support this Budget Vote. I thank you. [Applause.]
MS D CARTER
MR S N SWART
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 7
Ms D CARTER: Thank you, Chairperson. I am from the Congress of the People, Cope, and my apologies for arriving late, but I was participating in the debate on Energy as well, which is very important for economic growth in this country.
Chairperson, National Treasury has enormous responsibilities. Amongst other things, it has to play a pivotal role in supporting economic growth and development, including energy; good governance; social progress; rising living standards through accountable, economical, efficient, equitable, and sustainable management of public finances; macroeconomic and financial sector stability; and effective financial regulation of the economy.
The effective and honest management of public finances determine the success of a nation. Cope is deeply concerned about the magnitude of our national debt and the rising costs of servicing that debt. Each year a big slice of the Budget has to be reserved for debt services costs. This has continued to narrow the fiscal space. Is there any plan to start reducing the debt? Such debt in a climate of poor economic growth is not sustainable.
I would like to point out that placing emphasis on skills, competence, education and training is pivotal to the attainment of a capable state. It is also important in fighting corruption. Highly qualified and professional individuals would be more likely to resist corrupt practices. Cadre deployment, which I will not define right now, undermines the building of a capable state. A capable state and cadre deployment are mutually exclusive.
With regard to the economy, infrastructure development aimed at transforming urban and rural spaces is the right way to stimulate the economy. The unnecessary expansion of the size of government this year and the pervasiveness of futile expenditure consume vital resources. The National Development Plan, NDP, will fail and the economy will see more turmoil if resources are misdirected as they have been for a long time.
Furthermore, the department should strive to create a stable and an enabling macroeconomic platform to realise its objective of sustainable growth and employment creation. The department is promising to use the jobs fund to introduce a partnership funding model to create sustainable employment. The target is a 150 000 new sustainable jobs by 2015-16. Cope really wants to see this objective delivered and working.
The department's goal of redressing our country's distorted special legacy is overdue. Cope supports that. We also look forward to assessing the success of the technical assistance centre in providing technical skills to deliver the infrastructure projects in the provinces. Another important initiative is the support by National Treasury to cities in order for them to manage their built environments.
Finally, I wish to turn my attention to the newly established department of the Chief Procurement Officer. Improving and modernising the procurement system across government and related organs to stamp out corruption is indeed a national priority. The department must ensure that its anticorruption task team enforces compliance with the supply chain management ... [Time expired.] I thank you.
MR D C ROSS
MS D CARTER
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 8
Mr D C ROSS: Thank you, Madam Chairperson. Let me start by thanking the Minister and the chairperson of the Standing Committee on Finance for allowing frank and open discussions in our standing committee, and also for allowing some very proactive implementation ideas within the committee. It's much appreciated.
Chairperson, the aims and objectives of Treasury is also important, and it has been discussed in our standing committee, as well as the economic outlook for South Africa. With regard to Treasury's aims and objectives, it's important to note the policy debate, and the challenges we face in respect of co-ordinating the economic policy. Key to this policy's coherence is the creation of an enabling environment for economic growth, which is the DA's point of view.
Hon Minister, economists agree that pursuing economic growth, especially at high levels, is the best way to fight poverty and unemployment. This is also the direction that is given to us by the National Development Plan, NDP. This is the only sustainable way to create jobs and lift people out of poverty.
Chairperson, I haven't heard any ideas from other opposition parties with regard to their policy stance, especially regarding their views on the NDP and other policies. The economic moral, which we prefer, should be that the state is the enabler for growth with the private sector playing a pivotal role in growing the economy.
The DA thus supports the NDP; we've heard that many of our other colleagues also support this plan. It promotes a cycle of growth and development that focuses on expanding opportunities for all, creating an inclusive economy, and improving the state's capacity. These ideas also underpin, of course, the vision of the DA for an open opportunity society for all.
Now, noting that the Standing Committee on Finance is keen to see greater synergy between the NDP, strategic plans, and the allocation of budgets to departments, the chairperson has also alluded to this, the committee feels that National Treasury – this is a very welcoming step, Chairperson, - has a crucial role to play and this will be keenly monitored by the committee. This is also in our recommendations' report.
