Enkosi. [Kwaqhwatywa.] (Translation of isiXhosa paragraphs follows.)
[I would like to educate you a little bit about the issue of assets and debts. As the ANC-led government, we need to speak without shame so that when we speak about government assets, we start by referring to the employees in the department. Firstly, an employee becomes an asset when he is dedicated and works hard. But if the same employee is lazy, indolent and corrupt, he ends up being a debt and a responsibility on the government.
I thank you sir, your time has expired.
Thank you. [Applause.]]
Chairperson, hon members, our government has set itself a clear vision for the next five years. Its vision is embodied in the Medium-Term Strategic Framework, derived from the ruling party's manifesto, and finds expression in the 12 outcomes which government intends achieving over the medium term.
The Medium-Term Strategic Framework and these outcomes are the guiding principles that inform the work of the National Treasury. They are in line with its strategic focus areas of promoting economic growth and work opportunities, reducing poverty, promoting the optimal allocation and utilisation of resources, ensuring good governance and accountability, and maintaining macroeconomic stability. That is why, Chairperson, we present our Budget Vote for consideration by this House today, and we ask the House to approve our allocation so that we are able to deliver on these imperatives.
The National Treasury's resolve to improve financial management and ensure that funds are spent effectively remains unwavering. The Office of the Accountant-General and the Specialist Functions are to accelerate current efforts targeted at rooting out wastage and corruption and promoting cost efficiency, as opposed to the narrow politically-motivated campaign of the DA with its monitor. Ours will be judged by what comes out of the Auditor- General's report, and this House will engage on such findings.
Procurement reforms are currently underway to address the current supply chain management challenges and at the same time align procurement to government's broader economic objectives. Some of the interventions being explored include analysis of the market, benchmarking of prices, determining the most appropriate method of procurement, and due diligence audits on information provided by bidders prior to the awarding of contracts. This may also result in the centralisation of bids for strategic commodities. Oversight in respect of procurement planning and the auditing of the processes of adjudication and selection of suppliers before the awarding of large contracts is also to be strengthened.
Turning to the Integrated Financial Management Systems, the National Treasury will maintain government's current financial management system at a level of 98% availability to users by implementing the third phase of the Integrated Financial Management System, which will focus on rolling out the completed procurement, human resource and asset management modules in 2010- 11 and fast-tracking the development and implementation of the remaining modules in the 2011-12 financial year.
The period ahead will also see a further strengthening of the country's intergovernmental fiscal system. In line with some of the proposals made in the relevant parliamentary committees when the Division of Revenue Bill was processed, the National Treasury is reviewing the fiscal system for provincial and local government. Specifically, the provincial equitable share formula is being reviewed to improve targeting and to ensure alignment between the delivery agreements signed between the President and Ministers responsible for concurrent functions like education and health.
Chair, members will appreciate the vast fiscal differences that exist between the country's municipalities. Therefore the review of the local government fiscal system will attempt to align this fiscal system to these differences without compromising local accountability. In addition, a process is currently underway to review all conditional grants with the aim of rationalising them to ensure that the sphere of government that is closer to the people is funded directly to accelerate the delivery of quality basic services. The reforms will be phased in from the next financial year.
Steps to improve the quality of local government budgets are at an advanced stage. The quality of municipal budget information has improved considerably following the implementation of the new Municipal Budget and Reporting Regulations, which prescribe norms and standards for the preparation and format of municipal budgets.
As from the 2010-11 municipal financial year, all 283 municipalities are required to prepare their budgets, adjustment budgets and in-year financial reports in a uniform, prescribed format. This will greatly facilitate transparency and understanding of municipal budgets by councils, communities and other stakeholders, and thus, enhance oversight.
The Siyenza Manje programme, currently administered by the Development Bank of Southern Africa, DBSA, seeks to build capacity in the municipalities. In the past financial year, the programme succeeded in unlocking capital spending of R8,2 billion. Government is currently reviewing the programme to improve its targeting and to ensure its impact is sustainable.
Part of the review would look at options to strengthen local government governance, infrastructure delivery and financial management. It is expected that these interventions, together with the review of the local government fiscal framework, will put government in a better position to attain a responsive, accountable, effective and efficient local government system. This intervention speaks directly to outcome number 9; and also to sustainable human settlements, which is outcome number 8; and to vibrant, equitable and sustainable rural communities, which is outcome number 7.
