Speaker, Mr President, Mr Deputy President, fellow Cabinet colleagues, our new colleagues who have just been appointed by the President, Deputy Ministers, the Governor of the Reserve Bank and Deputy Governors of the Reserve Bank, MECs for Finance, members of the diplomatic corps, directors-general, heads of the finance family, hon members and ladies and gentlemen, I have the honour to present the third Medium-Term Budget Policy Statement, MTBPS, of President Zuma's administration.
We present this policy statement at a time when our own economy is recovering, but there are still winds of uncertainty in places that seem far away, which can rapidly affect us for better or worse at any time.
We have learnt from the 2008 global crisis that sound fiscal and financial institutions do not in themselves provide immunity against job losses in our own economy arising from turbulence originating elsewhere in the world. They are also insufficient for repositioning our economy on a new growth trajectory that creates jobs, reduces inequality and improves the quality of life of our people.
Our economic transformation requires much more. It requires an extraordinary national effort from all role-players, committed not just to identifying the barriers to progress, not just to proposing solutions, but also to working together over the long haul.
In February, at the time of this year's Budget, Mr President, we referred to your earlier injunction, and I quote:
We want to have a country where millions more South Africans have decent employment opportunities, which has a modern infrastructure and vibrant economy and where the quality of life is high. Mr President, we said in this Budget in 2011, and I quote again:
It reflects the collective determination of the government to address with energy the challenges of creating jobs, reducing poverty, building infrastructure and expanding our economy.
The Budget sets out a financial framework for implementing this vision, a framework that is sound and sustainable. It recognises that building South Africa is a multidecade project that must invigorate our capacity to grow, and must include all South Africans in that growth.
This remains our point of departure, but once again we have to take stock of this very uncertain environment and review how we might better address our challenges and seize new opportunities, because there are opportunities.
For the past two years we have felt the shock waves of financial crises, first in the United States and the UK and now at its epicentre in Europe.
A year ago, at the time of the 2010 MTBPS, we thought we would see a sustained improvement in global recovery and in our economy. That was not to be. The eurozone crisis has brought new financial challenges and threats to global growth. We are also seeing rising inflation and overheating in several economies, including Brazil, India and China.
Once again, we face the prospect of a decline in global trade, falling industrial demand, delays in investment, liquidation of businesses and stressed financial institutions; this time with the added risk that fiscal austerity will extend the slowdown and deepen the crisis in some parts of the world.
The crisis of leadership currently reflected in the eurozone and in Europe is having a damaging effect on the global economy, including our own. The world expects Europe, as its leaders meet tomorrow, to urgently mobilise the resources required to recapitalise their banks and support a durable restructuring of insolvent or debt-laden economies.
The MTBPS sets out the fiscal and budgetary dimensions of the government's response to what some have called "dangerous times". It challenges us to confront both our immediate priorities and long-term development imperatives. It invites this House and all South Africans to join in our collective effort to do more with the resources at our disposal, to strengthen our economic performance and improve public service delivery.
In brief, Mr Speaker, the MTBPS advises the following: The global environment poses considerable risks to the world economic recovery, and the outlook for our own economy. Our tax revenue collections have not yet recovered fully from the effects of recession, and so our counter-cyclical fiscal stance allows for a temporary increase in borrowing.
Higher borrowing must be carefully managed. Capital markets are volatile and debt service costs are already the fastest growing category of expenditure on our books. That means, as we pay more interest on debt, we have less money available for service delivery.
Over the next three years, we will stabilise the debt level through fiscal consolidation and a moderation in expenditure growth.
The composition of our spending needs to change. While public service expenditure has continued to expand strongly, we are not doing well enough to build a growing economy. By composition of spending we mean how much we are spending on investment in infrastructure, on goods and services and on paying interest on our debt. It means how much we are spending on compensation of public sector employees, as well as what the right balance is in order to have more money available for investment in infrastructure.
If we want to stabilise growth and increase growth, we must prioritise public infrastructure spending and invest in job-creating assets. We must also build support for business investment through a competitiveness package and protect workers and enterprises affected by current economic conditions and worse conditions that might follow.
We will create what we may call a policy reserve and indicate options for reprioritising expenditure and mobilising other resources within the state to fund economic development priorities.
