Chairperson, I must speak to the Whips; it is a very hard act to follow the hon Fubbs in the afternoon. [Laughter.] Firstly, I would like to express appreciation. The bulk of parties support the MTBPS and so I would like to express appreciation. Secondly, I would like to wish the Minister of Home Affairs a very happy birthday today. [Applause.]
Let us just pause and remind ourselves of what the MTBPS needs to do. It needs to put on the Table of this House those issues that will be considered in finalising the Budget, which will be tabled in February. More importantly, it will provide the thinking of government in respect of the medium term.
And in respect of the request by the Portfolio Committee on Finance and the Joint Budget Committee, I'd like to suggest that it is something that this Parliament should welcome. They asked for additional time for this discussion because it goes to the heart of parliamentary oversight.
The first thing that we have tried to do in this MTBPS is to recognise that there is a series of imbalances in the economy. Many members have spoken on this issue. The imbalances are in evidence between rich and poor, but they are also there in that which does not work in our economy.
The fact that we continue to rely very heavily on the export of commodities and not sufficiently on the export of tradables, is one of those imbalances. There are also a series of global imbalances and what we don't want to do is to create a situation where you have a stop-start economy or you move from boom to bust, and therefore the choices we exercise are as important as they are.
Secondly, we have introduced into the discussion on economic policy management recognition of the fact that there are significant parts of our economy that are governed by cyclical revenue sources. If we try and build on those revenue sources into the future then we will have difficulties. The choices we exercise are about the prudent management of the revenue sources so that we can smooth out the passage.
Thirdly, we are making a very strong commitment to investment in growth and that is why in terms of the expenditure commitments that we are prepared to make in respect of all three spheres of government, it is the investment in infrastructure and the investment in human capital formation that must get precedence. Fourthly, I think that we are very mindful of the ravages of inflation. In the discussion in the Portfolio Committee on Finance we also looked at global trends in respect of food price inflation. So clearly, we are mindful of this. Where we have control, as in the case of social grants, we have made a very strong commitment to this House that we will try and prevent the erosion of the grants by ensuring that at least we can keep up with inflation. It is not very easy because there are, as the Minister of Social Development said at a press conference yesterday, some 12 million recipients of social grants.
It is a challenge but we have to deal with that challenge because that is what delivering democracy into the lives of our people is all about. It does not allow us to extend this to each and every household. There are constraints in respect of what we can do, and if we don't understand that they are constraints, I think the risk is that we talk past each other.
In respect of the committees that had discussed this, I wish to express our sincerest appreciation. Let me deal with some of the key issues that a number of members raised. Let me turn to the Chief Whip of the Second Largest Party in this House, the hon Ian Davidson. Part of the difficulty, hon Davidson, is that we must rely on information that we can trust.
From your intervention this afternoon, I'd like to draw attention to three issues that suggest to me that you are using information that is exceedingly untrustworthy. You talk of borrowing R2 billion a day to finance our current account deficit. That is what you said. Check your notes, sir. That is what one newspaper used this morning. If you are borrowing at R2 billion a day, it comes to R730 billion a year and 37% of GDP - we would be bankrupt and out of here. [Interjections.] The number is R2 billion a week. Still a concern.
The second issue is that if you read the newspaper and believe it, you will believe that the Treasury is opposed to the MIDP, for no other reasons than my personal association. We have a long-standing relationship with the DTI. There are issues to be sorted out, but there is no opposition from the Treasury. Despite our saying this to a particular journalist of that newspaper that you so favour, she cannot be convinced of it.
The third issue is sustainable growth and development. Let me read to you what we said in the speech at this very podium in delivering the Medium- Term Budget Policy Statement:
Because of its impact on productivity and innovation, trade policy has a central place in promoting competitiveness. Our approach needs to ensure that competition is fostered through tariff simplification and reform and that the incentives for investment and for research and development are appropriately targeted and effectively administered.
That is not what that same journalist wrote that I said.
My plea to you, hon Davidson, is to trust the information that we make available to this House, in the documents that we take time and effort to put together and ensure that Members of Parliament have the best sources of information available and don't have to rely then on the views of journalists, that those same journalists are not prepared to test against reality. It is just gobbledygook that they spew out because they believe that it sells newspapers. I plead with you; use the official sources of information.
The second issue I'd like to deal with is the fiscal stance and this relates to dealing with the circumstances that confront us, and the key circumstance that confronts us is that we are living in a world whose economy and, especially, whose financial markets are very closely interrelated. This means that when there are people who take bad decisions far away from you, it might have an effect on you.
If you look at what has been called the subprime crisis in the United States, mortgage lending was provided for people who had no jobs, no income, no assets. Poor families, primarily black and Hispanic families, were charged packet or backloaded mortgages. More than a million families are now out of those houses as it happens. This was a cruel set of actions by people who don't give a damn about the poor. Mortgages were extended and then wrapped up as though it was triple-A credit. The ratings agencies approved it. The banks accepted and bought it and lost huge amounts of money. More than R50 billion has already been written down and the number, because there is a pipeline behind it, is probably going to be in excess of two trillion dollars. A lot of these positions will be closed out in the next year.
We think that 2008 is going to be a tough year, not because of anything that we have done wrong but because of the interconnectedness. Why we have taken the position that is prudent in respect of running a fiscal surplus is because these are the facts before us; the facts were not the same when we tabled the Budget in February. If we aren't informed by the circumstances and the best available information, I believe that we do democracy a serious disservice. That is the position that we have taken.
