VIEWS: 1 PAGES: 78 POSTED ON: 6/15/2012
22 FEBRUARY 2012 PAGE: 1 of 78 WEDNESDAY, 22 FEBRUARY 2012 ____ PROCEEDINGS OF THE NATIONAL ASSEMBLY ____ The House met at 14:02. The Speaker took the Chair and requested members to observe a moment of silence for prayers or meditation. ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS – see col 000. APPROPRIATION BILL FINANCE BILL ADDITIONAL ADJUSTMENTS APPROPRIATION BILL (2011-12 FINANCIAL YEAR) (Introduction) The MINISTER OF FINANCE: Speaker, Chairperson of the NCOP, Mr President, Mr Deputy President, fellow Cabinet colleagues and Deputy Ministers, the Governor of the Reserve Bank and deputy governors, MECs for finance, fellow South Africans, and ladies and gentlemen, it is my privilege to introduce the third Budget of 22 FEBRUARY 2012 PAGE: 2 of 78 President Zuma’s administration. Mr President, you have given us a clear and historic challenge - ... to write a new story about South Africa – the story of how, working together, we drove back unemployment and reduced economic inequality and poverty. This Budget has been crafted at a challenging but nonetheless very hopeful time. We have to say to our people that economic uncertainty will be with us for some time – you will hear the word “Greece” many more times – yet we have a programme of economic change that can steadily roll back unemployment, poverty and inequality. We have demonstrated excellent resilience during the post-2008 crisis. We now need to introduce a new dynamism amongst all South Africans. It requires an extraordinary national effort from all role-players, committed not just to identifying the barriers to progress, not just to proposing solutions, but to working together over the long haul, because this is going to be a long haul. Our new story, our period of transition, is about building modern infrastructure, a vibrant economy, a decent quality of life for all South Africans, reduced poverty and decent employment opportunities. It is a story that must be written by all of us – not just by government, not just by business, and not just by unions, but by all of us, South Africans from all corners of this country. 22 FEBRUARY 2012 PAGE: 3 of 78 The legacy of our past is not only that of difficulty and despair. We can justly take pride in the celebration of the ANC’s centenary and build on this past to get things done today. The idea of unity in action, working together to realise practical goals, must be revived. The idea of an active citizenry, drawn into motion by dedicated and honest activists and inspired by a compelling vision of the future, has to be renewed. Every one of the last 100 years has seen our nation overcome obstacles that seemed initially insurmountable. Some may have been beyond our control, the result of changes to the environment to which we were compelled to adjust. Some were the result of our failure to act, even when solutions were known to us. Others were the unintended consequences of our own successes. A towering leader of our movement, uBaba Walter Sisulu, wrote from his prison cell on Robben Island, and I quote: In a certain sense, the story of our struggle is a story of problems arising and problems being overcome. It is understandable that many of the problems should generate much controversy and emotion. However cool and detached we may strive to be in our analyses, the fact remains that we are deeply involved and interested parties and the solutions we adopt are solutions we ourselves have to implement. 22 FEBRUARY 2012 PAGE: 4 of 78 We will not turn away from our challenges. We must confront them boldly and with hope. In harnessing all the resources at our disposal, we have to do more, with less, and you will hear me say that very often. We have to work smarter and harder. We as South Africans must focus on our strengths and opportunities, to identify and activate the levers of economic change and social change at our disposal. Mr President, you have given effect to the wisdom of uBaba Sisulu. Through the work of the National Planning Commission, this country now has a 20-year vision. Through your initiative, we now have a massive infrastructure programme, also extending over 20 years, which will increase the growth and job-creating potential of this economy. We remain steadfast in addressing the challenges of creating jobs, reducing poverty, building infrastructure and expanding our economy. If we have to summarise today’s Budget, Mr Speaker, the following are the highlights. The global environment remains highly uncertain. While there are signs of a revival in the US economy, much of Europe is in recession, and significant financial risks cloud the global economic outlook. Greece sorted out some of its problems late on Monday night or in the early hours of Tuesday morning, but they haven’t sorted out all of their problems. 