Deputy Speaker, hon Minister and Deputy Ministers, hon members, the ANC at its 52nd conference helped South Africa in characterising the challenges facing the economy. The conference was able to define South Africa's economic growth progress and, at the same time, it managed to acknowledge challenges and also identified opportunities. It also came up with a roadmap of issues to be addressed and opportunities to be explored. Even though this happened before the actual economic crisis showed its ugly face, there were signs to that regard and the issue might be the analysis of the extent of the effect.
We realised that, at this juncture, our country's biggest challenges are the high rate of unemployment, poverty, and inequality. We recognise that central to addressing these challenges is to implement policies and programmes that will promote high rates of economic growth as measured by our gross domestic product. However, experience in the last 15 years has shown us that economic growth on its own is not sufficient to address these challenges. We have thus come to the conclusion that it is rather equally the quality of growth that will make a difference.
In the years between 1994 and 2007 our economy experienced its highest gross domestic product, GDP, growth rates of between 3% and 5,3% on annual bases. During this period and since the dawn of democracy in 1994, substantive changes and improvement in the lives of our people were made as a result. Notwithstanding this, the challenges of unemployment, poverty and inequality still remain.
Unemployment remains high by international standards and when comparing South Africa with other middle-income countries. Consistently over the years the unemployment rate has been estimated at between 23% and 35% of the economically active population. Equally, South Africa is now ranked as the number one most unequal society in the world. It is estimated that the richest 10% of households in South Africa receive more than 40% of the country's total national income as compared to just over 30% in most upper middle-income countries and the rapidly growing economies of Asia.
As a result of the entrenched colonial and apartheid legacy, the structures of our economy, in terms of production and ownership, are still dependent on exportation of raw materials, especially mining- and agriculture-based goods. Ownership generally remains highly concentrated, as characterised by the existence of monopolies in almost all sectors of the economy. The predominance of monopolies has often led to high costs and economic inefficiencies with resultant negative consequences for the working people and the poor.
To address these challenges, we have decided, as the ANC-led government, to speed up and deepen our economic transformation agenda for the country. This will be done through accelerated growth within the context of effective strategies of redistribution that build a new and more equitable growth path. Our approach is to ensure that, while we achieve accelerated growth, we transform the quality of that growth through appropriate policies and programmes. These must ultimately result in changes in the structure and patterns of our economy.
Our vision as defined in our policies is that of a mixed economy where the state, private capital, co-operatives and other forms of social ownership complement each other in an integrated way to eliminate poverty and foster shared economic growth. While appreciating the centrality of accelerated and inclusive growth, we will put emphasis on sustainability and environmental protection management.
For us to achieve a sustainable and equitable economic growth path, its content must include sustainability and green economy principles. We recognise the enormous challenges associated with the legacy of both the colonial and apartheid economic systems. Spatial management and economic patterns led to millions of black people, in particular, bearing the brunt of poor sanitation. They were located where the most polluting industries existed, and were denied the basic rights to defend themselves against harmful economic activities.
The legacy of apartheid spatial planning, which has resulted in massive inequalities and uneven development based on race, is still a feature of our economic landscape to date. High growth rates achieved up to 2008 when the recession hit our economy have not dislodged these patterns of spatial inequalities. In fact, in some areas they were reinforced as a result of unintended consequences of some of our macroeconomic policies. In addition, growth did not dislodge the historically deep-rooted structural impediments to our long-term economic development. In geographic, economic and social terms, there are huge differential disparities between our provinces as well as urban and rural areas in economic development.
Having realised that high economic growth on its own does not solve the critical challenges of unemployment, poverty and inequalities, we decided to speed up and deepen our agenda for economic transformation. This involves charting a new way of developing an accelerated sustainable economic growth that is inclusive, equitable and based on the green economic principles. The fundamental features of this growth path is the implementation of policies, strategies and programmes that promote faster growth and job creation, as well as ensuring sustainability through better management of our natural resources and the environment.
As a step towards that, we are currently implementing the new Industrial Policy Action Plan 2, Ipap2. Some of the key objectives - I think members know - include the green economy, which is the most critical aspect of this growth path. The green economy is also an aspect I would want to focus on, because it deals with sustainable development. In pursuing our new economic growth path as the ANC, we have stated in our policy positions that we embrace a transformative environmentalism based upon the idea of sustainable development, which is built upon the interconnection of environmental, social and economic justice.
We have stated further that our vision of the future includes a sustainable economy where all South Africans, including present and future generations, realise their right to an environment that is not harmful to their health or wellbeing. It is imperative, therefore, that this vision guides all our policies, strategies and plans for the new economic growth path as exemplified by the inclusion of the promotion of a green economy in the Ipap2.
