Hon members, I think it is important to highlight that this is the first time that Parliament is required to adopt the fiscal framework and revenue proposals. This is, of course, in line with the Money Bills Amendment Procedure and Related Matters Act.
Hon Speaker, the first thing that I noticed is that there is no water for me here, and my speech is going to be very long.
Mr Speaker, it is my honour and great pleasure to participate in this historic budget debate of the fourth democratic Parliament. It is indeed a special occasion for us as hon members, because the fiscal framework under consideration and the budget proposals contained in the Division of Revenue Bill and the Appropriation Bill to be deliberated upon are the first to be processed under the new Money Bills Amendment Procedure and Related Matters Act.
This Act is a consequence of years of deliberation by the public on how budgetary processes should reflect the concerns of broader society. The ANC as an organisation of the people, through its structures, finally resolved in Polokwane that Parliament should pass legislation to effect this aspiration of our people. This piece of legislation seeks to deepen public participation and therefore there is indeed an expectation from the public that their voices will be heard through this process more than ever before. After the Budget was presented, the Speaker referred the fiscal framework to the Standing Committee on Finance. Between 18 February 2010 and 1 March 2010 we interacted with different stakeholders representing the views of various constituencies on the fiscal framework, and all parties in Parliament, with the exception of the IFP, supported the framework.
Let me also take this opportunity to thank, express appreciation to and congratulate President Jacob Zuma on giving the nation and the world at large an opportunity to celebrate the 20th anniversary of the release of our torchbearer and true liberator, Tata Nelson Rolihlahla Mandela ... [Applause.] ... who epitomises the dignity and pride of the heroic and relentless struggles of our people in the fight for political and economic liberation, because, in reality, political freedom will remain meaningless and incomplete without economic power.
This celebration is but a recognition and reaffirmation of the correctness of our history, and that Mandela is not just an icon of our people but the heritage and a living symbol of human dignity. Given the current economic challenges, what we need is a growth path underpinned by a coherent industrial strategy, with clear sector programmes aimed at the creation and retention of quality jobs and employment opportunities via a process of retooling the skills of economically active people.
The proposed fiscal framework and revenue proposals are a base and foundation on which the Appropriation and the Division of Revenue Bills will be considered by this honourable House at a later stage. The new Money Bills Amendment Procedure and Related Matters Act, Act 9 of 2009, provides the ideal opportunity for the broader public and Parliament to engage with long-term trends in fiscal and economic policies.
When we compare this budget to the Medium-Term Budget Policy Statement presented in October 2009, the first observation we make is that it is premised against the backdrop of a slightly positive economic outlook, which remains fragile in terms of the projected recovery of the global financial markets, and it addresses two main policy challenges. The first is the transformation of the South African economy to realise sustainable growth accompanied by employment creation. The second is the need to have a responsive public sector to meet the expectations of our population and the broad objectives of a developmental state.
These proposals are borne out of our experience of the last decade, which justifies a new way of doing things, because we can safely say, without fear of contradicting ourselves, that we now know what has worked and what needs to be adjusted.
What was of critical importance in this Budget Speech was an admission by the Minister of Finance that the current economic growth path has not adequately responded to the challenges of the growing statistics on joblessness, income inequalities and wealth redistribution.
In the same spirit, the Minister used this public platform to invite all stakeholders to a national dialogue, particularly between government, business and labour, to chart a common developmental economic growth path with practical solutions to the challenges that confront ordinary people on a daily basis.
The fiscal framework recognises that the majority of the potentially economically active population who are unemployed are young people. This must be viewed in a very serious light. In fact, we must treat this as an emergency. Young people need to be exposed to an environment that will assist them in realising their goals. The proposed subsidy by the Minister will play a big role in responding to the negative impact that no education, no skills and no entrepreneurial skills have on young people.
The onus is on us to act in a responsible manner, cognisant of the fact that there are capable men and women who, in the past decade, lost hope of any job prospects. As leaders, irrespective of our political affiliations, we have a responsibility to engender entrepreneurship and skills development in young people who, in turn, will be capacitated to restore hope to uBaba Madikane in the Eastern Cape who last saw the inside of a factory 10 years ago before he was retrenched. This will create the type of economy which, simultaneously, changes the hopeless situation of Joyce Tshikukununu in Thothololo, a graduate who has not had a job for the past eight years.
The proposed measures to promote youth employment through employer subsidies should be carefully considered. Just like any other new initiative, there will always be serious challenges in the implementation of the proposed employer subsidy. Our response to these challenges will determine the success or failure of this noble idea.
All the parties should view this as the beginning of a potentially fruitful process; let us come forward with more enriching ideas. Together we can do more. The need to encourage the private sector to give young people experience and meaningful employment should be commended and supported vigorously. [Applause.]
For this initiative to succeed, maximum co-ordination between the economic cluster of Ministries and their departments is paramount. And, most importantly, the matter should be thoroughly canvassed with the labour representatives.
Taking experience as our best teacher, we must guard against employers turning this into a scab labour scheme, in which real jobs are conveniently replaced by this state intervention or by temporary jobs. We need to be careful of employers who may seek to turn the good intentions of government into a get-rich-quick scheme to boost their profit margins.
The question to ask is: What then is the trajectory of a new growth path? This brings me to my next point and observation with regard to the national response to the economic crisis. It is my considered view that, to a very large extent, what held our economy together during these trying times was largely the government's countercyclical fiscal policy, particularly on public and economic infrastructure spending. It is also evident from the budget presentation that our economy is on a recovery path, and this can be attributed to the partnerships among the private sector, labour and government.
Notwithstanding the successes of this state intervention, there are indications that not all sectors of the economy have responded positively to government's offer, particularly when we assess the training lay-off programmes in the clothing and textile industries, and in the transport and metal-fabrication industries.
We must commend government spending particularly on public and economic infrastructure and in the automotive industries, and we particularly commend BMW and Renault for taking full advantage of the lay-off programme incentives. This has thus far succeeded in mitigating the retrenchments.
Given that not every opportunity provided to the private sector has been maximally utilised, the impact of the economic recession has been more severe, hence we have lost almost one million jobs in the economy in a period of less than a year. We urge the private sector to participate fully in the lay-off programmes. In fact, there is a need to examine whether the economic recession wasn't used to a certain extent as an excuse to lay off workers in some instances. This matter requires the attention of Nedlac and other relevant stakeholders.
Although a deficit is bad, it can also be good, depending on the reason for borrowing and when properly managed. From the budget presentation it is clear that in order to meet our expenditure priorities, we will have to increase our debt levels over the next three years.
What is comforting, though, is that this borrowing is not meant to sponsor the current account, and there is a clear indication of fiscal stability around 2014. Our role as Parliament is to ensure that there is value for money. For us to achieve this, we will have to ensure that our Public Service is properly geared up to deliver on the mandates of a developmental state. We must further strengthen the efforts by the executive in the fight against corruption by mobilising all our communities to reject any corrupt tendencies wherever they occur.
In conclusion, we acknowledge that the fiscal framework, as stated before us, is presented under different economic conditions, which indicate positive signs of a slow recovery - and yet it has also taken into consideration the five priorities reflected in the ANC manifesto and is indicative of steps to strengthen the three arms of government. It is therefore a good basis and foundation for the Division of Revenue Bill and the Appropriation Bill.
I therefore urge the honourable House to support the fiscal framework, as presented by the Minister, and would like to say officially that the ANC supports the framework. I thank you. [Applause.]
Speaker, the Money Bills Amendment Procedure and Related Matters Act has initiated a process that will enable an active parliament to ensure that the people's voice is heard in the budget process and that the people's money is applied in the most appropriate way. Whether it actually makes any difference to the people is in our hands.
The heartbeat of the Act lies in the fiscal framework. This reflects how much revenue government expects to collect, how much it plans to spend and how big the gap between the two numbers is expected to be. If revenue exceeds expenditure, we have a surplus; if expenditure exceeds revenue, we have a deficit. A deficit needs to be funded, usually with borrowed money, and must eventually be repaid. Parliament can amend the fiscal framework, but it needs to do this within specific parameters, as set out in the Act.
Parliament must ensure that there is an appropriate balance between revenue, expenditure and borrowing; that debt levels and debt interest costs are reasonable; that the cost of recurring spending is not deferred to future generations; and that there is adequate provision on infrastructure development, overall capital spending and maintenance.
In October last year the Minister of Finance presented the Medium-Term Budget Policy Statement, MTBPS, detailing the estimated fiscal framework for 2009-10 and the next three years until 2012-13. The estimated revenue for 2010-11 was R743 billion and expenditure R905 billion, leaving a deficit of R162 billion - not unusual, given prevailing economic conditions. In our response in Parliament on 11 November 2009 the DA stated that "assumptions underlying the fiscal framework may well prove to be optimistic". In February the Minister tabled an amended fiscal framework for 2011, which reflected revenue at R738 billion - a R5 billion reduction on the October forecast, although the gross domestic product, GDP, growth estimate was revised upward from 1,5% to 2,3%.
