Hansard: EPC: Debate on Vote No 7 – National Treasury
House: National Assembly
Date of Meeting: 07 May 2015
No summary available.
EPC - OLD ASSEMBLY CHAMBER
Thursday, 7 May 2015 Take: 49
START OF DAY
THURSDAY, 7 MAY 2015
PROCEEDINGS OF THE EXTENDED PUBLIC COMMITTEE – OLD ASSEMBLY CHAMBER
Members of the Extended Public Committee met in the Old assembly Chamber at 16:40.
The House Chairperson, Ms M G Boroto, as Chairperson, took the Chair and requested members to observe a moment of silence for prayers or meditation.
The MINISTER OF FINANCE (Mr N M Nene)
START OF DAY
Debate on Vote No 7 – National Treasury:
The MINISTER OF FINANCE (Mr N M Nene): Hon Chairperson and hon members, in presenting the National Treasury’s Budget Vote for the consideration of the House, allow me to begin with an update on the outcome of the 2014-15 Budget.
At the conclusion of the fiscal year, tax revenue was about R7,4 billion higher than the February estimate. We now estimate our consolidated revenue for the 2014-15 financial year to be R1 102 billion –R1,1 trillion, with the budget balance at about R137 billion, or 3,5% of GDP. This is R15 billion less than the February estimate.
The South African Revenue Service, Sars, continues to do sterling work in raising the resources that are required for the delivery of public services. However, economic growth remains lacklustre. We cannot continue to expand service delivery on tax collections alone. Stronger economic performance has to be the foundation of our development and better public services.
It is, therefore, right to emphasise that the National Development Plan, NDP, sets the goals and provides the analysis for our Medium-Term Strategic Framework, MTSF, which is given practical effect in the budgets and plans of every department and public entity.
It is, however, not just what we do as government that counts in implementing the National Development Plan. Development is fundamentally about broadening participation in the economy, opening up opportunities for trade and social mobility and the mobilisation of private investment. Much of the Treasury’s work is focused on these larger objectives.
We are, for example, strengthening regulation and oversight of our banking and financial services sector to ensure that our financial institutions are well governed on the one hand, and on the other, to ensure that customers are treated fairly.
We have introduced tax incentives aimed at encouraging investment and technology and expanding employment, especially for young work seekers.
Through our City Support Programme, we are working with metropolitan councils to accelerate housing and public transport investment, promote more efficient urban landscapes and strengthen urban economic development.
The Municipal Finance Improvement Programme contributes to addressing financial management challenges in many of our municipalities.
We have expanded the capital base of both the Development Bank of Southern Africa, DBSA, and the Land Bank, to enhance their capacity to partner with other institutions in financing infrastructure investment and agricultural development.
The Jobs Fund has launched its 5th Call for Proposal, CPF, focused on partnering with businesses and nongovernmental organisations, NGOs, involved in agricultural development and support for emerging farmers.
The Treasury continues to work with other departments on a wide range of economic development initiatives. This includes working with the Department of Trade and Industry on manufacturing competitiveness enhancement; the Department of Telecommunications and Postal Services on investment in broadband communications; the Departments of Agriculture, Forestry and Fisheries and of Rural Development and Land Reform on support for agricultural investment and employment; the Department of Transport on moving people and goods more efficiently; the Department of Human Settlements on how to partner with banks in expanding housing investment and finance; and the Department of Energy on bringing independent power producers into the electricity network and addressing Eskom’s financing requirements.
These are just some examples. The implementation of the NDP involves a very wide range of activities. We need to do more to reinforce partnerships with the private sector and all stakeholders in building a more inclusive economy. However, as the NDP emphasises, these activities need to be co-ordinated within a sustainable, long-term framework, and also for broader participation and a more equal distribution of opportunities.
Allow me to comment briefly on the economic outlook. The National Treasury forecast for economic growth in 2015 remains unchanged at 2%. This is partly a consequence of the sluggish global economic recovery. It is also a consequence of domestic constraints, including the continuing shortfall in our electricity generation capacity.
Subdued business confidence therefore continues to hold back investment and growth. The Kagiso Purchasing Managers’ Index recently declined to 45,4%, which is at its lowest level in 11 months, indicating the vulnerable state of our manufacturing sector.
While the low oil prices are providing support to our economy, the fall in the prices of our export commodities such as platinum, coal, iron ore and gold is putting pressure on our mining sector and related industries. This reduces the profitability of investments and limits the growth and employment potential of the sector.
Over the period ahead we are likely to see some upward pressure on inflation, partly because of a reduced maize harvest, higher electricity prices and the weaker exchange rate.
These are reminders that we must remain focused on the critical constraints holding back our economic progress such as electricity supply; administrative capacity, especially at the local level; skills and access to globally competitive technology; transport and communication networks and the effectiveness of our labour-relations institutions.
The NDP also emphasises our links with the rest of Africa. We have been reminded in recent weeks of how important cross-border linkages are to millions of vulnerable people, both in our own communities and across the Mediterranean.
There are many aspects to these challenges, which we have to address in our social development and employment strategies and in development of partnerships with our neighbours and the international community.
Our linkages with other African countries are growing, including investment by South African companies abroad, which increases job creation both at home and elsewhere in Africa.
Allow me to draw the attention of the House to the National Treasury’s central organisational goals for the next five years, as set out in the strategic plan that was tabled last month.
These goals include promoting economic policy coherence around the objectives of growth and jobs; addressing risks on the public-sector balance sheet; executing a credible budget process that allocates resources sustainably to policy priorities and is in line with spending plans; exercising oversight responsibilities over public finance management, including capacity-building that delivers value for money; making the financial sector serve South Africa better; building a happy and effective institution that is a centre of excellence; and implementing a strategic communications and outreach programme that addresses stakeholders.
Our strategic plan notes three critical areas in which capacity is being enhanced within the Treasury over the period ahead.
Firstly, a new unit will be created to focus on the analysis of the conduct of financial markets, in line with the Twin Peaks regulatory framework.
Secondly, within the Office of the Accountant-General, dedicated capacity is being built to oversee and implement the Integrated Financial Management System, in partnership with the Department of Public Service and Administration and the State Information Technology Agency, Sita.
Thirdly, following the establishment of the Office the Chief Procurement Officer, centralised co-ordination of procurement in government is being strengthened.
Our strategic plan also draws attention to the establishment of the Government Technical Advisory Centre, GTAC, as a public-finance advisory and support initiative. This initiative works with other departments, provinces and municipalities on a wide range of organisational development and programme management activities, including support for public-private partnerships, the strengthening of operational capacity and learning networks focused on project management and local economic development.
Administration of the Jobs Fund has also now been consolidated into GTAC.
Details of the Treasury’s programmes, activities, targets and performance indicators are set out in the annual performance plan, APP. The departmental establishment for the current year comprises 1 153 posts. The National Treasury Vote amounts to R27 billion this year, of which compensation of employees is R725 million.
The Treasury also has the responsibility for the provincial equitable share and debt-service direct charges, which amount to R382,7 billion and R126,4 billion, respectively.
Time does not permit me to deal with all these plans and programmes in detail, but hon members have had the luxury and benefit of looking at these documents. I believe they are now familiar with them. I will, however, highlight a few key issues.
A notable turning point has been achieved in the financial position of Limpopo province, where we had instituted an intervention under section 100(1)(b). This was necessitated by a precarious fiscal situation, including the province’s inability to finance a bank overdraft of R1,7 billion in December 2011, and accumulated unauthorised expenditure and departmental debts of R2,7 billion. Large departments such as Education and Health had been overspending their budgets continuously since the 2007-08 financial year, and the number of unpaid invoices from service providers had reached over R2 billion.
As we speak, the executive and accounting authority has been handed back to the provincial government and national government administrators are no longer in the province. However, we continue to issue directives under section 100(1)(a) and receive reports in terms of this section of the Constitution.
Turning to municipal debt to Eskom, which is one of the recent interventions to address municipal debt to Eskom, we can see it is similarly achieving positive results.
Equitable-share transfers were withheld this year in respect of 59 municipalities with longstanding arrear obligations to Eskom. In 20 municipalities, already agreements have now been reached to enable the equitable share funds to be released. Discussions are in progress with the remaining municipal councils, with a view to resolving outstanding matters before the end of this municipal financial year on 30 June 2015.
When we look at the City Support Programme, we can see cities play a key role in driving economic growth and providing people with access to services and opportunities. To realise these benefits, cities must grow in ways that reverse the pattern of urban sprawl that we see in new communities, especially poor communities, located far from central business districts.
It also requires substantial investment in the urban infrastructure required to provide services and support growth. To plan these investments is a formidable task for cities and so we have introduced the City Support Programme to assist cities to plan and implement these investments.
This programme already co-ordinates and supports the process through which cities identify areas for strategic investment in their built-environment performance plans. Detailed planning for individual projects is then supported through a project preparation facility managed at the Development Bank of Southern Africa, DBSA. This support helps cities to develop implementation-ready plans for developments that will change the face of our cities and support long-term growth and development.
National Treasury is also working with the Department of Co-operative Governance to support the capacity of our cities, to raise the funding needed and to attract private investment for urban infrastructure expansions.
In our meeting with Minister Gordhan and the executive mayors of the metros, we reaffirmed our shared commitment to ongoing improvements to governance and service delivery in metropolitan areas, in particular, so that population growth in our cities can provide momentum to reconstructing more inclusive, productive and sustainable urban environments.
Our city leaders have committed to focusing their attention on the security of supply of critical urban services through enhanced maintenance and renewal of critical infrastructure, and to reorient their expenditure priorities to contain growth in personnel costs, reduce waste and obtain clean audits.
Building on their own built environment plans, they will also accelerate the preparation of a series of well-located, catalytic land development projects that will be implemented in partnership with the private sector.
With regard to the African Bank, I can report that good progress has been made towards establishing a new African Bank. Yesterday, as members would recall, the National Assembly, NA, passed the Banks Amendment Bill, which will provide the legal authority required to transfer identified good assets to a new bank, while enabling the curator to proceed with the winding up of the remaining business.
