Hansard: NCOP: Unrevised hansard
House: National Council of Provinces
Date of Meeting: 31 Oct 2013
Summary
No summary available.
Minutes
UNREVISED HANSARD
THURSDAY, 31 OCTOBER 2013
____
PROCEEDINGS OF THE NATIONAL COUNCIL OF PROVINCES – TAKING PARLIAMENT TO THE PEOPLE
____
The Council met at the Giant Stadium, Soshanguve, City of Tshwane Metropolitan, in Gauteng at 16:26.
The House Chairperson (Mr R J Tau) took the Chair and requested members to observe a moment of silence for prayers or meditation.
ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS – see col 000.
NO NOTICES OF MOTION OR MOTIONS WITHOUT NOTICE
The HOUSE CHAIRPERSON (Mr R J Tau): Hon members, I have been informed that the Whippery has agreed that there will be no notices of motion or motions without notice. We shall therefore proceed with the First Order of the day.
GEOMATICS PROFESSION BILL
(Consideration of Bill and of Report thereon)
Mrs A N D QIKANI: House Chairperson and Chief Whip, I greet you all. This afternoon I have been given the opportunity to share with you some of the deliberations that the Select Committee on Land and Environmental Affairs had on the Geomatics Profession Bill of 2013, Bill 4B of 2013, a section 75 Bill that was introduced by the Minister of Rural Development and Land Reform to Parliament.
The surveying profession in South Africa is regulated by the Professional and Technical Surveyors’ Act, Act 40 of 1984. The SA Council for Professional and Technical Surveyors, which is established by the Act, controls and regulates the education, training, registration and discipline of surveyors. This provides for the registration of different categories of surveyors. In order to provide for a mechanism to accelerate the transformation of the surveying profession in a meaningful manner which would serve the interests of both the profession and the public, and for the benefit of present and future generations, the Geomatics Profession Bill has been processed.
The Bill acknowledges that geomatics and the geomatics profession are areas of expertise involving a number of activities. It acknowledges that geomatics must pursue and serve the interest of the public to benefit current and future generations, and obliges the SA Geomatics Council to strive to achieve the transformation of the profession to ensure its legitimacy and effectiveness and to achieve high standards of quality and integrity in the profession.
The Select Committee on Land and Environmental Affairs, having deliberated on and considered the subject of the Geomatics Profession Bill referred to it and classified by the Joint Tagging Mechanism as a section 75 Bill, agrees with the Bill. I thank you, Chair.
Debate concluded.
Question put: That the Bill be agreed to.
Bill agreed to in accordance with section 75 of the Constitution.
ELECTORAL AMENDMENT BILL
(Consideration of Bill and of Report thereon)
Mrs R N RASMENI: Hon House Chairperson, hon Chief Whip and hon Members of Parliament, the Electoral Amendment Bill has come a long way since the Electoral Laws Amendment Act of 2003, which took away the voting rights of a certain category of detainees.
When the principal Act, the Electoral Act of 1998, was amended, it resulted in the disenfranchisement of people sentenced to imprisonment without the option of a fine. It did this by preventing them from registering as voters and prevented them from voting whilst held in correctional centres. However, those detainees who were unsentenced and those who were in prison because they had failed to pay fines were also allowed to vote by the same Electoral Laws Amendment Act of 2003, and prevented other prisoners from voting.
This 2003 amending Act was declared unconstitutional through the case of The Minister of Home Affairs v The National Institute for Crime Prevention and the Rehabilitation of Offenders, Nicro. The court declared that there was no just reason why the option of a fine for detainees should determine the right to vote or remove this right.
The current amending Bill now makes provision, through clause 4, for detainees to vote, even if they were sentenced without the option of a fine. This exact deletion made by the current amending Bill will no longer allow the chief electoral officer to prevent those detainees sentenced without the option of a fine from registering as voters.
The principal Act of 1998 also had the effect of denying franchise to those persons who were absent from the country on polling day of the elections. Section 33 of the Act provided for a special vote only to those persons temporarily absent from South Africa for the following reasons: taking a holiday; going away on a business trip; opting to study abroad at a tertiary institution; taking an educational visit; or participating in an international sports event. This section of the Act thus extended voting rights only to those citizens meeting the criteria mentioned above. As such, a person who is unable to cast a vote in the Republic for any reason other than those given in the principal Act would not be deemed eligible for a special vote, and they would have no voting rights.
Within the parameters of the Constitution, travel abroad for any reason by a citizen does not diminish or deny voting rights. The current amending Bill has now been reworded and extends special votes to those registered voters who will be absent from the country on polling day. Clause 6 of the Bill will now allow any registered voter to apply for and cast a special vote before election day at a national level if such voters cannot do so at a voting station in a voting district. As such, the Chief Electoral Officer is now compelled by the current Bill to make provision for registered voters to apply for and to cast a special vote. I thank you.
Debate concluded.
Declarations of vote:
Mr W F FABER: House Chairperson, according to section 19 of the South African Constitution, Act 108 of 1996, every South African citizen can vote for any legislative body. The Bill restricts the rights of some South African citizens to vote on the provincial ballot paper, allowing them to only vote on the national ballot paper.
The Electoral Amendment Bill prevents South African citizens who reside abroad from voting on the provincial ballot paper. This unfairly limits the ability of citizens to exercise their rights and, as such, this Bill is unconstitutional and cannot be supported.
The Electoral Amendment Bill also restricts the ability of South Africa citizens who reside inside the Republic from fully exercising their right to vote. Whilst the Bill now provides for special votes for citizens who will be absent from their voting districts on the day of the election, it still restricts citizens from casting their votes from outside their provinces.
The DA believes that there should be no restraints on the ability of citizens to exercise their right to vote, including voting from outside one’s province. The DA thus believes that this is a major restriction on every citizen’s constitutional rights.
We also believe that the Independent Electoral Commission should create voting stations in cities across the world where there are more than 500 South Africans situated in one place. The democratic right of South Africans to vote should not be restricted to geographical proximity to South African foreign missions abroad.
The Electoral Amendment Bill restricts the constitutional rights of South African citizens. As such, the DA cannot support this Bill. We urge this House to do the right thing and reject this Bill as unconstitutional and unacceptable in our democracy. I thank you.
Ms M G BOROTO: House Chairperson, I must say that I stay in Mpumalanga, and on the day of the election, knowing that I will not be in Mpumalanga on the day of the election, I am going to forfeit my right to vote for my province. I do not understand how the DA can expect us – because this is a practice that has been happening – to say the people who are not even in the country can vote on a provincial election, whereas I, despite being in the country, forfeit that right unless I am in the country and apply for a special vote. This means I will be somewhere in the country.
So, on that, I just want to say that the DA has no basis for their denial. It is just that they do not want to reason, and they do not want to show that they understand the election processes of this country. For that matter, we do not even want to get their reasons for not accepting this Bill. Thank you, Chair. [Applause.]
Mr K A SINCLAIR: House Chairperson, on behalf of Cope, I just want to make the following statement. Democracy is about practical measures to test the will of the people. In terms of the amendments that have been tabled before us today, it is necessary to weigh that up against the practicalities of allowing citizens of this country to cast their votes on a national and provincial level.
With this as background, we believe that in theory it would have been nice if all South Africans citizens throughout the world could vote on a national and provincial basis, but the unfortunate reality is that it is not practical. Because of that, Cope supports the amendment. Thank you.
Question put: That the Bill be agreed to.
Bill agreed to in accordance with section 75 of the Constitution.
MENTAL HEALTH CARE AMENDMENT BILL
(Consideration of Bill and of Report thereon)
Mrs R N RASMENI: House Chairperson, the current Mental Health Care Amendment Bill, Bill 39 of 2012, seeks to amend the Mental Health Care Act, Act 17 of 2002, which did not empower the executive to effectively implement the principal Act for persons detained in detention centres.