At face value this would mean that we have rising economic activity with falling revenue, thus a phenomenon of tax-less growth - not possible, given the tax to GDP multiplier. In its response to the DA's enquiry on this, National Treasury responded that:
Corporate tax revenue since October 2009 points towards a deeper decline than expected at the time of the MTBPS and the short-term outlook for both value-added tax and corporate income tax points to a stabilisation at more modest levels.
In simple English this really means that Treasury's forecast in October was optimistic and that tax collection is expected to be lower than anticipated.
A forecast is a prediction based on assumption. If the assumption is wrong, so is the prediction. The DA has concerns arising from the fiscal framework, because it is possible for forecasts to go wrong, as demonstrated in this instance. The fiscal framework before us today looks three years ahead to 2012-13 - a difficult task, even for the experts. By then our gross national loan debt, excluding that owed by municipalities, will be R1,4 trillion or 43,1% of projected GDP. In that year we will pay R104 billion to service our debt. Last year we paid R57 billion.
Comparing our debt level to that of the USA and the UK is not meaningful because our economy is very different to these developed economies. Those economies can withstand much higher debt levels for much longer than ours can. Highly indebted countries in the Euro zone can take comfort in the knowledge that others in the zone are unlikely to permit them to default on their debt because of the currency fallout that will ensue.
We do not have a bank of last resort other than our own hardworking taxpayers. The suggestion by the Financial and Fiscal Commission that government may want to adopt a fiscal stability pact to clearly establish the level of debt and what it can and cannot be used to finance has been included in our recommendations, given that government departments cannot maintain even the most basic principles of financial discipline.
The DA is not opposed to government borrowing money for appropriate reasons such as infrastructure development and stimulating our economy as it emerges from recession. We are, however, opposed to borrowing that yields questionable returns. The nonfinancial public enterprises will borrow R287 billion over the next three years. We have no certainty on whether this money will be appropriately spent as these institutions lurch from one financial crisis to another, secure in the knowledge that the people of South Africa will rescue them and their overpaid executives over and over again while the people wait for basic services to be delivered.
Eskom has vividly demonstrated the reality that government cannot deliver on its own and that the concept of a developmental state with parastatals as key drivers for economic growth cannot work. Without an incentive to become efficient, these entities never will and can only survive until their lifeline to the people's money is eventually unplugged. Not a murmur emerges from government when its parastatals, overflowing with underperforming and overpaid cadres, fund executive bonuses with bailouts and don't change their behaviour.
The DA's approach to public finance shows that it is possible to restrain public debt by attracting private investment into the parastatals. A modest private sector investment of R20 billion would reduce the need for debt escalation and help stem the bailout haemorrhage that drains the public purse. Increasing debt to prop up the failed parastatals is neither appropriate nor compatible with our mandate to ensure that the people receive maximum value for their money. The DA's alternative budget has demonstrated how a new financial model for the parastatals can change the debt trajectory. Our debt does not have to increase as forecast if we exercise the right choices.
The Minister has made it clear that government can raise taxes in future to fund spending commitments, given the possibility of delayed economic recovery. The DA's model is grounded in a different principle, based on the knowledge that sufficient investment capital exists in South Africa and that business will invest if the environment is attractive enough. The Minister has mentioned that government, business and labour should work together - so the sentiment is there, we just need some action. Government should not rest assured that it can just increase taxes to fund its often wasteful and extravagant spending. That is merely adding insult to the already injured taxpayer who waits in pain as their hard-earned tax contribution is thrown down yet another drain filled with empty promises. The social contract will only stretch so far and it is already strained.
A different message is needed and the DA would suggest that it should be that government will not increase your already heavy tax burden; we will become more efficient, less wasteful and build partnerships with business that does have money available for investment. The DA is not opposed to government spending, but we are opposed to government spending that fails to benefit the people.
Since October, the 2010-11 expenditure forecast has increased from R905 billion to R906 billion. This is not a large increase, but it does beg the question of why the Minister's promise to cut wasteful expenditure and restrain the spiralling public sector wage Bill is not reflected on the fiscal framework. The Minister is saying that steps will be taken to root out corruption and tighten up on wasteful spending, yet the number increases. Does the Minister not have any faith in his ability to actually cut the expenditure to the point that we see it in the numbers on the fiscal framework, because that is where, after all, it really matters? The Minister was so afraid of my question that he never came here today, neither did the Deputy Minister.
The DA's alternative budget has demonstrated how real expenditure cuts of R4 billion can impact on the fiscal framework, while ensuring that the people's money is more efficiently spent. Given that the revenue projection has been revised downwards, an increase in expenditure, however small, is not the right direction.
The DA supports the counter cyclical fiscal stance and therefore does not think it possible to balance the budget deficit to zero within the next three years. Our alternative budget delivered a 5,2% deficit off a growth of 1,5%. There does not seem to be consensus on growth expectations for 2011, with the Reserve Bank forecasting 2%; National Treasury 2,3%; the Reuters consensus 2,6%; the Economist Intelligence Unit 2,8%; and Nedlac, according to Fedusa, 3%. We hope that the higher forecasts will be achieved, but government must manage our money with its eye on the lower forecast, because if GDP growth dips or does not accelerate in line with National Treasury forecasts, our public financial model must be robust enough to withstand the shock.
National Treasury, in its explanation on how it calculated expected revenue, predicted that the tax to GDP multiplier at 0,95 in 2010-11 will gather pace in 2011-12 to 1,3. Therefore, if GDP growth exceeds Treasury expectations, government revenue should increase at an accelerating pace over the next three years. This will provide additional fiscal space for a reduction in the currently high levels of taxation to which South African individuals and corporates are subjected.
In October the DA stated that we would not support an increase in taxation unless it was offset by a tax reduction elsewhere. The 2010-11 budget proposes to reduce taxes on individuals and companies by R6,75 billion and increase indirect taxes by R6,3 billion - a net reduction of R450 million. We therefore support the general impact of this on the fiscal framework, although we believe that the Minister could have more fully compensated individuals for fiscal drag that erodes their disposable income. The increase in the general fuel levy is excessive and will contribute to inflation. The National Treasury's view during deliberations that the increase would not be inflationary has been contradicted by economists and the Reserve Bank.
The DA welcomes the proposed wage subsidy and made provision for a revenue reduction in our alternative budget to accommodate this. We look forward to its implementation next year. We also made provision for VAT zero-rating to be extended to books to improve access to this basic ingredient of quality education. In its report, the Standing Committee on Finance notes that the parliamentary budget office, as soon as it is established, will investigate the VAT treatment of books and other basic essentials with a view to zero- rating.
During parliamentary hearings, all submissions specific to the revenue proposals suggested that the introduction of a tax ombudsman should be investigated. This office would ensure that a balance exists between the need of the SA Revenue Service, Sars, to increase tax compliance and the right of individual taxpayers to fair treatment. Sars cannot be a player and a referee in a tax-collection game. Sars also needs to consider how cash business can more fully be captured into the revenue net and work more closely with the business community to achieve this objective. Rather than putting a vice grip on relatively compliant taxpayers, Sars should focus on those who blatantly ignore our tax laws by remaining outside of the net. Lifestyle audits are needed, with a focus on those who are inappropriately politically connected and feast at the expense of the poorest members of our community.
South Africa's development continues and it is time for us to reflect on the tax regime applicable to South Africa. Over the past few years, tax practitioners have consistently submitted that our tax laws are overly complex and complicated and do not do justice to our emerging economy. As we emerge from the depths of the recent recession, and with Sars of the view that tax compliance has deteriorated during the recession period, now would be an appropriate time to convene a tax commission to consider our tax laws and the central question of tax incidence and its suitability to the South African context.
We have entered a new era in South Africa where the budget is no longer the exclusive domain of the executive; it belongs to all of us. Although we have chosen not to amend the fiscal framework or revenue proposals, the committee has made recommendations and commitments that, when implemented, will have important consequences to ensure that debt levels do not spiral out of control; that we have a clear understanding of how the Reserve Bank will maintain price stability, given the variables it needs to consider in its decision-making process; and that the VAT treatment of essential items such as books is reconsidered.
Although the parliamentary budget office is not yet in place, the committee was able to consider properly the fiscal framework and revenue proposals. It is simply not true that the committee was not capable of understanding the implications and complexities around the forecasts. We know exactly what the numbers are saying and the context of the message. That is why the proposals were not amended - not this time, anyway.
The DA will support the fiscal framework and the revenue proposals and will monitor very closely the direction of the numbers and the policies that influence them. Thank you. [Applause.]
Mr Speaker, sound macroeconomic policies of the past 12 years have helped South Africa cushion the impact of the current recession.
It will all be about goals for 2010, not only for Bafana Bafana, but also for the economy and especially the public sector. A critical factor in cementing this recovery will be the behaviour of the public sector and our ability to do something about the glaring inequalities of our society. We are going to experience larger deficits and higher levels of debt.
