Hon Chairperson, hon Deputy Minister, hon members of the House and hon special delegates, the Minister of Finance, Minister Mboweni tabled National Annual Budget on 20th February and 21st February, four committees in both Houses finance appropriations received the briefing from the Minister, as well as the senior officials of the National Treasury.
The Parliamentary Budget Office, PBO, made a post Budget analyses where they brief the committee. On 28th February, public hearings were held and on 1st March the National Treasury responded to the inputs made by the twelve stakeholders that appeared before us in the public hearings.
The Minister was very frank on the fiscal position of the fiscus when he tabled the National Budget. Government can't do everything alone. The macroeconomic policy is directed to economic growth and distribution. Organised around the theme "risk, renewal and growth", government has never before been faced with such challenging circumstance to shape a Budget that balances and need to contain expenditure and be reasonably pro-poor and developmental.
The committee believes that the government has managed this reasonably well. In particular, we welcome the fact that pro-poor spending will once again grow in real terms. Sixty eight percent of the Budget goes to social commitments.
We note the Rl,2 trillion for learning and culture, R717 billion for National Health Insurance, NHI and health as a whole and nearly R894 billion for social development over the Medium-Term Expenditure Framework, MTEF.
Yes, in previous Fiscal Framework Reports, while noting the severe budgetary constraints, we called for higher increases in social grants as part of an overall approach to cushion the effects of the one percent increase in VAT. This remains our view. We believe more needs to be done to cushion the effects of the VAT increase on the poor.
Obviously, the Fiscal Framework has to be evaluated in terms of the extent to which it contributes to investment, growth, job creation and the reduction of inequalities.
We welcomed the President's Economic Stimulus and Recovery Plan and called for an implementation plan. We realise that such a plan is
not the responsibility of National Treasury alone, but government as a whole, but recommend that the National Treasury deals with this at its first quarterly briefing of the new Committee in the sixth Parliament.
Yes, we agree as raised in the public hearings, that there are very few if any economic drivers in the fiscal framework. We believe that the government also needs to follow up on the R300 billion pledges at the Investment Conference and see to it that this converts into bricks and mortar and jobs.
The committee agrees with the Treasury that there is an urgent need to ensure sustainable finances by containing the Budget deficit in stabilising public debts.
The committee welcomes the progress being made on growth enhancing reforms including the preparations to allocate the telecommunications spectrum, reform visa requirements and remove barriers to mining investment.
The downward revision of the growth rate forecasts from 1,7% to 1,5% in 2019 in the four months since October 2018 Medium Term Budget Policy Statement, MTBPS, and the possibility that the latest
forecasts may still not be realised given the risks identified. Once again, raises questions about the credibility of forecasts when the committee engage with the Treasury.
The committee notes that the Budget deficit and debt to gross domestic product, GDP, ratio have widened since the 2018 MTBPS. The Committee reiterates its concern about further increases in the public sector borrowing
The committee notes that in the context of the weak economic growth and the need to address the risk posed by Electricity Supply Commission, Eskom, the 2019 Budget proposes large scale expenditure reprioritisation and tax measures that narrow the deficit from 4,5% of GDP in 2019-20 to 4% in 2021- 22
The committee expresses its concern about the upward trajectory of the debt- to-GDP ratio, which is set to reach 60,2% in 2023-2024 and 60,1% the following year.
The committee notes that consumer price index, CPI, inflation is increasing and expected to be 5,2% in 2019 due to rising food inflation and electricity prices. Obviously, the biggest challenge is how to rescue Eskom. We welcome the decision to link the
R23 billion a year support to Eskom to the appointment of a chief reorganisation officer, who will contribute to the implementation of the mandate of the presidential task team on Eskom.
We urge that there be intensive and effective consultation with the trade unions on the restructuring of Eskom. The private sector is also urged to play its full part, both in its self-interest and in the country's interests, in contributing to Eskom's strengthening.
The committee agrees with National Treasury that if state-owned entities, SOEs, require financial support, the state should appoint chief reorganisation officers to work with their boards and management in the same manner that a curator does with private companies in trouble.
The committee also believes that there are needs to be far more progress on the sale of the noncore assets of SOEs. The committee will pay keen attention to how the Select committee on appropriations processes issues related to the public sector wage bill.
The revenue shortfall has now increased to R42,8 billion compared to the R27,4 billion initial revenue shortfall for 2018-19. The
National Treasury has attributed the shortfall to persistent weak economic activity in corporate income tax; CIT. Clearing of VAT refunds backlog will also reduce the net revenue collection
However, we note the improvements in SA Revenue Services, Sars, in these past few months. We look forward to the appointment of the new sars Commissioner and welcome the formation of a new Illicit Economy Unit; the strengthening of the Sars information technology, IT, system; the revival of the Large Business Unit; and the appointment of Judge Dennis Davis to assess the amount of revenue not being collected by Sars.
Given that billions of rands are lost each year through Illicit Financial Flows, IFFs and the urgent need for revenue, Sars needs, in cooperation with other state agencies, as we have repeatedly said to do far more and far more quickly to reduce IFFs. The committee will continue to pursue this matter vigorously with Sars and the other relevant agencies.
We also believe that there has to be more progress on the National Treasury deciding on the Davis Tax Committee recommendations on curbing tax evasion and avoidance.
We agree with the proposal in the public hearings that National Treasury should be more effectively exploring boosting revenue by taxing income and profits from the digital economy.
We note the concerns that the commitments made in the National Economic Development and Labour Council, Nedlac, by National Treasury and other government departments about reducing job losses related to the implementation of the Health Promotion Levy or sugar beverages taxes are not being fulfilled. The same issues may arise in regard to the implementation of carbon tax.
Progress on these Nedlac commitments need to be reported regularly to the committee, in the sixth Parliament and this will be done and that will be in our legacy report on the quarterly basis.
The committee agrees with the proposal in the public hearings that that the Office of the Tax Ombud should have more powers to investigate without asking for Ministerial approval and should be actively involved in amendments to the Tax Administration Act, 28 of 2011.
The committee welcomes the recommendations of the Nugent Commission of Inquiry on Sars Tax Administration and Governance and urges
National Treasury to introduce amendments to the legislation reasonably soon.
We also welcome the R526 billion for infrastructure over the medium term.
The Employment Tax Incentive Scheme has been very successful with 1,1 million young people being beneficiaries and we welcome the decision to extend it for another 10 years.
There are thirty recommendations and I am not going to deal with every one of them, but very important the committee will also refer the submission of the Pietermaritzburg Pensioners Forum. They came all the way from Pietermaritzburg to Parliament and the South African Insurance Association, SAIA, to the Select Committee on Appropriation to process further as they deal with appropriations issues. It is about inquest intentions.
The committee reiterates its views that government alone cannot ensure the necessary economic growth. Parliament, the private sector, the trade unions, other sections of civil society and the public all have a role to play. However, government has to lead in
this regard. We welcome the progress so far and would like to see more.
A word of appreciation, this is the last report on the Fiscal Framework and Revenue Proposals of the fifth Parliament and the word of appreciation to the support staff of this Select Committee for Finance. I worked with some of them for nine and a half years, others, others little bit shorter. Keep it up. With the finger in front of your chest and say, I want to be the best. You are doing well. The DA reserves its right on this report. I hereby table this report for consideration by House. Thank you.