Hansard: NA: Unrevised Hansard
House: National Assembly
Date of Meeting: 25 Oct 2017
No summary available.
WEDNESDAY, 25 OCTOBER 2017
PROCEEDINGS OF THE NATIONAL ASSEMBLY
The House met at 14:04.
The Speaker took the Chair and requested members to observe a moment of silence for prayer or meditation.
The SPEAKER: Hon members, before I proceed to the order of the day, I wish to acknowledge the presence in the Speaker’s bay of the delegation from the parliamentary budget office of the parliament of the Republic of Uganda. We wish to welcome you to our Parliament. [Applause.]
Hon members, we also have through the directive of Minister Mapisa-Nqakula, the Minister of Defence and Military Veterans, a note regarding the presence of Mr Kayla Motari, the Minister of Defence from the Republic of Niger in the National Assembly. We welcome all our guests to the Parliament of the Republic of South Africa. [Applause.]
The SPEAKER: The first to the fourth Orders will be read by the secretary of the National Assembly.
Dr M Q NDLOZI: Speaker, on a point of order.
The SPEAKER: Hon Ndlozi.
Dr M Q NDLOZI: Hon Speaker, I want to rise with all earnestness and with due respect that Speaker, we have a big problem in that we cannot be seen to be compliant and collaborating with crime ... [Interjections.]
The SPEAKER: Hon member, what is the point on which you are rising?
Dr M Q NDLOZI: Hon Speaker, I am rising on Rule 92. We cannot allow Mr Gigaba to address Parliament, because he is the sole reason why we have a state of capture in South Africa. [Applause.] [Interjections.]
The SPEAKER: Hon Ndlozi, please take your seat! [Interjections.]
Dr M Q NDLOZI: He is the one who has handed all public state institutions to a collapse with the Guptas, hon Speaker. [Interjections.]
The SPEAKER: Hon Ndlozi, hon Ndlozi, please take your seat! [Interjections.]
Dr M Q NDLOZI: Parliament cannot be seen to legitimate what is essentially a Gupta stooge. There is no difference between him and Duduzane. [Interjections.]
An HON MALE MEMBER: Switch off his mic! [Interjections.]
The SPEAKER: Hon Ndlozi, please take your seat! [Interjections.]
Dr M Q NDLOZI: He is literally going there and he is an extension of Mr Zuma in the Treasury to frustrate our funds. [Interjections.]
The SPEAKER: Hon Ndlozi, please take your seat! [Interjections.]
Dr M Q NDLOZI: We are persuading this House that let us allow the commission to be set up and let us not be associated with criminals! [Interjections.]
The SPEAKER: Hon Ndlozi. [Interjections.]
Dr M Q NDLOZI: Gigaba is a criminal! He is a mini-Zuma. [Interjections.]
The SPEAKER: Hon Ndlozi. May I ask, may I ask the Serjeant-at-arms ... Where is the Serjeant-at-arms? The Serjeant-at-arms should go and assist Mr Ndlozi to leave the House. [Interjections.]
Ms N V MENTE: No! No! You must not ask him to leave the House! [Interjections.]
Ms D CARTER: Hon Speaker! Hon Speaker! [Interjections.]
Ms N V MENTE: You cannot! You must first ask him ... [Inaudible.]
Mr N F SHIVAMBU: Speaker! [Interjections.]
Ms D CARTER: Hon Speaker! Hon Speaker! [Interjections.]
Mr N F SHIVAMBU: Speaker, in terms of the rules, you do not enforce that law in that way. There is a legitimate issue that is being raised here that ... [Interjections.]
The SPEAKER: Honourable! [Interjections.]
Mr N F SHIVAMBU: ... you cannot allow a Gupta boy and a ball boy of the Guptas to address this House! [Interjections.]
The SPEAKER: Hon Shivambu! Hon Shivambu, you will also have to be assisted to leave the House if you want to. [Interjections.]
An HON MALE MEMBER: Switch off his mic! Switch off his mic! [Interjections.]
Mr N F SHIVAMBU: The blue-eyed ball boy of the Guptas to come and force us to collaborate in crime here! So, that is the simple issue that we are requesting that if you permissible there and respectable institution to be addressed by ball boys from corrupt families. [Interjections.]
The SPEAKER: You cannot just rise and say such and such a person is not allowed in the House. You have no such power yourself. So, please take your seat or leave the House! [Interjections.]
Mr N F SHIVAMBU: But there is a legitimate point that we are raising here, Speaker! [Interjections.]
The SPEAKER: Hon Shivambu! [Interjections.]
Mrs M R M MOTHAPO: On a point of order, Chair!
Ms D CARTER: Hon Speaker! [Interjections.]
Mrs M R M MOTHAPO: On a point of order, Chair!
Ke eng? Ke eng? Ke eng wena? O ra mang ge o re, “Ai, wena?” O ra mang?
The SPEAKER: The Serjeant-art-arms ... [Interjections.]
Ms D CARTER: Hon Speaker ... [Interjections.]
The SPEAKER: ... must please assist the hon Ndlozi. [Interjections.]
Ms D CARTER: Hon Speaker, you cannot just decide to remove people when you feel like it. [Interjections.]
Mr N F SHIVAMBU: Speaker! Speaker! That is not how this procedure is implemented. [Interjections.]
The SPEAKER: I will now switch off ... [Interjections.]
Mr N F SHIVAMBU: It is even wrong and rowdy. [Interjections.]
Ms D CARTER: Hon Speaker, there are procedures in this House! [Interjections.]
Mr N F SHIVAMBU: That is not how to utilise the Serjeant- at-arms! But also the Serjeant-at-arms must not take illegal decisions. [Interjections.]
Ms D CARTER: Hon Speaker! [Interjections.]
Ms H O MKHALIPI: Hon Speaker, on a point of order.
Mr N S MATIASE: Speaker, hallo! [Interjections.]
Ms H O MKHALIPI: Speaker, my mic is off! [Interjections.]
The SPEAKER: Hon members, I have asked you to take your seats and I am now on the floor. I am asking you to be orderly and to take your seats. [Interjections.]
Hon EFF MEMBERS: Which seats must we take now? Which seats now, because we are seating? We are sitting and you say we must take our seats. [Interjections.]
The SPEAKER: I am going to follow the order and the rules and I will let you know at the correct point what I would wish done and you will not disrupt the business of this afternoon. If you insist on your behaviour, we shall have to ask you to leave us to proceed with the business of the House. [Interjections.]
Today we are going to have the business of the House proceeded with and we insist on the business of the House proceeding. It cannot be your word against mine. [Interjections.]
Ms H O MKHALIPI: Speaker! Speaker!
The SPEAKER: The secretary shall proceed. [Interjections.]
Ms H O MKHALIPI: Speaker! Speaker! [Interjections.]
Mr N F SHIVAMBU: But Speaker! [Interjections.]
Ms H O MKHALIPI: Speaker!
Mr N F SHIVAMBU: There is a point of order here. [Interjections.]
The SPEAKER: The secretary will read the Orders of the day.
Mr N F SHIVAMBU: You cannot switch off our microphones.
Ms H O MKHALIPI: But Speaker, you cannot ignore us! [Interjections.]
Mr N F SHIVAMBU: Speaker, can you please switch on the microphones. Switch on the microphones we want to speak here. We are allowed to speak in terms of Parliament! [Applause.]
The SPEAKER: Hon members of the EFF, before I call upon the Minister, I want to know whether you have made up your mind on which one of you am I going to listen to?
Mr T RAWULA: Speaker, the mics are ... [Interjections.]
The CHIEF WHIP OF THE OPPOSITION: You have turned all the mics off! [Interjections.]
Mr N F SHIVAMBU: Thank you very much, hon Speaker. We are raising a legitimate question here that South Africa is in crisis because of Mr Gigaba, who handed over state- owned companies to the Guptas ... [Interjections.]
The SPEAKER: Hon Shivambu, that is not a valid point. [Interjections.]
Mr N F SHIVAMBU: ... and we are collaborating in crime if we allow him to address this Parliament about monies. [Interjections.]