As government, we are also continuously confronted with the question of how best we can position our Development Finance Institutions, DFIs, in order to enhance their capacity to effectively and efficiently deliver significant and tangible developmental results to all the qualifying needy individuals and institutions of South Africa. This means that contributions of the DFIs must be measured, not by meaningless statistical numbers, but by their direct impact on the lives of the ordinary people of South Africa, observable through sustained improvements in incomes and standards of living as a result of access to DFI funding, the projects that they deliver, facilities and the infrastructure base.
In spite of government's concerted efforts, there are still some very significant challenges facing our DFIs. These include the sheer quantum and volume of underdevelopment, especially in provinces such as the Eastern Cape and Limpopo, as well as several places even within the metro areas. Our DFIs have limited capacity in terms of a financial resource base to satisfy these needs. The impact of these constraints is further aggravated by lack of institutional capacity in most implementing institutions such as municipalities, beneficiary contractors, emerging farmers and small, medium and micro enterprises, SMMEs.
The total combined balance sheet of all our national DFIs put together was approximately R142 billion in 2009. A strategic partnership with banks and capital markets is going to be key to leveraging development finance to ensure greater impact in the future.
Approximately 98%, which is R139 billion, of the total assets of South Africa's DFIs is concentrated in just five major DFIs, that is the Development Bank of Southern Africa, DBSA, the Industrial Development Corporation, IDC, the Land Bank, the National Empowerment Fund, NEF, and the National Housing Finance Corporation, NHFC. The IDC constitutes 52% of the total DFI asset base, whilst the DBSA constitutes 28%. The National Treasury has two of these DFIs reporting to it - the DBSA and the Land Bank.
A cursory look at the DBSA, Chairperson and members, reveals that, currently, the DBSA's geographical spread of its developmental loans exhibits a bias towards resourceful metros - Gauteng, KwaZulu-Natal and the Western Cape. This is followed by a significant presence in the Southern African Development Community, SADC, and multinational investments.
Owing to this bias, government challenged the DBSA to deepen its development impact and, in particular, to increase its support to poorer municipalities in the following manner: Firstly, to assist weaker municipalities with project identification, preparation and implementation to enhance service delivery, growth and improved revenues.
Secondly, to assist the capacity of municipalities through improved access to appropriate funding, including securing the participation of appropriate private sector partners for enhanced project quality and risk mitigation in project delivery.
Thirdly, to assist the administrative systems, management quality and operational processes of municipalities through the Siyenza Manje programme in order to ensure their diversified revenue streams.
Lastly, to assist with the eradication of classroom backlogs in some provinces.
To achieve this, the current Budget includes measures intended to enhance the DBSA's capital nature by increasing its callable capital by R15,2 billion from R4,8 billion, resulting in a total of R20 billion. This will effectively increase the DBSA's lending capacity from R38 billion currently to R140 billion. Since the increase of the DBSA's callable capital requires the amendment of the DBSA Act, Act 13 of 1997, which normally takes time for Parliament to approve, the Minister of Finance has, in the interim, provided a guarantee of R15,2 billion to the DBSA.
In order to allow the Land Bank to effectively implement its turnaround strategy, the Minister of Finance announced support for the Land Bank with a guarantee of R3,5 billion which will be converted into a capital injection over the Medium-Term Expenditure Framework, MTEF, period. In December 2009, the Land Bank received R1 billion from the Adjustments Appropriation Act of 2009, reducing the guarantee to R2,5 billion. It has been allocated R750 million in the current financial year, a further R750 million in the next financial year and in the last year of the MTEF, R1 billion.
Chair, I would like to take this opportunity to congratulate the board of the Land Bank under the leadership of Dr Ben Ngubane and the chief executive officer, Phakamani Hadebe, for the good work they have done in turning this institution around.
The 2010 Fifa World Cup is an African event. Africa is the theatre and South Africa is the stage. The awarding of the right to host the 2010 Fifa World Cup to South Africa in 2004 was a great achievement in itself. Through television, radio, the internet and the print media, a further opportunity exists between 11 June and 11 July to showcase the country to billions of people all over the globe, including the key decision-makers in the global investment community. Even beyond this event, we will continue to work with the global investment community to attract much-needed funding for further economic growth.
Hosting the event also contributes to the development of skills, enhanced construction capacity, the creation of employment, and economic growth. For example, construction of the stadiums has sustained over 130 000 direct and indirect jobs between 2007 and 2010. Direct jobs accounted for the majority of jobs and was sustained at 66 800. Stadium construction had a R15 billion direct, indirect and induced economic impact. It is 30 days before the kick-off, and we want to thank those who have worked diligently to make the hosting of this event a reality. We are, indeed, ready to host this event.
