Mr Speaker, sound macroeconomic policies of the past 12 years have helped South Africa cushion the impact of the current recession.
It will all be about goals for 2010, not only for Bafana Bafana, but also for the economy and especially the public sector. A critical factor in cementing this recovery will be the behaviour of the public sector and our ability to do something about the glaring inequalities of our society. We are going to experience larger deficits and higher levels of debt.
South Africa will need to cover the dent in its finances and to ensure that we have adequate fiscal space to deal with future negative shocks. A clear exit strategy out of debt and a disciplined spending programme shall be vital for survival.
The year 2010 was the time to keep the economy anchored and to embrace the consistency of the past. The hon Minister has succeeded in doing this and, therefore, Cope shall support this framework.
If we compare South Africa's position to emerging markets, only our interest rate bracket is "above average". At all other levels, we are in the "worst" or "unattractive" brackets of the score sheet - something we cannot ignore.
The International Monetary Fund, IMF, has warned emerging markets not to test the 50% of gross domestic product, GDP, debt levels. South Africa will start to stabilise its debt levels only in 2015, peaking at close to 48% of GDP, if there are no further shocks in the system.
There will be no room for mistakes in this arena. We almost made a mistake in 2008, when we argued whether or not this recession would hit us, and if so, how hard. To illustrate this, the former Minister of Finance was wrong in his projections for growth in 2009-10. He projected growth of 1,4% and we ended up at -1,5%. Gross tax revenue was down R70 billion and the deficit almost double what was projected.
There will be no room for mistakes again. All indications are that we shall experience a continued deficit for the next six years, making them very different from the previous six years.
The real tax trend shows that there is very little prospect for recovery in company taxes and VAT revenues in the immediate future. Since 1994, we saw the rising of debt levels, hitting close to 50% of GDP in 1998. During that time, there was a debate about the direction of policy in the alliance.
However, under the guidance of the former Minister of Finance and President Mbeki, we returned to sound macroeconomic policies. We realised that the market would shape the economy, and the correct decisions were taken. Debt levels dropped to 22% of GDP.
Again in 2010 we have a debate about the economic direction. Wisely, it was the Minister of Finance, his deputy, Minister Manuel and Minister Chabane, who won the contest - and may I add that it was with the blessing of the President and, hopefully, the Cabinet. Owing to the recession, however, debt will rise again in the next five years to levels similar to those of 1998.
In the next three years, we might see the clash of the titans in the credit- borrowing arena. When the domestic spending levels pick up, domestic people will go to the market for credit. State-Owned Enterprises, SOEs, will start borrowing, and the state will follow. We have seen this in the background of the global credit crisis where countries struggled to pay their state debts. We might see high interest rates in 2015 increasing high debt levels, and maybe slight downturns in the economic cycle. We all know that debt creates friction, as it does in a household, for example.
In 2014, or even before, because of tight spending, we might again see friction among the alliance partners around economic policies. This does not augur well for the future and for consistency. You cannot change economic policies every five years. We must strive for discipline and stability.
To get out of this debt trap, the easiest way is to raise taxes, but then it becomes a horror story. What we would like to see is value for our rand and tax, and an earlier exit strategy out of debt. If we grow more than projected, we must start paying back sooner.
Cope would like to see a zero-tolerance approach to ineffective spending by Ministries and departments. We all know spending patterns are down in the next three years. That is why we cannot tolerate any wasting of money. Why can't Ministries set the example now and cut 15% of their budgets? How is the Treasury or the hon Minister Chabane's performance agreement going to ensure that inefficient programmes in departments are cut? We need to know how. How are we going to ensure value for our rand if we struggle to maintain a professional Public Service at some levels? If performance agreements are linked to outcomes, for instance the number of houses built, and not linked to how much was saved by shredding bad programmes, then all the speeches remain a wish list and we are heading for troubled years.
Hon Deputy Minister, I have commended the Minister of Finance on his Budget Speech by quoting the famous American boxer Gentleman Jim. I said to him, "If you want to become a champion, you fight one more round; if it is tight, you fight one more round". He has fought two good rounds and he has kept the economy anchored. What we need now is another round - a knockout round to get rid of undisciplined departments and bad spending behaviour. Deputy Minister, you've got a weight advantage. I thank you. [Applause.]