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 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.]
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.]
Order! Hon members, please lower your voices.
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.
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.
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.]
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 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.
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.]
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.]
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.]
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.
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.
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 crches, 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.]
Order! Hon members, can we please lower our voices so that we can hear what members are saying.
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.
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 hon J Fubbs. [Interjections.] Oh. My apologies. The hon H Bekker. I wasn't chastising my member.
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.]
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.
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.