IFP GENERAL BUDGET DEBATE DELIVERED BY HON. LJ DE KLERK MPL 17 JULY 2019

Honourable Speaker and Honourable Members of this August house,
First the IFP wants to congratulate the MEC for Finance Honourable Pillay on his appointment as MEC of Finance. It is my opinion that the ANC couldn’t have appointed a better person for the job.
Unfortunately, I cannot share the optimism that the MEC has expressed during his budget speech on 9 July 2019.
The province find itself in a challenging financial position as funds have decreased for the 7th consecutive year. The data updates of the equitable share formula resulted in budget cuts of R444.6 million, R706.6 million and R1.3 billion over the MTE. The budget cuts are offset by halting plans for Government Offices and reabsorbing budgets allocated to projects which are not likely to take off in this financial year. In addition there have been budget adjustments based on other departmental shifts and the contingency fund has also been reduced. The austerity measures has to continue in an attempt to balance the books. The exercise to ensure that the Provincial Own Revenue growth was not too conservative ant thus to increase the Provincial Own revenue budget sounds like Chinese bookkeeping.
It is further of great concern that South Africa’s economy shrank by more than 3% compared to the last quarter. We all know that true transformation can only happen when the economy grows.
These challenges are further compounded by high levels of unemployment, high cost of living, the poor state of local Government and high crime rate. The Auditor-General’s report on our municipalities shows that our municipalities is in total disarray.

The MEC is correct when he said “We can only make this province work if we build a capable state and ensure good governance at both Provincial and Local Government level”.

Looking at the state of our municipalities and our economy we are very far from realizing our province to work. The MEC for Finance in essence, admits to failure.

To make matters worse the ANC National Government imposed an unfunded mandate on the KZN Province to pay the Izinduna salaries. 50% of the unfunded mandate are being funded by the Department of Cogta, making it very difficult to assist and support Municipalities properly. Even the Treasury has a limited budget to assist the failing municipalities. The MEC states in his budget speech that South Africa’s economy shrank by 3% and attribute this to load shedding, a strike at gold mines and weak levels of investment, but what he doesn’t state is that the weak investment was caused by policy uncertainty as stated by the World Bank. The results can be seen from the AG’s audit reports.

The province is hampered because of the ANC’S chosen policy of centralization of power, thus limiting the province’s ability of self-reliance and -determination as would have been the situation under a federal system. Because of these limitations the budget does not really support economic growth and hence the budget allocated RET initiated is likely to be limited in effectiveness.

Key issues in the Sona debate like acceleration of Investment attractions, the ease of doing business skills for the fourth industrial revolution and improvement in the SOE are not reflected at provincial level. The economic projects in the budget focus more on economic transformation and not enough on growth.

Sadly because of the dismal growth South Africa is experiencing at the moment most of the budget increases are only inflation coupled. If one take this reality together with the poor state of our economy and municipalities we are on the road to failure. This is mainly caused by the ANC’S poor economic policies and Governmental inefficiencies. The World Bank makes this clear when it states “South Africa came out of recession in the third Quarter of 2018, but growth was subdued at 0.8% over the year as policy uncertainty held back investment. It further states Sub-Saharan Africa growth should average at 3.6% in 2019/20 and please do not forget that our crime statistics is shocking. Our murder rate is at 20 000 per year, this is more than most war-torn countries. I do not question the MEC’S noble goals, we as the IFP share these goals but as Milton Friedman has said; “Concentrated power is not rendered harmless by the good intentions of those who create it”.

Honourable speaker, maybe it is time to look at alternative policies.

The IFP has always been the voice of reason:

The ANC fondly reminisces and often makes reference to its Freedom Charter which is deeply steeped in the Neptunian fantasies of socialism and communism. It was written during a time when some believed that communism was the definitive answer to the worlds’ problems, something that has been utterly disproved with each and every communist country ultimately becoming an abysmal failure.

It is therefore patently clear and has been proven many times over, that national democratic revolutions and other communist/socialist claptrap is nothing but mere conjecture and unrealisable illusion and fantasy.