It is now an established scientific fact that the current forms of economic growth that are reliant on energy, which is dependent on coal, oil and gas, are unsustainable and detrimental to the environment. This fact is particularly important in South Africa, because the structure of our economy has historically been based on mining.
There is increasing evidence of climate change which results in a significant rise in global temperatures. This is causing an increase in the quantities of greenhouse gases in the atmosphere generated by human activities that include burning of fossil fuels, deforestation, industrialisation, inefficient road transportation and intensive methods of agricultural production. It is predicted that with climate change, South Africa will become hotter and drier.
South Africa, by comparison, is generally a country where water is scarce. The impact of climate change will put even more pressure on the country's meagre water resources, with devastating prospects for our economic wellbeing and development. This is likely to affect some of our key industries such as agriculture, tourism, industrial production and biodiversity. As a consequence, there would be an increase in unemployment and poverty levels, with the resultant threat to the livelihood opportunities for the poor.
In recognition of these environmental challenges, our new accelerated sustainable and equitable growth path is aimed at promoting green industries and energy efficiency. To foster this economic agenda in such a way that it also supports job creation, the Ipap2 aims to implement measures that would mitigate that.
In conclusion, we believe that the tasks of transforming our economy in a manner that encourages it to grow should be inclusive, equitable, sustainable and green-orientated. It will require partnerships between all of us. Thank you. [Applause.]
Madam Deputy Speaker, on a point of order: I think in Rule 25(a) that deals with quorums in the House, it says that the Assembly may proceed with its business irrespective of the number of members present, but may vote on a Bill or decide on any question only if a quorum is present in terms of subrule 2, where it says that the majority of the members of the National Assembly must be present before votes may be taken on a Bill or an amendment to a Bill. During the second reading of the Sectional Titles Amendment Bill and the Deeds Registries Amendment Bill, I doubt very much that we had a quorum in the House, so I ask for your ruling on that matter.
I am advised that that intervention was supposed to have been done at that time. There is an assumption that there was a quorum when it happened. It is done now; we cannot go back to an item that we have agreed on.
Madam Deputy Speaker, may I reply to that?
HON MEMBERS: No!
I just want to point out that I have alerted the Table twice during the debate on that Bill to alert them to the possibility that we might not have a quorum. [Interjections.] So, they were aware of the fact, and they said that they would check on that.
But, still ...
Madam Deputy Speaker, if there wasn't a quorum then it's not valid.
HON MEMBERS: There was a quorum.
If it is not valid, it would be an unlawful decision.
Can we move from this item, because, surely, you drew the attention to the Speaker and to the House that there might not be a quorum, and the business is suspended. If you check with the Table instead of drawing the attention of the House to that, and we move from the item under the impression ... We don't know at the moment if there was no quorum. We don't know if there was no quorum ...
Mr R A P TROLLIP: Madam Deputy Speaker, on a point of order: If the Table is here to assist you and this Parliament, and one of my members goes to alert the Table and they do nothing about it twice, what is the Table actually doing in this Parliament? What is their responsibility and role in informing you as the Deputy Speaker and presiding officer whether we have a quorum or not?
You are right, hon Trollip, they might have failed then if they thought there was no quorum. But, the responsibility of a member is to bring that to the attention of the House. If it was done at that time, definitely it would have been an issue for me. We would have stopped to see whether we have a quorum. If it's only now, when we are dealing with a completely different item, that the issue is being brought to my attention, there is nothing I can do about it. But if the member had brought that to the attention of the House, at that time, it would have been addressed.
Madam Speaker, I agree that it is difficult for you to do something about it now because members may have left the House, but it is equally your responsibility as the presiding officer, when we consider legislation, or make decisions regarding legislation, to see that we have a quorum and that of your officials that are there to support you to take it into account when they are alerted.
In fact, sitting here and allowing people to speak, when I looked around I didn't see a number that was far, far less than when we started. If there were - you know, objections - I would have stopped and counted. But to be honest, looking around, I didn't see a number that was far less than when we started. Hon members, can we move from this item?
Madam Deputy Speaker, on Tuesday, Statistics SA released Gross Domestic Product, data for the second quarter. The seasonal real GDP increased by an annualised rate of 3,2% compared with the increase of 4,6% during the first quarter. This increase was below the Reuters Consensus of 3,7%, which means that our economy is recovering from the recession at a slower pace than generally anticipated. If this decelerating pace of recovery continues, we are unlikely to reach 3% growth in our economy this year.
This is not good news for South Africans, especially those who have experienced the pain of losing their jobs during the recession. Despite the modest recovery, our economy continues to shed jobs and poverty remains firmly entrenched in communities across the country. The Minister of Finance has stated that we need a sustained growth rate of 7% for our economy to create jobs and reduce poverty.