The SPEAKER: Hon Shivambu, the Minister of Finance is going to address us. [Interjections.]
Mr N F SHIVAMBU: The Constitution has got an obligation on us.
No, he is not going to do that today.
The SPEAKER: He is going to do it.
Mr N F SHIVAMBU: It is not going to happen today! We cannot be collaborators in the crime that is going to be committed by Malusi Gigaba today!
The SPEAKER: Hon Shivambu that is not ... [Interjections.]
Mr N F SHIVAMBU: That is a simple message we are saying that, we cannot allow Malusi Gigaba to speak today or we are not going to have a sitting of Parliament today! It is as simple as that! [Applause.] [interjections.]
The SPEAKER: Hon Shivambu, I wish to proceed! I wish to proceed and therefore it means you cannot stay in the
House while we are proceeding, because we are proceeding! For we are going to proceed with the business of the House this afternoon and so, I have to ask that you leave the Chamber, hon Shivambu! [Interjections.]
An HON EFF MEMBER: The Chief Whip of the ANC can please sit down!
Mr N F SHIVAMBU: I am not going any where, Speaker. We are not leaving to any where! This is our Parliament and we have been elected by the people of South Africa. [Interjections.]
The SPEAKER: Hon Shivambu. [Interjections.]
Mr N F SHIVAMBU: We are not going to allow a criminal to address this House today, please! [Interjections.]
The SPEAKER: No, no, hon Shivambu! You really have to take yourself and your job seriously and therefore ... [Interjections.]
Ms H O MKHALIPI: Speaker!
The SPEAKER: ... having given you the opportunity ... [Interjections.]
Ms H O MKHALIPI: Hon Speaker!
The SPEAKER: ... to comply with the rules ... [Interjections.]
Mr N S MATIASE: Speaker, on what basis are you dismissing the hon Shivambu? He spoke and you allowed him to speak! [Interjections.]
The SPEAKER: ... I am now asking you, if you do not want if you do not want to stay and disrupting. Leave the House! [Interjections.]
Ms H O MKHALIPI: Speaker, on a point of order.
Mr N S MATIASE: And whilst he was speaking, you did not rule! Interjections.]
Ms H O MKHALIPI: Speaker, I am making a point of order! [Interjections.]
Mr N S MATIASE: On what basis! [Interjections.]
The SPEAKER: Hon members, you know that if you have any allegations about the Minister, you know how you must submit them. [Interjections.]
Ms H O MKHALIPI: Speaker! [Interjections.]
The SPEAKER: You know how to submit them, not in this rowdy disruptive fashion.
Ms H O MKHALIPI: Speaker, we are not rowdy; we are calling for a point of order as Members of Parliament. Can you recognise us and can you listen to us. Speaker, do not rush us, just listen to us and then respond. There are rules in this House and you cannot just do as you please. [Interjections.]
The SPEAKER: The Chief Whip of the Majority Party - I am told - has had his hand for some time. [Interjections.]
Ms H O MKHALIPI: But Speaker, can you recognise me first. [Interjections.]
The SPEAKER: No. No, I am not recognising you. [Interjections.]
Ms H O MKHALIPI: My hand is up, Speaker! [Interjections.]
The SPEAKER: Hon Chief Whip, please proceed. [Interjections.]
Ms H O MKHALIPI: But Speaker, you see, you are not neutral! [Interjections.]
The SPEAKER: I am not recognising you, I told you.
Ms H O MKHALIPI: But Speaker, you see you are not neutral. I had my hand up before the Chief Whip of the ANC.
The SPEAKER: I am not recognising you. I told you. Take your seat, hon Hlophe.
Ms H O MKHALIPI: Can you please recognise me as well, Speaker! I am the member of this House!
The SPEAKER: Take you seat, hon Hlophe! You may rise, hon Chief Whip.
Mr N S MATIASE: Speaker, before you allow ... Speaker! [Interjections.]
The CHIEF WHIP OF THE MAJORITY PARTY: Thank you, hon
Mr N S MATIASE: Speaker! [Interjections.]
The CHIEF WHIP OF THE MAJORITY PARTY: Speaker, our rules are clear and they say: If any one in this House has an allegation to make against any member of this House, it can only be made through a substantive motion.
The SPEAKER: Mh.
The CHIEF WHIP OF THE MAJORITY PARTY: This is in our
rules. However, secondly Speaker, Rule 85 which deals with reflections upon members, the President, the Ministers and the Deputy Ministers who are not members of the Assembly says: No member may impute improper motives
to any member or cast personal reflections upon a member’s integrity or dignity or verbally abuse a member in any other way. [Interjections.]
What the EFF is doing today hon Speaker, is reflecting badly on a Minister of Finance, without substantively putting a motion before this House. In fact, they are in conflict with our rules as we now speak. This is gross violation on their part of our rules. We agree with you, Speaker. It is either they toe the line of these rules or leave this House. [Interjections.]
Dr M Q NDLOZI: We are not here to legitimise criminals in the name of rules, Mr Mthembu! You could not stop corruption from that side! [Interjections.]
The SPEAKER: Hon Ndlozi! [Interjections.]
Dr M Q NDLOZI: It defeated you! Now you want to bring it to Parliament with rules. Gigaba is a Gupta stooge! He is here to steal the people’s resources. That is what he is! [Interjections.]
The SPEAKER: Hon Ndlozi, I have given you a further opportunity to comply with the directives of the Chair, as assisted by the Serjeant-at-arms and the general House that is co-operative and waiting for us to proceed with the business of the House. And the supposed to be hon members of the EFF benches are consistently showing an attitude of not being able and not willing ... [Interjections.]
Ms N V MENTE: Address the person that you want to address! [Interjections.]
The SPEAKER: ... to respect the House and to respect the rules. [Interjections.]
Mr N F SHIVAMBU: That is not how the rules are applied! That is not how the rules are applied. [Interjections.]
The SPEAKER: Hon Shivambu, I am not going to be lectured by you about what the rules are saying! [Interjections.]
Mr N F SHIVAMBU: The rules are not applied like that! But you must read the rules properly. [Interjections.]
The SPEAKER: I am not going to allow you and I am asking you now to leave the Chamber!
Mr N F SHIVAMBU: The rules say you must deal with the members concerned! Who are you talking about? You cannot generalise the whole EFF caucus! Who are talking about now? [Interjections.]
The SPEAKER: Hon Shivambu, if you are ... I am talking about hon Shivambu.
Mr N F SHIVAMBU: Address me then! [Interjections.]
The SPEAKER: If you know what your job is. [Interjections.]
Mr N F SHIVAMBU: Address me only and do not address the whole EFF caucus.
The SPEAKER: I am also addressing the hon Ndlozi and also addressing all other EFF members. [Interjections.]
Dr M Q NDLOZI: Must I stand when you address me? Must I stand or sit down when you address me? [Interjections.]
The SPEAKER: All other EFF members who are also disruptively raising their so-called points of orders, when they know that they are being disruptive. [Interjections.]
Including the hon Mkhalipi. [Interjections.]
Dr M Q NDLOZI: Why don’t you listen to ... [Interjections.
Ms H O MKHALIPI: But Speaker, what must I do?
The SPEAKER: I am not recognising you, hon member!
Ms H O MKHALIPI: But we have our hands up and you do not want to point at us. [Interjections.]
The SPEAKER: Take your seat! [Interjections.]
Ms H O MKHALIPI: But you give Jackson Mthembu the chance to speak. Speaker, why are you not neutral? We are Members of Parliament and we are equal! [Interjections.]
The SPEAKER: You do not want to be given a chance to speak! [Interjections.]
Ms H O MKHALIPI: Yes, I had my hand up! [Interjections.]
The SPEAKER: You want to disrupt the House. [Interjections.]
Ms H O MKHALIPI: No! We are members! [Interjections.]
The SPEAKER: You want to be disrupting the House. [Interjections.]
Ms H O MKHALIPI: No, Speaker, please listen to us. [Interjections.]
The SPEAKER: Hon members! [Interjections.]