It is time to look at the IFP Constitution: PREAMBLE
1. EMBRACING the principle of African humanism otherwise known as uBuntu/Botho and accepting that governments are instituted and maintained to protect human dignity, personal growth and fulfilment, and individual pursuit of happiness;

2. INSPIRED by a political and constitutional vision that promotes and protects political, economic, social and cultural pluralism in an open society [based upon the rule of law];

3. BOUND by unwavering and uncompromising political commitment to foster the establishment of a truly open, free libertarian, equal-opportunity and reconciled society with democratic safeguards for all people regarded both as individuals and as members of the social formations to which they belong;

4. RECOGNISING the need to harness the great resources of the country to fight the real enemies of the people, namely: Poverty, hunger, unemployment disease, ignorance, insecurity, homelessness and moral decay;

5. DESIRING to ensure a fair distribution of the wealth of the country for the benefit of all its people, by means of political and economic structures that encourage free enterprise and create wealth, while promoting social justice and social responsibility and solidarity throughout the country and within our communities, families and workplaces;

And the Statement of Belief;
1. We believe that the political stability and economic prosperity of our society must be founded on a humanistic culture of respect for the people, regarded both as individuals and as members of the social and cultural formations to which they belong.
2. We believe in equality before the law, and in the intrinsic value of the rule of law as the cornerstone of a free and just society under the law. We are committed to eradicating the rule of man and substituting it with the rule of law. We believe in advanced constitutionalism and in the need for a justiciable, rigid and supreme constitution. We believe in the absolute integrity and impartiality of government’s institutions and in the separation between Party and State and between private and public interests.

10. We believe in libertarian political culture of tolerance and non-violence which promotes the direct empowerment of the people, communities and social and cultural formations with the regulation and administration of their own interests, and which rejects all forms of authoritarianism, paternalism and centralism.

11. We believe in economic pluralism base on a system of free-market enterprise which ensures that the resources and the wealth of our country belongs, and is made accessible to all people, and therefore, we also believe that the government shall not directly participate in economic enterprises or activities in all cases in which the private sector can provide the required product of service at equal or better quality and cost than the state.
12. We believe that the role and scope of the government must be limited to ensuring the protection of corresponding areas of individual and collective freedom, liberty and autonomy.

And the Aims and Objectives of the Party;

1.2 To eradicate all forms of corruption, exploitation and intimidation of man by man, fighting and opposing the ancient as well as the modern evils of government and all forms of social injustice.
1.6 To strive towards the elimination from our society of all forms of discrimination based on race, origin, sex, colour or creed.
1.7 To protect, encourage and promote free trade, commerce industry and agriculture, along with the conservation and rational use of natural resources.
1.11 To propagate among our people the spirit of self-help and self-reliance.

What South Africa requires is objective economic assessment leading to effective framework legislation, policy and regulation.

The ANC unionists, communists, cronies and populists are united in their mutual support for redistribution.

This will accomplish nothing but ensure poor Iong-term growth even if corruption and state-owned enterprise mismanagement were remedied.

The only way forward is a ‘Pro-Growth’ policy. Overemphasising policies like transformation without substance will only lead to more challenges and problems.

No Pro-Growth policies;
Look at successful countries. How did they grow their economies? Surely not through ‘expropriation without compensation’ and then compare them against the current failures of other socialist democratic revolutionist countries, like Venezuela and Zimbabwe, to name just two!
To overcome poverty we need to grow the economy. It is that simple.

The ANC always knows better though and won’t take sound, tried and tested advice if it is in conflict with their political ideology.

Effective policy making must be guided by a well-reasoned thought-through plan, not radical economic transformation! What are you transforming into what and what will be the effect on the economy as the Prince asked in Parliament, “where will the money come from”.

In 2010 I was part of a delegation on Study tour to Portugal and attended a discussion at Coimbra University during that visit. It was just after the 2008 Global financial crash and the recession was still exacting its toll on economies worldwide.
Some of the ANC members of our delegation put forward the main reason for the crash being due to free market policies and capitalism.

The Professor leading the discussion immediately interjected and explained that the real reason for the financial crash and crisis should be credited to socialism as at that stage most European governments were controlled by Socialist Parties.

He further elucidated that socialists tend to value their worth on success of rolling out social programs, without taking into consideration the financial impact of such programs. So for instance, they do not ask “Where will the money come from” but when the money runs out, they blame capitalism, their old failsafe scape-goat.