Our current growth path will not achieve this objective. Events in the global economy are not working in our favour. The developing economies face the very real prospect of sliding back into recession after experiencing mild recoveries in the wake of the world financial crisis. If this double dip does happen, our own economy will be negatively affected. As an emerging economy, South Africa aspires to join the Bric nations, an informal group of major emerging economies that includes Brazil, Russia, India and China. Expectations are that these economies will be the forefront of global economic growth as developed economies take time to fully recover. We are currently excluded from Bric, because our economy is not considered to be in the same league. This is an easy conclusion to reach when we consider the growth rates that the Bric countries are achieving in comparison to our own. They have emerged far stronger than we have, because they are more sharply focused on achieving economic success.
Before the world financial crisis began, our economy was already lagging behind its full potential. The International Panel on Growth identified several barriers to growth, but its recommendations were lost in the noisy transition from the Mbeki administration to the Zuma administration. The panel exposed poor policy choices that were made by the ANC government, particularly in education, resulting in a significant mismatch between skills available to our economy and skills required by our economy, and in its misdirected microeconomic interventions that stifled economic activity rather than it being promoted.
Although our room for manoeuvre is limited by a combination of adverse global events and domestic constraints, it is possible for us to craft a new economic growth path that will lead our economy to the forefront amongst emerging economies. It requires government to make the right choices and to exercise the necessary political will to do the right things for all the people of South Africa and not only for its politically connected cronies.
The role of government in the economy and its shaping of economic policy need to be clarified. The ANC government makes reference to the developmental state, but we still do not have clarity on what this actually means. The model applied to the state-owned enterprises doesn't work and we are still waiting for the review that was promised last year. We are also waiting for Minister Manuel's National Planning Commission to plan and for clarity on how it will interface with Minister Patel's advisory panel. It appears that political tension in the tripartite alliance has paralysed coherent economic policy-making and implementation. Investors are unsure about our economic policy direction. The prospect of nationalisation makes them extremely nervous.
The world financial crisis offered several lessons that we should apply to our economy. Most significantly we have learnt that government can perform a vital function in intervening where the market fails. In the South African context, this has important implications for government in positioning itself within the economy.
The ANC government seeks to position itself at the centre. This is a poor policy choice. From this central point, it seeks to control all aspects of our economy. In this way, it can dispense patronage to its loyal cadres and exert control over the population by providing or withholding access to jobs and poverty alleviating services. It should rather focus on encouraging people to make choices for themselves within an environment, facilitated by government, which enables them to become everything that they are capable of being. Government's primary objective, post recession, is to facilitate economic activity and not to attempt to act as a job provider, which it has proved unable to do in any event.
Our economy needs to be attractive to local and international investors. Our macroeconomic framework needs to facilitate this environment. South African businesses invested R44 billion in Ireland because the Irish government offered an attractive tax regime. We need to consider fiscal incentives to attract and retain foreign capital and to encourage South Africans to save more, especially towards funding their retirement.
Poor policy choices by the ANC government include unattractive corporate tax rates, an overly complex and complicated tax regime, suggestions to implement a Tobin tax, and a pension reform process that has dragged on for over seven years. To resolve this, we need a commission to review our tax regime and deadlines for completion of the pension reform process.
Millions of South Africans are neither employed nor in education. This is an enormous waste of human capital and the result of poor policy choices. Our education system is not producing the skills that our economy needs. To achieve a new growth path we need to ensure that our basic learning institutions provide quality education and that our higher learning institutions, of various kinds, can absorb far more students than they do now. Good policy choices would include incentives to establish more learning institutions and generate the specific occupational skills vital to our economic prosperity. If government builds the path to quality education, our people will walk on it and our economy will benefit.
Our rate of unemployment remains amongst the highest in the world and we are currently experiencing the phenomenon of jobless growth. Employers are reluctant to employ because poor policy choices make it really difficult for an employer to correct job mismatches and impossible for an individual to negotiate the terms of his or her own employment. Entrepreneurs thrive across the African continent, and we should be no exception. The environment needs to be conducive to the entrepreneurial spirit and good policy should remove obstacles to starting and operating a business enterprise. Technology and infrastructure needs to be developed and made available to those who are on the road to business development. It is currently very cumbersome for small businesses to operate in South Africa; for a new economic growth path, this needs to change.
A wide range of good policy choices can also be made to encourage employers to absorb more people from the available labour market; a wage subsidy is one of them. Although the Minister of Finance mentioned in his Budget Speech that a wage subsidy to encourage employment would be pursued, it now seems clear that it does not possess the political muscle to drive the policy to implementation.