Mr T RAWULA: Speaker, I rise on Rule 31. Speaker, you are inconsistent and you are biased. You have just given Mr Jackson Mthembu ample time to address the House without interrupting him, when you have been interrupting us! Why are you switching off my mic? We are bringing a critical point that Mr Gigaba is an enabler of corruption in South Africa. [Interjections.]
The SPEAKER: Hon member! [Interjections.]
Mr T RAWUALA: He is the one that has enabled the Guptas to force the country into this perpetual corruption! [Interjections.]
The SPEAKER: Hon members, hon members, I will now have to call the Parliament protection services to assist you to go out! [Interjections.]
Mr T RAWULA: So, we are saying this man must not address the House today, because, if he address this House we will be complicit to corruption! [Interjections.]
Mr N F SHIVAMBU: This is what is going to happen. [Interjections.]
This is what is going to happen and we are now giving a way forward. We are going to live you and continue with your corruption and listen to a corrupt person. [Interjections.]
We are not going to form part of this nonsense of a captured soul called Malusi Gigaba, who has surrendered our companies. Today he is going to sell Telkom. [Interjections.]
The SPEAKER: We welcome your leaving the House! [Interjections.]
Mr N F SHIVAMBU: He is going to finish off this country because of the corruption that is presided over by Jacob Zuma and the Guptas. We are done with this thing! [Interjections.]
The SPEAKER: Hon Shivambu, we welcome you leaving the House!
Ms H O MKHALIPI: Gupta puppet! [Interjections.]
Ms M S KHAWULA: This is not your House, this is our House! [Interjections.]
Mr M M DLAMINI: Gigaba is a puppet!
The SPEAKER: I call upon ... [Interjections.]
Nk M S KHAWULA: Salani, lamasela lawa! [Interjections.]
The SPEAKER: ... the Minister of Finance. [Interjections.]
Nksk M S KHAWULA: Zizikrelemnqa ezi!
MEDIUM TERM BUDGET POLICY STATEMENT
RATES AND MONETARY AMOUNTS AMENDMENT BILL
TAXATION LAWS AMENDMENT
The MINISTER OF FINANCE: Hon Speaker, Mister President, Deputy President, Cabinet colleagues and Deputy Ministers, Deputy Minister of Finance, MECs for Finance, leaders of political parties, Governor of the Reserve Bank, Commissioner of the SA Revenue Service, representatives of organised business and labour, civil society and faith community leaders, hon members, fellow South Africans, molweni, sanibonani, dumelang, goeie middag, avuxeni.
It is my privilege to present the 20th Medium Term Budget Policy Statement for consideration of the House and all South Africans. I also table the Adjusted Estimates of National Expenditure, the Adjustments Appropriation Bill, the Division of Revenue Amendment Bill, Taxation Laws
Amendment Bill, Tax Administration Laws Amendment Bill, and the Rates and Monetary Amounts and Amendment of Revenue Laws Bill.
As we I consider the medium-term outlook, I am reminded of a poem by Ben Okri, entitled Mental Flight, which I quote:
Will you be at the harvest,
Among the gatherers of new fruits? Then you must begin today to remake Your mental and spiritual world,
And join the warriors and celebrants Of freedom, realisers of great dreams.
You can’t remake the world without remaking yourself
With these evocative words, Okri challenges us to remake ourselves in order to remake the world around us. To become the realisers of great dreams, we must challenge and reimagine ourselves, be prepared to reinvent and create anew.
As part of this mammoth effort, and in one of the most important achievements of the fourth democratic administration, the National Development Plan, NDP, was developed five years ago, constituting a long-term vision for the country. The NDP was developed through an unprecedented and remarkably inclusive process, canvassing the views of South Africans from all walks of life, and drawing in the best national expertise and minds, as embodied by the distinguished and diverse group of national planning commissioners who developed the plan. This culminated in Vision 2030, which spelled out what was required to realise our aspirations for our society and for all who live in it.
It was absolutely critical for Vision 2030 to use the aspirations of our people as a starting point. That is what government is about. That is also what development is about – putting in place the conditions for people to realise their aspirations for themselves. This is true to Okri’s clarion call, which exhorts us not merely to be at the harvest or the realisation of the dreams, but to be among the gatherers of the fruit and the realisers of the great dreams; to be present at the letsema [harvest], not
merely as the beneficiary of the harvest of great fruit, but as an active participant of the sowing and, ultimately, one of the harvesters.
The NDP envisages a future in which our people will not be passive beneficiaries of the largesse of democracy but, indeed, active builders and midwives of the South Africa we want. Indeed, we must all be prepared to plant the seeds of the harvest. As Indian Nobel Prize Laureate and development economist, Amartya Sen, observed in his book, Development as Freedom:
Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy.
Expanding the freedoms that we have reason to value not only makes our lives richer and more unfettered, but also allows us to be fuller social persons, exercising our own volitions and interacting with – and influencing – the world in which we live.
Our people aspire to raise their children in conditions of safety, free from threats of sexual assault, drugs and gangsterism. They aspire to live healthy lives, with
access to medical care to prevent and treat illnesses. They aspire to develop their capabilities through education and training, apprenticeships and employment; to build wealth sufficient to live a decent lifestyle now and in their years of retirement; and to leave something to their families after passing on.
Perhaps, above all, they aspire to actualise themselves, to take advantage of all that life has to offer, and to pursue their dreams as masters of their own destiny. At its core, it is this fundamental purpose of enabling people-centred development that is and must be the central objective of government and the capable and developmental state called for by Vision 2030.
In this regard, the Medium Term Budget Policy Statement, MTBPS, is an important opportunity to reflect on the country’s finances and economic outlook, and to what extent this outlook supports our national development objectives, as articulated in Vision 2030. It is an opportunity to think about how we must remake ourselves if we are to reach the harvest evoked by Okri.
We are giving an honest view of the challenges facing our country. It is not in the public interest, nor is it in the interest of government, to sugarcoat the state of our economy and the challenges we are facing. It is only when we understand these challenges fully and candidly that we will know what to do and can decide what course we must take in addressing them, as well as what trade-offs we must make in the national interest. The Fiscal Framework we present to you recognises this and does exactly this.
The period ahead is not going to be an easy one. Our resolve is to remain on course and not to deviate irretrievably from the fiscal consolidation agenda we embarked on a few years ago. We will continue to optimise, squeeze and innovate to improve the quality and efficiency of our spending. We will continue to explore options available to us to stretch the rands in our care to address the challenges faced by the majority of the South African people – particularly unemployment, poverty and inequality – and the myriad social problems which emanate from these. It is tough but we must rise to the occasion. [Applause.]
Improving our economic growth outlook over the period ahead remains our biggest challenge. Creating jobs and dramatically rolling back the tide of unemployment remains our most urgent priority.
Ukuthuthukisa, nokulingana ngokomnotho, nokwandisa amathuba emisebenzi kubantu bakithi, yikho okumele sikuqhambise kukho konke esikwenzayo.
Government cannot do it alone. We need business, labour and civil society to come together to forge common solutions to growing the economy inclusively, and on a more radical and sustainable basis. Together, we must forge not only common dreams and commitments, we must become the architects of the dreams and ideals we share.
Time is of the essence. Our people want progress. They want tangible improvements in their lives. Government hears the call for urgency to act decisively on addressing key problems and creating tangible outcomes that citizens feel in their daily lives.
We are proud to say that, even in these difficult times, our nation’s budget continues to be a platform for social and economic transformation for all South Africans. The budget is strongly aligned with our constitutional imperatives and is highly progressive. Two thirds of spending goes to realising social rights enshrined in the Constitution.
The budget also strengthens the capabilities of working people to contribute meaningfully to national resources. Among developing countries, our fiscal system is notable for the extent to which it redistributes resources from the wealthy to poor and working families.
In response to spatial inequality, it develops township economies and connects them to economic opportunities. It also transfers significant resources from urban to rural communities. It cannot be overstated that the budget’s ability to advance constitutional and developmental objectives relies on economic growth as a prerequisite.
