Mr Freddie Adams, sit down, please. The Minister wants to speak now.
Chairperson of the National Council of Provinces, Deputy Chairperson of the National Council of Provinces, hon members and colleagues, I am here to present the Appropriation Bill, which most of you are now familiar with. The original Appropriation Bill was tabled with the Budget in the National Assembly on 11 February 2009 by my predecessor, Minister Manuel.
Following the general elections in April, it has been revived, debated, amended and approved by the National Assembly. Several technical changes have been made to better align the Bill with the new Cabinet structure announced by President Zuma in May this year after the elections. An extensive process has been put in place by the Department of Public Service and Administration, DPSA, to give administrative effect to the new Cabinet portfolios and departmental structures that support the Ministers responsible for those portfolios. This process is not yet complete and, in some instances, is very complex. So, I present to you, ladies and gentlemen, the Appropriation Bill as amended by the National Assembly.
Over the past weeks you have had the task of engaging in policy debates on the Budget Votes of all the departments. This is not an easy task and it demands your careful consideration. Once you pass the Budget, the public relies on their public representatives to ensure that the lives of our people are improved, wastage is eliminated and corruption is dealt with effectively. They expect Parliament to hold the executive accountable as much as they hold civil servants accountable.
This Appropriation Bill is passed in an uncertain and generally gloomy global context. About 10 days ago, there was a lot of talk around the globe in many financial newspapers and elsewhere about the recession bottoming out. In the past couple of days this week that attitude has changed quite significantly and, instead of the optimism that was prevalent 10 days ago, there's a climate of gloom hanging over the world.
The recent sentiment is that the green shoots in the global economy are being covered by brown shoots, as indications show that the much- anticipated global recovery is, as yet, some way off. It is now inevitable that 2009 will see a contraction in global economic growth, with signs that the recession will bottom out at the end of the year. Even in South Africa, it is predicted by the International Monetary Fund, the World Bank and the Organisation for Economic Co-operation and Development that our growth will be somewhere between -1,5% and -2%.
The global economic slowdown has pushed our own economy into recession - our first in 17 years. We have had to relook at our fiscal trajectory, with the impact of the slowdown on our revenue collection for this year being, undeniably, quite significant. We recently announced that our revenue collection could be as much as R60 billion below target if the present trends continue. Of course, we will only know this later in the year. Our spending will, therefore, exceed revenue this year. However, our prudent fiscal stance in the past years has given us the space to increase borrowing to address this shortfall, and to ensure that spending plans to sustain economic activity can continue.
In essence, over the past few years we've been careful not to borrow so much in South Africa. Our debt-to-GDP ratio is around 25% to 26%, and that means, unlike many other countries around the world, we have more space to borrow.
Equally, over the past two years we've had a small surplus in our budgeting in South Africa, and that small surplus in fact helped us to cope with the recession we are facing. This means that we have to borrow more in the coming year to make up for the shortfall in revenue. We have to prune unnecessary spending and reprioritise our plans going forward. We must be uncompromising about our approach in attacking wastage and corruption.
The space created by our fiscal position has also taught us that it is vital to ensure that any borrowing that is done, is done in a sustainable way. Borrowing means paying back later on with interest. So, borrowing now effectively means that there will be less money available in the future, because we will be paying more in interest. Our borrowing requirements, therefore, must be met in a manner that will not hinder our future growth plans. If we spend more money on paying interest, we are spending less money on delivering services to South Africans. Therefore, the balance between the amount of money spent on interest payments versus the amount of money spent on delivering services to South Africans is a balance that has to be carefully maintained.
As many of our borrowing requirements as possible should be met domestically. This means that we borrow from the domestic capital markets instead of relying on foreign inflows. But borrowing is also related to savings in a particular country. If a country's citizens don't save adequately, then there isn't enough money to be borrowed by government or by businesses in that country.
Therefore, it is particularly significant that July is known as savings month in South Africa and is aimed at promoting a savings culture in this country. There are positive indications that South Africans are taking this message to heart, as the gross savings rate as a proportion of GDP rose to 17% in the first quarter of this year, up from an average of 15,4% in 2008. But we are way behind those countries that save effectively. China's figure is 40%, and India's figure is 30%, compared to our 17%.
