Hansard: NA: Unrevised hansard

House: National Assembly

Date of Meeting: 13 Nov 2007


No summary available.








The House met at 14:01.


The House Chairperson, Mr G Q M Doidge, took the Chair and requested members to observe a moment of silence for prayers or meditation.






(Draft Resolution)





That Order No 10 be given precedence over Order No 6 on the Order Paper.


Agreed to.




(Draft Resolution)


The CHIEF WHIP OF THE MAJORITY PARTY: Chairperson, I move the motion printed in my name on the Order Paper, as follows:


That Rule 253(1), which provides inter alia that the debate on the Second Reading of a Bill may not commence before at least three working days have elapsed since the committee’s report was tabled, be suspended for the purposes of conducting the Second Reading debates today on the following Bills:


  1. Revenue Laws Second Amendment Bill [B 43 – 2007] (National Assembly – sec 75); and


  1. Securities Transfer Tax Administration Bill [B 45 – 2007] (National Assembly – sec 75).


Agreed to.




There was no debate.




That the Report be adopted subject to the first recommendation being amended to read as follows:


That consideration be given to extending the period for

consideration of and report on the Medium-Term Budget Policy

Statement to allow for a more comprehensive review and

interaction with various stakeholders.


Motion agreed to.


Report, as amended, accordingly adopted.




There was no debate.




That the Report be adopted.


Motion agreed to.

Report accordingly adopted.




Mr N M NENE: Chairperson and hon members, on the occasion of the tabling of the Medium-Term Budget Policy Statement of 2007, the Minister of Finance reminded us that the statement was intended to encourage parliamentary and public debate on how South Africa would meet the social and economic challenges ahead. The statement was, accordingly, referred to the Portfolio Committee on Finance and the Joint Budget Committee in terms of our respective mandates.


The Portfolio Committee on Finance undertook this engagement in two phases. In the first phase we had a briefing by the department, led by the Minister in his capacity as executive authority in terms of the PFMA and the Director-General as the accounting officer in terms of the same legislation. In the second phase we engaged with economists on the macroeconomic outlook, reflecting on the implications of the Medium-Term Budget Policy Statement.


Focusing on government’s strategic framework that seeks to enhance the social, cultural and economic welfare of all South Africans, the statement deals with the following. Firstly, it deals with the acceleration of economic growth and the state of investment; secondly, it deals with employment creation; thirdly, it deals with investment in community services and growing the social wage; fourthly, it deals with the improvement of the effectiveness of the state; and, lastly, it deals with the building of regional and international partnerships for growth and development.


Government is seeking to achieve the intended objectives within a very volatile and unpredictable global economic climate. Whilst the economy has posted reasonable growth since 2004, it is not entirely immune to the challenges that obtain in the major economies at a global level. The most obvious challenge the economy faces is that of a persistent current account deficit, which some economists attribute to a country living beyond its means.


To put it in the Director-General’s words to the committee, and I quote:


We are spending more that we earn and rely on the international community to finance our spending.


He estimated that at present we are spending about R2 billion a week. He went on to say:


This results in the current accounts and inflation imbalances that are not sustainable.


Savings and investment imbalances were also identified as the key constraints to faster growth. One of the key challenges has been the CPIX, which has been outside the target range since April 2007, influenced by supply-side pressures, including the high global prices of agricultural commodities and low domestic production, oil prices that were at record high levels and the average wage settlements that were above 8%.


Statistics SA has also identified food and energy prices as major contributors to the CPIX inflation, to the extent that if the two were excluded, CPIX would be within the target range. Even though the full impact of the interest rate increases has not yet been realised owing to the time lags, domestic consumption has moderated somewhat. Part of the moderation is attributed to the effects of the National Credit Act, which came into effect at the beginning of June this year.


The National Treasury, in the presentation to the committee, alluded to the greater risk of a global economic slowdown that arises from the slowing growth in the United States, coupled with the unravelling of the subprime mortgage crisis, as well as steps to curb inflation in China being likely to slow growth in that region.


The statement proposes some innovative means to mitigate the impending risks and fiscal policy is at the centre of this master plan. The structural budget balance is introduced in order to adjust fiscal balance for three issues: One, the cyclical deviations in the rate of economic growth; two, the cyclical changes in the composition of growth; and three, the changes to our terms of trade or to commodity prices.


This proposed structural budget balance is meant to be a contribution to a more systematic and consistent adaptation of the fiscal stance to cyclical factors. The statement simplifies this concept as follows, and I quote:


When economic conditions are good as they are now, we must invest and save in a manner that allows us to maintain public spending and societal welfare when economic conditions turn less favourable, as they inevitably will.


The ANC government will not relent in its endeavour to create sustainable livelihoods through the state machinery that is geared towards the eradication of poverty and meeting the basic needs of the vast majority of South Africans. It is in this context that it becomes crucial to allocate more resources to those programmes with the highest rate of social return, or which have the greatest impact on reducing poverty and unemployment.


Sihlalo, uhlobo lombuso inhlangano kaKhongolose ekholelwa kulo yilolo olugxile kakhulu ekuthuthukisweni komnotho nokwabelana ngokulingeneyo kwabantu bonke ngaphandle kokubandlulula. Uma sibheka lesi sitatimende senqubomgomo singaphawula ngokungangabazi ukuthi, yize sibhekene nezinselelo ezinkulu, ikakhulukazi ezingeni lomhlaba, umnotho waleli ezwe uyaqhubeka nokubhekela isizwe sonke ngenxa kahulumeni ozibophezele ekwenzeni ngcono izimpilo zabantu bonke.


Lesi sitatimende sigcizelela ukwehliswa kobubha ngokuqinisa izakhiwo nokusebenza kukahulumeni, ukuqiniswa kohlelo lokwakha izingqalazizinda, ukuthuthukiswa kwemiphakathi nokulethwa kwezidingongqangi kubantu bonke. Lokhu kwethulwa kwalesi sitatimende kuhloswe ngakho ukugqugquzela isiko lengxoxompikiswano kule Ndlu yesishayamthetho nasemphakathini ukuze wonke umuntu abe nezwi ekutheni zizohlangatshezwa kanjani izidingo zomnotho nezenhlalakahle zesizwe. Lolu hlelo luhambisana kakhulu nesiqubulo saleli Phalamende esithi “Masijule ngengxoxo Mzansi”. Kuphela nje sidinga isikhathi esanele nezinsiza ezifanele ukwenza lokho. (Translation of isiZulu paragraphs follows.)


[Chairperson, the kind of government that the ANC believes in is that which emphasises the development of the economy and in which people share equally without being discriminated against. If we look at this policy statement, we can undoubtedly notice that, although we are faced with many challenges, globally in particular, the economy of this country continues to sustain the whole country because of the government that is committed to improving the lives of all.


This statement puts emphasis on the alleviation of poverty by strengthening government’s structures and work, consolidation of the infrastructure building programme and the development of communities and service delivery. The introduction of this statement is aimed at encouraging the debate in this legislative House and amongst communities so that everyone has a say as to how the economic and social needs of the country are met. This programme goes hand in hand with this Parliament’s slogan “Masijule ngengxoxo Mzansi” which means that we must intensively engage in talks. All we need is enough time and appropriate resources to do that.]


The committee is of the view that the time allocated for the engagement with the Medium-Term Budget Policy Statement is not adequate for Parliament to make a meaningful contribution, neither is there adequate capacity within the institution to fulfil this. We trust that the Joint Budget Committee will make the necessary proposals, as enjoined by its terms of reference in order to address this situation.


The Medium-Term Budget Policy Statement deals with matters that cut across virtually all departments and that would require all portfolio committees to engage with the statement in relation to their respective mandates. This would afford departments and portfolio committees an opportunity to review their adherence to government policy overseen by Parliament immediately after the tabling of their annual reports and audited financial statements.


It is processes like these that place South Africa way ahead of other developing countries in terms of transparency and accountability. It is, therefore, incumbent upon us that, within the time constraints and limited resources, further compounded by the asymmetry of information, we engage with effective oversight of policy implementation.


The committee supports the MTBPS and trusts that the other committees will take the debate forward with their respective departments, with the information being of value during the tabling of the strategic plans and budgets next year. Thank you, Chairperson. [Applause.]


Mr I O DAVIDSON: Mr Chairman, last week the National Treasury revised our economic growth estimate for next year from 5,1% to 4,5%. Much of this deterioration is due to an expectation of poor performance in the global economy, and in response to this the Finance Minister presented a cautious Medium-Term Budget Policy Statement with built-in stabilizers.


The DA supports this approach. We do believe, however, that the state should be doing more to let market-led development lift our growth rate. Like many analysts and economists, we are increasingly concerned about the sustainability of the current account deficit and the lack of progress with respect to corporate tax relief, privatization and the final abolition of exchange controls.

The current account deficit is increasingly worrying with its projected widening to 7,7% of GDP in 2007 and 7,8% in 2008. Both of these rates are the biggest since 1951. The Director-General of the Treasury has indicated that South Africa now relies on R2 billion worth of capital inflows a day to finance its current account shortfall, which is most worrying when most emerging markets have current account surpluses, thanks to high commodity prices. This is also a worry in the light of the global credit crunch sparked by problems in the risky US mortgage market as well as a tendency of global investors to reduce their exposure to the global carry trade.


We believe that the persistently high current account deficit is driven by three factors which the Minister has influence over: Firstly, the bottlenecks in the economy prevent local production from meeting burgeoning demand. The Asgisa initiative has correctly identified the majority of these constraints, but little progress is being made in having them dismantled. The last Asgisa Annual Report bears eloquent testimony to this.


Secondly, the growth in government spending continues to outstrip economic growth. This is a worrying trend that will further worsen the deficit unless the Minister reins it in soon. We stand by our position that public sector wage hikes should be linked to increased productivity.


Thirdly, our chronic lack of domestic savings and investment compromises our ability to finance our expenditure. This situation needs to be turned around with incentivizing cuts in the corporate and retirement fund tax rates. In addition, the long-awaited abolition of exchange controls will help to counter-balance our significant dividend outflows.


We are also alarmed that, while the Minister was happy to continue to pour taxpayers’ money into state-owned entities such as Denel, Alexkor and SAA - which should have been privatised many years ago - he is mum on the fact that consumers could face energy tariff hikes of around 18% for the next few years to fund Eskom’s infrastructure catch-up programme.


Would it not make sense for Eskom’s biggest stakeholder, the state, to fund this expansion? The inflationary effects of passing on these infrastructure costs directly onto consumers could undo the positive effect the fiscally conservative policy statement before us has on inflation. Our view is that the national Budget is better placed than the South African consumer’s pocket to absorb these costs in an inflation-neutral manner.


I must point out here that we believe the new approach of a “cyclically adjusted budget balance” to be a level-headed policy reform that improves our view of the real state of the South African fiscus, provides some insurance against future financial instability and continues the Finance Minister’s successes in prudent management of the budgets. It is a fiscal policy development that the DA supports.


The problem is, although the Medium-Term Budget Policy Statement is meant to be a statement on broad policy direction, there are virtually no other announcements on fiscal policy directions with which we could agree, or in fact disagree.


Minister Manuel’s speech makes reference to monetary policy; macroeconomic and trade policy; policies in the domain of the Reserve Bank and the Department of Trade and Industry, respectively.


Now I understand the Minister’s frustration. Because of sound

macroeconomic policies he has secured excellent funding. It is in the delivery that his colleagues are often found wanting. Little surprise, therefore, that the policy statement went far beyond the Minister’s normal announcement of changes in expenditure and emphasis.


In the statement we heard the Minister sound off on trade and industrial policy, the public service, health, education, crime and even South Africa’s social behaviour. The speech was over-reaching and I am sure Cabinet colleagues found it intrusive and divisive. But I understand the Minister’s frustration.


The other Cabinet Ministers are clearly not taking the Finance Minister’s intrusions lying down: Last week’s ugly public spat between Minister Manuel and Minister Mpahlwa was just the latest in a long-running feud between the Treasury and DTI that is creating widespread uncertainty and holding up policy implementation.


It may be that the tensions in the ANC are now filtering through to Cabinet – and it would be truly alarming if this were so – but, whatever the cause, it is clear to us that the ANC Cabinet Ministers responsible for the economy are at odds with one another. But what are the costs of this rift?


There is a well-known saying that sums it up: “When elephants fight, the grass gets trampled”, for it is clear to us that those South Africans who are most vulnerable are the ones paying the price for this dispute. When the Finance Minister made his Budget speech in 2006, 4,2 million of our people were unemployed. By the time he announced this year’s Budget, the ranks of the unemployed had risen by 61 000.


If we include those people who have given up their futile search for work, there are over 7,8 million unemployed people in our country. These numbers have not changed materially in over six years. Unemployment is our national crisis.


The Ministries of Trade and Industry and of Finance should be working together to combat the scourge of unemployment and make it easier for businesses to grow, trade, and create jobs. Instead they are paralysed on a variety of critical issues because they are unable to agree on their broad ideological and policy positions. The result of this is that any initiatives that require the collaboration of the two departments – and they are many – are either shelved or massively delayed.


The examples are numerous: As last week’s headlines showed, our national trade policy is paralysed while Treasury and the DTI fight it out in the media over whether we should go for state-based interventions or the eminently more suitable market-driven tariff reforms.


The long-awaited and much-anticipated National Industrial Policy Framework which has finally been released by the DTI has emerged in the form of broad conceptual brush strokes. Now a debate may well be had as to whether it is a government’s role to pick winners, but leaving that debate aside, the framework announced requires the Treasury’s direct input and support in no fewer than 27 separate initiatives.


Key to these initiatives is the unresolved debate as to the nature and extent of sector as opposed to broad-based incentives, a debate around which the DTI and Finance Ministries are unable to agree, hence a further delay. It is no secret that the Treasury is reluctant to accept the extension of the Motor Industry Development Programme, effectively blocking efforts by the President and the DTI to provide certainty to foreign and domestic investors in the motor industry, one of our key industrial anchors.


The DTI’s handling of the Chinese textile quota issue has been shambolic, with the department being unsure of whether to retreat into protectionism or encourage efficiencies via competition; all at the expense of local consumers, who have seen final costs rise.


Despite the fact that the DTI’s finalized Codes of Good Practice reward BEE based on a new, broad set of measures, Treasury has yet to reconcile this with the Preferential Procurement Policy Framework Act, presumably for ideological reasons. This means government departments are out of line with the BEE Act and are still procuring on principles of narrow-based BEE while they insist that the private sector applies the broad-based scorecard.


I will not comment on the merits of these relative positions, but the point is, ordinary South Africans who are affected by these policies don’t want to take sides in the standoff in the Cabinet, and they shouldn’t have to. But if you ask me my money is on the Treasury and the Minister of Finance, for let’s face it: Any department that bungles something as small as the lottery surely can’t be trusted to be the key driving force behind our so-called developmental state.


Ministers Manuel and Mpahlwa should stop holding the South African economy hostage over their ideological differences. I hope that our President is not too busy with internal ANC affairs to stick his head over the parapet on this issue, but he needs to take a position of leadership here. He urgently needs to resolve this clash of dogma and personality between two of our most important Ministries. Our nation’s economic development is at stake. I thank you. [Applause.]


Mr N SINGH: Chairperson, hon Deputy President and colleagues, I just want to assure hon Davidson that we, the IFP elephants, don’t fight; we construct.


The IFP welcomes the Medium-Term Budget Policy Statement introduced by the hon Minister of Finance. My party appreciates that the Minister may not have had the same room to manoeuvre, due to the rising inflation and lower economic growth, than in previous years. But, overall, the government spending priorities for the next few years appear to be mostly directed at the right things. We are, however, concerned that the taxpayer should get full value for every rand the hon Minister has committed.


Some of the departments benefiting from the announcements are simply not performing adequately when it comes to financial management, as pointed out by the Auditor-General recently. General non-compliance with PFMA and Treasury regulations are creating a crisis for government as the public simply does not know whether it is getting good value from state expenditure, for instance, some provincial departments and municipalities appear to be in a state of audit disarray, yet this Medium-Term Budget shows very strong growth in transfers to municipalities and provinces to improve basic services.


We agree that increased spending in these areas is necessary, but we are concerned and must express our doubt about the ability of some provinces and municipalities to spend within the prescripts of the PFMA and the MFMA respectfully. Our concern is reflected in the approved rollovers of R4 billion arising from unspent balances in 2006-07.


The IFP also has to question whether the taxpayer is getting full value for money from state funds spent on salaries and bonuses for chief executives of public entities and agencies. Some of these public entities have had to be rescued by the state on more than one occasion, but government continues to pump money into loss-making entities such as SAA, Denel and the Land Bank.


The IFP wants to urge extreme caution in this respect, as the Land Bank case has clearly indicated the potential for executives to dole out patronage and enrich themselves at the expense of the taxpayer. We welcome the firm action of government in respect of the Land Bank, but we want to recommend that the National Treasury launch a full investigation into all public agencies and entities to establish whether taxpayers are indeed getting value for money or if that money is disappearing into a black hole.


Chairperson, while we understand the hon Minister’s reasons for building budget surpluses in the next three years, we are disappointed that he did not see his way clear to ring-fence some of the budget surpluses and revenue collection overruns and to redirect those funds to carefully selected strategic interventions like crime-fighting, education, job creation and specifically infrastructure spending on the new power generation. We question whether it is necessary in an emerging economy such as ours with the focus on development to maintain a surplus at all. That extra money, we believe, should be targeted specifically at strategic priorities.


One priority which is omitted in the policy statement is the question of rural development and we believe that much more focus needs to be placed on developing people in the rural areas, because urbanisation is not helping us in any way but is creating more problems in the cities of our country. We trust that this issue will be addressed by the hon Minister and Treasury.


Food price inflation is another serious cause for concern. We find that almost half of the 6% inflation is attributed to food prices. We would like to see the government’s food pricing committee come up with a report as soon as possible so that we can have a cap on the rising inflation.


As far as Eskom is concerned, we know that the hon Minister said that you do not scratch when it does not itch. Eskom has not asked for additional funding, but we do trust that there can be a dialogue between Eskom and government so that the taxpayer ... [Time expired.]


The HOUSE CHAIRPERSON (Mr G Q M Doidge): Order! Hon members, please lower your voices.


Ms L L MABE: Hon Chairperson, members of this august House and the public at large, I want to start by indicating that it is important for all of us, both members of this House and the public, to engage with the statement as presented by the Minister of Finance, but it is also important that we need to have sufficient time to deal with the statement because this is a major policy statement which requires more time to engage the public so that we know what the public view is. I believe that the recommendation from the committee will be taken on board by the powers that be.


