Deputy Speaker, the department will assist small, medium and micro enterprises, SMMEs, and black-owned enterprises to benefit from the implementation of the infrastructure plan in a number of the ways.
Firstly, it will be by working through the Presidential Infrastructure Co- ordinating Commission, PICC, together with other departments and public entities, on policy and procurement measures, and the development of strategic integrated projects; secondly, by facilitating industrial and small business funding through the Small Enterprise Finance Agency, Sefa, and the Industrial Development Corporation, IDC; thirdly, by liaising with larger businesses to strengthen their supplier development programmes and drawing black-owned businesses and small businesses into their supply chains; and, fourthly, by supporting efforts of the competition authorities to combat exclusionary and other anticompetitive behaviour by companies in the construction industry, principally larger companies that make the entry of new and smaller players more difficult.
I would like to point out that many SMMEs and black economic empowerment, BEE, enterprises can benefit from infrastructure: as suppliers of construction services, be it as contractors or subcontractors; as providers of inputs which will benefit from the expansion of local procurement; and as users of the infrastructure themselves, which is particularly important for smallholders and other emerging entrepreneurs in rural areas. We have a number of useful examples from the work of the Construction Industry Development Board, CIDB, the SA National Roads Agency Ltd, Sanral, the Trans-Caledon Tunnel Authority, TCTA, and others that we would be happy to share with hon members.
Finally, the strategic integrated projects themselves attempt to address the infrastructure needs of small businesses and those of black South Africans, which are often hidden away in the rural areas and not connected to the economic mainstream. We can make information on that available. Thank you. [Applause.]
Thank you, Madam Deputy Speaker. Hon Minister, would you please ensure, or rather would you please ... [Interjections.]
Order, hon members! Continue, hon Gcwabaza.
Thank you again, Deputy Speaker. Hon Minister, would you ensure that your department encourages ... [Interjections.]
You are making a noise - it is not ... [Inaudible.]
... your agencies to fund the SMMEs in order to ensure that they are drawn into the mainstream of economic activity using this infrastructure programme? Thank you. [Interjections.]
Thank you, hon Deputy Speaker. Hon member, yes, I think this is something that we want to do, but in two ways. [Interjections.] The one is obviously funding, but funding will not matter if you do not have markets; so you need to combine it with demand. This means that in the infrastructure programme we have to work towards set- asides and other measures that will encourage the awarding of contracts to small businesses and to black-owned businesses. That is on the demand side.
On the supply side it is finance, and we will certainly do what you have suggested, but it must be coupled with other supply side measures. Skills development and other measures are critical to bringing smaller businesses into the economic mainstream. Thank you. [Applause.]
Deputy Speaker, we heard yesterday that according to the South African Census 2011 almost 50% of black South Africans are unemployed. I want to know from the Minister whether his department will not consider supporting and developing programmes that will enable unschooled workers to attend training workshops that will make them more employable in such programmes as are awarded to SMMEs and black-owned enterprises?
Deputy Speaker, I think the suggestion by the hon member is sensible and it is something that we are beginning to do now.
Recently my department announced a training programme that would take people with some financial skills, put them in a specific programme with the SA Institute of Chartered Accountants, give them work exposure, and help them to be absorbed into employment opportunities. Now, of course, that will provide employment to those young persons. However, the financial skills that they would bring to smaller and black-owned companies would in turn help those companies to thrive.
The infrastructure programme is an important tool with which we can do that. We can even set out these requirements exactly for the larger contractors with regard to tenders and other technical conditions. So we see this as an opportunity to do more than build ports and lay railway lines. It is also an opportunity for skills development and industrialisation. Thank you.
Madam Deputy Speaker, I would like to ask the Minister the following question. We all know that both the Department of Economic Development and the Department of Trade and Industry are involved with the issue of SMMEs. Are you satisfied, Minister, that your department is going to be effective and efficient in seeing through the sustainability of the SMMEs, with this dual role or duplication of functions between the two departments? I ask this because in an instance where this duplication continues, the plight of the SMMEs is going to be stifled. Unless there is corrective action in that regard, the effectiveness and efficiency of the SMMEs are going to dwindle further. What co-ordination is there between your department and the DTI? Are you satisfied that your department is able to be effective and efficient, considering this duplication to which I have referred? Thank you. [Applause.]