South Africa will need to cover the dent in its finances and to ensure that we have adequate fiscal space to deal with future negative shocks. A clear exit strategy out of debt and a disciplined spending programme shall be vital for survival.
The year 2010 was the time to keep the economy anchored and to embrace the consistency of the past. The hon Minister has succeeded in doing this and, therefore, Cope shall support this framework.
If we compare South Africa's position to emerging markets, only our interest rate bracket is "above average". At all other levels, we are in the "worst" or "unattractive" brackets of the score sheet - something we cannot ignore.
The International Monetary Fund, IMF, has warned emerging markets not to test the 50% of gross domestic product, GDP, debt levels. South Africa will start to stabilise its debt levels only in 2015, peaking at close to 48% of GDP, if there are no further shocks in the system.
There will be no room for mistakes in this arena. We almost made a mistake in 2008, when we argued whether or not this recession would hit us, and if so, how hard. To illustrate this, the former Minister of Finance was wrong in his projections for growth in 2009-10. He projected growth of 1,4% and we ended up at -1,5%. Gross tax revenue was down R70 billion and the deficit almost double what was projected.
There will be no room for mistakes again. All indications are that we shall experience a continued deficit for the next six years, making them very different from the previous six years.
The real tax trend shows that there is very little prospect for recovery in company taxes and VAT revenues in the immediate future. Since 1994, we saw the rising of debt levels, hitting close to 50% of GDP in 1998. During that time, there was a debate about the direction of policy in the alliance.
However, under the guidance of the former Minister of Finance and President Mbeki, we returned to sound macroeconomic policies. We realised that the market would shape the economy, and the correct decisions were taken. Debt levels dropped to 22% of GDP.
Again in 2010 we have a debate about the economic direction. Wisely, it was the Minister of Finance, his deputy, Minister Manuel and Minister Chabane, who won the contest - and may I add that it was with the blessing of the President and, hopefully, the Cabinet. Owing to the recession, however, debt will rise again in the next five years to levels similar to those of 1998.
In the next three years, we might see the clash of the titans in the credit- borrowing arena. When the domestic spending levels pick up, domestic people will go to the market for credit. State-Owned Enterprises, SOEs, will start borrowing, and the state will follow. We have seen this in the background of the global credit crisis where countries struggled to pay their state debts. We might see high interest rates in 2015 increasing high debt levels, and maybe slight downturns in the economic cycle. We all know that debt creates friction, as it does in a household, for example.
In 2014, or even before, because of tight spending, we might again see friction among the alliance partners around economic policies. This does not augur well for the future and for consistency. You cannot change economic policies every five years. We must strive for discipline and stability.
To get out of this debt trap, the easiest way is to raise taxes, but then it becomes a horror story. What we would like to see is value for our rand and tax, and an earlier exit strategy out of debt. If we grow more than projected, we must start paying back sooner.
Cope would like to see a zero-tolerance approach to ineffective spending by Ministries and departments. We all know spending patterns are down in the next three years. That is why we cannot tolerate any wasting of money. Why can't Ministries set the example now and cut 15% of their budgets? How is the Treasury or the hon Minister Chabane's performance agreement going to ensure that inefficient programmes in departments are cut? We need to know how. How are we going to ensure value for our rand if we struggle to maintain a professional Public Service at some levels? If performance agreements are linked to outcomes, for instance the number of houses built, and not linked to how much was saved by shredding bad programmes, then all the speeches remain a wish list and we are heading for troubled years.
Hon Deputy Minister, I have commended the Minister of Finance on his Budget Speech by quoting the famous American boxer Gentleman Jim. I said to him, "If you want to become a champion, you fight one more round; if it is tight, you fight one more round". He has fought two good rounds and he has kept the economy anchored. What we need now is another round - a knockout round to get rid of undisciplined departments and bad spending behaviour. Deputy Minister, you've got a weight advantage. I thank you. [Applause.]
Mr Speaker, Minister Pravin Gordhan is an extraordinary man. I came to know him during the negotiation process. He has a strong personality that could have been intimidating and threatening, were it not for his intensely benign and reassuring attitude and the confidence that emanates from his leadership.
This may account for the fact that he has charmed so many into applauding his fiscal framework. Even the DA, notwithstanding them telling us how terrible it all is, seem to be supporting him.
In the next three years Minister Gordhan will borrow not only as much debt as was accumulated during the last days of colonialism, the apartheid period and the new democratic South Africa, including the money used for the greatly increased social spending of the past 16 years, but one and half times more than that. The present national debt is R513 billion, which will be raised to R1,3 trillion by 2013, and this is not the end of it.
According to his projection, the debt will stabilise only in 2015. If it grows at the same rate, the debt will be R1,7 trillion by that time. He clarified in the committee that, in 2015, we will have stabilised the Budget, by which he means the Budget will run on a deficit of only 4% of the GDP. By projecting the growth of the size of the Budget and the growth of the GDP, this means that by 2015 the deficit will grow by a few more hundred billion rands per year.
Let's place this in context: In 2015, every child will be born with a debt at birth of about R340 000 at present rand value, steadily growing each year thereafter. The principle of "no taxation without representation" will not apply in respect of such newborns, who will have to pay off money they had no part in borrowing.
With his charm, Minister Gordhan told us not to worry because he had it all figured out. He told us that the economy will grow this year by 2,3%, next year by 3,2% and the following year by 3,6%. Thereafter, it will all be hunky-dory. He is relying on the same advice of those who, over the past 15 years, got projected growth wrong time and again, starting from the 6% projected growth on Gear, the Growth, Employment and Redistribution strategy, which turned out to be a mere 3%, to finish with the grand prediction ... [Interjections.]
Hon members, your voices are drowning out the speaker. Please allow the speaker to be heard. If you have to speak, please do it quietly or, preferably, don't speak at all until we have finished the session.
... that the recession would bypass South Africa.
The Reserve Bank appeared before our committee and frankly told us that the Minister's growth projections are inflated and they themselves worked on something more realistic: around 2% growth in the foreseeable future.
This is not the end of it. Having decided to borrow us into major problems on the basis of such an optimistic outlook, Minister Gordhan candidly told us nobody knew if the recession was really over, and it may very well be much longer and deeper before it's over. Therefore, we are borrowing ourselves against the untested best-case scenario that the Minister himself warned us not to give much credence to. To me, this sounds like a daredevil's fiscal policy.
It gets worse. In order to reduce the borrowing, which would otherwise go to R3,6 trillion by 2015, Minister Gordhan took out of the Budget R846 billion's worth of public expenditure for infrastructure and placed this cost directly on the consumers' shoulders at the time of their most dire and greatest indebtedness.
There is no answer to the fundamental question of how this enormous debt will be paid off. The only thing we know is that perhaps we will stabilise at a constant rate over balanced growth. [Interjections.]
Hon member, your time has expired.
We have difficulty in supporting a leap of faith in the dark simply on account of how good and charming Minister Gordhan is. Thank you.
Speaker, the ID recognises the enormous challenges that the South African economy currently faces and the difficult task of presenting a fiscal framework that funds our ever-increasing priorities while still ensuring that our debt levels do not become unsustainable. Ultimately, the only way for us to achieve this difficult balancing act is to move our economy on to a higher growth path; one that will ensure that the majority of our population is able to take up gainful employment.
The ID, therefore, welcomes the tentative steps that are being taken to restructure our economy and create new sectors that can spur on future economic growth. Unfortunately, however, most of the budgetary resources to do this have been directed towards the automotive and textile sectors, each of them receiving R1,6 billion in this year's budget.
Despite the commitment to build up green industries there has not been adequate budgetary allocation to do that. We have also heard in repeated budget speeches for the last three years that different environmental taxes have been explored, but now is the time to start implementing them. The emissions tax is a good start but there are many others in which environmentally destructive practices can be effectively taxed. This will bring in much-needed revenue for the state and help to put us on a more sustainable development path.
The ID is also concerned with the projections put forward by the Treasury concerning the anticipated economic recovery. The global economy is in a precarious state and we are concerned about whether this recent upturn is sustainable. Questions can certainly be asked about whether this recent upturn is simply a product of the enormous stimulus packages of developed countries and whether this recovery will continue once these stimuli are removed. If the global economy slumps into another recession and South Africa becomes a victim, our budget deficit will balloon. This is something we have to watch very closely.
In this regard, the ID supports the Minister's concerted efforts to rein in government expenditure and ensure that failing public enterprises are not funded into perpetuity. We also support his commitment to root out corruption, particularly as it pertains to the tendering process. We wish him the best of luck in this endeavour, though, because he is no doubt going to make enemies along the way. The ID implores him to investigate all conflicts of interest in the tendering process without fear or favour, including those of government Ministers and even the ruling party itself through its Chancellor House front company.
Let's work together to ensure that the tendering process is free from any conflicts of interest and that service delivery is no longer sacrificed on the altar of naked greed. It is possible to turn this economy around and root out corruption but only if we remain committed to the task. I thank you.