Meeting the objectives in the NDP in transforming the economy and creating job means that the rate of economic growth needs to exceed 5%, which is quite a formidable challenge given the position we are in currently. The economic outlook in National Treasury's Annual Performance Plan indicates the following: confidence in the economy is low - and perhaps, my hon colleague, that is not such a good story - which negatively affects investment in the short term and is also not a good story; the economic goal for investment growth is 6% by 2017, which is a formidable goal; and the infrastructure investment goals of R827 billion over the medium term, which are formidable goals with regard to affordability and investment needs. I agree with the Minister that with increased costs the goals will be very hard to achieve.
Business analysts have warned, however, that urgent action is needed, and I think there is a general consensus that it is needed to save the economy from other credit downgrades that would increase borrowing costs, and make South Africa less attractive for investment. The focus should be on how we make South Africa attractive for investment.
If National Treasury remains steadfast in supporting the NDP - and perhaps, I can re-emphasise what my colleague is saying - the Industrial Policy Action plan, Ipap, and the New Growth Path, NGP, it needs to note that investors might be scared off because of the different views in the ruling party. Perhaps, we should get more clarity on this, and maybe this is an issue for the budget office.
My colleague, hon Dion George, indicated the importance to restore confidence in our economic policy direction. The three plans, as we have indicated, are not compatible, and if the NDP is the policy of choice, we would like to see commitment in its implementation, even more commitment than we currently have.
The developmental state concept where the state is at the centre for economic activity is, indeed, not useful in growing our economy. Let me tell you why, ladies and gentlemen, the reality in respect of our economy or the truth about it is that, today, our progress is still not a good story, taking into consideration the fact that our economy is not growing fast enough to create jobs.
The reality is that South Africa is facing weak economic growth prospects with the economy contracting in the first quarter, and this year the economic growth is likely to come in at well below 2%. I think the Minister is reserving the pronouncement with regard to growth for the Medium-Term Budget Policy Statement, MTBPS. But certainly, we are lagging far behind our peers in Africa who have been registering 5,5% growth. What would our growth prospects be? Would it be 1,8%? This is not a good story to tell.
The real challenge is that the South African economy has been caught in a stagflation trap as we struggle with persistently high inflation and low economic growth. Last year, in 2013, the inflation was 5,9% and the growth was 1,9%. Some analysts have given an indication that this gap will even get bigger; this is not good news.
The twin deficits on the current and budget accounts have parachuted South Africa into a very fragile corner. This is compounded by a third deficit, a household deficit, which has resulted in a battle against high costs, especially from administered prices.
I think it was the hon Carter who reflected on the importance of energy for our economy. He emphasised the importance of energy security and excessive pricing, which has to be inflation related, in order for the economy to move forward, and these are the challenges we are experiencing.
Chairperson, we are also concerned that it has been reported that Eskom has approached the National Energy Regulator, Nersa, for an increase in the price of electricity to fund the Eskom build programme and also the inefficiencies in Eskom. In the committee we discussed the threat to energy security that we need to address. The standing committee has expressed its concerns about the stresses placed on the national Budget by the constant recapitalisation of state-owned entities, and their inability to meet the goals they set for improvements in their financial positions and capacity to deliver.
Let me be positive by saying that it is the first time that the committee has very honestly addressed the problem, and we welcome their approach. We therefore would like to see solutions and real discussions, and the establishment of private and public partnerships with regard to some of the state-owned entities in order to get efficient entities off the ground.
Concerning investor confidence, we need to note that strikes, rising inflation, a weaker rand, and lower commodity prices in dollar terms were factors that weighed on investor confidence. The erosion of confidence in South Africa is very real. This is not a good story to tell. We should remind ourselves of the simple equation that investment equals jobs. So, inhibiting investment is not a good idea.
South Africa depends heavily on investors – that could also be for other members who do not regard investment as important - who buy local bonds and equities to run a large current account deficit that needs those funds to finance the shortfall. Indeed, we need to finance the shortfall. Inhibiting investment, I would say, is a very bad idea, given South Africa's fiscal constraints and the need to deal with the funding requirements of Eskom and Transnet. This is crucial.
To dilute property rights, could bring about the collapse of the economy. People will not establish businesses or develop commercial farming in South Africa if they are in fear of their property being expropriated. It would lead to an immediate downgrade by rating agencies and increased borrowing costs. It would also lead to diminished foreign and domestic investments, and would have unacceptable implications for South Africa's balance of payments.
Chairperson, I think that this is something we need to consider, and the government should not risk such a negative outcome. The DA has made proposals for reforms, which will turn the economy around. [Interjections.]
