Deputy Speaker, hon members and Ministers present will recall that on 27 October 2009, the Minister of Finance complied with section 28 of the Public Finance Management Act, which obligates him and his department to present to the House a multiyear budget projection. The purpose of this projection is to give certainty and predictability to the country's finances and indicate its sustainability, particularly in terms of revenue and expenditure patterns and, most importantly, in terms of the macroeconomic outlook that seeks to locate our country's place and space in the world economy.
The relevant committees responsible for finances in this House were assigned to process the Medium-Term Budget Policy Statement and recommend and report back to this House. On behalf of the Standing Committee on Finance, allow me to say that it is an honour for us in the committee to be part of a team from this Parliament, entrusted with the task of overseeing the processes and management of our economy and its finances.
I am therefore pleased and privileged to present the committee's report and recommendations, which I will deal with later in my submissions.
We need to submit, upfront, that the committee had to perform its duties within a very short space of time, given the busy schedule of our parliamentary work. Nonetheless, the committee managed to receive substantive comments and very useful inputs from businesses, organised labour and respectable economists affiliated to reputable institutions.
In processing its work, the committee reflected on the following important topics: the state of the economy; the economic policy outlook; fiscal and monetary policies; spending priorities; and budget deficits.
The 2009 main Budget, like many budgets over the whole world, was formulated under very severe economic conditions and in an environment that could be described as being hostile towards the poor and emerging economies, through no fault of their own.
It is not my intention to dwell much on the historical deficiencies of our macroeconomic challenges. However, it must be said that the Medium-Term Budget Policy Statement and its recommendations are being debated under slightly improved economic conditions compared to six months ago. There are signs of cautious hope of an economic recovery, which means the country's national framework response to the global crisis is beginning to yield positive results. However, we must warn that it is not yet time to celebrate. The projected economic growth, that would suggest the roll-overs of yesteryear, is not yet in sight.
Our work as parliamentarians is clearly defined under these current economic challenges. We are called upon, through our various standing and portfolio committees, to monitor vigorously expenditure patterns in government departments and parastatals, and support Operation Clean Audit - the courageous effort by the Minister of Cooperative Governance and Traditional Affairs to improve service delivery and accountability at local government level.
In terms of our economic recovery, this can only be realised if proper and sound economic policies, with better co-ordination between all spheres of government, are implemented, monitored and evaluated within the context of a coherent and sustainable plan co-ordinated from a central point - in this instance, the Presidency.
We have noted that government has provided support to several key sectors of the economy through development and finance institutions, while simultaneously enabling economic adjustment. Development Finance Institutions, DFIs, have assisted in boosting public sector infrastructure and investments, without which the much celebrated 2010 Fifa World Cup activities and 2010 legacy projects would have been impossible.
Before I submit the committee's recommendation it is critical that we explain how we see the steps that South Africa is taking to support its recovery plan through the Medium-Term Budget Policy Statement proposals in the current global crisis.
Firstly, we need to commend the Minister and his team for protecting the key priority areas outlined in the state of the nation address. These are: creation of decent jobs and protection of existing jobs; investment in public and economic infrastructure; education; a sustainable rural development strategy; stepping up the fight against crime and corruption; and prioritising the fight against the HIV/Aids pandemic.
The Medium-Term Budget Policy Statement also indicates a strong intention to maintain expansionary fiscal and monetary policies into the outer years of the Medium-Term Expenditure Framework. One of the key lessons that corporate South Africa and corporations the world over should learn from the current economic crisis is that heedless, selfish, amoral economic interests, particularly in terms of business practices, leads to bad economic outcomes with unintended consequences that affects mostly the poor and the working people. Financial institutions designed to carry out functions of the bank should do so within the designed regulatory framework. If they desire to deliberately avoid and evade regulations, they wreak havoc on the very same economy and markets that they are supposed to support and sustain.
Secondly, the creation of subprime lending to the unbankable in order to support profitability and award huge bonuses to executives in the banking or financial institutions, is not sustainable.
The third lesson that we should learn from this economic crisis is that overvalued corporate assets and stock market shares also lead to distortion of the economy and undermine the same economy that seeks to be promoted and sustained.