In addition, a new chief executive officer, CEO, has been appointed, bringing appropriate expertise, experience and stability to the leadership of a revitalised bank.
In its deliberations on this matter yesterday, the House again highlighted concerns with unsecured lending and the pressures on many households associated with inappropriate and expensive credit. Cabinet has already agreed to a range of measures in response to this issue, including new regulations on reckless lending.
In taking this forward, we have had the advantage of constructive support from the Ministers of Justice and Trade and Industry.
In addition to exercising general oversight of state-owned companies, the National Treasury has specific responsibilities relating to the Development Bank of Southern Africa, the Land Bank and South African Airways, SAA.
The DBSA aims to disburse R17,8 billion in 2015-16, rising to R26,4 billion in 2017-18, and contributing to municipal infrastructure investment, public-private partnerships and regional development in the energy, transport, water, communication, health and education sectors.
Of special importance is the bank’s support for addressing infrastructure backlogs in our cities — which I have alluded to — and the deepening of the municipal debt market in order to facilitate greater private investment in urban renewal. The DBSA also co-ordinates the implementation of the rural infrastructure strategic programme of the National Infrastructure Plan.
This year will see the Land Bank undergoing an organisational review, aimed at strengthening its role in agriculture financing. It plans to disburse over R2,2 billion in new development loans over the next three years, while supporting better co-ordination between agriculture initiatives, rural development and land reform.
In respect of South African Airways, we are now seeing the benefits in cost reductions and improved operational efficiencies associated with the board’s 90-day plan undertaken in the first three months of this year. This provides a platform for refining the 2013 long-term turnaround strategy.
A strong working relationship has been established between the airline and the National Treasury and we are confident that we will see further improvements in the airline’s financial position.
With regard to the New Development Bank, I am delighted to report that there is good progress in establishing the Brics-led New Development Bank. This month, the Bank will announce its pre-management group, comprising a president for the bank from India and four vice-presidents from the other Brics member countries, including South Africa.
In the interim, an Interim Board of Trustees has been appointed to oversee the process of making the Bank operational. With respect to the ratification process, the agreements that we signed last year at the summit in Fortaleza and the contingent reserve arrangement are currently before Parliament for ratification. Once they are ratified, South Africa will be able to participate fully in these new initiatives.
I hope that Parliament will be able to ratify the agreements before the end of May 2015, and that the Bank will be ready for business in time of the Brics summit to take place in Russia in July, this year.
Regarding Economic competitiveness, as emphasised in our Budget Review this year, the Treasury works closely with several other departments in promoting the medium-term strategic framework objectives associated with economic growth, employment creation and infrastructure network investments. Tax measures to support industrial investment amount to some R19 billion a year.
Economic competitiveness is also advanced through various spending programmes, including the Manufacturing Competitiveness Enhancement Programme, MCEP, of the Department of Trade and Industry. Recent press reports have drawn attention to the growth in applications for this support. The Treasury will work with colleagues in Trade and Industry to expedite the implementation of the incentive programme and determine its cash flow requirements, while ensuring value for money in these targeted appropriations.
As part of our continuing strengthening of public finance management, revised Treasury regulations will be published by 31 July 2015, to take effect on 1 April 2016. This follows an extensive process of consultation with departments and entities.
The new regulations contain a number of important reforms in areas such as procurement and governance, areas in which government’s performance has not been completely up to standard.
In conclusion, I would have also dealt with the issue of social security, the National Health Insurance, NHI, and our public wage negotiations; and here I would want to advise the House that progress is being made in this regard.
We emphasise the fact that we need a settlement that is fair and reasonable and that takes into account the overall position of the fiscus, the broader economy and an appropriate balance between remuneration and employment creation.
Let me take this opportunity to thank the committee for having worked hard and for the constructive engagement on the Strategic Performance Plan and Annual Performance Plan that we have had with the committee. Thank you very much, hon Chair. [Applause.]
Mr Y I CARRIM
The MINISTER OF FINANCE
Mr Y I CARRIM: Madam Chair, comrades and friends, well, my name is Yunus and it is gender-neutral, so I think it’s appropriate in my case.
So here we are, 10 months since our last Budget Vote, in more difficult and more challenging times. Also, the pressure on National Treasury has increased since last year’s debate; not just on National Treasury, but on our Standing Committee, this Parliament as a whole, civil society stakeholders — especially business and labour — and the public in general too.
More immediately, it means that the National Treasury needs to be even more rigorous than it has otherwise been – and it has been rigorous, actually – in ow its budget is spent. But more importantly — and I see at least one Minister here, the Minister of Tourism — you can oversee other departments to an extent. Minister, I know it’s difficult, but obviously, it is Treasury that has the most professional skills in this regard.
We are particularly concerned about the way budgets are used in the national fiscus. While recognising that there are three distinct spheres of government, also provinces and local government, we, as the committee, also need to be far more rigorous in what we do. Our Budget Vote reports, Budgetary Review and Recommendation Reports, BRRR, our Fiscal Framework and other reports, for example, have to be more concrete, more specific, more focused and more outcomes-driven.
With our budget reports we need to look far more carefully at the outcomes that the department sets for each programme and the allocation of budgets to them. This means, too, adequate research and support staff – and this is something on which we plead with the management. I notice the House Chair and hope she will take some lessons too, as we really need more resources and more support to play the role that the Constitution requires of us.
Now, in this input I’ll focus mainly, as I do as the chair, on the report — not only on it, but mainly on it. The report has been tabled in the Announcements, Tablings and Committee Reports, ATC, this morning and I will deal with some key issues. But in the first instance, Minister, we would like to say that we largely — the sensible people in our committee and the vast majority — share the strategic plan that you have. The goals are clear. We really think that National Treasury, on the whole, is performing well under difficult circumstances.
Our view is that the strategic plan is largely correct. But obviously, Minister, Deputy Minister and the Director-General, as you agree, we need to engage and refine the strategy plan. You too are doing it in your own way, and we too need to engage with you to do it, to help towards that end.
The main point I am making in my initial input is that it is not enough, as we have said repeatedly, for us to focus on the executive and ask why they haven’t done what they are supposed to be doing, without having a look at ourselves as the Parliament.
What are we doing to actually ensure that we are more rigorous, vigorous and effective in our oversight? What are we doing to ensure that we engage with the popular communities out there and actually bring to this Parliament their needs, concerns and aspirations? How do we engage with our departments and Ministers in our respective portfolios around these issues?
So, it’s only half the story to criticise the executive all the time; we should also be critical of ourselves. Are we doing anywhere near enough in terms of what the Constitution requires us to do and what we should be doing?
Now, in our report we noted, Minister, the challenging economic circumstances in which you brought the Budget and your own department’s budget to us some four weeks ago.
We feel that the National Treasury has been forced to make severe, significant adjustments in terms of its fiscal policy stance, and we understand that.
Low economic growth and the high debt service costs have put huge pressure on National Treasury and the committee will, through its review of National Treasury’s quarterly report — and the first of them comes out next week Tuesday, Director-General — more actively monitor its performance in these more challenging times. In your interests, we are also being more effective and vigorous, Minister.
Compared to last year, we see there’s a greater synergy between the National Development Plan, NDP, and the department’s structure of its budget, and this is to be welcomed.
It is interesting, however, Minister, that in another debate yesterday, hon Des Van Rooyen raised this issue, flowing from our report on Stats SA: Interestingly, Stats SA said that the key performance indicators for the Medium-Term Strategic Framework, MTSF, and the NDP don’t wholly coincide.
It said there are far fewer indicators for the MTSF than there are for the NDP. Our committee said that’s fine, because it is the first five-year MTSF, so it is understandable, but we expect the government to make its next MTSF more consonant with the indicators in the NDP. We said to him that he should raise this with the Minister in the Presidency, but I was mandated as the chair to raise it.
Perhaps you want to applaud even before I say this, but I’ve already done that. Within 24 hours of the report being published, or frankly, even before it was published this morning, I engaged with the Minister of the Presidency — and I see Des van Rooyen smiling with the approval.
I’m answerable to the Whip of the ANC, so to retain my position as the chair I have to impress the Whip — you know about politics, Chairperson, it is very fragile and you never know where you’ll be tomorrow morning. [Laughter.]
In any case, Minister, what I want to say is that, , the stats in general, or actually, what he said was quite good, maybe he got it wrong, here and there, I don’t know, but overall, I think what he’s saying, makes sense to the committee.
We also understand why the MTSF won’t fully cover all the indicators, but it’s something we need to pursue, and not just the Minister in the Presidency with the very long title, which I can’t remember right now. It’s Planning, Performance, Evaluation, Monitoring and Administration. I hope you get paid more than all the other Ministers, Minister Hanekom, having that title. Wow!
So, here we are, saying that we raised during the report, Madam Chair, this issue of Eskom at the time: the severe crisis, the chairperson’s position being threatened, four people who have exited and so on. We understand that our department is only one in a war room, but we pleaded with the Minister that, to quote the words of the report:
Treasury should play a fully effective role in the Cabinet’s “War Room” led by the Deputy President that is dealing with the challenges confronting Eskom.
We also said that the committee believes that the government is not managing its communication on the energy challenges well, and that National Treasury needs to raise this matter effectively in the meetings of the war room.
Then we noted that the Minister is going to bring to Parliament — obviously, to the Appropriations Committee, but in one Parliament, especially — the Appropriations Bill, to give the first tranche of R9 billion of the R23 billion that has been allocated to Eskom.
We asked for it to be brought, reasonably, as early as May so that Parliament can process it in time for the June deadline that the Minister has set for this task.
We also draw attention to what we said about last year’s report that, of course, we understand we have to forego nonstrategic assets. Last year, what we said was that we have to be very clear about the criteria that are used to define what nonstrategic assets are and the terms of any sales of these.
