Earlier this year, Standard and Poor's followed suit.
Commenting on the budget in February, Moody's noted that a rise of 110% of R630 billion in direct government debt since the end of December 2007 means the debt, serviced at 12% per annum, is the fastest growing line item in the budget, which at the margin is squeezing out the remaining resources for development spending.
To mitigate this trend, the rating agencies are looking for a consolidation in South Africa's debt and contingent liabilities. This will prevent a downgrade that will have a significant negative effect on our country and all South Africans in respect of increased borrowing costs.
Chairperson, the National Treasury budget before us today unfortunately does not provide much reassurance in this regard. On the table of performance indicators on p 5 we see that the debt service costs as a percentage of gross domestic product, GDP, rose from 2,6% last year to 2,7% this year, and will increase to 2,9% in 2013 and 2014. The fact that they do not decline in the medium term is particularly alarming when we listen to the Minister's warning on p 9 of his Budget Speech that the public sector borrowing requirement will rise rapidly after 2014, as the infrastructure programme of government accelerates. Mr Chairperson, I would like to ask the Minister: In what year does he forecast government debt will peak, because it's not obvious in the numbers before us today?
Of course, serious concerns about the sustainability of our fiscal stance are a relatively recent phenomenon in South Africa. They point to warning signs rather than all-out political travesties. If we are looking for political travesties, we need to dig deeper into the analysis of the rating agencies, which identifies increasing political risk linked to a competing ideological interest routine within the governing alliance.
These interests, which shift, depending on which candidates happen to be seeking high office, create a policy logjam at the highest level of government. They lead to the publication of conflicting economic policy documents by different factions in Cabinet and they compromise government's ability to tackle slow growth and our unemployment crisis.
Most disturbing are two recent examples where Treasury's efforts to tackle problems at the heart of our economy have been blocked by Cosatu's political manoeuvring. The first section of the saga is the youth wage subsidy. In 2011 the President declared that the year would be the year of the job. So National Treasury duly tabled a R5 billion youth wage subsidy in that year's budget, only to have it bogged down in Nedlac, where Cosatu refuses to debate it. Chairperson Mufamadi, you talked about balance, but I have it on reliable authority that Cosatu is refusing even to discuss the policy; that's not balance, sir!
This means that for the first time in a democratic South Africa a policy has been announced by the President, budgeted for in the national budget, given an implementation date, and then blocked by a trade union federation on narrow self-interest grounds. The policy remains at Nedlac two years later, even as up to 60% of young South Africans are unemployed or have given up looking for work.
Research shows, as the Minister knows, because it's his research, that if they are simply given a chance to get work experience, they are three times more likely to find a job. Hence the youth wage subsidy, a policy that National Treasury estimated would benefit over 400 000 young people and create 133 000 sustainable new jobs in three years. Importantly, Chairperson, it would create these jobs without altering labour laws or conditions of employment, meaning that the substitution of all the workers by new, younger workers would be minimised. Minister, your own document shows how the design of the policy would mitigate significant displacement. So, I don't feel there are genuine concerns there.
It's a national tragedy, however, that Cosatu's cosy political arrangement with the ANC has torpedoed the one plan to tackle youth unemployment from National Treasury that has brought support from the entire opposition, economists across the ideological spectrum and South Africa's second largest trade union federation, the Federation of Unions of South Africa, Fedusa.
So, it's back to the drawing board for the National Treasury, who last week told the Standing Committee on Finance that they would complete the redesign of the policy by the end of June and hand it over to Ebrahim Patel to be implemented as part of the broader youth employment strategy. So, we will have a Minister with almost no track record of delivering, whose last job was a senior position in Cosatu, being charged with implementing a policy flatly opposed by Cosatu.
A reply to a parliamentary question by the President this week indicates that part of the redesign will mean that young job seekers will require union or bargaining council approval for participation in the scheme. What's more, firms may be limited to creating one new job for every five people they employ. Minister, if this goes ahead, it will water the policy down to such an extent that it will create almost no new jobs.
The second example of Cosatu's flexing its muscle at Treasury's expense is with the recent e-tolling debacle. Regardless of how you feel about the e- tolling model, you have to see the absurdity in the National Treasury's arguing in court that a halt in e-tolling would have a devastating effect on our fiscus, even as the ruling party is striking a backroom deal with Cosatu to halt the project - a significant betrayal.
Unfortunately this leaves us with numerous unanswered questions about the R16,5 billion of the SA National Roads Agency's debt that is unguaranteed, including R8 billion of government pensioners' money. It also raises concerns about the creditworthiness of state-owned enterprises and whether all contingent liability should be added to government's debt. Fundamentally, it raises questions about how Treasury will pay for an expanded infrastructure programme. It also represents another example of how Treasury is increasingly being undermined by Cosatu and finds itself unable to generate the political capital required to implement is policies and plans.
Chairperson, the more the National Treasury's efforts in these key areas are undermined by Cosatu's political manoeuvring, the more this government's efforts to drive economic growth and tackle unemployment will be compromised. It is time that the President gives National Treasury the support it needs in the face of the unelected Cosatu's blatant self- interest. I thank you. [Applause.]