We have to address inefficiency, extravagance and waste in public administration, for trusteeship is at the heart of the contract between government and its citizens. We need to continually remind ourselves that the money we use and spend is the money of our citizens, not our own. [Applause.]
I am sure the ANC agrees with that as well. [Applause.] We have to demonstrate our majority from time to time. In confronting these challenges forthrightly, we are mindful that similar issues are faced by many other countries.
Across the world, there is rising indignation about unemployment, about inequality, about environmental degradation, about corruption, about the abuse of power - correctly so. Across the world, there is impatience at the slow pace and poor outcomes of international co-operation. There is anger about the impact of financial and governance failures on ordinary people, on employment and on livelihoods. But anger is not enough; we have to act, we have to be bold and farsighted in our resolve to move ahead with the reforms that will build a better future, not just for ourselves, but for generations to come.
Mr President, you have put jobs at the top of the agenda of our new growth path. Cabinet has endorsed a 12-point programme of action and we have targets and delivery schedules for a wide range of public services, programmes, projects and activities.
Various Ministers are addressing themselves to the injunctions that you have placed before them. Minister Chabane is active in respect of monitoring and evaluation. Minister Manuel is soon to emerge with the documents from the planning commission - I thought he might be followed by the man in yellow, who seems not to be around today.
Minister Nkwinti is steering a new course in development of rural livelihoods. Minister Patel has taken the lead in respect of social dialogue. Ministers Motshekga and Nzimande are doing their bit to improve our education and training systems.
How do we achieve the right balance between these and other objectives in public policy? How do we manage the tension between promoting a dynamic, enterprising economy and provision of collective goods and services?
The MTBPS does not set out the details of policies or spending plans, as these are the responsibility of specific Ministers and their departments, and furthermore there is still work that is being done at present. However, it provides the broad framework and it signals what is likely to be affordable.
It also invites Parliament and all stakeholders to reflect on the choices before us, and to assist in finding the best combination of revenue measures, borrowing and spending plans that are consistent with economic growth, sustainability, broad-based development and social progress.
In reporting on the outlook for the economy, Mr Speaker, we have to take account of the slowdown in the world economy and continuing uncertainty associated, as we said earlier, with the unresolved European debt crisis and sluggish growth in the United States. Global trade and growth at present are mainly driven by continuing expansion in China, India and other fast-growing developing countries.
Advanced economies are expected to grow by 1,6% on average this year, rising to 1,9% next year - look at those low numbers. Taking into account population growth, at best, this is standing still. On the other hand, developing Asia will continue to grow at over 8% a year, and Sub-Saharan Africa is projected to grow by between 5% and 6% a year.
South Africa's economic growth typically follows the average global trend quite closely. We saw a gradual recovery last year and an annualised GDP growth rate of 4,5% in the first quarter of this year. But in the second quarter growth slowed to 1,3%, which is somewhat below the projection at the time of the Budget in February. For the period ahead, growth is expected to be 3,4% next year and rising to be just over 4% in 2014 and 2015.
The current account deficit of the balance of payments will average about 4% of the GDP. Consumer price inflation has increased over the past year, and is expected to stabilise at about 5,5% a year.
Within the global economy, the overall trend is a gradual, but still inadequate convergence between living standards in rich and poor countries. The gap is still very wide and individual countries' performance varies considerably.
We have not yet seen convincing evidence of convergence within the South African economy. The income gap and the development gap are still very wide and employment growth has been too sluggish.
Also of concern is that the trends in expenditure and production are not taking us in the direction of faster, sustainable growth. South Africa has benefited from the boom in commodity prices over the past several years, and this has not led to significant growth in mining production. Energy constraints, inadequate transport capacity and uncertainty in the regulatory environment have held back progress.
In contrast, mining production expanded by 30% in Australia, and 44% in Brazil between 2003 and 2010. This has provided a huge boost for investment, tax revenues, jobs and incomes in these countries. Minister Shabangu's engagement with the Chamber of Mines on increasing investment in our mining resources is therefore to be welcomed.
