Chairperson, hon Minister, ladies and gentlemen, during her address to the Standing Committee of Finance in April, the Reserve Bank Governor, Gill Marcus, painted a concerning picture with regard to the South African economy.
Today, we accept the challenge by the Minister that we should all write a positive narrative - although this will be problematic as the Governor warned that South Africa is confronted with a toxic mix of slow growth and high inflation and that the stagflation danger for South Africa needs urgent and thoughtful interventions. But no one in this House today can dispute the fact that South Africa's economy is facing serious challenges. The Minister has alluded to the fact that we are facing challenges in terms of implementation.
We have to successfully accelerate growth while at the same time containing inflation. Our economy is expected to grow at a very low rate, a revised rate of 2,7% in the next year, lagging far behind our peers in Sub-Saharan Africa, who are expected to grow at an average rate of 5,5%. Furthermore, the International Monetary Fund, IMF, has unfortunate news for us and has also slashed our growth forecast for 2014 from 4,1% to 3,3%.
Noting the importance of unemployment, and it being the result of low growth, hon Minister, we note the Treasury's commitment to the National Development Plan, NDP, and the achievement of decent employment through inclusive economic growth. But as the DA we are very concerned about the official unemployment rate, which has increased to 25,2% in the first quarter of 2013.
Even more alarming is the number of discouraged workers, which has increased to a staggering 2,3 million, while the expanded definition unemployment rate peaked at 36,7% nationally. Further statistics are even more alarming. They indicate that two out of every three South Africans under the age of 24 are unable to find or sustain a job. By the end of this year, our budget deficit will exceed 5% of the gross domestic product, GDP, for the first time since 2009. The effect of the larger budget deficit will be to drive government debt higher over the medium term, topping 50% of the GDP in 2016 - a very high expected debt rate.
Debt levels, including the contingent liabilities - I expect we had to have a debate regarding this figure - extended beyond 150%, indicating that debt levels could leave South Africa vulnerable if our economy declines. Treasury's projected reduction of the Budget deficit to 3,1% in 2015-16 may very well be a very ambitious target at best, given South Africa's slow growth prospects.
With regard to the important issue of inflation, it is noted that food and fuel prices have pushed headline inflation up to 5,9%, very close to 6%. Currency weakness compounded these effects and many of my colleagues today mentioned the rand trading at 5,9%. This will have compounded effects and is expected to place further upward pressure on inflation in 2013.
South Africans continue to face the burden of ever-increasing prices. Increases in electricity, fuel, food and public transport have all made the cost of living much more expensive, and unaffordable for some people. Potential e-tolling, increases in rates and taxes in municipalities and increases in the cost of water are all further concerns in relation to rising prices.
The Minister mentioned the expansion of our power generation, but Eskom has a second application to the National Energy Regulator of SA, Nersa, with regard to financing the six nuclear bills. Two Ministers spoke about this, that this is now a done deal. But what will the implications be for the economy where we had a fortunate reduction in electricity from 16% to 8%? If the second application comes into effect, it will, in effect, escalate prices to above 20%. What will the effect on inflation be? It will result in unaffordable electricity pricing, and electricity is vital for economic growth. Eskom's application should rather consider the DA's point of view, which is that we should move towards inflation-related tariffs. The reality is that the poorest of the poor are the ones hardest hit by these factors.
In order to address these challenges, South Africa needs a clear plan. We have a clear plan. It is to direct us towards economic growth and prosperity. This plan will result in the achievement of job-creating economic growth and the elimination of poverty. We have just the right plan, and it is called the NDP. The Minister has alluded to the contributions that the NDP has made in terms of aspiring to job growth. The DA supports this plan with our own growth and jobs plan released last year, making many of the same proposals as the NDP.
National Treasury has a vital responsibility to ensure that the NDP is implemented across all departments in a co-ordinated manner. We have spoken about the lack of co-ordination in terms of the electricity pricing models. We need resolve in our policies and leadership when it comes to implementation. It remains to be seen whether Treasury will have sufficient political capital to oversee the implementation of the NDP. Let me tell you why. Cosatu's stiff opposition to the proposed youth wage subsidy and Treasury's resultant hesitation in implementing the youth employment tax incentives are prime examples of successful policy blocking by the union federation.
What is really concerning about Cosatu is that it has a history of blocking policies. It blocks policies that are aimed at tackling our greatest challenges and helping the poorest and the most vulnerable. And now Cosatu is growing ever louder in its opposition to the NDP. Will the Minister and President Zuma be able to stand up, lead and implement the NDP or will it, as with the youth wage subsidy, also be held hostage by Cosatu?
The DA is concerned about the new Tax Administration Act that came into effect in October. We heed the call by Prof Dennis Davis, head of the Tax Review Commission, that we should, in fact, perhaps review this legislation. Judge Davis has raised alarm over the effects the Act may have on small businesses, and is quoted as saying: "When it comes to small businesses we have to think very carefully if this Act has struck the right balance between the rights of the taxpayer and the SA Revenue Service's powers." Judge Davis then made specific reference to transactional costs and complexities of the legislation. These are serious concerns when taking into account our objectives of making it easier, cheaper and faster for small businesses to start up, grow and create jobs. If necessary, we should amend the Act. Increasing the burden of doing business in South Africa is definitely not the way to reach the goals of the NDP.
Another potential deterrent to growth that will be closely monitored by our committee, I believe, is the proposed carbon tax with expected implementation in January 2015. In principle, the DA is opposed to any tax increases that could stand in the way of stimulating growth, but I believe we have consensus in this. We believe that the proposal could result in unintended consequences that will have a negative effect on the economy. We believe that positive rather than punitive measures should be pursued to affect the behavioural changes required to build a green economy.
With regard to the retirement reform legislation - and the Minister has touched very briefly on that - currently tabled in Parliament, we call on the Minister to note the valid arguments presented by the savings industry in opposition to the prescribed assets approach. These concerns include that prescribed assets could undermine the value of members' and policy- holders' savings. Investments, Minister, at market competitive rates do not require prescription. The primary purpose of retirement savings should be to assist savers to achieve comfortable retirements.
In conclusion, the DA's top priority remains growing the economy and creating jobs. We congratulate the hon Minister on managing South Africa's finances under difficult global circumstances. The path is riddled with new and old challenges. The map and compass to steer us towards prosperity is the NDP. Where Treasury's actions reveal a commitment to this plan, we will support it; where it doesn't, we will oppose it. I thank you. [Applause.]