Blog

South Africa will once again be spending more on protecting the president, former presidents, their spouses, the deputy president, “persons related” to the president and deputy president, and “local and international dignitaries” than on land reform.

This came to light in the national budget released by Finance Minister Tito Mboweni on February 26, which shows that the budget of R3.44 billion for VIP protection and related activities is larger than the R2.93 billion set aside for land reform for the 2020/21 financial year.

And the difference between the two allocations is expanding: the budget for protection and security has grown 9.34%, while that for land reform has been reduced by 5.8%.

Although the land reform budget is expected to increase over the medium term, it is not projected to overtake that of protection and security in the next two financial years.

This trend follows a pattern where the budget for protection and security has once again outsized that for land reform.

If the trend continues, the budget for protection and security will exceed that for land reform by just under R400 million in the 2022/23 period.

This is a big change from when the government spent about R487 million more on land reform than protection and security in 2016/17.

The rise in the bill to keep the president, the deputy president, dignitaries and related parties safe comes as the government is going through a period of belt-tightening.

Mboweni wants to cut R167 billion in spending and is pushing to do so through big cuts to the public wage bill.

The cut in the land reform budget comes as government is under concerted pressure to accelerate land reform.

Last month President Cyril Ramaphosa said in his State of the Nation address that addressing the land issue would be a priority for the government.

“This year, we implement key recommendations of the Presidential Advisory Panel on Land Reform and Agriculture to accelerate land redistribution, expand agricultural production and transform the industry.”

The controversial issue around changing the constitution to allow for land expropriation without compensation would also be addressed urgently.

“Government stands ready – following the completion of the parliamentary process to amend Section 25 of the Constitution – to table an expropriation bill that outlines the circumstances under which expropriation of land without compensation would be permissible,” he said.

Article by Money Web

Despite these debt-ridden SOEs potentially crippling the economy, David Mabuza is confident of turning both around

Deputy president David Mabuza says the government remains confident that Eskom and SAA can be returned to profitability despite the current challenges the two state-owned entities (SOEs) face.

During a Q&A session in the National Council of Provinces on Tuesday, Mabuza reiterated that the government has no intention of disposing of SAA, despite growing calls for the state to sell the debt-laden airline.

The crises at Eskom and SAA have put the government under pressure to show its intent on the restructuring of SOEs and reducing the financial burden on the fiscus.

Though there has been  a decline in public participation on the proposed amendment of the constitution to make it easier for the state to expropriate land without compensation, a majority of participants still oppose the amendment, according to an analysis by an NGO.

The land expropriation issue has polarised the country and spooked investors.

Parliament’s ad hoc committee looking into the matter has published the draft bill to amend section 25 to allow for expropriation without compensation. It aims to tackle skewed land ownership patterns dating back to the apartheid and colonial eras. The ad hoc committee is holding oral public hearings across the country.

• Gym giant Virgin Active says South Africa doesn’t need a proposed Fitness Industry Regulatory Authority – and consumers shouldn’t have to pay for it.
• The government is proposing a specialist regulator with the ability to accredit personal trainers and gyms, and shut them down.
• But the idea is “unprecedented internationally”, Virgin Active says, and self-regulation plus enforcing existing laws is a better idea.

South Africa does not need a fitness regulator, gym giant Virgin Active South Africa says, and consumers shouldn’t have to pay for “further unneeded government regulation”.

The company, which operates 136 gyms and says it has 800,000 members in South Africa, published the broad strokes of its objection to new legislation that is currently in draft form.

The National Sport and Recreation Amendment Bill proposes giving the minister of sport more direct control of sporting codes, seeks to create new sporting bodies (including one to regulate “combat sport”) – and would create a Fitness Industry Regulatory Authority.

That body would have dominion over anyone who helps others get and stay fit in exchange for money, and the power to classify and close down anything resembling a gym.

Why, exactly, gyms would be closed down is not clear from the draft legislation, but the implication is that the regulator would be concerned primarily with safety.

Such a body would be “unprecedented internationally”, Virgin Active says, and is unnecessary.

“There already exist numerous other laws which comprehensively govern the industry and protect the consumer,” Virgin Active said in a statement on its submission about the draft law.

“Industry specific regulation provides no additional value to the consumer or the industry, but will instead add more cost for government, the industry, the individuals that operate within the industry, and ultimately the consumer.”

The company argues that smaller operators in particular will suffer from an administrative burden under the proposal. It also says government should be encouraging investment in the fitness field, to counter a rise in lifestyle diseases such as obesity and diabetes.

It wants self-regulation instead, “combined with proper enforcement by existing state agencies of legislation already in place”.

Virgin Active did not say whether it had commented on the proposal that the fitness regulator create a dispute-resolution mechanisms, which is anticipated to deal with complaints that difficulties cancelling gym contracts.

Article by BusinessInsider

Economists forecast GDP contraction of 0.2% for the fourth quarter of 2019

The state of the economy will be at the forefront this week, with some economists forecasting that SA may have slid into another recession.