In the manufacturing sector, rising domestic costs and weak external demand have held back the output recovery. Minister Davies is seeking common ground with leaders in industry on a strategy to revitalise manufacturing and provide appropriate support.
We recognise also that the volatility of the rand remains a difficulty for many businesses in the tradable goods sectors. The currency has traded in a range of R6,58 to R8,25 to the US dollar this year, with volatility clearly linked to global financial turmoil. The rand weakened by as much as 7,5% against the US dollar in one day during September, before strengthening by 5,4% on another. Depreciation in the value of the rand in recent months has brought some relief to manufacturers, though it has also contributed to some upward pressure on prices.
Of particular importance is the trend in food prices. Minister Joemat- Peterson's efforts to improve our agricultural trade position and support emerging farmers are critical not just for food security, but also because of the employment potential associated with farming activities. The expanding role of the Land Bank in supporting the farming sector will assist in growing our agriculture sector while contributing to job creation. However, the trend in gold prices is still of concern.
Mr Speaker, trends in the labour market indicate the magnitude of the economic challenge ahead. Real wage levels have increased in both the public and private sectors, but the pace of job creation has been far too slow. In the 15 months to March 2010, 426 000 jobs were lost in the formal nonagricultural economy, and the estimated overall loss of jobs was more than double this. In the subsequent 15 months of recovery to June this year, just 210 000 jobs were created, mainly in the public sector.
The quarterly employment survey records 8,3 million formal, nonagricultural jobs. Several million people also earn uncertain incomes in agriculture or household employment, and in informal, seasonal and unrecorded activities.
Yet the challenge for us is: How do we bring these activities into the formal economy? How do we improve livelihoods in vulnerable and insecure activities in which productivity is low, although there may be potential for growth?
The recent recession has exposed similar concerns in many other countries, so we are not alone in this regard. Everywhere in the world there is a struggle to boost job creation and to recognise and enhance the value of atypical forms of work. So we need to acknowledge Minister Oliphant's difficult task in finding the right balance between protecting job security, on the one hand, and the adjustment to changing market opportunities on the other.
The agreement reached between the South African Clothing and Textile Workers' Union, Sactwu, and employers in this sector illustrates that dialogue is the way to make progress.
Countries deal with these issues in different ways. We have to learn from international experience, and adapt these lessons to our circumstances. A crucial part of any package is social security and health insurance reforms, which are important elements in building a better deal for vulnerable workers, providing protection against unemployment, illness or injury and securing an adequate income in retirement.
In addition to this, better city planning, investment in public transport and well-targeted financing of housing and residential development are also important elements in what we call the social wage. These are activities that create work opportunities in themselves, but they also create better living conditions for working people and make it easier for the unemployed to search for jobs.
The central thrust of our economic policy challenge is to support competitiveness and promote the kinds of structural change that will lead to more rapid, inclusive growth.
This means that we need to have a reserve of funds and a capacity to direct these resources effectively. The Medium-Term Budget Policy Statement, MTBPS, proposes a competitiveness support package of some R25 billion over the next six years to boost industrial development, assist enterprises and to accelerate job creation. This initiative will build on several broader programmes that already exist or need to be enhanced.
These include tax incentives for industrial investment; technology and training amounting to over R8 billion for the recently approved projects; continuing investment in energy, water, transport, communications and infrastructure; improved incentives for investment in industrial development zones, particularly where there is the potential to participate in global supply chains and to develop competitive logistics hubs.
Also of importance is regulatory and administrative reform to facilitate small business development and above all micro business development; support for black business development, including preferential procurement and finance facilities; and encouragement of export diversification, including new trade partnerships with fast-growing emerging economies.
Regional integration within Sub-Saharan Africa, including investment in a North-South transport corridor, and administrative reform of trade arrangements are important elements also. Support for job creation, training and community work projects will also add to this list.
The alignment of trade, investment and energy policies to support the transition to a green economy, including private sector participation in our renewal energy production programme are all elements together that give us hope that we can reignite growth and faster job creation within our own economy. The fiscal challenge over the next three years is complex; we must support job creation, maintain the value of the social wage and finance economic transformation outlined in the new growth path.
Over the longer term, we must realise a rising flow of social and economic rights. Achieving these objectives, of course, requires us to work within a sustainable fiscal framework. Since 2009, in response to the global crisis and the recession, we have pursued what we might call an accommodative fiscal stance.