Let me take this opportunity to thank Minister Gordhan for his steady hand in the Ministry of Finance, and officials from departments and entities reporting to this Ministry for the way they have demonstrated what public service means - working without expecting undue reward. We thank members of the Standing Committee on Finance and the Committee on Appropriations under the leadership of hon Thaba Mufamadi and hon Sogoni. We thank you for your valuable contribution. [Applause.]
Chairperson, the ACDP has already joined others in expressing concern over our rising Public Service debt levels, although South Africa is in a better position than many other countries, as indicated by the Minister.
In this regard Sars is to be commended for collecting R8,1 billion more revenue than anticipated by the end of the previous year, resulting in the reduction of the budget deficit to 6,8% of the gross domestic product, GDP. We commend them and we trust that they will have even greater success in the present financial year, particularly, and hopefully, in an environment of an economy that is continuing to grow.
Whilst the budgeted economic growth forecast is 2,3% of GDP for this year, rising to 3,2% in 2011, much will depend upon the unravelling crisis in the Eurozone, as alluded to by other speakers including the Minister. Whilst a E100 billion bailout has been given to Greece, fiscal concerns about Portugal and Spain remain. European banks hold significant Greek, Portuguese and Spanish debt. A sovereign default by a European member could undermine the viability of European banks, creating another banking and credit crisis as severe as that caused by the subprime mortgages.
The hon Minister has already expressed concern regarding the time that it has taken the Europeans to deal with the Greek sovereign debt crisis. The question is, how will this impact on emerging markets like South Africa?
Thankfully, we have not experienced much fallout. Stock exchanges have bounced back since last week following the news that the European Union, EU, had moved to stabilise the euro and prevent the Greek debt crisis from affecting other member countries. South Africa's situation is also different. It is characterised by improving real growth and tax revenues with lower inflation rates.
We also do not have sky-high public debt and low economic growth, which is plaguing certain European countries. However, if double debt recession were to materialise in the euro area, this would undoubtedly impact on our markets due to investor risk aversion and have an effect on our exports to the EU.
We trust that this will not occur, particularly as we now have this unprecedented package of support with the International Monetary Fund, IMF, and US Federal Reserve, USFR, saying that they are also there to give support.
These crises, however, illustrate the need to bring our public debt levels down to manageable levels. Thus, the ACDP supports the finance committee's recommendation that Members of Parliament, MPs, should engage in more detail on the fiscal exit strategy which seeks to reduce the impact of high borrowing on future growth prospects.
The ACDP remains positive on our economic growth prospects. However, it is crucial that the National Treasury works closely with other departments, particularly the Department of Economic Development, and the private sector to achieve job creation, economic growth and poverty reduction. The ACDP wishes to thank the staff members of the Treasury, the commission and Sars for their hard work and commitment. We will support this Budget Vote. I thank you.
Chairperson, Minister and Deputy Minister, hon members, finance family, sanibonani [good day], it is my privilege to present the debate on the public finance and budget management.
This is programme 2 of the National Treasury. It consists of three divisions, namely the budget office, public finance, and intergovernmental relations. Within it there is also a subprogramme which is the technical and management subprogramme.
Let me quote from section 215, clause 1, of the Constitution of the Republic of South Africa:
National, provincial and municipal budgets and budgetary processes must promote transparency, accountability and effective financial management of the economy, debt and the public sector.
Let me congratulate the finance family for ensuring that the vision of our forebearers is achieved and maintained. On 17 February 2010, hon Minister Pravin Gordhan delivered his speech and said - and I quote:
Through a combination of corrupt practices, inefficient procurement, poor planning and, in some instances, collusion by the private sector, we are not getting the kind of value from our purchases that our people deserve.
This is so true. Indeed, this indicates that the ANC-led government is transparent and accountable, hon George, because you wouldn't know about this corruption or understand what hon Gordhan said on 17 February. Let me illustrate the three elements or divisions that I highlighted earlier on. Let me start with the budget office. The budget office, according to the ANC, co-ordinates the national budget process and ensures prudent resource allocation. The process improves value for money in spending across government.
We see this process as the critical reason for the establishment of the budget office, especially during the fiscal recession which is a global cancer. The ANC deems it correct to call upon all government departments to be able to deliver services within the available scarce resources.
We request that the National Treasury facilitates the efficient commissioning of the budget office. It should give a clear structure of the roles because they are the fundamental requirements for the existence of the budget office. It is critical for this budget office to exist, and we would request that its functions be well detailed and understood by all relevant stakeholders. A structured awareness programme would be appreciated if it was put in place to assist understanding and community participation.