Stats SA is expected to release the GDP print for the fourth quarter of 2019 on Tuesday. A contraction of 0.2%  is the median forecast among 12 economists polled by Bloomberg. The economy, which the Reserve Bank expects to have grown by only 0.4% in 2019, shrunk 0.6% in the third quarter, its second contraction in 2019. The most recent time SA entered a recession was in the second quarter of 2018.

The persistence of load-shedding and the government’s battle to curb its debt and bring in revenue have worsened concern that the local economy could go further in its downward trajectory.

“We expect those sectors that are inextricably linked to load-shedding — such as utilities, manufacturing and even transport via crucial supply chain networks — to underperform,” FNB economists said in a note.

“Based on the high-frequency data from Stats SA, gold mining production on a sequential basis may well prevent the mining sector from being a detractor from economic growth in the quarter. Overall, economic growth remains lacklustre and only structural reform will be able to lift potential growth meaningfully over time.”

Lowered expectations

International bodies, including ratings agency Moody’s Investors Service, have slashed SA’s economic growth forecast for 2020. Moody’s recently lowered its outlook for SA from 1% to 0.7%, citing load-shedding and weak domestic demand as crucial issues. The ratings agency is expected to give a credit ratings review on SA in March, which could cause SA to lose its last remaining investment-grade rating.

The IMF and the World Bank have also lowered their growth expectations for SA to below 1%.

The IMF has warned that the coronavirus outbreak poses a threat to the recovery of the global economy. The number of cases reported worldwide had climbed to more than 85,000 by Sunday.

On the back of a grim domestic economy, conditions in the  manufacturing sector are expected to have declined in February. The estimate among economists polled by Bloomberg is for the Absa manufacturing purchasing managers’ index (PMI) to have declined to 45.1 index points in February from 45.2 in the previous month. This would make it the seventh consecutive decline.

“We expect another contractionary reading in the February release as the sector has been marred by intermittent power outages, weak domestic demand and a potential dampening of export sales amid the coronavirus outbreak,” FNB economists said.

The current account deficit as a percentage of GDP is expected to have narrowed further in the fourth quarter after decreasing to 3.7% in the third quarter.

Vehicle sales for February will also be released this week.

Artice by Business Day

All municipalities will have to be compliant under the new Spatial Planning and Land Use Management Act (SPLUMA) by October 2020, says real estate company Seeff.

Seeff said that legislation introduces a new ‘SPLUMA certificate’ which the National Deeds Office will now require from the local municipality in which a property is located before any property transaction can be concluded.

Oliver Moorcroft, Seeff’s managing director in Polokwane, said that the law was established to create a uniform set of planning legislation in order for municipalities to apply land use control.

He added that the introduction of the new SPLUMA certificate is to ensure that the zoning of the property matches the land use and to determine that all the buildings on the premises are in accordance with approved building plans which should be filed at the municipality.

Moorcroft said that to obtain a SPLUMA certificate from the local municipality, a seller should have the following in place:

• An affidavit signed by the seller and filed at the municipality with an application wherein the owner states that the relevant plans pertaining to the property are in order, accurate and have been filed with the local municipality.
• All rates and taxes and any other funds pertaining to the property must be paid up to date.
• Building plans for all buildings (including the swimming pool and lapa) need to be approved and submitted. Should these plans not be compliant, the seller will need to appoint an architect or draughtsman to prepare the plans for lodgement with the municipality.
• The use of the property needs to be in accordance with municipal zoning.
• There should be no encroachments over the building lines and property boundaries”.

Moorcroft said that the process to apply for your certificate should be started as soon as the property is listed as it could be a time-consuming exercise taking up to three months.

“Sellers would need to apply for this certificate at their local municipality, but unfortunately the costs associated with obtaining the certificate has not been finalised yet,” he said.

“Not all municipalities have been applying this Act in its entirety and everyone should be compliant by October.”

Moorcroft said that while there are many benefits with regard to SPLUMA for buyers and the city council, it may be a challenging and time-consuming process for sellers to obtain these certificates from municipalities that are already under pressure – especially when physical inspections to the property are also needed.

“Therefore it is important that sellers start the process as soon as possible,” he said.

Articel by BusinessTech

The International Monetary Fund has forecast that South African and Zimbabwe will in 2020 have the same growth rate of 0.8%.

The fund on Wednesday revised its 2020 growth projection for Zimbabwe from 2.7% to just 0.8%. The Zimbabwean government, meanwhile, expects growth of 3%.

In January, the IMF also revised down its growth projection for South Africa to 0.8%. This revision depressed projected growth for the sub-Saharan Africa region, as Fin24 reported at the time.

In its Article IV Consultation with Zimbabwe, the global lender said the southern African country was facing an economic and humanitarian crisis exacerbated by policy missteps and climate-related shocks.

“With another poor harvest expected, growth in 2020 is projected at near zero, with food shortages continuing,” it said.

The review comes as the recently reintroduced Zimbabwe dollar has lost much of its value. Hyperinflation hit Zimbabwe in October, according to the Public Accountants and Auditors Board, following rampant price increases, including a 300% increase in the electricity tariff.