Revenue has fallen, as we indicated earlier, but we have maintained real growth in expenditure, complementing the Reserve Bank support for the economy through low interest rates and monetary easing.
Beginning in 2002, noninterest expenditure doubled in real terms in seven years and consolidated spending increased to 32% of the GDP. This spending growth was largely financed by increased revenue associated with the economic expansion and improved tax compliance and administration - so please continue to pay your taxes.
However, the higher revenue also included a temporary windfall associated with high commodity prices. Revenue has now declined relative to the GDP and the budget deficit has, of course, widened. For the first six months of the fiscal year, tax receipts grew by 7,1%, which is significantly lower than it was anticipated in the February Budget.
The lag in consumption spending and high administered prices have particularly affected small- and medium-sized businesses, contributing to lower back resets. The South African Revenue Service, Sars, has detected an increase in VAT fraud and has introduced more stringent screening of VAT refunds which to date has led to the prevention of R4,2 billion of potential VAT fraud.
Let me just illustrate what this means: Businesses submit VAT returns and they say, "You owe me R2 million", and when something suspicious arises, Sars says to these businesspeople, "Would you like to take a new look at your form before you resubmit it for real"? And when it comes back for real, the numbers are changed and as a result of the voluntary "change in numbers", R4,2 billion has been saved - let alone any additional enforcement that needed to take place. So if you have friends who do these things, please remind them to do the right thing.
Although corporate income taxes have not yet recovered to prerecession levels, they have remained resilient, despite the uncertain economic climate. Customs duties and import VAT have grown significantly year on year and, to some extent, have offset the poor performance of what we might call domestic VAT.
Enhancements in customs administration have resulted in faster processing of commercial traffic at border posts and have in the main attracted favourable responses from traders. This year we expect tax revenue to be R729 billion, which is R13 billion below the February Budget estimate. Next year, government will spend - get your pens and paper ready - over R1 trillion for the first time. So work out how many noughts there are in that! [Applause.]
The result is that the deficit will be 5,5% of the GDP this year. For the period ahead, the deficit will decline by 5,2% next year and by 3,3% by 2014-15.
The consolidated public sector borrowing requirement will be 8,1% of the GDP this year, falling to about 5% of the GDP in 2014-15. Government debt will rise from 23% of the GDP in 2009, to about 40% of the GDP in 2015, which signals the very substantial contribution of the fiscus over this period to the economic recovery and growth.
Put in simple terms, this is the period - the past two years - during which the private sector has actually retreated from its participation and leading role in the economy, and government has been the main carrier of the growth momentum in our own economy.
Budget deficits and continued rising debt erode the space for fiscal and monetary policy responses in future downturns. For the next three years, the aim is to moderate spending growth so that combined with a recovery and tax revenue, national debt will be stabilised as a percentage of the GDP.
This means that by 2014-15, we can begin to rebuild the fiscal space with a positive primary balance or revenue which is broadly in line with noninterest spending. In other words, we must borrow to invest in infrastructure, not borrow for government consumption - and that is the key shift we need to make. [Applause.] We will once again create a policy reserve to finance the initiatives we propose in support of economic growth.
Government as a whole has substantial financial investments, sometimes in surplus cash and sometimes in other assets. Where these resources could be more productively applied to other priorities, we would return the surplus funds to the fiscus.
Greater efficiency must also be sought in government cash management and in goods and services procurement where ordinary disciplines of financial management have to be strengthened. In simple terms, what we are saying is that one arm of government can't be holding on to millions or billions of rand in cash, while another arm goes out to borrow and pays 8% interest. Better cash management means, let's use all of these resources without having to borrow unnecessarily.
Further steps will be taken to reduce administrative costs and the unnecessary duplication of capacity. Departments will be obliged to identify and report on savings initiatives. In addition, we will request the Auditor-General to strengthen his focus on the value-for-money proposition.
Long-term sustainability, hon members, depends also, on shifting the composition of government spending from consumption to investment. Our aim is to strengthen infrastructure investment and maintenance, because this is the key contribution to the underlying growth potential of our economy. This means that we must see a moderation in the growth of the wage bill and spending on goods and services over the MTEF period ahead. You must do more with less.