I am going to speak on the priorities over the medium term and why it is important that the capacity of the state needs to be improved and strengthened. Amongst the issues that the statement raises is that there must be spending on infrastructure. This we have taken seriously as a committee - that the built environment will take up a huge part or a large part of spending over the medium term, and this takes on board housing, transport infrastructure, water and others.


However, the concern that we have as a committee is that despite the fact that there’s considerable progress with regard to housing and public transport systems, there needs to be more capacity-building in the departments, firstly, to monitor what takes place, and secondly, to have an integrated approach amongst the relevant departments and the entities that belong to these departments.


For instance, we engaged with the Department of Public Transport in terms of public transport infrastructure as well as other transport-related infrastructure over the medium term. We were worried that there is no clear plan between the department and the relevant institutions that account to the department when it comes to transport infrastructure. This compromises our objectives and aims as a developmental state to ensure that even those who are in the rural areas will benefit over the medium term when it comes to public infrastructure spending.


The other point is that, in our engagement with the department, we have realised that there are serious challenges of capacity to overcome to be able to deliver. Yes, indeed, government is going to allocate a lot over the medium term to emphasise and even strengthen the built environment, but the fact of the matter is that the departments could not convince us that they are ready to consume huge allocations that will be given to those departments, and this is a concern.


I would like to quote the Public Service Commission in its input to a seminar that was held on the developmental state. They raised a serious challenge when they mentioned that, for government to fulfil its developmental role, the capacity of the Public Service should be central to the developmental state to be able to achieve its objectives. They further indicated that there should be a link between departments in the developmental state and the entities that account to that department.


I would like to cite an example: The Department of Minerals and Energy needs to have a co-ordinated and integrated plan with Eskom, so that all entities that fall under the Department of Minerals and Energy can have the same view of what we want to achieve over the medium term.


Another example would be the Department of Transport. As I indicated earlier on with regard to the entities that fall under it, do they have the same understanding of what they want to achieve in respect of the developmental state?


Coming to the Department of Public Enterprises, we had a serious challenge when we engaged with them. We are not yet convinced that the entities and the public enterprises that fall under the department are really geared towards the developmental state’s capacity to deliver better service to our people.


The other point that I want to raise is the fact that, as a committee, in our interaction with the department, we felt that there was a strong need to engage the public more but even more so the portfolio committees. Although we had interacted with other portfolio committees of Parliament and we are really proud that the engagement was fruitful because the portfolio committees could inform us much more about what is happening in the departments as we were engaging, I would like to indicate that there is great potential to increase employment and there’s great potential to reduce poverty through interaction among different departments and the entities that belong to those departments.


I also want to raise the fact that there is a need for the government - as is stated in the priorities - to raise the productive capacity of the economy. Definitely, that needs to happen - the Minister stated in the statement that we are more reliant on primary resources to export - but the challenge is what we are doing to ensure that small businesses can develop. How do we ensure that the small businesses can be nurtured as they grow so that they can become better competitors in the long-term? This is one of the areas which has the potential to create more employment.


The other thing that we are also challenging as a committee is that, as we create more employment, is the employment that we create sustainable or not? Are those wages sustainable or not? Are they assisting people to get out of poverty or are they exacerbating the fact that people might permanently live in poverty?


The other point that we are raising, Minister, is that although, in the short term, there is an attempt that government will ensure that inflation does not impact negatively on social grants and on public service salaries, the issue is that, right now, inflation is eating into those grants. We feel that it would have been proper that right now – even before the end of this financial year - there needs to be that cushion rather than over the medium term, because probably we don’t know what the future holds. It might be that, in the medium term, inflation will have reduced, but what we are challenging is that, right now, inflation is eating into those grants as well as the public sector salaries.


Finally, what I want to state is that as a committee we are really concerned. Members of this House, we are concerned with the capacity of the state to deliver. Government is bringing more resources for spending, but do we have capacity? Why should government continue to rely on the private sector through consultants to deliver the service, whereas we are supposed to be developing the capacity of the state as a developmental state?


I want to emphasise that, as a developmental state, we must build our capacity in the state through training, skills development and the absorption of those who are unemployed but have qualities and skills which are not being utilised right now. What we are asking is: What are departments doing, for instance, to re-open colleges? [Time expired.] Thank you.


Mr L W GREYLING: Hon Chairperson, the ID fully supports the process of the Medium-Term Budget Policy Statement as we believe that it inculcates a greater measure of transparency and predictability in our budgetary process.


In terms of this year’s Medium-Term Budget Policy Statement, the ID is firstly concerned with the projected budgetary surpluses over the Medium-Term Expenditure Framework period. While on the face of it the budgetary surplus might sound like a positive feature, in a developing country such as ours with such huge social deficits to overcome, a budgetary surplus is a very worrying indicator. In some senses it makes a mockery of our stated objective of building a developmental state. To the ID, it is a very clear indication that there is a fundamental weakness on the part of government to effectively spend its money in delivering quality services to our people.


What we clearly need is a government that is able to spend its money as effectively as it collects it. The argument that we are using this boom period to save for a rainy day simply does not hold water. It is a rainy day now for the millions of South Africans who continue to live in abject poverty and are not receiving the basic levels of services they are constitutionally entitled to.


It is the ID’s firm belief that the capacity problems that are endemic in our government departments require a re-conceptualisation of the developmental state. What is required is a people-led development where the enormous capacity that resides in our communities and civil society structures is unlocked and financially supported through the state. If the state can’t spend money effectively, then we need to direct it to those that can.


In this regard, the ID believes that our current Budget surplus would have presented a perfect opportunity to announce an extension of the child support grant for children of 14 years to 18 years of age, as per the constitutional definition of a child. The cost of such an initiative would amount to around R6 billion, which is certainly affordable and sustainable over the MTEF, given our large predicted Budget surpluses and this extension will also help in reducing school drop-out rates.


The ID does, however, welcome the extra money that has been set aside for grant recipients in the MTEF period to adjust for the increase in the cost of living that the poorest of the poor have to endure. While food inflation is currently running at double that of general inflation, it is clear that the past inflation-adjusted increases in grants are simply going to lead to the poor sliding into even greater levels of poverty.


Finally, on the issue of inflation, the ID maintains that, as a country, we need to openly debate this issue in terms of its relation to economic growth. Inflation is quite clearly a global problem and is driven in large part by excess consumption and major supply constraints, particularly in the areas of oil and food. At the moment, we are using the blunt instrument of interest rates to control an inflation which is largely driven by factors outside of our control. Interest rates cannot deal with the global inflationary pressures of oil and food. Increasing interest rates are choking off demand in our economy and potentially restraining growth.


The ID, therefore, believes that we need to consider revising the target bands for inflation and debate what level of inflation we can realistically endure. Thank you.


Mr S N SWART: Chairperson, the ACDP supports the Medium-Term Budget Policy Statement, in broad terms, as it reflects our strong macroeconomic fundamentals despite a high inflation environment and the decrease in economic growth prospects.


We note the concept of structural budget balance. This is intended to ensure that public spending is protected even if economic conditions worsen. This is the reason for budgeting for a surplus of approximately 0,6% of the Gross Domestic Product over the next three years.


Clearly, it is very important that when economic conditions deteriorate, there needs to be resources to cushion the economy against global volatility. This is a sound and reasonable approach, which we support, and is in line with international best practice.


With the core priorities being the strengthening of education, public health and social welfare services, we welcome the additional R36,1 billion to the provincial baseline allocations over the next three years, as well as additional funding to fight crime. It is crucial, however, that we remain committed to poverty relief and employment creation, whilst not over-stimulating consumption, which has now resulted in interest rate hikes and has contributed to the worrying current account deficit of 6,7% in the GDP.


The ACDP particularly supports Treasury’s efforts to ensure that departments use resources more efficiently to deliver better value for money. Quality and efficiency are issues that must be addressed. In view of the widespread shortage of skills, however, it is disgraceful that the Setas charged with skills training should hold R3,7 billion in cash reserves. Clearly, they are woefully underperforming.


Trade liberalisation is, of course, an important issue, and we note the Minister’s views regarding the reduction of South African industry tariffs and duties, unilaterally if necessary, to boost exports and economic growth. It is interesting to note that China and India have been unilaterally reforming their tariff regimes.


We note the differences in approach between Treasury and the Department of Trade and Industry, DTI, on this issue, and trust that the Finance Minister’s good sense will prevail in this regard. At the end of the day we will be judged by the extent to which economic growth translates into more jobs to address the poverty experienced in our country - that is the ultimate challenge. The ACDP supports the Policy Statement. I thank you. [Applause.]


Mr B A MNGUNI: Chairperson, hon Ministers and hon members, the Policy Statement, once more, presents us with an opportunity to debate the economic policy and the direction in which the country is heading as far as the economy is concerned. The golden thread in this debate is the socioeconomic wellbeing of the populace.


As the document states, government would like, amongst other things, to ensure that the social security network remains intact and that it caters for those in need; to ensure the deracialization of the economy; to ensure the creation of jobs and poverty eradication; and to further integrate the South African economy into the regional and world economies at large.

One should note that investment in infrastructure constitutes a major portion of the investment expenditure towards the Fifa World Cup in 2010 and, most importantly, beyond. A policy argument on the investment trend is the amount of investment in respect of the total production in the country’s economy. According to the ANC policy conference held in July 2007, the envisaged investment trend is 25% of GDP.


Economists have engaged on and argued about the rate of investment necessary to sustain an economic growth of 5% or more in order to reduce unemployment by half in 2010 and reduce poverty. The million-dollar question is whether this kind of investment will, at the end of the day, generate enough economic activity to halve unemployment by 2014 and reduce poverty.


Thus the introduction of a structurally balanced budget is a prudent move towards attenuating the negative economic impact of external shocks on the economy. This brings me to the use of the surpluses in cushioning the economy during bad economic cycles.


National Treasury has coined the term “structural budget balance”. This simply means the smoothing of budget overruns or deficits during good economic times or bad economic times. This will ensure that government is able to sustain the quality of life we are currently living, especially for those who depend on state grants. However, in the long term this will not address the issue of the golden thread, which I mentioned earlier.


Job creation is a key element in addressing this issue and in turn the creation of jobs depends on the level of economic growth. The quality of jobs created will, at the end of the day, determine the quality of life. Therefore, government’s role in the development of our economy is central. We cannot continue to rely on the invisible hand of the market to better our lives.


Thus, increasing infrastructure investment to lay a foundation for the anticipated growth beyond 6% is needed, to be able to halve unemployment by 2014. However, according to the Financial Mail of 26 October 2007, we are not going to be able to reach the target because we are still not able to create enough jobs despite our current level of investment in the economy.


Do we then have to increase public sector infrastructure expenditure to more than R482,4 billion over the medium term? I personally do not know the answer to this question. However, we cannot debate the issue of economic growth without touching on the three main variables, namely capital, land and labour.


We can also not rely on the markets for the distribution of these resources. A conscious and calculated decision has to be taken by government to accelerate economic growth in a sustainable manner. The private sector has a role to play in so far as economic efficiency and other issues are concerned, but government has to take the lead.


Enough has been done to open our markets and to liberalise our economy. Many of the exchange control regulations and laws have been repealed. Trade liberalisation and transparency have to be balanced with the size of our economy, not forgetting that we are still an emerging economy.


Our economy is still based on the primary sector. Therefore, the pricing of commodities is determined by world markets, and that is why some of our industries still need protection by the state. Some members of the Portfolio Committee on Trade and Industry attended the public hearings, and the debate on this issue is welcome. However, further engagements on a broader basis are imperative.


State-owned enterprises need to gear up and channel their resources towards the development of the state and improving the quality of life of our people. In conclusion, I want to say that in the face of high and increasing oil prices, perhaps we need to rethink the role played by Sasol in producing fuel from coal so that we limit the amount of oil that we have to import, in order to curb inflation and remain within the inflation target. Thank you.


Mr I S MFUNDISI: Mr Chairperson and hon members, the annual review of spending trends of government is a healthy exercise that requires good custodians who will look after the funds. The National Treasury does all that is possible to ensure that resources are made available for prudent use. But there are other arms of government such as provinces and local authority administrations that show no commitment to physical prudence.


It boggles the mind to note that a good number of provinces have been shown to be poor in the administration of funds. To have 10 out of 13 departments in a province receiving qualified reports from the Auditor-General indicates that capacity is lacking and surely much has to be done in this regard to assist them.


We note that the theme of the Minister’s presentation is: Today is better than yesterday and tomorrow will be better than today. This may be a hackneyed expression when even Zwelinzima Vavi has gone on record as saying that life is worse today than in the past. We have instances in the Moses Kotane municipality where people who had access to potable water prior to 1994 now struggle to have some these days. The same issue in the Zeerust area has yet to be addressed fully. Resources are available, yes, but are not used prudently. According to the Minister, and I quote: “Development is also about access to jobs, security of incomes and redressing past inequalities.”


The truth facing us is that there are not sufficient jobs to be accessed. People are not sure where their next meal will come from as there is no secure income and the past inequalities have been turned upside down. The playing field has yet to be levelled. Some people are obscenely wealthy while others are wallowing in abject poverty.


We, however, totally agree that people must make hay while the sun shines. Spending patterns have to be controlled, with an eye to a rainy day that is yet to come. We cannot hope to develop if we continue to spend R2 billion per week while we do not have much to bring in. There is much truth in the saying that education should precede liberation. Young people should be motivated to prepare themselves for the future by learning skills and leaving liberation debates to those skilled in them.


It is going to be an uphill battle to get to a point where people are content with their remuneration. One wonders why employers and workers cannot find one another on issues pertaining to the construction of stadia for instance. Yesterday it was workers in Cape Town. Today it is those in KwaZulu-Natal and a month ago it was issues around the Gautrain. Where is patriotism in this case? When will people stop making us the laughing stock of other nations?


The greed and lavishness displayed at the Land Bank should be dealt with in the best possible way. We commend the Cabinet for having ordered that stringent legal steps be taken against those concerned.


The hundreds of millions thrown into the gaping bottomless pit that is the SAA, which has placed itself to gulp financial resources, could be put to better use if we had the necessary skills. The rollover for the prevention and treatment of multi-drug-resistant TB will, we hope, be extended to the troubled Delmas area as people there are dying because of suspected polluted water.


We welcome the billions set aside for improving what pensioners take home. We hope other departments will protect these vulnerable people against vultures who pounce on them at pay points.


Finally, municipalities must rise to the occasion and not spend money on salaries to the total exclusion of the delivery of water, sanitation and electricity connections. The UCDP supports the Medium-Term Budget Policy Statement. I thank you.


Ms S RAJBALLY: Mr Chairperson, we firstly take this opportunity to once again applaud our hon Minister of Finance and his team for an impeccable job.


The MF is pleased that the Medium-Term Budget has consistently helped in tackling our aims of eradicating poverty, enhancing social development and developing the economy by supporting all Asgisa efforts. From the hon Minister‘s report, it appears we have grown significantly and our progress has been faster than anticipated.


The MF is also concerned about education, health and social development. We are especially pleased that the Budget has advanced more funding to help target these sectors.


We appreciate that there are statistics that indicate that employment has increased, but we do feel that we need to eradicate rigidities in the economy that hinder job creation, in the light of this week’s security for long-term employment, as statistics do not indicate how many have short-term contracts for employment. The MF believes that we need to intensify labour absorption and take another look at employment equity.


The 2010 Soccer World Cup remains high on the agenda and while a great many are criticizing the Budget allocated for this auspicious event, the MF acknowledges that the money is being utilized in areas such as transport, stadium development and public works that will, in the long term, be to our benefit.


In view of the global trend, we express our concern that, despite increased global risk and slowing international demand, South Africa is set to consistently grow at 5% per annum. We would like to know how sure we can be of this and, in the event that this does not work out as planned, what we propose to do about it.


It is not that the local and provincial government allocation has been substantially adjusted. In this respect we are pleased, as this means that delivery may increase. However, we also have to acknowledge that many municipalities do not have the capacity to achieve this delivery. If we are to effectively reach our targets then we need to address the issue of gaps and incapacities as soon as possible.


Furthermore, many departments are experiencing under-spending as a result of similar circumstances, namely vacant posts. These posts need to be filled with immediate effect. This is seriously hindering our progress. In fact, all aspects contributing to under-spending need to be targeted.


In terms of education, the MF is pleased about the allocations made to school buildings and the nutrition programme. We reiterate that we wish the nutrition programme to be extended to secondary schools and that it should be secure and that all no-fee schools should be beneficiaries of the nutrition programme.


Furthermore, looking at the government’s financial contributions to private-owned companies such as SAA, these need to be reviewed, especially if they do not show any financial growth in their own capacities. The MF supports the Medium-Term Budget Policy Statement. I thank you [Time expired.] [Applause.]


Mr M R MOHLALOGA: Chairperson and hon members, I greet you all. I would like to congratulate the hon Minister and his team on the Medium-Term Budget Policy Statement, 2007, delivered to this House. I appreciate the opportunity granted to me to say a thing or two on it.


One of the key objectives of government is to halve the proportion of people living in poverty by 2014. Consequently, the core objectives of economic policy are to accelerate growth, raise employment levels and provide poor and marginalised communities with the necessary support to participate in the formal economy.


The role of land and agrarian reform cannot be overemphasised to achieve this objective. South Africa has a dual agricultural sector comprising of a well-developed commercial sector and predominantly subsistence-oriented sector in rural areas.


This was as a result of racial segregation laws that placed 88% of the agricultural land in the hands of white farmers while the remaining 12% supported 72% of the rural population in the overcrowded homelands. In addition, white commercial farming was protected from foreign competition and was supported by the apartheid government through a variety of measures.

Post-1994, we began a process of land reform and a broad-based programme of economic empowerment of the black population in the agricultural sector. I will revert back to this point later in my deliberation.


The report of the National Marketing Council, the Medium-Term Budget Policy Statement and the SA Reserve Bank Annual Economic Report all draw our attention to the growing inflation which has been above the target range since April 2007. The biggest contributor has been the higher food and fuel prices.


The food price inflation represented by the annual growth in CPI food has increased steadily since the end of 2005. Food inflation almost reached a year-on-year increase of above 9% in July 2007. The CPI of all items excluding food items, followed a slower increase, reaching 5% by the end of 2006.


The result is that some 14 million people in the country remain vulnerable to food security and 43% of households suffer from food poverty. Much of this poverty is associated with rural areas, particularly in the former homelands. This situation is in part accounted for by the growing middle class in China and India, which needs to be fed, unfavourable weather conditions and rising international prices, alongside the competing demand for agricultural output needing to be diverted to bio-fuel production.