The HOUSE CHAIRPERSON (Ms A T Didiza): Hon Ross, you have two minutes left.
Mr D C ROSS: Thank you very much, I will try not to construct clumsy sentences; I will only have some bullet points. [Laughter.]
These proposals include, among others: providing political leadership; boosting trade with the rest of Africa; and making it easier for South Africans to start and grow their own businesses. Our spokesperson on small businesses, Mr Tobias Chance, is present, and I'm sure he will put forward some useful points with regard to cutting red tape and providing more support to entrepreneurs.
We should also invest 10% of GDP in infrastructure to reduce the cost of doing business, and break up inefficient state monopolies. I've made this point before. We should put this on the agenda and have the budget office support us in respect of finding a real solution. Furthermore, we should make sure that the labour laws are supporting job creation by achieving a balance between the protection of workers' rights and the need for labour market flexibility. This indeed is a very complicated issue that we need to address, Minister.
Many speakers have alluded to managing public money better, and we, as the committee, will make some proposals in this regard. With regard to investment as a key driver for economic growth, the National Development Plan seeks to achieve a 30% investment rate, which must be backed by similar savings rates. This is quite a steep challenge, Deputy Minister, and I'm quite sure that in respect of engaging with those institutions, we will actively pursue this goal.
I've written to the parliamentary budget office and requested an analysis with regard to the importance of both foreign and domestic investments to our economy, and also in respect of the factors inhibiting investment. We've heard many pronouncements on this in some speeches, like radical structural transformation, radical economic transformation, and just radical transformation.
I'm pleased that the committee has asked that we do some introspection in this regard to get clarity on the content of these pronouncements, and see how we should address it as the committee.
In conclusion, noting the immense challenge of the African continent's infrastructure gap, the Minister has made an announcement with regard to this - that there is R100 billion per annum. This is a massive challenge for the continent [Interjections.]
Chairperson, if I can conclude by saying that South Africa needs government action that grows opportunity for all, and we believe that it should be done through the National Development Plan. Thank you. [Applause.]
DR M B KHOZA
MR D C ROSS
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 9
Dr M B KHOZA: Chairperson, I think it is going to be very important for me to, first of all, assist hon Shivambu and spare the Deputy Minister from having to explain. Clearly he has not read Sars' strategic plan, and he has not read the Annual Performance Plan of Sars, which clearly spells out, hon Shivambu, Sars' focus on these matters of transfer pricing and profit shifting. It is also very important for you to remember that we have a role to play as the Standing Committee on Finance by performing our oversight over these entities. If we don't read, it is a problem. It is very important to only make a pronouncement on a matter after having read the relevant documentation. If you haven't read the documentation, and you come here to tell us that you are not supporting the Budget, then we are not going to take you seriously. And we are not taking you seriously! [Interjections.]
Again, I think it is also very important to say that the EFF pronouncement on the National Development Plan, NDP - and the way they are saying that they don't support the Budget because it is premised on the NDP, and they don't believe in the NDP - is really consistent with a chronically inexperienced economic anarchist and political juvenile who would call this good story mediocrity.
Hon members, you have to understand, the EFF is inspired by anarchy. It is inspired by this adolescence. It has these unprocessed, ill-informed, raw, unrefined, catastrophic views of South Africa. This also applies to the way they tend to address the land question – they address the land question as if it is that easy. It is a complex matter. With every matter they seek to address, they become very emotional and throw tantrums about these very complex economic issues.
Mr N F SHIVAMBU: Chairperson, on a point of order. I think the hon member is losing focus. We are debating the Budget here and not making mediocre analyses. Can she please calm down? We are not fighting. She must calm down, please.
The HOUSE CHAIRPERSON (Ms A T Didiza): Hon Shivambu, that's not a point of order.
Dr M B KHOZA: Hon Shivambu, I know that you have seen "umbombo ka" Professor, so, you will be aware that Amilcar Cabral said:
Hide nothing from the masses of our people. Tell no lies. Expose lies whenever they are told. Mask no difficulties, mistakes, failures. Claim no easy victories.
It is within this context that I'm challenging you, hon Shivambu.
Chairperson, I think it is also important for me to assist hon George because I think he is, unfortunately, really displaying a tendency that is still stuck in the 1652 colonial racist white monopoly mentality. [Interjections.] I cannot expect you, hon member, to tell us as the ANC that we have a good story to tell. We have different agendas: you are here to defend white monopoly capital, and I am here to ensure that all South Africans prosper. Therefore, I am not going to be able to engage with you. [Interjections.] [Applause.]