Over the past three years, the Public Service wage bill has increased from 35% to nearly 40% of noninterest expenditure. The proposed framework for the 2012 Budget provides for more moderate cost of living adjustments for the public sector employees than in recent years, to be implemented earlier with effect from April of each year.
All of us must share in creating a greater momentum for growth, jobs and investment. As government, we see the need for the same principle of moderation to be applied to ourselves as Cabinet Ministers and other political office bearers. [Applause.] This must also be extended to senior management in the Public Service and executives of state entities. It is vital that the private sector provides responsible leadership as well. Indeed, throughout the world we need to see a paradigm shift in this regard.
We want to assure our people that we will address inefficiency, extravagance and waste in public administration. [Applause.] In the wider economy, the same principle applies - moderation in consumption means higher savings and stronger growth.
We will do all of this and more, because we need to invest more money in infrastructure that will help to stimulate the economy and increase job creation.
In recent years, infrastructure spending by many national and provincial departments and municipalities has lagged behind budget allocations. Efforts to strengthen capacity to manage capital budgets and construction contracts are therefore necessary. The Development Bank of Southern Africa, DBSA, is providing support in this area, but we also need to see much greater responsibility and accountability in municipal councils and key infrastructure departments, state-owned companies and public entities.
Public sector infrastructure spending in the current year is estimated at R233 billion, or 7,8% of the GDP. Over the Medium-Term Expenditure Framework, MTEF, period ahead infrastructure plans amount to R802 billion. This is a very substantial investment programme, within which there is considerable opportunity for local construction and manufacturing development and job creation.
Investment in the energy sector amounts to R292 billion over the next three years. Transport and logistics account for R226 billion. Provision is made for hospital construction and other health facilities amounting to R39 billion, and education facilities to R32 billion.
Substantial funding will go to municipalities and provinces for housing, residential infrastructure and local economic development. Much of this will be financed through debt. State-owned enterprises, SOEs, will borrow about R74 billion this year to finance investment spending, rising to just under R80 billion next year.
We need to appreciate that debt has to be repaid, either through the tariffs and charges that are dedicated to these services, or through higher taxes. It is important to find the right balance between cost recovery from users of services, on the one hand, and on the other, general tax funding. But the cost of not expanding capacity, the cost of not maintaining and rehabilitating ageing infrastructure, is an even greater future burden of congested and dangerous networks, constrained production and economic decline.
Before turning to the medium-term expenditure plans for the 2012 Budget, I need to explain briefly the adjustments proposed for this year's allocations. These are set out in the Adjusted Estimates of National Expenditure.
Additional appropriations are proposed amounting to R10,3 billion. Almost half of this amount is required to fund higher-than-planned wage bills; R3,2 billion will go to the provinces and R1,2 billion to the national departments.
The cost of the 2011 wage settlement will also require savings and reprioritisation in departmental administration and programme expenditures. In other words, most departments and provinces are receiving some money in this allocation to cover the additional wage increases, but some of that money must be found from within the departments and provincial budgets.
Members of the House will note that many departmental Votes include shifts in funds between identified activities, known as virements. Reservations have been expressed in this House, about these mid-year changes to allocations and the extent to which departments are able to amend allocations that have been approved in law.
Our aim is to bring greater reliability and consistency to the appropriations over time. However, it is not possible to predict expenditures with complete certainty, and so some scope for adjustment has to be accommodated within the budget rules.
On top of the additional allocations for wages, R3,8 billion of unspent money from last year is rolled over to this year. The adjustments also include provision for unforeseeable and unavoidable expenditure.
Some R150 million will go to help farmers to recover from the damage caused by flooding and the harm caused by livestock diseases. An amount of R81,4 million is required by Minister Sisulu to fight piracy in the Mozambican Channel. An amount of R266 million is proposed for once-off gratuities to be paid to outgoing councillors.
An amount of R208 million is allocated to meet urgent needs associated with acid mine water damage and drainage, and R752 million goes to provinces for various conditional grants. The overall impact of the adjustments is a decrease of just under R1 billion in the 2011-12 expenditure estimate.