In recognition of the Constitution that grants access to health care services to everyone, the Mental Health Care Act therefore compels the department to extend mental health care services, even to detainees who are involuntary health care users. In practice, the state is legally obliged to transfer those deemed mentally ill to state health establishments, where appropriate supervision can be provided. The reality, though, is that not all state patients in detention facilities can be transferred from these detention facilities to hospitals and other institutions.
Currently, the duties relating to the transfer of state patients from detention centres lie with the director-general. These duties are largely administrative and take up a great deal of time that could have been used for other priorities. The tasks can largely be transferred to other staff in the national department. However, the principal Act makes the director-general the only authority to initiate the transfer of mental health patients from any state detention facility. The turnaround time of the director-general for assigning patients to institutions has been cited as three days, in light of this heavy administrative load. The responsibilities linked to the transfers are cumbersome and, for the sake of accelerating transfers, can be dealt with by officials in the national Department of Health.
Clause 1 of the current Amendment Bill grants powers to the director-general, as the head of the national department, to delegate, in writing, authority to other staff members who will then be able to determine the transfer of patients from detention centres to health establishments. Through the Mental Health Review Board, the delegated authority will also be able to determine in which health establishment the state patient should be placed. Just as importantly, the delegated authority will be able to review the mental health status of the state patients. These amendments therefore enable the director-general to identify and authorise a staff member to take on the responsibility of determining the transfers of state patients from detention centres. The director-general will now be able to work on other national responsibilities. We commend the department for removing various obstacles to service delivery.
The final amendment to the Act pertains to the nullification of Chapter 8 of the Mental Health Act, Act 18 of 1973, which deals with hospital boards. The current Bill deems Chapter 8 unnecessary, in light of the provisions made for hospital boards by Chapter 6 of the National Health Act, Act 61 of 2003. All nine provinces are in favour of the Mental Health Care Amendment Bill, and the committee recommends that the House approves said Bill. I thank you. [Applause.]
Debate concluded.
Question put: That the Bill be agreed to.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Bill accordingly agreed to in accordance with section 65 of the Constitution.
CONSIDERATION OF REPORT OF SELECT COMMITTEE ON FINANCE - 2013 REVISED FISCAL FRAMEWORK
Mr C J DE BEER: Hon Chairperson, on 23 October 2013, the Minister of Finance tabled the 2013 Fiscal Framework with the Medium-Term Budget Policy Statement, MTBPS, in Parliament.
On 24 October 2013, the Minister and the National Treasury briefed the Joint Committee on Finance, the Select Committee on Finance and the Standing Committee on Finance.
On 29 October 2013, the Standing Committee on Finance jointly conducted public hearings on the revised fiscal framework. Business Unity SA, Busa, the National Union of Metal Workers of SA and the Solidarity Research Institute appeared before the committees.
The MTBPS sets the economic context for the next Budget, explains the fiscal policy and presents a three-year spending framework. The MTBPS further outlines government’s intent to, amongst others, keep government debt on a sustainable long-term path and implement the National Development Plan, NDP.
The plan provides a platform for increased collaboration between government, business, labour and civil society. Such co-operation on South Africa’s goal is expected to boost consumer and business confidence and translate into higher levels of investment, employment and growth.
The NDP is the road map for South Africa and we will have to get South Africans working. It is our role to take the NDP and educate our constituencies with regard to this, and explain where the money to implement this plan comes from.
If we look at the global economic outlook, there are signs of improvement in the world economy, although economic activity remains subdued. The International Monetary Fund expects global economic growth to average slightly more than 3% over the medium term.
Considering what is happening within the domestic market of South Africa and where we have come from since 1994, it is appropriate that, 19 years into our hard-earned democracy, we celebrate our achievements as a young nation and take this message to the people out there.
Our economy has grown by over 80% since 1993. In real terms, national income per capita has increased by 40%. Fixed investment increased from 15% of the Gross Domestic Product, GDP, in 1993, to an average of 20% over the past five years. The new tax administration has been established in the SA Revenue Service and an overhaul of the tax structure has allowed tax rates to be lowered while improving revenue performance.
Since 1995, over R600 billion rand in black economic empowerment transactions have been recorded. More than 15 million people are now eligible to get social grants every 30 days of the year. We have built more than three million homes and have substantially increased the number of households with access to electricity, water and sanitation. But, we also agree, more has to be done.
Since the recession of 2009, the South African economy recovered and grew by 3,1% and 3,5% in 2010 and 2011 respectively. Mining strikes shaved 2% points off exports and 0,5% point off GDP growth in 2012. In 2013, the rate of growth has steadily declined to a projected 2,1%.
Domestic inflation remained within the inflation target range for 14 consecutive months to June 2013. The headline Consumer Price Index is expected to remain within the target band of between the 3% and 6% over the medium term, averaging 5,9% in 2013.
South Africa’s fiscal policy remains anchored within the principles of countercyclicality, debt sustainability and intergenerational fairness. The three fiscal goals are: moderating expenditure growth to expand the Public Service at a sustainable pace and stabilising debt, improving the impact of public spending by prioritising capital investment, and reducing inefficiency.
What are the goals of the fiscal framework? It is to meet the 2013-14 deficit target of 4,2%; to narrow the deficit, going forward, in order to stabilise debt at 44% in 2016-17; to grow expenditure at 2,2% in real terms within a clear expenditure ceiling; and to contain growth on wages, goods and services in order to stabilise debt and begin rebuilding the fiscal space.
Considering the committee’s observations and inputs which were made by the stakeholders, the global economic outlook remains uncertain despite signs of improvement. Global economic activity is expected to strengthen moderately over the medium term, subject to high degrees of risk. The global economic developments and domestic factors narrowed the fiscal space available to government over the medium term, elevating the level of debts.
South Africa’s economic prospects remain closely linked to global developments. The revenue forecasts are premised largely on macroeconomic projections, which are also dependent on global and domestic economic developments. Prudent and sound macroeconomic policy has provided support to the economy and reduced exposure to volatility. South Africa has limited fiscal space to manoeuvre but the fiscal position remains sound, reinforced by accommodative monetary policy.
The effective and speedy implementation of the NDP will accelerate South Africa‘s growth trajectory. Cabinet will decide on details of cost containment instructions that will be issued during the 2014 Budget. Reforms are under way to enhance private sector participation in the electricity sector, given the importance of the private sector in economic growth. Although government remains the key employer, about 80% of jobs are provided by the private sector and 70% of the overall contribution to economic growth is provided by this sector.
South Africa is growing at a relatively lower rate than the rest of the African continent and business seems prepared to take a higher risk in Africa than in South Africa. The financial sector reforms are now in the implementation phase, with the ``twin peaks’’ legislation to establish two regulatory authorities to be submitted to Cabinet. Developing the clothing and textiles sectors’ competitiveness in performance is also a programme that we have noted in government, along with broadening access to finance and support services for small businesses.
Having considered the 2013 Revised Fiscal Framework, the Select Committee on Finance recommends that: Government should intensify and strengthen its working relationship with business and labour in various sectors of civil society to build confidence within the economy in order to reduce reliance on foreign investors to finance investment and create jobs; the National Treasury should assist with the implementation of the NDP and ensure that the departments align their strategic plans, annual performance plans, sector plans, delivery agreements and budgets with the priorities and strategic objectives as articulated in the NDP; and that the allocation of resources is in line with the NDP.
It is our role as select committees in Parliament to conduct our oversight by referring to the NDP and how money is being spent. The National Treasury should accelerate the work of the chief procurement office. National Treasury should submit to Parliament a progress report in this regard within three months of the adoption of the report by the Council.