National Treasury also needs to seek to ensure that the sale of these nonstrategic assets do not lead to job losses or other unintended consequences which may undermine the country’s economic growth and developmental goals.
Hon Minister, we think that for due consideration be given to this is something that will serve the interests of government, Parliament and the people. The committee also notes the strengthening of government financial management by accelerating the deployment to or use of the integrated financial systems all government departments — to use one of National Treasury’s many terms.
Minister, I’m sure you’ll agree that this is long overdue. We welcome it, and we will monitor it very carefully because this has been on the agenda for some many years, hence it is long overdue. We also understand the difficulties that the departments had, but as the committee, we have to engage with you and the department in order to see to it that we can help in whatever way we can.
On 1 April 2015, we welcomed the launch of the centralised supply database and the single supply chain management policy for all procuring government institutions. We welcome the e-tender publication portal and we think that that’s absolutely great. Within six months we want a sort of report-back on the progress.
We noticed also Dr Makhosi Khoza, from the previous position in South African Local Government Association, Salga, who drew to our attention the fact that they had many pension funds. This is not an easy matter to deal with. We don’t think it can be done overnight, but we would like some attention to be given to that by the National Treasury.
We also welcome the initiative of Brazil, Russia, India, China and South Africa, Brics. I won’t cover that as it has already been covered by the Minister. We think that it is crucially important to go with what the committee says. The committee believes that the New Development Bank should over time operate with a far more developmental and inequality-reducing approach than the World Bank and International Monetary Fund, IMF, and it recommends that National Treasury should take into account all the sensitivities to ensure this.
Point 12 of our report spoke about the Property Rates Act, how it applies in traditional authority areas and the fact that it’s not fair that the people with huge properties in communal land are not paying property rates. We understand that this is a sensitive matter, but together with the Department of Co-operative Governance and Traditional Affairs, Cogta, we need to address that issue.
With the South African Revenue Service, Sars, we recognise the challenges that Sars will confront in these difficult economic times and we will obviously engage with them and be more rigorous as we would have to be in our respective roles in this regard in monitoring progress.
We welcome the significant improvements in taxpayers’ compliance over the past few years. We note the commitment Sars has made to modernising its programmes and we will consider that in six months time.
We also feel that far more has to be done to empower Sars to deal with base erosion and profit shifting. In fact, it is our three committees, Trade and Industry, Minerals and us. We accept, on the 20th of this month, to consider the report from the Parliamentary Budget Office and the report from the Department of Trade and Industry, which is at public hearings for this matter.
It is one Parliament Minister. The very same stakeholders announced that they will appear before our committee, but we told them that we are one Parliament and the three committees are going to work together in this regard.
We will come to you, Minister, in the second half of the year with some proposals in this regard. In fact, you yourself, the Ministry and Treasury have been doing a lot on this issue in any case, in a variety of ways, but all of us have to agree that we have to do more; and needless to say, that is something we can work on in a more co-operative way.
We need a report on the Davies Tax Committee, which we’ll arrange shortly; of course, we’ve noted that. Well, I’ll skip this because my time is running out. How much time have I got left, Chairperson? How long is it?
The HOUSE CHAIRPERSON (Ms M G Boroto): I’m just waiting for the expiry note.
Mr Y I CARRIM: Oh, all right. Minister, I think you should sponsor a clock here. How much can the cost of a clock be? We just need a clock here. Given the cost that the Parliament bears every day, maybe we can have less cakes, less tea and less coffee five times a day. Put a clock here, please. You can name it after me: the Carrim clock. I just want us to have a clock here.
On an important issue, we have a concern as a committee, and that is about the divisions within Sars. We noted that the intelligence committee is dealing with the intelligence aspects of the Sikhakhane report, the Kroon committee, and so on. As the committee we made a decision and we said that we will deal with the consequences of the exit of the senior management of Sars — on the performance and operation.
We said that, while recognising the complexities, the committee believes that there should be an amicable settlement of the divisions. It please us here, that this afternoon it seems that some sort of settlement has been arrived at and presumably more about this will emerge in the next day or so. So, we welcome that, we think that ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Unfortunately, Minister, your time has expired.
Mr Y I CARRIM: May I finally thank the Minister and the Deputy Minister? I was also going to talk about the Freedom Charter but there isn’t time.
The HOUSE CHAIRPERSON (Ms M G Boroto): Hon members, we don’t have the clocks that we are used to in this Chamber, so I rely on the Table to give me the time. Thank you.
Dr D T GEORGE
Mr Y I CARRIM
Dr D T GEORGE: Chairperson, less than a year ago, I congratulated the Minister and Deputy Minister on their appointments. I did have great expectations of them.
Our economy has not recovered from the great recession that followed the global financial crisis, unlike other developing economies, and our unemployment rate, now at 36,1%, continues to climb.
Our youth unemployment is a staggering 66%. With economic growth projected at 2% and steadily falling business confidence, this presents significant risk to our social stability.
Resent attacks on peaceful migrants to our country reflect the anger of those unemployed and marginalised as a direct result of a hopelessly failed, incoherent economic policy. We need only to look at the growing social unrest to know that government has failed the people with its unworkable, so-called developmental state model that prescribes a central role for government in our economy.
The DA agrees that government must intervene when the market fails and provide a safety net for vulnerable members of our society. Government can drive economic growth under the right circumstances. We have demonstrated this in the Western Cape, where investor confidence, especially in the key financial and manufacturing sectors, remains high.
A government that wastes over R30 billion per annum and permits the construction of a monument to corruption at Nkandla, without any consequences to those who stole the people’s money, is not trustworthy and is incapable of performing a central role in our economy. In its current corruption-riddled and broken condition, government is crowding out the economic growth potential of our economy and getting in the way of any possible recovery that is now already long overdue.
The Treasury has a responsibility to ensure that the regulatory environment of the state-owned enterprises is effective. It should be clear by now from the meltdown at Eskom, and the never-ending bailouts to SA Airways, SAA, that the model for state-owned enterprises, SOEs, has failed dismally. Executives receive enormous pay packages and bonuses, yet fail to deliver the services that the so-called enterprises were established to provide. Minister, what are you doing differently to resolve this problem before the lights go out, permanently? Where are the nonstrategic assets for sale?
The Standing Committee on Public Accounts, Scopa, reports, year after year, that the departments and entities have wastefully and irregularly spent billions of rands of the people’s money. Nobody gets prosecuted, nobody goes to jail and the cycle just repeats itself as the looters move from one department to the next.
There isn’t much left to steal. The larder is empty, everything has been eaten, our deficit continues to widen and the tax rate goes up. This model, too, is not sustainable.
Last year, I asked the Minister to explain why the post of Commissioner of SA Revenue Service, Sars, had been vacant for a year, and now we know why: Someone had to be found who could bring the organisation to the heel of its political masters who are reluctant to pay their taxes, such as President Zuma who owes Sars at least R16 million in fringe benefits tax for the upgrades to his palace at Nkandla. Enter Tom Moyane, who has depleted the executive ranks of Sars to the point where our tax-collection capacity is at risk. Once the envy of other tax jurisdictions, the domestic and international reputation of Sars lies in tatters.
It was never a secret that Sars maintained the capacity to investigate tax evaders who steal billions from the people. It is now claimed that hundreds of millions were spent on a so-called rogue unit with funds that were never accounted for. If this is true, previous audit results from Sars are unreliable and invalid and the Auditor-General has failed.
Minister, did Sars also steal the people’s money to pay for this unit?
The sad tale of yet another broken state institution began when Tom Moyane suspended the Deputy Commissioner, Ivan Pillay, under the pretext of the findings of the so-called Sikhakhane report.
It was Ivan Pillay who commissioned the Sikhakhane report and Tom Moyane first told Parliament that the report was inconclusive. Then Sars refused my application under the Promotion of Access to Information Act to obtain sight of the report and insulted Parliament by informing MPs that we were not ready to see it.
The Sikhakhane report recommended a judicial enquiry into the Sars matter, but the President refused to establish a commission — for obvious reasons — and then the so-called Kroon report corroborated Tom Moyane’s version without interviewing those involved and almost purely on the basis of the Sikhakhane report which was previously inconclusive and focused mainly on the actions of an individual member of the unit.
The saga continues with the committee chairperson hiding from the committee a letter that he received from former Sars Spokesperson of 11 years, Adrian Lackay, before the committee met with Tom Moyane and this impacted negatively on the committee’s ability to interact with Tom Moyane.
Mr Y I CARRIM: [Inaudible.]
HOUSE CHAIRPERSON (Ms M G Boroto): Hon member, what’s your point of order?
Mr Y I CARRIM: That is a lie. Is a blatant lie! [Laughter.]
HOUSE CHAIRPERSON (Ms M G Boroto): Hon member, that is not a point of order. Thank you.
Mr J H STEENHUISEN: Sorry, Madam House Chair, it goes further than that.
HOUSE CHAIRPERSON (Ms M G Boroto): Are you rising on a point of order?
Mr J H STEENHUISEN: I am rising on a point of order. It’s unparliamentary to say that another member of the House is telling a lie. I would ask that you ask the hon Chairperson of the Finance Committee to withdraw that.
HOUSE CHAIRPERSON (Ms M G Boroto) Hon Carrim, please stand. There is a point of order. You referred to hon George as a liar. Can you withdraw that.
Mr Y I CARRIM: If the Rule requires me to withdraw, I withdraw it. But he is misrepresenting the facts.
HOUSE CHAIRPERSON (Ms M G Boroto): Hon George, continue.
Mr Y I CARRIM: He is misrepresenting the facts.
HOUSE CHAIRPERSON (Ms M G Boroto): Hon Carrim, lets deal with this in the other processes, but the mere fact of calling another member a liar in this House is unparliamentary. Thank you.
Dr D T GEORGE: Chairperson, today we read that Ivan Pillay and Peter Richer have resigned from Sars, no doubt with a handsome golden handshake to ensure their silence. This reveals the extraordinary lengths that the ANC will take to cover up the political infection of Sars, one of the key financial institutions in our economy.
