Hon Chairperson, hon members, and colleagues that have joined us as well, it gives me great pleasure to present the National Treasury's 2013 Budget Vote for the consideration of the House. In doing so, allow me to reflect briefly on where we stand in meeting our long-term social and economic development objectives. The global economic outlook is still depressed, and so our own efforts to strengthen economic performance remain critically important. I will say a few things about this challenge shortly.
Even in the currently depressed environment, in which growth is lower than we would like and the revenue outlook leaves little room for fiscal expansion - including increases for Members of Parliament, as somebody approached us - we are continuing to make progress in the service delivery programmes that are central to development and transformation. Social and economic progress is best measured over the long term.
In the past 19 years, we have seen substantial advances on several fronts. Let's reflect on some of them: Our economy has grown by over 80% since 1993; national income per capita has increased by 40% in real terms; total employment has increased by more than 3,5 million since 1994; gross fixed capital formation increased from 15% of the Gross Domestic Product, GDP, in 1993 to an average of 20% over the past five years; our social grants system now reaches over 15 million beneficiaries; over 3 million housing units have been built; access to electricity has increased from 50% to over 80% of the population; access to water and sanitation has similarly improved; over 1,6 million work opportunities were created in Phase I of the Expanded Public Works Programme, EPWP, and for the period ahead, it aims to achieve over 500 000 full-time employment opportunities; the new tax administration has been established in 1994 in the SA Revenue Service and an overhaul and modernisation of the tax structure and the administration itself has taken place; over R600 billion in Black Economic Empowerment transactions has been recorded since 1995; we have demonstrated our capacity to host major global sporting events; and South Africa remains a favoured destination for conferences and events.
We continue to see strong growth in tourism, and after something of a lull since 2010, we are now seeing renewed investment in tourist accommodation. Major public infrastructure projects include our partnership with Lesotho to build the Highlands Water Project, the completion of the Gautrain rapid rail link, the expansion and rehabilitation of our main airports, major national road improvements, and the expansion of power generation capacity and the rail transport that is now in progress.
The total value of infrastructure projects currently under way and in planning amounts to over R3,6 trillion. As we have done these things, we are also restructuring the fragmented public administration system inherited from the apartheid era, which we tend to forget while restoring order to the overall public finances. Public debt was reduced from nearly 50% of the GDP in 1994 to 23% in 2008 just before the recession. The main budget revenue increased from R112 billion in 1994 to over R800 billion last year, while expenditure increased from R135 billion to around R1 trillion.
You will recall that in order to table the 2013 Budget in February, I drew attention to the National Development Plan, NDP, which was published last year, and the contribution that it has made in focusing our policies and programmes on long-term growth and development challenges, and in a sense, building on the foundation that I have very briefly outlined.
We need the National Plan Development to be a catalyst of ideas, and a spur to further action in addressing the challenges of growth, employment, environmental sustainability and social cohesion, amongst many aspects. On infrastructure investment, we also have the work of the Presidential Infrastructure Co-ordinating Commission, PICC; on industrial development, we have the Industrial Policy Action Plan, Ipap; On environmental protection, we also have the biodiversity and sustainable development strategies. All these plans complement one another.
Much of the work of the National Treasury is directed at understanding and reviewing the fiscal and financial implications of these strategies and plans. This is a job that is getting more demanding every year. We have many policies, strategies and action plans.
However, what we are not doing well enough is to convert these plans into actions and implementation. The House will welcome the new emphasis on performance and measuring results, in our budget documentation and also in the Treasury planning documents and the strategic plans of the SA Revenue Service, the Development Bank of Southern Africa, DBSA, the Land Bank and other institutions that report to this Ministry, some of which will be covered by the Deputy Minister in his address to you.
Last week, the Portfolio Committee on Finance scrutinised the tabled plans and the plans for 2013-14 of both the Treasury and the SA Revenue Service. The Portfolio Committee on Finance rightly emphasised in its report to the House that not enough is being done to strengthen municipal governance and financial management. We agree.
Treasury has placed 1 800 interns in municipalities this year, and aims to expand further on this programme in the year ahead. There is one aspect that needs to be raised frankly with the House. The Pretoria Treasury can't run 250 ward municipalities. Municipalities, in terms of the Constitution, are the responsibility of municipal councils. It is primarily the municipal councils and political and administrative leadership in the municipalities that must take responsibility for what is happening with respect to financial management in municipalities.