The quality of life of millions of South Africans is unacceptably low. Many live in extreme poverty and do not have access to basic service delivery. Quality health care for all has not been achieved and results from poor policy choices. We know that the market does not provide universal access to quality health care and that government intervention is required, but instead of fixing the broken system that it currently operates, the ANC government looks to implementing a National Health Insurance Scheme that has not been comprehensively costed and is likely to make health care even more expensive.
Many other policy improvements are needed, including a more efficient and effective procurement process and a model for public/private partnerships that avoids patronage for the politically connected. Time is limited and the people will not wait forever.
On his recent visit to China, President Zuma said that plans are being developed in order for us to achieve a target growth rate of at least 7% per annum in the near future. The actions of the ANC government, to date, do not inspire confidence and the current public sector strikes point to deep divides within the tripartite alliance. Its previous plans have either failed or fizzled out under the weight of political agendas that cannot be reconciled within the ANC. Hoping for a bailout from China, as we have seen happen in Zimbabwe, is not good enough.
The people of South Africa deserve more. They deserve a government that will facilitate the economic activity that is required for them to achieve their full potential. They deserve a government that will focus on eradicating poverty at its root causes. They deserve a government that will work for the people, and not the other way around. Most importantly, they deserve a government that is capable of making the right policy choices. Thank you. [Applause.]
Hon House Chair, Cope strongly believes that the overarching challenge for South Africa is to achieve a 7% sustainable growth path. Our people are very unhappy, as poverty is increasing without any hope of a meaningful reversal.
Last year, according to Statistics SA, 870 000 people lost their jobs in the formal economy. As we speak, millions are jobless and half of our population live below the poverty datum line. Our society, in terms of the Gini coefficient index - which measures inequality - is rated as the most unequal society in the world. Cope wants to see substantial growth. We need to see it now.
At present, the contribution to GDP from agriculture is a mere 0,9% and from industry 20,6%. Mechanised services, on the other hand, account for 78,5% of GDP. These proportions are totally skewed and very wrong. A paradigm shift is what is needed at the present moment.
Here are some of Cope's proposals for a new economic growth path: Being the most developed economy in Africa, we should be the super megastore for ICT for the continent. Much as Dubai is for the Middle East, South Africa should be for Africa.
Our marketing of ICT products should encompass a continent-wide view so that we achieve the scale of distribution to reduce prices, as Dubai does to attract buyers from all over the Middle East. Already MTN and Vodacom, which are headquartered in South Africa, have a continent-wide footprint.
South Africa is well placed to be the ICT hub of Africa and will, therefore, be able to attract Africa to shop for ICT products and services in our country. South Korea's Presidential Lead Programme has shown what can be done in this regard if the political will to overcome the digital divide is there. We now live in a knowledge economy and everything we do must reflect that. With greater investment in skills, we can have the capacity to service the whole of Africa in the field of ICT. Blue IQ is an example of what can be done to catalyse sustainable economic growth. We must overcome the constraints of the digital divide. North-South trade in Africa is grossly underdeveloped. South Africa must be a market for African products from all over the continent. Two-way trade must be escalated. We must scale up our Research and Development, R&D, expenditure and support innovation. Hundreds of people are sitting with small innovative ideas which they cannot bring to market because they lack capital. The state must baby-sit new manufacturing projects until they become viable and then sell them off at the point where banks will lend money cheaply. Within this context, entrepreneurship must be encouraged to spread like wildfire.
Agriculture has been steadily declining and that is why jobs have been shed in such large numbers. Our food security is in jeopardy. We import what is highly subsidised elsewhere and we are thereby destroying our own capacity for agricultural production. Agriculture accounts for less than 1% of our GDP. That simply cannot be. It is disturbing that, until now, government has not put forward any turnaround strategy for agriculture.
Sustainable productive manufacturing is critically important for our economy. However, in steel pricing, ArcelorMittal has shifted fully to the Black Sea import-parity pricing ... [Time expired.]
Madam Deputy Speaker, Professor James earlier talked about the cost of government talking. The greatest part of the cost is the opportunity cost. There is in the English language a beautiful, archaic word, "velleity". Velleity is volition which does not come into the fruition of action. We have seen a great deal of velleity within government. Government does not make money; it can only spend money. Social programmes need to have a higher rate of economic growth to be financed. Government's Growth, Employment and Redistribution strategy, Gear, began with a 6% estimated growth rate and ended up with 3%.
We need to do something fundamentally different, or this may be remembered as the season of lost opportunities. A crisis offers an opportunity for restructuring. We have missed the opportunity; we are in the process of missing it.