I turn now to the medium-term economic outlook. We have had to revise economic growth projections downwards from
1,3%, as tabled at the time of the Budget speech, to 0,7% for 2017. [Interjections.] Growth is subsequently expected to increase slowly, reaching 1,9% in 2020. This trend assumes that the status quo prevails.
Therefore, we have the power to change our course; the political, social and economic agency to chart a new path. The global environment may be helpful, as growth is improving, despite persisting risks. The International Monetary Fund, IMF, projects that global growth will average 3,6%, in 2017, and reach 3,7%, in 2018.
The positive global outlook reflects a recovery in demand and trade in Europe and Asia. World trade volumes are expected to rise by 4,2%, in 2017. Low interest rates in the United States, Europe and Japan remain supportive of growth. The US will reach its pre-crisis average growth rate of 2,3% next year, which bodes well for broader global conditions. The Eurozone will continue to benefit from strong domestic demand. In Japan, better-than- expected growth in net exports is likely to improve its performance, in 2017.
Brazil and Russia have returned to growth after lengthy recessions. Growth in Brazil has been supported by a strong export performance. In Russia, stabilising oil prices and improved confidence have contributed to improved growth outcomes.
Similarly, the outlook for sub-Saharan Africa is projected to recover to 2,6%, in 2017, and climb to 3,4%, in 2018. This is, however, still below the average in the pre-crisis years. Growth outcomes vary across the region, but there are many opportunities. For example, Kenya and Ethiopia are expected to grow at 5% and 8,5%, respectively, in 2017, due to strong domestic demand and infrastructure investment.
Our firms are in a great position to capitalise on renewed growth in Africa. The development of our region will depend on how we leverage our global relations and the ability to mobilise both domestic and international resources. A key opportunity in this regard is to improve regional trade by upgrading key ports of entry, especially Beitbridge, which is the gateway to the North- South Corridor. [Applause.] The Department of Home
Affairs is working on revamping this and other ports of entry through public-private partnerships, which will improve the movement of travellers and trade facilitation.
Regional development requires capacity building in areas of capital markets, tax collection, the combating of illicit financial flows, budgeting, infrastructure financing and development, and many others. Together with Germany, we will be chairing a working group at the G20 focusing on mobilising financing for infrastructure on the African continent.
As the global and African economy improves, we need to better position ourselves to take advantage of the improved global outlook and, in turn, strengthen our medium- and long-term growth prospects. There is no magic bullet to do this. Much depends on the policy choices made and the effectiveness of their implementation.
Procrastination and dithering must end. We must demonstrate decisive leadership. We must plant the seeds of the harvest we want to reap.
Progress on the reform agenda is critical if we are to take advantage of changing global conditions. We need to increase the pace of reforms. Government must improve its productivity and decisiveness.
At the advent of our democracy, the people and their leadership forged a social contract to pursue a better life for all. The platform for this had already been set up during the course of our long, arduous and gallant struggle for freedom, which sought not only political rights, but fundamental socioeconomic transformation which would benefit all the people. The Freedom Charter articulated our common aspirations for a future in which the people shall govern, enjoy political and socioeconomic freedom, and live in peace with their neighbours.
During this, the centenary year of O R Tambo, it is fitting to reflect on the prophetic words of the great man, who did as much as anyone to usher in the democratic dispensation we enjoy today. He predicted that economic transformation would be a core issue of national dialogue in the democratic period, saying:
... the issues as to how the wealth of our country is redistributed for the benefit of all our people, how the economy of our country is remoulded in order that all South Africans may thrive and prosper, are of prime importance and should find their solutions in the context of democracy. These are matters requiring the participation of the people; issues to be settled by informed debate and discussion in a democratic and sovereign parliament rather than through street battles.
He predicted this very moment, when democratically elected leaders, with the people’s participation, would forge solutions that would ensure the prosperity of all South Africans. Accordingly, we have set ourselves ambitious but attainable targets in the NDP to alleviate poverty, inequality and unemployment. We said we would grow the economy by 5,4% per year, and we would bring unemployment down to 6%, by 2030. [Laughter.] [Interjections.]
Hon members and fellow South Africans, let us for a moment consider the importance of economic growth. Why do
we need our economy to grow? It is economic growth that creates employment opportunities; creates opportunities for large and small businesses to thrive; allows our population to accumulate wealth; supports increases in government revenues; and facilitates the expansion of social programmes.
Economic growth generates the tax revenue that allows the roll-out of housing, water and sanitation, health services, education, and many other services the government provides. Growth is therefore a precondition for our ability to deliver on the promise for a better life for all.
Disappointingly, between 2010 and 2016, the level of economic growth compares very poorly against our NDP ambitions. Consequently, GDP per capita has declined for two consecutive years; millions of South Africans are still living in poverty; unemployment is 27,7% - the highest level since September 2003, and is most harshly felt by our youth; and wealth remains highly concentrated
– 95% of our wealth is in the hands of 10% of the population. [Interjections.]
We have the unenviable twin challenge of growing the economy as well as ensuring that it is more inclusive. Our starting point therefore is that economic growth and transformation are mutually reinforcing principles. We cannot allow a repeat of the past where periods of relatively high economic growth were characterised by an uneven accrual of economic benefits. [Applause.] [Interjections.] There should be no doubt that an economy that grows should ensure that all our people live productive, prosperous and dignified lives.
The economic exclusion of a vast section of the population undermines the realisation of the constitutional vision of a more equal society. This economic exclusion is driven by a range of challenges that have been well-documented over the years. For example, direct black ownership and management of the economy remains extremely low. Employment equity remains a challenge with progress for black people and women participating at top and senior management levels having apparently stalled.
In addition, there is a high degree of market concentration, with low competition and high barriers to entry. In several sectors, a handful of companies dominates, controlling between 80% and 90% of the market share. Prospective market entrants find it extremely difficult to break in, as dominant companies enjoy seemingly unattainable advantages. Historically segregated and entrenched spatial planning affects travel costs as well as job searches, and effectively disadvantages many individuals from equal participation in the economy.
These distortions in the economy are unsustainable. They aggravate social fragmentation and pose a real risk to inclusive economic growth. The inequality they spawn can generate extremely divergent views, making compromises difficult. The resulting stalemate and policy uncertainty can contribute to economic weakness and low confidence.
As a result, South Africans - and citizens across the world - are rightly calling for a change in how the benefits of growth are distributed.
We cannot commit similar mistakes in the next phase of economic growth. We need to engineer a new growth and transformation paradigm, a model anchored on a common vision for the economy and its society. This model should embrace the sharing of economic resources provided by our land, the South Africa that truly, economically, belongs to all that live in it. We also need a transformation model that goes beyond mere tick-box compliance towards structural change of patterns of ownership, control, management and production. [Applause.]
These conditions for growth and transformation will lay a better foundation for better policy designs, discourse and collaboration. We need to demonstrate that we can be a country at work, and a country that works. We desperately need government to play its role effectively as an enabler for and an active participant in growth and transformation. We desperately need business that invests, thereby creating growth and employment. We need labour that is productive, ever growing its capabilities. We need a society that aids progress through constructive dialogue, active citizenship and social tolerance.
In this regard, I would like to highlight the encouraging example of the CEO Initiative, which brings together various business formations across economic sectors. I commend them for advancing efforts on the Youth Employment Service initiative to bring close to a million young South Africans into internship over the next three years; and setting up the R1,5 billion South African Small and Medium-sized Enterprise, SASME, Fund, which will soon be operational. I highlight these developments to show the power in having unity of purpose.
This Medium Term Budget Policy Statement reaffirms our collective commitment to inclusive growth, transformation and competitiveness because these three policy objectives form a virtuous circle. Our next phase of growth must be characterised by radical socioeconomic transformation, broadly defined by President Zuma in this year’s state of the nation address as “fundamental changes to the structures, systems, institutions and patterns of ownership, management and control of the economy, in favour of all South Africans, especially the poor, the majority of whom are African and female.” [Applause.]
Kumele sifinyelelise inqubekela phambili ne ntuthuko kubantu, ikakhulukazi kubantu abantsudu, abesifazane, nentsha.