The growth in the fuel price has a bearing on the production cost for farmers as well as the ultimate farm-to-retail price, because transportation costs are a matter of great concern for agriculture. The price of super maize meal, for instance, has increased by 36% from December 2005 to December 2006. And this is one of the most basic foods for our own people.


The other challenge is that there is a decline in the number of farmers. According to the Milk Producers’ Organisation of South Africa, the Free State has seen the largest decline in milk producers, with 80 producers leaving the industry, followed by Mpumalanga with 60, North West with 53, Western Cape with 51 and Gauteng with 30. This decline has taken place between January 2006 and January 2007.


For some of these farmers it makes more sense to sell their stock, given the high meat prices, than to keep them for milk production because of drought and the increase in the price of the main feed, namely maize.


The result is that you have fewer farmers who have to feed a growing population. In fact, this season will end with a shortage of 18 million litres of milk and, inevitably, higher milk prices. This is besides the possible irregular behaviour by the four large milk buyers or processors.


A lack of well-articulated support for small-scale emerging farmers is a cause for concern. I welcome the intervention to provide better extension services and post-settlement support to new farmers.


Most of the land that has been redistributed is performing far below capacity. Hence, agriculture is contributing less than 4% of the GDP and experiencing a decline in the number of jobs.


Our redistributive land reform is premised on the need to bring about direct benefits to beneficiaries and indirect benefits to the rural economy. According to the White Paper on South African Land Policy of 1995, redistributing access to and ownership of land to previously disadvantaged South Africans should reduce poverty and contribute to economic growth.


Where land is redistributed through land reform, agriculture is the dominant but not the only land use. However, land reform policy has not up to now envisaged what kind of land uses are to be promoted through the process of land reform and therefore what kind of structural changes in production, markets and settlement patterns are being pursued alongside the deracialization of ownership.


This is a product of land reform not being sufficiently located within a wider framework of agrarian reform. The result is that in Limpopo, for instance, 46% of the potential arable land, and in Northern Cape, 52% of the potential arable land, is reported to be unused.


Furthermore, the past decade has seen a reduction in farming as more land has been taken out of agricultural production altogether, to make way for non-agricultural land uses through conversion to game farms, our beloved golf courses and holiday estates.


The 1995 White Paper on Agriculture noted that the present structure of agriculture and rural communities is characterised by a very uneven income distribution. This problem can be addressed by broadening access to agriculture through land reform and bringing small-scale farmers into the mainstream of government technical and financial assistance.


The state has introduced a number of initiatives to support land reform beneficiaries. The key frameworks for providing agricultural support to new farmers are the Comprehensive Agricultural Support Programme of 2004 and Mafisa. The issue is the impact of this programme.


The ANC supports the Policy Statement. Thank you. [Time expired.]


Mr M T LIKOTSI: Chairperson, the APC wishes to reflect on the speech by the Minister of Finance, the hon Trevor Manuel, delivered on 30 October 2007, on the Medium-Term Budget Policy Statement tabled before us today. We concur with the Minister on many aspects in his statement and beg to differ or see things differently on many others.


Indeed, projected annual economic growth of 6% in our country has been reported regularly. To the struggling and poverty-stricken masses of our people, economic growth is a far-fetched idea. To the masses, economic growth would mean that the days of sleeping on an empty stomach would be over; no person would be roofless; the education of our children would be free and not sold at a high price; the wealth of the country would be created; and there would be equitable distribution of wealth and land.


To the elite, economic growth has a different meaning altogether. It means, amongst other things, sound relations with the stock exchange; a healthy bank statement and living a luxurious life -  holiday-making, playing golf on a super green golf estate; making the conditions of a poor person a tourist attraction, that is, see under what extreme social conditions they live but they are still surviving.


We welcome all the endeavours made by the government to better the lives of the people through public service delivery, water, electricity, housing, education, safety, and business, etc and wish to commend the good efforts done. We are fully conscious of the fact that we are still very far from where we want to be, a total freedom where all shall live a harmonious life; get a fair share of the land and its wealth; where education of our children shall be free from preschool to a first degree at tertiary institutions; where life expectancy shall be guaranteed to be more than 70 years; and where economic growth shall directly translate into good living conditions for our people.


The APC wishes to reiterate that we commend the government on its continued commitment to public spending and we encourage it to add more political will to reach the desired destination without any form of fear or hesitation. We think roll-overs may be averted as they are a clear sign of lack of capacity or elements of failure to deliver. The surplus of R5 billion becomes insignificant when the people we fought for all these years are homeless, living in abject poverty. Thank you very much. [Time expired.]


Dr S E M PHEKO: Chairperson, on the Medium-Term Budget Policy Statement and indeed on the Adjustments Appropriation Bill, I want to say that poverty is likely to be the lot of millions in our country for many years if we continue to design our economic policy and national Budgets as if only the rich matter.


The SA Institute of Race Relations’ research has now confirmed what the PAC has been saying for years, which is that absolute poverty in South Africa is rising and not going down. The number of people living on less than R7 a day has more than doubled in the last 10 years. This is against the background of the country’s booming economy since 1994. The supposedly booming economy has not translated into jobs or a reduction of poverty. It is clear that relying on growth alone will not achieve that target of halving unemployment or poverty by 2014.


What is dignified about living on a child’s grant? Why is it less humiliating to beg at the traffic lights or scavenge on a rubbish site? This calls for a national distribution of wealth strategy that closes the widening gap between the rich and the poor. What our country demands today is the equitable sharing of this land and its riches.


Plutocracy is fast replacing democracy that could pave the way to economic emancipation of the majority of the population. Poverty is the mother of revolutions, and it should not be allowed to grow. The wide gap between the rich and the poor, which is growing, must be arrested. South Africa deserves a budget and an economic policy which responds to the needs of the poor. This budget is not seriously taking into consideration the plight of the poor. Much more must be done. Nevertheless, the PAC supports this Budget.


Mr P J NEFOLOVHODWE: Chairperson, the Treasury has from time to time put up Budget proposals which are, in the main, in keeping with the strategy of allocating resources where they are most needed. In some instances, the Treasury has even proposed tax relief measures, including rising social spending, and yet millions of South Africans continue to live in poverty, to quote the Medium-Term Budget proposal.


This means, in Azapo’s terms, that there appears to be either a mismatch between the budget allocated to various government departments for poverty eradication and the actual practical steps and undertakings intended to eradicate poverty, or programmes funded for poverty eradication are not producing the desired effect. Alternatively, the yearly budgets to various departments have been spent on programmes that have no capacity to eradicate poverty, or year after year, we have become accustomed to believing departmental reports on poverty eradication that have no relevance to the process of enhancing the lives of the poor.


Otherwise how do we explain the fact that it is real? Millions of South Africans continue to live in poverty. What this means is that the pace of economic transformation that is often spoken about is happening somewhere else in our society but not where the poor and the marginalised are. This is very clear to Azapo and the statement, “Millions of South Africans continue to live in poverty” seals Azapo’s conviction that something drastic should be done to eradicate poverty.


Judging by the growth of the first economy, we have indeed produced a few empowered millionaires. The new South Africa has taken root within the middle and higher classes of our society. In South Africa, the rich are indeed now networking easily in Africa and the world, thereby increasing their opportunities, and yet millions of South Africans continue to live in poverty.


This, to Azapo, is an indictment of government departments which are in a position to use these resources allocated to eradicate poverty. Azapo believes that allocating greater resources for public spending has become just an act of faith by the Minister, and that it has thus far not had any significant impact on poverty and that is why millions of South Africans continue to live in poverty.


To this end, we propose that, from now onwards, the poor must be made to participate in designing and carrying out activities that are meant to assist in eradicating poverty. Emphasis should now be placed on developing areas where the poor live, improving the poor’s capacities to manage and direct their own affairs, particularly in rural, informal settlements and in the townships, for it is the poor who are the millions that continue to live in poverty. Azapo supports the Medium-Term Budget Policy Statement.


Ms R J MASHIGO: Chairperson, hon Ministers and Deputy Ministers, hon members, the ANC resolved to develop the HR Development Programme in the public service, building capacity in municipalities, in civil society and in the key areas of service delivery affecting the social transformation programmes. I will be addressing personal establishment and vacancy rates as well as skills development and training programmes.


We have seen a lot of transformation taking place in the departments in terms of historically disadvantaged individuals, women and the disabled. Vacancy rates are however still high in the departments. Explanations of high staff turnovers, recruitment and retention strategies were given but some of the clerical posts were still not filled.


As a result service delivery is compromised, to the disadvantage of the communities. This leads to unfair underspending and shifting of funds from compensation of employees to other activities within the departments. The use of consultants by some departments also needs to be re-examined, as some of these services could have been performed in more cost effective ways.


The government has made some resources available for skills development and training programmes, but the departments have problems of capacity to address these skills shortages. Departments presented training programmes, which aimed at improving the performance of employees. Learnerships are done and expose the interns to the work environment, which will also prepare them and give them experience when employed. The impact of this programme is still to be measured.


Youth unemployment is still high according to the latest Labour Force Survey. Most of them depend on social grants received by their parents and can end up in the poverty trap if the existing interventions are not implemented.


The following agencies will be addressing skills development within government institutions and the communities: SAMDI – the SA Management Development Institute – has a unit that addresses organizational knowledge, research and development and linking management with other institutions and also looking at workplace skills training.


The Setas have not produced results and as a result, due to their non-performance, they should be re-examined and identified and those that are underperforming should be closed.


Jipsa is a skills development project of Asgisa. There are targeted skills for development which should be acquired in the shortest possible time. This is a very good programme, as it addresses engineering and planning in transport and municipalities and information and technology. We would just like to know the number of engineers that have already been trained and how they have addressed the skills shortages in general thus far.


The state-owned enterprises, although not funded for this purpose, can also contribute towards national skills development through their technical expertise.


The Expanded Public Works Programme has done a lot of work and we have seen some of the people being employed and others creating their own jobs and employing other people.


The nursing colleges and other sector institutions should be re-opened and train people in proportion to the vacancies within those departments.


The Department of Education and Training is a department which saw additional funds allocated at 11,8% over the MTEM. It is being restructured, and exposure to education should start at an early age and become a culture right through the children’s lives. It is also fundamental for education to be aligned with the economic needs of the country.


We have Early Childhood Development, which, if well administered, should see all the ECD centres being registered and the practitioners in those centres being trained. But, unfortunately, most of these institutions, which are crèches, are not yet registered and their practitioners are not trained.


The Further Education and Training Colleges train students from NQF levels 2 to 4 and have increased the number of semi-skilled workers. The number of high school drop-outs has, as a result, declined because students who are not academically inclined tend to turn to Further Education and Training Colleges and then, as a result, fill vacancies existing within the departments.


Funding of Higher Education Institutions is also important, because this is for transformation of the institutions and is a positive step as the department itself will champion the whole process of transformation and plan it in line with the development of the country.


The Department of Education needs proper infrastructure as its good establishment will lead to more skills training and more qualified people within all the levels of the departments. After restructuring this will alleviate the lack of funds by parents who are not able to send their children to these institutions for training because of a lack of money.


The department has released school infrastructure report cards, which have highlighted the progress made since 1996 and where there are still shortcomings. This is of great concern, because the infrastructure grant to the provinces has been revised by R2,7 billion to address the school infrastructure shortages but there are some instances where this infrastructure grant is not being used and the department itself is lagging behind with the development of infrastructure in other areas.


We can remember the late Podu Mamabolo who stated long ago in his song “Thuto [Education]” that ”Matsatsing a lehono go nyakega thuto” [Nowadays education is essential]. Today we realise that there are many opportunities of “thuto” and we can utilize that benchmarking to ascertain what was lacking during Podu Mamambolo’s time and what we have today, because this department is an engine driving the economic development of our country.


Portfolio committees are in a position to follow up on the department’s human resources plans, the approvals of those departments and the implementation during their interaction and oversight with their relevant departments.


The ANC supports this statement. Thank you. [Applause.]


The HOUSE CHAIRPERSON (Mr M B Skosana): Order! Hon members, can we please lower our voices so that we can hear what members are saying.


Mr L M GREEN: Chairperson, hon Ministers and members, the FD supports the broad principles of the Medium-Term Budget Policy Statement as presented by the Minister of Finance in his speech.


According to the MTBPS, its approach is to focus more on policy review and to provide government’s view on the economic outlook for the future.


One of the key points of emphasis of the budget is to improve on the efficiency of public spending, and specifically targeting service delivery. And this aspect the FD wholeheartedly supports.


The budget reiterates the objective of our economy to grow at an average of about 5% a year for the next three years despite the decreased growth in global market economies. The three main challenges that may impact on the economy are the rate of economic growth, the growth of employment and the reduction of poverty.


Since our GDP is expected to continue to grow by 4,5% in 2008 and beyond, we need to guard against conditions that may be counterproductive to our economy.


Low accountability in public service is one of those adverse conditions that could put a strain on long-term global confidence in this country’s capacity to build institutional stability. For instance, to remain competitive, South Africa needs to improve its global confidence and attractiveness ratings, if we wish to forge ahead with our GDP predictions way beyond 2010.


Although our current low global competitiveness ranking may not have an immediate impact on GDP projections, a continuous slide in our performance ranking may in the long-term dampen international confidence in this country’s capacity to raise its levels to perform in the premier league of countries.


We have recently lost ranking positions in the global competitive index, slipping from 36th to 44th place according to the World Bank’s Doing Business of 2008 Survey. South Africa also fell six places from 29th to 35th position. We also rate the lowest of 30 countries when it comes to attracting skilled persons.


In other words, we need to overhaul our Public Service sectors and demand greater oversight responsibilities from all government spheres, which includes imposing strict regulations and penalties on government sectors that default on accountable governance.


If we want to attract foreign skills, we have to do so aggressively; yet in doing so, we must also identify the reasons why a loss of skills occurs within our own country. The reasons may vary but the preconditions for a skills absorbing society are linked to balance and democratic power relations in society, a safe and secure environment, democratic freedom especially in the media and telecommunications sectors.


The FD support the Medium-Term Budget Policy statement. I thank you.

Mr S SIMMONS: Chair, hon Minister and colleagues, when we as Parliament consider, review and decide on national fiscal policy, I believe that our primary and ultimate objective should be to achieve a better life for all.


The hon Minister and government have correctly identified halving the rate of unemployment and the proportion of people living in poverty to achieve a better life for all. I have a concern as far as whether government is indeed utilising all the relevant variables required to make an empirically sound determination of what the true nature and extent of the quality of life is of ordinary South Africans.


In this regard academic Anthony Butler points out that income per head, notwithstanding its relevance, does not tell us the full story of human experience in a society. I share his assertion that greater emphasis should be put, for instance, on the UN’s Human Development Index – HDI. This index helps us to realise that the overall lives of ordinary citizens, and not just bold economic growth statistics alone, should be used as the ultimate criteria for assessing the development of a country. I am not pleading for a move away from current practices, but that we employ all possible measures in order to give a genuine reflection of how we are doing and not just use measures that glorify ourselves.


Using this index could, for instance, have assisted the Department of Environmental Affairs and Tourism to identify that a need exists in the West Coast community for a sustainable community initiative that would have alleviated the hardships brought about by current fishing quotas, which could, in part, have been financed by the R2 million budgeted for a conference. Careful fiscal spending is an absolute necessity given the strain inflation has put on the buying power of the poor, requiring that we know exactly where the needs are.


The NA supports the Medium-Term Budget Policy Statement. I thank you.


The HOUSE CHAIRPERSON (Mr M B Skosana): The hon J Fubbs. [Interjections.] Oh. My apologies. The hon H Bekker. I wasn’t chastising my member.


Mr H J BEKKER: Chair, it is definitely not my intention to oust the hon Joan Fubbs. We have been colleagues for many years and I think we can view each other in that light. The hon Singh supported the Medium-Term Budget Policy Statement and we, of course, endorse that.


Chair, the hon member Mr Nene appropriately referred to the inflation dilemma in South Africa. Of course inflation is still climbing, but there is a reason for it, particularly the tremendous oil price increases. There is the food price hikes and then we are also facing the reality of an almost 18% hike in electricity rates.


Those are factors outside the ordinary consumer’s basis. The Reserve Bank’s response of increasing the repo rate from time to time does have a good impact on inflation, but the question arises whether it is the only aspect and whether we shouldn’t consider the possibility of revising the inflation targeting at this stage.


I realise that this is not something that one can do just like that. We have been in this predicament for such a long time that there should, perhaps, be consideration towards this. Inflation targeting has cooled consumer spending but has had absolutely no effect on those other aspects that are beyond our control.


We know, in theory, that inflation means that too much money is actually chasing too few goods. Merely curbing the money supply and making debts that expensive cannot be the only option. It is a matter of increasing the supply of goods and, if we can work together towards that particular aspect, I am sure that we can do much better in that respect.


South Africa has to compete globally, and globally the United States and the European Union have not been on the increasing side of interest rates. That means our prices became competitively more expensive. I would implore the Minister to look into this particular aspect. I thank you. [Time expired.]


Ms J L FUBBS: Hon Chairperson, I hesitate to bound up the steps this time. But I am here now, thank you. I think what’s important about this, hon Chair and members of this House, is that the Medium-Term Budget Policy Statement - MTBPS - gives us the opportunity to check out and see where it is that the ANC government will be taking us next year in the delivery of its services - contrary to what may be said on my left, but probably on my right; and I would prefer it if you didn’t keep on interrupting me because empty vessels make the most noise.


But let me just get back to this. The MTBPS is the ANC government’s policy which reaffirms our commitment to cutting poverty and creating jobs. But it’s more than that. It’s more than just a policy statement that is empty.


It shows us how we use concepts and constitutional principles like “co-operative governance”, which is unique to South Africa and is an essential element of our constitutional democracy. It provides our country with a political glue that binds all three spheres of government in a collective embrace that enables effective implementation of policy and consequent delivery of services.


The intergovernmental relations framework is precisely that. It is meant to actually bind the fabric of our society and our government and the optimum performance of delivery in all three arms.


The other aspect which we need to take account of when we look at the MTBPS is that this MTBPS, of which there are many internationally, is one which is developed in our developmental state. That is something - contrary to what one sometimes hears in this House - that is not a fanciful concept.


This is not something that cannot be concretised. We have seen this in one of the poorest provinces of India, Kerala. We have seen this in Vietnam, and we are going to see this right here in South Africa - as we have in the last 10 years and more.


The policy priorities stated in the medium term show that departments will shift from silo solutions to the active pursuit of synchronisation in implementation. The increased allocation of R48 billion to local government and of R32,7 billion to provinces underpins this. Indeed, this makes sound sense - to increase the allocations to these two spheres of government who are at the very coal face of delivery.