The failure of the African Bank has highlighted the very slow pace of regulatory reform following the 2008 global financial crisis. Where is the tangible progress on the Twin Peaks regulatory framework? We have fallen behind the curve in the global financial regulatory environment.
Retirement reform initiated more than a decade ago remains in limbo and has resulted in significant uncertainty in the industry. This is not in the best interests of pension-fund members who right now, are confused and distrustful of the policy makers.
Government must never forget that it does not have any money of its own; it all belongs to the people. No matter how much is poured into a broken system, it remains broken.
When I arrived in Parliament in 2008, I felt deeply honoured to be here at the point in our history where there was much debate in our society about the alternative economic routes that we could follow. I hoped that we could choose one that would grow our economy. That was not to be.
Minister, urgent action is needed to liberate our economy from the stranglehold of incoherent economic policy, financial mismanagement of gigantic proportions and now, the collapse at Sars. The time we had before has now run out and those great expectations appear likely to remain just that. Thank you Chairperson. [Applause.]
Mr N F SHIVAMBU
Dr D T GEORGE
Mr N F SHIVAMBU: Hon Chairperson, earlier there was a failed prediction that I’m going to speak about base erosion and transfer pricing. I am not going to do so because in Trade and Industry that issue is getting the necessary attention after we had firmly raised it and there is a process that we are engaging in.
Of concern, Minister, is that when we visited the Reserve Bank, they seemed to be unaware of what we had said on 25 February 2015, that they are working together with the Financial Intelligence Centre, Fic, and SA Revenue Service, Sars, to deal with illicit financial flows.
They were unaware of this and they said they don’t have a mandate in terms of dealing with those issues. I don’t know whom we were talking on behalf of because the Reserve Bank seems to have distanced itself from you.
However, I want to speak about four principle issues and I don’t want to go into the mechanical issues of internal squabbles and everything else.
Firstly, there is the issue of the misguided belief in the markets which are in the invisible hand. It is wrong; the invisible hand can never grow the economy and will never take you anywhere.
That is what made you yesterday wrongfully and mistakenly pass the Banks Amendment Bill, which ultimately is going to end up in private hands. But now with the secured and guaranteed soft landing, you are saying to the bank executives that they can do anything they want to do with the bank; they can engage in unethical lending, but when their bank collapses, they are going to be curated, they are going to be saved by the Reserve Bank, the Treasury and everything else.
Even in your own capitalist world and ideology, businesses that do not perform properly are allowed to collapse, but in this case, you passed a law which says that banks have got a soft landing and that is a seed for a crisis in the future.
The second principle that I want to deal with, is the issue of your misdirected belief in economic growth first, and the rest shall follow.
That is not how economies are grown. We have made a plea many times that go and study how all economies in the world have developed to be where they are now.
The Unites States, US, United Kingdom, UK, Belgium, France, Germany, Finland, all of them, played a critical and central role. There was a visible hand and it was strategic ownership and control.
Why, for instance, wasn’t there a Freedom Charter intervention with regard to African Bank Limited, because the Freedom Charter says that the banks, the monopoly industries and mines shall be transferred to the ownership of the people as a whole? By the way, the liberation movement interpreted that as saying there must be nationalisation of the banks.
You had an opportunity to do so politically, but you never did. We don’t know why. You are under the wrong guidance and it must be exposed.
The third principle I want to deal with is on the procurement process. You are establishing the office of the procurement general or something like that, someone who is ...
The HOUSE CHAIRPERSON (Ms M G Boroto): Hon member, would you please address me and stop talking directly to the Minister, as “you” and “you are”. Please.
Mr N F SHIVAMBU: Your own election manifesto says that 75% of goods and services that are consumed by government in the state should be locally produced.
Is that the case? No. The cars, clothes, food, the microphone I’m speaking into — all of them are produced in other parts of the world. The cellphones that we use and everything else is not procured locally.
There is no direction; there is no legislation that says that you must procure locally produced goods and services despite the fact that you have lied to the people of South Africa that you are going to procure 75% of the goods and services locally. There should be something on that; you need to deal with micro issues in that fashion.
The last principle I wanted to deal with is division of revenue process which you need to look into. But we will assist you. Sure. [Time Expired.]
Ms S J NKOMO
Mr N F SHIVAMBU
Ms S J NKOMO: The IFP takes note that South Africa’s national government’s finances, efficiency and sustainable public financial management are key to the promotion of economic development, good governance, social progress and a rising standard of living for all South Africans.
In accordance with the above mandate, Treasury, through the SA Revenue Service, Sars, has the unenviable task of the collection and then the fair equitable distribution, monitoring and oversight of fiscal monies according to government’s priorities.
Sars recently advised that despite difficult economic conditions, they had collected R986,4 billion, which is a 9,6% growth in total revenue in the 2013-14 financial year and is R7,4 billion above the revised estimate announced in the February 2015 Budget, and this must be commended.
Sars also states that this revenue performance was made possible by an extraordinary drive by them on compliance improvement, which in aggregate, added about R22 billion to the state coffers. Whilst this is all well and good, there still remain billions of rand in income that can be taxed through VAT which is unaccounted for, especially in our informal trading sector.
Minister, on a recent visit to the Crown Mines area in Johannesburg, I actually saw multitudes of informal shopping malls and shops mostly owned and managed by Chinese nationals. The malls are run on a cash basis and goods traded without any receipt or VAT paid whatsoever.
How much money does the state lose in income that can be taxed through VAT to this kind of trading which seems to be permitted? Why is it that these malls and shops are exempt from paying VAT or taxes? The robust collection performance from Sars is expected to make a positive impact on the fiscal framework. Yet, there is no urgency concerning the collection of these billions of rands of unpaid VAT.
In the spending and distribution, we still see large underspending, misspending and corruption by the departments which lead to service delivery failures and in the end this results in widespread protest actions.
Fiscal policy, integrity, long-term economic growth and the creation of employment are paramount. We can ill afford the opportunity cost of finite fiscal resources which are misused or not being used at all. We therefore call on Treasury to maintain the most vigilant oversight in this respect, for it is only in this way that we will ensure a strong and economically vibrant South Africa for future generations.
The IFP definitely supports Budget Vote 7. I thank you. [Applause.]
The DEPUTY MINISTER OF FINANCE
Ms S J NKOMO
The DEPUTY MINISTER OF FINANCE: Hon Chair and hon members, the National Treasury contributes not just to value for money in our public finances, but also to the broader financial environment that supports investment and growth.
I will highlight the key roles of several institutions of the wider finance family in bringing together savers, investors, lenders and borrowers in an orderly manner.
The role of the financial sector in facilitating economic development in a modern economy is critical and probably well documented, but it is a destructive force, if it is not well regulated, and this should never be underplayed.
In fulfilling this important role, there are various policy challenges for government, which have to be carefully balanced, for example, the need to facilitate financial access while ensuring that consumers are protected; the need to combat financial crime while ensuring that honest customers are not excessively burdened with compliance; and the need to ensure that financial entities are always financially sound enough to meet their commitments to their customers, while also noting the compliance costs associated with new regulations.
In our effort to fulfil the above objectives and to adopt best international practice where appropriate, several pieces of draft legislation were released over the past year for public comment.
These include the Financial Sector Regulation Bill, 2014, to give effect to the Twin Peaks regulatory model; the Insurance Bill, 2015, to support the financial soundness of our insurance companies and enable low-income access to insurance; and the Financial Intelligence Centre Act Amendment Bill, to strengthen the Financial Intelligence Centre’s ability to assist in combating financial crime.
We have also prioritised the need to encourage South Africans to save, and thereby to rely less on excessive debt, especially debt offered on expensive and sometimes predatory terms.
Over-indebtedness, hon members, makes our workforce depressed and less productive. On 1 March 2015, the Tax-Free Savings Account became a reality in South Africa. We encourage South Africans to take up this offer. This saving initiative also reflects what can be achieved if both government and the financial sector work together for a common cause.
The 2015 Budget Speech reiterated National Treasury’s commitment to continue with retirement reforms to ensure that workers are saving enough and get good value for their savings. We repeat our message that workers, especially government employees, should not panic and prematurely resign to access their savings. Their savings remain theirs under the stewardship of the trustees.
In fulfilling the above objectives, the National Treasury relies on various regulatory and supportive institutions within the family and I would like to focus on some of the institutions, in particular the Financial Intelligence Centre.
The Financial Intelligence Centre plays a critical role in protecting the integrity of our financial system. During the past year, the Financial Intelligence Centre, Fic, in collaboration with National Treasury, worked on the draft Financial Intelligence Centre Amendment Bill of 2015, which has been published for public comment after being approved by Cabinet.
South Africa has a long-standing commitment to combating money-laundering and the funding of terrorism, having ratified the United Nations Convention against Corruption, Uncac, in 2004, after joining the multilateral Financial Action Task team in 2003. In 2001, South Africa enacted the Financial Intelligence Centre Act and other related measures to criminalise financial crimes and facilitate access to information about illicit financial flows.
Financial crimes take several forms, for example, fraud, money-laundering, terror financing and corruption. In fighting such crimes, we aggressively seek to protect the integrity of our domestic financial institutions and contribute to the resilience of the global financial system.
Cabinet adopted this policy objective in 2011, in responding to the 2008 global financial crisis, as outlined in the policy document, A Safer Financial Sector to Serve South Africa Better. Moreover, the intelligence products from the Fic are increasingly used by the law enforcement agencies, intelligence, Sars and many other agencies.
The Financial Intelligence Centre Amendment Bill proposes several measures to address threats associated with money-laundering and terrorism financing and to address regulatory gaps which have emerged since the Act was last updated.
It introduces major shifts which seek to make complying with the Act easier for customers of financial products, while maintaining the controls necessary to protect the integrity of our financial system. To be “fica’d” will no longer be the frustration it has been in the past. It will become easier for all concerned.