Broad-based economic transformation opens up the economy to those previously marginalised, generating new businesses and wealth. It is about transforming key sectors of the economy to support globally-competitive production.
Slow progress and poor co-operation have given rise to a lack of trust between stakeholders and policy contestation that has compromised the economy and confidence. For example, it is critical that we resolve the impasse in the mining sector, which is critical to the South African economy.
Government and business must find common ground on a mining charter which attracts investment, advances transformation and benefits workers and communities. [Applause.] Government is eager to get all parties back
to the negotiating table to find a solution. In the immediate term, we need to rebuild confidence as a matter of urgency and also work to engender an economic system that is built on a common vision.
Business and consumer confidence are currently at historical lows. [Interjections.] This has direct negative consequences for investment, job creation and household spending. Confidence indicators can be self- reinforcing and self-fulfilling, as they serve as leading indicators to investment and employment growth, which is critical for the overall economy. For example, when business is optimistic about the prevailing conditions and economic prospects, it will set in motion a virtuous cycle of accelerating investment, employment and income growth. This will ultimately boost economic activity.
Conversely, heightened economic anxiety and languishing confidence can become entrenched, often making it difficult to reach and sustain growth over the long term. This creates a vicious cycle of low growth, low investment, unemployment, and thus, reduced government revenues and reduced government spending.
We must do the hard things required to move from a vicious cycle to a virtuous one. We must be decisive, avoid procrastination and work together to forge a social contract for a better life for all. [Applause.] We must plant the seeds of the harvest we wish to reap, in the end. [Interjections.]
Demonstrative actions that build business and consumer confidence can encourage global and domestic investment, broaden private-sector activity and boost competitiveness. Through our interactions with investors, both domestic and international, several key issues came to light about constraints to growth and the reasons behind low confidence. These are policy uncertainty emanating from long-outstanding legislation in key sectors; governance challenges and weak balance sheets for state-owned companies; a constrained Fiscal Framework and rising government debt; and perceived political uncertainty.
In order to address these and other concerns, Cabinet announced 14 confidence-boosting measures with clear timelines to facilitate faster implementation, in July.
It is commendable that we have been able to deliver on key aspects of the confidence-boosting measures in the last few months. We have proven that when a vision is set out with clear targets, we are able to put our shoulders to the wheel.
To cite but a few, we appointed a new board, permanent chief executive officer, and a chief restructuring officer at SAA. [Applause.] The airline now has a strengthened and capable leadership to implement its Long-Term Turnaround Strategy, to which we will return later.
Together with Ministers Zulu and Pandor, we are setting up a fund for small business enterprise development that focuses specifically on start-ups. [Applause.] The Government Technical Advisory Centre is assisting us to operationalise the fund.
The Council for Scientific and Industrial Research completed a study on spectrum availability and open access on behalf of Minister Cwele and his colleagues at the Department of Telecommunications and Postal Services.
Minister Patel is driving a process for the Competition Commission to launch a market inquiry to investigate data prices. It has also been actively investigating anti- competitive conduct. [Applause.] Minister Patel is also finalising draft legislation to improve our policy and legal framework on competition issues.
We are finalising draft legislation to enable the Postbank to receive a banking license. Minister Nkwinti is consulting stakeholders on the Regulation of Agricultural Land Holdings Bill.
We have to acknowledge that these efforts, alone, are not going to see our NDP goals realised. We need to increase the pace and scale of structural reforms. To stimulate economic growth, these confidence-boosting measures must be accompanied by a range of other microeconomic reforms.
Broader work on the Nine-Point Plan needs to be intensified. Other reforms are outlined in some detail in the NDP. Some of these microeconomic reforms include completing necessary logistics-sector reforms that drive down port and rail prices, improving global
competitiveness; and energy policy which provides electricity at the lowest possible cost to households and industry.
We should ensure greater support for the tourism sector, also increasingly referred to as “the new gold”. We must also expedite necessary reforms to enable ease of travel into and out of the country, particularly to support the tourism sector, which is a critical source of revenue.
In fact, many of these reforms are already part of the government’s existing work programme. It is not a lack of planning that is letting us down. Our greatest challenge remains effective implementation and slow pace, in many instances. We cannot expect the economy to slow down to the speed of government. Government must speed up to meet the needs of the economy. [Interjections.]
Our interactions with various businesses and stakeholders across many sectors have also highlighted several issues that are in line with the vision outlined in the NDP. Those in the manufacturing sector are calling for additional measures to support the sector to return to
its former glory. Those in the mining sector are calling for the resolution of key legislation to enable investments. Those in agriculture talk about missed opportunities with regard to the provision of land and government support for farmers.
There are widespread concerns about the governance and performance of key state-owned companies. All are united in condemning corruption in the public and private sector and are calling for renewed efforts to combat it. [Interjections.] [Applause.]
Minister Davies and I agree on the importance of the manufacturing sector in supporting sustainable growth, in the long term. Manufacturing is vital, in that it forms the basis of a modern economy by raising productivity levels and innovation, and driving structural change.
Minister Pandor consistently reminds me, and rightly so, that even during our economic difficulties, we must continue to invest in research, development and innovation as an indispensable driver of social and economic progress.
The manufacturing sector links agricultural production and resource extraction to high-value addition, which is critical for our trade balance. In a nutshell, manufacturing is critical to our aspirations as an economy to grow, create decent and sustainable jobs, transform, and develop into a modern society.
Public procurement, with a strong localisation component, is an important tool of industrial development across the world and has already started delivering results. The current Preferential Procurement Regulations provide the following: targeted procurement through pre-qualifying on the basis of a BEE status level, or SMME, or designated group, that is, black youth, women, co-operatives, township and rural enterprises, and military veterans; compulsory sub-contracting to designated groups in all projects or contracts above R30 million – and nothing prevents organs of state from applying sub-contracting provisions in projects or contracts below R30 million; and the designation of sectors and industries for localisation to support industrial development, localisation and job creation.
Further work on procurement reform is advanced. The Public Procurement Bill, which we plan to table in the National Assembly, in 2018, provides for the following, among others: set-asides in the allocation of contracts for the protection or advancement of designated groups, including township and rural enterprises; black-, women- and youth-owned enterprises; co-operatives; and people with disabilities, to name but a few. It proposes tools for optimising efficiency and effectiveness, and value for money. The Bill will consolidate this fragmented procurement legislative landscape and provide for a single overarching national procurement framework for all spheres of government.
The government cannot do this alone, however, as it can only buy so much. In order for procurement to have a lasting impact on our manufacturing sector, we need the private sector to match us in these efforts. The Proudly South African campaign must be deepened and expanded. I would like to challenge my co-chair in the CEO Initiative, Mr Jabu Mabuza, in his absence, to assist in putting localisation firmly on the agenda of this initiative. [Applause.] Furthermore, we remain committed
to providing incentives for investment, production and employment in a way that is effective, and provides the state with value for money.
Let me now outline the Fiscal Framework. In the democratic period, our government has responded to our nation’s high social needs with budgets which devote substantial resources to social spending. In our discussions about fiscal policy, we must not lose sight of the fact that the majority of South Africans rely on the services provided by government in order to live a decent life. These services are largely sustained by the greater part of consolidated government expenditure which goes to social services, on education and training, health care, water, housing, public transport and social protection.
The Fiscal Framework, which supports these services, is threatened by the low growth we have experienced in recent years, in an environment where there are new social pressures. Over the past four years, government has followed a path of measured fiscal consolidation, aiming to stabilise the debt-to-GDP ratio by reducing
spending and introducing tax increases. This strategy has met with some success, reflected in a narrowing primary deficit, but debt has continued to rise as a share of GDP as economic growth rates have declined.
This year, sluggish economic growth has caused a significant reduction in the tax revenue outlook, which has significantly eroded government’s fiscal position. Tax revenue is projected to fall short of the 2017 Budget estimate by R50,8 billion in the current year. This is the largest downward revision since the 2009 recession.