This also recalls the policy which our ANC government is committed to in respect of moving forward and growing the economy. It says that the optimum way of moving forward is to successfully negotiate the stormy global economic environment and not to be swayed by every economic fashion emanating from some quarters. To this end, it recalls our policy towards fuel - alternative forms of energy ranging from bio-fuels to the highly advanced conversion of coal into fuel by Sasol.


In the previous MTEF, financial resources have been allocated to SOEs and continue to be allocated, as we learn in the MTBPS, to Denel, Sentech, PBMR, Infraco and the like. We have raised our reservations on this expenditure. But we have raised no reservations on the policy and we have called for effective monitoring and tracking systems to ensure that this policy is fully implemented.


To ensure that parastatals are driving in the same direction as the developmental state, there is absolutely no doubt, as it came out during our engagement, that we need, as the ANC policy indicates and has directed earlier on, to restructure these parastatals and bring them all into line so that they too serve the developmental state itself.


The MTBPS also recognises the important role of Research and Development – R&D - in strengthening the economy through education, skills development and private sector encouragement. Although I must tell you that it beats me why the private sector demands and needs all this encouragement. I thought by now they’d be out of the incubation stage. But, no, they continue to need their bottles of encouragement - unlike overseas investors who have recognised what we have to offer here in South Africa.


But perhaps we are looking at structural fatigue in the economy, which we are addressing, as we can see, through the infrastructural commitment in the MTBPS itself, which engages the current challenges now and goes beyond 2010 to actually move towards 2020 and 2030. In line with this, the national departments’ baselines have been reviewed and upward of R7 billion has been allocated in the first year of the Medium-Term Expenditure Framework - MTEF. This has accelerated to R16,4 billion in the outer years and is expected to generate the infrastructural investments.


However, as we have learned from our co-chair of the Joint Budget Committee - JBC – we certainly cannot allow, and neither does the MTBPS want, the frills that are engaged in by some departments to continue. We need, in fact, to get rid of the frills and actually focus on quality service delivery. The budget will be adequate, as the policy indicates.


We may be asking ourselves: Are women the least catered for? As we all know, women are the largest group of the impoverished. This MTBPS directly addresses cutting poverty, and the youth forms the highest unemployed group. Again, when we look at the proposed allocations, this fully addresses it.


Hon Chairperson, the ANC fully supports the MTBPS before us, especially the move to support and underpin the labour-intensive projects which are certainly not marginalised but brought to the fore in the allocations at national, provincial and local government levels. People want work, and the ANC government will not be deterred by academic excuses.


The MINISTER OF FINANCE: Chairperson, I must speak to the Whips; it is a very hard act to follow the hon Fubbs in the afternoon. [Laughter.] Firstly, I would like to express appreciation. The bulk of parties support the MTBPS and so I would like to express appreciation. Secondly, I would like to wish the Minister of Home Affairs a very happy birthday today. [Applause.]


Let us just pause and remind ourselves of what the MTBPS needs to do. It needs to put on the Table of this House those issues that will be considered in finalising the Budget, which will be tabled in February. More importantly, it will provide the thinking of government in respect of the medium term.


And in respect of the request by the Portfolio Committee on Finance and the Joint Budget Committee, I’d like to suggest that it is something that this Parliament should welcome. They asked for additional time for this discussion because it goes to the heart of parliamentary oversight.


The first thing that we have tried to do in this MTBPS is to recognise that there is a series of imbalances in the economy. Many members have spoken on this issue. The imbalances are in evidence between rich and poor, but they are also there in that which does not work in our economy.


The fact that we continue to rely very heavily on the export of commodities and not sufficiently on the export of tradables, is one of those imbalances. There are also a series of global imbalances and what we don’t want to do is to create a situation where you have a stop-start economy or you move from boom to bust, and therefore the choices we exercise are as important as they are.


Secondly, we have introduced into the discussion on economic policy management recognition of the fact that there are significant parts of our economy that are governed by cyclical revenue sources. If we try and build on those revenue sources into the future then we will have difficulties. The choices we exercise are about the prudent management of the revenue sources so that we can smooth out the passage.


Thirdly, we are making a very strong commitment to investment in growth and that is why in terms of the expenditure commitments that we are prepared to make in respect of all three spheres of government, it is the investment in infrastructure and the investment in human capital formation that must get precedence.

Fourthly, I think that we are very mindful of the ravages of inflation. In the discussion in the Portfolio Committee on Finance we also looked at global trends in respect of food price inflation. So clearly, we are mindful of this. Where we have control, as in the case of social grants, we have made a very strong commitment to this House that we will try and prevent the erosion of the grants by ensuring that at least we can keep up with inflation. It is not very easy because there are, as the Minister of Social Development said at a press conference yesterday, some 12 million recipients of social grants.


It is a challenge but we have to deal with that challenge because that is what delivering democracy into the lives of our people is all about. It does not allow us to extend this to each and every household. There are constraints in respect of what we can do, and if we don’t understand that they are constraints, I think the risk is that we talk past each other.


In respect of the committees that had discussed this, I wish to express our sincerest appreciation. Let me deal with some of the key issues that a number of members raised. Let me turn to the Chief Whip of the Second Largest Party in this House, the hon Ian Davidson. Part of the difficulty, hon Davidson, is that we must rely on information that we can trust.


From your intervention this afternoon, I’d like to draw attention to three issues that suggest to me that you are using information that is exceedingly untrustworthy. You talk of borrowing R2 billion a day to finance our current account deficit. That is what you said. Check your notes, sir. That is what one newspaper used this morning. If you are borrowing at R2 billion a day, it comes to R730 billion a year and 37% of GDP – we would be bankrupt and out of here. [Interjections.] The number is R2 billion a week. Still a concern.


The second issue is that if you read the newspaper and believe it, you will believe that the Treasury is opposed to the MIDP, for no other reasons than my personal association. We have a long-standing relationship with the DTI. There are issues to be sorted out, but there is no opposition from the Treasury. Despite our saying this to a particular journalist of that newspaper that you so favour, she cannot be convinced of it.


The third issue is sustainable growth and development. Let me read to you what we said in the speech at this very podium in delivering the Medium-Term Budget Policy Statement:


Because of its impact on productivity and innovation, trade policy has a central place in promoting competitiveness. Our approach needs to ensure that competition is fostered through tariff simplification and reform and that the incentives for investment and for research and development are appropriately targeted and effectively administered.


That is not what that same journalist wrote that I said.


My plea to you, hon Davidson, is to trust the information that we make available to this House, in the documents that we take time and effort to put together and ensure that Members of Parliament have the best sources of information available and don’t have to rely then on the views of journalists, that those same journalists are not prepared to test against reality. It is just gobbledygook that they spew out because they believe that it sells newspapers. I plead with you; use the official sources of information.


The second issue I’d like to deal with is the fiscal stance and this relates to dealing with the circumstances that confront us, and the key circumstance that confronts us is that we are living in a world whose economy and, especially, whose financial markets are very closely interrelated. This means that when there are people who take bad decisions far away from you, it might have an effect on you.


If you look at what has been called the subprime crisis in the United States, mortgage lending was provided for people who had no jobs, no income, no assets. Poor families, primarily black and Hispanic families, were charged packet or backloaded mortgages. More than a million families are now out of those houses as it happens.

This was a cruel set of actions by people who don’t give a damn about the poor. Mortgages were extended and then wrapped up as though it was triple-A credit. The ratings agencies approved it. The banks accepted and bought it and lost huge amounts of money. More than R50 billion has already been written down and the number, because there is a pipeline behind it, is probably going to be in excess of two trillion dollars. A lot of these positions will be closed out in the next year.


We think that 2008 is going to be a tough year, not because of anything that we have done wrong but because of the interconnectedness. Why we have taken the position that is prudent in respect of running a fiscal surplus is because these are the facts before us; the facts were not the same when we tabled the Budget in February. If we aren’t informed by the circumstances and the best available information, I believe that we do democracy a serious disservice. That is the position that we have taken.


It does not mean that we are cutting on spending. We have evaluated the cyclical revenues that we have available and by our best estimates it would be in the order of R87,7 billion. We have not put all of that aside. In fact, we have added R84,1 billion to the baseline expenditures for the coming three years. If you believe that it is only cyclical revenues, then all of it would be allocated. That is not the stance that we have taken.


We have said that we must spend on those things that will not recur, so we have only committed to spending about R42 billion of the cyclical revenues and they can be measured. You will find that spending in infrastructure and human capital formation, but you have to save something. What we have saved is in the order of R44,5 billion, roughly R15 billion a year over three years; 0,6% of the GDP.


It is a position that we have to take and it is information that we have available and there is no shame or failure in running a surplus. There is no shame in taking out the unevenness, the boom and bust. There is no shame in it hon Greyling, and we shall not apologise for that.


Let me just run through some of the issues raised. He talks about the corporate tax. I have a wonderful article here. I will give it to the hon Davidson and charge him 7 cents a copy. I will charge you 15c because there is a colour picture. It is an interview with the fourth wealthiest man in the world, Warren Buffett, who says that he should pay more tax. Part of the reason why he thinks he should pay more tax is that the US Administration should be doing more for people in that country.


He says in this article that, in fact, he pays far less tax than people employed in his companies. He says that there wasn’t anyone in the office from the receptionist up, who paid as low a tax rate. He says that he has no tax planning and he has no accountant, and neither does he use tax shelters. He says that he just follows what the US Congress tells him to do. In following fashion on tax, pause and consider what others are saying. I rest my case.


The issue of energy tariff hikes has been canvassed in the debate. Again, it is something that we will have to deal with. From time to time we must take a view about step changes in prices. The poor can be dealt with through a series of subsidies. If you look at the allocations here, the provision of free basic services, that deals with the poor. Part of what we have to deal with is the carbon footprint, the emissions in the country and the fact that we are up against capacity constraints. We need a wider discussion about that issue, that this debate, as a sideshow, does not adequately lend itself to.


In respect of rural development, raised by the hon Singh and the hon Mohlaloga, I agree entirely. We should be doing a lot more than we are at the moment. Part of the challenge that confronts us is of course that the allocation of responsibilities by the Constitution does not give the national government all the authority over these things. The hon Singh is a former MEC in a province dealing largely with rural development in his portfolio and would understand this very well. If the call is not there and the capacity is not there, then sometimes you have to build the capacity.


This is why we say that, in respect of agriculture, we must get those extension officers in place. They can make a difference. They are the interface. They will make land reform work. That then lays a better foundation for rural development going forward. If we don’t do that, then we might just be pumping money into a black hole, the same black hole that the hon Singh spoke about.


The other issue I would just like to touch on is what the hon Simmons has said about measuring. He is gone now. Oh! No, he is here. Hon Simmons, I would like to invite you to look at the results of the community survey released. It is the largest survey undertaken outside of a census. It covered 274 000 households. It spoke to just under a million South Africans, and it is an incredibly large survey. It provides us with a basis for information far superior to that which the UN would draw on ordinarily. The key issue, in respect of the community survey, is that there is measurable improvement in the lives of people and all of the issues we are talking about.


I think that we can look at education and outcomes; access to health; and access to services. I think we also have a very good understanding of poverty and the ravages of poverty. It is all there. It is published and not hidden from view. It does not make us look good in every respect. But it does clearly point out those areas over which government has direct responsibility, such as the extension of services and the provision of free basic services. Life for people is improving but it does not make a lot of difference unless you can earn and maintain those services and improve on living standards. That is a different kind of challenge but something we must talk about as well.


The hon Bekker spoke passionately – and not for the first time – about the repo rates. The Constitution crafts, in a very curious manner, the task of the Reserve Bank. It says that the primary objective of the Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic. This does not give the Reserve Bank a mandate to deal with exchange rate markets. It does not say: “Fix the rand against the dollar and keep it at that rate.” It deals with the issue of price stability. This is where we must have a discussion.


There are countries in the world that have removed things like food and energy from their basket of inflation. So, you can have a basket of inflation that is perfectly stable because there is nothing in it. But the reason why you have to deal with price stability is because you need to understand the impact of price changes on the lives of our people. If these economists come before Parliament and say that every time the band is under pressure we should change the band, then we will never quite understand what happens in the lives of people.


We delude ourselves in order to meet an artificial objective. That I think is something we must clearly avoid, even if it looks bad. I think the commitment we must make is to have price stability because that allows everybody, especially working families, to log in their earnings. You do not have that rapid erosion.


Part of what the Reserve Bank looks at – I have said before that there should be an inflation report released at about this time - is an indicator that they have taken to watching with a lot more detail, the Private Sector Credit Extension - PSCE. Yes, the oil prices are there and the food prices are there.


In the numbers released two weeks ago, we can see that the PSCE to households is softening a bit. But to firms, it is still strong. That is okay. Firms are borrowing. Hopefully they are borrowing to expand, and that expansion will create jobs - which is okay. But it is households’ credit extension that should flatten.


This is a result of very strong, very severe measures in respect of interest rate increases and also the impact of the National Credit Act. I am hoping that this will work through the system. The Treasury remains very confident and I am advised that by next year, inflation will come back into the band. That is what we have to hold out for. If we move the target every time, the measure is checked a little bit. I think we will do our people a severe disservice.


Once again, let me express appreciation to everybody who spoke in this debate and to the many parties who are supporting the Medium-Term Budget Policy Statement. Thank you.


Debate concluded.




(First Reading debate)


Mr K A MOLOTO: Chairperson, hon members, in terms of the Public Finance Management Act, a national adjustments budget may only provide for the following key areas, namely adjustments required due to significant and unforeseeable economic and financial events affecting the fiscal targets, unforeseeable and unavoidable expenditure recommended by the Executive or any committee of Cabinet Members to whom this task has been assigned, any expenditure in terms of section 16 of the PFMA.


Section 16 of the PFMA deals with the use of funds in emergency situations, money to be appropriated for expenditure already announced by the Minister during the tabling of the annual budget, the utilisation of savings under the main division of a vote for the defrayment of excess expenditure under another main division, the shifting of funds between and within votes and the roll-over of unspent funds from the preceding financial year.

The Adjustments Appropriation Bill recommends R11,5 billion in additional expenditure. The recommended R11,5 billion of expenditure is broken down as follows: R4,1 billion is for funds rolled over from 2006-07 to 2007-08; R3,8 billion is for additional allocations for unforeseeable and unavoidable expenditure; and R700 million is for amounts already announced in the 2007 budget.


The money is for the restructuring of Alexkor and for contractual and operational spending on the pebble bed modulator reactor. R1,9 billion is for the higher costs of the 2007 Public Service salary agreement. The hon Sibhidla will deal with most of the votes in detail.


Let me turn to two matters - the budget votes of Public Enterprises and Correctional Services. The Portfolio Committee on Finance had an extensive interaction with SA Airways and the Department of Correctional Services regarding matters raised in this Bill.


The Department of Correctional Services asked for a roll-over of R512,9 million allocated for the construction of the Kimberly Prison. During this interaction with the department, the Chief Deputy Commissioner, without the assistance of the Chief Financial Officer, indicated that the contractor on site had estimated that only R344 million would be required.


Parliament could not be expected to rely on such information from contractors. We therefore had to rely on the information stated in the Bill. Hon members, I must also state that the National Commissioner, Mr Petersen, subsequently retracted, in writing, the statement made by his Chief Deputy Commissioner.


The commissioner has assured the portfolio committee, in writing, that the whole amount, which is R531,9, will be utilised for the construction of the Kimberly Prison. We have noted the response of the commissioner and referred the letter to the Portfolio Committee on Correctional Services.


National Treasury has also made a commitment to assist in the contract management of the other three new generation correctional centres, namely Nigel, Klerksdorp and Leeukop. The feasibility studies have been finalised on Nigel and Klerksdorp.


The Department of Public Enterprises is requesting an amount of R744 million for costs associated with the restructuring of SA Airways. This amount is required to cover the labour restructuring costs. South African Airways is undergoing fundamental restructuring, which requires that the shareholders must cover certain costs. Once more, we call on Parliament to support the restructuring process of SA Airways and pay sufficient attention to the costs and deliverables outlined in the turnaround strategy of SA Airways.


I must mention a certain paragraph on page 19 of SA Airways’ annual report that the committee found to be unacceptable. It says:


South African Airways was partly recapitalised at the year-end by securing a R1,3 billion subordinated loan from a SA financial institution. This is the first step in the recapitalisation process and the proceeds were used to strengthen the financial position of the SA Airways. Simultaneously, a guarantee was provided by the SA government ...


Hon members, this is the statement that I want to emphasise -


... that SA Airways can elect, at any stage and for whatever reason, not to repay the interest or capital due to the financier, at which time the claims are automatically ceded through the government terms of the guarantee. Should the government settle any capital or interest due to SA Airways’ election not to make payment to the financier, they will have no recourse to SA Airways.


Really, it was not necessary that SA Airways should rub this in, in the light of the recent calling of a guarantee issued to Denel. We support the restructuring of SA Airways, but not statements that encourage moral hazards. We all acknowledge that the state will incur costs in the event that a guarantee is called. No state-owned enterprise has the right to rub this in.

The ANC is satisfied that this Adjustments Appropriation Bill satisfies the requirements of section 30(2) of the Public Finance Management Act. Therefore, we call on the House to support this Bill. Thank you. [Applause.]


Mr M SWART: Chairperson, the Adjustments Appropriation Bill provides additional funding, focused on the built environment, covering housing, water and other services. Spending in these areas is welcomed as it could provide better service delivery, improved infrastructure and job creation.


A major area of concern, however, remains the inability of government departments to fulfil their mandates. Building the capacity of government departments will become a major challenge in the Medium-Term Expenditure Framework. A large number of departments just do not have the capacity to spend their current funding allocations, let alone spend the additional funds being made available now.


Underspending against budget is always attributed to a lack of capacity, resulting from the inability of departments to fill existing vacancies. This position is unlikely to be turned around and is particularly worrying in the departments of Transport and of Sport and Recreation. These two departments play a major role in the arrangements for Soccer World Cup 2010. Both departments are receiving substantial additional funding, but, judging by their current performance, however, they are unlikely to reach their spending targets.


The Department of Sport and Recreation has a vacancy rate of 50%, is badly managed in terms of its audit report and yet approves performance bonuses of R1,6 million to staff without conducting performance reviews.


The Department of Transport’s strategic plan states that 10 000 of the oldest taxis on our roads were supposed to have been scrapped by the end of 2006. At the end of March 2007, the department had managed to scrap only 2 800.


