SPEECH ON THE APPROPRIATION BILL
Steven Swart, MP
PRESS RELEASE African Christian Democratic Party STEVEN SWART, MP 13 MARCH 2007 SPEECH ON THE APPROPRIATION BILL Today in the National Assembly Steven Swart, ACDP MP made the following speech on the Appropriation Bill: Madame Speaker, Hon Minister Manuel, This is indeed a watershed budget with the first ever budgeted surplus, (following last year’s unplanned surplus ), an ambitious social security pension plan aimed at the poor, scrapping of the retirement fund tax, and huge infrastructure spending to encourage faster economic growth. Individuals are to receive an R8, 4bn cut in personal tax, and companies are aided by the phasing out of secondary tax (STC) and loosening of foreign exchange controls. Our cup indeed runneth over, for which we should be grateful. Economic growth is forecast at 4,9% of GDP. The revised budget spending level for 2007/08 is R533,7bn, up from R 474bn for 2006/07. We are now committed to becoming a welfare state which is undoubtedly necessary in the short-term to address widespread unemployment and poverty. Human life does have “equal worth” and citizens should enjoy equal opportunities. Certain questions do, however arise as to the sustainability of a welfare state in the long-run. Does the danger not exist in the long-run of focussing too much on fiscal redistribution to raise living standards through welfare, rather than job creation? Is it further compatible with the concept of the developmental state? However one looks at it, fiscal restraint has enabled funding for growing social reform – and to lift an estimated half of our population out of dire poverty, which is commendable and which the ACDP supports. The revenue authorities are to be commended for collecting R29 billion more than the projected target at the end of the present tax-year. We had an unprecedented surplus of (R5bn) 0,4% of GDP last year and are aiming for a surplus of 0,5% of GDP for 2007/08. The balance that must be struck is to use the fiscal space created by the revenue over-run, and savings on debt service costs (R33bn per year) to give something back to the economy, and in so doing to address poverty and unemployment. The balance that has to a large extent been achieved by firmly establishing our economy in the global arena, whilst addressing the immense social challenges of poverty and unemployment. The ACDP particularly welcomes the approximate R89,5 bn increase in spending on education, health and public transport, social welfare and the fight against crime. The ACDP appreciates concerns with rampant consumer spending, particularly on imported goods, and thus that individual tax relief has been restricted to deal with inflation-driven bracket creep, albeit in the not insignificant sum of R8,4bn. We need to stimulate output or production capacity rather than consumer spending. The reduction and eventual phasing out of (STC) the secondary tax on companies is to be welcomed. We trust that this step will also stimulate the supply side of economy and encourage an investor-friendly economy where growth is not driven by consumer spending on imports. The ACDP is concerned that not enough small businesses have taken up the offer of a special tax amnesty for small businesses. We encourage small businesses that are not tax compliant to make use of the tax amnesty granted by SARS. An extension of the May cut off date may be warranted. The ACDP welcomes the Minister’s announcement of further infrastructure spending to address the country’s infrastructure backlog to prepare for the 2010 Soccer World Cup. The Minister previously announced R15,1bn – with R8,4bn for stadium construction and the balance, now increased to R9bn for municipal transport, roads and precinct upgrades. Additional government spending will also help raise economic growth to the projected level of 6 % by 2010, which, in turn, will cut poverty and reduce unemployment. The critical question remains whether government can spend capital budgets effectively. Capacity constraints must be addressed. The massive increased levels of public investment needed in the run-up to 2010 highlights the need to invest in human capital – the engineers and project managers required. Government itself needs to improve its development and management capacity. Previous shortfalls in spending of capital budgets, albeit decreasing last year, highlights this problem. Hon. Min. T. A. Manuel, in view of the unacceptably high crime rate, fighting crime and ensuring personal safety remains of paramount concern, and needs to be addressed, not by 2010, but now. There is an unprecedented heartfelt cry from citizens for government to deal with the scourge of crime. South Africans would, we believe, even forgo tax cuts if they are assured of personal safety. The high crime rate is also a disincentive to foreign investment in the economy. The ACDP therefore welcomes the additional amounts to be spent on providing resources to fight crime (R7,4bn over the next 3 years) with more to be invested in personnel ( an extra 30 000 members by 2010 – 190 000 members up from the present 152 000 members), salaries, vehicles and equipment. Additional resources to assist the justice system to speed up trials and reduce case backlogs are also welcomed. Improved salaries will also reduce the loss of skilled policemen to the private sector. Urgent steps must be taken to address poor management and the absence of effective systems of command and control. We welcome the additional R8,1 bn for the hiring of additional teachers and improving salary levels. There can be no doubt that there is a need to improve education, with reports indicating that almost 80% of schools are dysfunctional. The ACDP believes that poor management is the main problem – our teachers need to be better trained and managed. Additional funds are also required for school security in view of the escalating child-on –child violence. The ACDP broadly supports the concept of a mandatory social security system, including a social security tax, particularly in view of lack of individual savings. An expanded social security system will contribute to reduce poverty and address vulnerability of many households. We are not a nation of savers, and this step will oblige citizens to put aside funds for retirement. In this regard we welcome the removal of 9% tax on retirement savings. Whilst social welfare grants have been extended widely, and are assisting the poorest of the poor, there is also a huge need for more and better-paid social workers to assist families struggling with unemployment, poverty and HIV/Aids. The ACDP believes strong families result in strong communities. We thus welcome the announcement of a bursary scheme for social workers. With the core priority of the budget to strengthen education, public health services and social welfare services, the ACDP welcomes the additional funds to the provincial equitable share (64% of the additional R89,5bn). The ACDP particularly welcomes the increases in social welfare grants, which, though modest, will go some way to alleviate the plight of the poorest of the poor. We must however look at extending the child grants to children over the age of 14 years. As far as job creation is concerned, the proposals regarding wage subsidies, particularly for young entrants to the labour market, should be supported notwithstanding reservations from both business and labour. The agricultural sector is a potential area for huge job creation particularly if accompanied by a possible wage subsidy. Successful models of job creation in the agricultural sector should be copied and rolled out nationally. The strengthening of the comprehensive response to HIV and Aids, including prevention and treatment program is to be welcomed. Government needs to urgently roll-out access to anti-retrovirals more widely as there are far too many South Africans who are unable to access treatment. Hon Minister, you attempted to allay concerns regarding the growing current account deficit (6, % of GDP - the international acceptable norm is 3%). Should we not be concerned, particularly in view of recent market jitters which may affect the capital inflows used to cover the shortfall? Has the issue of volatile markets and capital inflows sufficiently been considered? We are still importing far more than we are exporting and spending far more than we are saving. Clearly we urgently need to take steps to improve our export performance by inter alia addressing the issues of regulatory burdens and bureaucratic red tape. To conclude, the critical issue is whether the increased Budget addresses unemployment and poverty, whilst stimulating economic growth and development in a safe and secure environment. At the end of the day we will be judged as to what degree the economic boom translates into more jobs to address the poverty experienced in our country. This is the ultimate challenge. The ACDP supports today’s budget and commends the Minister on the budget surplus.
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