We also request objective and amicable participation from the opposition, especially the DA, to ensure effective oversight by Parliament since they complain rather than give solutions.
The ANC understands that one of the functions of the budget office is to enhance the quality of performance information as contained in the finance document. We are, therefore, interested in seeing how this function will unfold. If this function unfolds effectively, the ANC will ensure that the community participates and that Parliament gives proper and effective participation in budget allocation and debates.
The ANC also noted that there was poor attendance during the Budget Votes. We hope that this will improve that, through the budget awareness programme.
The ANC is aware that the establishment of the budget office will be like the milestones of an infant. Therefore, we are not requesting the impossible from the departments; however, targets and deadlines should be met.
Public finance is the second division which the ANC sees as a link with all national departments and other government entities. As a result, its function is to improve alignment between the policy framework and public spending. The ANC would appreciate the alignment of the budget allocation with the priorities that were set in the manifesto as well as the timeframes set for monitoring, whether it be quarterly or otherwise; so that, at the end of the day, we are able to identify any weakness and improve the implementation thereof. Intergovernmental relations is the third division which we see as the link between the provinces and the municipalities. We request the department to speed up the restructuring of procurement. We are aware that the department is trying, but, as the ANC, we are concerned about the pace at which we are moving towards this restructuring.
We are not too sure whether or not Broad-Based Black Economic Empowerment, BBBEE, does have teeth. The participation of historically disadvantaged individuals in the growing economy is still questionable. Unlike the DA, the ANC always comes with proposals. The hon George always complains about procurement without giving solutions.
We also request the department to ensure that there is an efficient implementation of the Money Bills Amendment Procedure and Related Matters Act, Act 9 of 2009. Hon George, it is unfortunate that when you decided to go out and collect the information about the wastage from the international bank, you only focused on South Africa. It would have been far better if, while collecting information, your report was comprehensive. You would have assisted this House with awareness of what other countries are doing.
However, I am not surprised because the DA has neither policies nor programmes to talk about other than complaining about the ANC. The ANC has never said that it is easy to govern. The ANC said they are ready to govern. Therefore, we are ready to govern.
Let me applaud the ANC for setting up a government based on the will of the people and on people-centred and people-driven principles as part of the process of deracialising the economy and society at large, thus ensuring economic growth, development and redistribution for a better life for all. The ANC supports Budget Vote 9. I thank you. [Applause.]
Chairperson, hon Minister, I just want to tell the hon Dubazana that if it weren't for the DA there would be no oversight, whatsoever. [Applause.] Secondly, the poor attendance, here, seems to me to be indicative of the fact that the departments do not know where money comes from, except the Department of Labour that adds R1 million to their own budget without reference to anybody.
But, hon Minister, on a more serious note, in your Policy Statement in the Strategic Plan of National Treasury, you commit yourself to ensuring the proper management of public finances and stepping up efforts to fight the scourge of fraud and corruption.
In this regard, the Treasury Budget provides for the establishment during 2010-11 of a special audit unit to focus on developing fraud prevention guidelines for supply chain management processes and providing fraud awareness and investigative capacity to departments. In this regard, the measurable outputs in the strategic plan, therefore, provide for the department to commit itself to the implementation of audit committee guidelines; to conduct internal audit reviews at municipalities; to report on the status of internal auditing in national and provincial departments and in municipalities; to support the roll-out of the internal audit framework and guidelines; to develop fraud detection guidelines for supply chain management processes; and to provide fraud awareness and investigative capacity to departments. The DA welcomes these objectives and they are crosscutting against all levels of government, but there are serious challenges in achieving them.
During an investigation by the Public Service Commission into supply chain management transgressions, for instance, it was found that the number of cases of financial misconduct in national and provincial departments reported to the Public Service Commission increased from 771 cases in the 2005-06 financial year to 1 042 in the 2006-07 financial year.
In parastatals the situation is equally bad. Consider, for instance, the awarding of a contract by Eskom to Hitachi, a company in which ANC Chancellor House holds shares. Not only was the contract awarded to Hitachi on very dubious grounds, but it was done under the then chairpersonship of Mr Valli Moosa, a National Executive Council, NEC, member of the ANC, at the time. The Public Protector, on investigating the case, quite correctly found a conflict of interest, but, as usual, no action was taken.
Municipalities are equally bad when it comes to fraud, supply chain management transgressions and perpetrators of unnecessary and wasteful expenditure. In the George municipality, for example, the Internal Audit Committee conducted investigations into wasteful expenditure incurred by the Speaker. They found him guilty and recommended that the monies concerned be recouped from him. When the report of the Internal Audit Committee served before council, the ANC-ID-led coalition council reacted by firing the chairperson of the Audit Committee, and they took no further action.