The Adjustments Appropriation Bill provides for the recapitalisation of the Land Bank to the tune of R700 million. Given the investigations into fraud at the Land Bank and the dismissal of the board, it is not surprising that additional funds are required. Government would be well advised to await the outcome of the investigation before throwing more good money after bad.


Major additional funding is also being made available to state-owned enterprises, such as SA Airways. This is another bottomless pit, and an urgent intervention and investigation is required to determine whether continued support and operation of these enterprises is warranted.


The additional funding for the Hospital Revitalisation Programme and the School Building Programme should be welcomed. A lack of good management and the dismal failure by the Department of Health, however, to provide proper health services, is a cause for concern.


The Department of Education, in its disappointing performance in erecting only 21 schools out of a proposed 150 schools to have been funded by the European Union, is equally disturbing, and one wonders how they will perform with the additional funding now provided for the School Building Programme.


Whereas increased funding for local government, for the appointment of agricultural extension officers, for improvements to crime prevention and for the School Nutrition Programme should be welcomed, fraud and bad management have also been experienced in these areas.


Discipline and good management practice in government departments should receive priority attention. In this regard, the continuous inclination to roll over funds and move funds to other programmes within the same vote, indicate a misalignment of expenditure and poor planning generally. Thank you.


Mr N SINGH: Chairperson, in general, the IFP supports the adjusted appropriations. However, we are concerned about the R4,1 billion in roll-overs from the previous financial year, indicating yet again that public spending is not up to scratch. The R3,8 billion appropriated for unforeseeable expenses is also a cause for concern, as it points to a lack of forward planning.


While we believe that the additional appropriation of R1,9 billion for Public Service salaries could be considered unavoidable, we, as the IFP, want to highlight the damage done to the country by this year’s protracted Public Service strike, especially in the education sector. We do hope that negotiations will start much earlier so that we don’t have a repeat of this year’s performance.


Turning to SAA: we will find it difficult, but we will eventually support the R744 million allocated to SAA. And I can assure you, hon Minister, that it’s not because they have cancelled two very important flights from Durban to Cape Town – the flights at 8:55 in the morning and 7:30 in the evening that we used to take - but we are going to find it difficult to support it for reasons other than the cancellation of those flights.


The R250 million given to Land Affairs for restitution grants is welcomed, but we have to call into question the ability of the department to deal with this money. The Director-General has been dismissed; he scored his last try in France. The Land Bank is under the Minister’s supervision, and I think we really need to get to grips with the Restitution and Land Reform Programme.


As late as yesterday, there were still a number of advertisements for land claims, and this is nine years after the cut-off date. I think this is causing a lot of uncertainty in the agricultural sector.


We appreciate the money for the justice cluster, but we hope that there will be a lot more co-ordination between policing, justice and the prison services. We don’t want a person to escape from prison after they have been arrested by the police, tried and sentenced in court. There has to be a lot more co-ordination in that regard.


As far as the conditional grants to provinces are concerned, the R300 million is welcomed, but we also have to ensure that there are models and policies in place in this regard. We know that you can’t predict a disaster, but there have to be models in place so that, if farmworkers and farmers are affected by disasters, they get paid timeously and not two years after the disaster has taken place.


We will support the Adjustments Appropriation Bill. Thank you.


Mr J BICI: Chairperson, hon members, the Adjustments Appropriation Bill before us presents us with an opportunity to reflect upon the general management and direction of government departments, as reflected by the state of their finances.


Regrettably, some departments – which have a reputation for poor management - require massive appropriations. These are inordinately large amounts of taxpayers’ money that one has difficulty believing can all be ascribed to unforeseen events or changing circumstances. In other words, we are left with a question about the quality and responsibility of the leadership in these departments.


We acknowledge that financial management has improved over the years. Be that as it may, there is still a long way to go in terms of the management of public finances.


The appropriations this year totalled billions of rand, and this simply does not reflect positively on the government’s management of taxpayers’ money. Nevertheless, the UDM supports the Bill. Thank you.


Mr S N SWART: Chairperson, the Adjustments Appropriation Bill makes provision for an additional R11,5 billion of state spending. This includes R654 million for expenditure resulting from fires, floods and other adverse weather conditions, and R400 million for the prevention and treatment of multidrug resistant tuberculosis. Clearly, these amounts are to be supported.


There is another amount of R744 million to support the restructuring of SA Airways, and R1,9 billion for the higher-than-budgeted cost of the 2007 Public Service salary agreement.

The ACDP also wishes to express concerns regarding the roll-over of R4,1 billion, as this clearly reflects negatively on the state’s ability to spend funds.


We must also bear in mind that this Adjustments Appropriation Bill is in addition to the Special Adjustments Appropriation Bill of 5 September, which recommended additional spending of R5,2 billion, for urgent requirements.


Notwithstanding the above, the ACDP will, however, support the Adjustments Appropriation Bill as it is drafted in accordance with the provisions of the Public Finance Management Act. I thank you.


Mr R B BHOOLA: Chairperson, in view of adjustments made to budget allocations of the various departments, the MF notes that a variety of reasons may exist for roll-overs, extra funding, underspending, etc. We also note that unlike at budget time, reasons for these adjustments are not provided. However, we do hope that these adjustments are used effectively to enhance delivery and progress.


The MF calls on all departments to address issues that hamper their spending. Allocations are made on the basis of need, priority and policy. We have annually experienced roll-overs that have been complicated by issues such as vacant posts in departments. We need to address the shortfalls as they are keeping us from going forward.


Allocations are also indicative of government priorities. In view of the adjustments and the intentions of various departments that were voiced earlier this year, the MF supports the Adjustments Appropriation Bill. I thank you.


Mr L M GREEN: Chairperson, a feature that, hopefully, will force departments to pay more attention to how they administer funds is the threat of withholding or withdrawing funds if they fail to use their budget allocations.


It is unacceptable that municipalities have failed to use

R817,740 million at their disposal, and the penalty for such slackness is the withdrawing of their finances.


There is clearly a capacity deficit in our municipal structures and it would appear that Project Consolidate is only a partial relief intervention strategy. We should look more carefully at increasing the skills capacity of our municipalities and impose further penalties on these structures should they fail to meet a specific skills regime.


With regard to the phasing out of the bucket toilet system, the added R200 million will add to the quality of life and the sanitation and health care of our communities. Despite our reservations about the inability of departments to spend their funds, the FD will support the Adjustments Appropriation Bill. I thank you.


The HOUSE CHAIRPERSON (Mr M B Skosana): Before the hon member makes her speech, let me say that this is her maiden speech, and we always make people making their maiden speeches feel welcome. I read somewhere that when Sir Winston Churchill made his maiden speech in the House of Commons, because he was somewhat shaky, after the maiden speech, he said, when asked, ``Well, it was terrible, but it was a delicious experience’’. [Laughter.] I hope you are going to make it just delicious, not terrible!


Ms N N SIBHIDLA: Thank you, Chairperson. Hon members, finances of the public in the hands of the state are a potent weapon to fight poverty and underdevelopment. The ANC-led government has been entrusted with people’s treasures to be used effectively for social progress. Underpinning the utilisation of the Budget is the essence of the Freedom Charter, especially the clause proclaiming the sharing of the country’s wealth. Understanding that the majority of South Africans live below the poverty line, our Budget endeavours to address this by being skewed towards expenditure on social services.


Since we are a developmental state, we project and commit our state to play a role in growing the economy so that we deal with the scourge of unemployment. To this extent, this Adjustments Appropriation Bill becomes paramount to ensure that all branches of government do not overspend or underspend what is allocated to them.


A total of R387 million is requested by the Department of Provincial and Local Government for unforeseeable and unavoidable expenditure. This allocation will assist in the eradication of bucket toilets and help municipalities in KwaZulu-Natal that experienced damages caused by storms and tidal surges.


We hope this allocation will go a long way in meeting our target in relation to the bucket toilet system. In this regard, we encourage provincial governments and municipalities to plan properly so as to avoid unnecessary delays.


An amount of R50 million is requested by the Department of Health to deal with unavoidable expenditure arising from the higher-than-projected take-up of HIV/Aids treatment in the Western Cape, while the Department of Agriculture is requesting R400 million for the unforeseeable expenditure arising from disasters and combating swine fever.


The Department of Water Affairs and Forestry is requesting R161,9 million for unforeseeable expenditure arising from flood damage repairs in a number of areas. The Department of Transport is requesting R300 million for unavoidable expenditure for bus subsidies. These subsidies are meant to cover increases arising from the growing demand for and use of public transport.


Parliament is requested by the Department of Home Affairs to agree to a roll-over of R206 million. The amount is supposed to deal with the repair and maintenance programme for the department’s offices. Part of the money is to be allocated to quick win projects as part of the department’s turnaround strategy and the Home Affairs National Identification System’s technology rehabilitation.


The Department of the Public Service and Administration is requesting that R12,5 million be rolled-over from 2006-07 to 2007-08 for the Global Forum Five on Fighting Corruption and Safeguarding Integrity. Part of the money will be allocated to completing the impact appraisal of the National Anti-Corruption Framework Project.


The SA Management Development Institute is requesting that R60 million be rolled over from 2006-07 to 2007-08. This money will be used to intensify and broaden the induction and orientation programmes of the institute. This is in line with our Reconstruction and Development Programme of building the capacity of the state.


The Department of Education is requesting that R195,8 million be rolled over from 2006-07 to 2007-08. The money is allocated to address the following: the early childhood development programme; HIV/Aids conditional grants; the recapitalisation of further education and training colleges; security in schools; the National Schools Nutrition Programme; and printing and distribution of the life orientation curriculum.


The Department of Minerals and Energy is requesting that R9 million be rolled over from 2006-07. This amount is allocated for rehabilitation and environmental management projects. Part of the money is for investigating fuel and gas retail margins as well as fuel price smoothing techniques.


The ANC supports this Adjustments Appropriation Bill, and trusts that the portfolio committees will ensure that moneys requested are spent accordingly. Thank you. [Applause.]


The MINISTER OF FINANCE: Chairperson, I’d like to express appreciation to all parties. I want to pay special tribute to the hon Sibhidla, who has clearly enriched the work of the Portfolio Committee on Finance. It was a very thorough maiden speech, so we want to express our appreciation for that. But Parliament is speaking on this issue.


I don’t think there’s much for me to say – Parliament must be heard on these issues. We’ve placed the facts before you and it’s in the hands of Parliament, so, siyabonga kakhulu, Sihlalo. [Ihlombe.] [... thank you very much, Chairperson. [Applause.]]


Debate concluded.


Bill read a first time.




(Consideration of Votes and Schedule)


The HOUSE CHAIRPERSON (Mr M B Skosana): Hon members, I must mention that according to the Schedule the format has changed slightly. There will be questions and answers, meaning that there will be questions to the Ministers and there will be answers until we finish the Schedule and then we will go into the next format which will be the objections and votes in the next Schedule. This is how it has been divided.


Vote No 1 – The Presidency – put.


Vote No 3 – Foreign Affairs – put.


Vote No 4 - Home Affairs – put.


Vote No 5 – Provincial and Local Government – put.


Vote No 6 – Public Works – put.


Vote No 7 – Government Communications and Information System – put.


Vote No 8 - National Treasury – put.


Vote No 9 – Public Service and Administration – put.


Vote No 10 – Public Service Commission – put.


Vote No 11 – South African Management Development Institute – put.


Vote No 12 – Statistics South Africa – put.


Vote No 13 – Arts and Culture – put.


Vote No 14 – Education – put.


Vote No 15 – Health – put.


Mr M WATERS: Chair, I am sorry to break the cycle of no questions. Hon Minister, a total of R394 million has been rolled over this financial year, of which R121 million was rolled over for forensic pathology services, about R10 million for the transfer payment to the National Health Laboratory Service, R4,7 million for the forensic laboratories, and R10,6 million for the HIV/Aids grant.


A total of R234 million has been rolled over for the Hospital Revitalisation Programme, of which several revitalisation projects had to be stopped due to lack of funds, yet we had a roll-over. The provinces worst affected were the Western Cape, the Northern Cape, KwaZulu-Natal and Gauteng. This was confirmed with the committee in our debate on the annual budget with the Director-General. What were the reasons for the project being stopped when there was clearly enough money available, and what assurances can you give the House, hon Minister, that this money will be spent this time? Thank you.


The MINISTER OF HEALTH: Thank you very much, Madam Speaker. I can only reassure the member that the money will be spent. [Applause.]


Vote No 16 – Labour – put.


Vote No 17 – Social Development – put.


Vote No 18 – Sport and Recreation – put.


Mr S J MASANGO: Speaker, this morning the President of Athletics SA raised his concern about the SA Sports Confederation and Olympic Committee, Sascoc, especially the preparations for the Beijing Olympics. Money has already been allocated for Beijing, and now an extra R6,5 million is being shifted from other savings to the Beijing preparations.


My question to the Deputy Minister is: Can he assure Members of Parliament that Sascoc is going to spend this money in the best interests of the members of Sascoc, and will the Sascoc members be happy about that spending?


The SPEAKER: Hon Deputy ...


Mr S J MAHLANGU: The second point is that the department has a saving in respect of employees due to a 50% vacancy rate. This saving has been shifted to municipalities for service delivery. I just want to know what service delivery there is going to be at municipality level.


Also, while the department has made savings on employees, it is shifting money from the goods and services provided by the Department of Sport and Recreation for 2010 projects. What I want to know is what employees they are talking about here, because there are already savings on employees, but they are taking money from savings on employees. Which employees is he talking about? And, if this money is from the department for 2010 projects, is the department not in future going to ask for money from the Treasury for 2010?


The DEPUTY MINISTER OF SPORT AND RECREATION: Thank you, hon Speaker. I want to correct the hon member. Sascoc will spend the money to the benefit of the athletes involved and not the employees at Sascoc. So, we are preparing for Beijing and, hopefully, a few more medals, and I want to assure the hon member that we will make this country proud once again like we did in France recently.


The second question to me about the shifting of funds to municipalities is not quite clear, because the savings we had were due to virements which we had on vacancies – the vacancy rate. It’s not 50% as we speak, hon Masango. Of the 231 allocated posts we have filled 177; we have advertised the balance and we are in the process of finalising that. So the shifting – the R400 000 you were referring to, hon Masango – was done mainly to pay for licensing of the vehicles in the Department of Sport and Recreation, and that goes to the municipalities. That was where they budgeted it.


In respect of the employees referred to for 2010, the hon Masango must be referring to the 2010 unit in the Department of Sport and Recreation. As we speak, we have not filled all the positions as yet, but we are in the process of filling them. And, no, I don’t foresee that we will come back for additional funding to fill those positions. Thank you.


Vote No 19 – Correctional Services – put.


Vote No 20 – Defence – put.


Vote No 21 – Independent Complaints Directorate – put.

Vote No 22 – Justice and Constitutional Development – put.


Mr L M GREEN: Madam Speaker, could the Minister inform the House whether the funds shifted to improve the accounting practices of the Guardian Fund will take into consideration any losses incurred by beneficiaries as a result, and whether a system exists that requires lawyers to submit proof that any funds relating to intestate cases have been deposited into the Guardian Fund. Further, does any information exist for any amount lost due to moneys held in the fund; and, if so, what are relevant details? I thank you.


The MINISTER FOR JUSTICE AND CONSTITUTIONAL DEVELOPMENT: In order to provide a fuller response to that I would need it on paper, but I could say, generally, that in fact we have made great strides in improving the capacity of the Masters and that we have furnished electronic infrastructure to eight sites – it should be eight sites by March next year.


Vote No 23 – Safety and Security – put.


Moulana M R SAYEDALI-SHAH: Thank you, Speaker. Hon Minister, it is of great concern to us that the largest percentage of the appropriation relating to the five programmes goes not to visible policing or to detective services or crime intelligence, but to the protection and security services – in other words, VIP protection  and static and mobile security, which also then includes the police stations.


Most of the police stations that we have visited now hire private security, and we need an assurance from the Minister that the majority of the 33,6% increase will be spent on protecting foreign embassy officials and diplomats, who have recently come under attack. It doesn’t look good for the reputation of our country that more energy and effort will be put into protecting them from further attacks, rather than protecting our own police officers from being robbed. Thank you.


The MINISTER OF SAFETY AND SECURITY: For starters, hon member, you have misunderstood this allocation. When you read it I’m sure you’ll see that the biggest allocation is for the purposes of visible policing. Protection and security have nothing to do with what you are talking about. Protection and security services relate to the protection of VIPs – VIPs who visit our country and other VIPs that we have in the country. So, this has nothing to do with what you are talking about.


The issue of the guarding of government installations is a different matter altogether, and we use private security companies for that. We don’t train – and I’ve been saying this over and over again in this House – police officials in order for them to guard installations. We train them so that they can deal with crime. It has nothing to do with the protection of installations.


Mr L M GREEN: Chairperson, there is a further question on Vote No 23 with regard to Programme 2 in respect of visible policing. Could the Minister inform the House whether the allocation that has been made here concerning visible policing will add to the building of trust between communities and the SAPS in terms of fighting crime? This is because the perception exists that the police have a low service record in responding to crime.


The MINISTER FOR SAFETY AND SECURITY: Well, hon member, the allocation is given for the purposes of ensuring that there are an adequate number of police officers in the streets for visible policing. If they don’t do that work, then there is a problem – and it is a problem that we will deal with. We would be happy if you could furnish us with information that will indicate that.


Rev K R J MESHOE: Speaker, we note with disappointment that in spite of the increasing levels of drug trafficking, particularly among schoolchildren, Programme 4 on crime intelligence has received the lowest allocation of the budget adjustment. Without increasing the budget of the crime intelligence department, how does the Minister plan to reduce drug trafficking, possession and abuse among school-going children? Thank you.


The MINISTER FOR SAFETY AND SECURITY: The matter of budgeting has to do with what we have and what we require in terms of the work that we do. Indeed, crime intelligence is a very important division of the police. But this is the amount that we had, and we gave them that amount for the purpose of doing their work.


Of course, we would like to get more money for all the work that we do, but this does not mean that they will not be able to do the work that they are supposed to do. In fact, crime intelligence of the SA Police Service is among the best in the world. We have said this over and over again, and it has not just come from us. People have indicated that, in fact, we do a lot of good work using crime intelligence in this country. It does not mean, therefore, that they will not be able to do their work. [Interjections.] They continue to do their work and they are doing their work very well.


Mr R J KING: Thank you, Speaker. Minister, it is of concern to us that the largest percentage of the appropriation relating to the five programmes goes to protection and security services - in other words, for the protection of VIPs, stable and mobile security, ports of entry, railway police and the government security regulator - and not, for example, to visible policing, detective services or crime intelligence. Most of the police stations we visit now hire private security.