At the same time, additional appropriations of
R13,7 billion to recapitalise South African Airways, SAA, and the SA Post Office are being made. [Interjections.] These have been partially offset by use of the contingency reserve. A shortfall of R3,9 billion remains.
To ensure the expenditure ceiling is not breached, we have decided to dispose of a portion of government’s Telkom shares. We do not take this decision lightly, but we have had to, in order to maintain the credibility of the expenditure ceiling. As a result of these
developments, the consolidated budget deficit will widen to 4,3% of GDP in 2017-18, against a 2017 Budget target of 3,1% of GDP.
We have been carefully deliberating on the best fiscal strategy to ensure the programme of measured fiscal consolidation is not derailed. None of these options is free of pain. Some would argue for the imposition of more austere measures to aggressively rein in the growth of public debt. Others might argue that to reduce spending levels would further damage the economy.
Government’s short-term options to reverse this situation are limited. Given that per capita income is falling, the economic impact of further expenditure cuts or tax hikes could be counter-productive. Following several years of expenditure restraint, further budget cuts will involve hard choices and difficult compromises. Sudden or deep additional cuts that are not well-targeted could put severe pressure on already stressed departmental budgets.
At the same time, government is acutely aware of the dangers of unchecked debt accumulation. Debt-service
costs are the fastest-growing category of expenditure, crowding out social and economic spending. By 2020-21, nearly 15% of main Budget revenue will be spent servicing debt.
To confront these challenges, government has agreed on at least four elements. Firstly, to offset revenue shortfalls and reduce borrowing, the contingency reserve has been pared down to R16 billion over the next three years.
Secondly, to consider fiscal efforts – a mix of expenditure cuts and revenue increases – to address some of the revenue shortfall over the Medium-Term Expenditure Framework, MTEF. Announcements will be made on these fiscal efforts at the time of the 2018 Budget.
Thirdly, over the medium term, government will maintain the ceiling on non-interest expenditure. New spending priorities will have to be met by funds reallocated from within existing limits. Any adjustments to the ceiling itself would need to be matched by revenue increases.
Fourthly, government recognises that the best way to ensure the sustainability of public finances is to achieve higher economic growth. We aim to kick-start inclusive growth by implementing the 14 measures to improve confidence and accelerating progress on structural and microeconomic reforms.
Delivery on these commitments will be complemented by a stimulus package, options for which are being considered.
In summary, these are the key points on the economic outlook and the Fiscal Framework in this MTBPS. Conditions in the global economy continue to improve, but the risks of financial turbulence remain high and the long-term outlook for growth and commodity prices remains muted. The 2017 Budget projected GDP growth of 1,3% in 2017. This is being revised downwards to 0,7%. We forecast growth of 1,1%, in 2018, and 1,5%, in 2019.
Due to lower than expected economic growth this year, gross tax revenue for 2017-18 is projected to be R50,8 billion rand lower than projected in the Budget.
The consolidated budget deficit will widen to 4,3% of GDP
in 2017-18, against a 2017 Budget target of 3,1% of GDP. Gross national debt is projected to reach 61% of GDP by 2022, with debt-service costs approaching 15% of main Budget revenue by 2020-21.
Government aims to resolve the setback in fiscal consolidation by paring down the contingency reserve over the MTEF; cutting into the deficit with fiscal efforts to be announced in the 2018 Budget; kick-starting higher economic growth by implementing confidence-boosting measures and implementing reforms; and maintaining the expenditure ceiling.
The expenditure ceiling is threatened in the current year as a result of government’s recapitalisation of SAA and the SA Post Office. In that regard, government is disposing of a portion of its Telkom shares to avoid a breach, with an option to buy them back at a later stage. [Interjections.]
Infrastructure investment will amount to R948 billion over the next three years. Efforts to improve supply
chain management and achieve value for money in government spending will continue.
To ensure that the budget process is aligned to the NDP, the Department of Planning, Monitoring and Evaluation has prepared a mandate paper which contributes to better alignment between planning and budgeting by providing a clear link between the NDP, the Medium-Term Strategic Framework, MTSF, and budget choices. It recognises that resources are finite and thus, hard choices will need to be made about which government programmes should continue and which should be postponed or shut down, as well as the need for more efficiency in the way departments deliver their programmes. It also improves alignment between all spheres of government and includes inputs from other stakeholders, like provinces and local government on the Budget before Cabinet approves the final version.
Despite fiscal pressures, government will continue to protect spending on core social programmes that benefit poor South Africans. Over the next three years, consolidated spending will increase by an annual average
of 7,3%, from R1,6 trillion in 2017-18 to R1,9 trillion in 2020-21. Community development, learning and culture, as well as health, are the fastest-growing functions.
The student movement has correctly put the issue of higher education at the centre of our transformation agenda. We cannot hope to grow and develop without the skills and intellectual capabilities that our universities and technical training colleges produce.
The budget already makes an enormous contribution. The sector’s budget is the fastest growing element of expenditure over the medium term, rising from R77 billion this year, to R97 billion in 2020-21. This includes the provision of financial assistance to subsidise the education of more than 450 000 students every year.
Clearly, however, more needs to be done.
The Heher Commission of Inquiry into Higher Education and Training has delivered its final report to the President, and we await the President’s determination and announcement in this regard. Although the fiscal constraints we face are real and binding, we must make
every effort to ensure that no academically deserving student is excluded due to financial constraints. [Applause.] Further announcements will be made in this regard, both in the state of the nation address and Budget 2018. The Adjustments Appropriation Bill allows for revision to the Budget tabled in February, as prescribed in the Public Finance Management Act.
With respect to the division of revenue between the three spheres of government, the MTBPS sets out revenue projections and the proposed MTEF for the three-year period ahead. The division of revenue takes account of the respective functions and own revenue-raising potential of each sphere. Over the next three years, the proposed division of revenue allocates 43,2% of non- interest spending to provinces, mainly for health, education and social services; and 9,2% to municipalities to support the cost of delivering basic services to the poor.
The Finance MECs for the nine provinces share my commitment to eliminating wasteful spending across government and ensuring that our public funds are used
for the benefit of our citizens. Provinces have already made good progress in reducing spending on non-priority items and in managing the growth of their wage bills.
They are now making strides towards also using their procurement budgets to drive local economic development and transformation.
Government is continuing to review the formula used to allocate the provincial equitable share among the nine provinces to ensure that it remains impartial and fair, while responding to the needs of provinces. The priority government places on the social services that provinces deliver - including health, basic education and social development services that account for nearly 80% of provincial spending – is reflected in the growth of provincial allocations by an average of 7,2% a year over the MTEF. This is well above projected inflation.
South Africa is an urbanising country. Over 70% of households will live in urban areas by 2030. All over the world, urbanisation has been associated with a reduction in absolute levels of poverty and rising prosperity.
However, due to the massive inequalities and social
legacy of apartheid, South Africa is at risk of missing the benefits of this urban revolution.
Government is on course to position cities and towns as the engines of future economic growth. To do so, it has embarked on the programme clearly set out in the NDP to radically transform the spatial footprint of our urban areas and rid ourselves of the distorted, inefficient and highly unequal spatial legacy of apartheid.
Recently, Cabinet approved the Integrated Urban Development Framework that will guide our response to urbanisation across all its dimensions. Already, the Cities Support Programme is under implementation in metropolitan municipalities, and will be scaled up from 2018. A complementary programme for secondary cities has also been prepared, and will begin to roll out in Polokwane and uMhlathuze from next year. Similar initiatives are under development for the regeneration of small towns.
The estimated infrastructure expenditure of R948 billion over the MTEF period constitutes some 5,9% of GDP. This
is an important contributor to growth and employment. The lion’s share of economic infrastructure is provided by state-owned companies, SOCs, which are projected to spend a total of R402,9 billion over the MTEF.
Municipal spending is projected to be R197 billion, whilst the provinces are anticipated to spend
R208 billion over the MTEF. The education sector is expected to spend R44 billion on building new schools and refurbishing existing schools, libraries and laboratories. [Applause.]
Government is embarking on a number of new initiatives in infrastructure in order to improve the quality of our infrastructure spending. This includes maintenance of existing infrastructure, improved procurement of infrastructure projects, and better conditional grant terms to eliminate inefficiencies and underspending.