In brief, we are adding to our spending plans for higher wages and salaries, but we will see offsetting underspending on investment and maintenance of infrastructure this year. This is not an acceptable situation. This is a pattern that needs to be reversed in the period ahead.
I now turn to the proposed expenditure framework for the 2012 Budget. I need to compliment this House, the chairs of portfolio committees and the Appropriations committee for the constructive advice set out in the first set of Budget Review and Recommendation Reports last year. Parliament's attention to the details of public expenditure plans and their implementation is critical for the success of our economic transformation and social development agenda.
The expenditure framework for the period ahead provides for real growth in spending of 2,3% a year - real growth means if you take inflation out. Reprioritisation and a concerted focus on efficiency and improved financial management mean that new expenditure priorities are mainly financed by savings within this expenditure envelope. A total of R48 billion is added to the spending allocations over the MTEF period, partly to accommodate the carry-through costs of this year's salary increases.
Chapter 4 of the Medium-Term Budget Policy Statement, MTBPS, outlines the planned consolidated expenditure of national and provincial government and public entities, and summarises the division of revenue between national, provincial and local government.
Let me highlight some of the key features. As a consequence of the wider budget deficit since 2008, state debt cost is the fastest growing category of spending, increasing to R115 billion in 2014-15, or just under 10% of our total expenditure.
Transport infrastructure is the second fastest growing category, rising from R67 billion this year to over R90 billion in three years' time. Minister Ndebele's responsibilities include the first phase of the commuter rail rolling stock replacement programme, and continued investment in the construction and rehabilitation of national and provincial roads.
Public order and safety spending is set to increase by 7,4% this year. The Expanded Public Works Programme continues to make progress towards a target of 3,4 million job opportunities over the next three years. The recently established Community Works Programme will be expanded to about 250 000 participants by 2014-15.
Health gets an amount which is increased by 7,4% a year, from R113 billion this year to R140 billion in three years' time. Spending on local government, housing and community amenities will rise from R122 billion to over R146 billion over the next three years.
There will be similar expenditure on the environmental protection and green economy initiatives, which will be strengthened. This includes assistance to municipalities for electricity demand management programmes and private sector partnerships aimed at reducing greenhouse gas emissions.
Allocations for science and technology will increase by 9,5% a year over the period ahead, with a special focus, under Minister Pandor's guidance, on support for business innovation with potential for growth and employment creation.
Of the R48 billion available for allocation in the 2012 Budget, 42% goes to the provinces and 11% to local government. Personnel expenditure will take up part of the revised provincial shares and allocations are also made for infrastructure repairs and rehabilitation and early childhood education programmes.
Transfers to municipalities take into account service delivery backlogs that have to be addressed, and bulk infrastructure and waste management services.
Decisive steps need to be taken to address slow and inefficient spending on social and economic infrastructure by provinces and municipalities. The rules for infrastructure conditional transfers to provincial departments and municipalities will be adapted to improve planning, procurement and implementation procedures.
The intention is to reward provincial departments and municipalities that accelerate implementation and ensure efficient and cost-effective delivery of services. These measures will be introduced from April 2012 and will be announced during the tabling of the Budget next year.
In short, what we are saying is that in many of these instances, money isn't a problem. The challenge of implementation is what we need to meet. [Applause.] If there are departments, provinces or municipalities that are not using their conditional grants properly, we will have amendments in place which allow for national departments or entities to intervene.
To grow the economy and further accelerate access to basic services, greater infrastructure investment is needed by municipalities. The 2011 Medium-Term Budget Policy Statement, MTBPS, signals a number of interventions in this regard. First, funding is targeted at smaller, predominantly rural municipalities to improve their institutions in order to deliver faster and quality services to their citizens. This should put them in a position to recruit and retain skilled municipal managers and obtain financial management expertise.
Secondly, these municipalities will also be provided with greater national support. Depending on their circumstances and need, bulk infrastructure project implementation will be accelerated. Thirdly, our metropolitan and secondary cities, which are our big cities, are home to the urban poor, who are accommodated in many instances in large informal settlements. Over R60 billion is to be spent in these cities and towns to transform these informal settlements into fully integrated and dignified built environments. [Applause.] The spirit of enterprise is there; we need to collectively roll up our sleeves and face these challenges head-on.