22 FEBRUARY 2012 PAGE: 5 of 78 South Africa’s finances are in good health. A Budget deficit of 4,6% of gross domestic product, GDP, is projected in 2012-13. We plan to reduce the deficit to 3% of GDP in 2014-15, and the public debt will stabilise at about 38% of GDP. An expansion in infrastructure investment is one of the central priorities of the 2012 Budget. Special emphasis is given to improving competitiveness in industry, investment in technology, encouragement of enterprise development and support for agriculture. Total spending will reach R1,1 trillion next year, representing some 32% of GDP. I thought you would clap; you have graduated to a new level! [Applause.] Now we can talk in trillions; we can forget billions slowly. Education, health and social assistance will remain the largest categories of expenditure, sustaining and expanding the social wage over the Medium-Term Expenditure Framework, MTEF, period ahead. Investment in people is at the centre of our growth and development strategy. The Budget continues to support job creation, with a particular focus on unemployed youth for whom we need to do a lot more. The Budget provides for personal income tax relief of R9,5 billion, with further measures to increase tax compliance. Measures are proposed to invigorate household savings. We will strengthen 22 FEBRUARY 2012 PAGE: 6 of 78 financial management in the public sector, pursue value for money with the greatest possible vigour, and ensure that taxpayers’ money is well used. Fraud and corruption will be combated through changes to procurement policies and practices, and tough enforcement of the law. Giving the Budget practical effect cannot be a project of government alone. In Setswana, we say “Mabogo dinku a thebana”. [Applause] I am learning. [Laughter.] This means, “We have to work together to achieve more”. Government has supported the recovery from the 2008 recession but, as we expand infrastructure investment over the period ahead, we have to see business investing in our future as well. Government has expanded social assistance to households over the past decade, but employment and economic growth have to be the main future drivers of income growth and poverty reduction. Government is responsible for developing effective municipalities and broadening access to services, but business, civil society and organised labour have to be partners in building cohesive communities and promoting much more intensive social solidarity. And so, Mr Speaker, in tabling the 2012 Budget, we have this to say: This is what we undertake to do, not just as a government, but as a nation. To paraphrase John F Kennedy, our development requires every one of us to ask: What can I do for my country, my people, and our future? We should not ask: What can government do for me? [Applause.] 22 FEBRUARY 2012 PAGE: 7 of 78 Allow me to reflect briefly, Mr Speaker, on the global environment and the historic shift in economic power that is taking place before and around us. In 2012, global output is projected to expand by 3,3%. That is a far cry from the averages of 5% and 6% we are used to. Advanced economies are expected to grow by 1,2%, while developing Asia will grow by 7,3% during 2012, and sub-Saharan Africa by 5,5%. Negative growth is forecast for the Euro area, impacting on trade in many other economies, including our own. In the last five years, the Chinese economy has expanded by 60% and India by about 45%. Advanced economies barely show any positive growth. A recent World Bank study argues that new growth poles are redefining the global economic structure. This study predicts that emerging economies will grow on average by 4,7% a year, while advanced economies will grow by about 2,3% between 2011 and 2025. The speed of transformation is unprecedented and places emerging economies at the centre of the global economy. Emerging market multinationals are playing an ever-increasing role in reshaping global industry, including marked increases in South-South investment and foreign direct investment. The evolving world we face presents us with both challenges and, more importantly, opportunities. Financial commentator Martin Wolf recently wrote, and I quote: 22 FEBRUARY 2012 PAGE: 8 of 78 Shaping this new world into a co-operative and flourishing order is going to prove extraordinarily challenging. History suggests that such times of transition, however inevitable and however just, are fraught with conflict and instability. Today, the western dominance of at least two centuries is under severe challenge. This period of transition is unlikely to be any less fraught than those that preceded it. It is quite an important point, hon members, that this world around us is changing. The change is not going to be easy. Those that have had economic and other power are going to try to hold on to it, and those that are emerging are going to say that they want some of it or that they are going to build their own. To succeed in this environment, we have to seize the opportunities presented by this changing world. As a major mining economy, we should be benefiting more from the continued buoyancy in commodity markets internationally. We also need to take advantage of rising demand for agricultural and manufacturing goods. Some 85 million manufacturing jobs in China will shift to other countries over the years ahead. The question for us is whether we have the right policies, conditions and, above all, boldness to enable South African businesses to gain from these immense shifts in the patterns of production and trade. That is what we need to answer, as South Africa, together. 