The sad part of everything is that all these mistakes hurt the poor and working class people the most. As we proceed into the future in terms of our economic recovery, it will be important that we deliberately seek state intervention in the economy to reduce and eliminate inequalities in society and also seek to equalise incomes between the poor and the rich.
As far as our recommendations are concerned, I would like to focus mainly on three or more things that the committee has looked at. In order for Parliament to engage substantially and more intelligently with the budget before it, there is a need to expedite the setting up of a Parliamentary Budget Office in the near future in order to support the work of the Select Committee on Finance and Appropriations, especially during the value-for- money oversight and accountability exercise. It will therefore be ideal for the Director of the Parliamentary Budget Office to be appointed as soon as possible. This should be done no later than March next year. [Applause.]
The committee also believes that it is important to provide sufficient administrative content and research support capacity to Parliament in order for it to fulfil its legislative obligations and oversight functions over the work of the executive. It is also critical that Parliamentary programmes allow time for Parliamentary committees to engage with the Medium-Term Policy Statement and Budget matters, otherwise we pay lip service to public participation.
In conclusion, I would like to thank the committee members for their participation and for their dedication in making sure that the committee executes its responsibilities. We therefore recommend that this House consider and accept our recommendations as proposed in our report. Thank you. [Time expired.]
Madam Deputy Speaker, the Medium-Term Budget Policy Statement confirms what the average South African household already knows: The job market has declined sharply; disposable income has fallen; indebtedness remains high; and government excess has been exposed. There is no doubt that the global financial crisis has hit home and has had a far worse impact on our fiscal framework than anticipated only a few months ago. Conditions have deteriorated very quickly. The steady progress made over the past 15 years to develop a robust economy capable of withstanding constantly changing globally integrated markets, has been reversed. The Budget deficit, at 7,6% of Gross Domestic Product, GDP, or R184 billion, will need to be financed by the people.
Government plans to expand its debt from a current 29% of GDP to 41% in 2012-13, mostly sourced on the domestic credit market. This will impact on the availability and price of credit for other participants in the economy. This 12 percentage point increase is a significant expansion in rand terms, given that the GDP is expected to grow from next year. The room left to manoeuvre is getting tighter, especially given that assumptions underlining the fiscal framework may well prove to be optimistic. If our economy does not grow as expected, we are heading for debt servicing expenditure that will slow down service delivery even further.
Given the service delivery protests that have erupted recently, it is clear that the people are growing restless over the absence of delivery caused by government's failure and inability to efficiently spend the money that is available. Matters will be far worse when money is not available.
Although the tax revenue shortfall amounts to R70,3 billion, a further R10,8 billion shortfall arises from sources in the provinces, social security funds and state-owned enterprises. This reduces government revenue to 27,3% of GDP. Government expenditure, however, increased nearly 5 percentage points from last year, to 35% of GDP. The numbers point to the emergence of a dysfunctional developmental state. The size of government participation in the economy is increasing, but government functionality and service delivery output is not.
The DA supports the counter-cyclical fiscal stance adopted by government. This does mean that government will be spending more at a time when its revenue is shrinking and the result will be a deficit and an increase in borrowing. The crucial issue, however, is that an increase in government spending during a recession should benefit the economy in the longer term and yield maximum post-recession benefits. Increased spending to fund government inefficiency and luxury lifestyles for the government lite is not acceptable and defeats the purpose.
The preliminary report by the Government Task Team to Effect Savings makes bold and welcome statements. We also welcome the Minister's firm commitment to not tolerate corruption; act forcibly against wastage; insist on value for money; and act against those who feed selfishly off the state.
Increases in government spending do not demonstrate this commitment. The R589 million set aside for new government departments and the appointment of additional Ministers and Deputy Ministers appears to be little more than a political exercise to appease the various factions within the government alliance with the perks and privileges of executive office. Ten thousand RDP houses could have been built instead. That would have represented a real and tangible impact on the lives of ordinary South Africans.
The R1 billion recapitalisation of the Land Bank would not be necessary if government had taken steps to prevent deployed cadres from infecting the institution with a culture of kleptocracy that is extremely difficult to eradicate, given that it is widen-spread across the state-owned enterprises. These entities are funded with taxpayers' money intended to improve the lives of the poor. We expect the Minister to do as he says he will do and ensure that the parasites who steal the people's money are identified and prosecuted.