Hon Minister, South Africa has rightly set herself the highest bar of excellence; hence, her mistakes are often magnified. Defying all odds, she has created universal expectations and sometimes even myths. South Africa is the home of the oldest liberation movement in the world, the ANC, which has become synonymous with political miracles.
Two of its Presidents, comrades Dr Nelson Mandela and Chief Albert Luthuli, are Nobel Peace Prize Laureates. Their highest ethical standards, ability to curb temptation associated with power and prestige, ability to conquer centuries of generational colonial racist psychological effects, as well as courage to preach peace and reconciliation in the face of aggression and the most extreme form of social, political, and economic injustice create a legitimate expectation from all fronts abroad and at home for the ANC to excel under the most difficult and often complex conditions.
Under the ANC stewardship, emerged a social contract amidst the devastating economic effects of Natives Land Act, Act 27 of 1913, and the Native Trust and Land Act, Act 18 of 1936. That social contract is the Freedom Charter of 1955, which proclaimed that all people are equal before the law and shall share in the wealth of the country as citizens, without any discrimination based on race and gender. This eventually culminated in the South African Constitution, Act 108 of 1996, hailed as the best in the world. The supreme law of the land demonstrates how far the ANC collective is prepared to make trade-offs in order to achieve lasting peace, prosperity for all, and social and economic justice.
I would like to borrow the words of Simon Critchley's in his book The Faith of the Faithless: Experiments in Political Theology, where he argues about authority of the law. He says:
If the social contract, understood as the coincidence of freedom and equality in the general will, is what breathes life into a legitimate polity, then it is the law that gives that polity motivation and legs to get up and walk.
This brings me to the one-sided narration of the South African story under the ANC in the past 20 years. All books that I have read recently, including the book by Prince Mashele and Mzukisi Qobo, The Fall of the ANC: What Next?, Alex Boraine's book What's Gone Wrong?, and Susan Booysen's The African National Congress and the Regeneration of Political Power, narrate a story that hardly appreciates the ANC's internal battles as it tries to root out corruption in this country. [Interjections.] The ANC has correctly identified corruption as the enemy of prosperity, and the ANC does act when corruption is brought to the fore. It is a difficult thing. [Interjections.]
You also have to understand that corruption is not synonymous with the ANC. [Interjections.] It is not synonymous with the ANC! It is synonymous with the colonial regime that reduced a black African person and coloured, in particular, to nothingness, and objects of wealth creation for white people. They even termed it a cruel necessity. They said "cruel necessity". How can cruelty be necessary?
This is why we are saying that it is in the final analysis the extreme duality of our economy - best described by former President Thabo Mbeki as a first economy, which is brazenly white, and a second economy, which is ashamedly black - that informs the ANC's policy choices, hon George. This is aimed at hon George for saying that we have incoherent policies, because our economic policies cannot ignore the fact that the majority of the people who are black and coloured are trapped in poverty. We cannot compromise public spending. We have to spend publicly. It is therefore disingenuous for anybody to claim that the ANC has incoherent policies.
It is also disingenuous not to acknowledge the effects of the 2009 global financial crisis, and the fact that our economy is contracting, and that the Reserve Bank has revised our forecast to 1,7%. There is a diminished appetite for South Africa as an investment destination of choice amongst the emerging markets. Of course, we agree with that. Hence, we are committing ourselves, as the Standing Committee on Public Accounts, to hold National Treasury and all its entities accountable so that we ensure that this country does not become part of what is termed the "shackled continent" by Robert Guest in his book The Shackled Continent: Africa's Past, Present and Future.
Of course, we are also concerned that South Africa does not appear on the list of the top 20 countries across the globe attracting most interest from western corporations, whilst Nigeria is on top. The continued unstable labour environment in our country is hurting our economy, Minister. [Interjections.] Our recovering economy is imposing an even stricter exercise of fiscal prudence. The decline in company income tax, which accounted for 24,7% in 2007-08, down to 19,8% in the 2012-13 financial year, and personal income tax that has more than quadrupled since the 2008-09 financial year are clear indicators of our economic challenges at hand, and constitute a clear call for us to perform effective oversight, irrespective of our ideological orientation, to ensure that this country, in the end, will emerge as a victor.