22 FEBRUARY 2012 PAGE: 9 of 78 There are expanding opportunities on our own continent. Africa is the second fastest growing region in the world, as you saw. This growth is sustained by high commodity prices but also reflects a youthful, increasingly educated population, rapid urbanisation and a new entrepreneurial spirit. Ten years ago there were fewer than 10 million Internet users on this continent. Today, they number almost 100 million. As well as developing South African business interests on the continent, we should use the strength and sophistication of our financial system to turn our country into a true gateway for investment in, and development of, Africa. Both the National Development Plan and the New Growth Path recognise that to compete in the global economy requires flexibility, innovation and leadership, in government and in the private sector. We have to build a more adaptable economy. This requires more effective and dynamic partnerships between government, civil society and the private sector. At the same time, the crisis and its aftermath have revealed intractable problems in the old system. Growing inequalities in income and wealth have undermined economic growth, social wellbeing and, indeed, social cohesion. The difficult task of moderating and reversing inequality requires active government intervention. The 22 FEBRUARY 2012 PAGE: 10 of 78 truth of the matter is that unregulated capitalism is clearly in crisis. We have to go beyond it. [Applause.] In building partnerships that will take us through this crisis, Mr Speaker, we have to implement a strategy for faster and more inclusive economic growth. We are not doing well enough in growing our economy and creating jobs, particularly for our young people. The South African economy has averaged at about 3% growth a year since 2009. Against the background of the slowdown in the global economy, real GDP growth is likely to fall to about 2,7% in 2012. We expect a recovery to 3,6% and 4,2% in 2013 and 2014, but these are modest rates of expansion relative to the social and developmental challenges we face and the opportunities that our mineral wealth and human capabilities offer. On present trends, the deficit on the current account of the balance of payments will widen from 3,3% in 2011 to 4,4% of GDP in 2014. There was a welcome recovery in job creation during 2011, but employment has not yet returned to its 2008 peak and the unemployment rate remains stubbornly high, at 23,9%. What then is our vision, if we were to paint one for our economy in 2030? Mr President, through your leadership, we are able to say to South Africa and the world that we do have a vision for our country and our economy – where we would like to be in the next 20 years. 22 FEBRUARY 2012 PAGE: 11 of 78 Our New Growth Path recognises that special employment initiatives have to be a priority in our present circumstances, whilst in the longer term growth in agriculture and manufacturing, and investment in the knowledge-based economy must be prioritised. The draft National Development Plan identifies several key objectives for us, which include: lowering costs for both households and business; increasing public infrastructure spending; growing our manufacturing and agricultural sectors; raising mining output; improving the functioning of the labour market, particularly to help young people access work; and raising competitiveness and exports. In each of these areas steps have been proposed over the three-year period ahead. Our development strategy requires a capable state and active citizens. We need parents to work with the state to deliver quality education, not just the Minister of Basic Education; community leaders that will help protect neighbourhoods; business leaders and trade unions to grow the economy; and investors to create jobs. In isiZulu, we say, “Uzothola kanjani uhleli ekhoneni?” [Applause.] This means, “How far will you get if you are sitting in your corner?” We have to stop sitting in our individual corners and move to a space where we can work with each other. If we are to succeed in putting our economy on a more rapid and inclusive growth path to 2030, we need to effectively direct and 22 FEBRUARY 2012 PAGE: 12 of 78 manage the levers of change – levers that activate both public and private sector energies and capabilities. Amongst these are: our public sector infrastructure programme announced by the President; support