One of the factors that led to South Africa’s economic growth lagging behind that of the emerging market economies, specifically in Africa, could be the regulatory environment. National Treasury should consider using a regulatory impact assessment mechanism to better assess the impact of regulations on small, medium and micro enterprises.
National Treasury should engage Busa in analysing the studies made that contrast the key drivers of economic growth in Africa.
Furthermore, I call on the Council to support and adopt this report. Thank you. [Time expired.]
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in terms of section 65 of the Constitution.
CONSIDERATION OF REPORT OF SELECT COMMITTEE ON SECURITY AND CONSTITUTIONAL DEVELOPMENT - UNITED NATIONS INTERNATIONAL COVENANT ON ECONOMIC, SOCIAL AND CULTURAL RIGHTS
Mr T M H MOFOKENG: Chairperson, in 2007 Cabinet took a decision that the Department of Labour should lead with the matter of the accession to the covenant. However, there was no capacity in the Department of Labour and the responsibility was shifted to the Department of Social Development. In conjunction with the Department of Health, it was requested to find out if there were any legislative hindrances that would affect the accession to the covenant. Working in conjunction with the Department of Health, no hindrances were identified.
The Department of Justice and Constitutional Development requested the opinion of its state law advisers because a period of time had passed since 2007. Both opinions provided were in favour of the accession.
The Department of Justice contacted the Department of Education with respect to Articles 13 and 14 of the covenant. Article 13 requires compulsory free primary education and also progressively free secondary and higher education. Article 14 states that if there was no compulsory free primary education within two years of accession, the country concerned should come up with a national action plan, complete with a timeframe, showing how they were going to deal with the challenges and implement free education.
The relevance of the covenant is that it promotes some of the key developmental goals of South Africa in addressing the challenges of inequality, poverty and unemployment. The covenant is also in line with South Africa's five priorities of government and the Millennium Development Goals. Most of the rights listed in the covenant are contained in other international instruments to which South Africa is a party, such as the African Charter on Human and Peoples’ Rights, the Convention on the Elimination of All Forms of Discrimination Against Women and the Convention on the Rights of the Child.
The International Covenant on Economic, Social and Cultural Rights is an important international instrument which is in line with the socioeconomic rights contained in the Constitution of South Africa of 1996. By ratifying this covenant, South Africa would be sending a strong message to the international community that it will abide by the principles contained therein and that South Africa will be accountable in terms of regular reporting to the United Nations on the implementation of the covenant in South Africa.
I table the report for adoption. [Applause.]
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.
CONSIDERATION OF REPORT OF SELECT COMMITTEE ON SECURITY AND CONSTITUTIONAL DEVELOPMENT - POLICY GUIDELINES FOR THE SELECTION OF NATIONAL PRIORITY OFFENCES BY THE NATIONAL HEAD OF THE DIRECTORATE FOR PRIORITY CRIME INVESTIGATION, DPCI, AND THE POLICY GUIDELINES FOR THE REFERRAL TO THE DPCI BY THE NATIONAL COMMISSIONER OF ANY OFFENCE OR CATEGORY OF OFFENCES FOR INVESTIGATION BY THE DPCI
Mr T M H MOFOKENG: Chairperson, the committee considered the request for concurrence by Parliament of the policy guidelines for the selection of national priority offences by the National Head of the Directorate for Priority Crime Investigation and for the referral to the the Directorate for Priority Crime Investigation, DPCI, by the National Commissioner of any offence or category of offences for investigation by the DPCI.
The policy guidelines provide a basis for the selection of national priority offences which include high treason; sedition; offences in terms of the protection of constitutional democracy against terrorist and related activities; offences in terms of Schedule 1 to the Implementation of the Rome Statute of the International Criminal Court Act of 2002; offences relating to the nonproliferation of weapons of mass destruction,and offences in terms of the Regulation of Foreign Military Assistance Act or the Prohibition of Mercenary Activities and the Regulation of Certain Activities in Country of Armed Conflict Act.
The policy guidelines aim to ensure that serious crimes, commercial crimes and corruption are being attended to by the DPCI. They provide for the National Police Commissioner to refer national priority offences to the DPCI if the prioritisation thereof is aligned with the strategic priorities of the Department of Police. Such referral must be in writing and must be accompanied by an affidavit and supporting documents that contain prima facie evidence of the commission of a crime.
The select committee notes that an implementation plan must be submitted to the Minister of Police within one month of the policy guidelines coming into force. The committee therefore recommends that the House approves the DPCI policy guidelines. I so move. [Applause.]
Debate concluded.
Question put: That the Report be adopted.
IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.
The HOUSE CHAIRPERSON (Mr R J Tau): Hon members, that brings us to the end of the last sitting. It was quite historic. We had a sitting under conditions where it was drizzling. The last time it drizzled was when we were in the Free State, but it drizzled before we arrived there. This time it happened during the sitting. We had the nice sound of showers.
The Council adjourned at 17:10.
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ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS
TUESDAY, 29 OCTOBER 2013
ANNOUNCEMENTS
National Assembly and National Council of Provinces
The Speaker and the Chairperson
1. Classification of Bills by Joint Tagging Mechanism (JTM)
- The JTM in terms of Joint Rule 160(6) classified the following Bill as a section 76 Bill:
- Division of Revenue Amendment Bill [B 38 – 2013] (National Assembly – sec 76).
- The JTM in terms of Joint Rule 160(6) classified the following Bill as a money Bill:
- Adjustments Appropriation Bill [B 37 – 2013] (National Assembly – sec 77).
2. Bills passed by Houses – to be submitted to President for assent
- Bill passed by National Assembly on 29 October 2013:
- National Environmental Management Laws Second Amendment Bill [B 13B – 2013] (National Assembly – sec 76(1)).
TABLINGS
National Assembly and National Council of Provinces
1. The Minister of Finance
- Report and Financial Statements of the Government Employees Pension Fund (GEPF) for 2012-13, including the Report of the Independent Auditors on the Financial Statements and Performance Information for 2012-13.
WEDNESDAY, 30 OCTOBER 2013
ANNOUNCEMENTS
National Assembly and National Council of Provinces
The Speaker and the Chairperson
1. Classification of Bills by Joint Tagging Mechanism (JTM)
- The JTM in terms of Joint Rule 160(6) classified the following Bill as a section 75 Bill:
(a) Tax Administration Laws Amendment Bill [B 40 – 2013] (National Assembly – sec 75).
- The JTM in terms of Joint Rule 160(6) classified the following Bills as money Bills:
(a) Taxation Laws Amendment Bill [B 39 – 2013] (National Assembly – sec 77).
- Employment Tax Incentive Bill [B 46 – 2013] (National Assembly – sec 77).
COMMITTEE REPORTS
National Council of Provinces
- Report of the Select Committee on Trade and International Relations on the Southern African Development Community (SADC) Protocol on Trade Services, dated 29 October 2013.
The Select Committee on Trade and International Relations, having considered the request for approval by Parliament, to ratify the Southern African Development Community (SADC) Protocol on Trade Services, tabled in terms of section 231(2) of the Constitution, 1996, recommends that the Council, in terms of section 231(2) of the Constitution, approve the said Protocol.
Report to be considered.
2. Report of the Select Committee on Finance on the 2013 Revised Fiscal Framework dated 30 October 2013
1.Introduction
Section 12 (3) of the Money Bills Amendment Procedure and Related Matters Act, Act No. 9 of 2009 (Money Bills Act), requires that the Minister of Finance must table a revised fiscal framework with the national adjustments budget if the adjustments budget effects changes to the fiscal framework. In terms of section 12 (5) of the Money Bills Act, the revised fiscal framework must be referred to a joint sitting of the Committees on Finance for consideration and report.
