Madam Speaker, hon members, the global economy is in a serious recession, the most severe in the past 50 or 60 years in terms of depth and length. The scale of this recession is alarming and has far- reaching consequences. Developing countries are finding it difficult to raise funds in international capital markets as the cost of borrowing has just shot through the roof. South Africa is in a very fortunate position as it can still raise most of the required funds in the domestic markets, as our domestic capital markets are very sophisticated and deep.
The private capital flows to emerging markets are drying up as the stimulus package initiated by the developed countries is sucking up all the available funds. The problem emerging markets have to deal with is the collapse in consumer demand in the United States and the European Union. The collapse in the housing market has meant that households could not use the equity in their home-loan finance consumption. This has an adverse effect on the exports from emerging markets, hence a drop in manufacturing output.
The fact of the matter is that US consumers are the most heavily indebted in the world, financing most of their consumption through credit. Access to that credit has ceased temporarily because banks' balance sheets have come under pressure as a result of subprime losses. The developed countries have to deal with two challenges, that of bailing out their banks and that stimulating the economy through massive infrastructure investments.
The Asian Tigers are also experiencing serious problems. Their narrow focus and excessive dependence on exports have made them even more vulnerable, compared to their Western counterparts, as their export-led growth was tied up to the American consumer boom.
About 36% of South African-manufactured exports are sold to the G7 industrialised countries. Only about 5% of such exports go to Brazil, Russia, India and China. Currently, the economies of the G7 countries are experiencing serious contraction in economic growth.
Above all, we need to realise that the neoliberal agenda of lax regulation of financial markets has landed the global economy in this mess. Those who have been arguing about rolling back the role of the state in the economy must realise the folly of their ideology.
I want to go back to the statement made by one congressman to Federal Reserve Chairman Bernanke, I quote:
Wall Street had a party, got drunk and broke chairs. American citizens were not invited to the party, and now they are expected to pay for the damage caused by Wall Street.
Wall Street has landed the global economy in the mess it is in now. The neoliberal agenda of reckless financial deregulation, turning a blind eye to the regulation of all manner of derivatives, has proved dangerous to the health of the global economy. The world needs comprehensive regulation of financial markets.
These global economic developments have major implications for the South African economy. Lower commodity prices have a huge influence on mining output and ultimately translate into reduced revenue collection for South Africa.
These international economic developments also have far-reaching consequences for the budgets of the Southern African Customs Union - that is Botswana, Lesotho, Swaziland and South Africa. The customs and excise revenue for each member state is collected into a common revenue pool and distributed to member states according to an agreed-upon formula. The problem is that customs revenue is highly volatile and closely follows the business cycle.
Customs revenue represents over 50% of the budget revenue of Lesotho and Swaziland. In the case of Botswana and Namibia, customs revenue represents over 20% of their budget. The contribution of customs revenue to our total revenue is negligible and has never been considered as a major source of revenue.
I'm mentioning these facts because customs duties for 2008-09 are expected to be R7 billion less than expected. This will have a negative impact on the budgets of Lesotho, Swaziland, Botswana and Namibia. It might force these countries to reduce their expenditure.
The ANC election manifesto acknowledges the existence of these serious global economic challenges. This Budget should be seen in the context of the realisation of the objectives of the ANC manifesto.
This year's Budget is guided by the following five principles: One, to protect the poor; two, to build the capacity for long-term growth; three, to sustain employment growth; four, to maintain a sustainable debt level; and, five, to address sectoral barriers to growth and investment. These are the principles that will guide the ANC for the next five years. Electricity failures in the past clearly indicate that South Africa's ageing infrastructure is a major impediment to economic growth. The R787 billion infrastructure investment plan will ensure that we build our capacity to create employment and grow the economy.
The building of rail networks, roads, school buildings, dams, port operations, housing and investment in power generation will lay a solid foundation for long-term economic growth. Decent work opportunities will be created in the process of building this infrastructure.
We have to strengthen the role of agriculture in our economy. The sharply food prices in the past clearly point to the need to focus on domestic agriculture as these prices have a negative impact on the poor. This is a labour-intensive sector and we need to pay sufficient attention to it. The manifesto mentions a number of interventions that will be made to strengthen the role of agriculture and food security.
We have to increase our export performance. Compared to other emerging markets, South Africa's export performance has not been impressive. We are still importing much more than we export. The 2009 Budget includes R17 billion for industrial support and tax incentives, which will assist in improving our export performance. It is important that the next Parliament should require an annual report on the effectiveness of these tax incentives and industrial support measures.
The ANC manifesto is calling for special-sector programmes to strengthen our industrial and trade capacity. The interventions contained in the national industrial framework will ensure that we build a competitive manufacturing industry and create jobs.
The ANC's plan is to step up the Expanded Public Works Programme linked to infrastructure and meeting social needs with home-based care, crches, school cleaning and renovation, community gardens, the removal of alien vegetation, tree-planting and school-feeding.
The 2009 Budget introduces a new performance-based incentive to municipalities to increase the labour intensity of Public Works programmes. An additional R4,1 billion is allocated to the Public Works programme.
We will manage our economy in a manner that ensures that it continues to grow, that our people benefit from that growth, and that we ensure that we create decent work for the unemployed, for workers, for young people, for women and the rural poor. We'll remain in touch with our people and listen to their needs. We have achieved much in the past 15 years, but we are committed to doing more. Working together, we can do more! I thank you. [Applause.]