In addition to high inflation and low international reserves, the IMF said there was a need to address governance and corruption challenges, entrenched vested interests, and enforcement of the rule of law to improve the business climate and support private sector-led inclusive growth.

“Such efforts would be instrumental to advance re-engagement efforts with the international community and mobilise the needed support,” it said.

Zimbabwe faces the difficult task of pursuing tight monetary policy to reduce sky-high inflation, and prudent fiscal policy to address macroeconomic imbalances and build confidence in the currency.

The IMF called for cuts to non-essential spending, including decisive reforms to agricultural support programmes, to allow for social spending needs.

The global lender also stressed that eliminating deficit monetisation would not only be crucial for fiscal sustainability, but would also serve as a precondition for stabilising hyperinflation and preserving the external value of the currency.

Article by Fin 24

In the wake of recent comments by United States Secretary of State Mike Pompeo, the country’s ambassador to South Africa says she has been assured that private land will not be expropriated without compensation.

Speaking to the Mail & Guardian, US ambassador to South Africa Lana Marks responded to Pompeo’s warning that plans to expropriate private property would be “disastrous” for the economy. “I am 100% satisfied in the way in which President [Cyril] Ramaphosa is handling everything — in a totally open and transparent manner. I am totally satisfied.

“I have personally advised all partners regarding this in the United States. There will be no confiscation whatsoever of private land … So now, having said that there will be no confiscation of any private land whatsoever, now is the time for major US investment in South Africa.”

Marks later added that she has been assured that there will be no confiscation of private land “across the board, in a transparent manner with President Ramaphosa”.

But legislation clarifying the circumstances in which land may be expropriated without compensation is still in the process of being drafted.

The president said as much in his response to the State of the Nation debate last Thursday.

Ramaphosa added that “land reform is an essential part of inclusive growth”.

“Unless we change the patterns of land ownership in this country — unless we give all South Africans access to land for agriculture, for commerce, for housing — we will not only be perpetuating a grave injustice, but we will also be constraining the economic potential of our land and our people,” he said. “The lack of land is — alongside the lack of skills — one of the greatest impediments to growth and prosperity.”

The Expropriation Bill was released for public comment in December 2018 and is likely to be tabled in Parliament in June.

The Bill will be processed together with the amendment to section 25 of the Constitution, which provides for expropriation without compensation. The first round of public hearings on the constitutional amendment are set to start on February 28 in Mpumalanga and the Free State.

At the Goldman Sachs investor conference in May last year, Ramaphosa reportedly allayed fears that investors would be prejudiced by land expropriation without compensation.

According to BusinessTech, the president said: “I’ve said it before — foreign investors have nothing to fear; there’s no way we can invite foreign investors to our country and say ‘come, invest’ and tomorrow we take your land away.

“That is not going to happen. That is not sensible. It’s not something that any sensible person does.”

In the interview with the M&G, Marks said she was not consulted by the US state department on the land reform issue prior to Pompeo’s remarks last week.

“But I think he [Pompeo] was just addressing this to say ‘Please, South Africa, keep things in check’ … I think it was just a matter that was on his bucket list in his huge responsibility in Africa and around the world,” Marks said.

Pompeo’s remarks were not the first time US government officials have stoked fears about land expropriation in South Africa.

In 2018, US President Donald Trump tweeted that he had asked Pompeo to closely study “the South Africa land and farm seizures and expropriations”.

But Marks said: “South Africa has seriously addressed all of the contentious issues in the most serious and responsible manner. And I have relayed this clearly and articulately to Washington. And now is the time for serious American investment in South Africa.”

Marks, who was first approached  by Trump in November 2016 to become ambassador — shortly after he was elected — only officially started work at the embassy in Pretoria three years later.

Her first 90 days in the position have been marked by her ambitions to lift South Africa into the top 20 of US trade partners. In 2019, South Africa was ranked 39th.

Marks said she has met some of the major US corporations engaged in industry in South Africa “for many years” with the view of increasing investment: “Obviously South Africa faces its most daunting economic challenges since the dawn of democracy a quarter of a century ago. And we are doing everything possible to assist with that flat economy to really raise it out of the doldrums.”

In response to Marks’ comment that “there will be no confiscation of any private land whatsoever” under the new land reform legislation, spokesperson for the president Khusela Diko noted that Ramaphosa has said, “Government is committed to accelerating land reform and thus reversing what he calls the ‘original sin’ of land dispossession of the oppressed people of South Africa.”

“He has further indicated that such land reform will be undertaken within the strict confines of our laws, of which the Constitution is the most supreme. Both within the country and elsewhere he has committed that South Africa will continue to protect property rights, while setting out very clear policy positions on how land reform will be accelerated.”

JOHANNESBURG – Public servants are easy targets in goverment’s bid to trim the wage bill. So say labour unions.

That’s while they’re accusing government of doing little to bring corrupt politicians in the upper echelons to book.

It comes ahead of Wednesday’s budget presentation.

President Cyril Ramaphosa has warned government’s current debt levels are becoming unsustainable.

The state wants to cut 30,000 jobs and freeze pay for three years.

But some experts aren’t sure.

