NATIONAL ASSEMBLY : 29th May 2008
 

Chairperson,

Introduction

The IFP has always been a champion of a free market economy that enables the provision of services, goods and jobs to the greatest number of citizens possible. That is not to say that we support an unfettered capitalist system, but what we do know is that the creation of an enabling environment for economic growth is a vital function of governments everywhere.

The Hon Minister of Finance has been a successful custodian of government's pro-growth economic policies that have created stability, predictability and an enabling environment for the market to function at its best.

However, even this government is not immune to extraneous shocks to the economy in the form of global fiscal turmoil, high oil prices and international food inflation. We are now seeing the first indications of a recession as figures released yesterday showed that our economy grew by only 2,1% in the first quarter of 2008, making it very difficult to reach the annual growth figures reached in previous years or the 4% prediction for this year. Although the agricultural sector performed well, mining and manufacturing were hard hit by power cuts.

Just as the economy had taken a hit, consumers have been very hard hit by rapidly rising fuel prices and food prices.

Fuel Taxes

We have little choice but to acknowledge that external factors are driving fuel price increases and that we have little, or very limited, control over those factors. However, the IFP believes that it is time for our government to tackle the factors that contribute to the fuel price that it has control over. Mostly, this is the taxes that are added to the basic fuel price to make up the pump price.

Hon Minister, South African fuel is among the most heavily taxed in the world and if there is one lever that the government can use to soften the global effect of the oil price on local motorists it is to investigate whether some of the taxes cannot be scrapped or at least lowered.

Many of these taxes are of course dedicated levies to fund, for instance, the Road Accident Fund, and one would have to look at alternative sources of revenue should government agree to lower some of the levies. But, government must also take a long and hard look at whether the RAF levy is in fact being utilised effectively by a Fund that appears to be in a constant state of shambles.

Equalisation Fund

Another measure could be the reactivation of the Equalisation Fund which previously was used to smooth out price fluctuations and lessen the immediate shock to the economy and the public at large. This government has done so in the past. I know the Hon Minister argues that in a climate of rising prices, it would not make much sense to replace the current monthly adjustments with a three-month adjustment as the shock effect would not be lessened.

However, if increases or decreases were only brought into effect every three months it would provide companies that rely heavily on fuel and diesel to better plan and budget for their future operations. This would provide predictability and a large measure of certainty for their operations - both conditions that all private companies require to operate optimally.

Food Inflation - VAT (zero-rating)

For more than a year now, food price inflation has outstripped headline inflation by a significant margin, leading to all food products becoming much more expensive and out of the reach of the public.

The IFP has previously called on the Minister to zero-rate more basic food items, including chicken, a very valuable source of protein. The Minister has argued, in my opinion unconvincingly, that it was not possible to disaggregate the effect this would have on the poor and the rich.

Hon Minister, the point is not that a few rich people might also benefit. The point is that millions of poor people will definitely benefit. The IFP calls on you to look at the bigger picture, i.e. the millions of poor in this country.

If you are so worried about the rich benefiting in any way from zero-rating more food items, then push up the VAT rate on luxury items that only they can afford to make up any revenue shortfall.

National Treasury has also informed us that it would be very difficult to design a system with differential VAT rates, but on the other hand SARS indicated that they would rise to the occasion if it were required.

National Treasury

Chairperson,

South Africa is indeed fortunate that we have such a professional, talented and dedicated team at National Treasury. Their efforts have created stability, predictability and certainty; essential factors for a successful economy.

The IFP have long held the view that taxpayers deserve value for money; in other words, they deserve a government that effectively spends their funding of the fiscus in providing goods and services for all without wastage or inadequate budgeting, planning and execution.

With specific reference to the main objective of Programme 5 of Vote 7 (Financial Accounting and Reporting with applicable standards and prescripts) to support all spheres of government and public entities with compliance, the National Treasury plays a crucial role to ensure that all state agencies spend their allocations effectively and for the most part they have had some success with this.

But, the IFP wants Treasury to take on an even bigger monitoring role of this spending, and if needed, to intervene more regularly in departments, provincial governments or local municipalities where money is wasted or not effectively spent. The same should apply to those agencies that cannot manage their allocations in line with the PFMA and the MFMA.

By way of example, the Auditor-General has just found that only one out of forty municipalities in the Eastern Cape exhibit good financial management. There is a clear case to be made for Treasury intervention in the other 39 where financial management is inadequate. The same goes for national departments such as Correctional Services, Home Affairs and Defence where qualified audits have become the norm.

KZN - Department of Health

Another case crying out for Treasury intervention is the R1,2 billion that has been overspent by the KZN Department of Health. Clearly, this department lacks adequate planning and budgeting skills, not to mention proper financial management skills. Perhaps if the MEC spent less time in the papers and on TV, and more on doing her job, this situation could have been avoided.

The overspending has a detrimental impact on service delivery at institutional level, for instance, hospitals and clinics as service providers are not being paid. Let's not forget - this is the same MEC who suspended a doctor for removing her picture from his office. I am not surprised!

SARS

Chairperson,

SARS is the jewel in this Minister's crown as their success in broadening the tax base and increasing revenue collection clearly shows. Without that success government's ability to redress many of the biggest needs in our society would have been severely constrained.

Revenue Collection

The IFP, however, wants to raise two concerns. First, revenue overcollection has become the norm in recent years with budget assumptions comfortably surpassed. On the one hand that is a good thing, but on the other it makes accurate budgeting difficult and spending predictions become more inaccurate.

Tax Collection

Second, while we welcome the modernisation of the tax collection system, the IFP must point out that many thousands of new taxpayers are now in the net for the first time and they have limited experience of dealing with the tax authorities. For this reason, it is vitally important that SARS does more to create public understanding and awareness of the changes now taking place in the system.

STATS SA - VOTE 11

Chairperson,

The fundamental requirements for every official government statistics organisation are accuracy, reliability and believability. These are crucial to building and maintaining stakeholder confidence and the usefulness of official statistics for planning and other purposes.

Regrettably, STATS SA has not yet reached the required levels of public confidence that one would like to see. A litany of mistakes, inaccuracies, restatements of already-released figures and public corrections over the past few years has understandably eroded public confidence.

By their own admission, STATS SA expects to restore the public's confidence in them by 2009 only. That startling admission to the Portfolio Committee on Finance recently shows that a renewed effort will have to be made to turn around the organisation.

Chairperson,

Support for Budget Votes

The IFP will support these three budget votes with the reservations I have placed on record. I trust the Hon Minister will address some of them in his response to this debate.

Thank you