Mr Speaker and hon members, we remain aware that budgeting, and the overall fiscal framework that drives it, is a balancing act. Competing, sometimes even contradictory policy and institutional demands must be met within the constraints of a finite budget. These constraints weigh even heavier upon the process when the economy is in recession and revenue is in decline.
Thus, now - more than ever before - we need to be very clear about our priorities. At this moment, various communities throughout the country are in turmoil due to the service delivery protests. The burning tyres and rubber bullets provide a stark reminder that the fiscal framework and everything that the government does should reflect the needs of the people, otherwise we will be heading for a violent crisis of legitimacy for this government.
The UDM welcomes the acknowledgement by the hon Minister of Finance that we require a national, long-term consensus on the economy. This is the reason that the UDM has been calling for a national indaba on the economy. It is regrettable that the Minister, in his delivery of the national budget, talked about "starting today" on job creation. The ANC government should have started on job creation 15 years ago.
We are concerned about the projected public debt rising to 40% of the gross domestic product, GDP, by the year 2013, especially since lower-than- expected revenues might become a trend. We broadly agree with the priorities of education, health, crime fighting, rural development, job creation, and municipal and housing investment.
We believe that it is necessary to heed the concerns raised by the Financial and Fiscal Commission regarding the apparent lack of intergovernmental structures for the co-ordination of the priority areas of employment creation and rural development. The continued pursuit of the national health insurance is troubling since current independent calculations indicate that it would be vastly unaffordable. Where will our economy source additional hundreds of billions?
We believe that the government should not claim victory on projected large infrastructure spending when much of it will not be funded through the budget but by the public through tariffs, such as electricity tariffs. Tariffs constitute a secondary tax that increases the burden on household budgets, escalates inflation and is poured into parastatals, such as Eskom, with poor track records and severe leadership vacuums. I thank you.
Mr Speaker, hon members, stable and mature democracies are indeed characterised by the resilience of their institutions, and their economic foundations are characterised by stability of income distribution.
The philosophy underlying leading democracies, the political aspects of their economics and the economic aspects of their politics ensures the stability of income distribution. We, in our beloved country South Africa, face the challenge of a stable democracy, but one that presides over worsening income distribution.
Combined with expansionary fiscal measures, cutting the interest rate always comes to the fore in any policy debate. It is true that this would go a long way towards assisting the economy. However, because of delays in the stabilisation measures having an impact on the economy - particularly in the case of the monetary policy, which usually takes 12 to 18 months to have a full impact - social protection measures are also critical in minimising the negative social impact on particularly the workers and the poor. Hence the current fiscal framework provides for more spending in this regard.
The macroeconomic policy context in which the 2010 Budget is tabled is characterised by a shift in emphasis away from inflation control to growth and employment creation. The pressures on inflation are significantly reduced, although with the recent electricity tariff increases we shall have to monitor the real effect of this increase. The demand for goods and services was in decline for most of 2009, but research has shown that a positive turnaround was achieved in the last quarter of 2009.
Major international economies are still in recession, and the main leading indicators of economic activity are pointing in a downward direction. Monetary policy is in an interest-rate-cutting phase of the cycle. Some central banks, especially the Federal Reserve and the Bank of Japan, are already reaching zero-bound interest rates. Options to use monetary policy as a policy stimulus are increasingly running out globally. This leaves fiscal policy as a potent tool to arrest the current decline.
However, issues of financial fiscal policy have come to the fore. Raising taxes appears not to be an option in the current phase of economic contraction, but the continued worsening of income distribution in South Africa during the past years of robust economic growth should not rule out this option.
Another financing option is to issue more debt. The capacity of South Africa's financial market to absorb the required amount of debt to finance fiscal expansion may not be sufficient, as has been realised recently. In this case, of course, we have no option but to look into foreign sources of finance. However, I must also indicate that the strained global liquidity conditions weaken the viability of sustained external finance.
The fiscal framework that we are debating today positions itself in terms of the Medium-Term Budget Policy Statement of October 2009. The budget deficit as a percentage of GDP has been increased significantly so as to have resources to cover the programmes the ANC-led government has to execute. All these programmes obviously mean an increase in the budget deficit. While some conservative economists have been critical of the ANC- led government's approach, what they have failed to appreciate is the need to continue to invest and spend in times of economic recession, even if the deficit as a percentage of GDP rises.
In this way, we are pushing the economy towards recovery. As has been outlined in the Budget Speech, the management of this deficit will be catered for in the outer years of the Medium-Term Expenditure Framework, especially as the situation provides little scope for any real increase in taxes. As the ANC-led government, we have raised the minimum wage level of tax over a number of years. This has given the lower-income earners much- deserved tax relief, which, in turn, has helped in increasing demand in the economy.
Despite the sustained - but, of course, moderate - growth we have realised, the gains from economic growth have benefited only a small section of our society. In particular, this is evidenced in the inability of our economy to create employment at rates that would meet the target of halving unemployment by 2014.
Moreover, economic concentration in the economy has not only resulted in price collusion in several industries but constituted a fundamental obstacle to the entry of new players into industries. In addition, the recent economic meltdown has further exacerbated the challenges that face poor households, while its pace has worked to limit the chances of adjusting to these challenges for the poor.
The impact in 2009 was obvious. The weakening demand for products has already seen job cuts, for example in the motor industry. Retrenchments were higher in more significantly smaller companies and across various vulnerable sectors. A number of companies responded by not hiring more workers, and pressure on economic growth has resulted in a slowdown in tax revenue, thus affecting the ability of our government to fund a more expansionary programme.
However, the creativity that underpins the 2010 Budget is remarkable. With reduced income and the shifts in policy, the ANC-led government, through the National Treasury, has been able to sustain expenditure and increase it whilst ensuring that the Medium-Term Expenditure Framework commitments are not abandoned.
The state has intervened to support existing jobs and create new jobs. Potentially, there is room for further economic stimulus packages that could provide a cushion for firms to adjust to new conditions. International conditions have not led the ANC-led government into retreating and withdrawing, as has been the case in so many other countries. Rather, they have potentially provided the space for moving towards a significantly more labour-intensive growth trajectory. This trajectory is possible, provided that social partners, as cited earlier, begin emphasising the importance of employment creation for our economy. We believe that a significant opportunity is available for increased social dialogue aimed, of course, at moving the South African economy forward on a new growth path.
To ensure the creation of decent jobs, our manifesto committed us to making available more resources, which will be used for the implementation of industrial policy and special programmes that will strengthen manufacturing, mining and other vulnerable sectors. The undertaking, through the vulnerable sectors programme, is a promise to increase savings and expand jobs in the clothing and textile sectors, to strengthen the automobile and components sectors, as well as to expand the food industry while making massive investments in public infrastructure.
As the ANC we are unambiguous about the argument that good-quality employment remains the first best option for our country. We will continue the major public job opportunities programme through the Expanded Public Works Programme as a key intervention. Our focus on employment is based on our understanding that whilst grants are important to stabilise society and support educational and job-search outcomes, a sustainable transition out of poverty, particularly for the young, will lie in widening opportunities for employment, including self-employment and study.
I think it is important that all of us in this House, as leaders, call on all intended beneficiaries to also reciprocate, because this is not a one- man show. We need their support, and we need them to reciprocate with regard to these interventions with the required vigour and commitment, because it takes all of us to make these interventions work for our country and, of course, for future generations.
Ours is a developmental state charged with driving social and economic development, a more efficient and co-ordinated public sector and an effective industrial policy.
In order to further entrench our developmental mandate, our government has committed substantial resources to developing sustainable economic activities that can also generate employment on a large scale. The commitment to upgrade the economic infrastructure represents only an initial step. It will be supplemented by establishing a clearer strategy for economic transformation, and of course for there to be better alignment of investment in infrastructure with the development strategy.
While we acknowledge land reform as a necessary condition for sustainable rural development in South Africa, it is equally important to stress that it is by no means a sufficient condition. Rural development entails more than the redistribution of land and ensuring that people make productive use of land. In other words, rural development is not only about agricultural development. Hence our approach recognises the following as some of the other elements of rural development that need to be taken into account when budgets are determined. These elements are: the promotion of agriculture-related enterprises in rural areas for those who are not interested in agricultural production; the development of rural infrastructure, particularly the provision of water and improved roads; ensuring that the curriculum in schools is revised and made to respond to the needs of rural areas; and the provision of health services.
From the above, I think we all concur that it becomes clear that for there to be sustainable rural development, a number of government departments will have to work together - a point set out clearly by the chairperson of our committee. This is something that poses serious challenges, not only for budgetary purposes but for co-ordination too.
With regard to issues of revenue and deficit spending, expenditure, as correctly captured, is matched by the sum of revenue and deficit spending, normally known as borrowing, with most of the expenditure funded through tax revenue in our situation. Raising the level of revenue is thus important in order to fund higher levels of much-needed spending.