Thank you, Deputy Speaker. No, hon member, I do not think that there is duplication. Small business is so fundamental that there are a number of different departments in government that have specific mandates in regard to them. It is not only the DTI that is doing important, in fact critical, work on small business development, but also the Department of Agriculture, Forestry and Fisheries, the Department of Science and Technology on the technology side, and a number of other departments.
We are committed to co-ordination. We have distinct roles, but it is bringing these roles together, co-ordinating them, and hooking them up that are important. Let me give you a small example.
The Department of Economic Development is responsible for industrial funding, so through the Small Enterprise Finance Agency, Sefa, it needs to ensure that funding is available to smaller businesses with good ideas and market opportunities. However, it works in partnership with the DTI, which is responsible for the incubation programmes, and for the technical support, in order to be able to ensure that this works well.
The DTI has the Small Enterprise Development Agency, Seda, as a board that reports to it. We have appointed one of the Seda people on the board of the financing agencies so that we have cross-directorship. In that way we are helping to foster greater co-ordination between the different responsibilities of government. I have spoken about the national sphere, but that cuts across all three spheres of government, bringing greater co- ordination, which is an important objective that we have set. Thank you very much.
Hon Minister, there have recently been many calls by you, the President, and the Deputy President, encouraging more public-private partnerships in this large-scale public infrastructure programme for the 18 Strategic Infrastructure Projects, Sips, and the 645-odd projects. It is common knowledge - we all know this - that the multitrillion rand programme cannot be funded through domestic savings alone, which is why Deputy President Motlanthe recently said that there would be countless opportunities for partnerships.
But, what we are not seeing from the department and from your Ministry is more clarity on exactly how the business community can enter into these partnerships, or what role they will play in them. Neither are we hearing anything from the Presidential Infrastructure Co-ordinating Commission, PICC, with regard to the role that SMMEs can play in partnering with the government in this.
Can you provide more clarity on the issue and confirm that the infrastructure building programme will not be dominated by public entities, and that more opportunities will be created for local businesses?
Deputy Speaker, I am indeed very happy to confirm that the infrastructure programme will have a very important private sector component. But, having said that, I think it is important to note that the role that the public enterprises will play will be equally critical.
I wish that the hon member had been present at an investors' conference that was held on 19 October, and convened by the President. We had banks, suppliers of services, construction companies, and a range of players from the private sector there.
At the end of the day's proceedings they were enthusiastic and publicly endorsed the state's programme on infrastructure development. They saw opportunities for the private sector and small businesses, and stretched out a hand of partnership. Indeed, we signed a memorandum of understanding with the social partners, and we signed one with one of the large business organisations and one of the strategic integrated projects. We are already working in partnership with the private sector. Thank you.
Costs associated with downgrades in South Africa's sovereign credit ratings
345. Mr T D Harris (DA) asked the Minister of Finance:
Whether, with regard to the recent downgrades in South Africa's sovereign credit ratings by (a) Moody's and (b) Standard and Poor's ratings services, he has calculated the (i) direct cost to the fiscus in terms of increased borrowing costs related to the downgrades and (ii) indirect cost to the economy; if not, why not; if so, what are the estimated costs? NO3657E
Deputy Speaker, I was quite pleased that you upgraded me to Minister! [Laughter.]
The rating downgrades impact the fiscus and the economy by raising investors' perceptions of risk, and reducing the number of investors and their appetite to invest in the country.
This results in a higher cost of borrowing, not only for the fiscus, but also for the private sector and state-owned corporates, which face a higher cost of debt or equity issuance as a result of heightened perceptions of country risk. The downgrades might also result in a weaker exchange rate, which could raise the cost of key imports, such as petrol, and raise the overall inflation rate. Secondary effects on the economy might also include lower confidence levels that could result in slower domestic activity.
National Treasury has been monitoring the impact of the downgrades carefully, but has find it quite difficult to determine the precise impact, given the interplay of a number of factors. High levels of global liquidity, low returns in developed countries, and rising allocations to South Africa by portfolio managers due to our inclusion in the World Global Bond Index have also had an important dampening effect on the potential risk aversion associated with the downgrades in ratings.
At the same time, a number of domestic constraints to investment, including wildcat strikes and electricity constraints, may have affected the performance of financial market indicators, such as the rand and equity markets. Thank you, Deputy Speaker.
Deputy Speaker, the Moody's downgrade was not simply about our ability to repay debt. The number one reason they gave for the downgrade, Deputy Minister, was that the authorities have a reduced capacity to implement effective strategies to place the government on a path to faster growth. What they are saying is that this government cannot implement its plans. That is why they gave us the downgrade. [Interjections.]
