Hon Chairperson, hon Minister, members, hon MECs present here from the provinces and other special delegates, the Minister of Finance tabled the 2011 Budget before Parliament on 23 February 2011 and met his obligations in terms of section 27 of the Public Finance Management Act, the PFMA, and section 7(1) of the Money Bills Amendment Procedure and Related Matters Act.
We can put the question: What is the kind of South Africa we want? To quote the late Comrade Chris Hani:
We want to build a nation free from hunger, disease and poverty, free from ignorance, homelessness and humiliation, a country in which there is peace, security and jobs.
I believe we all agree on this.
President Mandela sacrificed 27 years of his life in prison to lead the new South Africa based on democratic values, as outlined in the Freedom Charter and the Constitution. President Zuma outlined the programme of action in the state of the nation address, and I quote:
We want to have a country where millions more South Africans have decent employment opportunities, which has a modern infrastructure and a vibrant economy and where the quality of life is high.
I believe we agree on this as well.
Under the ANC-led government this action plan has run through like a golden thread since 1994. It started with the Reconstruction and Development Programme, RDP, laying a foundation for an integrated socioeconomic policy framework and eradicating the legacy of apartheid. It was a process; it is not completed yet.
It must be said that we cannot deliver in 17 years what was not done in the previous 100 years. It is impossible. Not one country in the world has achieved that. The present structure of the economy is more than 100 years old, and you do not change it overnight.
What has happened over the last 17 years as a result of current fiscal policies? The budget deficit was brought down. The inflation rate was targeted at 3% to 6%. The balance of payments of the current account is within moderate limits.
The fiscal framework, revenue proposals and the division of revenue, as tabled by the Minister, form the basis of the construction of a developmental state. There are challenges facing the 2011 Budget: deep- rooted structural problems; poverty, unemployment and inequality; bottlenecks and backlogs; the spatial geography of the legacy of apartheid - just look at Griekwastad in the Northern Cape; shortages of skills to support growth and development; economic transformation; job creation and the creation of sustainable livelihoods.
The New Growth Path and the Budget constitute a nation-building programme. Through the New Growth Path the objective is to create jobs for our people and make them less dependent on social grants. Again, it is a process. We have to give our people the conditions for a decent life and dignity within a South African society, based on the principles of nonracialism, nonsexism, democracy and prosperity, creating safer communities. I believe we agree on this as well.
The Medium-Term Budget Policy Statement of 2010 provided the policy basis on which the 2011-2012 and Medium-Term Expenditure Framework for the financial years of 2011-2014 would be funded. We agreed on this in November 2010 in this House.
The World Economic Outlook of the International Monetary Fund, IMF, shows steady but fragile global economic growth. The IMF forecast a global growth of 4,4% in 2011 and 4,5% in 2012. The IMF, however, lowered its projection for South Africa's economic growth in 2011 by 0,1% to 3,4%, citing the slower pace of recovery due to lower world trade and high chronic unemployment rates.
South Africa forms an integral part of the world economy and is affected by what happens on the global market. South African participation in the Brazil, Russia, India, China and South Africa bloc, Brics, will give local firms expanded access to fast-growing markets and investment opportunities.
Fiscal policy is the management of revenue expenditure and debt in the context of a dynamic economic environment. We are grateful for the government's response of adopting a countercyclical fiscal stance two years ago, ahead of the recent economic crisis. The overall structuring of the fiscal framework and monetary policy setting is conducive to the macroeconomic stability and the fiscal sustainability of this economy. South Africa is rated number one internationally in terms of our Budget transparency.
The economic downturn resulted in approximately 1 million people losing their jobs. As a household consists of about three dependants, on average, it affected 4 million people directly. What do you do as a government? Do you close your eyes, shut your ears and say, "I did not see it and I did not hear it"? No. You act. A total of 15 million people are dependent on social grants. This situation cannot carry on forever. In addition to other job creation initiatives, we welcome government's programme to create 5 million jobs over 10 years.
The challenge is to get the youth between 18 and 25 years of age employed. Economic growth is the principal driver of employment creation. We support government's employment programme, especially for the youth to be at the centre of economic development. We are in this together. This includes organised business and everyone seated here today.
Sustainable growth depends on improved industrial and trade performance, strengthening those sections in which South Africa has competitive potential in global markets. We need to improve on our competitiveness and become an exporter of commodities. A more stable and competitive currency can enhance industrial competitiveness. Skills development, technology modernisation and effective investments are the building blocks of sectional growth in industry and exports. We have to work to be the best, be more committed to our work. We have to get better performance. The depreciation of the rand to a sustainable, more competitive level and inflation remaining in check will lead to a stronger recovery in the South African industry and exports.
Tax revenue forms the basis of government's income. If revenue does not cover expenditure, borrowing is a short-term solution. Higher government expenditure as a share of the gross domestic product, GDP, ultimately requires a growing tax base or higher taxes. We all want to avoid paying higher taxes. I think we agree on this as well! A growing economy will result in a growing tax base.
An increase in government borrowing to cover expenditure will give rise to debt and debt service costs, thus borrowing has to be managed very carefully. Under the leadership of the hon Minister, this is happening. A higher wage bill in conjunction with a rising interest bill will result in reduction of spending on maintenance, capital investment and Public Service employment growth.
Revenue collected has to be spent wisely on the set priorities to improve the lives of our poor people. We welcome the tax expenditure statement that was published and thank the Minister for his responses to the committee on pages 134 to 138 in the Budget Review of this year.
The Select Committee on Finance conducted joint public hearings with the Standing Committee on Finance, complying with the requirements of involving the public. Thirteen organisations made submissions to the committee on the fiscal framework and revenue proposals. The committee recommends as follows.
Firstly, National Treasury should analyse the progress that has been made with regard to the set performance indicators before funds are allocated. Secondly, National Treasury should ensure that before funds are allocated to development finance institutions and the youth development subsidy, a measurable programme with a defined monitoring and evaluation tool is developed by the relevant stakeholders. Thirdly, revitalisation of further education and training, FET, colleges should be prioritised by the Department of Higher Education and Training, as this will help to improve skills development. Fourthly, government should co-ordinate the New Growth Path and the social security network system in order to reduce the number of people on social grants. Fifthly, the information system on the government database should give a clear indication of how many jobs have been created and how many people have exited the social grant system. This should be done through the Department of Social Development.
Sixthly, the tax regime and incentive schemes should not only be targeting the older generation but should also provide an environment that will encourage the youth to start saving. Seventhly, the provincial wage bill should be made service-orientated, and National Treasury should monitor spending on wages. Proper research should be done on the size of the wage bill compared to the number of employees. Eighthly, government and its provinces should concentrate on the filling of service delivery posts and not only filling posts for the sake of it. Ninthly, National Treasury should present a programme that will instil a culture of saving and investment in South Africa. Lastly, the House should support the fiscal framework and revenue proposals and adopt the report.
I thank you.
Hon Chairperson, hon Minister, hon members of the House and hon visitors, late last year I was moved from the committees Co-operative Governance and Safety and Security to Finance. I would like to thank the chairpersons of the Select Committees on Finance and Appropriations for their support while I was becoming accustomed to my new position.
I believe we have been very lucky to have had the Ministers of Finance that we have had since 1994. All of them are very capable people. We did not always agree with what they did, but overall they did a good job.
Ons kon met die vorige en met hierdie Begroting nie baie verskil nie, maar wel met sekere klemverskuiwings en dan veral met die implementering daarvan. Die DA het probleme met die implementering en bestuur van die Begroting. Dit was vir die afgelope weke weer vir ons baie duidelik dat ons wonderlike stelsels in plek het, met genoegsame fondse, maar ongelukkig word dit nie gemplementeer nie en die beheer en bestuur daarvan is uiters swak.
Kommunikasie tussen departemente bestaan bykans nie. Beheermaatrels, om beheer en doeltreffende bestuur moontlik te maak, bestaan nie of word lustig verbreek om by persoonlike doelwitte aan te pas. Ons kan dit bewys deur net te kyk na die baie uiters swak ouditverslae dwarsoor die hele Staatsdiens se spektrum.
As ons na die vergoedingspakket kyk, dan kan ons dit nie aanvaar nie. Salarisse en lone is baie hor in die staatsdiens as in die private sektor. Die totale pakket het in die afgelope vyf jaar verdubbel, maar produktiwiteit en effektiwiteit het geen verbetering getoon nie. Daar is nog gedurig klagtes oor dienslewering. Die land gaan gebuk onder 'n geweldig ho werkloosheidsyfer. Slegs 41% van die arbeidsmag het 'n werk. Dit vergelyk baie swak met: Brasili op 65%, China op 71% en Indi op 55%.