On 23 October 2013, the Minister of Finance tabled the 2013 fiscal framework with the Medium Term Budget Policy Statement (MTBPS) in Parliament. Section 12 (7), states that the Committees on Finance must 9 days after the tabling of the national adjustments budget submit a report on the revised fiscal framework to the respective houses of Parliament for consideration and adoption.
The Standing and Select Committees on Finance jointly conducted public hearings on the revised fiscal framework on 29 October 2013. These hearings were held together with the Business Unity South Africa (BUSA), National Union of Metalworkers South Africa (NUMSA) and the Solidarity Research Institute.
According to the Minister of Finance, the MTBPS sets the economic context for the next budget, explains fiscal policy and presents a three-year spending framework. The MTBPS further outlines government’s intent to, amongst others, keep government debt at a sustainable long term path and implement the National Development Plan (NDP). The Plan provides a platform for increased collaboration between government, business, labour and civil society. Such cooperation on South Africa’s goals is expected to boost consumer and business confidence and translate into higher levels of investment, employment and growth.
The fiscal framework gives effect to macro-economic policy for the next three years, striking a balance between consolidation and service delivery. This report summarises the economic outlook; fiscal policy and trends and the key issues emerging from the public hearings with the identified stakeholders.
2.Economic Outlook
2.1Global economic outlook
There are signs of improvement in the world economy, though economic activity remains subdued. Economic growth is improving in advanced economies while growth continues in the emerging markets, at a slower rate. Monetary authorities in the developed economies maintained exceptionally low interest rates to support economic activity. Recovery of manufacturing sentiment in advanced economies is expected to boost growth in 2013. The slowdown in emerging economies has led to a decline in commodity prices.
The International Monetary Fund (IMF) expects global economic growth to average slightly more than 3 per cent over the medium-term. These forecasts assume a stronger United States (US) economy as fiscal consolidation eases and monetary conditions stays supportive, reduction in fiscal tightening (except for Japan) and highly accommodative monetary conditions.
Table 1: Annual % change in GDP and consumer prices in selected countries 2012 - 2014
|
Region / country |
2012 |
2013 |
2014 |
2012 |
2013 |
2014 |
|
Percentage |
GDP projections1 |
Consumer price index projections1 |
||||
|
World |
3.2 |
2.9 |
3.6 |
4.0 |
3.8 |
3.8 |
|
Advanced economies |
1.5 |
1.2 |
2.0 |
2.0 |
1.4 |
1.8 |
|
US |
2.8 |
1.6 |
2.6 |
2.1 |
1.4 |
1.5 |
|
Euro area |
-0.6 |
-0.4 |
1.0 |
2.5 |
1.5 |
1.5 |
|
UK |
0.2 |
1.4 |
1.9 |
2.8 |
2.7 |
2.3 |
|
Japan |
2.0 |
2.0 |
1.2 |
0.0 |
0.0 |
2.9 |
|
Emerging markets and developing countries |
4.9 |
4.5 |
5.1 |
6.1 |
6.2 |
5.7 |
|
Brazil |
0.9 |
2.5 |
2.5 |
5.4 |
6.3 |
5.8 |
|
Russia |
3.4 |
1.5 |
3.0 |
5.1 |
6.7 |
5.7 |
|
India |
3.2 |
3.8 |
5.1 |
10.4 |
10.9 |
8.9 |
|
China |
7.7 |
7.6 |
7.3 |
2.6 |
2.7 |
3.0 |
|
Sub-Saharan Africa |
4.9 |
5.0 |
6.0 |
9.0 |
6.9 |
6.3 |
|
South Africa2 |
2.5 |
2.1 |
3.0 |
5.7 |
5.9 |
5.6 |
- IMF World Economic Outlook October 2013
- National Treasury Forecasts
Economic conditions are improving in the Euro area, with Gross Domestic Product (GDP) growth projected to register 1.0 per cent in 2014, compared to a contraction of 0.4 per cent estimated for 2013. Broad recessionary conditions persist in Europe and weak economies on the periphery are likely to hold back growth. According to the IMF, risks in the Euro area remain unfinished business of restoring bank health and credit transmission as well as corporate debt overhang.
GDP growth in the US economy is expected to average 2.6 per cent in 2014, up from an estimated 1.6 per cent in 2013, assuming slower fiscal consolidation and low interest rates. The forecasts assumed that discretionary public spending is approved and the debt ceiling is raised promptly. The prospect to reduce monetary accommodation in the US would directly affect the global economy, in general. As the US tapers its quantitative easing programme and starts to raise interest rates, this will impact on the South African debt costs and might cause further volatility with the Rand. Business Unity South Africa (BUSA) shares the same sentiments and notes a possible increase in the cost of capital as well.
The Japanese outlook remains uncertain despite strong monetary policy and fiscal stimulus. The economy is expected to grow at a constant rate of 2 per cent in 2013 as was the case in 2012 and decline to 1.2 per cent in 2014, due to tapering of fiscal and monetary support, higher consumption taxes and lower construction spending.
The emerging market and developing countries are expected to expand by 5.1 per cent in 2014, despite vulnerability to capital flow volatility. Growth in China is slowing and that may have consequences for other economies, particularly commodity exporters including South Africa. In 2013 GDP growth in China is forecast at 7.6 per cent compared to 9.3 per cent in 2011, expected to slow moderately to 7.3 per cent in 2014. China needs to rebalance growth away from investment towards higher household consumption to support long-term growth.
Economic activity in sub-Saharan Africa remains robust, with growth projected to increase from an estimated 5 per cent in 2013 to 6 per cent in 2014. Continued growth is supported by growing investment and rising household incomes. Expanded agricultural production and retail services, rising oil production and increased mining activity will expected to underpin strong growth over the medium term.
Global economic activity is expected to strengthen moderately over the medium term subject to a high degree of risks. The outcome of the US fiscal policy debates and the timing of the Federal Reserve’s decision to wind down its asset purchase programme will affect the global economic and financial environment. These outcomes have the potential to lower US growth, reduce capital inflows into emerging markets and increase global borrowing costs. The emerging markets are exposed through capital flows, currency depreciations and balance of payments risks. Lower commodity prices may pose challenges for many countries in sub-Saharan Africa.
2.2Developments in the South African economy
The South African economy recovered quickly from the 2009 recession and grew by 3.1 per cent and 3.5 per cent in 2010 and 2011, respectively. According to the IMF, mining strikes shaved off 2 percentage points of exports and a 0.5 percentage point of GDP growth in 2012. The rate of growth has steadily declined to a projected 2.1 per cent in 2013. Commodity prices have declined from historically high levels and limited availability and rising costs of electricity, labour disputes, rising unemployment, lower household consumption, weak business confidence and lower private sector investment weighed down on economic growth.
Prudent macroeconomic policy has provided support to the economy and reduced exposure to volatility. Countercyclical fiscal policy, following the fiscal stimulus packages implemented since 2008, resulted in a widening budget deficit, increased borrowing and a period of slow growth. Monetary policy has provided a low interest rate environment to encourage capital investment and assist households.
The costs of borrowing in bond markets increased and the exchange rate weakened significantly. Foreign exchange reserves have risen from US$34.1 billion at the end of 2008 to US$47.9 billion at the end of August 2013 due to effective regulatory oversight of the financial system.
South Africa’s current account deficit widened, reflecting lower levels of domestic savings and imports exceeding exports. This means that the economy is reliant on foreign savings to fund the gap between government revenue and spending and the cost of infrastructure expansion. The deficit has been comfortably financed by capital inflows, signalling confidence of investors in the country’s economic prospects. South Africa’s policy choices provide flexibility to adjust and weather short term volatility.