So, we have to find some way of creating a conversation in South Africa and also an attitude which ensures that even with limited incomes we save more money than we currently do, and consume less than is currently done as well. And, we believe that Chambers like the National Council of Provinces and the members of the NCOP can play an important role in educating the public about the importance of saving.
The slowdown is putting additional pressure on ensuring that value for money remains tantamount or important in all the spending decisions. Spending pressures are making themselves felt at all levels of government, and in particular provinces and municipalities are grappling with lower revenue streams. This has implications for spending on priority areas like health and education. Where necessary, spending must be reprioritised so that we can spend more on providing services required by our people and less on programmes that can be delayed or done away with.
The times have changed and our way of doing things must also change. So, part of the conversation that we need to have with both the executive in the provinces and civil servants in provinces and in municipalities is how we stop wasting money, how we take exotic projects and kill them, and how we ensure that money is directed towards the services that all of our people actually require.
Let me from the outset clarify that there is no additional funding that the new departments will receive in this main Budget. Funds will be transferred from one Vote to another in line with the transfer of functions, and, where necessary, additional resources will be provided to cater for new Ministries and new functions. These transfers and changes will be reflected in October when we table the Adjustments Appropriation Bill.
To ensure continuity, departments that were in existence before 10 May 2009 will continue to exist until such time as the reorganisation becomes effective. Yesterday we tabled an explanatory memorandum in the National Assembly, and it is available for all to read, to assist you to better understand how these changes and processes will work. This is important so that service delivery continues.
In essence, it's going to still take us a few months, and perhaps, in some instances, longer than a few months, in order not just to get the reorganisation of departments undertaken successfully, but also to move the right amount of money successfully. If you look at the Department of Agriculture, Forestry and Fisheries, there is quite a significant change in its functions. So, you have to work out how many people are going to move and the amount of money needed that has to move with those people as well.
Our intergovernmental fiscal system has indeed matured over the past 15 years. We have relatively stable budgets and our financial reforms have deepened. Over the past 10 years the budgets of provincial and local governments have grown in real terms and, in some instances, have more than doubled in size.
Great progress has been made on the delivery side. We have improved access to basic services like water, sanitation, refuse and electricity. All service delivery indicators point in the right direction, but the question we have to ask is whether we have done enough and whether we have the necessary quality of services that our people require.
Education outcomes are not what they should be, given the level of investment being made in the system. At present, a great chunk of our school infrastructure does not create a conducive learning environment.
The health system, particularly the hospitals, is under severe pressure due to management failures.
The poor remain marginalised and are located on the peripheries of our cities far from economic opportunity. What are the chances that these communities will get out of the poverty cycle that they find themselves in?
I am sure these things are not new to hon members. These are just a few examples to illustrate that government is simply not getting value for money, given the enormous investment that it is making.
At the same time, we have challenges and successes amongst both our provinces and our municipalities. And as a House that represents the interests of the provinces and municipalities, I trust you will engage more keenly with the challenges that our provinces and municipalities face as much as we must also celebrate the successes of the provinces and municipalities.
The National Treasury has provided this House with all the information it requires, and I assure you that it will work closely with you to enable you to get on top of your portfolios and interact with both the executive and public servants as effectively as you should.
When the Budget was tabled, we said that we would protect the poor, build capacity for long-term growth, sustain employment growth and maintain a stable debt level, and, at the same time, address barriers to growth and investment. The economic outlook has changed since then, but we remain committed to these objectives.
I want to take this opportunity, in conclusion, to thank members of the NCOP for their commitment, dedication and patience. In particular, I want to thank the Select Committee on Finance and Appropriations, ably chaired by Mr De Beer, for their thorough engagement on the amending Bill. I thank you for this opportunity to speak with you. Thank you very much. [Applause.]
Hon Chairperson, it is an honour to take part in the proceedings this afternoon to deal with the allocation of money in order to better the lives of our people outside.