Ons is darem bly oor die klem wat op werkskepping geplaas word. Ons is egter baie skepties of dit suksesvol sal wees. Die Nasionale Jeugontwikkelingsagentskap, of National Youth Development Agency, NYDA, het nie 'n geskiedenis van effektiwiteit nie. Die sektorale onderwys- en opleidingsowerhede, Seta's, werk nie, alhoewel dit 'n baie goeie doel het. Daar is groot onsekerheid oor hoe en of loonsubsidies toegepas sal word. Kapitaal-projekte deur die staat skep tydelike werk, maar permanente werk word net deur die private sektor geskep.
Daar moet wins gemaak word. Ons sukkel om met die wreldmarkte te kompeteer want ons werksmag se produktiwiteit is baie laag. Hulle geniet ongekende beskerming. Ons steun die uitbrei en ontwikkeling van opleiding. Ons moet egter met die Internasionale Monetre Fonds, IMF, tydens hul besoek in Desember, saamstem dat ons arbeidswette te beskermend vir die werker is. Hierdie is seker maar 'n nagevolg van die apartheidsregime. Dit sal wonderlik wees as ons dit kon agterlaat en vorentoe kyk na 'n werk vir almal, in 'n oopgeleentheidsamelewing.
Ons glo nie dat die jaarlikse tekort onhanteerbaar is nie, maar ons moet waarsku dat dit baie fyn bestuur moet word, want dit was gunstig vir ons gedurende die vorige resessie en ons weet nie wat voorl nie. Staatskuld, soos enige ander skuld, moet gediens word en hoe groter die skuld, hoe moeiliker.
Ons hoor baie oproepe vir nasionalisering, maar as ons net kyk na die semi- staatsondernemings se doeltreffendheid, dan is dit glad nie 'n opsie nie.
Ons glo dat die staat 'n omgewing moet skep waar private besighede suksesvol kan funksioneer. Die staat moet die private sektor stimuleer met belastingvoordele en subsidies, sodat hulle kan groei en werk skep. Ons gaan die groot las van armoede nie verlig deur toelaes nie, maar deur te probeer verseker dat daar vir elkeen 'n werk is. Die uitbetaling van toelaes kan ook beter beheer word.
Die wisselkoers is baie sensitief en 'n verswakking is net 'n tydelike hulpmiddel om uitvoere te stimuleer, want ons is hoofsaaklik 'n netto invoerder. Ons glo nie dat die waarde van die geldeenheid so belangrik is soos die stabiliteit daarvan nie. Ons glo daar is geen ruimte vir verdere belastingverhogings nie.
Die staat moet sy inkomste laat styg en dit sal slegs moontlik wees deur ekonomiese groei te bewerkstellig. Die gaping tussen ryk en arm vergroot gedurig. Die regering gaan dit nie oplos deur die verhoging van toelaes en hor belasting nie, maar net deur groei in die ekonomie. Die werkloosheidsyfer moet drasties verlaag word, of ons gaan probleme in die land optel. Ek dank u. (Translation of Afrikaans paragraphs follows.)
[With both this Budget and the previous one there wasn't much that we disagreed with, but we certainly do disagree with certain shifts in emphasis and specifically with the implementation thereof. The DA has problems with regard to the implementation and management of the Budget. Over the past weeks it was again abundantly clear to us that we have wonderful systems in place, with adequate funding, but unfortunately these are not implemented and the management and administration thereof is extremely poor.
Communication among departments is almost nonexistent. Control measures, to make control and efficient management possible do not exist or are violated at will to accommodate personal goals. We can substantiate this simply by looking at the numerous exceedingly poor audit reports across the entire spectrum of the Public Service.
When we look at the remuneration package, unfortunately we cannot accept this. Salaries and wages are much higher in the Public Service than in the private sector. The total package has doubled in the past five years, but no improvement has been demonstrated in productivity and efficiency. There are still constant complaints about service delivery. Only 41% of the labour force has work. This compares poorly with Brazil at 65%, China at 71% and India at 55%.
We are indeed pleased about the emphasis being put on job creation. We are, however, very sceptical as to whether it will be successful. The National Youth Development Agency, NYDA, doesn't have a history of effectiveness. The sector education and training authorities, Setas, are not working, though the objective is very good. There is great uncertainty as to how and whether wage subsidies are going be put into practice. Capital projects by the state create temporary jobs, but permanent jobs are created solely by the private sector.
Profits have to be made. We are struggling to compete with the world markets because productivity on the part of our labour force is very low. They enjoy unprecedented protection. We support the extension and development of training. However, we have to agree with the International Monetary Fund, IMF, which, at the time of their visit in December, stated that our labour laws were too protective of the worker. This is probably in consequence of the apartheid regime. It would be wonderful if we could leave that behind and look forward to an open opportunity society where there is a job for everyone.
We do not believe that the annual deficit is unmanageable, but we have to caution that it should be managed very carefully, since this was to our advantage at the time of the previous recession and we do not know what lies ahead. State debt, like any other debt, has to be serviced and the bigger the debt, the more difficult it becomes.
We hear many calls for nationalisation, but when we just look at the efficiency of the semi-state enterprises then this is not an option. We believe that the state should create an environment in which private businesses can function successfully. The state should stimulate the private sector by extending tax benefits and subsidies in order for them to grow and to create jobs. We won't be able to ease the burden of poverty through grants, but by attempting to ensure that there is a job for everyone. The payment of grants can also be managed a lot better.
The exchange rate is very sensitive, and a weakening is just a temporary means to stimulate exports, since we are essentially a net importer. We do not believe that the value of the currency is as important as the stability thereof. It is our belief that there isn't any room for further tax increases.
The state has to increase its income and this will only be possible by bringing about economic growth. The gap between the rich and the poor is constantly increasing. The government is not going be able to solve this by increasing grants and through higher taxes, but only through growth in the economy. The unemployment rate has to be drastically reduced or we are going to experience problems in our country. I thank you.]
Hon House Chairperson, hon Minister, hon MECs, hon members, ladies and gentlemen, it is indeed an honour and a privilege for me to take part in today's debate on the adoption of the fiscal framework. My focus in this debate will be on job creation, as it must be a focal point for all spheres of government, as directed by the President. The time has indeed arrived for all to share in the wealth of the country. It is now time for all of us to work together to practically give meaning to the vision outlined in 1994 by former President Nelson Mandela when he said, "Let there be work, bread, water and salt for all."
This vision was further amplified by President Zuma during his state of the nation address, when he declared this year to be the year for job creation. To prepare the soil, in his 2011 Budget Speech, the Minister of Finance, Mr Gordhan advised:
We must show, across the economy, the game-changing strengths we have shown on big issues, from creating our democracy to hosting Africa's first soccer World Cup festival. Now we have to ignite the flame of higher inclusive growth and sustain it.
This vision finds expression in the ANC's adopted New Growth Path policy, which advocates inclusive growth. The New Growth Path outlines the fact that South Africa's economic development must contribute to and reinforce complementary efforts to overcome widespread poverty and income inequalities. Inclusive growth aims to address the low quality of life associated with poverty and inequality, namely poor education, poor health and poor opportunities of all kinds. All this can be reduced through economic growth and sustainable job creation, which is one of the key points that the ANC has always advocated and is still advocating with vigour. However, these efforts are suffocated by unchanged structures in our economy due to injustice and the inequalities of the apartheid government in the past.
As the first step in levelling the playing fields and creating a conducive climate, the 2011 Budget sets out a sound and sustainable framework for implementing this vision. This framework acknowledges the fact that building South Africa is a multidecade project that requires the input of all to achieve sustainable growth. Emphasis is placed on job creation and expenditure on social wages, including access to health services, education, social security, transport and municipal infrastructure.
This framework expands on investment in modernising our infrastructure and transport logistics, accelerating further education and skills development, and supporting research, technology and industrial development. This budget targets financial and enterprise development programmes and tax relief measures. All these are indeed measures that will assist each one of us in working together to focus on the implementation and ultimate realisation of the vision as outlined above.