In the mini-budget last week, we heard the Finance Minister said again that what is needed are active labour market policies. This is a euphemism for the youth wage subsidy. During every single Budget, the Finance Minister stands up and says that we need a youth wage subsidy. This government doesn't listen to him. The Minister missed an opportunity on Thursday to reassure rating agencies that we can actually implement our plans. Instead, he just put aside the downgrade as inappropriate.
Now, Deputy Minister, I have done a back-of-the-envelope calculation here. We issued R21 billion's worth of debt yesterday. If the downgrade has cost us 20 basis points, as one of your officials had told me in committee, that would have increased our debt repayment by R60 million. Could you confirm this, and will you outline your plans for how you will actually start implementing the things that the Minister announces? Thank you.
Thanks, Deputy Speaker. Shadow Minister of Finance, as you are aware, correctly, the Minister does not speak in euphemisms. When he spoke about active labour management, it wasn't a euphemism. He is saying that we need to find a way of making sure that our labour market is such that we are able to allow for the entry of the unemployed into the labour market. [Interjections.]
That is not the only solution. The capacity to implement is like a half empty and half full glass. If we look back, we see we have a track record. This is what the investors have confirmed, for your information. This is not a back-of-the-envelope calculation; it is a "front-of-the-envelope" calculation! [Laughter.]
In regard to foreign flows, net bond purchases by foreigners since the Moody's downgrade have totalled R9,5 billion. This has been a net sale of R6,8 billion's worth of equities. The cost of borrowing for the South African government has remained largely stable since 27 September. There has been a slight increase in yields at the long end of the curve. Yields for debt maturing beyond 2020 have risen by between 0,15 and 0,30 percentage points. For debt maturing before 2018, the difference is negligible. The cost of borrowing foreign currency debt has also increased somewhat, at a much smaller margin of 0,1 percentage points. This is a "front-of-the-envelope" calculation, not a back-of-the-envelope calculation! [Applause.]
Deputy Speaker, I wish to ask the hon Deputy Minister the following question. It is our understanding that the Fitch rating agency is expected to wait until after the ANC conference in December before deciding whether to reduce South Africa's credit rating. [Interjections.] My question is: Have you estimated the possible cost to the fiscus in the event of a Fitch downgrade and, if so, what would that be?
Deputy Speaker, I think we can only anticipate an upgrade after the conference of the ANC. [Applause.]
Deputy Speaker, my question has been almost answered, but let me ask this anyway.
Downgrades, Deputy Minister, are all about the perception they create and their knock-on effect on business confidence. That is the unfortunate thing about downgrades.
It is clear that Moody and Standard & Poor unfortunately remain negative even after the Medium-Term Budget Policy Statement. They are worried about the socioeconomic conditions in South Africa, and we saw the Census 2011 figures yesterday. They are also concerned about the various approaches we are seeing from the Cabinet benches.
Could you just reassure us again that when the conference comes in December you will not divert from the national development goals and the policy statement goals set last week?
Deputy Speaker, I think the hon member must wait for an invitation. We must invite him to be an observer too. As I have indicated, the markets themselves have responded - with hindsight they know what the ANC is capable of. After the conference, I can assure you, we will actually be upgraded, if people are serious about upgrading. [Applause.]
Madam Deputy Speaker, the Deputy Minister has just told us that the downgrade has been a disaster, and it will be an ongoing disaster.
I just wish to place on record, before I ask my question, that four months ago I wrote a letter to a very reputable colleague on the other side of the House, predicting that this would happen as a result of our imminent approval of the Credit Rating Services Act, as has happened in each and every country after the adoption of this legislation.
This is on account of the fact that the rating is a function of two things: the type of assessment to which the hon Harris was referring and the likelihood of that happening, and then the risk one is taking if one is calling it wrong. We have increased that risk by making them liable if they have called it wrong, so each rating agency has been bound to play it conservatively and downgrade us. So, I made the point that it was not in our public interest to pass that piece of legislation.
Do you, Deputy Minister, realise ...
Thank you.
... that we had no need ...
Hon Ambrosini!
... for that piece of legislation ...
Hon Ambrosini!
... and that there is a connection between the downgrading and the legislation we passed in this House?
Hon Oriani-Ambrosini, when you speak, you are supposed to speak for one minute. Your ear is also supposed to be attentive to me as the Chair when I say that your time has expired. It is the second time now that you have not done that. I notice that every time I say that your time has expired, even though you know that you should talk for only one minute and I give everyone grace of more than 10 seconds, you continue speaking. This occurs even when I say that your time has expired. I am not saying that you should respond to this, but I don't think it is fair. Please!