Good afternoon It is my honour to introduce the first Budget of the Sixth Administration. Today I table:

1. The Division of Revenue Bill
2. The Appropriation Bill
3. The 2020 Budget Review
4. The 2020 Estimates of National Expenditure
5. The 2020 Tax Proposals

1. INTRODUCTION Madam Speaker, The Aloe Ferox survives and thrives when times are tough. It actually prefers less water. It wins even when it seems the odds are against it. Mr President, in your State of the Nation Address two weeks ago you reminded us that our capacity to win is not diminished. We have it within ourselves to be the best in the world.

Congratulations to Miss Universe Zozibini Tunzi, the Springboks, and the Proteas, who won while we were preparing this Budget. Our economy has won before, and it will win again. Before democracy our growth was pedestrian. Indeed, between 1990 and 1992, the economy contracted for three years in a row. In the fifteen years following democracy, economic growth averaged 3.6 per cent a year. The gross debt-to-GDP ratio declined from 46 per cent to 26 per cent. In the five years from 2003 to 2008, growth averaged around 5 per cent, and South Africa was amongst the fastest-growing major economies. The unemployment rate improved by 5 percentage points. Now, even after a decade of weak economic performance, South Africa still boasts deep and liquid capital markets, strong institutions, the most diversified economy on the continent, and a young population. We are part of the most vibrant continent in the world. As Pliny the Elder said: “Ex Africa semper aliquid novi” Winning requires hard work, focus, time, patience and resilience. Achieving economic growth and higher employment levels requires a plan. To quote First Corinthians chapter 9 verse 24: “Do you not know that those who run in a race all run, but only one receives the prize? Run in such a way that you may win.”

2. ECONOMIC CONTEXT What are the conditions under which we must implement our plan to win? In 2020, global economic growth is expected to strengthen to 3.3 per cent. Global inflation remains contained. Global monetary policy is supportive, and we are benefiting from demand for emerging market assets. Asia (excluding Japan) is expected to grow by 5.8 per cent in 2020. The Coronavirus is a source of uncertainty to this forecast. With growth of 3.5 per cent, sub-Saharan Africa is forecast to be the second-fastest growing region in the world. Against this backdrop we forecast that the South African economy will grow by 0.9 per cent and inflation will average 4.5 per cent in 2020. Over the next eighteen months, the economy should get a number of jump starts. These include, amongst others: 1. The fruits of the reform agenda led by the President 2. Lower inflation 3. The interest rate reduction earlier this year 4. The recent gains in platinum group metals prices 5. The impending change to the electricity regulatory framework 6. The tax proposals we are setting out today Persistent electricity problems will, however, hold back growth. Over the next three years, we expect growth to average just over 1 per cent. Therefore, a stable supply of electricity will be our number one task.

3. TOWARDS AN ECONOMIC STRATEGY Last year, the Government embraced the ideas contained in the document Towards an Economic Strategy for South Africa. This is our plan, and it contains the basic and fundamental pillars of our approach: 1. Strengthening the macroeconomic framework to deliver certainty, transparency and lower borrowing costs 2. Focusing spending on education, health and social development 3. Modernising “network industries” and restructuring our state-owned enterprises 4. Opening markets to trade with the rest of the continent 5. Implementing a re-imagined industrial strategy 6. Lowering the cost of doing business 7. Focusing on job-creating sectors, such as agriculture and tourism Underpinning all of this is the need for an efficient and capable state. We must also leverage the private sector as far as possible. Today, we report on our progress. “We are moving forward!”

3.1. PRUDENT FISCAL POLICY
3.1.1. OUTLINE OF THE BUDGET FOR 2020/21 A sound macroeconomic framework always lays the foundation for growth. Budgets are complex, but the numbers are simple. The numbers show that we have work to do. For 2020/21, revenue is projected to be R1.58 trillion, or 29.2 per cent of GDP. Expenditure is projected at R1.95 trillion, or 36 per cent of GDP. This means a consolidated budget deficit of R370.5 billion, or 6.8 per cent of GDP in 2020/21. 2020 Budget Speech 7 Gross national debt is projected to be R3.56 trillion, or 65.6 per cent of GDP by the end of 2020/21.