Compounding these factors are the complexities of Sars' global operational environment marked by covert tax dodging methods and tactics, such as sophisticated profit shifting practices by multinational companies, and an illicit tobacco trade. As the Standing Committee on Finance, we remain extremely concerned about international credit rating agencies whose downgrading of South Africa's financial institutions leads to high borrowing costs and defies logic, as we've been a stable constitutional democracy since 1994, notwithstanding our own mistakes and weaknesses. In the past 20 years, we have also only had three Ministers of Finance who are and were highly competent and really committed to fiscal prudence. [Interjections.] All of them have actually ensured that we meet our global fiscal commitments whilst ensuring that our agenda of creating a prosperous society is not compromised.
The finance committee has made an undertaking of vigorously scrutinising the effectiveness of Sars' programmes in dealing with these tax evasion practices. I must say, hon Shivambu, the standing committee has made a decision, and I'm not sure if you were there, that it would ensure that Sars acts on recovering revenue from individuals with high net earnings who are evading tax. This even includes the leader of your party who is a tax evader. [Laughing.] [Interjections.] We recommend that he sells all of his Rolex watches because I know that he does have a cell phone; so, he doesn't need a Rolex watch. We also suggest that now that you are wearing red overalls, he no longer needs the red overalls. [Laughter.] We can't afford this deficit in size as a result of an hon member.
Mr N F SHIVAMBU: Chairperson, on a point of order.
The HOUSE CHAIRPERSON (Ms A T Didiza): Hon Khoza, please take your seat. Hon Shivambu?
Mr N F SHIVAMBU: The hon member is making allegations about the leader of the EFF, who is an hon member of this Parliament. She is speaking about Rolex watches ...
The HOUSE CHAIRPERSON (Ms A T DIDIZA): What is the point of order hon Shivambu?
Mr N F SHIVAMBU: The point of order is that she is misleading Parliament about basic things. She is attacking the personality of the leader of the party, and we want to ask her to withdraw the remarks she has just made, please.
The HOUSE CHAIRPERSON (Ms A T Didiza): Hon Shivambu, it is for the Chair to advise the member whether or not to withdraw. Can you please take your seat? I've heard your point of order, and I will make a ruling. Hon Khoza, please continue.
Dr M B KHOZA: Chair, it is an open secret that hon Shivambu himself and hon Malema wear Louis Vuitton shoes; now they are wearing gumboots. They must auction those and pay Sars. [Laughter.] I'm not going to retract.
Mr N F SHIVAMBU: On a point of order, Chair.
The HOUSE CHAIRPERSON (Ms A T Didiza): Hon Khoza ... hon Shivambu, can you take your seat?
Mr N F SHIVAMBU: Alright, but can I raise my point of order first?
The HOUSE CHAIRPERSON (Ms A T Didiza): Can you please take your seat? Hon Khoza, in terms of parliamentary Rules, the statement you have made about hon Malema evading tax has been stated without proof, so I think you need to withdraw those allegations.
Dr M B KHOZA: Madam Chair, I withdraw the statement, but the merits remain. Thank you, Madam Chair.
The HOUSE CHAIRPERSON (Ms A T Didiza): Can you please withdraw it unconditionally?
Dr M B KHOZA: I withdraw, Madam Chair.
The HOUSE CHAIRPERSON (Ms A T Didiza): Thank you, hon Khoza. [Laughter.]
Dr M B KHOZA: Madam Chair, despite all the challenges that we face, it is also very important for us that, as we exercise our financial oversight, we acknowledge the achievements that have been made under the ANC-led government, often conveniently omitted by political commentators and opposition parties in their narration of the past 20 years of freedom.
South Africa is not dependent on foreign aid as is the case on most parts of the African continent. Despite the constraints of international commodity pricing challenges of the first and second economy, and the unstable labour environment, Sars collected over R813 billion during the 2012-13 financial year, which is R71 billion more than the 2011-12 financial year. South Africa's leading service delivery record in housing, the roll-out of electrification, telecommunications, and basic services is amongst the highest in the world, and this is often not said and is often underplayed. [Interjections.]
Chairperson, South Africa injects ... and I want to dispel the myth that says South Africa is encouraging dependency by injecting R120 billion in social grants. In fact, what we are doing under the ANC-led government with this R120 billion is re-injecting it in the economy and, at the same time, alleviating the burden of indignity and the plight of over 15 million trapped in poverty. John F Kennedy - and you are also a neoliberalist - said the following: "If you can't feed the many who don't have, the few who have can't be safe." [Applause.]