According to the 2009 Medium-Term Budget Policy Statement, which gives the terms for this fiscal framework, we are moving towards a much more expansionary fiscal policy. In particular, with the economic downturn, expansionary spending to stimulate the economy is needed. This has led to a significantly higher deficit-to-GDP ratio. Given the current economic conditions and the developmental challenges facing the country, it makes sense to run a budget deficit in the medium term, as long as it is sustainable. Opposition to a deficit is usually based on the false neoliberal assertion that a government that finances spending through borrowing is "living beyond its means" and is deferring the cost of borrowing to future generations. This means that government can borrow from future generations. With accelerated growth, future generations will be rewarded with higher standards of living than would have been possible without deficit spending.
Expenditure needs to be efficient and productive. Productive and reasonably efficient deficit spending is crucial for building the economy and human capital for the future. It would be problematic to fund wasteful or fruitless expenditure through deficits. The ANC-led government has recognised the need for significant increases in the deficit-to-GDP ratio and the coupling thereof with strict monitoring and evaluation capacity. I must reiterate: "... with strict monitoring and evaluation capacity".
It is our take that this fiscal framework and these revenue proposals must be accepted as a tool that provides the much-needed scope for all role- players to shape our country's development in a way that will benefit future generations. We are all welcome. Kea leboga. [Thank you.] [Applause.]
Madam Deputy Speaker, the ACDP shares the concerns expressed in the parliamentary report about deficit levels and the increasing public debt levels, forecast to rise to R1,3 trillion by 2013. Debt service costs are set to escalate dramatically, reaching R104 billion by 2013. We appreciate, however, that the increased borrowing requirement is a response to exceptional circumstances and that government has done relatively well, given the global recession.
May I, however, remind members that God in His Word promises that if we obey His commands, we as a nation will be blessed and that we will be a lender to nations, not a borrower. There is no mention about global recovery or global economic crises. Why are we not experiencing this blessing?
I submit, Madam Deputy Speaker, that it is not insignificant that the number of job losses last year was in the region of 900 000, and that this is almost the same number as the number of babies that have been aborted since abortion on demand was allowed. Can this be a coincidence? I don't think so.
The Budget Review states in no uncertain terms that high deficits lead to rising debt service costs that compete with productive expenditure. We are given the assurance by the government that steps will be taken to ensure that the growing debt burden does not crowd out spending on development priorities and that government will also stabilise growth in interest costs through a careful, controlled reduction in the deficit, taking into account the health of the economy. There is, however, no guarantee of this, given that the global recovery is risky and fragile.
Our trading partners in Britain and the Euro zone are facing a bleak time in the next few months. The Governor of the Bank of England has stated that this nascent recovery is fragile. According to him, the tensions that underlie the building up of large world imbalances have not been resolved.
Should there be - God forbid - a double-dip recession or even stalled economic growth, South Africa would be in an extremely precarious position - given investor sentiment with regard to emerging market economies.
For this reason the ACDP and other members, as well as the report, indicate our concerns about escalating public debt. This is also the reason that the report has recommended that National Treasury develop a clear strategy on how it plans to manage these new levels, both in a scenario of a growing economy and in a scenario of an economy not growing as forecast, given the possibility of a second wave of global recession.
At the very least, we should have a fiscal stability pact, as proposed by the Financial and Fiscal Commission. The ACDP will, however, remain positive and trust that growth forecasts will be far higher than estimated, leading to increased revenues, and that we will speedily reduce public debt and debt service costs, leading to a better future for all. I thank you.
Agb Adjunkspeaker, agb lede, die fiskale raamwerk gaan nie net om syfers nie, maar wel ook om mense met begeertes, behoeftes en verwagtinge. Dit is 'n monetre uitdrukking van die ANC se politieke voorkeure en hoe daardie voorkeure op 'n fiskaal volhoubare wyse nagekom kan word. Dit is beide 'n politieke en finansile instrument wat aangewend word om te verseker dat die beleidsprogramme deur die toekenning van finansile bronne aan die onderskeie regeringsvlakke uitgevoer kan word.
Die Polokwane-resolusies is die grondslag van die ANC se mediumtermyn- prioriteite en is sy mandaat om die wense van die mense ten uitvoer te bring. Die fiskale raamwerk vloei voort uit die ANC se resolusies, asook uit die mediumtermyn-begrotingbeleidsverklaring en die mediumtermyn- bestedingsraamwerk. Die prioriteite is die vertrekpunt by die bepaling van die 2010 Begrotingstoekennings.
Die politieke voorkeure ten opsigte van insameling en besteding van inkomste word bepaal deur die aanwending daarvan in die rekonstruksie en ontwikkeling van die samelewing. Die sukses van enige fiskale raamwerk moet dus gemeet word aan die mate waarvolgens Suid-Afrika uit onderontwikkeling beweeg na die punt waar sosio-ekonomiese ontwikkeling en die stryd teen armoede begin vrugte afwerp.
Deurdagte besluite moet geneem word en die fiskale raamwerk moet aangewend word om ekonomiese deelname en patrone van eienaarskap in die samelewing te lei. In di proses moet die staat 'n sentrale en strategiese rol speel by die direkte investering in onderontwikkelde gebiede en die staat moet rigting gee aan beleggings uit die privaatsektor.
Een van die onmiddellike uitdagings wat Suid-Afrika in die gesig staar, is die inwerkingstelling van belangrike infrastruktuurprogramme wat ons organisatoriese, tegniese en strategiese vermons sal toets. Ons vermons om te verseker dat sulke programme en projekte as katalisator sal dien vir die brer ontwikkeling van die ekonomie en ons ekonomiese transformasiedoelwitte, sal 'n kritiese aanduider wees van die vordering wat ons maak in die bou van 'n ontwikkelingsstaat wat as 'n instrument van ekonomiese bevryding sal dien.
Sleutelelemente van die beleggingsprogramme sluit onder meer in: die opgradering van 'n infrastruktuur vir massa waterlewering; die opgradering van die kapasiteit van elektrisiteitsvoorsiening; groot projekte vir die opgradering van ons vervoer infrastruktuur; en die verbreding van die omvang van behuisingsprogramme.
Sodanige programme, asook deurlopende infrastruktuuronderhoud, is nie eenmalige gebeurtenisse nie. Na die suksesvolle voltooiing van die 2010 Sokker-Wreldbeker se infrastruktuurprojekte wag daar weer nuwe programme wat tussen nou en die einde van die tweede dekade van vryheid ontwikkel moet word.
Die hoofdoel is om te verseker dat infrastruktuurprojekte gentegreer is en dat 'n onderlinge ondersteunende verhouding tussen projekte en ander beleidsdoelwitte, soos die ontwikkeling van vaardighede, nywerheidsstrategie en makro-ekonomiese bestuur, bestaan.
Die hooftake wat in die fiskale raamwerk in onskou geneem moet word, word gereflekteer in die vyf prioriteitsgebiede vir die volgende vyf jaar, soos vervat in die ANC se 2009 verkiesingsmanifes, naamlik: die skepping van goeie werk en volhoubare lewensbestaan; opvoeding; gesondheid; landelike ontwikkeling; voedselsekerheid en grondhervorming; en die stryd teen misdaad en korrupsie.
Hierdie prioriteite sal met alle middele tot ons beskikking, soos staatsbronne, die visie van die Vryheidsmanifes en die energie en verbintenis van ons mense, aangepak word. Op hierdie wyse sal die behoeftes van die jeug, vroue, die landelikes, armes, bejaardes en mense met gestremdhede, aangespreek word.
Dit is duidelik dat ons die aandag sal moet toespits op die direkte en indirekte bydrae wat infrastruktuurontwikkeling kan maak ter bereiking van ons doelwitte om goeie werk en 'n volhoubare lewensbestaan te skep. Werkgeleenthede wat geskep word, vereis weer op hul beurt die ontwikkeling van ons vermo om die nodige ambagslui, ingenieurs- en projekbestuurders op te lei. (Translation of Afrikaans paragraphs follows.)
[Ms P E ADAMS: Hon Deputy Speaker, hon members, the fiscal framework is not only about figures, but also about people with aspirations, needs and expectations. It is a monetary expression of the ANC's political preferences and how those preferences can be fulfilled in a fiscally sustainable manner. It is both a political and financial instrument that can be applied so as to ensure the execution of the policy programmes by way of the allocation of financial resources to the respective levels of government.
The Polokwane resolutions form the basis of the ANC's medium-term priorities and are its mandate to execute the will of the people. The fiscal framework arises from the ANC's resolutions as well as from the Medium-Term Budget Policy Statement and the Medium-Term Expenditure Framework. These priorities form the point of departure when determining the 2010 Budget allocations.
Political preferences regarding the collection and expenditure of revenue are determined by the utilisation thereof in the reconstruction and development of society. The success of any fiscal framework should therefore be measured according to the rate at which South Africa is moving from underdevelopment to the point where socioeconomic development and the fight against poverty start to bear fruit.
Well-considered decisions must be taken and the fiscal framework must be utilised to guide economic participation and patterns of ownership in society. In this process the state must play a central and strategic role in direct investment in underdeveloped areas and the state must give direction to the investments from the private sector.
