Chairperson and hon members, the Minister of Finance tabled the 2010 Medium-Term Budget Policy Statement, MTBPS, before Parliament on 27 October 2010 in terms of section 28 of the Public Finance Management Act, PFMA, and section 61 of the Money Bills Amendment Procedure and Related Matters Act.
The MTBPS describes the economic context in which the 2010 statement is tabled and the considerations that inform the Medium-Term Expenditure Framework for the 2011-14 financial years and its funding.
Fiscal policy guides government's decisions on revenue, spending and borrowing. South Africa's fiscal policy enables government to deliver on its developmental mandate by providing resources in a manner that is sustainable and that reinforces the stability of the economy. The Budget is a function of the economic growth that underpins the sustainable development goals of government.
The MTBPS has based its proposals on the assumptions of how the economy might perform globally and locally. South Africa is a role-player in the global economy, and what happens in the global economy affects us. We have experienced this since 2008.
In the last 16 years of democracy we have succeeded in perfecting our tools of analysis and therefore the MTBPS has become a reliable tool or resource of information upon which policy-makers and government departments develop their strategic plans. It is not, as the DA indicated in a debate on Friday, a dismal failure. Acknowledgement must be given to the Minister of Finance as well as the National Treasury.
We must remind ourselves of how the late Comrade Oliver Tambo outlined his vision for the postapartheid economy. He said: "Our starting point is what the economy should serve - the people."
Like we did last week when we went to Phuthaditjhaba. That's an excellent example.
The economic downturn has forced us to think better, to be more innovative and to act. South Africa managed to cushion the impact of the recession on its economy through a large expansion in the fiscal deficit, so as to protect and increase social spending and to invest in infrastructure.
It is important that the MTBPS should factor in the possibilities of unforeseen and unavoidable situations that might be beyond our control - as we have experienced in the 2009-10 financial year.
We need closer co-operation on economic thinking between the developed and the poor nations. We should support the proposal made by the G20 nations of moving towards stronger multilateral co-operation; focusing on structural reforms to sustain global demand; fostering job creation and increased growth potential; and realising the need to complement financial repair and regulatory reforms, as in the case of Germany.
Our approach should be underpinned by our understanding that globalisation is not about bridging the economic divide between developed and emerging markets. Big economies like that of the United States have resorted to currency depreciation by pumping billions of dollars into the market. This will have serious consequences for emerging economies such as South Africa.
The currency war debate is dominating the recovery path of the global economy. It is therefore important to focus internally on the value of the rand and exchange rates coupled with low inflation and a sluggish economic recovery.
It is important to note that the economies of countries such as Brazil and China, which are export-driven, have chosen to retain weak currencies to stimulate their economic growth, based not only on exports but on domestic demand and savings.
There is a need, in our case, to balance the external and domestic demand for the goods and services we produce. The 2010 MTBPS indicates that the net capital inflows to South Africa have risen strongly over the last two years, reaching 5,5% of GDP in the first half of 2010, as compared to 4,7% in 2009 as a whole.
The economic questions that require our attention are the following: What are the implications of retaining high interest rates as compared to developed and developing nations? What are the implications of short-term speculative capital inflows? Can a weaker currency improve domestic demand and productivity and what will its impact be on foreign reserves?
We must remind ourselves that our key priority is spending on infrastructure projects such as roads and stadiums, and social spending, particularly on health and education, so that these are also sustained. The creation of decent work and youth employment also remains a priority.
The current economic challenges cannot only be addressed by monetary policy alone. We must look at other possibilities that emerge from this crisis, and we must aim to improve our competitiveness and productivity, in order to stimulate our economy. We are all in this together. We have to focus on what needs to be done to improve the lives of our people. The MTBPS puts us on a new growth path that will propel economic growth from 6% to 7%.
The Select Committee on Finance had joint public hearings with the Standing Committee on Finance in the National Assembly on 10 and 11 November 2010, where stakeholders made their inputs on the MTBPS. The committee commended the Minister of Finance on the balanced approach that was followed in the 2010 MTBPS.
Having considered the 2010 MTBPS, the Select Committee on Finance recommends that the Minister of Finance should provide details to Parliament on how the National Treasury will supplement the proposed new growth path. These details are to form part of the 2011 national Budget.
The Minister of Finance must consider providing details on how the state plans to design and fund the much-needed universal health care system. This information may be included in the 2011 national Budget.
The Minister must provide more and updated details on how South Africa is dealing with an appreciating rand. This information is also to be included in the 2011 national Budget.
The Minister of Finance should provide the committee with details on proposals to address corruption in the public financial system, including any amendments to legislation.
The Minister of Finance should provide the committee with a progress report on the proposed wage subsidy, as promised in the March 2010 speech.
The Minister of Finance should provide the committee with further details on promoting small businesses in South Africa.
Chairperson, the Select Committee on Finance supports the 2010 MTBPS and calls on the NCOP to support it. Thank you. [Applause.]
Debate concluded.
Question put: That the Report be adopted. IN FAVOUR: Eastern Cape, Free State, Gauteng, KwaZulu-Natal, Limpopo, Mpumalanga, Northern Cape, North West, Western Cape.
Report accordingly adopted in accordance with section 65 of the Constitution.