Under the ANC-led government, there is transparency and accountability, which we are continuously improving. The ANC-led government is challenged, and most of the time when the ANC-led government is challenged, it listens and makes amends. Our institutions that were established to ensure fiscal prudence, such as the Independent Regulatory Board for Auditors, have been voted number one in the world for four consecutive years. And so has the Auditor-General.
In South Africa, because we also want direct foreign investment, government has an entity called the South African Special Risk Insurance Association, Sasria. It is a government-owned entity which is one of only four in the world that has an insurance product to cover risks associated with political unrests, terrorism, and labour unrests.
Hon Chairperson, we are therefore saying that we are very happy with Sars' plan to modernise. However, we also have a word of caution for Sars. The reason for this is because we are saying whilst they are doing that ...
The HOUSE CHAIRPERSON (Ms A T Didiza): Hon Khoza, you are left with two minutes.
Dr M B KHOZA: Thank you very much, Madam Chair. We are also saying that we have to make sure that government departments honour this 30-day policy because it is not good for our small businesses as engines of growth and economic development to be frustrated by our own government. We welcome what the Gauteng government has done, from what I have seen this morning, by embarking on a campaign to cultivate the township economy by instilling a culture of entrepreneurship in the townships. [Applause.]
With that Madam Chair, the ANC supports the Budget. I thank you. [Applause.]
THE MINISTER OF FINANCE
MR M B KHOZA
UNREVISED HANSARD
EPC – COMMITTEE ROOM E249
Monday, 21 July 2014 Take: 10
The MINISTER OF FINANCE: Chairperson, thank you to all the members who have participated in this debate. Indeed, we will come from different angles when we make our points, which is evident of our democracy and the 20 years of its maturity.
The chairperson of the committee mentions a number of important points. These include: firstly, a focus on the structural reforms that we need to implement, in order to get our economy on the right path; secondly, the issue of synergy between the National Development Plan, NDP, and the Medium-Term Strategy Framework, MTSF, which government is currently working on, as you will see when they table their Medium-Term Strategy Framework; and, thirdly, the utilisation of grants and all the money that is transferred.
As I mentioned earlier, we take this matter of subnational governments quite seriously, because you will find that more than 60% of our Budget is actually spent at levels below the national government departments. Therefore, we need to focus on that in particular. We trust that in our engagement with the committee, going forward, we will monitor this quite closely.
One of the members also referred to the issue of local government, which the chairperson raised. Our partnership with the former Minister of Finance - who is now the Minister of Co-operative Governance and Traditional Affairs, Cogta - is important. We have had a series of meetings to forge this relationship in order to emphasise, firstly, the financial management at municipal and provincial levels, and, secondly, the service delivery aspect of it. We are making good progress, and I think we are on the same page in this regard.
The issue of taking account of certain assumptions in our forecasting is also noted, and in our response that we have prepared for the committee we are dealing with those, and we would want to engage more with the committee.
The issue of the presidential review of state-owned entities, and the implementation of some of its recommendations, is also on the cards for government. Thank you very much, chairperson, for guiding us.
Hon George talks about the incoherent economic policies of government. Honestly, I don't know which ones you have read and to which ones you are referring. I think the difficulty is trying to read our economic policies with the DA's policies. The twain shall never meet, even if you actually try to liken them, as some skewed-minded individuals have tried to do. Honestly, don't try to do that because you are going to read incoherence.
You even go to the extent of saying that the NDP and the New Growth Path, NGP, are incompatible. Which part of the NDP is incompatible to the NGP? If you look at the growth drivers that are mentioned in the NGP, you will find them in our budget review that we spoke about. I always refer members to page 4 of our budget review. If you read that soberly, you will understand where we are going. [Interjections.]
You talk about corruption and you go on, all over again. That is why you actually could not get the votes you wanted. Instead of focusing on your policies that you were putting forward, you were focusing on Nkandla.
It is because of the legislative framework that we as this ANC-led government have put in place that you are able to identify corruption today. The Public Finance Management Act, PMFA, was only passed in 1999 after the ANC came into power. What was in its place prior to that? The Municipal Finance Management Act, MFMA, was passed in 2003. What was in its place before that? You measure us against the same pieces of legislation. You are able to identify corruption as a result of the legislative programme that we have put in place. [Applause.]