From the examples I have quoted, it becomes clear that there are two very important requirements to be met to eradicate fraud, corruption, wasteful expenditure and supply chain management transgressions. These are a clear distinction between party and state and the independence of audit committees at all levels of government to be guaranteed. Strengthening the independence of audit committees, in particular, at all levels of government, including parastatals, is therefore important.
Serious consideration should be given to delegating to the special audit unit, which we are going to form, the responsibility for confirming the names of appointees to such audit committees, and for authorising the dismissal of any member of such a committee. The special audit unit should also be authorised to take the necessary action where a clear distinction between party and state has not been upheld in the awarding of tenders.
The National Treasury further remains responsible not only for its own budget but also for the compilation of the overall Budget of government. In this regard, it is vitally important that the Treasury ensures the optimum usage of funds available for distribution, since choices are difficult when trying to balance the growing needs of the large number of people who have been, and are still, waiting in vain for service delivery and jobs.
Whereas the DA supports the existence of a social security net for vulnerable members of society, danger signals are starting to develop in that the number of people dependent on the social security net is growing beyond the means of the taxpayers. The current annual budget of R89 billion has to be funded by only 5,8 million taxpayers.
If public finances are to be sustainable and properly managed, urgent steps must be taken to dismantle the barriers to job creation that government seems determined to maintain by way of a closed patronage society and at the expense of hardworking taxpayers. The budget should, in fact, be used to place emphasis on the creation of an environment conducive to job creation - as you said in your speech, Minister - an open opportunity society where success is achieved through good skills development and hard work and where every citizen will have the opportunity to succeed, irrespective of race, religion or sex. Thank you. [Applause.]
Chairperson, hon Minister, Deputy Minister and hon members, the legislative mandate of the SA Revenue Service in terms of the South African Revenue Service Act, Act 34 of 1997, is to collect all revenue due and show maximum compliance with tax and customs legislation, to provide a customs service that will maximise revenue collection, protect our borders and facilitate trade.
It is generally accepted that, as a result of its transformation, Sars has played a positive role in the economic growth of the country. Amongst other things, Sars collects a variety of taxes such as personal tax, corporate tax, secondary tax and other taxes. Over the years great strides have been made in realising its legal mandate and achieving its outputs.
Its successive reports have provided evidence of a progressive increase in revenue collected and a general improvement in efficiencies and effectiveness in all areas relating to its mandate. An example of such evidence appears in their strategic plan for 2010-13, namely that over the past six years the revenue collected by Sars has grown faster than the economy has. From 2002-03 to 2007-08 Sars increased collections while tax rates were reduced. As we go forward, this is indeed important for the country's development trajectory.
In its Medium-Term Expenditure Framework 2010-11 to 2012-13 Sars has identified the following seven strategic priorities: to drive revenue realisation; to deliver now and ensure sustainability; to drive productivity, service quality and cost efficiency; to fully deliver on the customs mandate in a way that is aligned with government's stated intentions; to clarify the Sars operating model by streamlining governance and strengthening its leadership so as to implement segmentation and strengthen the business model; to enable Sars personnel to perform at their peak; and to deepen key external relationships to enhance reputation and results.
The Sars mandate and its Medium-Term Expenditure Framework priorities, in particular as they relate to tax, trade policies, compliance models and customs, have to be examined against the ANC's goal of a developmental state and its key priorities for the medium-term period.
The SA Revenue Service as an institution is an important capacity for the building of an efficient and effective developmental state envisaged by the ANC. Central to a developmental state is the capacity and ability to intervene, hon George, in the economy, using the strategic policy and institutional levers at its disposal to effect change. The ANC's conceptualisation of a developmental state is that it will guide national economic development and mobilise domestic and foreign capital and other social partners to achieve the goal of ensuring that all South Africans, especially the poor, experience an improving quality of life.
It will therefore have attributes that include, amongst others: the capacity to intervene in the economy in the interest of higher rates, growth and sustainable development; effective sustainable programmes that address the challenges of unemployment, poverty and underdevelopment with requisite emphasis on vulnerable groups; and mobilising people as a whole, especially the poor, to act as their own liberators through a participatory and representative democracy. Within this context Sars, therefore, has to play an important role in the mobilisation of the resources that will enable a developmental state to achieve its goals.