On behalf of the Select Committee on Finance and Appropriations, I congratulate the hon Minister and the Deputy Minister on their appointments to serve our nation in positions of responsibility. We commend the Minister of Finance for the sterling work done during his time as Commissioner of the SA Revenue Service. We wish him well in these trying times, but also give him endless opportunities. John Maxwell said: "Tough times never last, but tough people do."
Prudence and discipline in the management of fiscal policies is required more today than ever before, as the days of the public spending boom are over. Leadership means taking responsibility for good and bad, even if it means taking unpopular decisions.
As a committee we have taken note that the fiscal policy framework, as outlined in the Medium-Term Expenditure Framework presented by the previous Minister of Finance in February this year, has since been altered by the new economic realities prevailing in the world today.
The important issue is: How do departments in the national and provincial spheres manage their spending, including municipalities?
The budget is guided by five enduring principles, which are as follows: protecting the poor; sustaining employment growth and expanding training opportunities; building economic capacity and promoting investment; addressing the barriers of competitiveness that limit an equitable sharing of opportunities; and, in doing these things, maintaining a sustainable debt level so that actions today do not constrain development tomorrow.
The debates on the Budget Votes showed that the departments do have clear objectives to do what is captured in the five principles. Progress in these areas will be more difficult over the period ahead. Policy adjustments need to reinforce macroeconomic stability. New departments will have to align their budgets with the set priorities.
Our country's intergovernmental system faces a number of challenges with regard to service delivery, where concurrent functions are concerned. Some of these challenges have been identified as follows. Sometimes there seems to be a misalignment between policy initiatives and resource allocation. The lack of accountability for service delivery where the functions are concurrent creates problems. The lack of clarity on whether the assignment or configuration of certain functions lends itself to inefficiency and ineffectiveness is another challenge.
The largest adjustments to spending plans go to poverty reduction. Key spending allocations are, for example, R489 million to Education for the school nutrition programme; R200 million for health care; and R2,3 billion to adjust social grants for inflation and to accommodate the increase in beneficiary numbers due to changes in the means test.
It is our responsibility to give our people a better life. The quality of services delivered is important.
It is thus the responsibility of the NCOP, as we do our oversight, to look at the allocated resources and how they are spent. What priorities are addressed? The main issue is: Do we get value for money?
We are going to do our constituency work now and we will be confronted by the communities wanting to know whether there are projects on the ground. The underspending and overspending by departments and provinces lead us to pose the question: What are the implications in respect of quality of services rendered because both are unacceptable?
There will be serious engagement with the departments' strategic plans and their spending on a quarterly basis, as well as dealing with their annual reports. The Appropriation Bill is providing more money in many areas. It is our task to do oversight of this money.
In light of the economic downturn, provinces should be in a position to weather the storm, provided the following are in place: improved and better cash management and cash-flow procedures; improved ability to cost activities and plan expenditure; adherence to the prescriptions of the Public Finance Management Act, Treasury regulations and other financial guidelines; avoidance of expenditure on nonpriority items; improved execution of departmental plans and budgets; and renewed focus on the efficient, effective and economic delivery of services.
The select committee dealt with the Appropriation Bill this morning, and adopted it. But there are a few concerns that I also want to note on behalf of the committee. The committee will deal with them in the future, when we call on the National Treasury on a quarterly basis to find out about progress on the issues mentioned.
What is the impact on service delivery by newly created departments that still do not have any budget allocations and support staff? What is the practicality of having functions transferred to new departments, while budget allocations are still with old departments? How will the transfer of functions to new departments impact on personnel transfers? How does the Treasury expect the departments to implement their mandate as they do not have any budgets and are expected to ask other departments for financial assistance?
As I have indicated, we will deal with these issues when we call the department back on a quarterly basis.
These are the kinds of challenges that are facing all of us - not only one party but everyone sitting here - as we deal with the Appropriation Bill today. We have a responsibility to our people out there. Let's work and give them a better life. Thank you. [Applause.]
Debate concluded.
Bill agreed to in accordance with section 75 of the Constitution.