Government is working to implement the NDP, manage medium term risks and enact structural reforms to the economy. The Plan prioritises measures to build a capable, effective state that delivers services to citizens while encouraging business investment and economic growth. Government recognises that South Africa cannot rely on external developments to alleviate domestic growth constraints. Over the next three years, South Africa will have more electricity, rail and roads to support growth.
BUSA supports the point of departure in the MTBPS that the NDP is now a framework within which policies and projects will be increasingly aligned. It is the view of business as it is of the NDP that key stakeholders need to collaborate and cooperate on a much bigger scale to address the socio-economic challenges facing South Africa.
NUMSA is concerned that, 2013 marks the centenary of the 1913 Land Act and that government failed to successfully redistribute land ownership according to its own targets but the 2013 MTBPS has overlooked this important matter.
2.3Domestic economic trends and outlook
The National Treasury expects the South African economy to grow by 2.1 per cent in 2013 (0.7 percentage point lower than a February 2013 forecast of 2.7 per cent and shaved off 1 percentage point of an October 2013 MTBPS estimate of 3 per cent). The 2013 MTBPS expects the rate of economic growth to accelerate to 3 per cent in 2014 and to 3.5 per cent in 2016. There is close convergence between the economic forecasts of the National Treasury and BUSA.
The economy is expected to be buoyed by improvements in global economic conditions and strong regional growth. Continued investment in infrastructure is expected to reduce supply constraints, help crowd in investment and allow for more production and employment. The weaker exchange rate will support the profitability of mining and competitiveness in the manufacturing sector. Supportive fiscal, monetary and financial management policies will continue to support economic growth over the medium term. China’s transition from investment-led growth, with a larger role for household consumption, is expected to open up new opportunities for South African manufactured exports.
South Africa’s economic prospects remain closely linked to global developments. The real economy is expected to strengthen gradually over the medium term. Implementation of the National Development Plan will alleviate some structural constraints, strengthen growth and accelerate job creation while broadening social development and economic participation. The pace of economic recovery will depend largely on the rate at which private investment and export growth strengthen. In line with the NDP, BUSA’s view is that South Africa should concentrate on the domestic factors over which it has control to move forward with planned structural reforms to boost growth and create jobs.
All sectors of the economy have shown a slowdown in economic activity in response to subdued global economic growth and supply side disruptions. Production stoppages have been most pronounced in mining and manufacturing. Contraction in the mining sector, muted growth in manufacturing, weaknesses in the services sector, a deceleration in consumer spending weighed down economic growth.
Mining remains a key sector in the domestic economy in terms of economic activity, job creation and revenue collection. Mining production increased at a rate of 14.6 per cent in the first quarter of 2013 and contracted by 5.6 per cent in the second quarter, reflecting high levels of volatility in the sector, particularly in the production of platinum and diamonds. Increased safety stoppages, escalating cost pressures, sporadic labour disruptions and infrastructure challenges negatively affected production.
Manufacturing is a driver of innovation, productivity and competitiveness, making the sector critically important for growth and development. Real output of the manufacturing sector rose at a rate of 11.5 per cent in the second quarter of 2013, having contracted by 7.9 per cent in the first quarter of 2013. Second quarter growth can be attributed to more stable global economic conditions, lower exchange value of the Rand and normalisation of output following refinery maintenance and temporary industrial action weighing on production.
Growth momentum in the agricultural sector remained relatively strong in the first half of 2013, registering 3.6 per cent. Over the medium term, agriculture will be supported by continued growth in African markets and better integration of small scale farmers. Growth in the services sector remains subdued, having recorded 2.2 per cent in the first half of 2013, relative to the same period last year. A tight electricity demand supply balance is expected to persist until the second half of 2014, limiting the ability of the economy to expand.
Household consumption expenditure averaged 3.5 per cent in 2012 having decelerated from 4.8 per cent in 2011. Household consumption is a key driver of the economy, accounted for 61 per cent of GDP in the second quarter of 2013, according to the South African Reserve Bank (SARB). National Treasury projects household consumption to average 2.5 per cent in 2013 and register 2.9 per cent in 2014 as a result of decelerating disposable income growth, high debt burden, tightening lending conditions and rising inflation. Household disposable income slowed to 2.6 per cent in the first half of 2013, from 4 per cent a year earlier.
Domestic inflation remained within the inflation target range for 14 consecutive months to June 2013 against the backdrop of subdued global and domestic output growth. Headline Consumer Price Index (CPI) is expected to remain within the target band of between 3 and 6 per cent over the medium term, averaging 5.9 per cent in 2013. Growth in food, petrol and administered prices is expected to slow down but weaker currency might put pressure on inflation in 2013. Inflation expectations are expected to remain anchored around the upper end of the inflation target range.
Table 1: Macroeconomic projections 2009 to 2015
|
Calendar year |
2 010 |
2 011 |
2 012 |
2013 |
2 014 |
2 015 |
2 016 |
|
Percentage change unless otherwise indicated |
Actual |
Estimate |
Forecast |
||||
|
|
|
|
|
|
|
|
|
|
Final household consumption |
4.4 |
4.8 |
3.5 |
2.5 |
2.9 |
3.2 |
3.4 |
|
Final government consumption |
5.0 |
4.6 |
4.2 |
3.4 |
3.4 |
3.0 |
3.3 |
|
Gross fixed capital formation |
-2.0 |
4.5 |
5.7 |
4.1 |
5.0 |
5.5 |
6.3 |
|
Gross domestic expenditure |
4.4 |
4.6 |
4.1 |
2.7 |
3.2 |
3.4 |
3.8 |
|
Exports |
4.5 |
5.9 |
0.1 |
6.1 |
5.0 |
6.7 |
7.0 |
|
Imports |
9.6 |
9.7 |
6.3 |
7.3 |
5.2 |
6.4 |
7.0 |
|
Real GDP growth |
3.1 |
3.5 |
2.5 |
2.1 |
3.0 |
3.2 |
3.5 |
|
GDP inflation |
7.2 |
6.0 |
5.5 |
5.9 |
5.9 |
5.7 |
5.7
|
|
GDP at current prices (R billion) |
2 659.4 |
2 917.5 |
3 155.2 |
3 411.7 |
3 720.2 |
4 061.7 |
4 443.7 |
|
Headline CPI inflation (Dec 2012 = 100) |
4.3 |
5.0 |
5.7 |
5.9 |
5.6 |
5.4 |
5.4
|
|
Current account balance (% of GDP) |
-2.8 |
-3.4 |
-6.3 |
-6.5 |
-6.4 |
-6.2 |
-6.1 |
Source: Reserve Bank and National Treasury
In 2012, the total Gross Fixed Capital Formation (GFCF) expanded by 5.7 per cent compared to 4.5 per cent realised in 2011. Growth in real GFCF slowed to 4.1 per cent in the first half of 2013, compared to the corresponding period in 2012. Unplanned delays and sluggish uptake of new projects slowed investment by public corporations. The outlook for investment expenditure remains positive over the medium term. Gross Fixed Capital Formation is forecast to grow at a rate of 3.5 per cent in 2013 reaching 5.3 per cent in 2016, supported by higher levels of domestic and global demand, relatively low borrowing costs, continued implementation of the national infrastructure programme and improved business confidence.
Job creation prospects will depend largely on the private sector hiring. Employment by the private sector is not sufficient to absorb new entrants into the labour market and reduce the high rate of unemployment. A risk also identified by BUSA. Employment remains slow in recovering to levels attained before the economic crisis. Employment grew at an average of 0.8 per cent between 2010 and 2012, leading to an increase in the unemployment rate to 25.6 per cent in the second quarter of 2013. The quarterly Labour Force Survey shows that in the year to July 2013, employment increased by 274 229 jobs. Gains in the public and financial sectors were offset by employment losses in mining, manufacturing and construction.