3.1.2. TAX ADJUSTMENTS To support growth, we propose no major tax increases. Indeed, there is some real personal income tax relief. This Budget means that a teacher who earns on average R460 000 a year, will see their taxes reduced by nearly R3 400 a year. Hard-working tax payers, who earn on average R265 000 a year, will see their income tax reduced by over R1 500 a year. Our income tax system is progressive, and the adjustments reflect this. Someone earning R10 000 a month will pay 10 per cent less in tax. Someone earning R100 000 a month will pay about 1.5 per cent less. We are also proposing broadening the corporate income tax base. This additional revenue will be used to reduce the corporate tax rate in the near future to help our businesses grow. Start-ups will ignite the economy. The tax system supports them in a number of ways, including the preferential small business tax regime, the VAT registration threshold and the turnover tax. We will review these to improve their effectiveness while at the same time reducing the scope for fraud and abuse. To support the property market, the threshold for transfer duties is adjusted. Property costing R1 million or less will no longer be subject to transfer duty. There will be a renewed focus on illicit and criminal activity, including non-compliance by some religious public benefit organisations. Religious bodies must operate within the strict boundaries of the law if they are to enjoy tax exempt status. The annual tax free savings account contribution limit rises to R36 000. 8 We have increased excise duties to keep pace with inflation. From today: A 340ml can of beer or cider will cost only an extra 8c A 750ml bottle of wine will cost an extra 14c A 750ml bottle of sparkling wine an extra 61c A bottle of 750 ml spirits, including whisky, gin or vodka, will rise by R2.89 A packet of 20 cigarettes will be an extra 74c A 25 gram of piped tobacco will cost 40c more A 23 gram cigar will cost an extra R6.73 I am again happy to report that there is no increase in the price of sorghum beer. In line with Department of Health policy, we will start taxing heated tobacco products, for example hubbly bubbly. The rate will be set at 75 per cent of the rate of cigarettes. Electronic cigarettes, or so-called vapes, will be taxed from 2021. To adjust for inflation, the fuel levy goes up by 25 cents per litre, of which 16 cents is for the general fuel levy and 9 cents is for the Road Accident Fund levy. Despite this increase, the liabilities of the RAF are forecast to exceed R600 billion by 2022/23. We need to take urgent steps to reduce this risk to the fiscus and bring about a more equitable way of sharing these costs. One option is to introduce compulsory third-party insurance. The carbon tax and other measures will help green the economy, and will bring in R1.75 billion over the next few months. This will be complemented by more focussed spending on climate change mitigation. We remain extremely concerned about plastic bags throughout the length and breadth of our country. In this regard, we have increased the plastic bag levy to 25 cents.

3.1.3. REDUCING STRUCTURALLY HIGH SPENDING Madam Speaker, our measures will support growth. But fiscal sustainability must be uppermost in our mind. Our Aloe Ferox can withstand the long dry season because it is unsentimental. It sheds dead weight, in order to direct increasingly scarce resources to what is young and vital. Total consolidated government spending is expected to grow at an average annual rate of 5.1 per cent, from R1.95 trillion in 2020/21 to R2.14 trillion in 2022/23. This is mainly due to mounting debt-service costs. Non-interest spending declines on average over the MTEF in real terms. As a major step towards fiscal sustainability, today we announce a net downward adjustment to main budget non-interest expenditure of R156.1 billion over the next three years relative to the 2019 Budget projections. The total reduction is mainly the result of lowering programme baselines and the wage bill by R261 billion. These are partially offset by additions and reallocations of R111 billion. Of this, more than half, or R60 billion, is for Eskom and South African Airways.

3.1.4. PROGRAMME SPENDING ADJUSTMENTS Let me unpack the R261 billion in baseline spending reductions. The first part is adjustments on programme spending of about R100 billion. Some of these were announced in the MTBPS. Adjustments are mainly in conditional grants for provinces and municipalities. For human settlements, adjustments amount to R14.6 billion over the MTEF. There are also adjustments of R2.8 billion to the municipal infrastructure grant. 10 Over the three years, public transport spending is adjusted by R13.2 billion, mainly on allocations to the Passenger Rail Agency of South Africa and the public transport network grant. The planning and implementation of integrated public transport networks will consequently be suspended in the Buffalo City, Mbombela and Msunduzi municipalities. Education infrastructure allocations are adjusted by R5.2 billion over the medium term, while health is adjusted by R3.9 billion over the same period. While some of these savings are good for the fiscus, in many cases we are also making difficult and painful sacrifices. It is therefore important that we direct our constrained resources to areas that have a high social impact and have the largest economic multipliers. We shall undertake spending reviews to ensure that we achieve this objective.

 

3.1.5. THE WAGE BILL The second part is adjustments on the wage bill by about R160 billion over the medium term. Public servants do crucial work for our country, often in trying conditions. The governing party is a firm believer in the critical role of the state in development. For this reason, we need qualified, motivated and effective staff. Working with the public sector unions, we have over the past 15 years sought to improve the lot of public servants, and we have committed significant resources for compensating them every year even as we have tried to increase their numbers in recognition of their demanding workloads. Between 2006/07 and 2011/12, we were able to add about 190 000 employees. However, at the same time government wages also increased significantly. 2020 Budget Speech 11 To balance the books, we slowed hiring, and since 2011/12 the number of government employees has declined. Madam Speaker, we cannot go on like this. Classroom sizes are growing, hospitals are getting fuller and our communities are becoming increasingly unsafe. Once we get wage growth, corruption and wasteful expenditure under control, we will focus our attention on hiring in important areas such as education, police, and health care. We can hire strategically, and better match skills with opportunities. The employer has tabled an agenda item on the management of the public service wage bill at the Public Service Coordinating Bargaining Council, the focus is to discuss containment of costs in the final phase of implementation of the current wage agreement. We aim to save R37.8 billion in the next financial year. There is more than one way in which this goal can be achieved. Organised labour understands where we are. They have made constructive proposals on a range of issues.