Deputy Speaker, on a point of order: ... [Interjections.] ... You did not say that my time had expired.
I did!
No, you said "Hon Ambrosini! Hon Ambrosini! Hon Ambrosini!" [Laughter.] You just did not say that my time had expired. Had you said it, I would have stopped. [Laughter.]
This will come back to you. [Laughter.]
Deputy Speaker, I think the hon member is aware that perceptions are also shaped by how we behave - not only on the other side of the House, but also on this side of the House. They are shaped by how we actually behave, and by the things we say.
You say that you wrote a letter predicting that we would be downgraded, and when we were downgraded, as fortune would have it, you thought it was because of the letter you had written, or that your predictions were correct. Your predictions could not have been further from the truth. We still maintain that it is not because of how the economy of this country is run that we were downgraded. It is also not because of the impending situation in the country, but again because of the perceptions, and you are part of the cause of the creation of those perceptions. [Applause.]
Intentions regarding allegations of assistance by employers in creation of rogue unions
361. Mr D A Kganare (Cope) asked the Minister of Labour:
Whether she intends investigating the allegations that some employers assisted in the creation of rogue unions that destabilise organised labour; if not, what is the position in this regard; if so, what are the relevant details? NO3675E
Deputy Speaker, the hon member has indicated what the allegations are. Hon member, you are also aware that we have a country that is run in accordance with the Constitution, so if the member has evidence that he can submit then I will investigate the matter. I can't investigate allegations. Thank you, Deputy Speaker.
Thank you, Deputy Speaker. Minister, these allegations were made by your allies, the National Union of Mineworkers, NUM. They are the ones who made this allegation that the Chamber of Mines had created these particular "sweetheart" unions.
It is quite surprising that you don't know what your allies know! If I were a Minister, and if my allies made this particular statement, I would be worried. I would be worried! However, it seems as if you have not become worried about the creation of such unions that are meant to undermine established collective bargaining processes in the country. It is quite surprising that you did not know that.
Minister, it was said by Dr Martin Luther King Jr that there was "nothing more tragic than to sleep through a revolution". It seems as if you are definitely sleeping through this revolution. [Interjections.]
Deputy Speaker, through you to the hon Kganare, unfortunately you are not the Minister, and you are not going to be the Minister in future! [Applause.] As I have said, I will not investigate something that is alleged. Therefore, I'm saying that if you have evidence, you should just come forward, and I will investigate. I think you must have the learning skills. [Interjections.] Thank you, hon Deputy Speaker.
Thank you, Deputy Speaker. Minister, it seems as if there are members of the trade unions who don't trust their trade unions. It seems as if there are people who don't believe in some - not all - of the leadership of the trade unions. What has happened over the weekend, what we have seen on national television, proves beyond reasonable doubt that there are people who do not trust their leadership within the trade unions. As Minister of the department concerned, don't you think that it is high time to investigate what is really happening in the trade unions regarding those trade unions that are called "sweetheart" unions? Thank you.
Mhlonishwa uGatsheni, okokuqala nje uma uchibiyela umbuzo wakho uthi ... [Hon Gatsheni, first, to rephrase your question, you are trying to say ...]
... that it seems as if it is so, but you are not sure. Maybe what I can tell you ...
... wena Boya beNyathi engingakusho ukuthi mina sengihlangene nazo zonke izinyunyana zabasebenzi kanye ne-Association of Mineworkers and Construction Union, i-Amcu imbala. (Translation of isiZulu paragraph follows.)
[... Boya beNyathi [Clan name], I wish to inform you that I have consulted with all trade unions and even the Association of Mineworkers and Construction Union, Amcu.]
Nobody has raised these allegations. Even Amcu has not raised these allegations. Therefore, I think we must respect all the unions, even if people are saying whatever they like. It's like political parties when they just make any announcement in the newspapers, and, therefore, these relevant unions must respond to that. I am not going to do that. Thank you, hon Deputy Speaker. [Applause.]
Thank you, Deputy Speaker. Minister, let me see if I can take another tack on this one. Our labour relations dispensation is a socioeconomic system that is in need of adaptation to a dramatically changing industrial relations environment. So, my question is this. Will the Minister support the call by the DA for the urgent establishment of a parliamentary ad hoc committee to address this and other problems plaguing the country's mining industry? Thank you.