The Bill introduces a risk-based approach to give financial institutions the flexibility to work out how best they can verify their clients’ identity.
South Africa has long recognised the problem of illicit financial flows. I know some members here tend to think that it is their own discovery. We started taking strong steps to try to deal with this issue long before it became fashionable to talk about it. This can be seen from the routine work of the SA Revenue Service, Sars, the SA Reserve Bank, Sarb, the Finance Intelligence Centre and the prosecuting authorities.
I will take up hon Shivambu’s point later, because I think there’s a bit of misguidance there.
While there are various mechanisms that are used to facilitate such illegal capital flows, such as trade mispricing, money laundering, drug trafficking and corruption, we believe that aggressive tax avoidance and evasion probably form the most significant part of such illicit flows.
This was one of the reasons why the former Minister of Finance appointed a Tax Review Committee, chaired by Judge Davis, to improve the tax system and reduce the scope of tax avoidance and evasion. Judge Davis and his committee have already produced a report to deal with the problem of base erosion and profit shifting.
The problem of illicit flows within Africa requires Africa-wide co-ordination and co-operation. However, this is a global problem and it also requires globally-co-ordinated action. South Africa strongly supports and is, therefore, a party to actions taken by the African Tax Administration Forum, Ataf, and a number of other global agencies.
Therefore, as much as we have to do a lot of work as South Africans, we must also recognise that collaboration with other jurisdictions is critical in this regard.
Can I briefly talk about the SA Revenue Service? The global and domestic economic environments continue to pose a risk for revenue collection and compliance goals. Despite all this, I think the performance is well documented; Sars’ performance, as recently announced, is well documented.
What probably should be said is that it flies in the face of the assumption that Sars is in chaos and is collapsing. The performance proves the contrary, that indeed Sars remains focused on its core business of revenue generation and tax collection. However, we also need to add that some of the initiatives that have been taken to date to deal with the challenges at Sars have begun to bear fruit.
Our focus is to ensure that Sars remains stable and focuses on its core business of revenue collection. Indeed, if you read the results and the facts correctly, they point to the fact that we are succeeding in that regard. [Applause.]
You will see that Sars is also focused on profit-shifting schemes used by multinational entities and high-net-worth individuals to avoid or reduce tax liabilities in South Africa. It will also participate in and implement a multicountry, exchange-of-information agreements to enhance its efforts in this regard.
The SA Revenue Service’s efforts to improve trade facilitation will also be enhanced by the implementation of the new Customs Control and Customs Duty Acts during the 2015-16 financial year. This will have many benefits for traders, importers and exporters.
The SA Revenue Service’s will also continue in its efforts to reduce the compliance burden for small businesses operating in South Africa through its continued roll-out of small-business desks throughout the country. I stress the fact again that, contrary to what seems to be circulating and being pushed by some members in this House, Sars is focused on its core business and succeeding in doing its work.
With regard to the Financial Services Board, FSB, the process of preparation for transition to market conduct authority in terms of the Twin Peaks is well under way. The FSB is focused in this regard.
Within Treasury we have three institutions that particularly focus on financing development: the Land Bank; the Development Bank of Southern Africa, DBSA; and the Public Investment Corporation, Pic. I will briefly touch on a couple of points on the DBSA because the Minister has already said a lot on the matter.
Over the next three years, the DBSA will seek to increase investment in sectors such as energy, transport and logistics, water, information and communications technology, ICT. Health and education will get significant increases in its infrastructure financing support, contributing to municipal lending. State-owned enterprises will also be financed and their infrastructure plans and regional lending will be increased in the coming year.
Given the country’s current energy supply challenges and constraints, the DBSA will continue its investment in power-generation projects, including renewable energy as well as coal and gas-fired power sources. Key initiatives to be supported over the medium-term include the Small Projects Independent Power Producers Programme as well as continuing with the Coal Baseload Independent Power Producer Procurement Programme, CBIPPPP.
The DBSA actively supports infrastructure development in municipalities and I would say that the Minister covered this area quite well.
The fact is that in addition to increasing its investment and infrastructure, the DBSA will also be setting aside R30 million annually for project origination because we realise that in many instances projects don’t come to light because many municipalities don’t have the finance for project preparation. We will also be rolling out about R150 million in interest subsidies for selected municipalities.
As part of the banks project preparation activity, the DBSA will continue to manage the Infrastructure and Investment Programme for South Africa, IIPSA, on behalf of National Treasury and the European Union, EU. The IIPSA facility was concluded with the EU during the 2013-14 financial year, unlocking about €100 million for project preparation over a seven-year period. It is estimated that a leverage effect of at least 5 to 10 times the amount of financial nonrefundable contributions could be achieved.
In line with government’s objective to progress to a low-carbon and sustainable economy, the DBSA will continue with the R800 million green fund which remains crucial in supporting and focusing on high-quality and high-impact, job-creating, green economy projects around the country.
The Public Investment Corporation, Pic, currently has assets under management of approximately R1,8 trillion. The key strategic focus area for the Public Investment Corporation is to invest in sectors and industries that are aligned to government economic activities, as encapsulated in the National Development Plan, but also ensuring that you create value for those on whose behalf it holds the resources for.
The PIC investment strategy is focused on developmental investments across sectors. These include economic infrastructure, such as roads, ports, water and telecommunications; renewable energy; support to Eskom; and many other areas that will be announced. So, we wanted to stress ... Thank you very much. [Time expired.] [Applause.]
Mr M L W FILTANE
THE DEPUTY MINISTER OF FINANCE
Mr M L W FILTANE: Chairperson, hon Minister, hon Deputy Minister, hon members, I must acknowledge that I am not a member of this committee. I don’t want people to be surprised as to where I come from. I’m here on behalf of hon Kwankwa, who is not around today.
The UDM, as a matter of principle, and for practical reasons, does support the budget. We fully support the attitude of the committee with regard to the urgent need to resolve the internal divisions in SARS that are widely reported to the public. We do this regardless of the fact that one of them has actually exited today, because his exit could very well be the beginning of a new cycle of problems.
In support of the significance of the role of the National Treasury in the cabinet war room on Eskom, we further wish to emphasise the need to ensure that bailouts do not become the order of the day. They drain the national fiscus. Let us find another way of resolving these problems. Otherwise, people will artificially create problems knowing that they’ll be bailed out with millions.
The strengthening of government financial management and acceleration of deployment of the Integrated Financial Management Systems, IFMS, to all government departments should be considered for all spheres of government, in particular, the local government sphere. They need that.
The sharing of expertise through skilling, recruitment and retention should also accommodate the local-government spheres of government as well as the provincial sphere. They need the service.
We welcome the recommendation by Statistics SA, for a statewide statistical reform. We believe this process will also address the absence of suitably qualified officials with a background in statistics, with specific emphasis on local government again.
In addition to the creation of greater synergy across the three spheres of government, we believe that the role of community-based structures such as traditional institutions will make the work of Statistics SA easy and accurate with figures.
We will welcome and appreciate voting districts and ward-based statistical information that can help local government to develop voting districts and ward-based development plans in the context of integrated development plans. Thank you.
Mr M G P LEKOTA
Mr M L W FILTANE
Mr M G P LEKOTA: House Chairperson, hon Minister, Deputy Minister, members of the House, according to the 2015 Estimates of National Expenditure, ENE, government is instituting carefully selected tax measures, which must mean an increase in taxes.
Secondly, it is realigning expenditure in response to the closing of the fiscal space. That must, of course, amount to reducing government services this year. Furthermore, that service cost has now soared to R126,44 billion, and that is a massive slice of the budget that has been taken away.
According to this document, the purpose of this Vote is to support economic growth and development; good governance; social progress and rising living standards. This is supposed to happen through proper management of public finances and effective financial regulation of the economy; yet, the departments — most notoriously Public Works — routinely bypass the Public Finance Management Act.
The Auditor-General laments that there are no consequences for futile and fruitless expenditure, yet the ruling party does not take action on this matter. We are therefore taking part in a costly charade. There are no consequences for looters, only heavy consequences for taxpayers.
Many officials are scoring, but citizens are losing out in a big way. The net loan debt has shot up from 32% of Gross Domestic Product, GDP, in the 2011-12 financial year to 42,5% in 2015-16.
Why and how did we incur such a massive debt? According to this document, government borrowed heavily to achieve decent employment through inclusive economic growth. This is all smoke and mirrors. The money is gone, but the jobs never came.
Government has dashed the hopes of 4 out of 10 people in our country. It has also put the burden of the debt on the next generation. Where did the money go to? Where also is the countercyclical impact of the borrowing? Where is the infrastructure that resulted from the borrowing? These are questions to which we need answers.
South African tax payers, whom the government has taken for a big ride up to now, must prepare for a scary slingshot ride as government will squeeze harder.
In respect of our financial accounting and Supply Chain Management Systems, SCMS, the department asked for the budget to implement an efficient, effective and development-oriented Public Service.
The House Chairperson (Ms M G Boroto): Hon member, I’m afraid your time has expired. [Interjections.] Thank you, hon member.
Mr M G P LEKOTA: I’m sorry, Madam Chair, I’m not Malema! [Laughter.]
Mr S N SWART:
Mr M G P LEKOTA
Mr S N SWART: Madam Chairperson, we know that South Africa’s economy decelerated and depreciated markedly last year due to the negative impact of the domestic demands, labour strikes and the power supply shortages; and, as the Minister has indicated, recent data has shown that the economy struggled to gain momentum in the first quarter of this year as it derives its benefits from low oil prices, but these were offset against our electricity supply constraints.
Now, power shortages were raised in that committee and the ACDP shares the concerns raised about Eskom and the impact on economic growth targets. We believe that while it doesn’t resort under National Treasury, it should play some role in the Cabinet’s war room that is dealing with Eskom’s challenges.