Hon George made reference to the Bric countries - Brazil, Russia, India and China - which are products of fundamental restructuring made ahead of need with vision. They are ready to go. We are still within the mould of an economy shaped by international sanctions, by economic isolation and by a government programme that keeps alive what is not viable, with a constant transfer of money from the aggregate of paying, innocent taxpayers to the industry.
If we are serious about dealing with the major problem of this country, which is unemployment, we need to have the courage to implement the policy which we heard the Minister of Finance - who is not here - the Minister of Trade and Industry - who is not here - and the Minister of the National Planning Commission - who has somehow left the House - mention very often, which is that of reducing the excessive costs of the Rand which makes our country uncompetitive. This is the easiest way of putting people to work and having products capable of being exported.
The issues, too, on which there has been a great deal of debate, are about how we should manufacture partnerships between government and state, the assistance of the state, and moving beyond the model of free-market enterprise if we are to have a developmental state. That would be a wonderful world, but the issue confronting this country, like any other country in the global village, is not how but what are we going to produce? What are we going to manufacture? This is crucial, and I do accept what hon Ngonyama said. He said that the state should be ...
Is it a point of order, hon member?
Chair, this is just to make sure that incorrect information is not captured by Hansard: The hon member may not know me, but I am present in the House. Thank you.
I did not mention you. I don't know where all this comes from, but it is eating into my time. But I guess I can get it back? [Laughter.] It would be much nicer if every now and then we listened to one another. It is a novel idea, but we could experiment with it! [Laughter.]
We need to look at the issue of productivity. It is serious. We need to find ...
Hon member, your time has expired. [Laughter.]
Well, what can I say! [Laughter.]
Chairperson, hon Minister, hon members, poverty, food insecurity and environmental degradation are part of the reality that developing countries are confronted with on a daily basis, and have been recognised as critical development challenges that need the highest priority in the developmental agenda.
The Food and Agricultural Organisation of the UN defines food security as a "situation that exists when all people at all times have physical, social and economic access to sufficient, safe and nutritious food that meets their dietary needs and food preferences for an active and healthy life".
The consequences of food insecurity are clearly visible, and appear in the form of deteriorating health situations and breakdown of communities and family structures, as families are forced to migrate in search of livelihoods.
Poverty, inequality and joblessness in South Africa are the consequences of centuries of underdevelopment and exploitation consciously perpetrated on the majority of the population, which had the most destructive and enduring impacts on rural communities. Consequently, the structural faults that characterised the apartheid rural economy remain with us today.
The 52nd National Conference of the ANC, therefore, resolved to pursue a programme of economic transformation based on, amongst others, a comprehensive and clear rural development strategy, which builds the potential for rural sustainable livelihoods, particularly for African women, as part of an overarching vision of rural development with strong interventions in the private land market, combined with better use of state land for social and economic objectives. It also transforms patterns of landownership and agrarian production, thereby restructuring and deracialising the agricultural sector to be sustainable, inclusive, equitable and produce decent jobs.
Unemployment is disproportionately high in rural areas where the majority of those with jobs earn poverty wages. Limited opportunities of sustainable livelihoods in rural areas, insecurity of tenure and widespread evictions contribute directly to the growth of informal settlements in cities and towns. The challenges of urban poverty and migration to cities are therefore inseparably bound with the struggle to defeat poverty, create work and build a better life for South Africans living in rural areas.
Many rural areas still lack basic infrastructure such as roads, water and electricity supply. This lack of infrastructure entrenches the problems of chronic poverty and limits the potential of communities to sustain economic growth, rural livelihoods and social development. Efforts to extend free basic services to all our people are slowest to reach rural areas and farm dwellers. Moreover, access to government services, such as education and health care, are the weakest in rural areas.
Social grants are making a huge contribution to pushing back the frontiers of poverty, fighting hunger and improving potential for economic growth in rural areas. However, in the struggle to build a better life for all, grants are no substitute for a broader strategy of rural development and employment creation.
Millions of our people who farm on small agricultural plots do make a substantial contribution to poverty reduction and the creation of sustainable livelihoods in the most adverse conditions. Part-time and full- time agriculture in these areas, therefore, remains a critical opportunity in our people's efforts to combat poverty, provide social security for themselves and build sustainable livelihoods.
The prevailing structure of commercial agriculture is the outcome of centuries of dispossession, labour coercion and state subsidy for the chosen few. Since 1994, commercial agriculture has continued to develop in a manner that is characterised by growing concentration of ownership and farm size, underutilisation of vast tracts of land, capital intensity, job shedding and the casualisation of labour.
While deregulation, liberalisation and the resulting competitive pressures on the sector have eliminated many of the privileges of the large-scale farm sector, various aspects of policy and legislation still reinforce the legacy of the past, making it difficult to redistribute land to a modern and competitive smallholder sector. At the same time, commercial agriculture has also reacted to legislation intended to protect the rights of workers and farm dwellers by sharply reducing their number, resulting in significant job losses and painful evictions of people living on farms.
