Ke a leboha, Modulasetulo. [Thank you, Chairperson.]
Hon members, Ministers and Deputy Ministers present here, comrades and distinguished guests, it is now common knowledge that the Revised Fiscal Framework and the Medium-Term Budget Policy Statement under consideration are tabled under an extreme and difficult global economic environment. However, it is an environment within which emerging economies could find new conditions and opportunities to redefine and reposition themselves to lead in the economic recovery path. Most importantly, it is the moment for emerging markets to reshape the role of multilateral institutions in order to focus on the plight of the poor nations and to reduce inequalities amongst nations.
Since 2008 the European economic zone, is commonly known as the eurozone, remains a major source of concern, with persistent leadership crises and a failure to mobilise the required resources to capitalise banks and support stable economic restructuring programmes. Furthermore, the deepening sovereign debt of the European economic zone, together with the slow United States economic recovery, will continue to have a negative bearing on our domestic economic outlook for the foreseeable future.
The road ahead of us remains bumpy and unpredictable, and this will require a comprehensive set of additional extraordinary measures with very strong determination by governments, political leaders and all role-players to commit and implement what is required to overcome the present difficulties.
The current persistent economic crisis requires more than just temporary financial packages or stimulus packages. What is now needed is fiscal solutions, as predicted by the European Central Bank in 2010 in its first attempt to bail out Greece, Ireland and Portugal.
The Medium-Term Budget Policy Statement highlights, amongst other things, the following critical areas: continuity of the countercyclical approach in managing our economy, and projected inflation of 5,5% which is well within the current policy range target of 3% to 6%.
On the revenue side, revenue tax collection will grow by approximately 7,1%, which in real terms amounts to 1,5%, and government spending is expected to grow by 2,3%. GDP growth is revised downward to 3,1% owing to the unfavourable international economic climate, and this poses a serious challenge to the targeted number of jobs to be created annually of 5 million by the year 2020.
It is again noted that the Medium-Term Budget Policy Statement commits about R25 billion over the next six years to boosting industrial development, which will assist in new enterprises and accelerate job creation. It is our hope that new and emerging entrepreneurs will take this as an opportunity to create new firms and employ others so that we can deal with the scourge of unemployment in our country. Infrastructure spending at 7,8% of GDP in the current year is estimated to be a huge amount of R802 billion over the next three years. This will require that skills development and capacity-building within government departments and especially at local level are prioritised to avoid underspending on capital projects.
The Medium-Term Budget Policy Statement also addresses the challenges of implementing the Department of Health's 10-point plan, which was outlined in the 2010 Budget Review. The first introduction of National Health Insurance, NHI, is captured in this process through the ongoing hospital refurbishment programme, which will lead to the accreditation of hospitals under the NHI system.
Let me also take this opportunity to commend the Minister for his frank approach to budgetary matters, while also being open to the nation as a whole when he said:
We have learnt from the 2008 global economic crisis that sound fiscal and financial institutions do not provide immunity against job losses in our own economy arising from turbulence originating elsewhere in the world; nor are they sufficient to reposition our economy on a new growth trajectory that creates jobs, reduces inequality and improves the quality of life of our people.
In agreeing with this assertion it is important to understand that the priorities and projections set out in this fiscal framework will have to be negotiated carefully within an environment that is not entirely dependent on conditions of our own choosing or making.
The Medium-Term Budget Policy Statement therefore is a reflection of a delicate balance of what we can do or what we can achieve as a nation, on the one hand, and the necessary caution we need to take into consideration given the impact of the international economic situation owing to the European and US economic recovery challenges, on the other hand, as these will indeed have an impact on the South African economy, given the large trade volumes between our country and these countries.
Having considered the 2011 Medium-Term Budget Policy Statement and public submissions, the committees observed the following. The 2011 Budget Policy Statement sets out a fiscal framework that is projected to narrow the gap between government spending and revenue, while providing support to the economy and strengthening infrastructure investment for sustainable long- term growth.