These have guided the development of the ANC National Executive Committee's Medium-Term Economic Policy with the following priorities: accelerating growth and investment and improving productive capacity; strengthening rural development, land redistribution and agrarian reform; integrating the economy and redistributing resources more equitably; improving the national youth service and national youth development; expanding the Public Works Programme; improving and strengthening the education system by introducing a national health insurance system; and strengthening the social wage. Of fundamental importance is to ensure that the strategic objectives of Sars, as espoused in its Medium-Term Expenditure Framework, are consistent with the ANC priorities.
The achievement of these priorities is dependent on our ability to collect revenues and manage customs in a manner that promotes trade as well as protecting the country's borders. In support of the priority of growing the economy and creating decent jobs, it is important that Sars demonstrates through its programmes a new way of doing business. There has to be greater emphasis on better co-ordination with all other relevant stakeholders in the economic transformation cluster. This will ensure harmonisation between different economic policies and instruments in support of an integrated economic development approach.
The current progressive tax policies have to articulate the new growth path policy imperatives. We all agree that the 2010-11 tax proposals, in their implementation, will support the ANC's agenda of stimulating the economy, protecting it from the impact of recession and growing it, while at the same time addressing the plight of the poor majority.
Another measure to benefit the poor that has been outlined by the department is to treat all retirement and retrenchment lump sum payments equally. This will have the impact of placing increased cash in the hands of retrenched workers for short-term relief and to improve their potential to engage themselves in some income-generating activities.
These proposals will, however, have more of an impact if they are coupled with the management of inflation and interest rates. Therefore, this requires greater co-ordination between the Treasury, Sars and the Reserve Bank together with the Ministry of Economic Development.
Although there is evidence of a recovery from the devastating recession that engulfed the world and our country, a positive impact on revenue collection is likely to take longer to realise, especially for corporate taxes. However, over the past years the Treasury and Sars have become more effective in tax collection and administration, hence, over the years there has been an underestimation of revenue and overestimation of expenditure. While underspending may be the result of lack of capacity, constantly underestimating revenue leads to problems with regard to spending, borrowing and driving economic activity.
The ANC's call to work together is especially relevant in the area of revenue collection. For individuals and companies the decision to pay what is due in terms of taxes is not only a function of ability or inability to pay based on means, it is also a function of behavioural culture and values. Historically, South Africa has had a culture of noncompliance and avoidance when it comes to due tax payments. These behaviours, if not programmatically addressed within Sars strategies, will undermine our efforts to increase our revenue through tax collection and by expanding the revenue base.
The government's new measures to limit salary structuring opportunities, to tighten company car fringe benefit rules, to tax employee deferred compensation and insurance packages as fringe benefits and to enhance anti- avoidance schemes by closing some of the identified sophisticated tax loopholes must be supported. Since some of these practices emanate from behavioural cultures, there will be a need to couple punitive measures with education and establishing closer contact with taxpayers by Sars as part of its plan of doing business differently.
The past few years have witnessed progressively lowered personal taxes, which has largely brought relief to the poor, whilst at the same time broadening the tax base and achieving better revenue collection. It is expected that, even in the current global slow down, this trend should continue in order to cushion the poor even further.
In an environment where Foreign Direct Investment, FDI, is necessary for development, there has been an overreliance on competitive corporate tax cuts, rather than a reliance on FDI tax incentives, property rights, institutional and political stability. While some have argued that the best way to attract FDI is via lower corporate tax revenues, this should be seen in the context of South Africa's development objectives and the fact that FDI is not only reliant on the presence of tax cuts.
Taking a long-term perspective, South Africa needs a tax system that attracts the type of investment that leads to companies investing in productive infrastructure and is reliant on the stability of institutions and governance. This avoids short-term and speculative investment.
The FDI by its nature is long-term and likely irreversible, thus a variety of factors such as potential increases in the market size, wage rates, taxes, property rights and institutions affect the attraction of FDI. Therefore, policies need to focus on the state driving growth in the market, increasing social security, strategically directing investment in labour-intensive production.
It has been shown that political stability and property rights are more likely to attract FDI than corporate tax cuts. Additionally corporate tax cuts could be avoided in favour of tax incentives and stability.
In-depth investigation is necessary to establish how to improve on these incentives, for example, FDI in South Africa has largely contributed to capital-intensive industries, which means that FDI investment has been horizontal rather than vertical. Therefore, larger tax incentives towards labour-intensive production methods with a range of interventions to change the variables mentioned above could lead to the type of FDI that meets South Africa's developmental objectives.
One of the key priorities of the ANC is to intensify the fight against crime and corruption, also to promote a better Africa and a better world. Most importantly, the ANC commits government to work towards regional economic integration in Southern Africa on a fair, equitable and developmental basis to promote SADC integration based on a developmental model that includes infrastructure development, co-operation in the real economy and development of regional supply chains.