The finance committee has requested a progress report on the establishment of the chief procurement office and steps taken to improve supply chain management processes to combat corruption. This is indeed a top priority, and a new organisational structure for this office has been agreed upon. New procurement rules will be implemented this year and steps are being taken to improve the capacity of procurement officials. There will indeed be plans to modernise systems and increase accountability and transparency.
The finance committee has also requested a progress report on provincial financial management interventions. The outcomes for 2012-13 reveal marked improvements in the financial performance of provinces in which the National Treasury has been active. The committee asked for reports on the new automated tax clearance certificate system and there is indeed progress in this regard, and on the single business registration project, which involves several other agencies as well. We will briefly cover some of the progress that has been made on each of these matters. Let me turn to the outlook for the economy.
We have to face the reality of slow growth internationally and difficult challenges in our own economy. But it is time to construct a positive narrative and to work together to implement it. There are many countries in the world that have all sorts of instability, even terrorist incursions, but when you look at the economic narrative around those countries they are extremely positive. If you look a little deeper, you will find all sorts of challenges in those countries. It appears that South Africans want to specialise in focusing on the negative. It is absolutely urgent that we start focusing on our own positive stories as I have outlined earlier in the speech. [Applause.] In this regard, let me quote John Maynard Keynes, who said:
The future never resembles the past - as we well know. But, generally speaking, our imagination and our knowledge are too weak to tell us what particular changes to expect. We do not know what the future holds. Nevertheless, as living and moving beings, we are forced to act.
In other words, despite the uncertainty that we have around the globe, we have to ask ourselves: What is it that we can do for ourselves by ourselves for the 50 million people we are primarily responsible for? The burning question for South Africans is not only how we navigate through global uncertainty and risks but can we become more resilient and globally competitive? What will it take, and can we up our game? We have much strength to build on: good infrastructure, many institutions at work, a robust democracy, a dynamic private sector, strong public finances and healthy financial institutions, amongst others.
South Africa's GDP growth, as you know, was 2,5% in 2012, is likely to be 2,7% in 2013 and, accelerating to 3,5% next year, all things being equal. Overall investment spending remained robust last year, growing by 5,7%. Consumer confidence still remains weak, and business surveys also suggest fragile levels of confidence in the economic outlook. This is likely to constrain private household consumption and business investment during 2013. The formal sector non-agricultural employment has slowed in tandem with the slowdown in growth, with just 83 000 jobs created in 2012, up 1% on an annual basis, but is nonetheless positive growth in jobs.
Labour unrest and stoppages in the mining sector contributed to much of the weaker economic performance in 2012, as we reported to the House before. In part, slower growth in South Africa reflects a weak global environment.
The International Monetary Fund, IMF, has downgraded the global GDP growth outlook for 2013 to 3,3% from 3,5% previously, although it kept its 2014 estimate unchanged at 4%. The IMF now has new terminology for global growth. It sees, what they call, a three-speed global economy with emerging markets continuing to lead the recovery, and a growing divergence between resilient growth in the United States and contraction or sluggish growth in the euro area.
While global financial conditions have improved, the outlook remains weak, with downside risks emanating from the Eurozone debt crisis, the US fiscal policy challenges and the slower growth in major emerging markets, including China, India and Brazil. These are clearly circumstances in which we need to take bold steps to strengthen economic performance.
The present uncertainty in the labour relations environment in mining and other sectors requires concerted action by organised labour, business, civic leaders and government. There is no room for complacency here; we are all in this together. If we do not resolve our labour relations challenges, we will be losers. We will see deteriorating confidence, job losses and business failures. But if we find balanced, fair and socially responsible solutions, we all stand to gain and we will see higher investment, higher employment and improvements in living conditions. This is the choice that lies before us.
Infrastructure investment is also an arena in which we need to see concerted action. This is not just about building and maintaining the energy, water and transport networks we need for faster growth, but it is also about raising our savings performance so that we can finance more rapid investment and growth. In urban development, we need faster investment in housing. Regarding rural development and agriculture, we are addressing constraints to land reform and improving support for emerging farmers. With regard to further education and skills development, there is greater alignment between the skills that businesses need and the curricula that our colleges offer. And concerning regional development and trade, we are beginning to address the issues of infrastructure and institutions across national borders. I need to stress that economic growth in our times requires new ideas and, if you like, the new heterodoxy and a diversity of approaches. In the words of the renowned economist Michael Spence:
No one has a complete formula for restoring growth. We will have to be persistent, determined, pragmatic and experimental - a mindset familiar to policy-makers in emerging economies where these complex issues are being dealt with on a regular basis.
