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.]