Of course, the unprotected strikes at the Medupi power station are further aggravating the situation and require urgent intervention. It is shocking that Medupi may not reach full capacity until 2020, which is some seven years late. This will not only have an impact on economic growth, but it will also result in at least R3 billion rand in penalties to coal supplier Exxaro over the next three years.
We do wish to commend National Treasury in other areas such as its decision to withhold the distribution of municipalities’ equitable revenue share. Minister, that is a positive development as this will then hopefully ensure that municipal debt, including R4 billion to Eskom and R3,6 billion to various water boards, is raised and paid.
We also welcome the support to municipalities with their budget preparation and proper revenue forecasting. Nonpayment for services hobbles the providers and this results in service delivery protests.
We also believe that some of the issues at SA Revenue Service, Sars, are of concern. We will trust that golden handshakes aren’t given with the result that many of the issues are not dealt with. We also trust, as the Chairperson indicated, that these issues will be dealt with both in the Standing Committee of Finance and in Financial Intelligence. There are issues which are of concern.
Again, we need to commend Sars for its targets that were reached and we trust them, but obviously the proof of the pudding will be in the eating and we will have to see whether Sars reaches its targets again for this year.
We also trust that the implementation of the new electronic systems will assist in that we see taxpayers filed more than 99% of their returns electronically. Therefore, there are a lot of good things which are being done.
In conclusion we wish to commend National Treasury for its work that is being done. We are also grateful that the gallery is empty and that a lot of money hasn’t been spent on bringing a lot of officials down here. Maybe other departments need to follow your good example in saving the costs of bringing officials down. Thank you very much.
Mr D D D VAN ROOYEN
Mr S N SWART
Mr D D D VAN ROOYEN: Hon Chairperson, hon Minister and Deputy Minister, colleagues and comrades and the National Treasury team, in this year, which the ANC has declared as the Year of the Freedom Charter and Unity in Action to Advance Economic Freedom, allow me, as an acknowledgement to the role played by uMkhonto weSizwe, MK, in the struggle for the liberation of our beloved country, to dedicate my submission to the Budget Vote 7 debate to the many excombatants, who, after 21 years after our hard-fought freedom, are still struggling to make ends meet.
One of the key facets of the ANC’s conceptualisation of a developmental state is a sustained development based on high growth rates, properly restructured economy and inclusive growth.
As part of our transition from apartheid to a national democratic society, working together with our government, we need to ensure that economic growth is accelerated and the programme of economic transformation is intensified.
Hence, as the ANC we will forever be committed to building an integrated and growing economy from which all South Africans can benefit. We will continue to advocate and support government programmes meant to eliminate economic dualism and exclusion.
To give effect to this, the ANC resolved that the national infrastructure plan should be used as an instrument to change the structure of the economy and apartheid spatial distortions. It should also be used to support beneficiation and industrialisation, as well as to contribute to facilitating intraAfrica trade.
Hon Chairperson, despite the weak economic conditions alluded to by Comrade Yunis, our committee chairperson, the budgetary commitments made through this Budget Vote for 2014-15, has made it possible for the Public Infrastructure Programme to reduce constraints to growth. I will site a few examples.
Transnet’s seven-year, R310 billion capital investment programme, is currently creating jobs for our people, but also, it is modernising the freight logistic network to be the best and most competitive service provider. As a result of this intervention, 60 trains now run daily between Durban and Johannesburg, compared with fewer than 20 a decade ago. That is service delivery!
Maybe those who are obsessed with semantics will agree with me that this can also qualify to be classified as part of our radical transformation approach. [Applause.]
The stated ANC resolution will further be realised in this Budget Vote because it commits funding to telecommunications investments in the construction and upgrading of fibre-optic and mobile networks, and the introduction of the municipal wireless network, Wi-Fi, which will boost information access and affordability.
Faster, cheaper and more accessible broadband is critical to support small business and overall competitiveness.
Chairperson, on the 26 June 1955, our forbears resolved that the state should recognise the right and duty of all to work. Through this Budget Vote commitment, over 1 million jobs of varying duration were created in the 2013-14 financial year. To date, the Jobs Fund has created 30 701 permanent jobs and trained 75 163 job seekers. Just between August and December 2014, over 484 000 young workers were employed as a result of the employment tax incentive.
Interventions in the clothing, footwear and textiles sector made it possible for new production and clustering systems, and this enabled most firms to respond flexibly, with short lead times, to local and foreign demand. Such changes could boost job creation quite substantially.
In pursuance of our elder’s clarion call to open the doors of learning and culture, the ANC resolved that all mud schools should be eradicated. Underpinning this resolution, among other things, was an understanding that expanding education is the key to developing the skills required in the modern economy.
Through the commitment of this Budget Vote, over the past three years, 92 new schools have been built as part of the Accelerated School Infrastructure Development Initiative, Asidi; and in a well-known and well-documented development, two new universities opened their doors last year. [Applause.]
We are raising all these achievements to indicate to the doomsayers that as we approved this Budget Vote in the last financial year we were very clear as the ANC on which of our resolutions should be realised. Contrary to some misinformation peddled by others in this House, we are not giving a blank cheque to the Ministry. We are now confirming to the House and the nation what has been realised, and, of course, which areas should be improved.
The ANC welcomes the budgetary undertaking of spending R2, 8 billion for neighbourhood development planning projects. Over the medium term this will assist municipalities not only to develop more inclusive and productive built environments, but also integrated city development projects are provided for. Inter alia, we expect municipalities to use their allocations to encourage developments that help us to do away with the apartheid spatial development patterns that are very costly to our people.
As the ANC, we resolved that we would continue to strive for macroeconomic balances that support industrialisation, and are biased towards job creation which will ensure long-term stability and a sustainable economy. Central to that resolution is the need for our macroeconomic policy to counter economic volatility.
In this regard, the Budget Vote before this House makes commitment to allocate resources to a directorate that will focus specifically on analysing financial market conduct in line with the Twin Peaks model of regulating the financial sector. I think the Minister touched on this point.
With all the lessons learned from the recent global financial crisis, I hope we will all agree on the importance of these step. It will go a long way in ensuring that as a country we are ready for any economic shock.
At our last elective conference, we have noted as the ANC that despite all noble interventions made by our government, many former uMkhonto weSizwe members remain destitute, unemployed and poor, and do not receive much assistance from the state. And most importantly some of these former members were demobilised from the South African National Defence Force, SANDF, with few safety nets for their survival. We therefore resolved that there should be programmes to uplift these former members.
In responding to this resolution, Programme 7 of this Budget Vote before the House, namely Military Pensions and Other Benefits will be receiving R821,8 million of the R3,96 billion allocated to this programme; that is about 20% of the programme budget. [Applause.] We hope that this will help to ameliorate former MK members’ conditions.
As much as we welcome this appropriation, we are equally aware of the Auditor-General’s concerns about financial management irregularities in Department of Military Veterans. We call on Members of Parliaments, MPs, serving in the relevant Parliamentary committees and the Minister and her Deputy, to ensure that every cent of the appropriated amount reaches the intended beneficiaries; of course, we will be working with them.
In conclusion, Chair, as indicated by our committee chair, this
Budget Vote comprises commitments responding to most of the challenges faced by our people, and not supporting it is tantamount to abandoning our mandate as public representative.
Mokgatlo wa Batho, ANC, o ikamanya le go tshegetsa Tekanyetso Kabo ena ya bosupa. Ke a leboga Modulasetulo.
Mr D C ROSS
Mr D D D VAN ROOYEN
Mr D C ROSS: Chairperson, the Minister indicated his concern about our low growth that got stalled at 2%, and, of course, we share that concern.
The Minister also indicated the shortfall in electricity as a huge constraint to economic growth and that is, of course, problematic. But the Minister, in terms of addressing the Eskom funding requirement, only mentioned the increased tariffs as an option and also increased Independent Power Producer, IPPs, as a viable option.
I believe that we should put our full effort into alternative funding in this regard and how we can fund solutions to Eskom’s problems. I would like us to discuss this more thoroughly because it is noted with concern that when South Africa’s economic growth forecast was cut to 2% this year by the International Monetary Fund, IMF, the IMF also cited electricity constraints as one of the biggest impediments to growth in the economy. It therefore is important that we give our full attention to this.
The Standing Committee on Finance has given its attention to this, to a certain extent and was concerned about the divisions in Eskom — there are divisions everywhere, but specially in Eskom.
The committee further believes that National Treasury should play a full and more effective role in the Cabinet’s war room. Now that is very more important, and it is being led by the Deputy President and is dealing with the challenges confronting Eskom.
With regard to the funding crisis, the war room has not made any pronouncements and I believe that there should be proactive interaction from our committee with the war room — and that was also the proposal of the committee.
Currently Eskom finds itself in a funding crisis and is struggling to fund the completion of future generating plants, maintenance and operational costs. The concern is that we have to fund the R230 billion black hole that will require the attention of government.
The first option to plug this R230 billion black hole is a hike in electricity tariffs. We believe that this is unsustainable and if tariffs are high, mining, manufacturing and transport will bear the largest output losses. We have to be cognisant of that.
The electricity costs in the mining sector make up 30% of the total input costs and that will render the mining sector with no profit cover. These are serious concerns.
The implications of low economic growth is intensified by South Africa’s electricity crisis, as the prospect is that the National Energy Regulator of SA, Nersa, might be forced to open the Multi- Year Price Determination 3, MYPD3, which is currently 8%, to increase electricity prices to 25%.
Now it is estimated that if tariff hikes are increased by 15% to 25% it will cost the economy about R10 billion to 16 billion in terms of the revenue for the fiscus. This implies that the gross domestic product, GDP, growth will perhaps then dwindle to 1,6% instead of the 2%, after the predictions of the IMF.
Now this will have a huge impact on our growth forecast, so the hike in the electricity prices, I believe, should be avoided if possible.
Now the second option that could be addressed is with regard to increased state guarantees. The DA has long called for it that we should not increase state guarantees as it will have a serious impact on the contingent liabilities of the fiscus.
