Thank you, Madam Deputy Speaker. The global economic meltdown has ignited a debate on which economic model is the most appropriate solution to the worst economic conditions in living memory.
Across the world governments in developed economies are intervening to stimulate their economies by increasing spending and cutting taxes. In their intervention, there is also the knowledge that once this crisis passes, the hand of government within the economy will be relaxed. They are performing the role expected of government by ensuring that their economies remain functional.
Despite hopes to the contrary, our own developing economy is not immune from the fallout, and we now face deteriorating economic prospects. Over the past few years, our economic prospects have been improving and there existed an expectation that this trend would continue.
Economic hardship is not good for democracy, especially if government seeks to create dependency from which individuals will struggle to emerge. The tightening hand of government in the economy can easily become a stranglehold that can choke the growth prospects of even the most vibrant economy. We need to be assured that the aim of policy is to stimulate the economy and not to drive it into an unworkable central plan.
We face the possibility of recession, although currently it looks like a slowdown. We need to be prepared for what is actually coming our way. Before the global crisis began, our economy was already grappling with the fundamental problem, identified by the International Panel on Growth, that too few South Africans were working and that skills were in short supply. This problem has not gone away and the environment in which this problem exists has become a whole lot worse.
This Budget is clearly focused on the global economic realities likely to hit us hard this year. The 2009 tax revenues will fall short on the baseline budget, and this will be compensated for by a widening deficit and more borrowing. There is R130 billion more spending than budgeted over three years and a cumulative R115 billion tax shortfall over this period. The budget deficit will need to be funded and cannot be sustained at this level.
The Appropriation Bill sets out where government spending will be applied. This is crucial because the application of funds to a particular part of our economic system influences the performance of the multipliers that drive economic growth. Government has already demonstrated that its mechanisms for delivery are inefficient at best, and that it is incapable of applying the people's money to optimal effect.
We simply cannot afford ongoing bail-outs to entities such as Eskom and SAA. We cannot afford to squander the taxpayers' hard-earned money on departments that fail to deliver and on fixing the gaping holes in public enterprise balance sheets. Underwriting Eskom's debt is a further noose around the neck of our economy.
An economic model that places the state at the centre of the economy as a controller of resources and as a dispenser of patronage, denies the economic freedom that should follow from the long and painful struggle for political freedom. Command economies across the world did not work because they denied this human right.
What will work is the hand of government facilitating an environment within which the engine room of the economy, driven by business and entrepreneurs, is stimulated to the extent that it not only survives the prevailing harsh conditions but grows stronger and is thus able to sustain the necessary social spend.
Small steps have been taken to ease the process of doing business, but far bolder steps are required for any real economic impact. A reduction in the corporate tax rate would have been appropriate. An increase in the fuel levy is not. A delay in implementing mining royalties will not compensate for the damage done to the industry as a result of the Eskom fiasco.
The DA's approach to economic development remains rooted in an unwavering belief in the empowerment of the individual, with a focus on boosting the economic engine room. Millions of well-equipped economic agents acting in the economy will provide a far more powerful stimulus than a government that has already proved unable to implement its own policies.
The process of retirement reform must bear in mind that optimal asset allocation and the maximisation of returns cannot be achieved through a central fund, managed by bureaucrats. Clarity is required on exactly how the proposed national health insurance will be funded and how it will fit into the overall reform programme.
The DA's focus remains on breaking the cycle of poverty. Our carefully designed and costed economic model presents the people of South Africa with a viable alternative to life without hope of ever participating in the economy. Our economic modelling shows that spending on appropriate points in the economy can lift all of our people out of the poverty trap. The aim should be to minimise dependency on social grants, rather than to boast about the rising number of grant recipients.
Since 1994, government has initiated several programmes with limited success. It has not succeeded in breaking the back of poverty. The poverty line index promised to be available weeks after last year's budget has not materialised. The very basic starting block of quality education has not been achieved despite the steady increase in annual spend. The process of getting appropriately skilled people into the workforce in sufficient numbers has stalled. A wage subsidy, opportunity vouchers, a simplified tax regime and less onerous business regulations could have been the catalysts to bring this process back to life.
Just as the economic crisis has presented an opportunity to question the market system, it also presents an opportunity to question the missing ingredient in the government's approach to poverty elimination, that ingredient is the individual wanting to soar beyond the confines of a life trapped within the boundaries set by the circumstances of birth. An environment that encourages individuals to be everything that they are capable of being is the missing ingredient. We need an open-opportunity society for all.
No system is perfect and our economic system is no exception. We have witnessed at first hand how things can go horribly wrong and will feel the incredibly painful process of correction. We do, however, need to remain focused on the long-term prospects for our economy, influenced by the real drivers of economic activities such as entrepreneurs and small to medium business enterprises. Sentiment influences the economy, and we must remain hopeful that we will not only survive the crisis but emerge stronger when it is over. To achieve this, we need to make the right choices. To make the right choices, we need to filter out the noise and focus on what actually works. Thank you. [Applause.]