Our fiscal policy is built on the guidelines outlined in the 2011 Budget Review. The counter-cyclicality guideline means that changes in the Budget balance work to offset the fluctuations in demand that create economic slowdowns and booms.
The second guideline is that debt sustainability increases in the stock of debt, incurred by financing deficits during slowdowns, will be offset by debt reduction in boom periods.
The third guideline, intergenerational equity, states that our children and their children should not be unfairly burdened by the future costs of commitments we make today. In other words, don't leave your debts for your children to pay.
Next year, the National Treasury will publish a long-term outlook for public finances drawing on these guidelines and taking into account South Africa's demographic trends and economic challenges. It will explore the implications for government finance of major long-term priorities, including improvements in infrastructure investment and maintenance, social security and retirement reform, the establishment of national health insurance, the role of development finance institutions and the strengthening of our municipal finances.
In other words, we want to try to do a five- or ten-year plan so that we can comfortably and sustainably do the things that we need to do with the urgency with which they actually need to be done.
The main source of finance for the real growth of total expenditure will be, as always, tax revenues. I wish to pay special tribute to Commissioner Magashula and the South African Revenue Service team for their continued hard work and success in building payments compliance and securing the revenue stream. [Applause.]
Co-ordination of fiscal and monetary policy is also critical to macroeconomic management and our financial stability. Working together with Governor Gill Marcus and the South African Reserve Bank, we have begun the reform of financial regulation and risk management set out in the paper, A Safer Financial System to Serve South Africa Better, which was published in February 2011.
Prudential regulation has been strengthened by establishing the Financial Stability Oversight Committee chaired jointly by the Governor and me. It aims to ensure that we maintain financial stability and deal effectively with systemic risks to our financial system which might come from outside our own country.
Progress has also been made in setting up the necessary technical support to implement the proposed separation of prudential regulation and consumer protection, which will probably take the next two or three years to implement.
We have also agreed on several reforms to improve South Africa's position as a financial and investment gateway into Africa and facilitate cross- border transactions into Africa. All inward listed shares on the JSE will henceforth be classified as domestic assets and be included on the JSE indices, as agreed with the regulatory authorities.
Steps will be taken to simplify procedures and reduce the cost of cross- border money remittances, particularly to neighbouring countries and the rest of Africa.
I am pleased to be able to assure the House that whilst some banks in advanced economies now appear to be undercapitalised, our own banks and financial markets are in robust condition. Our regulatory and oversight systems have stood the test of time, ensuring that our financial sector has remained steady in these troubled times.
Minister Nzimande seems to disagree. [Laughter.] I am pleased to welcome the new Banking Registrar, Mr Rene van Wyk, who will take forward this work and will build on the firm foundations laid by his predecessor, Mr Errol Kruger.
On previous occasions I have stated that we must target economic growth of 7% per year sustained for a generation or longer. At this pace the economy would double in size every 10 years, delivering jobs and prosperity and lifting millions out of poverty. For us as a nation to achieve this ambition requires the deep-rooted transformation of our economy that removes the many barriers to growth and development.
Microeconomic reforms are at the heart of undertaking structural change, increasing our own productivity and improving our competitiveness in the rough world out there. Central to these efforts are interventions that will systematically raise the level of competition across industries and sectors; provide efficient and cost-effective energy, transport, ICT and logistics networks; encourage innovation and foster entrepreneurship and enterprise development; and provide the platform for closer regional economic integration.
Within government our reform efforts must provide value for money and improve the efficiency with which we build social and economic infrastructure as well as the delivery of high quality public services particularly in health and education.
Minister Motsoaledi's insistence, for example, on achieving lower costs in our antiretroviral procurement and better management of medicines and other supplies in our hospitals and clinics would represent savings of billions of rands over time.
Minister Motshekga's cost-saving through centralised publication and distribution of workbooks to schools is yet another excellent example of Ministers taking the lead in this regard. [Applause.] Minister Dlamini-Zuma has led an impressive administrative turnaround in the Department of Home Affairs and don't exclude her, please. [Applause.] Everybody is happy now that they get their passport on time.