One of the immediate challenges facing South Africa is the putting into operation of important infrastructure programmes that will test our organisational, technical and strategic abilities. Our ability to ensure that such programmes and projects will serve as a catalyst for the broader development of the economy and our economic transformation targets will be a critical indicator of the progress we are making in establishing a developmental state that will serve as an instrument of economic liberation.
Key elements of the investment programmes include, among others: the upgrading of infrastructure for mass water supply; the upgrading of the capacity to supply electricity; large projects for the upgrading of our transport infrastructure; and the expansion of the scope of housing programmes.
Such programmes, as well as continuous infrastructure maintenance, are not one-off events. After the successful completion of the infrastructure projects of the 2010 Soccer World Cup new projects now await, which have to be developed between now and the end of the second decade of freedom.
The main aim is to ensure that infrastructure projects are integrated and that a mutually supportive relationship exists between projects and other policy objectives, such as skills development, industrial strategy and macroeconomic management.
The main tasks to be considered in the fiscal framework are reflected in the five priority areas for the next five years, as contained in the ANC's 2009 election manifesto, namely: the creation of proper jobs and a sustainable livelihood; education; health; rural development; food security and land reform; and the fight against crime and corruption.
These priorities will be tackled with every means at our disposal such as state resources, the vision of the Freedom Charter and the energy and commitment of our people. In this way the needs of the youth, women, the rural people, the poor, the aged and people with disabilities will be addressed. It is clear that we will have to focus on the direct and indirect contributions that infrastructure development can make in the attainment of our objectives to create proper jobs and a sustainable livelihood. The job opportunities that we create will, in turn, require the development of our ability to train the requisite artisans, engineers and project managers.]
Referring to the priority of education, it is noted that this sector remains the largest item of spending in the 2010 Budget, giving meaning to the commitment that it is the ANC's number-one priority.
The ANC's election manifesto stated that education is a means of promoting good citizenship as well as preparing our people for the needs of a modern economy and a democratic society, and it called for an increase in output in areas of skills shortages. A framework for the development of skills in the workplace was identified as a key requirement for economic growth in South Africa and for the economic empowerment of our previously disadvantaged majority.
There was also a renewed call for the revival of further education and training colleges to promote skills development in the economy. Making education one of the five priorities reaffirms the commitment of the ANC to the improvement of the quality of education and access thereto. The 2009 curriculum review addresses the content and impact of an education mainly on young people, their progression to higher education and their preparation for entry into the labour market. Decent work, which embraces both the need for more and better-quality jobs, is a foundation of the fight against poverty and inequality. This is central to the ANC-led government's agenda and is a primary focus of its economic policies. It intends to make maximum use of all the means at the disposal of government to achieve this.
The 2010 Budget acknowledges that people want action on jobs, growth and poverty and that a new common purpose must be built so that all the talent, skills and resources to tackle our socioeconomic challenges can be used to improve their own lives and communities. It also acknowledges that South Africa needs a new growth plan, so that the key challenges are job creation, poverty reduction and faster economic growth. The capacity of the economy needs to be expanded to grow sustainably and to ensure that growth must be more labour-absorbing.
The Budget's approach to employment creation includes measures to encourage industries and services that have significant job potential, stepped-up implementation of the Expanded Public Works Programme, investment in further education and skills development, encouragement of small business development and entrepreneurship, and a new focus on promoting youth employment.
Over the 2009-14 period, the second phase of the Expanded Public Works Programme aims to create 4,5 million short-term job opportunities.
In October 2009, additional spending on the HIV and Aids programme was announced, while further allocations mean that the number of people who are on antiretroviral treatment will rise from 920 000 to 2,1 million in 2012- 13. Our total national and provincial health spending is projected to be R105 billion next year.
A new grant to support on-site water and sanitation infrastructure as part of the rural housing programme over three years is provided. Provision has been made for the phased extension of the child support grant up to a child's 18th birthday while the state old-age pension and the disability grant also increase.
As far as the fight against crime and corruption is concerned, additional funds have been allocated to bolster the efforts to strengthen supply chain management, while the relevant government departments have intensified efforts to bring perpetrators of tender fraud to book. Data matching will become a regular feature of a systematic approach to minimise abuse.
The Budget reflects the choices to be prioritised in spending. In its drive towards the progressive realisation of socioeconomic rights through the provision of social security for the poor, universal access to basic services, and ongoing programmes to defeat poverty, the Budget remains informed by the ANC policy and resolutions.
Strong growth in expenditure has resulted in a significant increase in government's share of the economy. In the past two years, government's share of GDP increased from 28,5 to 34,1 percent. Slowing economic growth over the past 18 months, in an environment of a global economic crisis affecting every region of the world, has resulted in a marked decline in budget revenue. This left a deficit of 7,3%, which must be financed through borrowing. It also had a dampening effect on economic growth in our own country, with negative implications for investment, employment, incomes and government revenue.
Since more needs to be achieved with smaller financial resources, diligence in the management of public finance and savings within all spheres of government has become more important than ever before. Wastage will not be tolerated, and neither will corruption and mismanagement.
To succeed in combating corruption, it is not enough that people should fear the law and punishment. They must also be ethical and possess the ethos that makes corruption fail to thrive. Only through broad and sustained efforts to create a shared future, based upon our common humanity in all its diversity, can we succeed in defeating and eradicating the value system that justifies naked selfishness represented by acts of corruption.
We welcome the robust and open debate occurring in the public domain regarding corruption. We unapologetically encourage exposure of tender manipulation as shown in the announcement by the Minister of Finance that Treasury is to set up a unit to monitor and investigate corruption in public procurement processes.
Building on the economic achievement of the last 15 years, the ANC will continue to accelerate a sustainable, equitable and inclusive economic growth path to address its stated priorities. The 2010 fiscal framework reflects the choices to be prioritised in spending. I thank you. [Applause.]
Sekela-Somlomo, egameni lombutho wesizwe endingumbhobho wawo emva kwemini nje mandikhahlele kuwe nakuzo zonke izinxibamxhaka ezikhoyo kule Ndlu ibaluleke kangaka. Ndiza kugawula ndiwarhuqa kwaye ukwenza oko mandithathe esi sixhobo sabantu abafundileyo ndenjenje. (Translation of isiXhosa paragraph follows.)
[Dr Z LUYENGE: Deputy Speaker, let me greet you and all the dignitaries who are in this very important House this afternoon on behalf of the ANC for which I am the spokesperson. I will be brief and in so doing let me use English to articulate my position.]
The debate on the transformation of the economy is within the budget fiscal policy. The ANC recognises the necessity to transform the economy in order to ensure that the Budget is not unevenly distributed. Budgets must serve the needs and interests of the people as an instrument for change for a better life for all.
The key task in building and transforming the economy is to ensure a strong and responsive economic system that serves all South Africans. However, this recognises that since 1994 the new government inherited an economy that was designed to meet the needs of a minority. It was an economy in deep structural crisis, and consequently required fundamental reconstruction. This economic problem emanates from the discriminatory policies of the apartheid era. Above all, the international economic balance of forces contributed immensely to unequal patterns of distribution adversely affecting the local economy. Similarly, at present, the South African economy is affected by the international economic crisis as part of the global economy.
During the years of transition in the 1990s, it was noticeable that the South African economy was characterised by the excessive concentration of economic power in the hands of a tiny minority of the population. In the mid 1990s, four corporations controlled 81% of share capital. Twenty families held shares worth R10,7 billion. Eighty-seven percent of the land was owned by whites. Comrade Prof Turok, a fundi amongst us here, argues that 80% of the country's wealth was owned by 5% of the population.
On the one hand, the international climate demanded free-market liberalisation and tended to constrain radical transformation of the economy. As a consequence, the ANC has had to reach a compromise on transition and economic reform from what had been envisaged over the years. This was done with a view to future struggles rather than as an end in itself. The impetus during the 1990s was the Freedom Charter's clarion call that the "people shall share in the country's wealth".
As a result of the vision based on the Freedom Charter since 1994, the ANC government has made substantial achievements in transforming the economy in the interests of the poor. In the same vein, the ANC recognises the huge challenges of unemployment, poverty, and inequality.
This Budget must address the socioeconomic challenges. It could do so probably through an economic policy that promotes an expansionist budget. That requires economic growth which translates into the creation of decent jobs. In this regard, fiscal policy must support economic growth, creation of decent jobs and development. This could happen through ensuring that government expenditure continues to grow in a sustainable manner.
It is noticeable that government expenditure growth has continued, reaching 34,1% of GDP during the 2009-10 financial year, particularly in some key priorities. The current Budget has shifted from a surplus of 1% of GDP in 2007-08 to a deficit of 7,3% in two years. This is despite a global economic crisis. However, the public debt is expected to rise from 23% of GDP at present to about 40% in 2013 and will probably stabilise in 2015.
The ANC is committed to a mixed economy where the state, private sector capital, co-operatives and other forms of social ownership complement one another in order to fight poverty. This should be done in an integrated manner to eradicate poverty and ensure economic growth. This economy should be part of the evolving world economy which benefits from equal trade - or the fight for equality - with the rest of the world.