The R12 billion increase in the state payroll - not provided for in the main Budget - demonstrates that government does not manage its human capital effectively. There are too many public servants in unproductive jobs within a bloated bureaucracy, and too few in critical service delivery areas. The state payroll is steadily increasing, without tangible benefits to taxpayers and service recipients. This is not value for money. Not long ago in a place not far away, a government forgot that it exists to serve its people. It adopted unworkable policies that brought a once- thriving economy to collapse; it violated property rights; it ignored its constitution; it spent more than it received; it used the people's money to fund luxury lifestyles for some; it printed money to fund its debts and rendered it currency worthless. And now, Zimbabwe awaits financial rescue. We must prevent this from happening to us.
Now that Minister Manuel has vacated his position as Minister of Finance, the public will no longer have an opportunity to offer their "Tips for Trevor" in the lead up to the annual Budget. It therefore seems likely that this would be replaced by "pointers" for the present Minister. The DA would like to offer the first one to the Minister: The social contract between government and taxpayers is already strained because taxpayers must fund inefficient government spending and luxury lifestyles for some while they struggle daily to put food in their children's stomachs and a roof over their heads. Tax increases will not be necessary if government spends the people's money wisely. Thank you. [Applause.]
Madam Deputy Speaker, we are all aware that this policy statement by the hon Minister of Finance was made against the backdrop of a very uncertain economic time, compounded by a behind-the- scenes ideological debate regarding the direction of economic policy. The hon Minister has passed this hurdle looking like the boss we expect a Finance Minister to be. His consistent approach, in not diverting from previous policies, has won him Cope's support.
It was 20 years ago that the world was reborn when the Berlin Wall collapsed and the face of the world changed forever. The current debate, fuelled by Cosatu and the SACP on who should be the boss on economic policy, is ironic. Cosatu must realise that the real opposition in South Africa's economy is not us or them, but the financial markets.
Cosatu must be wary not to overplay their hand with the new government and need to pick their battles with government with greater care. Battles should never be personal. Cosatu and the SACP should stop this debate now, support the Treasury under the guidance of the hon Minister and get on with the job to address our serious economic challenges. We do have serious challenges.
Firstly, South Africa will have a hesitant economic recovery. We are going to lag behind the world's economic recovery and some downward risks remain in our economy. Therefore, our growth forecast should be conservative.
Secondly, the uncertain effect of rising energy prices over the next 12 months affects inflation forecasts and creates uncertainty. Until we have sorted out Eskom's capital requirements, the market will remain volatile.
Thirdly, the question remains as to whether our fiscal stimulus package is correct and not too late. So far, this government has relied extensively on public spending increases and not on any tax cuts. This programme is too silent on private sector involvement.
A large portion of this expenditure increase is the growing salary bill, approaching like a swarm of locust throwing a dark cloud over our economy. Government has acknowledged that the increase in the salary bill is not sustainable. Let's now see action to curb it.
Economists have warned that our fiscal deficit increase is one of the highest. It is comparable to that of the United States. Because of that, our public debt will increase dramatically, shifting the burden of this debt to future generations.
Cope would like to see a clear plan, even if it needs to take a longer view, to ensure that we shall be out of this debt. Only a conservative and consistent approach by government to cut the salary bill and to grow the economy will spare our future generations from hardship.
Failure to improve efficiency in government spending will delay our recovery and prolong further borrowing. We need specific investments. We need to speed up access to the Internet. Government does not have the fiscal space to create jobs alone. We need the private sector. We need low inflation targets, high productivity and competitiveness. We need to ensure that the small and medium-sized enterprises, SMEs, become the main engine of job growth by getting the banks to fund them, cut the red tape and make the internet more affordable. It is vital that we focus on expenditure programmes that will improve competitiveness.
It will be the hon Minister's duty to control our soaring debts so as to avoid serious discomfort for our economy. We wish him all the best and Cope will support him in these efforts. [Applause.]
Madam Deputy Speaker, the IFP would today like to present two dissenting views on the Medium-Term Budget Policy Statement,