As we ignite the flame of higher inclusive growth we should not lose sight of the challenges ahead. We should take note of the realities that, one, only 13 million people out of the total population of about 50 million are employed; two, 42% of young people at the age of 19 are unemployed; three, almost 15 million adults of working age are under the age of 30; four, many people have given up looking for employment, and the number of discouraged has risen by 440 000 over the past 12 months, pushing the broad unemployment rate to 32,4%; and five, one million jobs created between 2003 and 2008 were lost in the period between 2009 and 2010.
The ANC, unlike all other parties and commentators, has refused to take these as mere statistics. The ANC-led government has, among others, and despite all shortcomings and pressures, created a climate in which employment rose by a net 157 000 across the formal sector in the final three months of 2010. As of January 2011 the training layoff scheme has supported 7 286 workers at a cost of R21,3 million in training allowances. Since its second phase in April 2009, the Expanded Public Works Programme has created one million short-term jobs, and is targeting the creation of a further 80 000 short-terms jobs with an average duration of 104 days during the 2011-12 financial year.
The community works programme introduced in 2009 created about 81 000 part- time jobs in 2010. As at December 2010 about 335 552 people had enrolled in training through the learnership incentives in the 2010-11 financial year. This is part of the reform of the sector education and training authority and the implementation of the new National Skills Development Strategy. The ANC-led government has created a R9 billion jobs fund to support projects with the potential to create a large number of jobs. In total the Budget makes R150 billion available for job creation.
These are not just statistics but the real work being done by the ANC-led government, not by the DA, Cope nor any other party for that matter. Despite all these noble endeavours we continue to be bombarded by all sorts of criticism that this and that will not work, without our critics coming up with alternatives or working out the solution. Even worse is the realisation that among those who criticise so much are owners of the means of production and architects of apartheid who created this mess in the first place. It is so unfortunate that the DA has positioned itself among those. [Applause.]
Perhaps it is about time that our detractors tell us why the ANC should not bring radical changes to the structure of our economy, given that it remains an impediment to our economic transformation agenda, and why our economy continues to benefit beneficiaries of the past order when masses of our people continue to die. I am interested to know what the answers would be from both the DA and Cope.
Unlike the ANC-led government, other parties have turned a blind eye to the reality that the youthful army of the unemployed is growing. They are deaf and so preoccupied with criticising the ANC for the sake of criticising that they can't even hear the voices of the unemployed on their doorstep, shouting at those who hold the keys to resources to release them, and any further delay will result in them pushing and forcing open the gates for their own survival.
Before it is too late, let us heed the call and join the President and the ANC in all their efforts towards creating jobs and improving the quality of life. The stage is set and we know what should happen. The time for criticising without offering solutions is over. It is time for putting forward all the ideas and resources that will help us economically to break away from past injustices and inequalities. The time for change has come and it is now.
As I close I wish to remind the hon members and all parties that the clarion call has been sounded for job creation, skills development, quality education, rural development, infrastructural development, housing and health. We appreciate the work already done by all provinces and await with keen interest sound plans from all departments and other role-players, including our detractors and those who continue to criticise us. This time around we will perform oversight on this matter and ensure full implementation. Let there be more work and jobs for all, and less talk and criticism, because working together we can do more for our communities. I thank you. [Applause.]
Chairperson, Minister, colleagues and hon members of this august House, I must mention that we feel honoured to have the opportunity to participate in this important discussion.
From the outset, we want to agree with the sentiments expressed by the chairperson of the committee when he said that the President's stewardship of our country, including the stewardship demonstrated by the Minister of Finance, is clear for everyone to see and is indeed commendable. Their stewardship is carried out against a background of uncertainty across the world, and we are indeed honoured to see that there is a brighter future for us, certainly in terms of their command of the issues at hand.
As part of contributing to this discussion we would like to make the following observations. From our point of view, one of our tasks is to extend the reach of our democratic government. As a developmental state - as we have come to be defined - we face new challenges. Whenever we make advances, new challenges emerge.
As part of the review of our equitable share distribution, we welcome the review that has been introduced to the provincial equitable share formula. We would specifically like to make the following observations.
We welcome the review of the health component, and we especially appreciate the changes that have been made to the education component. Going forward, however, we would like some of these aspects to receive attention and be addressed on a continuous basis. We are sure that, working with the Minister, this can be achieved.
I would like to give an example. Because data sets change from time to time, there will be impacts on the equitable share. When some of the cost structures remain in place, the changes as we go forward impact on available resources, while their cost to the provision of such services remains unchanged. We think this is a matter that should be addressed and, given the capable leadership of the Minister and his team, it is very possible to address this.
Again we would like to note specifically that one of the major tasks of our government is the elimination of poverty. Indeed, as things stand, poverty is spread disproportionately across the country. In the rural areas particularly, this creates a much stronger need for resources because, unlike with poverty in the urban centres, it is not possible in far-flung areas to benefit from economies of scale as would happen when the same problems are addressed in urban centres. Again, this is a clear legacy issue, bequeathed to us by that notorious system we had before the democratic government came into being.
We specifically want to express our appreciation for the contribution and commitment towards infrastructure development, because poverty in rural settings can only be effectively dealt with by ensuring the roll-out of infrastructure. The commitment over this Medium-Term Expenditure Framework period to the infrastructure roll-out is indeed commendable and appreciated because only through the provision of such infrastructure are we effectively able to reduce the dependence of the majority of the people on social grants and other related grants from the state. The President has actually warned all of us to try to reduce this dependence.
It is indeed heartening to see the particular commitment made in this Budget for this period to areas that deal with the backlogs that we have experienced as a province, particularly those that relate to education infrastructure. Over this period of time a significant injection is made to enable us to deal with such backlogs. It is a commitment that we appreciate.
To conclude, we wish to identify with the recommendations made by the committee and will be working with National Treasury and the Minister to ensure that we deepen the advances that have been made. We will work tirelessly to remove from our systems some of the impediments to the smooth delivery of services to our people. Thank you, Chair.
Mrs C M CRONJ (KwaZulu-Natal): Chairperson, as KwaZulu-Natal we fully support Minister Gordhan's fiscal and budgetary guidelines of a countercyclical fiscal stance, long-term debt sustainability and intergenerational equity. We tabled the KwaZulu-Natal budget yesterday and it was indeed a good news budget. Fortunately for us we are now cash- positive and we have been cash-positive since May 2010. This has had a very positive impact on the finances of our province.
The savings that we made, through our crosscutting measures, have been paying for our provincial priorities. For instance, the austerity measures that we took assisted us to finance and maintain our roads better, of course supplemented by a healthy injection from the national fiscus. The so- called pothole money that we are distributing to our department of transport will certainly go a long way in maintaining our provincial road network.
Also, one of the things that we have been able to do with this budget - thanks to the added allocations from the national fiscus - is implement the expanded extension officer programme in the food security programme. This means that the department of agriculture will recruit a large number of agriculture graduates as extension officers. We think this will have a very positive impact on food security in our province.
Further savings from our austerity measures will be re-allocated to service delivery projects in various departments and they will be used mainly for job creation purposes. There is no point in stopping wastage, which we have done on a very big scale in the province, but then not allocating the savings to job creation and service delivery programmes, so that is what we have been doing.
It is a known fact that there were adjustments to the equitable shares of provinces. Now, KwaZulu-Natal did not benefit from those adjustments. In fact, our equitable share was reduced by R316 million in 2011-12, R471 million in 2012-13, and R302 million in 2013-14, due to various technical adjustments.
Now, let me say up front to the hon the Minister that we think that those cuts were fair. We were not happy about them - I want to be clear about that! It's always nice to get more money, but when we looked at the cuts and analysed them, the ball really was in our court and we could only conclude that those adjustments were fair and justified in the circumstances.
How, then, did we manage to fund those reductions in our equitable share? The first source of funding is the surplus, which the province has been budgeting for. When we were in deep trouble as a province, we took a decision to budget for a surplus. And now we are out of trouble. We are not paying any interest any more on an overdraft because it does not exist. That surplus is now being used, to a very large extent, to make good on that cut in our equitable share.
We are now also able to use the money that we are saving because we are no longer paying for an overdraft to further supplement the cuts and also to embark on additional programmes. So, Minister, not only are we able to make good on the drop in our equitable share, but we actually have some money to spend on service delivery programmes. We did take a tiny, miniscule proportion away from each department to help with the funding of those cuts, but all in all, as I say, it has actually gone very well.