Transforming the economy should mean integration into the Southern African region and the continent as a whole. This is in line with the advancement of the goals of development and African renewal indeed the advocate for a sustainable economy for a better life for all.
The transformation of the economy should increase social equality and the growing economy in a dialectical manner that changes the lives of the poor people. This includes the creation of decent jobs. It also calls for increasing productivity, labour-absorbing industrial growth, competitive markets, small business, and the co-operative sector.
Part of the goal behind the transformation of the economy is to fulfil economic rights through fair labour practices, social security for the poor, access to basic needs, and the eradication of poverty.
The hon members of the ANC need to mobilise people and build a popular hegemony in order to drive the transformation of the economy in their interest. Transforming the economy requires a state-led process. It calls for the building of a developmental state with the capacity to intervene in economic direction for the purposes of service delivery. This state must play a central and strategic role by directly investing in underdeveloped areas and directing private sector investment. This calls for industrial policy at the centre of developmental strategies.
The ANC is committed to ensuring the diversification of the economy, but this is not a narrow economist notion simply to promote the accumulation of wealth by the few. In this regard, the character of a diverse economy should be informed by class, race, gender and the youth factor. This is to avoid the exclusion of certain sections of society in the economy of South Africa. It is further to transform the skewed patterns of ownership and production, which reflect the legacy of apartheid, inequalities, dualism and marginalisation. The diversification of the economy has to ensure popular economic participation for all people. This seeks to accommodate the historically excluded groups. Part of this is to strengthen and ensure access to the key sectors of the economy, involving minerals, mining, agriculture, forestry and timber, Eskom and so on. There is a need for a state-driven industrial policy to ensure effective and productive use of the Budget. This involves the use of the Public Sector and the harnessing of private sector resources that are essential.
There is a need to break away from the simplistic calls for the state merely to create an investor-friendly climate. This has failed before and it is not going to work now. A clear and coherent industrial policy needs to inform budget, fiscal and other policy-making processes, including the state's planning capacity. Comrade Minister Rob Davies revealed a promising and detailed Industrial Policy Action Plan, Ipap, which represents a step forward along the new developmental growth path. This approach could accelerate state-led development and economic transformation.
Uqoqosho nophuhliso lwamaphandle kunye namaphondo ngokubanzi luyinxalenye yoxanduva lwenkqubo yokuvuselela uqhagamshelwano phakathi kwemo yocwangciso nophuhliso lwabantu bakuthi. Uphuhliso lwamaphandle lufuna uhlaziyo olukhawulezileyo, oko kukuthi ukusekwa kweSebe lezoPhuhliso lwaMaphandle noBuyekezo lwezeMihlaba yindlela elungileyo eya phambili. Uphuhliso noqoqosho lwamaphandle lwalusoloko lungahoyekanga kwiminyaka yoorhulumente bengcinezelo. Yiyo le nto uxanduva lungamandla kubantu bakuthi ezilalini nasezifama.
Inkqubo yezoqoqosho yasemaphandleni iza kuphuhla ixhamle kwinyathelo elisungulwe ngurhulumente. Ucwangciso nokwakha ukhanyo kujongwe ukuba iinkonzo ziyaya na ebantwini kulinyathelo elikhulu elo. Kunyembelekile ke, masibhinqele phezulu siphakamise izinga lokwenza izinto phaya emaphandleni ukwenzela kubekho imiphumela yophuhliso.
Kuyafuneka siqinisekise ekwakheni imisebenzi enesidima phaya ezifama nakwiilali zakuthi. Oku kuquka uphuhliso loomama, abasebenzi nabantu abatsha.
Zombini iimeko zophuhliso lwemihlaba kwakunye nezoqoqosho maziqiniswe zisekelwe kwiimfuno zabantu phaya ekuhlaleni. Loo nto yenza uphuhliso lomhlaba lube yinxalelenye yemo yezoqoqosho. Kuyafuneka ukuba ibe ngabahlali abayinxalenye yokuthatha izigqibo ngemo yophuhliso lwabantu nentlalontle.
UMongameli weli lizwe nongumongameli wombutho wesizwe kwintetho yakhe yovulo lwale Ndlu inkulu kangakanana uyikhankanyile ngokumandla imfuneko yokuthatha inxaxheba kwabantu bonke kuphuhliso lwemihlaba namaphandle. Olu luxanduva olufanelekileyo ukwenzela ukuba uphuhliso noqoqqosho lwasemaphandleni lube sezandleni zabantu, lungabi kwizandla zegcuntswana. Kwinkomfa yombutho wesizwe i-ANC, eMorogoro ngo-1969, esinye sezindululo sasilumkisa ngolu hlobo:
Xa sisedabini kufuneka sazi ukuba sizabalazela abantu bonke. Singaba libali abanye sisuke sityebise iziqu zethu, sishiya ngasemva isininzi.
Lo yaba ngumgca onolwamvila nefuthe lokusikhuthaza singurhulumente we-ANC emaphondweni najikelele. Eneneni sibe nemiphumela enje ngoku; siphuhlise indlela, sakha izikolo neekliniki. Urhulumente uthathe unyawo evuselela imithetho yokuhlala ukuze abantu bakwazi ukuzikhusela balwe ubundlobongela bencedisana namapolisa, baze kwakhona badulise imikhwa yokurhwaphilizwa kweenkonzo zikarhulumente yimigewu.
Ngokubhekiselele kwimfundo sithi abazali nabantu bokuhlala ngokubanzi mabadlale indima eqaqambileyo kwikamva labantwana babo. Kuwo onke amaphondo lisatyelwe eli khwelo. Ndithetha nje amawaka ngamawaka abafundi afumana imfundo engahlawulelwayo ukuncedana nabazali abangathathi ntweni.
Senze ngakumbi ukubethelela amalungelo abo baphila nogawulayo. Ukongeza apho, siqinisekisile ukuba bayaxhaswa ngumphakathi uwonke. Konke oku kuza kufumana isandla esiqinileyo sikarhulumente ngokuthi ajonge aze adibanise imali yokudiliza intlupheko kubantu bakuthi. (Translation of isiXhosa paragraphs follows.) [Rural and economic development in the provinces in general are part and parcel of the programme to revive communication between development and planning and our people. Rural development needs a speedy transformation and that is the reason it was fitting to establish the progressive Department of Rural Development and Land Reform.
Rural and economic development had always been marginalised by the previous apartheid regime. That is why it is an immense responsibility for our people in the rural areas and on the farms.
The rural economic development programme will grow and benefit from the government's initiative. It is a great step to have planning and oversight to monitor service delivery to the people.
It is becoming extremely difficult, so let us pull up our socks in the rural areas so that there is excellent development. This includes the development of women, the proletariat and the youth.
Both economic and land development must be intensified and be centred on the people's needs within their communities. That makes land development part of the economy. It must be the communities who take part in the decisions about the development and welfare of the people.
The President of the Republic, who is also the President of the ANC, in his state of the nation address emphasised the need for all the people to take part in the development of the land and the rural areas. This noble responsibility of rural economic development must not be in the hands of the few, but must be owned by the people.
In the ANC's Morogoro Conference in 1969, one of the resolutions warned us that:
In the struggle we must know that we are fighting for everyone. We must not forget others and enrich ourselves, leaving the masses behind.
This resolution was a mark that encouraged and influenced us as the ANC government in the provinces and nationally. Honestly, we have now achieved excellence; we have built roads, schools and clinics.
The government has gone the extra mile and came up with the idea of establishing community police forums which assist with security and fighting lawlessness together with the police. They also report corrupt tendencies within government departments.
In respect of education, we asked parents and communities at large to play an active role in the future of their children. All the provinces responded to this call. Thousands of learners are receiving free education to assist the struggling parents. We have even endorsed the rights of those living with HIV and Aids. To add to this, we have assured them of our support as the whole community. All this will be done through substantial funding from the government by organising funding in order to break barriers of poverty affecting our people.]
The fight against corruption should be located within the national democratic revolution. The objective of the national democratic revolution is to promote economic and political transformation. This articulation has become the ANC's moral vision to restore ubuntu - the values of humanity. The ANC's understanding of moral values is rooted within the struggle. This implies that corruption should not be viewed as a moral matter. It means meeting the needs of the people and treating them with respect. It also refers to the building of a society based on democratic values, social justice, and the rule of law. It is noticeable that privatisation, procurement, outsourcing, entrepreneurs, and tenders result in corruption, and affect the economy. However, the election manifesto of the ANC and the state of the nation address by the President call for measures to ensure the transparency of the tendering system so as to ensure the accountability of the public servants.
Corruption has a more devastating economic effect than the inflicted pain of common crime, and it affects poor people indirectly. It is mostly the crime of the rich and powerful. The ANC-led government notes that corruption erodes the economic base for effective service delivery and mostly affects poor people. It has the potential to reverse the gains of the people and of the country as well.