The SPEAKER: Hon member, you sound like you are repeating a question that has been raised earlier. [Interjections.]


Vote No 24 – Agriculture – put.


Vote No 25 – Communications – put.


Vote No 26 – Environmental Affairs and Tourism – put.


Mr S SIMMONS: Madam Speaker, the question to the hon Minister is ... [Interjections.]


The SPEAKER: Can you please speak into the microphone?


Mr S SIMMONS: The question is whether the hon Minister is prepared to consider the implementation of improved sustainable community projects, given the negative effect the current allocation of fishing quotas has on the West Coast communities? Consider further that the department has shifted R2 million for a conference, which could be used for such a proposal.


The DEPUTY MINISTER OF ENVIRONMENTAL AFFAIRS: Madam Speaker, the department has programmes for the communities along the coast. For instance, we are developing a mariculture programme for food security that will also assist with job creation. With those mariculture projects, we will even export.

Two weeks ago, we held a workshop in Port Elizabeth for the small-scale fishing communities, where we are developing the policy. Very soon, the Minister will be announcing that policy. Again, we are developing the small-scale fishing harbours, which are going to be tourism attractions. We have a lot of tourists who go to harbours, but would always like to go to communities and be part of them.


We are also working with the Department of Labour on a social plan for the communities along the coast. We want to look at it in a more holistic way. We also have the social responsibility project. For instance, we have the coast care that is cleaning the beaches. Those have been very innovative projects and have even introduced refreshment stations. They are also recycling the waste that comes from the coast and that is creating small, medium and micro enterprises – SMMEs.


We have the seaweed project that is processing seaweed for feeding the mariculture abalone. We are also exporting it. As you know, we have many tablets and other medicines that contain seaweed that comes from here. Farmers buy it as well. All those are job-creating projects. We are the only ones, in Africa, who are members of the blue flag initiative.


Blue flag beaches are the ones tourists usually go to, because the quality of water is very good, the beaches are very clean, and there are healthy and well-managed businesses along the coast. These days, many tourists just look in the internet for the blue flag, and then flood there. They are creating employment and more businesses for the people and communities along the coast. I am just giving you a tip. There are lots of them. I thank you. [Applause.]


Vote No 27 – Housing – put.


Mr A C STEYN: Madam Speaker, the additional appropriation this year is not much in relation to the original budget. It is just about 1,2%. However, notwithstanding a 21% vacancy rate in personnel, the department identified R6 million savings on compensation of employees. This amount plus an additional R2 million is to be shifted or transferred for pensionable service costs in the government employees’ pension fund for the former non-statutory forces members.


I do not begrudge anybody their pension. I would like to ask the hon Minister, if she could please inform this House who these non-statutory members are and why the Department of Housing has to contribute to this fund, and not the Department of Defence? Secondly, why an amount of R105 million is to be allocated to the   North West province for emergency housing? Once again, I agree that this is a very necessary expenditure.


However, I would like to ask the Minister if this is for the same disaster area in Taung where flooding took place in early 2006. The committee visited that area in October last year and contrary to what we found in other provinces, the rebuilding of houses was actually going very well there. Therefore, my question to the hon Minister is whether this transfer is for the same project or for other emergency housing in the province? And will the province be able to spend these funds on such emergency housing, preferably within the next month or so? I thank you.


The MINISTER OF HOUSING: Speaker, if you will allow me I will start with the last matter, which is a substantive one. The hon member does attend most of the portfolio committee meetings that we hold. He will no doubt know that we do have a big disaster in North West in an area called Carltonville.


He will also know that together with the Department of Provincial and Local Government, we are in the process of ensuring that we can remove those people who are living on a dolomitic area, to a new area, so that we can build a new village there. We have discussed this at length. This is what we are using that money for. Is that understood? You won’t ask again. I thank you. [Laughter.]


You do know that ... [Interjections.] Please allow him to interact with me. We interact quite freely in the portfolio committee without any interference from the rest of you. [Laughter.] As far as non-statutory forces are concerned, you know that we have a policy in terms of which we are dealing with these forces and the provision of housing. You know that we dealt with that matter in the last budget. It is with us and not with Defence. We discussed this and you understand it. [Laughter.]


Hon Speaker, I just wish that he had not been dragged out of the coffee room, because most of these matters were dealt with at length in the portfolio committee. I thank you very much. [Laughter.]


The SPEAKER: We now put Vote No. 28 – Land Affairs. Are there any questions? Hon Bici, is that on Land Affairs?


Mr J BICI: Yes, Madam Speaker.


The SPEAKER: Is there someone who is still on Housing? Yes, hon member. It is so strange, because it sounds like you interact quite regularly in the portfolio committee? [Laughter.]


Mr A C STEYN: Speaker, just on a point of correction to the hon Minister. My question was very specifically about a transfer for the pension fund, not for housing. I do realise that we have a responsibility in the department in respect of non-statutory members, but it was a transfer to a pension fund of non-statutory members. I thank you.


The MINISTER OF HOUSING: Thank you very much, Speaker. I have been advised by all the hon members sitting here, that it happens to all Ministries. Perhaps the hon member could acquaint himself with how the budgeting processes work. I thank you.


Vote No 28 - Land Affairs – put.


Mr J BICI: Madam Speaker, my first question would be: What care services does the department provide to land reform beneficiaries to ensure that production does not deteriorate? What is the position in this regard, regarding the black farmers who obtained their farms from the previous TVBC states? The Land Bank seems to be struggling. Has the Minister managed to determine the reasons why the Land Bank is struggling? What strategies are in place to recap this?


Lastly, we have quite a number of institutions or structures like the Comprehensive Agricultural Support Programme - Casp, Elrad, the Micro Agricultural Financial Institutional Scheme of South Africa - Mafisa, Vimba, Khula, the Land Bank and Gijima. Are these not duplications which could probably cause problems to the management of these institutions? I thank you.


UMPHATHISWA WEZOLIMO NEMICIMBI YEZEMIHLABA: Somlomo, ndiyavuya ukuba lo kaBici sinaye phaya ekomitini, ngoko ke uyayazi imigudu esiyenzayo kwabo bafumana uncedo kulungiso lwezemihlaba okanye ii-Land Reform beneficiaries. Zonke ezi nkqubo athetha ngazo ezinjengoo-Casp, Elrad, Mafisa, kunye noo-Land Bank yimizamo apho iSebe lezoLimo lidibana khona nelezemiHlaba aze ahlangabezane, aqaqeshe abantu bakuthi, abangazange balifumana ithuba ngelaa xesha looHlohlesakhe lokuba nabo bangene kulo mnyango wezoLimo. Mininzi imigudu eyenziweyo ke sinayo nentsebenziswano eqiqileyo okanye ukunkampana kunye nabalimi abamhlophe. Ubuninzi babo bayeza baze kuncedisana naba basakhasayo ukuze bagqithisele amava abo kwakunye nezakhono zabo kubo ukwenzela ukuba la malinge abo kunye nezi fama zintsha zingafi.


Kulo mba weza ngingqi zazisakwaziwa njengee-TBVC states andazi namnye mna kula rhulumente wobandlululo noonomgogwana owakhe wanika abantu umhlaba. Ndazi ukuba umhlaba uqale ukunikezelwa ebantwini ngorhulumente ka-ANC, ongene apha eburhulumenteni ngonyaka we-1994. ukuba ke kukho ooTBVC abanika abantu umhlaba ngamaphupha angekhoyo ke lowo.


Kulo mcimbi weBhanki yomHlaba ndifuna ukukhumbuza ilungu elibekekileyo lo mcimbi waqalwa sesi siGqeba-solawulo, esathatha isgqibo ngomhla wama 20 kuMatshi 2007 ukuba makubekho uphando olunzulu okanye i-forensic audit ngabula makhumsha. Sithe sakufumana ingxelo sathatha izigqibo zokuba mazithathwe ezo ngxelo zisiwe emapoliseni ukuze zisetyenzwe ngokusemthethweni. Sele yenziwe ke loo nto kwaye ezo ncwadi zisaphandwa ngamapolisa. Ukuba kukho ophume endleleni ke wenza izinto ezingafanelekanga apho ebhankini kuza kuqhawuka unobathana. Ndiyabulela. (Translation of isiXhosa paragraphs follows.)


[The MINISTER FOR AGRICULTURE AND LAND AFFAIRS: Speaker, I am glad because hon Bici is a member of the committee, and therefore he knows that we spare no effort in helping the beneficiaries of the land reform programme. All the programmes that he is talking about, such as Casp, Elrad, Mafisa and the Land Bank are joint efforts involving the Department of Agriculture and the Department of Land Affairs, where the two departments train previously disadvantaged people. We also have a partnership with white farmers in this regard. Most of these farmers come and share their experiences and expertise with the small farmers so as to ensure that their ventures become viable.


With regard to the former TBVC states, I know of no former Bantustan government that redistributed land to the people. All I know is that land redistribution started in 1994, under the ANC-led government. That any TBVC state ever had a land redistribution programme in place, is a mystery.


Regarding the Land Bank, I want to remind the hon member that this issue was brought to the fore by this executive, which took the decision, on 20 March 2007, to carry out a forensic audit of the bank. When we received the report on the forensic audit, we decided to take it to the police for investigation. That has happened, and the police investigations continue. If any official of the bank is found guilty of any wrong-doing, the law will take its course. Thank you.]

Mr J BICI: Madam Speaker, I think I need to make a follow-up on this. The assertion that there are no farms which were given to the black people before 1994, is misleading. If you go to Elliot in the Eastern Cape ... [Interjections].


The SPEAKER: Hon member, if you have a question to put to the Minister, this is the time to do it.


Mr J BICI: Speaker, I have a question to put to the Minister.


The SPEAKER: Yes. Please put the question.


Mr J BICI: Is the Minister aware that there are farms in Elliot, Queenstown, and Qumrha in the Eastern Cape, which were given by the then government to ... [Interjections.]


The SPEAKER: Hon member, the business right now relates to what the order of the House is – and that is about the allocation of the budget. So, the question of history lessons is not relevant. I am sure you can make an appointment with the Minister so that you can sort out the history. [Applause.]


Mr J BICI: Madam Speaker, I have no problem with that, but it would appear that the Minister is not acquainted with what is happening in her department. If she would talk to hon Didiza, she would get the information because she was there and she knows what I am talking about. I thank you.


The SPEAKER: Hon member, I now want to proceed.


UMPHATHISWA WEZOLIMO NEMICIMBI YOMHLABA: Ndiyayazi Somlomo laa fama ise-Elliot, awazinika yona uMathanzima, kodwa ke wabhubha ke ngoku kwaye akhange litsho ilungu elibekekileyo ukuba lifuna uncedo ngayo. Ndiyabulela. [Kwahlekwa.] (Translation of isiXhosa paragraph follows.)


[The MINISTER OF AGRICULTURE AND LAND AFFAIRS: Speaker, I know about that farm at Elliot, which Matanzima allocated himself. However, he passed away and the hon member did not indicate whether he needs some help with regard to that farm. I thank you. [Laughter.]]


Vote No 29 - Minerals and Energy – put.


Adv H C SCHMIDT: Madam Speaker, following a number of recent incidents at mines around the country, a renewed interest in the promotion of mine safety and health has developed, so much so that hon President Mbeki has directed that an overall audit or investigation into mine safety issues take place. In light thereof, the reduction or virement in the allocated budget for the programme on the promotion of mine safety and health appears at best odd and out of step with the President’s stated intention.

What reasons have led to a reduction in the budget of the above programme, and shouldn’t we rather be increasing the department’s budget on this important programme? Thank you.


The MINISTER OF FINANCE: Chair, this is one of the sectors of the Department of Minerals and Energy that actually has enormous difficulty in recruiting staff. I mean, you’re fighting against employers who pay people large amounts of money.


There is even a part that’s quite cynical where they actively recruit skilled people because the mines are in a position to remunerate at such high rates. The problem that then arises is that you have vacancies and you can leave the vacancies funded or you can utilise resources differently.


Clearly arising from the many incidents that have taken place, the Minister has indicated that the oversight branch that deals with mine health and safety will have to be strengthened, but this will mean recruiting people to ensure that they can actually earn their spurs and remain in the department. Thank you.


Mr S SIMMONS: Madam Speaker, does the Department of Minerals and Energy intend to continue spending billions of rands on the pebble bed modular reactor considering that it has no proven direct benefits to ordinary South Africans?


The MINISTER OF FINANCE: Chair, I have pages 135-139, which is Vote: Minerals and Energy, and there isn’t a dime for any pebble bed modular reactors, so I think the question is out of turn. Thank you.


Vote No 30 - Public Enterprises – put.


Mr E W TRENT: Minister, let us just continue with the pebble bed modular reactor. We notice that ... [Interjections.]


The SPEAKER: Which vote are you on?


Mr E W TRENT: I am on Vote 30. I am talking to Programme 4, which is about pebble bed modular reactors.


Minister you have allocated R678 million to this project and this is for research, etc. We all realise that we must reduce carbon emissions, but we believe that the Medium-Term Budget has made R6 billion available for the next three years.


My first question is: Will this be enough to begin construction of this pebble bed modular reactor, bearing in mind that the corporate structure is still not in place? The second question is: We notice that a guarantee of R220 million, which was a guarantee against Denel, had to be paid, and we would just like to know why Denel did not perform properly with regard to this contract. Could you please just help us there? Will this R220 million be the only claim or are there more claims to be paid out in respect of this guarantee for Denel?


The MINISTER FOR PUBLIC ENTERPRISES: Madam Speaker, with regard to the pebble bed modular reactor the R6 billion allocated over the period is, in our view, a very satisfactory allocation. Our intention, as you have just indicated, is to finalise a corporate structure for the pebble bed modular reactor. This is a relatively complicated negotiation. We are dealing with international partners, but the intention would be to attempt to get them to finance the balance.


So, we’re comfortable that, although it’s a very complex, large and difficult project, we are on track and the R6 billion that the state has given, plus other amounts that were given previously, are a reasonable contribution for the state to make. We would seek to raise the balance from other partners.


With regard to the Denel guarantee, once again I don’t know if you are part of that particular committee, but this is a relatively difficult commercial agreement. It relates to supply conditions for parts for a military aircraft and whilst we are in negotiations and some degree of dispute as to who was responsible for what happened, we were obliged commercially to meet our obligations on that guarantee, which we’ve done. We will continue some negotiations to mitigate the position further, but as we supply more and more products for this aircraft, the value of that guarantee drops quite fast.


Vote No 31 – Science and Technology – put.


Vote No 32 – Trade and Industry – put.


Vote No 33 – Transport – put.


Mr S B FARROW: Speaker, through you to the Minister, I’m sure you must be as concerned as I am at the continued inability of the department to spend its operational budget over the past two years. Much of this can be attributed to the delays in the Taxi Recapitalisation Programme and the continuous vacancy rate, which exceeds 40%. Roll-overs of R386 million should never have occurred if proper public transport policy and planning was in place.


Let me focus on the R300 million that has been appropriated for bus subsidies. Almost 20% of the department’s budget goes to bus subsidies, if you take out the Gautrain cash cow. Yet, according to the National Household Travel Survey, the nodal share of buses for the journey to work has fallen from 12% in 1997 to 9% in 2003; it could be even lower now. The reason for this is that very few or no bus contracts have been awarded since the mid-1990s.


Transport authorities are few and far between and municipalities in general have failed to co-ordinate formal operators, joint marketing initiatives, improved scheduling or the introduction of thorough or multiticketing systems – all important issues to ensure that an integrated public transport system is in place. Furthermore, Minister, operators have been loath to purchase buses considering that some 39% of that purchase once goes back to the state in the form of VAT and import duty.


Bus commuters, therefore, are not happy with bus services being offered to them and - again according to the National Household Travel Survey - they claim that there are not enough buses available. Often enough they are not there at the right times and travel time is too long and expensive.


My question, therefore, Minister, is threefold: Has your department done any research into the effectiveness of the subsidies, much of which go to the wealthy operators and very little to people such as our pensioners and unemployed who really need it - in other words, the commuter?


Why is it, then, that the buses are being used less, and yet more money ends up going into subsidies? And will you investigate the exclusion of VAT or import duties on these bus purchases? Thank you.


The MINISTER OF TRANSPORT: Madam Speaker, regarding the first issue, the Taxi Recapitalisation Programme, I think Mr Farrow is aware that as early as 7 November, that is last week, the portfolio committee was briefed about the progress thereon.


Despite what his colleague, Mr Swart, said during the debate on the main appropriation earlier today, we have to date scrapped more than 11 000 taxis throughout the country and paid out more than

R600 million to taxi operators and owners. This means that the Taxi Recapitalisation Programme is on course and is going to be even more robust going into the next financial year.


As far as the issue of bus subsidies is concerned, the budget appropriation is requesting an additional amount because of the demand by commuters to use buses as well. Mr Farrow, you should also be aware that we want to focus on a public transport subsidy as opposed to a specific mode. We want to see a combination of both buses and taxis.


So, this transformation of the bus subsidy system will alleviate some of the challenges that our people face. At the end of the day, it is the commuters who have a choice whether to use buses, taxis or even passenger rail. Our responsibility is to ensure that we create that environment, so that people can have those choices. However, buses still have relevance in South Africa.


Government will continue to subsidise buses because the majority of the people that need subsidies are those that were excluded under the previous system of apartheid. So, Mr Farrow, we shall continue to do that.


Insofar as the last question is concerned, I think the laws of the country have to be applied. There can be no preferential treatment for people who purchase buses.


Mr S B FARROW: I just want to know whether we have enough time for a follow-up question, Madam Speaker. Thank you.


Minister, my emphasis is on the fact that this is a major part of the transport budget that goes into subsidies. They are only going to buses and rail at the moment. But now, effectively, with transport and public transport coming into the realm of the recapitalisation of taxis, where is this money going to come from, because every year we run out and we re-appropriate money into the subsidy scheme – a bottomless pit - and yet buses are not really a reality in our situation.


Are we saying that this money is now going to taxis specifically in the same form the subsidies go to buses? That is my question.


The MINISTER OF TRANSPORT: Well, you will recall, Mr Farrow, that we are introducing what we call a “model tender document” that will see the gradual incorporation of taxis into this so-called “bus subsidy system”. Last month we saw, in the Free State, a bus subsidy system that incorporates taxi operators. We want to see this happening throughout South Africa. So, very shortly, that model tender document will see the transformation of the bus subsidy into a public transport subsidy.