To support these priorities Sars' systems need to be transformed in a manner that is consistent with what other institutions such as Home Affairs, Foreign Affairs, the Police, Justice and Trade and Industry are doing in terms of policy changes. There needs to be greater co-ordination between all these role-players to deal with corruption and improvements in trade within the region and on the continent. The ANC supports the Budget Vote. I thank you. [Applause.]
Chairperson, thank you to all the members for their contributions. Whether it came from the 21st century or the 19th century, it still was a very important contribution. Hon Oriani-Ambrosini and I will always have some differences about which century we live in and which philosophy is relevant. That is a fact of life that we have to live with.
The words "the developmental state" have been used quite frequently today. I think it would be useful, as I said on 1 July 2009 to hon George, if we could build a few ideological or philosophical bridges amongst ourselves. We can neither imagine that the ideological state is here because we proclaim it, nor imagine, certainly in the current context of the last two years, that it will disappear because we don't want it. The fact of the matter is that the nature of the state, market, multilateral institutions, financial regulators and the role of rating agencies are all up in the air, as hon Koornhof said.
If we stick to blinkered approaches to these questions, we might score political points. That I also said on 1 July 2009. It doesn't advance the argument. It doesn't enable us to get a better command of what the crises are that we are dealing with now and how we, as South Africans, approach these crises and create a basis for national consensus amongst ourselves. None of the books that we have read and written up to now have any application today.
The new books are being written and the scripts are being retold in one way or another. The challenge for us is whether we will engage with these political exchanges that have no meaning or whether, through the political exchanges, we can enrich the kind of strategic direction the South African economy takes. That is the challenge that we have to take on.
We can spend two and a half hours here - with great respect - and go through the rituals that parliamentarians are required to go through. What value are we then adding to the very people, in whose name we say government must operate better, more efficiently, save more money, do procurement better, etc? We do little.
I would seriously ask that we rethink the way in which we approach some of these questions. Even the role of the advanced economies and of the emerging economies and what lessons they could teach each other, are changing.
Mr Robeni, who is called Dr Doom sometimes, in the Financial Times this weekend, says that the tables have turned in the last couple of months. The emerging market economies can teach the so-called emerged economies how to manage their fiscus; how not to get into debt traps; how to ensure that they get the right kind of assistance from the state and how not to overextend the kind of assistance they give to their citizens, so that they don't overreach themselves as societies. Today all of you should go and visit the Western world and tell them how we did it in South Africa. We should do so with pride. [Applause.]
We can score some cheap points, but it doesn't really advance the case in any way. Why can't we stand up as true patriotic South Africans and recognise that we do have some difficulties in our ranks. We will deal with those difficulties in time. Which country doesn't have difficulties?
Now, 30 days, as my colleague, the Deputy Minister said, away from the World Cup, it is time to put our shoulders back, hold our heads high and be proud of what we have achieved in this country, notwithstanding the debate, discourse and criticism that we might get, and more importantly the criticism that we have of ourselves.
It is in this context that I want to appeal to the chairperson, Mr Mufamadi, that we need to work towards some consensus on how we approach key national issues. The Reserve Bank Bill shouldn't be turned into a political football. We might disagree about Hitachi and the role of the ANC. I have said publically that the ANC will, in time, do the right thing concerning this matter, but the World Bank loan should not have led to the kind of discourse that we had from certain parties.
Parties were trying to shoot down $3,75 billion that we actually need, which we can't get at this stage from higher tariffs and which we can't and don't want to get from other forms of borrowing. We are trying to find a package solution to a problem that we have all inherited. We can't shy away from it now. Let's find the solutions and let's work together in order to find the solutions. The appeal, Mr Mufamadi, would be how we get our act together and find some consensus around these issues.
Around tenderpreneurs, procurement, etc, we can today stand up with pride and say that we told you so. Nobody pointed this out. We, as the ANC and as the new administration, pointed out the problems in local government, provincial government and national government. We said what the problems are and that we must confront this as a society and as a government. It is not a government problem. It is a social problem today. This social problem arises from our history, when we deprived millions of people of economic opportunities in our country for more than a century. Today we are paying the price for that. We must actually acknowledge it.
We don't have solutions. Black Economic Empowerment, BEE, and the other things we are doing are not providing all of the solutions. Do we now bash each other's heads in or do we find constructive solutions to some of these problems to approach things in a different way? My submission is that we should work together to find a different way of handling this.