With regard to National Treasury's oversight, it should be complemented by Parliament's oversight. We do our bit and Parliament does its bit. That is why we subject ourselves to scrutiny by these committees, in order to take our country forward.
You still talk about the Chief Procurement Officer, CPO, as being an establishment. It is already operational, and it has already made strides in dealing with transversal procurement in particular. We will report to the committee, but some of its work is already in the public domain.
You also talk about the Brics Bank and Development Bank of Southern Africa, DBSA, overlapping. Again, how do you read these two documents? Ask, and you shall be empowered. [Applause.] We have been working on the Brics Bank and we have just returned. Mr Ross has also correctly pointed out that, which is perhaps in conflict with what you have said, we have identified the infrastructure gap in the region to be in the range of about US $93 billion. That means we still have not had sufficient instruments to address this. Therefore, the Brics part only deals with the other part of it. We still need more of these in order to do it. So, there is no overlap between the Brics Bank and the DBSA.
You welcomed the Davis Tax Committee. Thank you for that. You also focus on the saga involving the Chief Financial Officer, CFO, of the Financial Services Board, FSB. We said in the committee, when we appeared before the committee with regard to our strategic plan, that we have taken action, and we have read you the statement. We have taken action in all three areas.
The first area is that of an official in our important regulatory institutions who has been caught in the act, and we are dealing with that at a FSB level. The FSB has also publicly outlined exactly what they have been doing in order to deal with this.
We are also taking steps on the side of the SA Revenue Service, Sars, because it also impacts on Sars. Sars has also issued a statement explaining exactly what we are doing. Action has already been taken in respect of some of the officials that were implicated.
The third part of it is about the taxpayer who is prepared to bribe someone to the tune of R12 million. How much is his liability? We need to focus on taxpayers as well. You completely lose sight of the taxpayer. The taxpayer is the person whom we should actually deal with. [Applause.]
Regarding some of the things you have raised, you will have to be patient until we get to the Medium-Term Budget Policy Statement, MTBPS.
Your skewed understanding of the economic environment when you talk about the role of government as only being to intervene where the markets fail is not what government is about. Government actually also has to play an active role in making sure that we drive our economic and developmental agenda.
Hon Shivambu, you have already been assisted with a number of things, and I would just like to say to you that you are going to have an interesting five years of learning. We are available to assist you.
The ANC started discussing this issue of growth and development before you were born. We came to the conclusion that there is no way that you can redistribute wealth before you create it. So, growth is primary. [Applause.] In the five years ... [Interjections.]
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Hon Minister, you can take a pause. Is that a point of order, hon Shivambu?
Mr N F SHIVAMBU: The hon Minister does not know when I was born, and he is misleading the House. He is misleading the House and he must withdraw that. [Interjections.]
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Order, hon members! Hon Shivambu, can you please take your seat? Can you please take your seat?
Mr N F SHIVAMBU: He must withdraw the statements he has just made. He does not know when I was born. [Interjections.]
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Can you please take your seats. Order, hon members! [Interjections.]
Mr N F SHIVAMBU: He does not know when I was born ... [Interjections.] ... and he must withdraw such a thing.
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Hon Shivambu, if you make a point of order, can you please be straight to the point. Don't make a speech when you try to make a point of order. Thank you. Hon Minister, please continue.
The MINISTER OF FINANCE: Thank you, ...
Mr N F SHIVAMBU: Can we have a ruling, Chair? I said he does not know when I was born. He is misleading the House in respect of the discussion. [Interjections.] Can we have a ruling, please?
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Hon Shivambu, that is not a point of order. I think we should exercise discipline in the House.
The MINISTER OF FINANCE: Okay, he was still in nappies before he joined the ANC Youth League. He must have been in nappies before he joined the ANC Youth League, of which he still qualifies to be a member, if he wants to be.
Hon Shivambu, I still want to say that we are available. We will take you through, step-by-step. It is an important learning curve for you. You must actually accept this as a free learning opportunity that the voters have erroneously allocated to you. We will help you. [Interjections.] [Laughter.]
You then talk about ... [Interjections.] You see, that is the problem with you.
Mr D D D VAN ROOYEN: Chairperson, on a point of order: I don't think it's parliamentary for a member to interject while the Minister is making his speech. Will you please rule on this?