Cabinet has approved the Budget Facility for Infrastructure, which aims to overcome shortcomings in the planning and execution of large infrastructure projects. It has begun considering proposals in water,
rail development, broadband, magistrate and high court construction and refurbishment, amongst others.
In addition to the tabling of tax legislation for the 2017 Budget, I am also happy to announce that Cabinet has approved the release of the Carbon Tax Bill to Parliament for formal consideration and adoption. The fairness and integrity of the tax system is critical for the deep social contract between government and the people. It shapes the willingness of the people to pay their just dues to the state, which governs on their behalf. In this respect, it is important that we continually strengthen tax morality and deal with any underlying causes that may undermine it, such as public concern about government corruption, poor governance, or those undermining or abusing the fairness of the tax system.
Whilst most of our taxpayers remain responsible, we are noting slippage in compliance. The SA Revenue Service, Sars, has enforcement powers, which are, in the main, punitive - and these will be applied to taxpayers who wilfully and cynically avoid paying their taxes. However,
Sars also remains sensitive to taxpayers, who are facing challenges.
In addition, Sars is also aware of the major problem of illicit financial flows. To this end, Sars is working closely with the Financial Intelligence Centre, FIC, and the SA Reserve Bank to close gaps which are currently arbitraged.
The capacity of these institutions to combat cybercrime must be enhanced. From an international perspective, the first exchanges of information under the global Common Reporting Standard took place at the end of September 2017. This information will give Sars insights into the foreign financial accounts of South Africans.
Data verification without treaty partners is currently under way. Country-by-country reporting, which will give Sars insights into risk areas of multinational enterprises will begin at the end of this year. The first exchanges will begin next year.
Government is aware of the concerns raised by taxpayers regarding delays in refunds and with regard to the capacity of Sars to deal with transfer pricing, increasing VAT fraud and aggressive tax structuring. The Office of the Tax Ombud and the Davis Tax Committee have also commented on such challenges, and made recommendations. I am engaging with the Commissioner of Sars on these recommendations to take concrete and practical steps to help improve taxpayer confidence.
The financial services sector is at the heart of the South African economy and touches the lives of all citizens. Financial services allow people to make daily economic transactions, save and preserve wealth to meet future aspirations and retirement needs, and insure against the loss of income, personal disaster or vulnerability. At the macro level, the financial sector enables economic growth, job creation, the building of vital infrastructure and sustainable development for South Africa and her people.
The new “twin peaks” system of financial regulation represents a significant reform. It will create a new
regulator for market conduct which will substantially improve the way financial institutions treat their customers. For too long, consumers have been sold inappropriate products, and faced high costs and a wall of opaqueness. For example, one of the furniture chains sold retrenchment insurance to retired people. I will shortly be releasing, for public comment, draft transitional regulations to begin the process of implementing the “twin peaks” system. [Applause.] We are on track to create the two new authorities in the 2018-19 financial year.
We also need a transformative financial sector – a sector that is not only transformed, but is transformative to the economy. The Finance and Trade and Industry Portfolio Committees in Parliament have done excellent work over the past few months, holding hearings on all aspects of financial sector transformation. There is consensus that more can be done to transform the sector.
Their draft report carefully balances the competing interests of the nation, as a whole, foreign investors, borrowers, lenders and ordinary South Africans. This
report will assist in preparing for the Financial Sector Summit that we hope the National Economic Development and Labour Council, Nedlac, will convene early next year. In this way, we can take stronger steps to develop appropriate targets for the Financial Sector Charter which accelerate broader transformation.
In the interim, Minister Davies and I support the latest version of the Financial Sector Charter all stakeholders have developed in the last two years, to comply with the latest BEE codes. The development of sector codes is an integral and strategic vehicle to advance transformation in the economy at sectoral level. Sector codes provide sector stakeholders an opportunity to develop a common vision for the growth and transformation of their sector. The new financial sector code supported by all stakeholders sees transformation as being not only about ownership but also skills development, targets for empowerment finance, access to credit, management control, and the provision of services to previously underserved areas.
Government is working diligently to achieve efficiencies in supply chain management. Since the introduction of expenditure ceilings and the implementation of specific cost-containment measures in 2013, spending on consultants, travel, accommodation, catering, advertising and conferences has declined by R2 billion.
The Office of the Chief Procurement Officer, OCPO, has managed to expose corrupt activities in certain government institutions and state-owned enterprises through the review of contracts above R10 million. The fight against corruption is being accelerated, and National Treasury is currently working with law- enforcement agencies to investigate contracts which are alleged to have been irregularly procured in certain state-owned enterprises. [Applause.]
The fight against fraud, corruption and abuse of the supply chain management system is being extended to cover both public- and private-sector corruption. [Applause.] This includes restricting companies found to have contravened competition laws through collusive practices which rob government and citizens of billions of rand.
The OCPO has strengthened initiatives to modernise public procurement through the use of technology. This will automate procurement processes to simplify and reduce the costs of doing business with government, generate savings through centrally-arranged contracts, and implement a differentiated procurement approach through strategic procurement initiatives. National Treasury and provincial Treasuries are working with relevant government departments to identify sectors and commodities for potential investment by black industrialists to promote local industrialisation and local economic development for job creation.
The payment of legitimate invoices to suppliers within
30 days is critical for small and medium-sized enterprises, SMEs. Failure to do so is devastating for small businesses, and is regarded as financial misconduct in terms of the Public Finance Management Act and the Municipal Finance Management Act. [Applause.] Therefore, accounting officers and accounting authorities who fail to do so should be charged with financial misconduct. There must be consequence management, in this regard.
Furthermore, performance agreements of accounting officers and accounting authorities must include timeous payment of suppliers as one of the key performance areas.
Recent years have seen several worrying developments with regard to state-owned companies, with worrying trends of governance failures, corruption, operational inefficiency and the need for government bail-outs. In this way, SOCs are developing a poor reputation with the public at large, and have become a major fiscal risk to the country due to government guarantees of their debt.
State-owned companies, some of which are among the biggest companies in the country, are powerful levers for the state to directly drive economic transformation. They have played a leading role in the development of the world-class infrastructure which sustains the South African economy.
South Korean development economist, Ha-Joon Chang, points out that many advanced countries relied on state-owned companies to industrialise. They provide services to historically neglected communities, invest heavily in
skills development, and support the development and transformation of upstream suppliers and downstream customers.
State-owned companies have played a critical role in the advancement of black professionals, managers and skilled workers, many of whom have gone on to play leading roles in the private sector. State-owned companies, like Eskom, Transnet and SAA, are multibillion rand companies by revenue, with enormous value chains. We have increasingly begun to use these strategically, incorporating localisation and preferential procurement into their operation philosophy and investment plans.
Thus, for example, at Transnet, we have established a trend of appointing black accounting firms as external and internal auditors in contracts worth tens of millions of rand, annually. In addition to the revenue flowing to these companies, it helps advance their growth by making it more difficult for large, private-sector companies to exclude them on the basis that they have not proven their ability to service large, complex enterprises. This is an
illustration of the developmental impact of state-owned companies, if leveraged strategically.
The current challenges at some of our state-owned companies obscure the success and progress evident at stable and self-sustaining SOCs, such as the following. The Development Bank of Southern Africa is a leading institution on the continent in infrastructure provision, particularly at local government level. The Airports Company South Africa, Acsa, has rolled out world-class airport infrastructure which has helped position our country as a dynamic regional business and tourism hub.
The Land Bank plays a key role in supporting emerging farmers and agricultural development, more broadly.
Government can manage SOCs well, and will act decisively to stabilise those which are experiencing challenges. [Interjections.] Executives of state-owned companies are paid competitive salaries for their professional expertise as business managers. The public and, indeed, government, as a shareholder, are correct to expect a lot of them. As the shareholder, we are tired of being dragged into crises by those we employ to govern and
manage state-owned companies. This must end. [Applause.] The trend of SOCs seeking bailouts to finance operational expenditure, inefficiency and waste must also be brought to an end. [Applause.]