The purpose of broad-based black economic empowerment, BBBEE, is to deracialise the ownership and control of the economy. It has to encourage productive opportunities by black people who have been excluded from the economy over decades. BBBEE should not be narrowly responding to the minority of blacks, but rather broadly target women, youth, poor people, workers and rural communities to promote new enterprises to build skills and the production needed by the economy.
It has to broaden ownership and participation by the majority of the people and to ensure a competitive market in rural areas and the townships, not just in the big cities. This requires the continued acceleration of economic transformation, with fiscal policy talking to industrial strategy.
BBBEE has had successes and has weaknesses. It has taken strides to redress past economic imbalances; broaden the economic base of the country in the last 16 years; stimulate economic growth; create jobs while eradicating poverty; and ensure the increasing participation of black people in the productive capacity of the economy.
The shortcomings of BBBEE relate to the fact that sometimes its implementation tends to be narrow, which might lead to unintended consequences. It sometimes tends to be concentrated amongst a few males. It tends not to be visible in rural communities, resulting in fewer women entrepreneurs. Nevertheless, a lot has been said today, but the record of the transformation of the economy is evident on the ground. There is no turning back to a fragmented and skewed economy, and our fiscal policy should assist this new economic path to a better life for all.
Nditsho ndisithi umbutho wesizwe uyayibethelela into yokuba le Ndlu imele iwuphehlelele kwaye iwuthathe lo mgaqo-nkqubo usikhokelela phambili nomhle kangaka. Ndiyabulela. [Kwaqhwatywa.] (Translation of isiXhosa paragraph follows.)
[The ANC mandates this House to endorse and welcome this policy which is progressive and well articulated. [Applause.]]
Madam Deputy Speaker and hon members, it is indeed a fulfilling and very rewarding moment for me to see the democratisation of our budget process, which has evolved over the past decade. I wish to thank all those who have made it possible for us to be at this phase of our constitutional democratic order. A number of Members of Parliament played a huge role in actually seeing this legislation reach the stage where we are now. In keeping with the provisions and tenets of this legislation, it's also encouraging to note that Parliament has risen to the occasion and given full meaning to its oversight role. Speaker after speaker has come to the podium and spoken about this fiscal framework. It is encouraging to see how many of the speakers spoke in support of the fiscal framework in general. I, therefore, would not want to bore this House by going through each of the speakers' comments and trying to respond, as most of the members have supported it. I do, however, want to focus on four general issues with regard to the points that have been raised by some members.
If some of us believe that revenue needs to be higher than what we have estimated, this needs to be the result of three potential factors: Firstly, higher economic growth; secondly, faster recovery in corporate income tax; and thirdly, higher tax rates. Dr George, the Treasury's economic focus is based on the latest economic data, mainly the SA Reserve Bank's December quarterly bulletin. They have been interrogated, discussed and ultimately approved by the Ministers' Committee on the Budget and have also been presented to Cabinet for adoption.
As the Minister indicated, the budget we tabled on the 17th was a collective statement of government. I want to assure you that the Minister did not run away from the DA's shadow minister of finance. The acting Minister of Finance is Minister Pandor, because we act as a collective, and Minister Pandor is here to represent the Ministry and I'm delegated here by the very capable Minister. [Applause.] With those words I also want to indicate that we take this process quite seriously, since the Minister is abroad with the President on a state visit.
The focus is in line with consensus expectations and most commentators have noted that they effectively take account of the fragile nature of global recovery and associated risks. The recovery in corporate income tax is based, firstly, on the corporate income tax data up until January 2010 and, secondly, on our experience of the lags in corporate income tax over the past 15 years, as well as the analysis of the expected recovery in corporate profitability.
The corporate income tax data suggests a deeper decline in corporate income tax than we originally estimated in the Medium-Term Budget Policy Statement, MTBPS. While corporate profitability will recover somewhat, the pace of recovery is expected to remain muted as economic activity continues to remain subdued over the next two to three years. Even where corporates successfully return to profitable positions, assessed losses built up during the economic slump will mean that it may still be a few years until we start seeing income tax revenue from many corporates.
These factors are considered by the Revenue Analysis Working Committee, comprising Sars, the SA Reserve Bank and the National Treasury, and the revenue focus is debated and approved by the Ministers' Committee on the Budget. This is meant to just indicate what processes we follow in order to arrive at these figures. The October MTBPS contained a much more aggressive increase in tax revenue as a percentage of Gross Domestic Product, GDP, and this was partly based on the likelihood of a tax rate increase or introduction of new tax instruments to raise revenue to close the gap between expenditure and revenue.
Since October, higher nominal GDP has allowed us to close the financing gap at a similar rate to what was proposed in our MTBPS, but without such an aggressive increase in tax revenue as a percentage of GDP. This is an extremely positive development and should be welcomed as it allows the fiscus to continue to operate in a strongly countercyclical fashion, supporting development and contributing to demand in the economy whilst not compromising long-term sustainability. Higher tax rates too soon would have the likelihood of threatening the sustainability of the economic recovery and by implication would strongly undermine the long-term sustainability of the fiscus.
The next point is on the fiscus sustainability pact that members and the committee have raised as a recommendation. We welcome the idea of a fiscus sustainability pact and look forward to engaging with Parliament as to the likely purpose and form of such a pact. Any fiscal rule or pact must be countercyclical in nature and this is notoriously difficult to achieve, as illustrated by some of the bigger economies like the UK which, despite a cyclically adjusted sustainability rule, finds itself facing severe fiscal constraints and the likely burden of higher tax interest costs, lower expenditure and higher taxes in the future.
The Chilean experience also, however, points to what can be achieved if a fiscal policy can be disciplined and countercyclical. Successful fiscal management has enabled Chile to respond to the economic crisis with higher expenditure, which has placed them on an excellent path to economic recovery and has played an extremely important role in limiting volatility in the Chilean currency.
It is also important to note that the flip side of significant deficits, when the economy is underperforming, is substantially lower deficits and perhaps even surpluses when the economy is overperforming.
The third point is on the impact of the Eskom tariff increase - some people have even referred to it as double taxation. Let me say that in the 2010 Budget our economic outlook assumed a 35% increase in the electricity price. The impact of the awarded increase being closer to 25% is that real GDP growth will be marginally higher and inflation will be lower in the next three years. As a result, the impact of higher GDP growth would be offset by the lower inflation and nominal GDP is not expected to change very much as a result of the decision of the regulator. Therefore, the impact on tax revenue and the budget framework is expected to be broadly neutral.
The last point I want to refer to is the issue of how the fiscus will respond if the growth remains low and the deficit high, as some of the members raised this as a possible risk. The 2010 Budget clearly and boldly states that the objective of a sustainable fiscal framework remains the primary goal of fiscal planning. This is to be achieved through a stabilisation of growth in expenditure combined with rising budget revenue, thereby returning the fiscus to primary surplus, which allows us to sustainably finance expenditure in the long run.
The committee report correctly identifies the economic risks to this recovery. Should the economy fail to grow at the rates expected, it is likely that the fiscal position and the trajectories of revenue and expenditure will have to be re-evaluated. In this scenario we will be able to choose from a combination of three options: firstly, we can further reduce spending; secondly, we can meet our revenue targets through additional taxation; and thirdly, we will be able to consider borrowing additional resources.
While all three of these options entail both current and future costs, our first instinct would be to extract further savings and efficiency gains to government spending, as most members have alluded to, while attempting to continue to support the economy through continued borrowing. We would also seek to defer tax increases until the economy recovers, but we'll obviously have to balance this against the rising interest burden on the fiscus on future generations.
The level and extent to which we wish to provide this support will be a result of the outlook for the economy and the extent to which we expect the economy to recover. Clearly, the longer we continue to borrow, the greater the interest burden. With interest already the fastest-growing expenditure item on the budget, any decision to continue borrowing would not be taken lightly. It must also be recognised that while the economic outlook poses a risk in the fiscal trajectory, any additional expenditure requirements on the fiscus would also serve to undermine the sustainability and raise debt costs.
For anyone interested in how we are dealing with the debt sustainability and economic scenarios, let me refer you to the box in chapter four of our Budget Review, which shows the results of Treasury's modelling of various economic and fiscal paths over the five years.
With these few remarks I want to take this opportunity to thank the committees for having dealt with the fiscal framework in the manner that they have, did for the time that they have put into it, this being the first of these fiscal frameworks that we've tabled before you. We hope that we will be able to engage with the budget process going forward in a much more meaningful way as we have done, starting today. Thank you. [Applause.]
Debate concluded.
Madam Deputy Speaker, I move:
That the House adopts the Fiscal Framework and Revenue Proposals, and the Report of the Standing Committee on Finance on the Fiscal Framework and Revenue Proposals.
The motion is that the Fiscal Framework and Revenue Proposals as well as the Report of the Standing Committee on Finance be adopted. Are there any objections? No objections. Motion agreed to.
Fiscal Framework and Revenue Proposals and the Report of the Standing Committee on Finance accordingly adopted.