for industrial development and special economic zones, which Minister Davies is guiding; investment in science and technology, which Minister Pandor is guiding; support for emerging farmers and land reform beneficiaries, under Ministers Nkwinti and Joemat-Pettersson; expansion of employment programmes, hopefully under all of us, and improvements in further education and skills development. The redoubtable Minister Nzimande has all the answers on that one! So, these are amongst the things that we need to do together. A sustainable fiscal framework, based on the principles of countercyclicality, debt sustainability and intergenerational equity, underpins our growth strategy. Mr Speaker, we can be proud of the collective wisdom and will of our government in making the tough decisions that have kept our fiscus on a sustainable track. Reprioritisation, savings and “haircuts”, the new buzz word, have been executed with singular determination. I said to the President that I would share the story about “haircuts” – it is not in my speech. The President, when we were talking about haircuts recently, said that we should look at your 22 FEBRUARY 2012 PAGE: 13 of 78 hair. Now, clearly there is not much of a haircut we can take off those people who come close to me or have very little hair. [Laughter.] However, if you are close to the Deputy President and maybe Deputy Minister Nel, you can have a modest haircut and still have some hair left. [Laughter.] If you come closer to Minister Molewa, and I am sure there are colleagues on the left here who are similar, you can have a deeper haircut! [Laughter.] So, what we are saying to South Africans is that all of our Cabinet members are ready for haircuts. They understand that if we are to prioritise investment, and if we are to prioritise infrastructure, haircuts are necessary to reprioritise our financing, and that is part of the story as we go forward. [Applause.] The consolidated resources available to the state over the MTEF period – that is, the state as a whole – amount to some R4,5 trillion, taking into account the investment plans of state enterprises and development finance institutions. Key features of the budget framework include real growth in noninterest expenditure averaging 2,6% over the medium-term. This is 2,6% without inflation, which means that even in the slow recovery after the recession we are still able to take 6% plus 2,6%, an 8,6% increase in our expenditure, bringing spending in line with long- term revenue trends. 22 FEBRUARY 2012 PAGE: 14 of 78 The key features of the budget framework also include: additional allocations of almost R56 billion over the next three years, including R9,5 billion for an economic support package; the stabilisation of tax revenue at about one quarter - 25% - of our gross domestic product, GDP; a reduction in the budget deficit from 4,8% in 2011-12 to 3%, as I said earlier, in 2014-15; and a public sector borrowing requirement of 7,1%, declining to 5%. The importance of this is that if you borrow less, you pay less interest and have more money available to deliver services. This is in the context of the public sector borrowing requirement rising again as infrastructure programmes of the government accelerate. By phasing in our fiscal consolidation over the medium term, we avoid the social and economic dislocation associated with more rapid adjustments, while still stabilising the fiscal position without burdening the economy and future generations with excessive debt, particularly debt incurred from consumption. A question that everyone has been asking is this. The President has announced the infrastructure plan – where is the money? The Presidential Infrastructure Co-ordinating Commission, PICC, has made considerable progress in identifying projects and clarifying long- term investment plans to drive economic change. The Budget Review lists some 43 major infrastructure projects, adding up to R3,2 trillion in expenditure. Over the MTEF period, approved and budgeted infrastructure plans amount to R845 billion, of which just 22 FEBRUARY 2012 PAGE: 15 of 78 under R300 billion is in the energy sector and R262 billion in transport and logistics projects. These projects are funded in various ways. The fiscus meets the costs of Public Service facilities such as schools, courtrooms, hospitals and rural roads. Public entities, such as Eskom and Transnet, finance their investments from internally generated surpluses and borrowing from the capital market. This means they have to generate sufficient revenue from tariffs and charges to repay that debt over time and cover operating and maintenance costs. In some cases, a mix of tax finance and cost recovery is appropriate. We make budget contributions to the costs of commuter transport services, electricity and water service delivery, particularly to low-income communities. Private sector investment plays a substantial role in several sectors. Access to telecommunications services is financed by private operators. Our airlines industry has several private sector players. The first round of over 1 200 MW of renewable energy projects, under Minister Peters’s guidance, was recently successfully tendered for by independent power producers. Private sector capacity can also be mobilised through construction and operating concessions, for example, in the management of industrial development zones, freight logistics and ports operations. 