Hon Chairperson, the ID fully supports the process of the Medium-Term Budget Policy Statement as we believe that it inculcates a greater measure of transparency and predictability in our budgetary process.
In terms of this year's Medium-Term Budget Policy Statement, the ID is firstly concerned with the projected budgetary surpluses over the Medium- Term Expenditure Framework period. While on the face of it the budgetary surplus might sound like a positive feature, in a developing country such as ours with such huge social deficits to overcome, a budgetary surplus is a very worrying indicator. In some senses it makes a mockery of our stated objective of building a developmental state. To the ID, it is a very clear indication that there is a fundamental weakness on the part of government to effectively spend its money in delivering quality services to our people.
What we clearly need is a government that is able to spend its money as effectively as it collects it. The argument that we are using this boom period to save for a rainy day simply does not hold water. It is a rainy day now for the millions of South Africans who continue to live in abject poverty and are not receiving the basic levels of services they are constitutionally entitled to.
It is the ID's firm belief that the capacity problems that are endemic in our government departments require a re-conceptualisation of the developmental state. What is required is a people-led development where the enormous capacity that resides in our communities and civil society structures is unlocked and financially supported through the state. If the state can't spend money effectively, then we need to direct it to those that can.
In this regard, the ID believes that our current Budget surplus would have presented a perfect opportunity to announce an extension of the child support grant for children of 14 years to 18 years of age, as per the constitutional definition of a child. The cost of such an initiative would amount to around R6 billion, which is certainly affordable and sustainable over the MTEF, given our large predicted Budget surpluses and this extension will also help in reducing school drop-out rates.
The ID does, however, welcome the extra money that has been set aside for grant recipients in the MTEF period to adjust for the increase in the cost of living that the poorest of the poor have to endure. While food inflation is currently running at double that of general inflation, it is clear that the past inflation-adjusted increases in grants are simply going to lead to the poor sliding into even greater levels of poverty.
Finally, on the issue of inflation, the ID maintains that, as a country, we need to openly debate this issue in terms of its relation to economic growth. Inflation is quite clearly a global problem and is driven in large part by excess consumption and major supply constraints, particularly in the areas of oil and food. At the moment, we are using the blunt instrument of interest rates to control an inflation which is largely driven by factors outside of our control. Interest rates cannot deal with the global inflationary pressures of oil and food. Increasing interest rates are choking off demand in our economy and potentially restraining growth.
The ID, therefore, believes that we need to consider revising the target bands for inflation and debate what level of inflation we can realistically endure. Thank you.