We are pleased that in the budget we were given additional ring-fenced funding, specifically to pay for the carry-through costs of the 2010 wage agreement. We are getting R1,1 billion for 2011-12, and this is set to increase in the future to R1,263 billion. That is real money. We are also pleased about the occupation-specific dispensation offer for educators of some R348 million in this financial year, increasing to R438 million in 2013-14. This makes a real difference.
Part of our financial work in previous years was directly attributable to underfunding of the occupation-specific dispensation, OSD, and wage increases. So, Minister, we really believe that you listened to our cries that we couldn't keep absorbing these underfunded mandates when it came to salaries from within our own budgets. This year you actually demonstrated to us that you did listen to our pleas and we got the additional funding.
We also got significant amounts of money for certain health priorities, including the OSDs for doctors, therapists, maternal and child health, and the ARV 350 threshold, among others. In the current financial year, we have R373 million. In 2013-14 the amount for these health priorities actually increases to close to a billion rand. We think this truly is very necessary.
For the first time KwaZulu-Natal has received the full payment for OSD and this is making a dramatic difference to the state of our finances. We are also very pleased that the Budget provided for the shortfall in the devolution of the property rate funds to our province. This is making a significant difference to the old issue of government debt to the municipalities. This is very interesting and, Minister, we have been working on this since May last year.
At that time we called on all municipalities to submit what they believed government owed them. They submitted to us invoices to the amount of R1,2 billion. This is now down to R37 million, not because we have paid all of it but because R424 million was actually a national department debt to municipalities. And may I say that we were very generous to the national Department of Public Works because we paid some of their debt.
Some of the invoices that were submitted to us were actually bills for properties owed by the municipalities, but they are on their books as government debt to municipalities. I can say a lot about this because we really researched this intensely, but the good news is that from the initial R1,2 billion we are down to R37 million in the province. And most of that is in dispute because some of that is interest of interest on interest.
We are dealing with all these matters because we have committed ourselves to wiping out that government debt to municipalities. We may ask for your assistance, Minister, in helping us with the national departments who are not paying their debt. I have no doubt that a lot of those debts will be in dispute, as is the case in the province. Still, some of them will be legitimate debts and I think we must do the right thing and pay all outstanding debt to municipalities.
I have one more plea, Minister: When the conditional grants are phased back into the equitable share, please do not reduce the amounts. We had this very unhappy experience in the previous financial year, when the FET college money that we had budgeted for FET colleges was taken out of the equitable share and given back to us in the form of a conditional grant, and we got less than we gave. The same is now happening with this forensic pathology service grant. We are getting less than we are giving. Can you please look into that, hon Minister? Thank you very much. [Applause.]
Hon Chairperson of the NCOP, hon members, hon visitors to this House, Minister, on the whole we support the current division of revenue and the fiscal framework. However, two matters are of concern to me because they negatively affect the citizens of this province.
Firstly, just as Gauteng and KwaZulu-Natal are severely prejudiced by the immigration of people looking for job opportunities, health care and decent education, so are we. We are looking forward to this year's census as it will provide us with updated information on our population. We suspect that the Western Cape's official population figures will jump considerably, and we look forward to a more fair division of revenue based on these new figures. Of course, the new division will not take into account the 206 000 people that are expected to immigrate to this province within the next three years, and more in the following years, as they will only be captured in the subsequent census.
Hon Chaane has a holier-than-thou attitude about jobs, but I did not hear the hon member Chaane say anything about Jimmy Manyi's one million jobs that people of this province are going to lose should the government implement its plan. Nevertheless, I must point out that we welcome citizens from other provinces who wish to come to the Western Cape in order to receive better quality health care and education. We will not turn them away, but we need government to recognise that the global trend of urbanisation, as well as the DA-led government's excellent reputation, is resulting in more and more citizens making the choice to move to this province. This is placing a strain on our ability to deliver the kind of services that all South Africans in our new democracy deserve. The Western Cape is currently providing economic growth opportunities, health care and education to people of other provinces, such as the Eastern Cape, Free State and Northern Cape. These provinces continue to receive the funding despite not providing the service. In essence, we have to do more with less and they have to do less with more.
It is clear that the days of a one-size-fits-all-approach, and a funding differential that promotes towns and regions with very little growth potential, should honestly be reviewed. We must fund economic development where the potential and capacity exist. This is the model followed by China, India and Brazil, our partner Bric countries, from whom we must learn lessons.
Let me elaborate on one final matter that is of grave concern to me. The year-on-year above-inflation wage negotiations by the Bargaining Council are not always fully covered by the National Treasury's funding. Provinces budget according to an inflation forecast and whenever this is exceeded, we have to top up the shortfall. Money is redirected away from service delivery to the poor into the pockets of government employees.
In the Western Cape, we have 76 000 employees and a salary bill of just R20 billion. Even minor unfunded adjustments have major impacts on our fiscus and accordingly on our ability to deliver.
We can no longer allow union representatives to bully us into redirecting funds away from the majority and towards its members. We need to debate this matter urgently and determine a reasonable way of proceeding well before the salary increase silly season commences. I thank you. [Applause.]
Hon Chairperson, Minister of Finance, special delegates, delegates of the NCOP, ladies and gentlemen, never before has the fiscal revenue framework debate been put in the spotlight and illuminated by debate more than now. This is important because it locates our work within public participation and influences and empowers the funding of provinces from the equitable share.
We have contended that revenue should benefit the various spheres of government, that is provinces and municipalities. It is crucial that money is used effectively and for the purposes it is intended for. There is a need to ensure that there are strategic plans which speak to the ANC election manifesto and policy statements to give effect to the ideals our people have fought for. We want our people to be empowered through the public participation process to give effect to the notion of a people's budget.
We have noted the challenge of effectively spending conditional grants. There are some departments that are still struggling to spend their conditional grants. There is a need to constantly monitor the spending of these grants. Departments should not wait until it is late before spending the grants as this usually results in fiscal dumping. Grants allocated for libraries, sports, land care, HIV/Aids and others should be spent to ensure that communities benefit from these targeted initiatives.
There is a need to ensure that the necessary capacities are built within departments, especially finance directorates and supply chain management, to ensure the effective expenditure of the conditional grants.
It is important that whenever allocation of revenue is done for each province, some of the factors alluded to below should be taken into consideration. In the case of Limpopo, the province is facing a challenge with regard to immigration, especially illegal immigrants entering the province from neighbouring states, given its geographical location. A feature of Limpopo is that the province shares borders with three countries, namely Botswana, Zimbabwe and Mozambique. As a result it is seen as the best place through which people can access South Africa. Before moving to any part of the country, they stay in Limpopo. During the permanent or temporary stay of our brothers and sisters from elsewhere in Africa, the province needs extra resources from the equitable share to cater for these unforeseen needs, which are not planned for. We have contended that the province's population, as reflected by the official census, may not be a true reflection of the reality on the ground. We are saying this because Limpopo is the first point of entry for people coming from the various neighbouring states, who are entering South Africa from time to time for better opportunities. Given the above, the budget allocated is therefore overstretched by undocumented citizens.
It is therefore crucial that whenever budget plans are made, these challenges and factors should be borne in mind, rather than only using the official statistics of the population. We should cater for the unforeseen challenges posed by unaccounted-for residents. As a result of migration, illegal immigrants that move into the Limpopo province place a strain on our health system and other facilities which are struggling to sustain our population. Indeed, Limpopo may share some of the challenges facing provinces like Gauteng, given the challenges of migrant labour, but because of its rural vastness, sharing borders with other provinces and being the entry point from the north, Limpopo has unique features and is a unique province.
There is a need to increase the revenue baseline for Limpopo, given the socioeconomic conditions that characterise the province. It is important to take the following into consideration when allocating the budget for the province in 2011. To flag the point made earlier regarding the vastness of the province, there are five districts in Limpopo that need to be covered when the issue of service delivery is taken into account. This has a budgetary impact when outreach initiatives are involved. The rural nature of the province also poses challenges with regard to the delivery of services. There is still a need for critical infrastructure that is important for the delivery of certain types of services. The level of poverty is one of the highest in South Africa and more budget will be required to address this.
On a positive note, the province remains a gateway to Africa. It has the potential for development initiatives that will put the rest of the country in a better position. More budget is needed to stimulate growth and development, but Limpopo has the potential for growth. Lots of opportunities are still to be unlocked in areas such as Lephalale, Sekhukhune and elsewhere in the province.