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Hon member, actually all members were interjecting when speakers were making their speeches. Thank you very much. As I said earlier, can we ... [Interjections.] Hon Shivambu! Hon Shivambu! Hon Shivambu, can you please exercise discipline.
The MINISTER OF FINANCE: Our democracy provides people with an opportunity to demonstrate their ignorance, at times.
I want to ask the hon member, when he gets back home, to check whether his party has made submissions to the Davis Tax Committee, because it is there precisely to look at the issues of taxation, including the one of the mining industry.
On the issue of co-ordination between Sars, the Department of Trade and Industry, DTI, and National Treasury, just take time, read the Constitution with regard to National Treasury's co-ordination with Sars, and take time to understand what the Department of Trade and Industry does in government.
Thank you to hon Nkomo for reminding us that we have large shoes to fill, but they provide us with a solid foundation to build on, as we take the country forward.
On the issue of strikes, I agree with you. We should actually take this quite seriously, so that there is stability as we continue to build the economy of the country on a sustainable basis.
Hon members, a number of points were made and the fact of the matter is that in supporting our Budget Vote, we are called upon to heed a number of points that the members are putting across. We are available to take them on as we continue to implement our Budget Vote.
On the issue of poor growth and Sars being a tall order, indeed, we are working closely, hon Swart, with Sars to ensure that we close the tax gap and improve on the efficiency, but that we do not stifle the economy through our collection. As the Davis Tax Committee tables its report before the end of this year - we now have the preliminary report - we will actually engage with it in order to see what areas need attention.
Hon Chairperson, I again want to thank all members for having participated in this debate and for the important points that they have made. I promise that, as we move on, we will avail ourselves to the committee in order to take some of the matters forward.
Let me also report that we have reached the one million mark on the filing of tax returns, and we want to urge members to please be part of this million that have submitted their returns. Six hundred of them have filed through e-filing and the rest at branches, and some have filed manually. We want to applaud the members because we already are at that point, and this is only from the beginning of July until today.
Regarding the relationship between the Department of Co-operative Governance and Traditional Affairs, Cogta, and us, you will notice that the Minister of Cogta, in tabling his Budget Vote, also announced that, in a few weeks time, they would establish an advisory panel to improve on the integrity of the supply chain management and procurement system in municipalities. In order to improve in that area, he was in consultation with our department as well. It has our blessing.
This panel will include members of civil society and the corporate sector to provide advice on how the procurement system of municipalities could be improved to inspire greater public confidence in municipal finance management. It will address the area that hon Khosa spoke about regarding the 30-day payment. Our commitment and resolve is to pay the suppliers within 30 days, but we also want to urge suppliers to submit credible invoices so that the delays do not arise as a result of invoices that still need to be verified. Thank you very much. [Applause.]
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Hon members, I just want to remind you to go back to Rule 46 and 47 that deals with how we conduct ourselves in meetings and debates, so that we do not have to call members to order every time. All of us were given the Rules book when we came for orientation at Parliament. This book must live with us, as we continuously go on. Hon Shivambu, do you have a point of order?
Mr N F SHIVAMBU: Chairperson, I don't agree with all the rulings you make, but I am going to take it further with the parliamentary presiding officers. The rulings you have made were biased, and there must be a review of all these rulings that you have made because the Minister has said a lot of irresponsible things, and you are taking sides because, obviously, they are from the ANC. You must just put it on record that I am going to take the issue forward on the rulings that you have made, so that there is a proper process to deal with some of them. Thank you very much.
The HOUSE CHAIRPERSON (Ms A T DIDIZA): Thank you, hon Shivambu. You, as a party, do sit in on the Joint Rules Committee. You do sit in on the Chief Whips' Forum where some of these matters can be raised. It is within your right to follow the necessary processes, as you said you might, but it is also incumbent upon you to read that Rule, as I have indicated. It indicates how we all must behave ourselves during a debate and sitting of the House.
You requested a point of order. You went on and on, and I made the ruling, which was indeed in your favour, but you kept on going on and on. I reminded you that when you make a point of order, you should please be straight to the point, but obviously, as indicated earlier, I will just ask all of us to remember what the Rules for sittings and our conduct are supposed to be.
Hon members, you are reminded that the Extended Public Committee on Performance and Monitoring and Evaluation and Statistics South Africa will meet at 14:00 in the Old Assembly Chamber.
Debate concluded.
The Committee rose at 12:18.
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