Mr L M GREEN: Madam Speaker, there is another question. My question relates to Programme 7: Public Entity Oversight and Economic Regulation. We have passed the Road Accident Fund Amendment Act here in Parliament, and R14 million has been rolled over owing to the regulations, programmes and strategies to restructure the Road Accident Fund. What is it, within this Department of Transport, that is hampering the Minister passing and implementing those regulations?


What is happening on the ground, really, is that victims of accidents are having a very difficult time with unscrupulous lawyers and the way in which they deal with them. We feel that the restructuring of this Act, especially the regulations, is going to assist victims in making those direct claims. Minister, what is the problem in terms of the restructuring and regulations? Thank you.


The MINISTER OF TRANSPORT: Well, you would be aware that Parliament passed the Road Accident Fund Amendment Act and promulgated regulations. There was also a court case recently, which the Constitutional Court is going to pronounce upon. Certain sections of the Act have not yet come into operation. So, we are waiting for the ruling of the Constitutional Court, which we understand will be made at the beginning of February.


However, I can assure the hon member that there is a great deal of improvement in terms of the approach of the new management of the Road Accident Fund. And as soon as clarity is received from the Constitutional Court, we are going to see accelerated transformation of the Road Accident Fund.


This would help the fund do what it was intended for, that is to pay victims of road accidents, and not to line the pockets of lawyers or even doctors who are living off the fat of the Road Accident Fund, thereby making the victims of road accidents victims of the fund itself.


Vote No 34 – Water Affairs and Forestry – put.


Discussion on Votes and Schedule concluded.


Vote No 1 – The Presidency – agreed to.


Vote No 3 – Foreign Affairs – agreed to.


Vote No 4 – Home Affairs – agreed to.


Vote No 5 – Provincial and Local Government – agreed to.


Vote No 6 – Public Works – agreed to.


Vote No 7 – Government Communications and Information System – agreed to.


Vote No 8 – National Treasury – agreed to.


Vote No 9 – Public Service and Administration – agreed to.


Vote No 10 – Public Service Commission – agreed to.


Vote No 11 – South African Management Development Institute – agreed to.


Vote No 12 – Statistics South Africa – agreed to.


Vote No 13 – Arts and Culture – agreed to.


Vote No 14 – Education – agreed to.


Vote No 15 – Health – agreed to.


Vote No 16 - Labour - agreed to.

Vote No 17 – Social Development – agreed to.


Vote No 18 – Sports and Recreation South Africa – agreed to (Democratic Alliance dissenting).


Vote No 19 – Correctional Services – agreed to.


Vote No 20 – Defence – agreed to.


Vote No 21 – Independent Complaints Directorate – agreed to.


Vote No 22 – Justice and Constitutional Development – agreed to.


Vote No 23 – Safety and Security – agreed to (Democratic Alliance dissenting).


Vote No 24 – Agriculture – agreed to.


Vote No 25 – Communications – agreed to.


Vote No 26 – Environmental Affairs and Tourism – agreed to.


Vote No 27 – Housing – agreed to.


Vote No 28 – Land Affairs – agreed to.


Vote No 29 – Minerals and Energy – agreed to.


Vote No 30 – Public Enterprises – agreed to (Democratic Alliance dissenting).


Vote No 31 – Science and Technology – agreed to.


Vote No 32 – Trade and Industry – agreed to.


Vote No 33 – Transport – agreed to.


Vote No 34 – Water Affairs and Forestry – agreed to.


Schedule agreed to.




(Second Reading debate)


There was no debate.


Bill read a second time.




Ms P TSHWETE: Madam Speaker, hon Ministers, Deputy Ministers and hon members, let me start by thanking Parliament for giving this committee an opportunity to make a recommendation for a fulltime Commissioner for a period of five years in the Office of the Commission for Gender Equality.


The Department of Justice, in a bid to expedite the process, called for proposals from interested parties by way of a notice in Government Gazette No 30149 in August 2007 and in the Sunday Times of 5 August 2007. The deadline for submission was 3 September 2007. Afterwards, CVs, a copy of the Government Gazette and the notice as published in the Sunday Times were referred to the ad hoc committee. The ad hoc committee consisted of hon members from the ANC, DA, IFP and MF that performed tasks collectively.


Discussions in the committee were very constructive and I would like to thank you for the support. The committee was blessed with a combination of skilled members, some of whom were experts on gender issues, such as hon Morutoa, hon Bertha Gxowa, and others were legal experts such as hon Louw and hon Camerer. This was a very committed group of members of Parliament. The committee received 14 very impressive CVs and shortlisted six candidates.


The following candidates were shortlisted: Ms Malima Mapula, Lebisi Cecilia Phama, Ms Evangelinah Shirley Mabusela, Mr Cheney Mandla, Dr Andre Keet and Ms Moira Thandoluhle Mpanza. Interviews were conducted on 16 and 17 October 2007. Having interviewed the candidates, the committee unanimously agreed to recommend Dr Andre Keet for the appointment to fill the vacancy in the Commission for Gender Equality.


Dr Keet holds an MA Degree in Education and a PhD in Education Management Law and Policy which he completed in 2006. He obtained several certificates on human rights training for trainers’ courses. The list is long, hon members, but the most important thing about Dr Keet is that he is not just an academic; he has worked in the communities. He is the Deputy Chief Executive in the Office of the Southern African Human Rights Commission.


In conclusion, I would like to thank members of the ad hoc committee once more for the support they gave me. The tough and thorough discussions we engaged in before reaching consensus taught me a lot about co-operating. Hon Mzimande, hon Rajbally, hon Lucas and other members of the committee, I thank you very much. [Applause.]


Question put: That Dr Andre Keet be recommended for appointment to the Commission for Gender Equality.


AYES — 244: Anthony, T G; Arendse, J D; Asiya, S E; Balfour, B M N; Baloyi, M R; Bekker, H J; Beukman, F; Bhengu, F; Bhengu, M J; Bhengu, P; Bici, J; Blanché, J P I; Bloem, DV; Boinamo, G G; Botha, A; Botha, C-S; Botha, N G W; Burgess, C V; Cachalia, I M; Camerer, S M; Carrim, Y I; Cele, MA; Chalmers, J; Chauke, H P; Chikunga, L S; Cronin, J P; Cupido, H B ; Cwele, S C; Davidson, I O; De Lange, J H; Diale, L N; Didiza, A T; Dikgacwi, M M; Direko, IW; Dithebe, S L; Ditshetelo, P H K; Dlali, D M; Doidge, G Q M; Doman, W P; Dreyer, A M; Du Toit, D C ; Ellis, M J; Farrow, S B; Fihla, N B; Fraser-Moleketi, G J; Fubbs, J L; Gabanakgosi, P S; Gaum, A H; George, M E; Gerber, P A; Gigaba, K M N; Gogotya, N J; Green, LM; Greyling, C H F; Gumede, DM; Gumede,MM; Gxowa, N B; Hanekom, D A; Hangana, N E; Hendricks, L B; Hlangwana, N; Hogan, B A; Holomisa, S P; Jacobus, L; Jeffery, J H; Johnson, C B; Johnson, M; Joubert, L K; Kalyan, S V; Kasienyane, O R; Khaoue, M K; Khoarai, L P; Khumalo, K M; Khunou, N P; King, R J; Kondlo, N C; Kota, Z A; Labuschagne, L B; Landers, L T; Lekgetho, G; Likotsi,MT; Lishivha, T E; Louw, J T; Louw, S K; Lowe, C M; Luthuli, A N; Maake, J J; Mabandla, B S; Mabe, L L; Mabena, D C; Mabudafhasi, T R; Madasa, Z L; Madikiza, G T; Madlala-Routledge, N C; Maduma, LD; Madumise,MM; Magwanishe, G B; Mahlaba, T L; Mahote, S; Maine, M S; Maja, S J; Makasi, X C; Makgate, M W; Malahlela, M J; Maloney, L; Maluleka, H P; Maluleke, D K; Manana, M N S; Manuel, T A; Mapisa-Nqakula, N N; Marais, S J F; Mars, I; Maserumule, F T; Mashangoane, P R; Mashigo, R J; Masutha, T M; Mathibela, N F; Matlala, M H; Matsemela, M L; Matsomela, M J J; Maunye,MM; Mayatula, SM; Mbete, B; Mbombo, N D; Mgabadeli, H C; Minnie, K J; Mkhize, Z S; Mkongi, B M; Mlangeni, A; Mnguni, B A; Moatshe, M S; Modisenyane, L J; Mogale, O M; Mogase, I D; Mohlaloga, M R; Mokoena, A D; Mokoto, N R; Molefe, C T; Moleketi, P J; Moloto, K A; Moonsamy, K; Morgan, G R; Morobi, D M; Morutoa, M R; Morwamoche, KW; Mosala, B G; Moss,MI; Motubatse-Hounkpatin, S D; Mpahlwa, M B; Mpontshane, A M; Mshudulu, S A; Mthethwa, E N; Mtshali, E; Mufamadi, F S; Mzondeki, M J G; Ndlazi, ZA; Ndzanga, RA; Nel,AC; Nene, M J ; Nene, N M; Newhoudt-Druchen,WS; Ngcengwane, N D; Ngcobo, B T; Ngcobo, NW; Ngculu, LV J; Ngele, N J; Ngwenya, M L; Nhlengethwa, D G; Njobe, M A A; Nkabinde, N C; Nonkonyana, M; Nqakula, C; Ntuli, B M; Ntuli, M M; Ntuli, R S; Nwamitwa-Shilubana, T L P; Nxumalo, M D; Nxumalo, S N ; Olifant, D A A; Oosthuizen, G C; Opperman, S E; Padayachie, R L; Pahad, E G; Pandor, G N M; Phungula, J P; Pieterse, R D; Pule, B E; Radebe, J T; Rajbally, S ; Ramgobin, M; Ramodibe, D M; Ramotsamai, C P M; Rwexana, S P; Sayedali-Shah, M R; Schippers, J; Schneemann, G D; Schoeman, EA; Seadimo,MD; Seaton, S A; Sefularo, M; Sehlare, L J; Selau, J G; September, C C; Shabangu, S; Sibidla, N N; Siboza, S; Sibuyana, M W; Sigcau, S N; Sikakane, M R; Singh, N; Sisulu, L N; Skhosana, W M; Skweyiya, Z S T; Smith, P F; Smuts, M; Solo, B M; Sonto, M R; Sosibo, J E; Sotyu, M M; Stephens, J J M; Surty, M E; Swart, M; Swart, P S; Swart, S N; Thomson, B; Tinto, B; Tobias, T V; Tolo, L J; Trent, E W; Tshabalala-Msimang, M E; Tshivhase, T J; Tshwete, P; Twala, N M; Vadi, I; Van den Heever, R P Z; Van der Merwe, S C; Van Niekerk, A I; Vundisa, S S; Waters, M; Woods, G G; Xingwana, L M; Yengeni, L E; Zikalala, C N Z; Zita, L.


Question agreed to.


Recommendation accordingly agreed to in accordance with section

193(5)(b)(ii) of the Constitution.




(First Reading debate)




(First Reading debate)


Ms N R MOKOTO: Chair, hon Minister of Finance, Deputy Minister of Finance, hon members, the Minister of Finance, hon Trevor Manuel, upon his presentation of the national Budget Speech for 2007 and reiterating the pronouncements made earlier by the President, made critical announcements on the anticipated taxation law reforms for 2007.


The main thrust for these tax reforms has been as a result of the fiscal stance that South Africa has taken with regard to the direction and the path that our economy should take. These efforts are driven by the country’s historical circumstances which required the exerted implementation of our developmental goals dictated by the Freedom Charter and the Reconstruction and Development Policy Document.


In short, our economic stance has placed a clear directive that we should strike a balance between increasing spending on services and providing infrastructure development together with tax relief in order to raise household income and savings. On top of that the intention was to lower the cost of doing business in South Africa while increasing government savings.


Hon members, it is of importance to note that since 2004 we have seen and appreciated the huge growth in tax revenue, with tax collection figures rising to 17% per year. This collection has far exceeded the targeted range of economic growth. The robustness of revenue collection was a direct consequence of strong economic growth, together with improved tax compliance and other factors which are cyclical in nature.


In the past three years, government expenditure has increased by more than 9,2%. The strong revenue patterns have also allowed us to have a reduced budget debt service cost which has also allowed us to get the physical space to spend more on services and infrastructure.


This allows us to add further to our spending plans, raising public expenditure to 7,7% for the past three years. This has been effectively done and has been part of our programmes and new initiatives that government continues to fund, and has been able to be implemented quite effectively. The positive outlook presented will continue to produce some socioeconomic and developmental benefits for future generations in the coming years without necessarily exposing them to the new debt burden.


In terms of the amendment to the revenue laws, we have noted that some of the amendments do support the growth of the economy. Firstly, we have to appreciate the fact that the SA Revenue Service has been very effective and has been approaching matters positively through broadened tax outreach, and it has given proper support services to big businesses, some of which were not tax compliant.


At present, we have experienced a rather unexpected response from corporate South Africa, and the Portfolio Committee on Finance commends corporate South Africa for the active role it has taken in terms of ensuring that it contributes towards the finalisation of these amendments and to ensure that everybody in the business sector becomes tax compliant, thereby contributing towards the positive growth of our economy.


We have to acknowledge that South Africa has a very competitive tax legislation regime, whose main intention is to promote investment, local and foreign, to encourage job creation and to bring confidence to business and also to further reaffirm the ANC position on building small business.


I would like to go straight into specific issues that relate to taxation law amendments, especially the secondary tax on companies, STC. We have noted that this proposal recommends the gradual abolition of STC which, at the moment, stands at 12,5%. Finally, it has been reduced to 10%.


We have taken that route deliberately as the ANC. It is not something that we were pressured to do. It is not something that the DA called for. It was deliberate action at the right time that we should lift the burden from corporates and reduce double taxation. [Interjections.]


The intention of this amendment has been eventually to do away with STC and replace it with the shareholder dividends tax. In the long run, the positive effects of this will be the expansion of the tax net to more businesses which were never tax compliant.


Another amendment that promotes business investment in infrastructure is the depreciation allowance for commercial buildings, including dams, railways and ports. This amendment allows for the depreciation of a building at 5% per annum, which is intended to cover the cost of the building to the taxpayer. However, this depreciation allowance does not cover businesses that are residential properties or that are bought or leased. It does cover buildings that are new, that were improved or that have remained unused for a long time.


In terms of tax relief for corporate banks, the purpose of the amendment is to provide relief for financial services, co-operatives – particularly the corporate banks – by extending small business tax relief. In this case, an income of R300 000 and below will attract a taxable rate of 10%, whereas when the income is beyond R300 000, the threshold would be 29%. The ANC supports the Bill. Thank you, Chairperson. [Time expired.] [Applause.]


Mr S J F MARAIS: Chairperson, these Bills before us were probably some of the most intricate, complex and far-reaching Bills that I have been involved with so far. The National Treasury, the SA Revenue Service and the portfolio committee had to be intensely involved with the process and the interrogation of various issues which continually confronted all the stakeholders.


The process was, however, very transparent and there were a large number of submissions received from various stakeholders in government and the private sector. The affected businesses as well as organised business generously participated in written and oral submissions to the committee, as well as to the National Treasury and SARS.


Compliments must be given to the Treasury, SARS and the portfolio committee on the progressive manner in which each input was valued, and how the National Treasury and SARS were prepared to accommodate reasonable and justified concerns.

Voorsitter, die Securities Transfer Tax Bill en sy gepaardgaande administrasiewetsontwerp hanteer die samevoeging van twee bestaande wetgewings wat handel oor seëlkoste op transaksies van ongelyste aandele en die ongesertifiseerde sekuriteitsbelasting op transaksies van aandelebeursverhandelings. Ons glo dat dit administrasie en kontrole sal vergemaklik en alle verhandelingstransaksies meer koste-effektief sal maak.


Die Wysigingswetsontwerp op Inkomstewette van 2007 verteenwoordig die tweede gedeelte van die belastingvoorstelle soos in die begrotingsoorsig aangekondig aan die begin van hierdie jaar. Die Minister van Finansies het tydens die Medium Term Budget Policy Statement - MTBPS - onder andere aangedui dat dit nie net makliker en meer bekostigbaar gemaak moet word om besigheid te doen in Suid-Afrika nie, maar dat onnodige rompslomp verwyder moet word.


Aanvanklik was daar ’n bekommernis dat hierdie wetgewing teenstrydig hiermee kan wees, maar daar is wyd en met verskeie rolspelers en geaffekteerdes gekonsulteer. Die Nasionale Tesourie en SARS het groot empatie gewys, nie net teenoor die MTBPS doelstellings nie, maar ook teenoor die opregte en ernstige bekommernisse van die privaatsektor en geaffekteerde besighede.


Voorsitter, hierdie wetsontwerp handel oor verskeie verreikende sake, maar onder andere oor die volgende: Eerstens, die verbreding van die basis van sekondêre belasting op maatskappye; die implikasie van die aanslagkoersverandering van 12,5% na 10%, en die vereenvoudiging van die intergroep STS verpligtinge.


Tweedens handel dit oor die verdienste uit, en verkope van, aandele en ander belange, asook die hantering van aandelepremies wat vervolgens as van kapitale aard geag sal kan word, asook die aanspreek van verskeie praktyke en meganismes om aanspreeklikheid te vermy, om dit hok te slaan.


Voorsitter, ten opsigte van herorganisasie van maatskappye, veral binne groepsverband, is daar verskeie voorsienings om sekere onnodige beperkinge op te hef terwyl ander konsessies heroorweeg moes word; alles om dit makliker te maak vir besigheid. (Translation of Afrikaans paragraphs follows.)


[Chairperson, the Securities Transfer Tax Bill and its associated administrative Bill manage the conjunction of two existing pieces of legislation which deal with stamp duty on transactions of unlisted shares and uncertified securities tax on transactions of stock exchange trading. We believe that it will simplify administration and control and ensure that all stock exchange transactions are more cost effective.


The Revenue Laws Amendment Bill of 2007 represents the second part of the tax proposals as set out in the Budget Review at the beginning of this year. The Minister of Finance indicated, among other things, during the Medium-Term Budget Policy Statement – MTBPS - that not only must it be made easier and more affordable to do business in South Africa, but the unnecessary red tape must also be eliminated.


Initially the concern was that this legislation could be contradictory to this, but role-players and affected people were widely consulted. The National Treasury and Sars have shown great empathy, not only towards the MTBPS goals, but also towards the sincere and serious concerns of the private sector and affected businesses.


Chairperson, this legislation deals with various far-reaching matters, but among others also the following: Firstly, the broadening of the basis of secondary taxation on companies; the implications of the assessment rate being lowered from 12,5% to 10%; and the simplification of the inter group STS obligations.


