Chairperson, the recent financial crisis has demonstrated to us the interconnectedness of financial markets and instruments. This time everyone was correct in blaming this on greedy Wall Street operators exposing and exploiting the free market system.
It came as no surprise when the weaknesses of markets around the world, and now governments, were exposed and the models of John Keynes had to be hastily reintroduced to rescue and stabilise markets. From that moment on everything changed and the free market will never be the same again.
Let me remind this House how deep the recession was - we are still feeling aftershocks and economies are hesitant to react over positively. Strangely, this recession, like those in the previous 30 years, did not originate in emerging markets, but in the most powerful country in the world, the USA, and then it spread rapidly to Europe and Asia. The USA lost $250 billion worth of loans. In 16 months stock markets in the USA lost $26 400 billion. The capital loss was 95 times the gross domestic product, GDP, of this country.
In other words, it wiped out wealth equal to the annual GDP of 95 countries the size of South Africa. South Africa was slightly better off because of conservative financial regulations but was nevertheless hit hard, and it will take us another five to six years to regain heavy losses, according to Clem Sunter.
Prof Estian Calitz wrote a good perspective in the publication discourse on the recession, stating that "the fallibility of markets had required government intervention to restore confidence". This recession has exposed the shortcomings of human knowledge about human behaviour. According to Calitz, we have witnessed:
... the inadequacy of our economists' understanding of how economies function and their ability to credibly predict and prevent major crises!
He concludes by saying:
The fact is, we as humans still do not know how to protect ourselves against harmful collective behaviour in its unpredictability.
In the words of the Pogo principle: "We have met the enemy and it is us!"
This brings us to a sensitive topic, and I would like a response from the hon Minister. According to a report compiled by Dr Philip Theunissen of Computus, he has studied and surveyed 326 companies in this country, and he found that the salaries of CEOs in South Africa are out of control.
Despite the recession South African CEOs were still able to double their normal annual earnings. It takes the average CEO three months to earn more than R1 million. Chief executive officers still earn twice as much on average as the President of the country, and three times more than Cabinet Ministers - only salary wise. They earned ten times more than a director-general in 2009, while they earned 106 times more than a cleaner in the Public Service for the same year. Seventy eight percent of CEOs earned more in a month than the average worker earns in a year. All of this put pressure on the ever-increasing state wage bill, and it is setting a bad example in terms of expectations.
Banks in South Africa, like in the UK and the USA, are paying their CEOs higher than normal salary packages. Bloomberg has reported that Nedbank's CEO earned R43 million in 2009, Standard Bank's CEO earned R18,2 million and ABSA's CEO earned R13,5 million.
In all three examples their salaries were just below R5 million, but add the rest, the bonuses and the share options, and then it becomes ridiculous. Dr Theunissen has further found that neither the performance of the individual companies, nor the size of the company, influence the size of the salaries. No single business factor has emerged in his study as a main factor for the determination of salaries.
Why does someone who earns more than R5 million in salaries alone want more when he or she is already working in a stable low risk environment? When a company is listed on the JSE there should be some sort of a cap on remuneration packages. I do not have the time to argue the case for or against share options, but there are some ridiculous examples in our economy. Hon Minister, the remuneration committees of companies are not doing their jobs and they are not sensitive to the wide gap between CEOs' salaries and those of workers. They are also not sensitive towards the poverty gap in South Africa. And if boards of directors are not responding to this challenge, is it not fair to pose a question: Who do they want to do the job? Do they really want government to step in?
This greed and sickness of high salaries has been contagious - state-owned enterprises are being paid, salary wise, even more on average than their counterparts in companies! Let us not even talk about deputy CEOs and other top management officials or municipal managers. Something is wrong and possibly the hon Minister Hogan will set the example with her investigation about these SOE salaries; this might just become a guiding principle for JSE-linked companies.
In conclusion, we have seen that unchecked building up of debt levels is not sustainable in either the private sector or the public sector. Most countries will have to reduce their debt at least to levels prior to the crisis. According to JAC Laubscher of Sanlam, South Africa will need a required adjustment in the structural primary budget balance, between now and 2030, of 3,8% of GDP to make sure that our debt level will be around 40% of GDP.
In the new book recently published about Barack Obama, Race of a Lifetime: How Barack Obama Won the White House, there is a lovely story about fellow Senators asking Hillary Clinton why she was attending so many fundraising events and other commitments in Chicago - that was in 2004 when Barack Obama was still a Junior Senator - and she replied: "Didn't you know there is a superstar in Chicago?"
Minister, we wish you many superstars in the Treasury with the big fiscal challenge ahead of you and to keep our debt levels under control. We also wish Bafana Bafana lots of super goals. [Time expired.] [Applause.]