Rural development is a central pillar of our struggle against unemployment, poverty and inequality. High levels of rural poverty and inequality inhibit the growth of our economy and undermine our efforts to ensure that growth is more equitably shared amongst our people.
Programmes of rural development, land reform and agrarian change are being integrated into a clear strategy that seeks to empower the poor, particularly those who already derive all or part of their livelihoods from the exploitation of productive land. In line with the Freedom Charter's call that "the land shall be shared among those who work it", the critical beneficiaries of change are rural women, farm dwellers, household producers, small businesses and rural entrepreneurs and residents that wish to engage in agricultural livelihoods.
Since the majority of the poor in the country are in rural areas, it makes sense that rural development emerged as a key strategy of the ANC-led government to fight poverty. The aim of rural development is to enable the rural poor to take charge of their destiny by creating sustainable rural livelihoods through optimal use and management of natural resources.
The Letsema programme was implemented in 2008-09 as part of the land and agrarian reform project and managed by provincial departments. The main focus was increasing household food production on fallow land, and it targeted disadvantaged rural communities. It became popular through the provision of agricultural starter packs in response to increased food prices associated with the economic recession.
A once-off allocation of R96 million was made in that year with additional allocations of R1 billion being made over the medium term to further strengthen the programme. The additional allocation is commendable and it is hoped that the increase will produce the desired outcomes in terms of sustainable household self-sufficiency in rural areas and increased agricultural production that will subsequently create decent jobs.
I call upon members to look at The Cape Times on Tuesday this week, on 24 August 2010, where one of these projects is working here in the Western Cape and it is quoted as being a very good example.
The participation of the poor in the design, implementation and monitoring of rural development programmes is a key objective of the developmental state. And it must be supported by appropriate structures to give voice to affected communities and structure their engagement with government programmes. Again, I call upon the members to look at the Muyexe pilot project where the community members participate in the design of their future.
The developmental state has a central role to play in leading and sustaining rural development. This includes leading the process of land reform, promoting sustainable change in social and economic relations and supporting the goals of growth and development in the rural economy.
Rural development therefore is taken beyond implementation of projects to a more integrated programme, requiring the financial commitments by various Ministries and co-ordinated centrally. Food production and food security in these economically depressed areas go beyond the narrow definition of rural development to the creation of economic nodes that can contribute to the economic recovery in a visible way.
The department of Rural Development and Land Reform was established by President Jacob Zuma on 11 May 2009, when he announced his Cabinet, with a mandate to develop and implement a comprehensive rural development programme throughout the country. And the key focus is to ensure sustainable land and agrarian reform that contributes to rural development, food security and improved quality of life in rural areas, in line with the ANC-led government's key objective to combat unemployment and poverty.
The department, however, cannot do all this work alone. Rural development is a transversal function and for the government to achieve its key objective of vibrant and sustainable rural communities and long-term outcome of social cohesion and development, rural communities have to be both objects and subjects of all processes affecting them. [Time expired.]
Hon Chairperson, hon members, the UDM has, for many years now, advocated for a more assertive government approach to economic policy. The South African economy fails to provide opportunities for millions of adults who are capable of a productive contribution. This directly translates into millions of households that live in abject poverty. They hover at the periphery of suffering.
Increasingly, these disaffected and marginalised masses are showing their frustration through community protests that are a countrywide phenomenon. The indisputable truth is this: Political freedom without economic freedom is not real freedom. We must face this truth before we discover too late that democracy has no legitimacy in the eyes of millions of our fellow countrymen. Thus, unemployment is not merely an economic statistic, but a constitutional and moral issue.
Current and previous economic policies have failed to address the unemployment crisis. There are three broad changes in approach that the UDM has been advocating. Firstly, we need government to invest in real infrastructure on a grand scale. Roads, electricity and water infrastructure barely exist in vast areas of the country, while existing infrastructure in the developed areas is poorly maintained and falling into disrepair. Roads, electricity and water infrastructure are the arteries of an economy. Without these, real economic growth will never happen. Secondly, we need to reduce the countless legislative and bureaucratic obstacles that prevent business, especially new entrepreneurs, from creating new wealth and job opportunities. We must never lose sight of the fact that no amount of redistribution policies will increase wealth and jobs; it merely amounts to rearranging the deckchairs on the Titanic.
Thirdly, we need an education system that prepares learners and students for the marketplace. Thank you. [Time expired.]
Hon Chairperson, during the NEC lekgotla of the ANC in January, the ANC identified five challenges which must be tackled quickly to turn around the economy of the country. One of the questions which had to be answered was: How far did we progress as a country in ensuring that the people share the wealth of the country, noting that the Freedom Charter demands that the mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole?