Secondly, it deals with the earnings from, and sales of, shares and other interests, as well as dealing with share premiums which can henceforth be viewed as capital, and addressing various practices and mechanisms to avoid accountability in an effort to curb this.


Chairperson, in regard to the restructuring of companies, especially within groupings, there were various measures to lift unnecessary restrictions, while other concessions had to be reconsidered; all in an effort to make things easier for business. ]


The section dealing with the research and development of intellectual property, the corresponding tax concessions, and the retention of these properties as assets for our future economy, was very challenging at times. Specifically, concerns were raised about the accountability on royalties for the assumed further development of non-South African intellectual properties and the cross-border transfer pricing of intellectual properties, but all were amicably dealt with eventually.


Voorsitter, die uitdaging is om die bates van ons ekonomie te beskerm, terwyl ons wetgewing tegemoedkomend moet wees ten opsigte van die vereistes van moderne internasionale handel en besigheidsvestiging. Hiersonder kan ons weinig op ons eie vermag, wat weer ons ekonomie kan laat stagneer. (Translation of Afrikaans paragraph follows.)


[Chairperson, the challenge is to protect the assets of our economy, while our legislation must be accommodating in regard to the requirements of modern international trade and the establishment of business. Without this, we cannot achieve much on our own, which in turn could lead to the stagnation of our economy.]


Furthermore, in support of increased international compliance, the South African tax system must also account for realities and restrictions in foreign countries in order to protect South Africans investing in these foreign countries from, among others, hyperinflation consequences.


Voorsitter, hoewel die DA van mening is dat ons voortdurend krities moet wees om te verseker dat ons ’n kompeterende, ontwikkelende ... [Inaudible] ... steun ons hierdie wetsontwerp. Baie dankie. [Tyd verstreke.] (Translation of Afrikaans paragraph follows.)


[Chairperson, although the DA is of the opinion that we should constantly be critical in order to ensure that we have a competitive, developing ... [Inaudible.] ... we will support this Bill. Thank you. [Time expired.]]


Mr N SINGH: Chairperson, I would like to follow the hon Marais in commending the process through which these Bills were dealt with and in this regard I would like to congratulate and thank the chairperson of our committee, hon Nene, who deserves praise for the phase of public consultation and the manner in which he handled affairs of that committee.


I must also mention the positive and professional role played by Treasury and the South African Revenue Service officials who briefed us, and who commented in great detail on proposals contained in the public submissions. While they had their instructions, they tried their best to be accommodating and in many instances accepted public advice and our recommendations. The final Bill, Chairperson, is certainly a much better piece of legislation because of their diligence.


The IFP will support both the Revenue Laws Amendment Bill and the Securities Transfer Tax Bill. I want to highlight just four areas where our initial concerns have been successfully addressed. Firstly, we welcome the reduction in the Secondary Tax on Companies to 10%, although we hope that the hon Minister will be able to announce further reductions in the next budget.


Secondly, we support the increased depreciation allowances for buildings and infrastructure, including port assets used for transport purposes. Thirdly, we welcome the tax exemption on accommodation provided to foreign workers by local employers. To have done away with this exemption, or to have limited it severely would have placed the ability of local employers to attract skilled foreigners at risk at a time when our economy desperately needs the skills that they bring.


Fourthly, we are particularly pleased that the original intention to subject public benefit organisations to the skills development levy has been dropped. We know that this would have placed pressure on available funding for public benefit organisations and might have done more harm than good. We agree with Treasury and Sars that more research into this matter is required.


As I indicated earlier, we support both the Bills. Thank you Chairperson.


Mr S N SWART: Chairperson, the main focus of the Revenue Laws Amendment Bill is the broadening of the base for Secondary Tax on Companies, the amendments amount to a switch of STC from a company level tax to a shareholder level tax with the reduction of the rate from 12,5% to 10%.


As far as other amendments are concerned, the ACDP shares the view that our children in amateur sports need support so that they can develop into future stars. We therefore welcome the amendments that allow professional sporting organisations to obtain tax deductions for funding amateur sport development directly. This concession will play a significant role in developing amateur sport in our country.


We also support the amendment allowing for tax-free treatment of up to R3 000 additional death and injury benefits that certain employers provide in addition to the tax-free compensation under the Compensation for Occupational Injuries and Diseases Act. We note that our policemen and women who daily put their lives on the line to protect us would be major beneficiaries of this proposal.


The ACDP will consequently support these Bills. I thank you.


Mr R B BHOOLA: Thank you, Chairperson. Most view taxes as a way for the state to make money, but the MF believes that it is crucial that we educate our people on tax, its reasons and benefits.


In respect of the Revenue Laws Amendment Bill, the MF supports all provisions, especially in view of the controls it sets in the various sectors, including export and import. We do, however, hope that mechanisms will be enhanced to secure our system against corruption and tax evasion.


As for the Securities Transfer Tax Bill and the Securities Transfer Tax Administration Bill, the MF once again supports their provisions. We, however, have no objection to merging the Stamp Duties Act and the Uncertified Securities Act in view of the mergers’ intention that this will serve to create a new transitional taxation beneficial to ownership of all securities.


The MF will support both the Bills. I thank you.


Mr L M GREEN: Chairperson, the legislation that deals with securities transfer taxation suggests that greater onus will be placed on persons to declare their security benefits in order to avoid penalties that relate to tax payments. One of the key aspects of the Bill is the penalty imposed with regard to tax evasion. If it was the intent of the person to omit information which falsifies receipt or expenditure of taxable amounts, that person will have committed a tax evasion offence.


Given the already strict rules governing our Revenue policies, the legislation will hopefully mean that greater compliance will be expected from persons and should this happen, Sars coffers will continue to increase, hopefully to the benefit of our people in the end.


One of the ways in which payment of any tax interest or penalty will be done in respect of transfer of a security will be through the use of electronic payment tools.


The Revenue Bill has undergone certain changes to comply with business concerns, yet it still remains the obligation of business to work transparently with the state.


Finally, the FD supports both the Revenue Laws Amendment Bill and the Securities Transfer Tax Bill. I thank you.


Mr M E MBILI: Thank you, Chairperson and hon members. Since the first Budget Speech in Parliament on 22 June 1994, the new ANC government has made a commitment to investigate virtually every aspect of the South African tax regime against the backdrop of the political, social and economic goals of the incumbent government. One of its key commitments was to close loopholes within the tax regime by introducing timeous legislation.


My colleagues have already alluded to most issues regarding this Bill. I will only touch on one aspect, which was omitted, which is port infrastructure depreciation. The new and unused port infrastructure will be eligible for a write-off of 5% per annum. This means that the port infrastructure will have a lifespan of 20 years and beyond.


With regard to the depreciation of environmental fixed assets, a taxpayer will be allowed a deduction of 40% of the costs of acquiring environment treatment and the resettling assets from the taxpayer’s income in the year of assessment that the asset was brought into use. A further 20% should be deducted in each succeeding year of the assessment.


An amendment proposed on the company re-organisation is provided in clauses 41-47 of the Bill. The purpose of this amendment is to repeal the financial instrument limits from domestic re-organisation provisions. The financial instrument will be retained for foreign assets.


We in the ANC feel that an effective tax system that is perceived to be fair and legitimate is a prerequisite for building a prosperous and stable society. Given the challenge of the Reconstruction and Development Programme, it is essential that South Africa has in place both a revenue-raising and an expenditure policy that are capable of meeting the demands of the future and putting South Africa on a growth path that is sustainable and equitable and creates jobs.


The ANC does not view taxation policy in isolation, but as part of the broader revenue-raising policy, which is in turn integrally linked to the government expenditure policy and favours an approach to taxation that rests on the three pillars of sound macro-economic management, a comprehensive system of the contract of fiscal responsibility.


The ANC favours a broad comprehensive tax base as a narrow tax base inevitably favours certain forms of income and certain goods or services over others. This makes the system unfair as it favours those taxpayers who are able to take advantage of tax-advantaged forms of income over others. It also makes the system inefficient as it creates distorted incentives for taxpayers to take income in other forms and distort their labour savings and consumption decisions to take advantage of tax deferentials.


Broadening the tax base promotes efficiency by closing loopholes and enabling the reduction of tax rates. The ANC aims for a tax that meets the following objectives: It must be transparent, fair and perceived to be so by the taxpayers themselves. It must raise revenue in a cost-effective manner. It must levy taxes as efficiently as possible with minimum distortion. The tax system must distribute the tax pattern equitably according to the taxpayer’s ability to pay and the tax system must support economic growth.


One of the ANC’s most important considerations in devising the tax regime is the tax system that must support economic growth. This principle must be seen within the broader imperative of ensuring that such growth and benefits of economic prosperity are shared amongst all South Africans.


The tax relief thus given to small business, which includes co-operative banks, is aimed at promoting the use of services of these banks by lowering the tax burden and administrative costs and thus ultimately the costs are passed on to members through the bank fees. We all know about the charges of banks which keep on escalating all the time. This developmental thrust is found throughout the Bill, as I have mentioned, and it aims at increasing the tax exemption for work-related debt and disability benefit as well as those aimed at promoting the development of amateur sports.


The tax regime we seek to achieve ...


... sikholwa ukuthi izosiza kakhulu ikakhulukazi ekudonseni osomabhizinisi bethu ukuthi babe yingxenye enkulu ekwakheni umnotho wezwe lakithi. Kusiphatha kabi kakhulu ukubona abantu abamnyama ezindaweni ezifana noSoweto, KwaMashu, e-Claremont naseMlazi amabhzinisi abo efa. Sikholwa-ke ukuthi ... (Translation of isiZulu paragraph follows.)


[... we believe would help especially in attracting our business people to play a big part in creating the economy of our county. It saddens us to see our people's businesses in places like Soweto, KwaMashu, Claremont and Umlazi go under. We believe that ...]


... the tax regime that we are seeking to achieve ...


... izosisiza ekutheni laba bantu bethu ababukeka ... [...will help those people who seem to be ...]


... outside of the economic mainstream ...


... bazobuya beze neno ngoba inqubomgomo yethu yentela isiza ukuthi ingahlali kakhulu emqaleni kubona ... [ ... to be included because our tax policy helps to relieve them from paying  more...]


... and by so doing we hope that this will promote the economic integration ...


... ezosiza ukuthi abantu bakithi babe yingxenye ezweni nasekwakheni umnotho wezwe lethu. Yingaleso sizathu uKhongolose eseka lo Mthethosivivinywa. Ngiyabonga. [Ihlombe.] [... which will help our people to be part of this country and grow the economy of our country. It is for this reason that the ANC supports this Bill. Thank you. [Applause.]


The MINISTER OF FINANCE: Chairperson, this piece of legislation is clearly exceedingly important. The Bills, between them, are 70 pages in length and the explanatory memorandums 104 pages. When the presentation was done to the committee by the Treasury and SA Revenue Service, it was a 90 slide presentation. The hearings have been very extensive.


One of the interesting aspects of the debate here this afternoon is that every party feels that it owns the policy recommendations incorporated in these two Bills. So, I think we must declare a victory and say thank you very much for the support and allow these two Bills to move to the next stage. Thank you very much. [Applause.]


Debate concluded.




(Second Reading debate)




(Second Reading debate)

There was no debate.


Revenue Laws Amendment Bill read a second time.


Securities Transfer Tax Bill read a second time.




(Second Reading debate)




(Second Reading debate)


There was no debate.


Revenue Laws Second Amendment Bill read a second time.


Securities Transfer Tax Administration Bill read a second time.


The House adjourned at 18:05.








National Assembly and National Council of Provinces


1.      Classification of Bills by Joint Tagging Mechanism (JTM)


(1)     The JTM on 7 November 2007 in terms of Joint Rule 160(6) classified the following Bills as section 75 Bills:


  1. Revenue Laws Second Amendment Bill [B 43 – 2007] (National Assembly – sec 75)


  1. Securities Transfer Tax Administration Bill [B 45 – 2007] (National Assembly – sec 75).


  1. Standards Bill [B 46 – 2007] (National Assembly – sec 75)


  1. National Regulator for Compulsory Specifications Bill [B 47 – 2007] (National Assembly – sec 75).


  1. The JTM on 7 November 2007 in terms of Joint Rule 160(6) classified the following Bills as money Bills:


  1. Adjustments Appropriation Bill [B 41 – 2007] (National Assembly – sec 77)


  1. Revenue Laws Amendment Bill [B 42 – 2007] (National Assembly – sec 77).


  1. Securities Transfer Tax Bill [B 44 – 2007] (National Assembly – sec 77)




National Assembly and National Council of Provinces


1.       The Minister of Finance


  1. Convention between the Republic of South Africa and the Republic of Mozambique for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, tabled in terms of section 231(2) of the Constitution, 1996.


  1. Explanatory Memorandum to the Convention between the Republic of South Africa and the Republic of Mozambique for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.


  1. Explanatory Memorandum on the Revenue Laws Amendment Bill, 2007.


  1. Explanatory Memorandum on the Securities Transfer Tax Bill, 2007.


National Assembly


1.       The Speaker

  1. Report of the Public Service Commission (PSC) on the Implementation of the Promotion of Access to Information Act, 2000 (Act No 2 of 2000) in the Public Service – August 2007 [RP 166-2007].


  1. Consolidated Report of the Public Service Commission (PSC) on Inspection of Public Service Delivery Sites – August 2007 [RP 162-2007].


  1. Report of the Public Service Commission (PSC) on Citizen Satisfaction Survey 2006/2007: Department of Home Affairs, Department of Trade and Industry and Transport Services by Provincial Departments – September 2007 [RP 163-2007].





National Assembly and National Council of Provinces


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National Assembly and National Council of Provinces


1.      Classification of Bills by Joint Tagging Mechanism (JTM)


          Please note: The following item amends item 1(2) in the English “Announcements – Classification of Bills, published on page 2066 of the Announcements, Tablings and Committee Reports of 9 November 2007. The entry should read as follows:


          “(2)     The JTM on 7 November 2007 in terms of Joint Rule 160(6) classified the following Bills as money Bills:


  1. Adjustments Appropriation Bill [B 41 – 2007] (National Assembly – sec 77)


  1. Revenue Laws Amendment Bill [B 42 – 2007] (National Assembly – sec  77).


(c)      Securities Transfer Tax Bill [B 44 – 2007] (National Assembly – sec 77).”


2.       Translations of Bills submitted


(1)      The Minister for Provincial and Local Government


  1. Wysigingswetsontwerp op Plaaslike Regeringswette [W 28 – 2007] (National Assembly – sec 75)

This is the official translation into Afrikaans of the Local Government Laws Amendment Bill [B 28 – 2007] (National Assembly – sec 75).




National Assembly and National Council of Provinces


1.       The Minister of Finance


  1. Government Notice No R.1002 published in Government Gazette No 30393 dated 28 October 2007: Amendment of Schedule No 6 (No 6/110) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


  1. Government Notice No R.938 published in Government Gazette No 30356 dated 12 October 2007: Amendment of Schedule No 1 (No 1/1/1345) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


  1. Government Notice No R.939 published in Government Gazette No 30356 dated 12 October 2007: Amendment of Schedule No 1 (No 3/621) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


  1. Government Notice No R.955 published in Government Gazette No 30370 dated 12 October 2007: Amendment of Schedule No 3 (No 3/622) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


  1. Government Notice No R.956 published in Government Gazette No 30370 dated 12 October 2007: Amendment of Schedule No 4 (No 4/307) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


  1. Government Notice No R.957 published in Government Gazette No 30370 dated 12 October 2007: Amendment of Schedule No 8 (No 8/6) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


  1. Government Notice No R.958 published in Government Gazette No 30370 dated 12 October 2007: Amendment issued in terms of section 74(3)(a) of the Value-Added Tax Act, 1991 (Act No 89 of 1991).


  1. Government Notice No R.959 published in Government Gazette No 30370 dated 12 October 2007: Amendment of Rules (DAR/38) in terms of the Customs and Excise Act, 1964 (Act No 91 of 1964).


2.       The Minister in The Presidency


  1. Report and Financial Statements of the National Youth Commission (NYC) for 2006-2007, including the Report of the Auditor-General on the Financial Statements and Performance Information for 2006-2007 [RP 184-2007].


National Assembly


1.       The Speaker

  1. Letter from the Minister in The Presidency, dated 8 November 2007, to the Speaker of the National Assembly, in terms of section 65(2)(a) of the Public Finance Management Act, 1999 (Act No 1 of 1999), explaining the delay in the tabling of the Annual Report of the National Youth Commission (NYC) for 2006-2007.




Dear Ms Mbete


The Annual Report and audited Financial Statements from the National Youth Commission (NYC) for the 2006/7 financial year has now been completed and the relevant copies delivered to the Parliamentary Stores.


I am aware that the report was to be submitted for tabling in parliament by no later than 30 September 2007.


The reasons for the late submission, which I received from the Chairperson and Chief Executive Officer of the NYC, relates to delays and difficulties in the finalisation of the audited statements with the Auditor-General. Due to staff turnover at the NYC and other discrepancies in the initial financials submitted to the AG more work had to be done before the financials could be finalised so as to provide an accurate picture of the financial position of the NYC.


I hereby request that NYC Annual Report and audited Financial statements for 2006/7 be tabled in Parliament.


Kind regards


Essop Pahad





National Assembly and National Council of Provinces


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3.    Report of the Standing Committee on Private Members` Legislative Proposals and Special Petitions on the Legislative proposal to amend Constitution in respect of abortion dated 14 September 2007:


The Standing Committee on Private Members` Legislative Proposals and Special Petitions, having considered the Legislative proposal to amend the Constitution in respect of abortion (Ms C Dudley), and having consulted with the Department Health, recommends that permission not be given to the member to proceed with the proposal.


Report to be considered.






National Assembly and National Council of Provinces


1.      Draft Bills submitted in terms of Joint Rule 159


(1)      Housing Development Agency Bill, 2007, submitted by the Minister of Housing on 12 November 2007. Referred to the Portfolio Committee on Housing and the Select Committee on Public Services.




National Assembly and National Council of Provinces


  1. The Minister of Environmental Affairs and Tourism


  1. General Notice No 1301 published in Government Gazette No 30389 dated 19 October 2007: Nomination for the appointment of suitable persons as members on the Board of South African Weather Services (SAWS) in terms of the South African Weather Service Act, 2001 (Act No 8 of 2001).


  1. General Notice No 1024 published in Government Gazette No 30418 dated 26 October 2007: Notice in terms of section 16 of the Marine Living Resources Act, 1998 (Act No 18 of 1998).




National Assembly


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