Chairperson, I will also try to watch the clock! I must say that we have listened to some good speeches this morning. There is a liveliness in this Treasury debate, which should be the most important debate on the calendar. However, for some or other reason people are not so interested in it.
There was a general consensus around the time of the Budget that South Africa's headline fiscal ratios appeared to be healthy, but there were vulnerabilities. There is doubt as to whether we will be able to keep recurrent state expenditure under control and the developments in Europe are not assisting us. A higher oil price and a volatile rand could easily push the percentage of gross debt to gross domestic product, GDP, to a danger limit of 50%. At these levels, Business SA is concerned that a debt trap becomes a significant risk and development goals could be in jeopardy.
Against this background, the former World Bank Chief Economist, Joseph Stiglitz, remarked that South Africa would have to intervene to manage its exchange rate if it were to avoid the risk inherent in the unstable world economy. This does not make sense. Even hon Rob Davies is being reported as being on this bandwagon. He is calling for an intervention to manipulate the rand. Even his deputy director-general is comparing us to China and calling for an intervention. The most dangerous thing that can hit this economy now is a volatile currency, which would result in even higher fuel and food prices. This is bad news for the poor.
Europe, our major trading partner, is in absolute turmoil and it is just getting worse by the hour. Good trade prospects, even with the weaker rand, are slim with our major trading partner, Europe. No trade, no jobs. To think that we have the capacity to start a currency war is an absolute pipe dream. Hon Davies and company are irresponsible and one-track minded.
Government must make up its mind and decide on what it wants around this issue. Hon Minister, you are on record as saying that we cannot afford to enter a currency war. While Brazil and China will use heavy artillery and bazookas in this war, we can hardly fire a gun. Can the Minister confirm that the Treasury, and I quote him, "wants a stable and competitive exchange rate, (and) it has said it won't seek to influence the level at which the currency trades"?
Gill Marcus was correct when she warned that tightened currency and trade controls could lead only to the intensification of trade and currency wars. She wants to see a reduction in exchange rate volatility and the rand floating freely. She is right and it is time to back her up.
We all know that we are entering a very unstable time in Europe and to some extent in the United States of America in the run-up to elections. The capital markets will be exposed. How can Stiglitz compare us with China and advise us to print rands? I quote him:
One thing that South Africa can produce a lot of cheaply is rand. If people want to buy rand, then selling rands and buying dollars will have the effect of depreciating the currency. Printing presses don't cost that much.
I am astonished and I would like to hear the Minister's views on this.
The Financial and Fiscal Commission has not fulfilled its task. If you compare it to other Chapter 9 institutions, you find you can hardly take it seriously anymore. Do we really need the Financial and Fiscal Commission, FFC, to carry on in its current form?
In 2010, Parliament requested the FFC to investigate the merits of fiscal rules and, in a brief report back to us, they expressed their reservations about the desirability of fiscal rules. They put forward a very interesting proposal that the establishment of a South African fiscal policy could be considered.
In his economic commentary this week, Jac Laubscher was asking whether we needed a fiscal policy council. Three leading rating agencies, and Jac Laubscher himself, have expressed the view that our credibility around fiscal policy has been impaired. Jac Laubscher said:
Recent events have shown that concern about SA public finances is not without grounds. Three matters stand out: the e-tolling saga; confirmation that the current wage negotiations in the public sector implies exceeding the budget; and government's plans to go on an infrastructure drive after the fiscal space has been used up by an increase in current expenditure.
Why is a set of fiscal rules combined with the creation of a statutory fiscal body that plays an independent evaluative and directional role in fiscal policy so attractive? The reason is that such rules can play a valuable role during times of upward pressure on government spending. Maybe it is time we ask the question as to whether the lack of fiscal rules allowed the state wage bill to spiral out of control.
Maybe it is time for Treasury to think afresh about whether a fiscal council comprising independent experts working in conjunction with Treasury is not the way forward. Is it not possible to incorporate this into the fiscal guidelines to be announced later this year? This is not a foreign idea and it already exists in some or other format in the rest of the world. Maybe we should trade the FFC in for a new fiscal council.
In conclusion, I cannot sit down without saying something about the SA National Roads Agency Limited, Sanral, debacle. On 7 May the National Treasury issued a statement announcing to the world that they would not discuss Sanral with our committee on 8 May. They said it would be neither possible nor prudent for the National Treasury to speak to the committee. For the Treasury to issue that statement was wrong and not well thought out. That morning all went wrong. Eventually they did reply to the questions. However, the director-general gave us far more information than we thought was prudent for the situation.
The Treasury came to this meeting unprepared, deepened the crisis, and added more insecurities. They missed your leadership and it was a pity that you were overseas. The National Treasury missed a golden opportunity to come to the committee well prepared, calm the market down and give the reassurance that the Treasury would protect the integrity of our bonds when it was necessary to do so. I thank you. [Applause.]