Chairperson, this is an historic occasion for this House today. The House will be dealing with a report of the Select Committee on Finance on the Revised Fiscal Framework, as tabled by the hon Minister of Finance last week on 28 October 2010. It is a first for the NCOP.
What is very important is that we must look at and evaluate where we come from, that is since 22 April 2009, when the people of South Africa made a decision and gave a mandate to a specific political party, the ANC - to which I belong and am proud of - to govern South Africa [Applause.] What does the ANC say in the manifesto on which the people of South Africa took a decision on 22 April 2009?
The main thrust of fiscal policy, which is countercyclical and expansionary in approach, is designed to best address main policy goals. The policy goals include the creation of decent work; sustainable livelihoods; education; health; rural development; food security and land reform; enhancing safety and security and the human settlement philosophy, and programmes as well as local government that address the needs of the people. This is the policy as defined in that manifesto on page 21. It is in light of this that the Minister of Finance tabled the Revised Fiscal Framework to take South Africa forward.
Coming back to the report of the committee, the Select Committee on Finance conducted its work in terms of section 12(5) of the Money Bills Amendment Procedure and Related Matters Act of 2009, which reads that if the Minister has tabled a Revised Fiscal Framework, it must be referred to a Joint Sitting of the Committees on Finance in the NCOP and the National Assembly for consideration.
The committees received the briefing from the Minister of Finance and the Department of Treasury on 28 October 2010 and deliberated on the Revised Fiscal Framework on 29 October 2010. The two timeframes, Parliament's programme and the timeframes in the Act, do not gel very well. Parliament will have to review the parliamentary programme from January to December in such a way that committees do the work that has to be done as the money Bills Act requires.
South Africa did not escape the effect of a global economic downturn. Our fiscal policy stance of the previous years assisted us to get through the economic crisis better than countries in Europe like Spain, Greece and Italy. Even America is still battling. A countercyclical fiscal policy stance is crucial to both long-term growth and sustainability in public finances. Real gross domestic product, GDP, growth accelerated to a rate of 3,9% in the first half of this financial year. Expansion in fiscal and monetary policies and lower inflation supported this growth.
The unemployment rate is high; it's at 25,3%. The question is: How do we utilise the present growth rate and projected growth rate of 3,5% in 2011 and 4,4% in 2013 to create jobs for our people? That is the challenge. We can learn from a country like Brazil that has created 2 million jobs since 2006. China, India and Brazil are developing economies that are leading the economic growth in the world at this stage.
It will require a change of mind-set from each of us in this country, together with government's target of a 7% growth rate over 10 years to create 5,5 million jobs. We will have to work harder and smarter, and stringent control over government's spending will be required. An economic climate has to be created for ordinary citizens to save more money.
The committee observed that the consolidated government deficit is projected to decrease from 6,3% of GDP in the 2010-11 financial year to 3,2% of the GDP in 2013-14 financial year. It further noted that the projected reduction in government deficit was driven, amongst other things, by the strong uptake in the revenue and the stabilisation in noninterest spending.
National Treasury indicated that growth in expenditure will need to moderate as debt service costs increase over the Medium-Term Expenditure Framework, MTEF, period. National Treasury undertook to continue pursuing a countercyclical fiscal policy that will aim to grow revenue while gradually reducing noninterest stimulus spending. However, while meeting growth expectations, it is important to keep the fiscal trajectory on a sustainable path. The committee noted that revenue, as a percentage of the GDP, will increase at a rate of 0,2% per year over the next three years. Over the same period, expenditure is expected to decline at a rate of 0,4%, 0,5% and 0,5% respectively. As revenue increases and expenditure decreases, the budget deficit is projected to decrease gradually to 0% in the 2018-19 financial year.
Over the MTEF period, government departments are requested to reprioritise programmes in order to be efficient and effective. In view of the 2010 audit outcomes by the Auditor-General on various government departments, this calls for more stringent control measures on expenditure and prudent financial management. The committee recognises that the revenue-sharing formula of the Southern African Customs Union, Sacu, is currently under review and that Sacu's council will meet in December 2010 to resolve this matter. The committee accepts that this revision should be done carefully, without jeopardising the economic stability in member countries. The committee noted that, over the long term, higher economic growth will support debt reduction and enable government to rebuild the fiscal space.
The committee noted that the 2010 Medium-Term Budget Policy Statement, MTBPS, estimated that the debt amount will be approximately 40% of the GDP in the 2015-16 financial year. If the economy experiences another recession and the level of debt is higher than projected in the 2015-16 financial years, the committee foresees major challenges. While the MTBPS indicated that the exact level of debt will largely depend on the pace of economic growth, the committee is of the view that there is still an element of economic uncertainty. However, the committee fully endorses the fact that the economy is currently in a solid position.
In conclusion, the committee would like to commend National Treasury for the fact that South Africa came first in the world in a budget transparency survey conducted by the International Budget Partnership. We are number one in the world. This achievement resulted from years of commitment to the reform of the budget system towards greater transparency and potential for accountability and participation.
Based on its deliberations, the committee recommended that National Treasury should take appropriate steps aimed at reducing the level of debt at a faster rate in order to further create an economic cushion in the event of another economic recession in the near future. National Treasury should provide a detailed report to the committee on how government intends to guarantee fiscal stability, including a contingency plan in the case of a double-dip recession. This report should be submitted to Parliament within 45 days after its adoption by the House, and National Treasury should provide a detailed report to the committee on the impact of a zero- rating value-added tax on books on the fiscal framework. Finally, National Treasury should resolve issues pertaining to Sacu's revenue-sharing formula as a matter of urgency.
Chairperson, we put this report to the House for adoption. I 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.