Currently there is a Split in the ANC. One group are Pro-Growth and the other group are the Radical Economic Transformers. It seems that the Radical Economic Transformers are steadily gaining popularity and why not, populism is on the rise the world over by the very virtue of the fact that the “have-not’s far outstrip the have’s”, inequality being a runaway train and South Africa being one of the most unequal countries in the world.

If South Africa does not follow ‘pro-growth’ policies and continue to push ‘anti-growth’ radical economic and transformative empowerment, we will be heading the same route as Zimbabwe.

As asked by the IFP leader, Prince Mangosuthu Buthelezi “where will South Africa get the money from”.

Dawie Roodt said:
“Given that there is a huge tax shortage to fill in South Africa, the state may try to move onto those people with pensions. It seems we [SA] will follow the same trends set by other nations who have drained their reserves through misguided and ill-considered socialist and communist ideologies.

Once the State’s finances reach a certain level of sustainability, a typical pattern is for a state to first steal from its tax payers, then steal from the savers, until it runs out of savers. If the state persists in its ways it enters a weak growth trajectory with continuous tax-evasions, roadblocks, political uncertainty and protest marches and a possible collapse and failure of the state”.

Roodt further states that for a rogue state to repay its crushing debts:-

“the most popular way by far, however for the state to get rid of the debt, is to pretend to pay it. It works like this:

The independence of the Central Bank is somehow compromised (sounds like Ace Magashule) and the Central Bank then allows inflation to accelerate which reduces the state debt in real terms.

An extreme version of this approach is quite popular where the Central Bank, under the control of the State starts printing money like there is no tomorrow as Germany did after the 1st world war and Zimbabwe 10 years ago and Venezuela right now.” Also take note of Ace Magashule’s “quantity” easing and the Public Protector’s report on the mandate of the Reserve Bank.

Maybe it is important to head to the words of Winston Churchill”:

“I no longer listen to what people say, I just watch what they do, behaviour never lies”.

Look at the ANC behaviour during their reign as government in South Africa.

South Africa is not growing at all. In fact the possibility of another recession is real. The official unemployment rate has now hit 27.6%. Youth unemployment is at 55.2%. Irregular, fruitless and unauthorised expenditure in government departments has skyrocketed. State owned entities are in shambles and entities like Eskom, SAA and others needs billions of Rands of bailout. Almost all Municipalities are dysfunctional.

These are the actions Winston Churchill was talking about. Their actions are proof that the ANC policies are an utter failure.

It is time to change and use policies that are pro-free market and that grow the economy.

Moody’s lowered South African growth forecast after the first quarter to 1.0% from 1.3%. Moody’s is the last of the big three international credit firms to rate South Africa at Investment grade.

So it is critical that we act radically, but radically towards policies giving recognition to a free market economy with greater encouragement and less bureaucratic interference:

1. Our labour laws must be revised in the face of heavily unionised and for all intents and purposes, hostile workforce. As a result investors remain wary of committing funds for development.

2. Land ownership must be prioritized. Expropriation without compensation is an unnecessary and unworkable objective, except in respect of state owned land.

Building a successful, healthy and peaceful nations requires patience, courage, tenacity and above all policies based on well-founded and proven fundamental principles of law and economics.

Without voluntary exchange end entrepreneurial exchange activity, co-ordinated through markets, modern living standards would be impossible. This is the opposite of a developmental state. Let us look at the Government’s track record with SOE and government departments and municipalities and then objectively advise me if it is a good idea to put the government in control of development.

A trend towards great economic freedom results in great economic growth and sound legal systems. The people in such countries enjoy greater personal security and more secure property rights.

Sadly South Africa is not such a country. In 2000, SA had the 46th most-free economy in the world but it steadily declined to 110th place in 2016. The country and its people have become poorer and the consequences are visible for all to see.

Citizens of economically free countries enjoy freedom of trade, low taxes, open opportunity, political and civil liberties and peace.

There must be a rapidly growing, innovative private sector and a shrinking rate of government control of enterprise that would be better suited to private ownership and management.

Government efforts should concentrate on continually assessing the relevance and constitutionality of the body of laws and regulations on the state body and must always be consistent with the rule of law.

Respect for these provisions, which are by and large also contained in the IFP Constitution is the recipe for success.