Now, currently, if the contingent liability is included in the debt-to-GDP ratios it will amount to a staggering 57% of the GDP. That is far too high and I believe this option is not a viable option.
Therefore, to make a concrete proposal, I believe the third option in this regard, which the DA has been calling for a long time, is the implementation of the alternative new-build funding model that will be fair to customers and could downplay the severity of this funding crisis.
This funding model is based, of course, on increased competition. This increases its efficiency and productivity, and it curtails political interference. The Minister has indicated the IPPs, and it is a very important aspect and we agree with that. But we noted the generally accepted business practice is that capital projects should be funded by a way of share capital, long-term loans and the bond markets.
I believe that the war room has made some progress in this but the details are scant. We would like to have more details on this.
With regard to share capital, a more sustainable solution would be to partly privatise the company by issuing shares on the Johannesburg Stock Exchange, JSE, as they are recognised internationally as a valuable acquisition currency.
Chris Logan from Opportune Investments indicates investors should be allowed to buy equity in Eskom — these are just proposals. Logan proposes that 30% of Eskom should be made available in new shares, resulting in direct cash injections into Eskom. That is partly privatisation.
Another option is access to long-term loans. In this regard I was delighted when the World Bank affirmed its support of the Eskom Investment Support Project, which was necessitated by delays in the new build projects.
It is unfortunate that we do not have any further details in this regard. We do not have details with regard to the alternative funding model. We urge Treasury to investigate and disclose the current status with regard to the commitment by the World Bank on funding Eskom.
We note, of course, our fiscal constraints which will make debt a little bit more expensive. The war room should be clear on this and with regard to the Brazil, Russia, India, China and South Africa, Brics, bank that was mentioned, of course it is a step in the right direction, but I believe we are still in the founding stages, as the Minister has indicated.
Minister, with regard to the bond market — and this is very interesting — South Africa should follow the example set by fellow African countries such as Senegal, Zambia and Nigeria, which have already issued international sovereign bonds for infrastructure development in the last five years and there is more to follow.
Our fiscal space, as everybody knows, shrank considerably during 2012, and we need to transform our economy into providing jobs and inclusive growth.
The developmental model, as my colleague Dr George has indicated, has failed in driving the economy. The DA has always advocated for the privatisation of the electricity-supply generation and the unbundling of Eskom’s supply monopoly.
In this regard, of course, people in energy are working on the Independent System and Market Operator Bill, but it has been stalled for a long time at a certain desk — so let us see if we can have that implemented. It would be hugely beneficial to our economy. It would take financial pressure off the state by getting private investors to help fund electricity supply provision.
The damage to confidence has begun, Madam Chair, and the silence on South Africa’s energy reform is not helpful. It is common knowledge that infrastructure constraints do hamper economic growth. I thank you, for the opportunity to participate. [Time Expired.] [Applause.]
Ms H B KEKANA
Mr D C ROSS
Ms P S KEKANA: Hon Chair, hon Minister Nene, Deputy Minister Jonas, the chairperson of the standing committee, my colleagues and the Treasury team, I think it is important for me to put the record straight on issues that have been raised by the hon members of the opposition.
I want to say to hon George that I think you have more reasons to be optimistic about the Minister and the Deputy Minister because they continue to do good work under harsh economic circumstances. There is no reason for you not to keep on congratulating them.
On the issue of Eskom, hon members will recall that when the ANC government came into power, one of the priorities that we looked at was access to basic services, and that included electricity.
The expansion of electricity infrastructure is a priority of the ANC government. That is why even now the issue of attending to the challenges of Eskom are at the top of the agenda of the ANC government. That is why Mr Brian Molefe has been deployed to deal with some of the challenges that Eskom is faced with. [Applause.] We are confident that he is equal to the task and he will be able to do that.
I don’t understand why the hon George is so obsessed with finding fault with the new SA Revenue Service, Sars, Commissioner. I don’t want to reduce this issue to having racial connotations, but I think I will appeal to the hon George to give him chance to perform because he has not even had 12 months in that institution.
For your information, hon George, for Sars to be a world-class institution is because of the ANC-led government. [Applause.] Today you cannot compare the capacity of Sars with any other institution and it is this ANC-led government that was able to do that and deliver. The DA must do the honourable thing and give credit to the ANC because we deserve it. [Applause.]
Coming to the Sikhakhane report, I have to set the record straight. The issue came to the attention of the committee and as the ANC is a democratic organisation, that also takes place in our committee in a very transparent and very democratic way, so all of us participated. We agreed unanimously that we will let this issue be dealt with. Let this issue come back to the committee after all other things, including the Kroon commission, is concluded. The DA agreed with us in that meeting. For the DA today to come here and be disingenuous is not fair to the committee.
On the issue of the Lakay report, even there the chairperson brought it to the attention of all of us and indicated that this matter will be referred to the Committee on Intelligence. Even with all other engagements, whether telephonically or whatever, these matters were brought to our attention and we were able to deal with them. That is how transparent and democratic the ANC government, including our chairperson and the standing committee, are able to be.
Don’t come here and be disingenuous on some of these matters and then want to grandstand.
On the amendment of the Banks Act, it is unfortunate the hon member from the EFF is corresponding with this committee and is not consistent in attending meetings. In between he misses out on other things. It is not about creating a soft landing for banks, by the way. Don’t confuse the R7 billion guarantee from the SA Reserve Bank, SARB, as a bailout. For your information, the new, good bank has been established with investment from private banks.
There is an investment of about R10 billion in which Absa Bank, Standard Bank, Investec, Capitec Bank, the Public Investment Corporation, PIC, and many others are participating.
The private sector is actually bailing itself out. That is there as a guarantee and it will still go back. It is not done at the expense of the taxpayers. Be consistent with this committee and you will have facts, and when you talk you will be talking from an informed position. [Applause.]
At the core of the ANC’s economic mandate is the transformation of the economy for inclusive growth. At the heart of radical economic transformation is the need for co-ordinated interventions in a number of sectors to fundamentally alter the structure of the South African economy.
This requires an effective state that is decisive in its pursuit of structural change. The core structural weakness of South Africa’s economy is our continued incorporation into the global division of labour as a producer and exporter of primary commodities and importer of value-added products.
Where the gross domestic product, GDP, has exceeded 5%, it was driven by the commodity boom, now ended, and by debt through consumption leading to unsustainable levels of household debt. Structural transformation must accelerate industrialisation towards a growth path driven by productive sector investment.
Key economic priorities for government in the short-term include sustaining and expanding the public infrastructure programme with particular emphasis on ensuring that key infrastructure programmes are more effectively linked to industrial policy goals including beneficiation, local manufacturing and regional integration.
These are the programmes of the ANC-led government so producing locally and doing all those things is an agenda set by the ANC, hon Shivambu. This is a programme that we are talking to, to explore greater opportunities for cofinancing with other stakeholders including the development finance institutions, DFIs, institutional investors and retirement industry and catalysing private-sector resources behind infrastructure development.
The National Treasury Budget Vote should be assessed against what is contained in the ANC-inspired medium-term strategic framework which guides government programmes over the 2014 to 2019 period, but equally instructs the National Treasury where revenue should be allocated. In addition, the 2014 ANC five-year election manifesto forms the policy programme against which the performance of the National Treasury can be measured.
With regard to the centrality of the infrastructure in economic development, South Africa needs to invest in a strong network of economic infrastructure designed to support the country’s medium and long-term economic and social objectives.
The Medium-Term Strategic Framework, MTSF, 2014-19, moves the country towards an inclusive and dynamic economy, but requires that the country should urgently launch the virtuous cycle that allows it to move to a new growth trajectory.
The emphasis on absorbing the unemployed into economic activity and higher mining exports to forge a new path in the economy of the future implies urgent investment in rail, water and energy infrastructure alongside regulatory reforms that provide policy certainty. At the same time, the private sector should commit more investment to supplier industries for the infrastructure programme, and to general economic capacity.
The 2015-16 Budget highlights a number of key important commitments by the government over the medium term in line with what is contained in the ANC’s election manifesto.
The 2012 Mangaung conference of the ANC reiterated our commitment to the Freedom Charter and improved service delivery for the poor. As a result, government continues to fund and support a number of key strategic projects that are aimed at moving South Africa forward and changing the lives of our people.
Hon Minister, you have shown in this programme of infrastructure investment and the National Development Plan, NDP, that government will support the development of infrastructure in economically integrated cities and communities. This will be done by the National Treasury through providing subsidies, technical assistance and training for infrastructure planning and development. The support is channelled through the neighbourhood development partnership grant, the integrated cities development grant and the infrastructure development improvement programme.
Steps have been taken by the current administration by placing infrastructure at the forefront of government’s agenda to transform the economy and stimulate economic growth and job creation.
In September 2011, the Presidential Infrastructure Co-ordination Commission, PICC, was inaugurated bringing key Ministers, premiers and metro mayors for the first time into a joint forum to promote infrastructure co-ordination and decision-making headed by the President, Comrade Jacob Zuma, and assisted by the Deputy President, Comrade Cyril Ramaphosa. The support initiative enhances infrastructure delivery and improves the lives of our people.
Hon Minister, you have spoken at length about the Eskom debt and the improvement thereof by municipalities. The call we are making, as this committee, is that there are departments that owe municipalities rates and taxes. That should also improve so that municipalities too can raise their own revenue and be able to develop accordingly. The ANC supports this budget. [Time expired.][Applause.]
MINISTER OF FINANCE
Ms P S KEKANA
The MINISTER OF FINANCE: Hon Chair, thanks to all the members who have participated in this debate as we table our Budget Vote. I also want to take this opportunity just to confirm that unless we have other interests and other agendas, we will see that all the initiatives that we have taken to restore the integrity of the South African Revenue Services, Sars, have been paying dividends.
If anybody were to listen to hon George speaking here, you would indeed believe that when you walk into Sars you will find a desk outside, everybody running out and there is just no institution. On the contrary, as the Deputy Minister was saying the organisation is solid and we have done everything in our power to maintain that.