National Treasury also indicates that South Africa's financial institutions are well capitalised and government debt is moderate, as compared to European countries, and that slower economic growth, falling tax revenues and uncertain financial conditions confront many of South Africa's trading partners and other developing nations. Our GDP growth is lower than the 2011 national budget forecast and it is expected to remain moderate, and as such it is expected to be 3,1% for the 2011-12 financial year, and 3,4% for the 2012-13 financial year.
Furthermore, the committee also observed that revenue collection has not yet recovered and the economic outlook remains uncertain. The deficit of 5,5% of GDP is projected for this year and it will moderate at about 3,3% over the Medium-Term Expenditure Framework period. Government debt is projected to stabilise at approximately 40% of GDP by the 2015-16 financial year.
The committee also observed with concern the increase in the state wage bill from 31% to 42% in the past four years. This is a concern for the Committee on Finance since this has resulted in a higher cost of production and low growth in job creation and, to a certain extent, the crowding out of capital expenditure. The current labour survey paints a not-very- encouraging picture wherein government has been the main provider of employment whilst the private sector is lagging behind, and this will have a negative impact with regard to our job creation target. Therefore, there is a need for a firm commitment and tangible plans by the business sector and the private sector in particular with regard to job creation in order to complement and support government's ultimate goal of creating 5 million jobs by 2020. Young people and the less skilled have yet to see economic recovery translate into jobs, which does not address government's priority of the creation of decent work and sustainable livelihoods.
The committee also welcomes the allocation of the R25-billion increase to the economic stimulus package. Given this observation, the committee wishes to report that there is a need for government departments to prioritise the composition of spending to address inefficiencies, extravagance and waste. The committee further supports the Minister of Finance in his drive to get all departments to identify and report on savings initiatives. Also, the need for Parliament cannot be overstated in terms of its oversight role over the executive in order to improve operational and financial excellence in government departments and their entities. The fiscal framework must be aligned above all with the New Growth Path amongst other objectives.
Having considered the Revised Fiscal Framework and public submissions, in accordance with sections 59 and 72 of the Constitution, the Standing Committee on Finance recommends that National Treasury should launch a campaign to educate the nation about the importance of saving and its broad implication both in their lives and the economy in general. More support, including the relaxation and/or reviewing of constraining laws, should be given to small business enterprises to create jobs. National Treasury should expedite infrastructure development through partnerships with the private sector. These partnerships will also require the review of public- private partnerships in their current form. National Treasury and Parliament's committees should place greater emphasis on budget performance to achieve the targeted growth rate.
The government wage bill and recurrent expenditure should be closely monitored and controlled, and all stakeholders, particularly the unions and Nedlac, the National Economic Development and Labour Council, should be encouraged to come up with a lasting and sustainable solution to this matter. The committee supports the initiative by National Treasury to reduce the wage bill from 42% to an acceptable ratio in the Medium-Term Expenditure Framework period.
The proposed fiscal framework should take into account the need to shift the creation of economic activities to rural communities as part of the rural development strategy. Furthermore, the National Treasury should advise the Department of Public Works to minimise any escalation clauses in new building contracts and ensure that professional fees are negotiated down to minimum levels. While growth is expected to pick up over the medium term, structural reforms are required to set the economy on a different trajectory that increases labour absorption, raises competitiveness and ensures that the benefits of growth are shared by all.
Also, let me say that the committee supports the Minister of Finance in ensuring that a detailed report be provided for the committee in order to understand the total integration of the intergenerational expenditure framework that will actually have an impact on future generations in the near future.
The committee proposes that this House accepts the report on the 2011 Revised Fiscal Framework. Let me also take this opportunity to thank the committee members for their collective commitment and co-operation in ensuring that the committee executed its work within a very short space of time. It is also important for me, on behalf of the committee, to take this opportunity to thank our outgoing Whip, Ntombikayise Sibhidla, for her sterling performance as the Whip of the Standing Committee on Finance and wish her well in her new deployment to the KwaZulu-Natal provincial legislature. [Applause.]
The committee proposes that this House accepts the report on the Revised Fiscal Framework, as proposed. Thank you. [Applause.]
There was no debate.