There was the question about the letter to procurement around the tender register. Some of those issues, Dr George, are legal procedural issues which require that the courts decide about a name and our court system doesn't work fast enough, regrettably. You also made reference to bullying by Sars. As a former commissioner, I have to defend Sars. More importantly, we must be careful that we are not becoming a mini United States where it is possible for certain interest groups to now lobby Members of Parliament. I am not saying that this happens in this case.
There is a big lobby out there which says: Leave us alone, give us freedom of operation on the tax side and whenever Sars catches us out, then it is one thing or another. On behalf of the Sars management, I can certainly say that they operate with the greatest integrity. If there are problems, bring them to our attention and we will deal with them.
Mr Koornhof actually made some very important points in relation to the current crisis and I hinted at that earlier on. We should bring that on board, Mr Mufamadi, in the finance committee. We should ask what these crises actually mean and what it means for the establishment, as you pointed out, for the developmental state.
I can't but fully endorse, as I have done in the original speech as well, the Tennyson study about CEOs and their salaries. I was a little bit more polite than Mr Koornhof, but let us confront the question. The divide between rich and poor in South Africa is unacceptable. The rate at which CEOs and others are awarding themselves salary increases is also unacceptable. We should say with one voice that this is a recipe for a future disaster, not the current ones that we are facing now.
This is about making choices as a society in terms of what kind of society we want to be. You can't on the one hand say that we are coming from 19th century socialism if we ask for better equity in our society. We can't attach labels to one another if we are saying that the divide is an unjust divide. Without focussed attention by all political parties, and society more generally, on how we produce a socially just society in South Africa, we are just exacerbating the inequality and that study just amplifies that particular question.
Mr Koornhof, you raised important questions about remuneration committees and the role of boards. I think they all work within a particular mindset and a particular paradigm. Unless they get kicked out of that mindset and a new set of parameters are established, nothing will happen. We, therefore, have another challenge. If Government says too much about this, then we are interfering in the private sector. If we don't say enough, then we are not doing enough for the private sector. So, one can't win with this one. Thank you for raising this debate. I hope that other Members of Parliament will join the debate and bring to the fore some of the challenges that we have.
We look forward to Mr Oriani-Ambrosini's vision realising itself at some stage somewhere. Like many other speakers, we talk about the imbalance between the five million taxpayers and the many millions that we have to support through that tax space. That is a product of our history. That is not a product of something that we whirled for ourselves. The challenge for us, when we talk about restructuring the economy and approaching job creation differently and not getting involved in rhetorical debates, from whichever direction the rhetorical debate comes, is to get serious about these issues and not score political points.
We are waiting for the formulae, wherever they might come from. Young people today desperately need jobs. Who has the formula? If we have it, we will put the state resources behind them and ensure that we can deliver the jobs that they require. Until then, I think we are scoring petty points if we keep pointing to this divide. That is the historical structure of our economy today and we have to work diligently with one another to ensure that we move in a different direction.
Hon Luyenge pointed out the many things that we need to do. I want to thank him for diligently going through all of the Treasury material. The hon Dubazana also made some important points about the necessity to restructure procurement and to look at value for money in the way in which we actually operate.
The hon Swart raised the fraud issue and the role of audit committees as well as the importance of distinguishing between party and state. We agree with that. Let us make that a culture in South Africa. We are still 15 or 16 years old and we are not doing enough to embed the right kind of culture and practices in South African society which will enable us to take some of those ideas further.
We agree on the need for job creation. We have all been saying it, but there is still a poverty of concrete ideas that can be implemented tomorrow, that will make an actual difference. There are lots of ideas, policies and papers, but what we do, is the challenge that we face.
The hon Sibhida raised some important questions. There is no deliberate overestimation or underestimation. I must tell her that respectfully. Estimation - as you can see all the economists are getting everything wrong - is a difficult science. I can't even call it science at this point in time. If you look at the numbers, we are doing reasonably well in situations where there are no extraordinary events that intervene in our environment.
The emphasis that you place on the balance between education and enforcement is something that Sars has pioneered over the years. Your approach to Foreign Direct Investment, FDI, and what we need to do to get the balance right in our own country, is certainly a refreshing one. In conclusion, I want to thank all the members and the parties for supporting this Budget Vote. I want to thank the chairperson, Mr Mufamadi, and his committee and Mr Sogoni and his committee. I want to thank the leadership of the various institutions, some of whom are here on my left, not politically speaking, for their contribution to the kind of results that we get year in and year out. Thank you. [Applause.]
Members are reminded that Parliament's Budget Vote will be held in the NA Chamber at 14:00 this afternoon.
Debate concluded.