As we indicated, we just need to work with the committee in order to sustain the work that is continuing, unless we have other interests. But I can assure you that no amount of posturing and grandstanding is going to destroy this organisation. We will work together with this committee and make sure that the institution continues to stand on its feet — and we are making good progress. [Applause.]
Hon George says that he asked a question as to why the commissioner had not been appointed; and says that we were waiting for somebody from the mountain. Hon George, you ask the question why the commissioner has not been appointed, and when the commissioner is appointed then you have a problem with the appointment of the commissioner. What exactly do you want? It’s not clear, hon Chair, what some members want.
He says our developmental model is failing; it’s precisely because he doesn’t want a developmental agenda because it addresses the challenges that were brought about by apartheid. When we address them, we know that there are people who actually feel the pain because we are actually inflicting the pain on them whilst we are actually taking the rest of South Africa out of bondage.
It was interesting to see that hon Shivambu without transfer pricing in his speech, is left with nothing. [Laughter.] So, indeed, there was absolutely nothing other than a little bit of kindergarten politics here and there, such as the invisible hands versus the visible hands. Honestly, I will be wasting time even on that.
The only thing he said was that we should have allowed the African Bank to fail so that the pension funds money that is in that bank to the tune of R40 billion goes down the drain. We salvaged it, and we actually still feel that it was the best thing we could do for the country and those pensioners. We are making good progress and again no amount of posturing will actually take that away from our performance. [Interjections.]
Mr N F SHIVAMBU: Chairperson, you know, I left ... [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Is it a point of order, hon member?
Mr N F SHIVAMBU: It’s an order.
The TEMPORARY CHAIRPERSON (Ms X S Tom): A point of order?
Mr N F SHIVAMBU: Yes.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Okay.
Mr N F SHIVAMBU: We left hon Kekana to speak there with a lot of ignorance, and the Minister is continuing on the same line.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Please, that is not a point of order. [Interjections.] It’s not a point of order. [Interjections.]
Mr N F SHIVAMBU: I think we need to have a mechanism whereby we clarify utter ignorance and semiliteracy in terms of these issues because ... [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member, it’s not a point not a point of order, please! [ Interjections.]
Mr N F SHIVAMBU: ... we have the time to indicate, you know. [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): It’s not a point of order. [Interjections.]
Mr N F SHIVAMBU: But if the ignorance continues like this, it’s so sad, especially if it is from government officials. [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member, order! [Interjections.]
Mr N F SHIVAMBU: Can we please be allowed to clarify some of these issues then? [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member, it’s not a point of order. Can you sit down. [Interjections.]
Mr N F SHIVAMBU: Is pure ignorance, it’s so sad.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member! [Interjections.]
Mr N F SHIVAMBU: It’s so sad.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Can you sit down? It’s not a point of order.
The MINISTER OF FINANCE: You should be grateful to this democracy that allows you space to demonstrate the tendencies you are demonstrating. But, indeed, he said we should have allowed the bank to fail. And what we did, in his view, was actually just to ... [Interjections.]
Mr N F SHIVAMBU: Order, Chairperson.
The MINISTER OF FINANCE: If that is ignorance, then it came from him. I just repeated what he said.
Mr N F SHIVAMBU: Order, Chair.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member!
Mr N F SHIVAMBU: On a point of order!
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon Minister can I ... What is the point of order, hon member?
Mr N F SHIVAMBU: The point of order is that I am from the podium there ... [Interjections.]
The MINISTER OF FINANCE: The next point I want to make ... [Interjections.]
Mr N F SHIVAMBU: But can I be allowed to speak and the Minister must ... [Interjections.] I am raising a point of order.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member, that is not a point of order. Can you sit down, hon member.
The MINISTER OF FINANCE: No, no, no. Not anymore.
Mr N F SHIVAMBU: Can I raise a point of order before I sit down?
The TEMPORARY CHAIRPERSON (Ms X S Tom): Will you sit down!
Mr N F SHIVAMBU: Can I raise a point of order before I sit down?
The TEMPORARY CHAIRPERSON (Ms X S Tom): Can you sit, hon member.
Mr N F SHIVAMBU: If the Rules do allow someone to deliberately misrepresent you ... [Interjections.] According to the Rules, I said ... [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member! [Interjections.]
Mr N F SHIVAMBU: ... why don’t you take strategic ownership of the bank ... [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member, you can’t debate here.
Mr N F SHIVAMBU: ... as it’s called for in the Freedom Charter and not to allow the bank to collapse — that is what we made a point on. [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Minister! Hon member ...
Mr N F SHIVAMBU: This semiliterate Treasury or Minister of Finance ...
The TEMPORARY CHAIRPERSON (Ms X S Tom): Can you sit down, hon member!
Mr N F SHIVAMBU: ... is misrepresenting what we said here. That is why I …
The TEMPORARY CHAIRPERSON (Ms X S Tom): We are degenerating into something that we don’t want. Can you please sit down, hon member.
Mr N F SHIVAMBU: You allow him to misrepresent what we said here.
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon member ... [Interjections.]
Mr N F SHIVAMBU: That is why he has never been elected. He relied on patronage because he is from KwaZulu-Natal. [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): ... this is not a point of order. It’s not a point of order. Sit down! [Interjections.]
Mr N F SHIVAMBU: Then we must listen to a person who speaks foolish things here. [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Sit down, hon member, it’s not a point of order. [Interjections.]
Mr N F SHIVAMBU: Hey! [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): It’s not a point of order.[Interjections.]
Mr N F SHIVAMBU: If Parliament means that we must agree to nonsense must we then sit down? You can’t sit down just because people are speaking nonsense here. [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): This is not a point of order, can you sit down, hon member. [Interjections.] Can you continue hon Minister? [Interjections.]
Ms N V NQWENISO: Chairperson! [Interjections.]
The TEMPORARY CHAIRPERSON (Ms X S Tom): Hon members, can we have order! Can we have order, hon members so that the Minister can proceed. [Interjections.]
The MINISTER OF FINANCE: Chairperson, I am convinced ... [Interjections.]
Ms N V NQWENISO: Order, Chairperson.
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): On what point of order are you rising?
Ms N V NQWENISO: Chairperson, according the Rules, Rule 64, a member is allowed to stand up and explain when what he said is distorted in the House. Yes.
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): But hon member, you are out of order.
Ms N V NQWENISO: I am not out of order, I am rising on the Rules. [Interjections.]
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): Because ... [Interjections.]
Ms N V NQWENISO: He is allowed to stand up and explain himself if what he said is distorted in the House. [Interjections.]
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): Hon member ... [Interjections.]
Ms N V NQWENISO: He is allowed to. That is one of the Rules of this House. [Interjections.]
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): Can you sit down, hon member. [Interjections.]
Ms N V NQWENISO: We cannot pronounce on them and interpret them the way we want to.
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): Any member needs the permission of the Chair to say whatever he or she wants to say.
Ms N V NQWENISO: He asked for your permission. You allowed it.
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): Can you sit, hon member.
Ms N V NQWENISO: He asked for your permission and you allowed it.
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): It was not a point of order. Can you sit down, hon member. Thank you. Continue hon Minister.
The MINISTER OF FINANCE: Chair, now let me deal with the real issues. On the point raised by hon Lekota with regard to growing debt and what happened to the borrowed money, I am sure it is on record, and hon members have this at their disposal, that over the past six to seven years we actually have invested in access of R1 trillion in our infrastructure in pursuance of exactly the countercyclical fiscal policy which sought to protect infrastructure.
We have increased the productive capacity of our economy by investing in infrastructure, protecting also — because that is where intergenerational equity comes in — the next generation from inheriting debt from this government without assets. Therefore, building infrastructure addresses precisely that point.
So if he wants to know what happened to the R1 trillion, it went into infrastructure as an investment — that is how debt actually was accumulated. What we are doing now is to consolidate our fiscal position so that we are able to create space again to be able to increase our spending.
Even in this Budget we continued to protect infrastructure, among other things, even when we were reducing the rate of growth of our expenditure.
Indeed, Parliament has a role to play, as hon Van Rooyen indicated. It is through the oversight of the committee and Parliament in general that we will be able to monitor the expenditure and the money that has actually been allocated to departments in order to make sure that we get value for money.
Looking at Eskom again, hon Ross, the package that we put together for Eskom still stands. The package deals with all the elements ranging from the R23 billion which will be realised by the end of June, to the issue of the conversion of the subordinated loan, but also giving space to Eskom to able to utilise the guarantees that they currently hold. And if you look at all the state-owned entities, the actions that we are taking are intended to make sure that the contingency reserve or contingency guarantees and liabilities, as you correctly pointed out, are not called on because it is when you build their balance sheets and their financial sustainability that you do not get into that position. Indeed, the high tariff hikes, if they can be avoided we will, but all we are saying is that Eskom needs to move towards a cost-reflective tariff structure because it then that they will be on sustainable basis. It is actually just that — being cost reflective.
The issue of private sector participation, private sector participation is not only through privatisation, but it is through a number of measures. We have said with our energy generation, coregeneration is one, IPPS is one of those – and a number of other initiatives that are being taken that seek to address the issue of government working with the private sector. [Interjections.]
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): Thank you very much hon Minister.
The MINISTER OF FINANCE: Once again, thank you hon Chair, and thanks to all sane Members of Parliament, MPs, who have actually supported this without any hesitation. Thank you. [Applause.]
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): That concludes the debate and the business of the Extended Public Committee.
Mr N F SHIVAMBU: Order, Chairperson, Chairperson, Chairperson!
The TEMPORATRY CHAIRPERSON (Ms X S Tom ): The committee will now rise.
Mr N F SHIVAMBU: Chairperson!
AN HON MEMBER: We must adjourn.
Mr N F SHIVAMBU: I am calling for order, but you are adjourning the meeting. What is the problem now?
AN HON MEMBER: We have adjourned!
The House adjourned at 18:37.
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