Hon Chairperson, let me thank all members for their contribution and the committee for its support for this Bill. Hon Mufamadi, hon Adams, hon Koornhof and hon Swart in particular have very clearly explained the rationale which requires us to put this Bill before the House.
Regrettably, hon Harris still has a kind of dinosaur element to his thinking. For his and for his party's benefit, let me explain once again why we require a Bill like this on credit rating agencies. We require a Bill like this on credit rating agencies in order to have certainty, consistency, a clear legislative framework and, above all, harmonisation of our legislation with international trends and commitments that we have actually made.
Let us also remind ourselves, as speakers and hon members have done, that credit rating agencies and their challenges came to the fore for the first time in almost 110 years in 2008-09, when the financial crisis hit the globe. As speakers have pointed out, they came to the fore because they had misread the risks involved in subprime lending, subprime lending products and the derivatives that emerged from subprime lending, which gave us the recession, not only in the United States and Europe, but also in our own country. We seem to forget that we have still not recovered from the impact of the recession and that we still have a long way to go.
We are members of the G20 and we participate in the global Financial Stability Board. We have an obligation in respect of developments that are taking place in this regard, all of which are a reaction to the global crisis that we are confronted with. More important is the realisation that, for about 20 years before the crisis, the world had fallen asleep. It had begun to believe in an ideology which said, as the hon Harris said, that we needed a much lighter touch.
It is this lighter touch that got the globe into trouble, put the regulators to sleep, and allowed them to become captive to certain interests in the financial markets. Everything that we are seeing before us, and the great work that is happening in the G20 and the Financial Stability Board, is in fact exactly opposite to the lighter touch approach. It is now beginning to compensate for 20 to 30 years of misapplication of the regulatory approach in this particular regard.
South Africa is fully aligned and its approach is fully harmonised with international developments and commitments. South Africa is the first country in Africa to pass this legislation and to create the kind of legislative certainty that we require within our own situation. We must dismiss any idea that credit rating agencies will have their independence interfered with. The legislation takes care of that.
There is a difference between independence on the one hand and accountability on the other. What we are saying is that you are independent, make up your own mind, and give your own rulings. We have the democratic right to disagree with you when you do so. At the same time, what this legislation does is to ensure that we have proper accountability to an independent regulator in the form of the Financial Services Board, FSB, in South Africa.
In fact, what we have done through this legislation places us way ahead of many countries around the globe, and indicates to those who want to lend to South Africa and to South African entities, which involve the private sector and the state-owned enterprises - all of whom go and borrow within and outside South Africa - that we fall within the investment grade as far as ratings are concerned.
Reference was made to the question of draconian powers by the hon Harris. The only question in the committee that was raised by a representative of the Treasury was that sometimes when extreme crises take place within the financial sector, draconian or far-reaching powers are required to actually intervene. Go back to 2008 and the manner in which the United States government had to intervene and you will find that, overnight, they had to find trillions of dollars, print them in the Federal Reserve, make sure that they made them available to the banking system and stopped the crisis from becoming any worse that it actually became.
If we went through very slow, pedantic processes, the United States would not have been able to stop a depression from setting in, let alone a recession which we were impacted by. We are told by the hon Harris, as well, that there are issues of the cost of compliance. That is a perpetual balance that, as in anything in life, you have to get right.
How do you fall within the regulatory environment, but also not impose too many costs on compliance? There is no perfect formula or textbook for this. It is experience that will teach us whether we are overstepping or understepping the mark in this particular regard. We are told that the endorsement process is onerous. It is not. All it is saying is that, if you are using a rating that has been provided by an agency outside of the geography of South Africa, that agency must be registered with the Financial Services Board. That's all - not each rating or opinion being required to be endorsed, as might have been suggested.
In the last minute and a half, let me also refer to the hon Harris's rather melodramatic, and I believe unnecessary, remarks about the fiscal framework. To make reference to the fiscal framework and the smoke and mirrors concept is absolutely uncalled for. We are internationally recognised as being first to second in budget transparency. Yet, to score cheap political points, we are using words like "smoke and mirrors". We are told that we are depending on underspending. All we are doing is estimating a reality. The reality is that entities do underspend. We are anticipating and taking that into account in a transparent way. It is not hidden anywhere.
He has a complete misunderstanding of contingency, which we repeatedly explained in the committee meeting chaired by the hon Mufamadi. If you like, contingency caters for a surprise element such as floods and natural disasters. In the outer years, contingency also caters for policy initiatives that we can't anticipate at this point in time; and then the contingency gets absorbed within the normal framework.
The hon Harris must stop scoring cheap political points. Thank you for your support. [Applause.]
Debate concluded.
Bill read a second time.