As part of strengthening our economic performance, a sustainable fiscal policy stance remains critical. Owing to sound management of the fiscus when economic growth was strong, government was able to enter the 2008-09 recessions with healthy public finances and a comparatively low level of debt, as we know. The countercyclical response to the downturn in economic conditions has been substantial and, by various measures, was amongst the largest in the world.
From the peak of the economic cycle in 2007-08 when we were doing very well as a country, the budget balance swung from a surplus of nearly 2% of the GDP to a deficit of 6,5% in 2009-10. In aggregate, the final outcome of tax revenue for the 2012-13 fiscal year amounted to R813,8 billion, a 9,6% increase or R71,2 billion higher than actual collections in the year 2011- 12. We thank all of you for your contribution to this R813 billion. It's your taxes as well. [Applause.]
Revenue collected this year was R3,7 billion higher than the 2013 budget target. The persistence of economic weakness since 2009 has meant that government's share of the economy has remained substantial and the deficit has remained high. Countercyclicality is not just about supporting the economy and sustaining government spending when revenue declines due to economic conditions. It is also about reversing the accumulation of debt built up during difficult times when economic conditions improve, and that is the challenge that we have in the years that lie ahead. At the same time, we need to enhance our capacity to finance long-term infrastructure investments and municipal capacity.
I am pleased to report that the DBSA outlines a concerted effort to support basic and economic infrastructure development in South Africa and the region. If I get a chance during the answering part of this session, I will give you some details in this regard.
A wide range of measures have been taken to improve the environment for retirement savings and reduce costs and risks associated with financial services. A central proposal is that pension funds should transfer members' balances into a preservation fund when they change employers, as the default option, and should also identify suitable retirement annuity products for the years beyond retirement.
A harmonised tax treatment of pension and provident fund contributions and benefits is also proposed, together with higher caps on contributions. We have also proposed steps to enhance the governance of pension funds. I will shortly meet with business leaders in the life insurance industry to discuss the lowering of costs in this sector. A first draft of legislation dealing with these proposals will be published towards the end of the year.
We have taken a number of steps to improve our already world-class financial system. This includes a complete overhaul of our securities legislation. Parliament passed the Financial Markets Act last year, and the President has agreed to it coming into operation on 3 June 2013, this year. In addition, over the past year, I have initiated a comprehensive process to deal with abuses in unsecured lending. In October last year, banks agreed to put in place measures to curb excessive lending to vulnerable households and the selling of inappropriate products. The ongoing monitoring of both these measures by market conduct regulators is playing a critical role, and they need to continue the excellent work they are doing.
The National Treasury is involved in a number of areas apart from the ones that I have mentioned: infrastructure investment that supports regional integration, reducing red tape, corruption and delays at border posts, using our financial institutions to partner with businesses wanting to expand into the continent, and developing regional markets for food, energy and water together with other government departments.
Our participation in Africa-wide and regional bodies also contributes to regional co-operation: The Southern African Development Community Protocol on Finance and Investment assists in bringing about macroeconomic, monetary and financial sector convergence in this region. Reforming the Southern African Customs Union Agreement remains a priority for South Africa, to improve its contribution to trade promotion and development finance as well as fiscal sustainability for our neighbours. And trade facilitation is making progress through the creation of one-stop border posts and improved customs legislation to increase border efficiency.
The strategic plan for the Treasury covers, amongst others, changes in respect of the Chief Procurement Office, CPO. The CPO was created in response to the need to improve public sector supply chain management. The objectives of the office include the following - and the work has already began in this regard: Modernising state procurement by taking advantage of information technology; improving compliance with relevant legislative frameworks; enhancing governance, and increasing accountability and transparency in state procurement; and improving capability and the performance of supply chain management practitioners. This office has already intervened in a number of procurement areas in order to ensure that we stop the unnecessary expenditure of state money either because of overpayment or other mishaps in the procurement process.
In conclusion, I submit the Budget Vote of the National Treasury for your consideration and trust that all the parties will support the good work that Treasury does. Thank you. [Applause.]