3.1.6. WASTEFUL EXPENDITURE AND CORRUPTION Mr President you have directed your government to deal with wasteful expenditure. This is a vital step in restoring the confidence of the public in the government. We must get more value for our money. The President’s instruction requires a dynamic and appropriate mix of quantity, quality, capacity and capability in the administration of the state. 12 We are moving forward with reforms to the procurement system with a focus on value for money and maximising the quality and quantity of services. Cabinet approved the publication of a new Public Procurement Bill. We will accelerate merging and consolidating public entities. We will propose a new law to stop excessive salaries in these public entities. We must also deal decisively with the excessive high cost of leasing government buildings. We are already acting on fruitless and wasteful expenditure. Last year, this House amended the Public Audit Act to empower the Auditor General to: 1. Refer matters to a public body for investigation and prosecution 2. Take binding remedial actions 3. Recover money directly from the responsible culprits To show the determination of the executive to deal with runaway costs, we will implement a number of steps. These include: 1. Abolishing the current wasteful subsidence and travel system 2. Replacing the cell phone policy 3. Requiring economy class travel for all domestic flights, except for exceptional circumstances Minister Pandor, the Minister of International Relations and Cooperation, is providing phenomenal leadership in building A Better Africa and a Better World. Her work is unlocking massive value for money from South Africa’s overseas missions by amongst other things: 1. Closing and merging some missions 2. Downgrading the level of representation 3. Reducing the number of officials 4. Establishing a fully-fledged Diplomatic Academy

3.2. APPROPRIATE MONETARY POLICY The twin of our fiscal framework is appropriate monetary policy. Regular consultation on fiscal and monetary policy is critical to the sustainability of our fiscal accounts, to the balanced growth of the economy, and to protecting the welfare of our people. We would like to re-iterate the current inflation target band of 6 to 3 per cent as the most appropriate monetary policy framework for a country like ours. In line with that target, the moderate inflation outcomes for 2019 of 4.1 per cent and the forecast for inflation to be about 4.5 per cent over the next few years, has helped to lower the cost of capital to firms, households and the public sector. The South African Reserve Bank will continue to undertake its duties in line with section 224 of the Constitution which is to perform its functions independently without fear, favour or prejudice in the interest of balanced and sustainable growth in the Republic.

4. ALIGNING SPENDING PRIORITIES TO THE ECONOMIC GROWTH PLAN For our Aloe Ferox to grow to its full potential, we need to do things that will help it in the medium to long-run – for example, augmenting the soil with the right amount of organic manure, providing the right amount of sun and the correct amount of water. For a fast-growing economy we need to make sure our children are well educated, our people are healthy and our money is invested properly.

4.1. LEARNING, HEALTH AND SOCIAL DEVELOPMENT 14 Consequently, the largest spending areas will be learning and culture, which receives R396 billion followed by health R230 billion, and social development with R310 billion. In the education sector, investment goes to new schools, replacing schools constructed with inappropriate materials, and providing them with water, electricity and sanitation. In 2020/21 the maths, science and technology grant will introduce coding and robotics to learners in grades R to 3 as announced by the President. Transfers to provinces support schooling for 13 million children and healthcare for 49.1 million South Africans. It is in this context that taking forward consultation on the NHI is important. President Ramaphosa has been elected Chairperson of the African Union. We shall commence work on the Pan African University for Space Sciences Institute at the Cape Peninsula University of Technology. Funding can come from the Africa Renaissance Fund. The Department of Higher Education and Training will reallocate existing funds to undertake a feasibility study for the establishment of a new university of science and innovation in Ekurhuleni. Over the next three years, 48.2 per cent of nationally-raised funds are allocated to national government, 43 per cent to provincial government and 8.8 per cent to local government. R500 million has been provisionally set aside for disaster management to respond to the impact of recent floods and the ongoing drought.

 

4.1.1. THE INFRASTRUCTURE FUND Honourable members, Funanani Sikhwivhilu from Limpopo told us “Infrastructure development should be a priority for the government” and we agree. 2020 Budget Speech 15 In fact, capital spending is the fastest growing component of non-interest spending. This spending is complemented by the Infrastructure Fund. Over the next three years the Development Bank of Southern Africa will package blended finance mega-projects of least R200 billion. Government has committed R10 billion over the next three years. The public can now find information on infrastructure projects on the VulekaMali internet portal.

4.1.2. YOUTH EMPLOYMENT 8.2 million young people between the ages of 15 and 34 are not in education, employment or training. Government is committed to helping them. Raising skills and improving the matching of young people and jobs is an important focus of the Presidential Youth Employment Intervention. To date, Jobs Fund projects have created more than 175 000 permanent jobs, and helped 21 000 people into internships and created 59 900 short term jobs. Of these, 65 per cent went to youth. As the President announced, we will reprioritise resources to raise spending on this critical area. We will start work immediately! I will provide more details in the 2020 Medium Term Budget Policy Statement. We intend to make this intervention a resounding success.