As I conclude, the issue of monitoring cannot be overemphasised. It is important to monitor the spending patterns of departments and other entities to which money has been allocated, hence the role of the various portfolio committees in oversight cannot be overemphasised. If expenditure is monitored by committees throughout the year, this will ensure that public money is well spent and we will have value for money budgeted for.
We hope that these recommendations for this financial year will go a long way towards addressing these challenges. With the above in mind, the Limpopo province supports the 2011 fiscal framework and revenue proposals. You are indeed a revolutionary, Mr Minister. I thank you. [Applause.]
Hon Chairperson, special delegates, permanent delegates, hon Minister and guests present in the House, the ANC-led government is committed to improving the health of its citizens. As the ANC, we have made health our national priority. The following are some of the steps meant to address health-related issues: the appropriate appointment of heads of department, HODs, chief financial officers, CFOs, chief executive officers, CEOs, and district and clinic managers with relevant competencies and qualifications; an increase in the employment of nurses, doctors, health technicians and other health professionals; the reintroduction of nurse training and reopening of nursing schools and colleges; monitoring the availability of medicines, especially antiretrovirals, ARVs, TB drugs and chronic medication; and the progressive introduction of the National Health Insurance, NHI.
The ANC national general council has re-emphasised the 52nd national conference resolution on health as a priority. This is underpinned by the following principles, yet not limited to them: capacity-building and training of hospital CEOs, district and clinic managers and HODs; the appointment of managers subject to the signing of performance agreements; the decentralisation of emergency services; improving the attitude of health workers; upholding Batho Pele principles and extending service hours for clinics and health centres.
The introduction of the National Health Insurance will alleviate much of the current burden on the health sector. The implementation is expected to bring about an improvement in our health facilities and an improved level of service. In this Medium-Term Expenditure Framework period the following allocations have been appropriated to achieve the NHI objectives: R1,2 billion to introduce family health-care teams; R2,9 billion to improve health facilities, equipment and hospital systems; R1,4 billion for improved district-based maternal and child health; and the revitalisation of health infrastructure, including new infrastructure.
A further R26,9 billion for a comprehensive HIV/Aids conditional grant has been allocated to deal with this scourge. This government has shifted into high gear to confront this epidemic unapologetically. More resources will be appropriated as they become available. We will continue to attach a high premium to the life and health of our citizens. This is a complete break from the state of affairs during apartheid rule, when the lives of black people in general and Africans in particular were very cheap. In pursuit of the Freedom Charter, the ANC promises a progressive realisation of these objectives to the citizens.
The ANC-led government believes in the Freedom Charter. By the way, this valuable document is highly regarded by many of the world's nations and will remain the authoritative framework that guides our work. Also of interest is that this document states that the people shall share in the country's wealth. Depending on the angle and context from which you approach this statement, you may derive many meanings. One of them is that we should first grow the economy. But before we grow the economy, we should first create employment opportunities. But to create employment opportunities, we should first have appropriate workers with the requisite skills. You may not stop here but if you continue you'll complete a vicious circle. For my intended purposes, I will break the circle here.
The ANC-led government has accepted and resolved to pay the necessary attention to skills development. The seriousness of the skills shortage and the resolve of the ANC have been shown by the establishment of the Ministry of Higher Education and Training. The new department's infrastructure and systems are taking shape and some of its work is starting to show results.
Our 2009 elections manifesto committed us to increasing the graduate output in areas of skills shortage; restructuring of the sector education and training authority; embarking on the reopening of teacher training colleges where appropriate; reviving the role of state-owned enterprises in skills development and training; placing further education and training at the centre of the popular drive to develop skills development for the economy, and reviewing the National Student Financial Aid Scheme to encourage students from the working class and the poor to go to tertiary institutions.
In implementing these progressive commitments, government has made some progress in many of the objectives. The National Skills Development Strategy has been approved; the Quality Council for Trades and Occupations has been established; the National Skills Fund is being transformed as a developmental grant-making body; the sector education and training authorities, Setas, have been restructured; the Setas' governance challenges are being addressed; decisive action is being taken on nonperforming Setas; the National Artisan Moderation Body has been established to focus on quality artisan training, and work is being done with the Department of Defence and Military Veterans, state-owned enterprises and private industry to accelerate artisan training; and there is a review of the funding formula for universities, with a particular focus on the recapitalisation and strengthening of historically disadvantaged institutions and, of course, the establishment of the two much-needed universities in Mpumalanga and the Northern Cape.
For our economy to grow in order for all of us to share in the wealth, resources need to be appropriated progressively and consciously to achieve these desired goals. In the 2011 Budget Speech the Minister of Finance said:
We entered the recent recession with a healthy fiscal position and a comparatively low level of debt. These allowed us to maintain government spending despite a sharp deterioration in revenue.
This explains how this government is able to achieve the following: over R14 billion allocated for further education and training, FET, colleges, seeing as our DA member has been complaining about FET colleges; over R20 billion directed to Setas and R5 billion to the National Skills Fund; R5 billion for a youth employment subsidy; just under R1 billion added to Funza Lushaka teacher bursaries and postgraduate bursaries for students in natural sciences; and R9,5 billion for the expansion of FET colleges and skills development.
These resources are indicative of the resolve of the ANC-led government in addressing the issue of skills in the country. Only when this level of commitment is made can we sustain economic growth. Growth will present opportunities to mitigate the high unemployment rate and growth will produce a bigger cake of wealth. Then the people shall govern and the people shall share. I thank you.
Hon Chairperson of the NCOP, hon Minister of Finance, hon MECs, hon members of this House, distinguished guests, fellow comrades, I bring you all revolutionary greetings from the platinum province. It is my privilege and honour to be afforded this opportunity to take part in today's debate on the fiscal framework as tabled by the Minister of Finance on 23 February 2011.
As a province we remain fully supportive of the countercyclical fiscal stance adopted by our government two years ago. The countercyclical model provides a framework that seeks to save additional resources during good times for spending during difficult periods. Had it not been for the stance taken by our government, one wonders what would have happened during the economic recession of the past two years.
This is due to the sound financial management in the six years of strong economic growth; a strong foundation that saw South Africa managing to sail through the rough seas during the economic recession without huge casualties, as happened in other countries. We remain resolute and committed that 2011 is the year to pull out all the stops in our endeavours to create jobs. We wish to commend the Minister, Cabinet and the National Treasury team for their hard work and for making it possible once more for South Africa to be declared number one in an open and transparent budget process, overtaking even the developed countries that are regarded as old democracies.
During his state of the nation address, President Zuma declared this year "the year of job creation" and said this was a task that required the involvement of all and sundry. He directed that all spheres of government focus their resources, energy, skills and plans towards the attainment of this noble vision. Indeed, the creation of jobs cannot be the task of government alone - the private sector is also expected to play its part. Let us remember that having a job gives one dignity and allows for the fulfilment of one's worth.
As we engage further in today's debate, we should be mindful of the reality that economic growth that is inclusive is a prerequisite for reducing poverty, creating employment and improving livelihoods. The people of the North West province have hope that the direction taken by our government, as tabled in the national Budget, will change lives and have maximum impact on their lives. But it is also vital that we make our people understand that our country is not a welfare state. On this I agree with the President. They must participate in their own liberation from economic exclusion. Let us make them understand that government cannot do everything for them and they must actively help government to lift them out of poverty.
At the time of tabling the national Budget, the Minister indicated that the Budget provided benefits to the poor workers, business sector, small businesses, women and the youth. Our province, in response to the direction given by the President, took advantage of the space created and focused all resources on the priorities of government, with job creation receiving much more attention than ever before. The provincial treasury will continue to monitor the expenditure of various departments in line with the national priorities, in particular spending on infrastructure and conditional grants, which has been a challenge.
During the presentation of the national Budget, Minister Pravin Gordhan indicated the following:
We have taken on the challenge that the legacy of apartheid left us - a legacy of disempowerment, landlessness ...
I hope the DA is listening -
... inequality of opportunity, and millions of unemployed young people who cannot see a realistic prospect for a decent life.
He continued:
... now is the time to do extraordinary things, in dealing with our particular development circumstances. It requires new ideas and bold efforts from all: government, business, labour, communities and every family.
With regard to the economic outlook, the New Growth Path implores us to focus on key drivers such as continuing and broadening public investment in infrastructure; targeting more labour-absorbing initiatives in the agricultural and mining value chains; manufacturing, construction and services; promoting innovation through green economy initiatives; and supporting rural development and regional integration.