In due course, National Treasury will make proposals to make our government guarantee framework more stringent. It is imperative that government ensures that the boards of directors in the state-owned companies are properly qualified and ethical, and provide the requisite skills sets that will ensure that the state-owned companies are soundly and profitably run to serve their mandates, properly. This needs to be done without delay. If board members do not exercise the leadership, good governance and financial management expected of them, government must act quickly and decisively.
Last week, government appointed a new board at the SABC and overhauled the board of South African Airways. These entities now have trusted, capable boards which will be supported and expected to guide their institutions back to healthy and sustainable operating states. I would like to take this opportunity to thank the lenders to SAA,
especially our local banks, for the understanding and patriotism they have displayed and the constructive role they continue to play in SAA’s turnaround.
After we meet the new board of SAA, we will pronounce on our plans to consolidate aviation assets and bring in a strategic equity partner for the airline. We believe a strategic equity partner can play an important role in SAA’s turnaround and unlock value for the fiscus, which has invested significantly in the airline over the years.
Despite the current challenges, government remains convinced that retaining a national carrier is in the public interest. [Interjections.] It is in our national interest to have influence over our connectivity to all parts of the world and not have to rely exclusively on the profit and scheduling considerations of global airlines. South African Airways sells South Africa’s economy, tourism and culture to every one of its passengers. [Applause.] Global airlines do not, and will not, perform this priceless marketing and branding role for us. So, let us not ignore the contribution SAA is making to our nation’s development, even as we insist on
dramatic improvements in its governance, strategy and operations.
Similarly, Eskom is critical to our development, with the link between electricity infrastructure and economic growth being well established. Over the last decade, our economic growth has been effectively capped by our electricity supply constraints, which have now been resolved. Of course, we now have the problem of surplus capacity, but that is a better problem to have. Eskom is addressing this by working with its intensive users to grow demand, as well as increasing exports to our neighbouring countries. The energy mix, going forward, and sequencing of adding new-generation capacity will be informed by the updated Integrated Resource Plan.
During the Presidency Budget Vote on 31 May 2017, President Zuma re-affirmed the view that: “With regard to nuclear energy, we reiterate that the programme will be implemented at a pace and scale that the country can afford.” This will necessarily take the economic climate and electricity demand into consideration.
It is Eskom’s governance issues which are of major concern to government. The failures of governance, leadership and financial management at Eskom are of grave concern. As government is guarantor over a significant portion of Eskom’s debt, it has become a significant risk to the entire economy.
Eskom is simply too important to the country to fail, and we will not allow it to. A team from National Treasury with the necessary expertise will work closely with the Department of Public Enterprises to address these governance, management and financial management challenges at Eskom, and will report back periodically. [Interjections.]
Government commits to the following urgent steps. We will appoint a new board at Eskom before the end of November, this year. Working with the new board, we will ensure a credible executive management team is put in place. We will ensure its financial management complies with the Public Finance Management Act and that irregular expenditure is accounted for.
Five years on from the adoption of the NDP Vision 2030, the fast growth that will enable us to make substantial progress in eliminating unemployment, poverty and inequality remains elusive. We must find the wisdom, humility, vision and perspective to ask how we must remake ourselves in order to build the South Africa we want.
The global economy is growing again after the turbulence of the financial crisis and ensuing recovery. While not without risks, global conditions are favourable for South African growth. To take advantage of this, we must get out of our own way and forge a working coalition for inclusive growth and economic transformation.
Restoring confidence is the cheapest form of stimulus we can inject. Delivering on the 14 confidence-boosting measures announced in July is a start. It must be followed up with structural and microeconomic reforms.
Government must move at the pace required by society and the economy, and not expect it to slow down and wait on our behalf.
We were once one of the world’s great mining countries. We can be that again, this time with the benefits shared across the full spectrum of our society. We can reindustrialise our economy with manufacturing as a platform.
We have one of the world’s most beautiful countries, with warm people and a rich culture and history. We can grow our tourism sector even more, creating sustainable jobs. Let us view tourism as an export growth sector.
Government recognises that action must be taken to stabilise gross public debt. This requires tough decisions on expenditure, even as we acknowledge that growth is the essential prerequisite for restoring the health of the nation’s finances.
The challenge is clear. We must drive inclusive growth and economic transformation. We must deliver on our commitments to regain the confidence of citizens and the business community. We must work with business, labour and civil society to forge consensus on structural reforms and growth programmes. We must bridge divides,
make difficult decisions, and transcend special interests in the nation’s interest.
We must remake ourselves, and in so doing, remake our society. We must plant the seeds of the harvest we hope to reap. In that way, we can build the South Africa we want. We can bring forth the harvest and the realisation of our dreams.
In the Preface to his book, Development as Freedom, Amartya Sen writes:
We live in a world of unprecedented opulence of a kind that would have been hard even to imagine a century or two ago. There have also been remarkable changes beyond the economic sphere ... And yet we also live in a world with remarkable deprivation, destitution and oppression. There are many new problems as well as old ones ... Overcoming these problems is a central part of the exercise of development.
He goes on:
Indeed, individual agency is, ultimately, central to addressing these deprivations. On the other hand, the freedom of agency that we have individually is inescapably qualified and constrained by the social, political and economic opportunities that are available to us. There is a deep complementarity between individual agency and social arrangements ... Expansion of freedom is viewed, in this approach, both as the primary end and as the principal means of development.
This is what we must pursue – the expansion of the frontiers of political, social and economic opportunity for our people in order to enhance their freedom of agency. If the masses of our people must sow the seeds of the fruit they must harvest, then we must do all we can to uplift the growth of our economy by implementing the structural and state-owned company reforms required to get us out of the slow growth zone. As I have repeatedly said throughout this speech, it is in our hands. We must shake off the complacency, accept the urgent challenges we have and increase the pace and scale of the implementation of the reforms.
The Medium Term Budget Policy Statement is a collective policy statement of Cabinet. Mr President, President Zuma, thank you very much for your guidance and leadership throughout this process. [Interjections.] [Applause.] Hon Deputy President Ramaphosa, thank you for your encouragement and your wise counsel at all times when requested. [Applause.]
I would also like to thank my Cabinet colleagues, members of the Ministers’ Committee on the Budget and the Presidential Fiscal Committee for their co-operation and support. I wish to thank the Premiers, Finance MECs and municipal mayors for their commitment, co-operation and ideas in confronting our shared fiscal and financial responsibilities.
Deputy Minister Buthelezi and Director-General Mogajane have given invaluable support throughout the budget process. As an aside, during a meeting, a colleague was trying to pronounce the director-general’s surname. After many attempts, he ended up saying, “Eish, Galagajane.” [Laughter.]
I know that members of the House will join me in expressing appreciation to staff of the National Treasury, the Governor and staff of the SA Reserve Bank, the Commissioner and staff of the SA Revenue Service, and the finance-family institutions. [Applause.]
My sincere thanks goes to the finance and appropriation committees, who are responsible for processing the Division of Revenue Amendment Bill, the Adjustments Appropriation Bill, the Finance Bill and the Taxation Bills.
I also wish to thank my predecessors, some of whom are present in the House today, including Comrade Pravin Gordhan. I saw his bold head here. [Applause.] ... and Comrade Trevor Manuel ...
... naye impandla yakhe ngike ngayibona [Ihlombe.] ...
... for the support they have provided and the platform they have laid over the years. [Interjections.]
I thank you very much. [Applause.]
Medium Term Budget Policy Statement referred to the Standing Committee on Finance and the Standing Committee on Appropriations to consider, in accordance with their respective mandates.
The Revised Fiscal Framework referred to the Standing Committee on Finance for consideration and report.
The Rates and Monetary Amounts and Amendment of Revenue Laws Bill referred to the Standing Committee on Finance for consideration and report.
The Taxation Laws Amendment Bill referred to the Standing Committee on Finance for consideration and report.
The Division of Revenue Amendment Bill referred to the Standing Committee on Appropriations for consideration and report.
The House adjourned at 15:36.