Government initiatives are underway to promote economic participation and job creation. These include improving education sector and skills development, continued Expanded Public Works Programme (EPWP), tabling of an employment incentive proposal to encourage youth employment. BUSA is concerned that, the MTBPS, the NDP and other policies emphasise the importance of SMME’s and emerging business but no targets are set, for example 2 million new enterprises by 2030 to create 11 million jobs. BUSA proposed that government and the private sector should work together to support entrepreneurship and set targets for jobs.
In real terms, exports dropped from 5.9 per cent in 2011 to 0.1 per cent in 2012, while imports increased by 6.3 per cent in 2012. This reflects slowing global demand, falling prices of some major commodity exports, rand volatility and the impact of extensive disruption in the mining sector. Import growth is expected to remain resilient as investment in infrastructure and capital equipment accelerates. Trade deficit widened in the first half of 2013 as export revenue was held back by lower commodity prices and slower growth in the volume of non-gold exports.
The deficit on current account of the balance of payments, a source of external vulnerability, widened to an estimated 6.5 per cent of GDP in 2013. Strong demand for government bonds and other investments has financed the deficit. Current account deficit is projected to remain elevated at 6.5 per cent of GDP over the medium term as investment growth continues to outpace increases in domestic savings. Net capital inflows into South Africa declined by 4 per cent in the first half of 2013 compared to the same period in 2012. Weaker capital inflows reflect pull back from emerging markets. BUSA has identified capital inflow reversal as a risk that exposes South Africa to swings in investor sentiment. BUSA proposed a policy of higher SARB foreign exchange reserves to lower balance of payments risks.
The Rand’s exchange value declined from R8.79 to the US dollar in January 2013 to R9.98 in September 2013. The real effective exchange rate has depreciated by 11.7 per cent over the year to July 2013. The weaker Rand is expected to support mining and manufacturing exports, provided the depreciation is sustained. Sentiment towards the Rand gets affected by domestic factors such as the industrial action in the mining sector, higher current account deficit, weak business and consumer confidence and credit rating downgrades. The South African Rand was among the emerging-market currencies that were negatively impacted by the “tapering” remarks of the US Federal Reserve in May 2013. Movements in the Rand will continue to reflect global risk appetite and investor sentiment towards South Africa and the possible scaling of the US asset purchase programme.
The deficit on the current account, which has been mitigated by the flexible exchange rate and the fiscal deficit pose a risk to the macroeconomic outlook.
3.Fiscal policy and trends
3.1Fiscal policy stance
A year ago, government underlined the need to secure the country’s fiscal footing, striking a balance between fiscal consolidation and a premature withdrawal of support for the economy. The 2012 MTBPS pointed out that if the economic and fiscal outlook were to deteriorate, a reconsideration of expenditure and revenue plans would be warranted. South Africa has several strengths that limit the vulnerability of its fiscal position.
South African fiscal policy remains anchored within the principles of counter-cyclicality, debt sustainability and intergenerational fairness. Accordingly, Government set three fiscal goals, namely, moderating expenditure growth to expand public services at a sustainable pace; stabilising debt and improving the impact of public spending by prioritising capital investment and reducing waste and inefficiency.
NUMSA believes that the countrywide implementation of the National Health Insurance (NHI) should be fast tracked as the slow progress and the absence of a coherent health policy framework is problematic considering the enormity of South Africa’s health care challenge.
South Africa’s macroeconomic policy framework remains well-grounded. Credible monetary policy and flexible exchange rate enable the economy to adjust to external shocks. Financial markets are liquid and financial institutions are generally well managed. Levels of foreign currency denominated debt are low, reducing exposure to exchange rate shocks. Corporate and public balance sheets are robust, and household debt levels, though high, are declining.
Recently, the economic and fiscal outlook has weakened. Economic growth rate has been revised down since the 2013 budget, leading to lower revenue projections. Commodity export prices have declined, historically low bond yields have started to rise, putting additional pressure on interest costs. Reliance on foreign investors to finance the budget deficit has increased.
Space for counter-cyclical policy interventions has narrowed. The deteriorating current account deficit and increasing debt-to-GDP ratio underscore the need for further fiscal consolidation. Domestic demand slowed and unemployment remains high, further justifying the need to maintain fiscal support to the economy.
Despite weaker economic growth in 2013, tax revenue collection remained resilient. Nonetheless, expected gross tax revenue for 2013/14 has been revised down by R3 billion to R895 billion. Personal income and corporate income tax and taxes on imported goods have been buoyant. Secondary tax on companies has been revised down by R5.9 billion to R17 billion in 2013/14 because this year’s sharp depreciation of the Rand in 2013 is unlikely to result in a sustained surge in company profits. Lower domestic VAT and excise duties point to reduced consumer demand and weaker income tax collection over the medium term. Lower revenue growth is expected over the medium term as a result of slower economic growth than projected during February 2013.
National Treasury expects the Tax Review Committee’s recommendations to inform tax policy changes going forward. The Committee’s first report on small and medium-sized business will be submitted before the end of this year. BUSA supports the work of the Committee in terms of reviewing the tax system and tax structure and wishes that the tax decisions will be put on hold until the Committee has developed the Terms of Reference.
In light of the deteriorated outlook for economic growth and revenue, government remain committed to maintain spending within the previously announced limits. Expenditure limits are extended into 2016/17. The implementation of cost containment measures from 01 December 2013 will restrict public sector air travel, car hire, catering, overseas delegations, and entertainment and conferencing costs. Over the long term government will rebuild fiscal space by stabilising and reducing debt to GDP ratio.
NUMSA welcomes the measures to reduce costs and eliminate wasteful expenditure including reducing expenditure on consultant services. NUMSA is of the view that the proposed measures are minimal and that more severe measures to address corruption, fraud, misappropriation of public funds and non-compliance with procurement policies and regulations are required. The proposed measures to reduce spending on consultants include the monitoring of consultants and avoidance of duplication of work and studies done across government departments.
3.2Fiscal Framework
The 2013 MTBPS balances fiscal consolidation with support to the economy. The proposed fiscal framework will:
- Meet the 2013/14 deficit target of 4.2 per cent, with no additional resources been added to spending plans over the MTEF;
- Narrow the deficit going forward in order to stabilise debt at 44 per cent in 2016/17.
- Grow expenditure at 2.2 per cent in real terms within a clear expenditure ceiling; and
- Contain growth on wages and goods and services in order to stabilise debt and begin rebuilding fiscal space.
Revenue of R999.7 billion in 2013/14 financial year has been set aside, reflecting a slight upward increase of R13.4 billion compared to the February 2013 estimate. Over the medium term, government expects total consolidated revenue of R3.576 trillion, R1.086 trillion (revised up by R4.8 billion) in 2014/15, R1.184 trillion (revised up by R15.6 billion) in 2015/16 and R1.306 trillion in 2016/17.
The 2013 Budget was the first since 1999 that did not add resources to the previously announced spending plans. Given the outlook for economic growth and revenue, government is reinforcing its commitment to maintain spending within previously announced limits. Since the introduction of the expenditure ceiling, forecasts and outcomes have been more closely aligned. The limit on main budget non-interest expenditure is also extended in the revised MTEF to include 2016/17.