4.1.3. SOCIAL GRANTS We are a caring society. We are a caring government. More than 18 million people receive a grant, which is a lifeline for many. Grants reduce inequality and protect the most vulnerable in society. I am happy to announce that grants are adjusted as follows: 16 1. R80 increase for the old age, disability and care dependency grants to R1860 per month 2. R80 increase in the war veterans grant to R1880 3. R40 increase for the foster care grant to R1040 per month 4. The child support grant will increase by R20 to R445 per month Changing the way we provide social grants has generated about R1 billion per annum in efficiency savings, which will be partly used to raise the daily subsidy per child.

4.2. MODERNISING NETWORK INDUSTRIES AND RESTRUCTURING THE SOEs Madam Speaker, the next component of our plan is to modernise network industries and to restructure the state-owned enterprises.

4.2.1. ELECTRICITY Government will do “whatever it takes” to ensure a stable electricity supply. As I said, it is our number one task. We have allocated R230 billion over ten years to achieve the restructuring of the electricity sector. The current electricity shortfall will ease as Eskom finishes critical maintenance. Bid Window 4 of the renewable energy programme is being accelerated. The rapid decline in renewable energy prices will give new momentum to Bid Window 5. Determinations to implement the Integrated Resource Plan of 2019 are finalised and await the concurrence of the National Energy Regulator. It will shortly be possible for municipalities in financially good standing to purchase electricity from independent power producers.


4.2.2. SOUTH AFRICAN AIRWAYS. 17 The SAA Sword of Damocles has now fallen on us. SAA has been placed under business rescue which will lead to a radically restructured airline. Over the medium term, Government has allocated R16.4 billion to settle guaranteed debt and interest. The associated restructuring costs will be reprioritised within the Budget. It is the very sincere hope of many that this intervention will lead to a sustainable airline that is not a burden to the fiscus.

4.2.3. RAIL Cabinet approved the economic regulation of transport bill in November, which takes us toward a fairer process for third party access into the rail network.

4.3. OPENING UP OUR MARKETS TO TRADE WITH THE REST OF THE CONTINENT In 2019, South Africa signed the African Continental Free Trade Agreement, which comes into effect on 1 July 2020. This agreement will open up new markets, promote regional integration and contribute to economic growth. Today we announce complementary measures to make it easier to do crossborder financial transactions, which will support trade and investment. We want to encourage South Africans abroad to keep their ties with the country. We will raise the exempt amount for foreign remuneration to R1.25 million. We will phase out the administratively burdensome process of emigration through the South Africa Reserve Bank.

4.4. RE-IMAGINING OUR INDUSTRIAL STRATEGY To implement the reimagined industrial strategy: 18 1. An Innovation Fund will be capitalised with R1.2 billion over the next three years 2. Industrial business incentives worth R18.5 billion will create and retain approximately 56 500 jobs 3. An additional R107 million is reprioritised for the refurbishment of 27 industrial parks in townships and rural economies 4. R6.5 billion is allocated for small business incentive programmes of which R2.2 billion will be transferred to the Small Enterprise Development Agency Together with the Department of Trade, Industry and Competition, we are considering various proposals from ITAC related to scrap steel and poultry.

4.5. LOWERING THE COST OF DOING BUSINESS Madam Speaker, Steps are being taken to address South Africa’s lagging productivity growth and reduce the cost of doing business. For example, the BIZPortal will provide a streamlined way to register a new business with the CIPC, SARS, the UIF and the Compensation Fund in one day. The Competition Amendment Act came into force on July 2019, strengthening the Competition Commission’s powers. The Commission has conducted inquiries into a number of sectors to strengthen competition. South Africa is moving with the fourth industrial revolution. We are determined not to be left behind. We are relaxing regulations to help our flourishing FinTech sector. The spectrum licensing plan was released in November, preparing the way for auctioning high demand spectrum. ICASA will be appropriately capacitated for 2020 Budget Speech 19 this. A voucher system will be introduced to allow households to acquire digital devices.

4.6. SUPPORTING AGRICULTURE AND TOURISM Over the medium term we will support Agriculture and Tourism. Government has allocated R495.1 million to the Department of Agriculture, Land Reform and Rural Development to improve compliance with biosecurity and support exports. An additional R500 million is reprioritised over the medium term for the department to finalise land claims. To support tourism, we will engage with the tourism industry on formalising the tourism levy.

4.7. ENFORCING JUSTICE Madam Speaker, fighting corruption is a priority of this Administration. The NPA, Special Investigating Unit and Directorate for Priority Crime Investigation get an additional R2.4 billion in this Budget. This will enable the appointment of approximately 800 investigators and 277 prosecutors who will assist with, among other things, the clearing the backlog of cases such as those emanating from the Zondo commission. The disruptive actions of those who storm construction sites or mines harm growth and lead to job losses. Communities should expose such people to allow Ministers Cele and Lamola to ensure that the law takes its course. I hope all South Africans join me in condemning this.

4.8. OFF-BUDGET INITIATIVES TO GROW THE ECONOMY
4.8.1. SUPPORTING LENDING Working with the financial sector, a pilot of the Help to Buy scheme has supported over 2 000 families to buy their own homes. For every R1 subsidy 20 provided by government, the scheme crowds in R8 from the private sector. In a single year, the Help to Buy scheme has supported nearly R1 billion in new lending.