Arising from the demand of the Freedom Charter, the issue of nationalisation of mines had to be debated so as to give meaning to the above-mentioned clause of the Freedom Charter. The NEC also had to acknowledge that the ownership of all mineral deposits has reverted to the state and that private operators pay royalties to the state.
The above challenges, which were raised by the ANC, were necessitated by the fact that the structure of the economy of South Africa has not changed over the past 500 years. This economic structure is characterised by the extraction and export of unprocessed minerals, agricultural products, marine resources and other raw materials. There is minimal or no beneficiation of these raw materials, which leads to hampering the creation of the tertiary goods.
This economic structure was also characterised by a poorly skilled migrant labour. Because of the poor skills in the economy, the economy was unable to reach its maximum development. This is evidenced by the fact that when the economic growth was at its zenith, the unemployment rate continued to be above 23%. During the global economic meltdown, the unemployment rate increased to about 30%. When taking into account the expanded definition of unemployment, it could have easily reached 40% of the population. In these figures, the unemployed youth of the age 18 to 24 is estimated to be about 2,8 million people. No government can sit back and allow such a situation to thrive.
That is why the ANC in its January 8 statement committed itself to building a developmental state which is democratic, people-driven and people- centred. This developmental state will pursue a sustained development based on an inclusive growth path. Since South Africa has very high levels of inequality among all races, the new growth path should factor in the equitable distribution of wealth and job creation in order to move towards an inclusive economic development.
With the above-mentioned high unemployment levels, it shows that we are far away from sharing the country's wealth. Since we know from time immemorial that the market system has proved that it was never geared to redistribute wealth equitably, the state must intervene and correct the market failures. An example of a classical market failure is in the steel industry where a state-owned enterprise, Iron and Steel Industrial Corporation, Iscor, was privatised and the South African economy is still bleeding from high steel prices, although there are plenty of ore and coal reserves in the country.
The example of how the country can be ripped off is in the fight between ArcelorMittal and Kumba. When ArcelorMittal was getting cheap ore from Kumba that benefit was never transferred to the consumers of steel; instead, they were slapped with a high import parity price. These high steel prices led to the lowering of the economic growth. What is worse in the scenario is the continued export of iron ore, even when there is evidence that if iron ore is processed into steel, more jobs can be created. For example, if the selling price of one ton of iron ore is $180, only 0,17% of the people will be employed at a cost of about R8,5 million; whereas when one ton of iron ore is processed into structural steel, structural steel will be sold at $3 000 a ton and create about 30 jobs at an investment cost of about R0,5 million. This shows that when we beneficiate the iron ore the process is labour- intensive as opposed to capital-intensive when the iron ore is unprocessed. The local companies continue to export iron instead of processing it. For example, in 1990 about 17 000 tons of iron was exported, and in 2008 the export of iron ore has almost doubled to 34 000 tons. In 1990 the local consumption of iron ore was 11 000 tons, and in 2008 it was still 11 000 tons. This flat consumption of iron ore proves that, instead of creating jobs, the steel industry has shed the jobs. This situation cannot be allowed to continue when we have about 4,3 million unemployed people.
This demands that a developmental state must create a state-owned mining company which will ensure the reduction of the cost of doing business in the steel industry and related fields. This state-owned enterprise must develop critical skills and the expertise in the field. The creation of this state-owned enterprise must ensure the viability and cost competitiveness of local steel production. This enterprise must also ensure a competitive steel-pricing regime to support the development and deepening of value-added manufactured products in the down stream industry.
Development finance institutions like the Industrial Development Corporation must fund such an enterprise. This enterprise must contribute to both direct and indirect job creation. This must be done as of yesterday because the steel industry continues to be a strategic industry for the growth of our economy. The national objectives of promoting government policies such as employment equity and broad-based black economic empowerment must be at the centre of the corporate direction of this enterprise.
The third challenge identified by the ANC was how to create 4 million decent and sustainable jobs by 2014. The government infrastructure budget of about R800 billion in the next Medium-Term Expenditure Framework, MTEF, period must be used wisely to stimulate the economy and fund the new growth path. This can be done by using state-owned enterprises like Eskom and Transnet.
In their procurement of goods and services in their infrastructure expansion, the Industrial Policy Action Plan demands that enterprises like Transnet and Eskom must do fleet procurement when sourcing their goods. For example, when Transnet is sourcing their locomotives, instead of buying two or three locomotives at a time, it must source more than 30 so that the components which will go to those locomotives are manufactured locally. This must also be matched with the creation of skills like artisans, engineers, procurement managers and other related skills which must provide support and maintenance of the fleet.