Table 2: Consolidated fiscal framework
|
|
2010/11 |
2011/12 |
2012/13 |
2013/14 |
2014/15 |
2015/16 |
2016/17 |
|
R billion |
Outcome |
Estimate |
Medium-term estimates |
||||
|
Operating account |
|
|
|
|
|
|
|
|
Revenue |
764.7 |
843.5 |
907.6 |
998.9 |
1 086.1 |
1 184.0 |
1 305.8
|
|
Current payments |
756.3 |
837.7 |
919.1 |
1 008.6 |
1 086.3 |
1 165.7 |
1 247.6 |
|
Compensation |
309.9 |
345.5 |
375.4 |
409.0 |
437.2 |
466.9 |
498.9 |
|
Goods and services |
137.2 |
153.7 |
165.1 |
178.6 |
188.2 |
198.1 |
211.8 |
|
Interest and rent on land |
75.3 |
81.8 |
93.2 |
106.6 |
116.6 |
128.8 |
141.0 |
|
Transfers and subsidies |
233.9 |
256.7 |
285.4 |
314.3 |
344.3 |
371.9 |
395.8 |
|
Current balance |
8.4 |
5.9 |
-11.5 |
-9.6 |
-0.1 |
18.3 |
58.3 |
|
Percentage of GDP |
0.3% |
0.2% |
-0.4% |
-0.3% |
0.0% |
0.4% |
1.3% |
|
Capital account |
|
|
|
|
|
|
|
|
Capital receipts |
0.4 |
0.2 |
0.3 |
0.2 |
0.2 |
0.2 |
0.2 |
|
Capital payments |
55.7 |
61.2 |
68.0 |
75.7 |
87.9 |
95.6 |
101.7 |
|
Capital transfers |
45.4 |
49.7 |
52.5 |
55.8 |
63.3 |
70.1 |
72.9 |
|
Capital financing requirement1 |
-100.8 |
-110.6 |
-120.1 |
-131.4 |
-151.1 |
-165.6 |
-174.4 |
|
Percentage of GDP |
-3.7% |
-3.7% |
-3.7% |
-3.8% |
-4.0% |
-4.0% |
-3.8% |
|
Financial transactions2 |
2.3 |
2.8 |
3.3 |
3.6 |
3.3 |
3.0 |
0.0 |
|
Contingency reserve |
– |
– |
– |
– |
3.0 |
6.0 |
18.0 |
|
Budget balance |
-114.7 |
-107.5 |
-135.0 |
-144.6 |
-157.5 |
-156.3 |
-134.2 |
|
Percentage of GDP |
-4.2% |
-3.6% |
-4.2% |
-4.2% |
-4.1% |
-3.8% |
-3.0% |
|
Revenue |
65.0 |
843.8 |
907.9 |
999.1 |
1 086.3 |
1 184.2 |
1 306.0 |
|
Expenditure |
79.7 |
951.3 |
1 042.9 |
1 143.7 |
1 243.8 |
1 340.4 |
1 440.2 |
|
Non-interest expenditure3 |
804.4 |
869.5 |
949.6 |
1 037.0 |
1 127.2 |
1 211.7 |
1 299.2 |
|
Interest payments |
75.3 |
81.8 |
93.2 |
106.6 |
116.6 |
128.8 |
141.0 |
|
Primary balance4 |
-39.4 |
-25.8 |
-41.7 |
-37.9 |
-40.9 |
-27.5 |
6.8 |
|
Percentage of GDP |
-1.4% |
-0.9% |
-1.3% |
-1.1% |
-1.1% |
-0.7% |
0.1% |
|
|
|
|
|
|
|
|
|
Source: 2013 MTBPS, National Treasury
- Includes payments for capital assets, receipts from sale of capital assets and capital transfers
- Transactions in financial assets and liabilities
- All spending except for consolidated interest payments
- Revenue less non-interest expenditure
The 2013 consolidated fiscal framework makes R1.144 trillion available for spending in 2013/14 (slightly lower than R1.149 trillion estimated during the National Budget 2013 period). The consolidated fiscal framework makes R1.244 trillion (revised up by R94.4 billion) available for spending in 2014/15, R1.340 trillion (revised slightly up by R96.4 billion) in 2015/16 and R1.440 trillion in 2016/17 financial year. Over the next three years, in real terms, non-interest expenditure is expected to grow at a moderate average rate of 2.2 per cent compared to 2.3 per cent projected in February 2013. The fastest growing expenditure item in the consolidated framework remains interest payments, reflecting the substantial increase in government’s debt stock in recent years.
The budget deficit is now estimated to be 4.2 per cent of GDP in 2013/14, in line with the projection made at the time of the 2013 Budget. The deficit will narrow to 3 per cent of GDP in 2016/17, as economic activity accelerates, expenditure growth slows down and revenue collections gather pace. Inclusion of extraordinary receipts and payments implies a narrower budget deficit in 2013/14. The main budget deficit is offset by surpluses expected on the accounts of provincial governments, public entities and social security funds. According to BUSA, this could be a temporary situation because provincial surpluses, the result of under spending, will cease if provincial governments are encouraged to spend their budgets.
BUSA sees the MTBPS process as frank and transparent. The announcement to meet the 2013/14 fiscal deficit of 4.2 per cent of GDP is welcome and so is the plan to consolidate the deficit, the introduction of cost containment measures, introduction of tax legislation to incentivise business to employ youth, continued emphasis on improving access to finance and support services for small businesses and the fact that the fastest growing component of non-interest spending is capital spending.
The 2013 budget framework includes a contingency reserve of R27 billion over the medium term, R3 billion in the 2014/15, rising to R6 billion in the 2015/16 and R18 billion in 2016/17. The contingency reserve serves to finance any unforeseen and unavoidable expenditure not included in the baseline. It enables government to absorb risks, but remains lower in the beginning of the medium term.
3.3Managing risks
Government will ensure that, over the medium term, the wage bill does not place expenditure at risk. Specific attention will be paid to restraining growth in administrative posts. Compensation budgets currently account for 39.4 per cent of consolidated non-interest spending. Growth in the public sector wage bill has exceeded the rate of inflation over the past several years. This was partly due to the implementation of Occupation Specific Dispensation (OSD). There is some evidence that the public sector employment growth has begun to slow, following the three-year wage settlement reached in 2011.
The weaker Rand exchange rate has pushed up the rand value of foreign-denominated debt. Inflation has also increased the revaluation value of inflation-linked debt. Deterioration in the economic growth outlook has increased the debt-to-GDP ratio. South Africa’s debt-to-GDP ratio remains sustainable. Government’s denomination of debt is mainly in domestic currency to limit external vulnerability. Net debt is projected to reach 39.3 per cent of GDP (R1.37 trillion) in 2013/14 and stabilise at about 43.9 per cent of GDP (R1.994 trillion) in 2016/17. Government will continue to build cash reserves and switch short term debt for longer term debt if market conditions allow. BUSA is concerned that debt stabilisation level will be reached later than previously anticipated and at a higher percentage to GDP, contrary to the 44 per cent of GDP forecast for 2017/18.
The costs of servicing government debt are influenced by the volume of debt, new borrowing and market variables such as interest, inflation and exchange rates. Debt service costs continue to grow over the medium term, from R100.5 billion in 2013/14 to R135.4 billion in 2016/17.
The state owned companies are expected to borrow on the strength of their balance sheets, rather than being funded from the fiscus. State owned companies facing persistent difficulties will require operational restructuring to become financially sustainable to fulfil their mandates.