22 FEBRUARY 2012 PAGE: 16 of 78 The Development Bank of Southern Africa will play a co-ordinating role in raising finance in partnership with multilateral finance institutions, foreign investors and other investment funds. The Industrial Development Corporation, IDC, similarly invests directly in income-generating projects, in partnership with other investors. South Africa has deep and liquid capital markets, through which long-term capital can be raised at competitive rates by government, state enterprises and, indeed, the private sector. Our development finance institutions are capable of raising capital and cofinancing investments of the private sector, state entities and municipalities. These are considerable strengths that most developing countries don’t have. They mean that we do not have to rely on expensive external finance or complex structured arrangements. But the key consideration, Mr Speaker, is the impact and economic viability of our infrastructure investments. The PICC will ensure expert project assessment, subject to appropriate standards of review and public accountability – a critical requirement before investment decisions are taken. And the assurance we give to both the government, generally, and the public is that no good project will be without funding. [Applause.] Of course, you might ask: What is a good project? We will come back to that. 22 FEBRUARY 2012 PAGE: 17 of 78 We are aware of several weaknesses in the state’s infrastructure capacity and we must be frank about that. In the past, spending has lagged behind plans. Our estimate is that in 2010-11, R178 billion was spent out of a planned R260 billion, or just 68%. But, there is no point in pointing out weaknesses and moaning about them. The real issue is what we do to correct those weaknesses. [Applause.] We have to do better than that and I’m sure all of us will agree. State enterprises, municipalities, provinces and government departments all need to improve their planning and management of capital projects. In addition to long delays, we have often experienced significant cost overruns in infrastructure projects. That’s the responsibility, not just of government, but the private sector as well. So we shall step up the quality of planning, costing and project management, so that infrastructure is delivered on time, and on budget. [Applause.] This means that government departments and municipalities that do not spend, underspend or misspend their allocated funding, will be at risk of losing those allocations. [Applause.] The relevant officials will also be held liable for such misdemeanours, if there are any. [Applause.] National Treasury will be proactively monitoring the spending of grants to ensure value for money, adherence to Expanded Public Works Programme targets and implementation of operational and maintenance 22 FEBRUARY 2012 PAGE: 18 of 78 programmes. Several measures are in place to improve infrastructure project implementation and build management capacity within the state. Within state-owned entities, development finance institutions and the private sector considerable capacity has already been mobilised in project planning and management. We need to bring it effectively into operation. The Infrastructure Development Improvement Programme assists national and provincial departments focused largely on education and health projects and support for provincial public works departments. The Construction Industry Development Board has played a key role in developing standards and procedures for government tenders. A new cities support programme will get under way this year — subject to Cabinet approval — initially in eight metropolitan authorities, and focused on improved spatial planning, public transport systems and management of infrastructure utilities. The Municipal Infrastructure Support Agency will be established by Minister Baloyi this year. It will be focused on rural municipalities that lack planning capacity. Technical assistance to municipalities is also provided through the Neighbourhood Development Programme, which supports over 220 projects aimed at catalysing business investment in township partnership projects. 