Madam Deputy Speaker, there were approximately four opportunities for business, labour and other organisations to participate in public hearings on the Budget and the Medium-Term Budget Policy Statement. We had some interesting contributions, but the consistency in the below-average contribution from Cosatu now stands out.
This year, the late arrival of Zwelinzima Vavi added some substance to the delegation, but not to the content. Mr Vavi quoted statistics, some not very recent. However, he was still convincing, saying that we have a crisis when it comes to the inequalities in our economy, poverty, the crisis in education and the high levels of unemployment among Africans. He is right. We should all be concerned about this.
Moeletsi Mbeki warns that government will be forced to cut expenditure in future, that it will start cutting the social grant budget, and therefore what happened in Tunisia remains a possibility in South Africa. I differ from him. I do not share his view that government will target the social grant budget first before they have addressed debt-servicing costs and the state wage bill.
So, between the projections of Vavi and Mbeki lie the performance of the Treasury and its ability to stick to sound fiscal and monetary policies. Their job is not an easy one, however. The world economy is split 50-50 between emerging markets and the developed world. The developed world economies remain fragile. With the return of higher oil prices, some might slip back into a recession, and we are influenced by that.
Added to that, in South Africa, only 41% of all adults are employed. This means that 19 million adults are not working. The fact that our active labour force is declining might influence personal income tax revenues negatively in future. Furthermore, if we take government wages as a percentage of the gross domestic product, GDP, South Africa is in the sixth highest position in the world, behind Denmark, Sweden, Iceland, Finland and France. In addition, the formal employment costs of the total public sector in South Africa are the third highest in the world, behind Sweden and France. Mr Minister, that is ridiculous!
It is very strange that Mr Vavi is not pointing out that this is a crisis. The reality is that salaries in certain categories in the Public Service, excluding those of the police and teachers, are simply too high. Add to that wrong appointments that do not assist service delivery and the state wage bill becomes the Treasury's single most important challenge. If we fail to shrink it, we shall fail South Africa.
The Treasury foresees a 6,5% increase in the wage bill in the next three years. For the past three years, it was more than 15%. If they do not manage this, and given the possibility of an increase in interest rates, which will put upward pressure on debt-servicing costs, the balancing act by the Treasury becomes very tricky in the next three years.
The concern is that the Medium-Term Expenditure Framework is not going to be as smooth as expected. Therefore the proposed fiscal guidelines must be welcomed and supported. We need a stable and strong Treasury, one that does not bow before the populist pressures of certain forces that do not understand the importance of agreeing now on the set of guidelines according to which state finances must be handled.
We cannot ignore this. Let us at least unite around it. The hon Minister needs all the support he can get now, and therefore Cope will support this fiscal framework. [Applause.]