I am also pleased to be able to report that the Jobs Fund, launched on 7 June 2011, received a total of 2 651 applications following its first call for proposals. This illustrates the demand, innovation and desire across both the private and public sectors to create jobs.
Applications were spread across each of the four funding windows, enterprise development, support for work seekers, infrastructure investment and building institutional capacity. The investment committee has commenced the approval of projects with a total grant allocation in the last couple of weeks of R352 million, with the potential 115 000 projected jobs.
Mr Speaker, we owe it to our young people to take these reforms forward, both within government and in building our wider economy.
This week the matric examinations begin for another cohort of school- leavers. I know that the House will join me in wishing them everything of the best. [Applause.]
In a few weeks' time, Minister Nkoana-Mashabane will seek to make progress in a most difficult, global co-ordination challenge: how to invest in a clean-energy future and how to share the costs of this transition. In wishing her well as chair of what has now become known as COP 17, or the 17th Conference of the Parties, we can also take pride in the contribution of the South African scientific community to understanding climate change and its implications.
We also wish Minister Molewa well in leading South Africa's delegation to this conference. Let us applaud them, ladies and gentlemen. [Applause.]
Speaker, allow me to express my appreciation to President Zuma for his wise leadership and to Deputy President Motlanthe for valued guidance. [Applause.] I am grateful for the support of the Ministers' Committee on the Budget, who share the responsibility for what I am delivering to you. I also thank my Cabinet colleagues, members of the Treasury Committee, Premiers and provincial Finance MECs. They have also played a role during a year of serious financial challenges.
I would also like to thank and commend Mr Mufamadi and Mr Sogoni, Mr de Beer and Mr Chaane of the NCOP, who chair the Standing Committee on Finance and the Select Committee on Finance respectively.
We are grateful to the Governor of the South African Reserve Bank, Ms Gill Marcus, and her team at the Reserve Bank for their steadfast management of monetary policy at a challenging time. I know that the House will join me in expressing our admiration for and thanks to the Auditor-General, Terence Nombembe, and his staff for their rigorous scrutiny of public finances. [Applause.]
Thanks are due to Mr Oupa Magashula and the staff of Sars for taking what they call the "Eish out of taxation" and for their valiant efforts to give us the revenue we need. Please, just give us more - that is all! [Applause.]
May I also thank Deputy Minister Nene for his tireless support and for sharing our burden. Of course, the National Treasury team have once again delivered a set of budget statements during a dynamic and uncertain time when innovation, dedication and hard work - more so than usual - are required.
I would like to congratulate the new Director-General, Mr Lungisa Fuzile, on his appointment five months ago, and thank him for his leadership and tireless efforts in steering his first MTBPS. [Applause.]
We live in challenging and uncertain times. There are, however, many opportunities for us to advance towards our goal of a better life for all in South Africa. This is a time for united action, for greater urgency and for an unconditional focus on those programmes which will demonstrate to our people that we do care and that we will change their lives for the better.
I hereby submit in this pack the Medium-Term Budget Policy Statement, and I table the Adjusted Estimates of National Expenditure, the Adjustments Appropriation Bill, 2011, the Division of Revenue Amendment Bill, 2011, the Taxation Laws Amendment Bill, and the Taxation Laws Second Amendment Bill for consideration by Parliament. The bottom line in this MTBPS, ladies and gentlemen, is that we are living in tough times, but in South Africa, even at 3,1% growth, we have a lot going for us. However, we will have to make some serious changes in our own composition of expenditure and in our own ability to invest more in infrastructure.
We will have to direct all of our energies with a much greater urgency towards faster growth and faster job creation. I am sure we can all do it together. Thank you very much. [Applause.]
Hon members, on your behalf, I wish to express a collective thank you to the hon Minister of Finance for his Medium-Term Budget Policy Statement. The Medium-Term Budget Policy Statement will be referred to the Standing Committee on Finance and the Standing Committee on Appropriations to consider, in accordance with their respective mandates. The revised Fiscal Framework will be referred to the Standing Committee on Finance for consideration and report. The Taxation Laws Amendment Bill will be referred to the Standing Committee on Finance for consideration and report.