This New Growth Path has to unfold in an environment where the price of Brent crude oil has appreciated beyond the US$105 mark due to political instability in the Middle East. The high oil price impacts negatively on the consumer, because when the petrol price increases it has a multiplier effect on the increase of the price of transport, food and other commodities. The price increase poses a risk to inflation and the cost of living.
We support the Minister in his commitment to putting in place the measures that will ensure that banking charges are fairly set, transparent and do not create undue hardships for the poor. South Africans are among the few consumers across the globe who are charged high fees by banks for doing business with them.
With regard to the budget framework, public finances cannot address all the challenges and backlogs that are part of our lives and history as South Africans. To this end we have taken a conscious decision, as a province, to strengthen our working relationships with the private sector, communities, labour and traditional leaders as we continue to change the lives of our people.
As a province we do not have the potential, hon Minister, to create sufficient own revenue that can augment the equitable share allocated by national government. In this context, we face the serious challenge of a shortage of water in the province, and this requires huge investment in infrastructure. We call on your intervention to assist in this regard. We have not borrowed funds for any project for this financial year, but when the time comes to borrow funds we will do so responsibly in order not to burden future generations and also to ensure that we deliver quality services with these borrowed funds. The province has adopted a "no plan, no budget, use it or lose it!" principle, to address underspending and improve spending on core priorities. On 2 March 2011, the executive council approved a budget cut of 0,3% across all provincial Votes, except the Vote of the provincial legislature. The process made available R380 million to be reprioritised to address areas of pressure. Since the recession, we have been reprioritising spending to redirect funds from noncore items to core priorities of government. We welcome the review of the provincial equitable share and also support the fact that the Budget Council endorsed the new formula for health and the change of weight for health, education and basic components, based on surveys conducted nationally. The effect on our province is that the equitable share has been revised from 6,7% to 6,8% over the medium term.
We managed to increase our own revenue from R625 million to R652 million for the 2011-12 financial year. As a provincial government we are determined to reclaim the fifth casino licence, which will contribute positively to our own revenue enhancement. We will strengthen the entities and mechanisms that enhance revenue collection over the medium term. Discussions are unfolding with the North West Gambling Board to that effect.
Our intention is to pull together resources from various sources and invest in infrastructure projects that will impact maximally on the huge challenges that we experience as a province, like roads and water, over the Medium-Term Expenditure Framework, MTEF, period. As a province we are also expected to create labour-intensive jobs in the next financial year by employing more women, youth and people with disabilities.
Regarding job creation, we critically analysed our budget and concluded that over the medium term the funds that are available for job creation amount to R16 billion. Therefore, for this coming financial year, R5,3 billion will be available across provincial departments in exclusion of the local government sphere. The North West province supports the fiscal framework. Thank you, hon Chair. [Time expired.] [Applause.]
Chairperson, Cope supports the fiscal framework but would like to make the following points. The key point is contained on pages 10 and 11 of the report. It says that "higher government expenditure as a share of GDP ultimately requires a growing tax base or higher tax rates." That is what the report says. As there is little likelihood of the tax base growing, the country must brace itself for higher tax rates.
This year, government expenditure is going to be R979,3 billion and the revenue is going to be R666,6 billion. The government will spend R312,7 billion more than it has in the bank. Government will either have to reduce its expenditure by 50% or seek to increase its revenue by 50%.
Government's net loan is now hovering near R1 trillion and will therefore soon pass the trillion mark. As we now see, South Africa no longer has a cushion to ride out a financial storm. We are in a situation of high risk. Meanwhile, the government wants us to believe that its borrowing is countercyclical. That is not so. If government borrowing went 100% into infrastructure development and manufacturing investments, then the expenditure could certainly be regarded as countercyclical.
We know, however, that the opposite is true. Government is funding consumption from borrowing. This year, government will enter the market to borrow over R300 billion. This will put a squeeze on money supply. With government taking such a large chunk of savings, businesses, investors and households will have less to borrow. It will also, once again, put pressure on the interest rates. We in Cope are not comfortable with this.
Job creation, as the hon Chaane has said, will need greater liquidity in the economy to stimulate business growth. The government must reduce its own expenditure. When the Minister of Finance requests that money be spent on frontline services and not on administration, he is being very gentle towards us or government. He should, in fact, demand it.
While the Minister of Finance should be commended for achieving savings of R30,6 billion over the Medium-Term Expenditure Framework, MTEF, period, he should seek to increase this.
Cope does not believe that the government should be relying on economic growth to stabilise the debt stock. Government must use a belt-and-braces approach, otherwise our children will be landed with debt incurred by this government.
The Minister of Finance needs to be given a free hand to curb expenditure and to institute a state procurement process which will adjudicate these finances from the outside, not within the department. We need to save every cent or face the consequences of higher taxes and a constrained economy. I thank you. [Applause.]
Hon Chairperson, hon members, my colleagues, members of the executive council, MEC, and hon Minister of Finance, let me join others who have commended the Minister for delivering a very impressive Budget.
As Gauteng, we support the fiscal framework that was presented but we want to take this opportunity to make it part of the national conversation about reforming our country's fiscal framework. So, there are issues that we want to raise. Before that, though, let me say that through the wisdom of the national government and the National Treasury, we as provinces have been able to get through the recession period fairly well. We are not out of the woods, though, and that is why we support the determination of the Minister and say that we still have to focus on two issues.
The first is fiscal consolidation, which speaks to the issues of reprioritisation to ensure that we do things that are core to service delivery. So, we have to sustain that for quite some time to ensure that our finances are fairly healthy. But, as we do that, we must not move away from our major infrastructure investment. Because of the stance we took, we did not go over the hill during the recession. It actually enabled us to take on quite a lot of issues.
The presentation of the Budget assisted us a lot. There have been discussions on conditional grants by management. The issue of infrastructure is very important and needs our attention. There are two issues arising from infrastructure. First, there is the issue of project management capacity within provinces, as it speaks directly to the extent to which we are able to spend money. The second is contract management, which also speaks to issues that the Minister raised earlier, namely the issues around value for money, something that is preponderant in the workings of the provinces.
One other area emphasised by MEC Cronj is the issue of conditional grants. What we have seen over time is the increase in conditional grants, which means the centre is taking more without giving more to provinces. This is something that needs to be discussed going forward, we think.
The other area at the centre of this, of course, is the issue of the equitable share, which has been revised and reviewed over time. It evolved from seven components to about five - education, health, economic activity, poverty and an institutional component. A province like Gauteng is specific in some respects and an issue that we want to come back to is that of economic activity and how we attend to it, because we feel it is not well developed in terms of the equitable share.
In this regard, notable changes have also come up and been looked at. In our view one of the biggest concerns is that the equitable share formula is still not flexible enough to deal with expenditure responsibilities that are driving the provincial budget. It is our view that we need to look at this, going forward.
At a provincial level, there are other challenges. For instance, provinces are expected to achieve more with the equitable share because the provinces are expected to perform more functions. Now the balance is going to be important because service delivery happens in the municipalities and at the level of the provinces - how do we back what is going to be important for us?
We also think that the equitable share does not sufficiently recognise the fiscal capacity of the provinces. And, again, we want to talk more about the economic component in that regard. The same equitable share is misaligned with the functions that are performed by the provinces. We have to look at the specificities of different provinces - Limpopo would come with its own special situation, so will KwaZulu-Natal, etcetera. In a province like Gauteng the issue of immigration is very important and puts a burden on education, health and human settlements.
Let me say, in the hope of not being misunderstood, that the developments that have taken place in the equitable share are welcomed, particularly in health. At one point this was not adequately addressed, as the province had a lot of medical aids and was adversely affected as a result.
We think that the current formula does not differentiate the expenditure needed across the provinces. There is a disjuncture in the way the other spheres are resourced, particularly vis--vis the expenditure requirements by different spheres of government. All these things would still be realised properly if we grow the economy - but again, going back to what the Minister raised in the Budget, there must be value for money, and there are issues around contract management that we thought we should deal with.
Over the years, in dealing with the challenges that are facing the provincial spheres of government, efforts have been made to tweak the provincial equitable share. However, we think it still had not provided or yielded sufficient desired outcomes. At worst, we think it has just shifted resources between provinces without addressing the funding challenges at the provincial level - and that is where we will put an invitation to the national government to intervene or to be very close to what is happening at the provincial level to understand the intricacies there.