It does not mean that we are cutting on spending. We have evaluated the cyclical revenues that we have available and by our best estimates it would be in the order of R87,7 billion. We have not put all of that aside. In fact, we have added R84,1 billion to the baseline expenditures for the coming three years. If you believe that it is only cyclical revenues, then all of it would be allocated. That is not the stance that we have taken.
We have said that we must spend on those things that will not recur, so we have only committed to spending about R42 billion of the cyclical revenues and they can be measured. You will find that spending in infrastructure and human capital formation, but you have to save something. What we have saved is in the order of R44,5 billion, roughly R15 billion a year over three years; 0,6% of the GDP.
It is a position that we have to take and it is information that we have available and there is no shame or failure in running a surplus. There is no shame in taking out the unevenness, the boom and bust. There is no shame in it hon Greyling, and we shall not apologise for that.
Let me just run through some of the issues raised. He talks about the corporate tax. I have a wonderful article here. I will give it to the hon Davidson and charge him 7 cents a copy. I will charge you 15c because there is a colour picture. It is an interview with the fourth wealthiest man in the world, Warren Buffett, who says that he should pay more tax. Part of the reason why he thinks he should pay more tax is that the US Administration should be doing more for people in that country.
He says in this article that, in fact, he pays far less tax than people employed in his companies. He says that there wasn't anyone in the office from the receptionist up, who paid as low a tax rate. He says that he has no tax planning and he has no accountant, and neither does he use tax shelters. He says that he just follows what the US Congress tells him to do. In following fashion on tax, pause and consider what others are saying. I rest my case.
The issue of energy tariff hikes has been canvassed in the debate. Again, it is something that we will have to deal with. From time to time we must take a view about step changes in prices. The poor can be dealt with through a series of subsidies. If you look at the allocations here, the provision of free basic services, that deals with the poor. Part of what we have to deal with is the carbon footprint, the emissions in the country and the fact that we are up against capacity constraints. We need a wider discussion about that issue, that this debate, as a sideshow, does not adequately lend itself to.
In respect of rural development, raised by the hon Singh and the hon Mohlaloga, I agree entirely. We should be doing a lot more than we are at the moment. Part of the challenge that confronts us is of course that the allocation of responsibilities by the Constitution does not give the national government all the authority over these things. The hon Singh is a former MEC in a province dealing largely with rural development in his portfolio and would understand this very well. If the call is not there and the capacity is not there, then sometimes you have to build the capacity.
This is why we say that, in respect of agriculture, we must get those extension officers in place. They can make a difference. They are the interface. They will make land reform work. That then lays a better foundation for rural development going forward. If we don't do that, then we might just be pumping money into a black hole, the same black hole that the hon Singh spoke about.
The other issue I would just like to touch on is what the hon Simmons has said about measuring. He is gone now. Oh! No, he is here. Hon Simmons, I would like to invite you to look at the results of the community survey released. It is the largest survey undertaken outside of a census. It covered 274 000 households. It spoke to just under a million South Africans, and it is an incredibly large survey. It provides us with a basis for information far superior to that which the UN would draw on ordinarily. The key issue, in respect of the community survey, is that there is measurable improvement in the lives of people and all of the issues we are talking about.
I think that we can look at education and outcomes; access to health; and access to services. I think we also have a very good understanding of poverty and the ravages of poverty. It is all there. It is published and not hidden from view. It does not make us look good in every respect. But it does clearly point out those areas over which government has direct responsibility, such as the extension of services and the provision of free basic services. Life for people is improving but it does not make a lot of difference unless you can earn and maintain those services and improve on living standards. That is a different kind of challenge but something we must talk about as well.
The hon Bekker spoke passionately - and not for the first time - about the repo rates. The Constitution crafts, in a very curious manner, the task of the Reserve Bank. It says that the primary objective of the Reserve Bank is to protect the value of the currency in the interest of balanced and sustainable economic growth in the Republic. This does not give the Reserve Bank a mandate to deal with exchange rate markets. It does not say: "Fix the rand against the dollar and keep it at that rate." It deals with the issue of price stability. This is where we must have a discussion.
There are countries in the world that have removed things like food and energy from their basket of inflation. So, you can have a basket of inflation that is perfectly stable because there is nothing in it. But the reason why you have to deal with price stability is because you need to understand the impact of price changes on the lives of our people. If these economists come before Parliament and say that every time the band is under pressure we should change the band, then we will never quite understand what happens in the lives of people.
We delude ourselves in order to meet an artificial objective. That I think is something we must clearly avoid, even if it looks bad. I think the commitment we must make is to have price stability because that allows everybody, especially working families, to log in their earnings. You do not have that rapid erosion.
Part of what the Reserve Bank looks at - I have said before that there should be an inflation report released at about this time - is an indicator that they have taken to watching with a lot more detail, the Private Sector Credit Extension - PSCE. Yes, the oil prices are there and the food prices are there.
In the numbers released two weeks ago, we can see that the PSCE to households is softening a bit. But to firms, it is still strong. That is okay. Firms are borrowing. Hopefully they are borrowing to expand, and that expansion will create jobs - which is okay. But it is households' credit extension that should flatten.
This is a result of very strong, very severe measures in respect of interest rate increases and also the impact of the National Credit Act. I am hoping that this will work through the system. The Treasury remains very confident and I am advised that by next year, inflation will come back into the band. That is what we have to hold out for. If we move the target every time, the measure is checked a little bit. I think we will do our people a severe disservice.
Once again, let me express appreciation to everybody who spoke in this debate and to the many parties who are supporting the Medium-Term Budget Policy Statement. Thank you.
Debate concluded.