4.8.2. STATE BANK Last year, this House passed legislation which will allow state-owned enterprises to apply for banking licences. In July 2019, I tasked the Deputy Minister of Finance with the responsibility to undertake the state bank project. Madam Speaker, I am pleased to inform the House that preferred options for the establishment of a bank are now ready. The architecture will be that of a retail bank operating on commercial principles. The state bank will be subject to the Banks Act, and will have an appropriate capital structure and performance parameters on investments and loan impairments. It will be regulated by the Prudential Authority on its own merits. We will also consolidate the currently fragmented system of national and provincial Development Finance Institutions.

4.8.3. SOVEREIGN WEALTH FUND Mr President, a Sovereign Wealth Fund is an important long-term tool for saving and investment for future generations. It can also contribute to strengthening the fiscal framework. We must learn to save during the good times, and a Fund can play an important role as a counter-cyclical fiscal tool. Today we announce the formation of the South African Sovereign Wealth Fund with a target capital amount of about R30 billion, which converts to about US$2 billion or so. Given the legal, administrative and procedural issues involved, a relevant bill will be submitted during the course of this Parliament. There are a variety of possible funding sources, such as the proceeds of spectrum allocation, petroleum, gas or minerals rights royalties, the sale of non-core state assets, future fiscal surpluses and money we set aside. This will ensure that we continue to invest in the future generations of this country in a fiscally-prudent manner. 2020 Budget Speech 21

4.9. AN EFFICIENT AND CAPABLE STATE The National Development Plan calls for a capable and efficient state that creates the right environment for the private sector to flourish. Taxpayers deserve to feel that their money is going to a government that is efficient and capable. We thank all South Africans for paying their taxes. SARS is an integral part of the capable state. We are focused on re-establishing institutional integrity and fighting criminal activity. Just this past week two individuals were convicted for up to 168 years’ imprisonment for tax fraud.

4.9.1. STRENGTHENING MUNICIPALITIES For all South Africans, the “state” is their municipality. Allocations to local government help municipalities provide basic services and are a powerful redistribution tool. Mr President, the National Treasury asked members of the public to provide tips to guide our thinking as we shaped this Budget. Today we are joined by Ms Akhona Mgwele from Gauteng who advised us to “support greater local economic development in municipalities.” We agree with her! I am therefore pleased to announce that local government is allocated R426 billion from nationally-raised funds over the MTEF. The Minister of Cooperative Governance and Traditional Affairs and I have agreed that our officials will find ways to use the allocations made through the Municipal Infrastructure Grant to ensure that municipalities not only build new infrastructure but also maintain the infrastructure they already have. The O.R. Tambo aerotropolis in Ekurhuleni is at an advanced stage of implementation and King Shaka airport in eThekwini is progressing in that direction. Cape Town shall join them soon. Meanwhile Lanseria has been identified as a potential smart city. 22

4.9.2. STRENGTHENING PROVINCES Provinces provide health care and education and are at the frontline of service delivery. I wish to thank my colleagues in the provinces, the MECs for Finance, for the work they are doing and inputs they have shared with me on fiscal consolidation and economic growth. All these steps build a capable state.

4.9.3. STRENGTHENING REGULATORY OVERSIGHT Madam Speaker, there are a number of entities that report to the Ministry of Finance. The report into the Public Investment Corporation highlights important lessons, including the need to implement and adhere to governance and financial controls, and to reduce risk appetite. This House has passed legislation to strengthen the Independent Regulatory Board for Auditors, and further legislation is planned. We will shortly appoint an independent panel of experts to review practices in the auditing profession. The country’s money laundering system is currently undergoing a peer review, which will help strengthen the fight against illegitimate and illegal flows. The South African Reserve Bank will in future play a more integral part in this fight. The Financial Sector Conduct Authority has repositioned itself as a market conduct regulator, and we will shortly appoint a new Commissioner. The National Treasury will take steps to strengthen the budget process. 5. CONCLUSION Madam Speaker Winning is not easy. 2020 Budget Speech 23 Less than two years before winning the World Cup, the Springboks lost 57-nil to the All Blacks. Miss Universe did not win her first attempt at Miss South Africa. Winning takes patience, prudence and perseverance. As Saint Paul tells us we must run in such a way that we may win. To paraphrase Charles Dickens, who I quoted in my first address as Minister of Finance, we will make these the best of times. Mr President and Deputy President, thank you for your leadership. A word of appreciation to the Deputy Minister of Finance, The National Treasury Director General and his team. My thanks to the SARS Commissioner, to the Governor of the South African Reserve Bank, to colleagues in the Cabinet and in the Minister’s Committee on the Budget. My gratitude for the Parliamentary Committees who work tirelessly to process the legislation accompanying the Speech. I close by reflecting on the words of Comrade Bram Fischer from the dock: “With confidence we lay our case before the whole world, whether we win or die, freedom will rise in Africa, like the sun from the morning clouds”.

Mudzimu fhatutshedza Afurika

END