Over the Medium-Term Expenditure Framework, MTEF, period the provincial share of the total budget remains at 43,8%, while the national percentage is increasing from 47,0% to 47,3% at the end of the MTEF. The area that should be of focus in dealing with the funding issues is around the vertical split. We should have more discussions on how to deal with it because it is important, given that it is assisting us to share ideas and resources for effective service delivery.
The role of provinces, particularly in economic development, should be clarified, because out of the five areas that I mentioned earlier, if we look at the weightings, the economic development part for Gauteng, and maybe one or two other provinces, is prominent yet the weightings are very low. In this sense, the cumulative effect would be that the equitable share is biased against urban provinces in favour of rural areas. This is important because there is an area where I come from in the Eastern Cape, Engcobo, so I also need that to be sorted out. But Gauteng contributes more than 35% of the gross domestic product of the country. So, how do we address the economic development aspect as far as the equitable share is concerned?
But at the end of the day I think the issues of fiscal discipline remain reprioritisation and the monitoring of the resources that we have. We support the Budget and the fiscal framework as presented by the Minister. [Applause.]
Chairperson, thank you for the opportunity to take part in this important debate today. My recollection is that this is the first time that the NCOP has debated this report. It is important to continuously debate the fiscal framework, also as a way of creating an awareness among the public of how figures are arrived at. So this is an important tool.
I hope the Chairperson will arrange further meetings, even in the provinces, to allow all of us to continue to engage in this debate, because it is important to understand what the fiscal framework entails. As I have said, it informs the figures you see in the Budget. I can see today that some of us are tempted to even discuss the Division of Revenue Bill in this particular debate.
I will refrain from doing so because it is tempting to get into figures, yet we are debating just the framework today. We need to understand it in its proper context. I want to look back a little bit, because it is important to touch on history as a way of learning. All nations learn from their past.
Before 1994, the country was in huge debt. More importantly, the Budget process was highly secretive and incremental. We need to understand where we come from. When the new government came in 1994, it did some soul- searching about how best to address the challenges facing the country.
A solid foundation was needed to deal with economic transformation and budget reform. Therefore today's debate takes place to reaffirm the ANC's commitment to addressing service delivery, particularly as it affects poor communities. In the report it is clearly stated that the economy continues to recover and a positive focus in the MTEF period has been noted.
Opportunities for further investments have been boosted by the participation of South Africa in Brics. The New Growth Path will yield many jobs opportunities for both the short and long term. This is an area that many of my colleagues have raised in today's debate.
However, we realise that our country is affected by the global economy, hence we take this opportunity to congratulate government on the measures put in place to deal with the economic meltdown. Government was prepared to take tough decisions.
When one lists achievements in this debate, I would first of all mention Parliament itself. Committees were engaged continuously in the Budget reform process to make sure that our Budget is transparent and means something to the people who are engaged in it and to the people out there.
The transparent budget process of this country is hailed as the best in the world. This is no mean feat as this demonstrates the efforts of the government working collectively. We should applaud the Minister and those civil servants who had sleepless nights making this a reality.
Greater fiscal stability allows the country to plan ahead and to implement its programmes. Huge investments in infrastructure created many jobs and we need to continue in this direction.
I just want to touch on some of the comments that were made here, particularly by the DA. I think we should appreciate that both speakers of the DA appreciated the leadership that has been shown in the Budget process itself. That is the leadership of the ANC, the governing party. They acknowledged that the process has been achieved, but all I can say to them is that they should not doubt the ANC's leadership and government.
We have done it over the past 17 years; we will continue to do it forever and ever. [Interjections.] So, basically, the DA should not fear the ANC. They should rather join us in the efforts to improve the quality of life of our people in this country.
The usage of the terms "swart gevaar" and "fight back" does not help even the DA itself because it will continue to be in the laager for ever. I once read a book by Ayi Kwei Armah titled The Beautyful Ones Are Not Yet Born. In it there is a story about people who had lived in a cave all their lives. One of them went outside one day and saw light. He came back and told the others that he saw light. They killed him because they thought he was lying and there was no such thing. I am saying, therefore, that the DA should not fall into that trap of staying in the laager. They would kill their people, morale and development in this country if they continued to sit in the laager.
Hon Chair, on a point of order: I would like to ask that we please don't go into a political speech at this stage because it is detrimental to the good work of the Minister of Finance.
Hon member, why are you standing? Are you rising on a point of order? [Interjections.] What is your point of order? I can't hear. Can you give me a chance?
We ruled in the previous sitting that we must stick to the agenda of the day. I think this is becoming a political speech. [Interjections.]
It is dealing with the agenda of the day. That's not a point of order. Continue, hon member.
Hon Geyer remarked on Jimmy Manyi. The problem here is that the statement is made opportunistically. It is used to perpetuate the race issue, particularly in the Western Cape. They use it because they want to catch votes. They hope to benefit from pushing people away from the ANC. This should be exposed as such because it's the reason they continue to raise that issue. They hope that it will continue to feed in so that the DA can gain some votes at the end of the day. It should be stopped.
Hon members, history in this country is important and we are part of it. We've been there; we experienced some of the things that happened in the past. The Eastern Cape, for instance, was targeted for underdevelopment and was only used as labour reserves for Johannesburg, the Western Cape and elsewhere in the country.
I was here in the seventies and eighties. I used to come here to the Western Cape in fear because I did not have a dompas. The one I had was from a homeland, and I knew if I was caught by the people who were policing the township at that time I would be given section 10. It would be stamped red, meaning "don't ever come back here again". Therefore the debate about people coming to the Western Cape and the issues that are being raised about being compensated and about people coming here who don't belong here really are an insult to us. It is an insult to us because in this province there are many other racists who came to settle here.
I must conclude by saying this is not an easy issue. It is nothing to laugh about because it pains us a great deal every time you raise it. It pains us a great deal. Thank you very much. [Applause.]
Mr Chairperson, the MECs for finance, particularly our relative newcomer, the MEC from the Eastern Cape, Mr Masualle, and hon members, thank you very much for both your support and valuable contributions to the debate on the fiscal framework. However, as one hon member pointed out, we have gone steadily beyond the fiscal framework in looking at some of these issues.
I want to underline the importance of MECs participating in this debate because ultimately, on the one hand, they are the ones who are responsible for proper financial management in the provinces. On the other, they are held to account on behalf of provinces to Parliament, through the NCOP. I trust that this relationship will become stronger as we go and, equally, that accountability, monitoring and evaluation become stronger as well.
Let me also compliment, thank and extend my appreciation to the chairpersons of the two select committees, Mr De Beer and Mr Chaane, for their leadership, the intensive hearings that they have been to and their contribution to the report that we have. Parliament, including the NCOP, has a key role to play in fiscal sustainability and to ensure that there is effective utilisation of public funds. It also has to ensure, in particular, that as we grow our 17-year-old democracy, we are characterised not by underspending but by proper spending; characterised not by fiscal dumping - which I will come back to - but by the proper management of our funds; characterised not by a lack of delivery, but by proper service delivery; and characterised not by people pocketing money, but by spending it where it should be spent.
I think that your role, hon members, is critical, as is the role of the MECs for finance, in ensuring that in every single province we have effective treasuries, financial managers and financial controls and that the billions of rand - whether it is 44%, MEC Nkomfe, 45% or whatever the debate is that we will have - are spent properly. Are we spending that 44% properly? That is the critical question we actually face.
As we get used to the idea of debating the fiscal framework, we must understand what fiscal sustainability means. We must understand and underpin our understanding of the fiscal guidelines, which several of you have commented on and actually support. In other words, we must understand better what countercyclicality means, what debt sustainability means and what intergenerational equity means.
For some, countercyclicality means that we are just going to take away money. Countercyclicality is about saying that the way in which we manage our household budgets is the way in which we need to manage the nation's budgets. When you have spare money, don't spend all of it but save some of it. When you are in trouble, don't go and get further into debt. Try and get away from debt. There will always be a day when you are going to require some savings for an emergency. Make sure that you do have those savings to take care of the emergencies that actually strike you. That is what we have done over the past two years.
We have made sure that over the last 16 or 17 years - as several hon members have pointed out - the ANC government has brought down the deficit from over 9% or 10% in 1994 to 1% surplus before the recession. That is what enabled us to say we don't have to engage in fiscal austerity from 2009 and 2010, because we have the fiscal space to borrow more money. We now have a sustainable path to pay that money back, reducing the deficit and moving our fiscus back on to a sustainable path.