4.Committee Observations
Having considered the 2013 MTBPS and public submissions, the Select Committee on Finance observed that:
4.1The global economic outlook remains uncertain, despite signs of improvement. Global economic activity is expected to strengthen moderately over the medium term subject to a high degree of risks;
4.2Global economic developments and domestic factors narrowed the fiscal space available to Government over the medium term, elevating the level of debt;
4.3South Africa’s economic prospects remain closely linked to global developments. The revenue forecasts are premised largely on macroeconomic projections, which are also dependent on global and domestic economic developments;
4.4Prudent macroeconomic policy has provided support to the economy and reduced exposure to volatility. South Africa has limited fiscal space to maneuver but fiscal position remains sound, reinforced by accommodative monetary policy;
4.5Welcomes the shifting of resources towards the implementation of the National Development Plan priorities, improving infrastructure allocations, and stepping up efforts to combat waste, inefficiency and corruption;
4.6The effective and speedy implementation of the NDP might accelerate South Africa’s growth trajectory;
4.7NDP implementation is largely supported, but it is concerned that some unions such as NUMSA have not yet endorsed the plan in its entirety;
4.8Cabinet will decide on the details of cost-containment instructions that will be issued with the 2014 Budget;
4.9The reforms are under way to enhance the private sector participation in the electricity sector, given the importance of the private sector on economic growth. Although government remains the key employer, about 80 per cent of jobs are provided by the private sector and 70 per cent of the overall contribution to economic growth is provided by the private sector;
4.10South Africa is growing at a relatively lower rate than the African continent and that Business seems prepared to take a higher risk in Africa than in South Africa.
4.11The Business community has been engaging with government on unlocking the SA economic growth potential, which is currently deemed to be below average. Business investigated key areas that can unlock growth and investment, of which, work streams and action plans will be presented in November 2013;
4.12The financial sector reforms are now in implementation phase, with the Twin Peaks legislation to establish two new regulatory authorities to be submitted to Cabinet shortly;
4.13The trade union Solidarity is of the opinion that tax increases are not a viable answer to current government and public sector problems. Furthermore, it remains their view that South Africa is on an unsustainable welfare state path. Not only is the welfare state financially unsustainable, but it is also crowding out market and civil society initiatives necessary to restore vibrancy and dignity to community life. According to Solidarity, South Africans should become eligible for tax rebates for private provision of government services where government failed to provide such services;
4.14Solidarity is concerned that South African taxpayers are being taken for granted and that a very small number of taxpayers are responsible for paying a large part of entire tax revenue collected. Solidarity estimated that 130 000 of its members were responsible for a minimum of 5 per cent of the personal income tax paid to SARS in the 2011/12;
4.15Solidarity is also concerned about the inefficiency of public expenditure and corruption by public office holders and indicated that the current public resistance to e-tolling implementation is not so much about the tolling of public roads as it is a general symptom of the larger tax situation in South Africa;
4.16Noted progress regarding the appointment of the Chief Procurement Officer in the National Treasury, appointment of 3 Chief Directors, the completion of the macro structure and the work currently done regarding pricing;
4.17NUMSA is pleased with the announcement that the rollout of the infrastructure programme will be “accompanied by programmes to support the local manufacture of components, ranging from buses to energy components” in order to support this industry and create more decent jobs;
4.18Notes that the unemployment rate has slightly dropped by 0.9 per cent to 24.7 per cent in the third quarter of 2013, as released by Statistics South Africa (Stats SA);
4.19Government initiatives underway to promote economic participation and job creation including the tabling of an employment incentive proposal to encourage youth employment;
4.20An employment incentive proposal has been tabled to encourage youth employment and share the costs of job creation in special economic zones and targeted industries. This measure is expected to support about 200 000 jobs over the next three years; and
4.21The Committee notes the effort to achieve energy security in the Eskom build programme. The Committee expresses concern with regards to the cost and time overruns in terms of the build programme and the resulting impact on the economy.
5.Recommendations
Having considered the 2013 Revised Fiscal Framework and public submissions, the Select Committee on Finance recommends that the House adopts the 2013 Revised Fiscal Framework and further recommends as follows:
5.1Government should intensify and strengthen its working relationship with business and labour in various sectors (labour organisations, unions, business, civil society and all other stakeholders) to build confidence within the economy, to reduce reliance on foreign investors to finance investment and create jobs;
5.2The National Treasury should assess value for money, efficiency and effectiveness of all education related investment. Such assessment should include roll out of head count project piloted in Limpopo Province to the rest of the country;
5.3The National Treasury should assist with the implementation of the NDP, and ensure that the departments align their strategic plans, Annual Performance Plans, Sector plans, delivery agreements and Budgets with the priorities and strategic objectives articulated in the NDP. The allocation of resources are in line with the NDP;
5.4The National Treasury should accelerate the work of the Chief Procurement Office. National Treasury should submit to the House a progress report in this regard, within three months of the adoption of the report by the House;
5.5One of the factors that led to South Africa’s economic growth lagging that of the emerging market economies could be the regulatory environment. National Treasury should consider using a regulatory impact assessment mechanism to better assess the impact of regulation on SMME’s;
5.6The National Treasury should engage BUSA in analysing the studies made that contrasts the key drivers of economic growth in Africa. Furthermore, there is a greater need for interventions in terms of taking investment opportunities in the African continent;
5.7Government through National Treasury should within the next two months provide clear mechanisms that will be used in dealing with the planned cost-containment measures, add more measures where necessary and adapt the further announced ones when practically necessary;
5.8The National Treasury should provide Parliament with progress made with regards to the R9 billion Jobs Fund allocation for the employment creation program launched by the Minister of Finance on the 7 June 2011;
5.9National treasury should report to the House on the approach to the allocation of the contingency reserve in the light of the allocation of the full R4 billion reserve in this year's MTBPS; and
5.10The National Treasury should submit to the House a report on the recalibration of the budget deficit measure and include a comparison of the approach in other countries.
6.References
- BUSA, (2013), Business Unity South Africa: MTBPS Presentation to the Standing and Select Committee’s on Finance, Cape Town, 29 October 2013
- NUMSA, (2013), National Union of Metalworkers of South Africa: Submission on the 2013 Medium Term Budget Policy Statement, Cape Town, 29 October 2013
- Gordhan, P. (2013), Medium Term Budget Policy Statement Speech, Parliament of RSA, Cape Town, 23 October 2013
- National Treasury, (2013) Medium Term Budget Policy Statement, Pretoria: Government Printers
- Solidarity Research Institute, (2013) Submission to the Standing and Select Committee’s on Finance, 29 October 2013.
Report to be considered
THURSDAY, 31 OCTOBER 2013
ANNOUNCEMENTS
National Assembly and National Council of Provinces
The Speaker and the Chairperson
1. Bills passed by Houses – to be submitted to President for assent
- Bill passed by National Council of Provinces on 31 October 2013:
- Geomatics Profession Bill [B 4B – 2013] (National Assembly – sec 75).
- Electoral Amendment Bill [B 22B – 2013] (National Assembly – sec 75).
National Council of Provinces
The Chairperson
1. Message from National Assembly to National Council of Provinces in respect of Bills passed by Assembly and transmitted to Council
- Bills passed by National Assembly and transmitted for concurrence on 31 October 2013:
- Financial Services Laws General Amendment Bill [B 29B – 2012] (National Assembly – sec 75).
The Bill has been referred to the Select Committee on Finance of the National Council of Provinces.
- Employment Tax Incentive Bill [B 46 – 2013] (National Assembly – sec 77), with amendment (see Minutes of Proceedings of National Assembly, Thursday 31 October 2013, Fourth Order (item 15)).
The Bill has been referred to the Select Committee on Finance of the National Council of Provinces.
- Taxation Laws Amendment Bill [B 39 – 2013] (National Assembly – sec 75).
The Bill has been referred to the Select Committee on Finance of the National Council of Provinces.
- Tax Administration Laws Amendment Bill [B 40 – 2013] (National Assembly – sec 77).
The Bill has been referred to the Select Committee on Finance of the National Council of Provinces.
TABLINGS
National Assembly and National Council of Provinces
- The Minister of Finance
- Consolidated Financial Statements for the year ended 31 March 2013 [RP 337-2012].
- Report and Financial Statements of the Reconstruction and Development Programme (RDP) Fund for 2012-2013, including the Report of the Auditor-General on the Financial Statements and Performance Information for 2012-2013 [RP 337-2012].