The other challenge we face in growing the economy is the sourcing finance for development. This demands that the developmental state must adequately resource development finance institutions. The Industrial Development Corporation was last capitalised in the 1950s; the IDC is expected to source funding from the markets where it is going to pay a premium in loan repayments. This high premium will be passed to the customers of the IDC, hence this will increase the cost of doing business in South Africa.
The developmental state must try to use the Brazilian model of development finance, where the Development Bank of Brazil uses a wide range of instruments to finance development, for example, direct and indirect operations where half of the finances go through commercial banking systems, project finance, import and export, equity investment and nonrefundable credit lines. Within the same system of the Brazilian Development Bank, there is an investment bank which is capitalised to the tune of $50 billion. Through the equity investments, the bank is represented in all the large corporations of Brazil where they actually play the strategic role of directing these companies to support the economic development of the country.
Although the Brazilian capital market is well-developed in terms of corporate governance, the Brazilian Development Bank ensures that they are open to the minorities and historically disadvantaged individuals. It means that the Brazilian Development Bank is being used to deracialise the financial market of Brazil. This bank derives its strength from the regular recapitalisation from the state. For example, last year the bank disbursed about $69 billion, of which $48 billion went for infrastructure projects which were worth $93 billion, and this led to the creation and maintenance of about 4,5 million jobs during the investment period. This large investment was possible because the Brazilian bank injected $100 billion in the previous two years.
In the South African situation, our IDC must also be regularly recapitalised by the government so that it can also have its footprint in major projects which will drive the Industrial Policy Action Plan. To achieve this objective there must be co-ordination between the Department of Trade and Industry, DTI, Department of Finance and the IDC. The DTI must identify the incentives as per the demands of the Industrial Policy Action Plan, and the IDC must identify the projects which must be funded. Lastly, the department must identify tax incentives and loans which must be given to the IDC to fulfil its tasks.
This co-ordinated approach must direct funding towards the manufacturing sector so that the objectives of the industrial policy plan can be attained. The beneficiation of mineral resources and agricultural products must be at the centre of the new growth path because they tend to be more labour-absorbing. The Department of Trade and Industry must adopt a developmental approach in the tariff setting. For example, those import products which are important to the value chain beneficiation can have their tariffs lowered or eliminated. The tariffs can be increased in order to protect this infant industry until it is able to stand on its feet. The development finance institutions must have the capacity to adapt and be flexible. The strategic objectives of these development finance institutions must be always to serve the public interest. The public interest objective demands that the employees of the IDC must be highly qualified and technically efficient.
During the public hearings of the Industrial Policy Action Plan there was unprecedented unity in the inputs of the labour, organised business and private business sectors. The unity between labour, business and government can lead to the speedy realisation of the new growth path. This new growth path must lead to economic development, which leads to sustainable improvement of the country's living standard, in an equitable manner. As the ANC said in 2009, working together we can do more. Thank you. [Time expired.]
Chairperson, we have forever been talking of new economic strategies to tackle, amongst other issues, the high rate of unemployment, but the translation of these into action seems to take ages. Our economy continues in its failure to be labour absorbent.
Further to the 900 000 jobs losses due to the recession last year, we continue to see massive job losses, with Statistics SA having reported 4,6 million in the first quarter and 126 000 finance jobs which were lost in the first quarter of the year. Any economic growth must first address unemployment as a priority. I thank you.
Hon House Chair, let me thank members for participating in this important debate. However, I must also indicate to the hon George that we have opened an opportunity for you to debate, discuss, sell and come with an alternative. [Interjections.] No, you said the obvious.
I understand you had a prepared speech, but I think you should have listened carefully to what I was saying, because all that you said is what I had said and acknowledged in my speech. It is important, though, that we also inform you that we have a good relationship with the Bric and Impsa groups or countries. Actually, we have strong relations with Russia and China. I do not think that there is an issue there. What is important about this topic is that we open up discussions and are able to come with issues and alternative policies that can make this country work.
We have done so during other events that we held as a country. Obviously we don't have any room for pessimists in this country. We want people who are positive and want to contribute positively. We are sure that with the 2010 World Cup spirit that we had, we could continue to build this country and realise the growth that we are so desperately looking for as South Africa. I thank you. [Applause.]
Debate concluded.
Hon members, I just wanted to appeal that in future the Whippery should take their responsibilities very seriously; because members were making a lot of noise. I even heard the members recruiting each other; and others talking about visiting each other. I think next time the Whippery should really make sure that their members listen and that those who want to continue with their discussions should go to their offices and continue there.
Hon members, that concludes the debate on the subject and I hope that no one will object when I say, that also concludes the business of the day and therefore the House is adjourned.