I think it is also critical that we have a debate in the NCOP on the other of the two elements of sound fiscal management, that of debt sustainability. Several hon members either say they are concerned or comfortable, while the committee itself says it is concerned. Let us debate about where we stand as far as debt sustainability is concerned. I think if we have an evidence-based discussion, we are much better off than most of the world.
Our management of the fiscus has ensured that even with the borrowing we have done to take the deficit to 7,3%, we are just over 31% or 32% in terms of our debt. We will be, at worst, 40% in a couple of years' time, and then that debt to GDP ratio will actually decline. When you look at the Southern African Development Community, SADC, or the Organisation for Economic Co- operation and Development, OECD, standards, those standards sit at 60%. If you look at some of the leading democracies in the world, their debt-to-GDP ratios are between 90% and 112%, 90% and 200%. In the case of Japan, the debt-to-GDP ratio is 200%. We don't want to go there. So, don't get too excited.
Similarly, intergenerational equity is a critical issue. It is basically saying - as many of you have correctly pointed out - invest in things that will help us to grow the economy. Invest in infrastructure and in sustaining economic growth in this country. At the same time, let's recognise that we are working our way out of the recession. We have to keep repeating this message, so forgive me if you have heard it before. The recession wasn't created by us. We had to respond to the recession. In responding to the recession, we borrowed money in order to maintain all our government programmes and so that provinces in particular didn't have to undertake the kind of austerity that we actually heard about. We will work our way out of this over the next two or three years and make sure that we go back to a sustainable level.
More than that, over the last few years, government - the ANC government - has launched the savings campaign. It is good to hear the words "value for money" resonating so frequently in the Chamber. It means the message is beginning to get through. All of us have a role to play in making sure that there is value for money. What we do need to remember is that the taxpayer is the person who foots the bill. It's the taxpayer that we need to be accountable to. It's the taxpayer who will say to us one day: "You are not spending my money well, so why must I pay you any more tax?" It is therefore important that we gain legitimacy for each of the governmental institutions - municipalities, provinces and national departments - in the way in which we manage the taxpayer's money at the end of the day.
We reprioritised at the national level, and it is very encouraging to hear KwaZulu-Natal and the North West, for example, speak of their efforts to reprioritise within the provinces and also take what is called the "haircut" - although you have nice hair - of 0,3%. Those are important signals and benchmarks that we need to take into account in terms of how we want to manage our own fiscal situation.
Let me address some of the concerns and comments that come from the hon members. Mr De Beer, thank you for your scan of the environment. I think that's an excellent one. You reassure us that we are moving on the right side of the line. Mr Bekker, we appreciate your support for control measures, proper implementation and management. We concur with you that in many instances it is not money that is the problem - and MEC Nkomfe also mentioned this - it is our collective ability to implement.
I know it is election time, so we are going to point all sorts of fingers at one another and say, "You are bad at this and you are hopeless at that", and so on. But outside of election mode, let's be frank. We are a 17-year- old young state. It is very important to remember that. We are a teenager, right? There are states that are centuries old and are still incompetent in terms of delivery. We need to understand what state-building means. We need to understand what building institutions of democracy means.
So, we can politic as much as we like; at the end of the day, we are not getting to the real issue. The real issue is to build efficient state institutions. The choices that each of us makes as politicians about who to appoint, what kind of skilled person to put in that position and whether we are focused on delivery or focused on other issues in terms of helping friends get tenders and so on, will decide which direction this country goes in at the end of the day. So, those day-to-day choices ultimately determine where we are going, but we will improve.
You can go around the world today and stand up proudly and say in 17 years we have done very well as South Africans. Nobody else has reconstructed a state in 17 years like we have. No one else, in 17 years, has done what we have done to build the service. [Applause.] Go into any history book you like and try to find a 17-year-old nation that has done what we have.
There are a number of examples in certain parts of the world - which I don't want to mention - where there are also 15- to 17-year-old states. Let's have a look at the conditions of those states and then look at ourselves. Yes, we must be critical and we must challenge ourselves, but let's also be humble enough and proud enough to say we have done extremely well with all the limitations that we face.
Mr Chaane, thanks for repeating the words about game-changing strengths because that is certainly what we are going to need if we are going to pull off the many challenges that we actually face.
Hon Masualle, I will come back to issues of poverty and commitment to infrastructure because it's good to hear these commitments on your side. Your province, in particular, has many challenges in this particular regard. We'll see how we work with you to improve your capacity to take on some of those challenges.
Chairperson, I have to declare a bias, as I come from KwaZulu-Natal. I must say that I'm very proud of what the KwaZulu-Natal premier and MEC for finance and their team have been doing for the last year or so. This is a tremendous example of an ANC government saying, "I recognise we have problems in our province. I recognise that we are not in a sustainable position. I'm not going to cover up the story, but I'm going to confront the challenges that we face. We are going to make the hard choices that are necessary in order to put our province on the right kind of footing."
So, I don't want to repeat everything she said, but to be in a cash- positive position is extremely good. So, MEC Nkomfe or hon Masualle, you can borrow money from her now. She is the one who, very politely, says that we accept the cut in terms of the equitable share. We hear your plea, although we might not be able to respond to it.
Hon Maake, the spending of conditional grants is certainly a challenge. There are many instances where this is a problem. Your point about fiscal dumping is a critical challenge for all of us. Up to December of each financial year, including the current one, the graph shows something like this. Then, from the end of December to January, the graph certainly shoots up, and then it comes down again. That kind of fiscal dumping is wastage of money, and the NCOP needs actively to monitor what's going on in the provinces.
Why do we get fiscal dumping, even from provinces - and I won't name them right now - who are supposedly better administered than other provinces? This is a political and administrative phenomenon that is costing us maybe a couple of billion rand each year, where we are spending money which could be better spent elsewhere, in terms of delivering services and so on.
The hon Maake made an extremely valuable point which, I think, we need to give a lot of attention to. Hon Maake, compliments on the haircut and your efforts in terms of creating intensive jobs.
Again, the NCOP, in the context of the New Growth Path and the urgency for job creation in South Africa, should maybe have a special session on what each of the provinces are doing in terms of the kinds of proactive programmes that they are putting in place for the new financial year in respect of job creation - whether it is labour intensive, supporting small businesses and enterprise development or related activities - because provinces have an important role in that particular regard as well. I also want to make reference to the hon Mabe's point about own revenue. We would like to do a study, maybe with the NCOP, of what the revenue gap is in provinces. Currently there is a lot more revenue that can be collected than what is being collected. Where we are in a situation where we need every cent, not just in terms of the equitable share but also with what we could generate ourselves - not necessarily from new taxes, but from the existing regime of taxes and charges that we have - we have to ask how we can do better in that particular context as well.
The hon Makhubela made reference to expenditure and maintaining the debt level. I have given you assurances that we are moving in the right direction and that we will not increase taxes unnecessarily. But we also take your point that we owe it to South Africans to make sure that we spend our money well. Thank you for giving the Minister of Finance a free hand. We must just legislate somewhere so that we can actually use it in some way.
The hon Nkomfe, thank you for your support and for understanding what fiscal consolidation is and why it is required. But let's also be careful that the bidding around the equitable share doesn't overshine or overshadow the other issues in provincial finances that we actually have to deal with. It is the easiest thing to ask for more money.
The bell is beeping, so the Chairperson is going to ask me to sit down now. In conclusion, Chairperson, thank you very much for this debate. [Interjections.]
You can finish up, Minister.
In doing so, let me address one key issue that the hon Mazosiwe addressed. Notwithstanding the fact that elections are coming up, and notwithstanding the fact that we all have to engage in some form of political polemic, it is absolutely crucial that the first line of the Freedom Charter is always remembered: "South Africa belongs to all who live in it, black and white."
It is absolutely crucial that at a sensitive time like this we do not abuse statements made in very different and particular contexts to inspire fear, uncertainty and insecurity. This is a time when we need to unite everybody in this country and agree that elections will come and go. We should actually establish certain conventions about what we can and should do in elections and what we shouldn't and can't do in elections.
We cannot politic with the lives of people and we cannot politic with the security and welfare of people. These are real people with real families, real concerns and real aspirations for the future of their children as well. Whichever political party we belong to, let's make sure that our convention in South Africa says, "Let's not use race as a factor." Thank you very much. [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.