22 FEBRUARY 2012 PAGE: 19 of 78 The infrastructure skills development grant supported 150 graduate interns in engineering and spatial planning in 2011-12, and will be extended to a further 43 municipalities over the period ahead. Special attention will be given to the procurement processes for major infrastructure projects, to ensure both value for money and the development of local suppliers and support industries. What we are saying to South Africa today is that we are aware of our weaknesses, we have plans in place, we have institutions in place, and we will make sure that the programmes to increase our capacity to deliver infrastructure actually work within the next year. Training and mentorship programmes have a critical role to play in addressing capacity constraints of departments and municipalities. However, professionalism, hard work and commitment to value for money are preconditions for successful project delivery. There can be no compromise on the basic principles of sound financial management in ensuring that resources are mobilised efficiently to serve our people – and not just a few pockets. A capable state focused on delivery requires a passionate and patriotic Public Service, without those few individuals whose only desire is to profit from the state. Now what are our revenue estimates and tax proposals? I am sure if you have been feeling sleepy, you will be awake now! [Laughter.] I 22 FEBRUARY 2012 PAGE: 20 of 78 turn now, Mr Speaker, to the revenue estimates and tax proposals. The underlying principles are that the tax system should be fair, efficient, transparent, certain and, where possible, uncomplicated. Tax revenue recovered during 2010-11 and 2011-12, following a decline in 2009-10 during the global recession. That means the SA Revenue Service, Sars, is beginning to do its job well again. Although tax revenue is slightly lower than our estimate in February last year, the revised estimate for the 2011-12 financial year of R739 billion is R10 billion higher than projected in last year’s Medium-Term Budget Policy Statement, MTBPS. [Applause.] So, what are this year’s tax proposals? I will quickly summarise them for you. Personal income tax relief of R9,5 billion is proposed, which takes account of inflation and provides modest real tax relief. Much of this goes to the lower end, which is people who earn less than R200 000. Tax treatment of medical expenses undergoes a change from 1 March 2012. We have a tax credit system for contributions to medical schemes, which will be introduced at a rate of R230 a month for the first two beneficiaries and R154 each for additional beneficiaries. What this means, essentially, is that where medical deductions were dependent upon whether you earned at a lower level, or at a higher level and therefore you got a higher discount, if you like, there is 22 FEBRUARY 2012 PAGE: 21 of 78 now equity within the system and everybody will be getting the same tax credit. Taxpayers aged 65 years and older and people with disabilities will be included in the second phase of this reform, which will be implemented in 2014. These reforms will significantly improve the fairness of the personal income tax system. In respect of retirement funds and savings, reform of the tax treatment of contributions to retirement funds is also envisaged to take effect in 2014. To encourage voluntary savings, which is a key priority for South Africa, consideration is being given to the introduction of tax- exempt short and medium-term savings products — that’s a new set of products. The proposal is that individuals should be permitted to save up to R30 000 a year, with a lifetime limit of R500 000, in registered savings or investment products that would be free of tax on interest that is earned, dividends or capital gains. [Applause.] We believe that there should be more such products to attract all income groups in South Africa to increase their savings. The current tax-free interest income thresholds will be reviewed and possibly phased out as part of this overall reform. Full details of these proposals are in the Budget Review. 22 FEBRUARY 2012 PAGE: 22 of 78 In respect of dividends tax, the secondary tax on companies, which is the tax that we have currently, will be terminated on 31 March 2012, and a withholding tax on dividends will be implemented on 1 April 2012. This has been in the pipeline for three years now. This will align South Africa’s tax treatment of dividends with that in most other countries. Pension funds will benefit from this transition as they will receive dividends tax free. The dividends tax will be introduced at 15%, as opposed to the original 10% we thought of. There is a change in the capital gains tax, CGT. When CGT was introduced by Minister Manuel in October 2001, that was an important step in broadening the tax base of South Africa. In order to reduce the scope for tax arbitrage and broaden the tax base further, the CGT inclusion rate for individuals and special trusts will be increased with effect from 1 March 2012 from 25% to a modest 33,3%; and for companies and other trusts from 50% to an equally modest 66,6%. [Interjections.] Just before we have too much whistling, these rates in equivalent countries are 100%! So ours are still modest, and we need to think carefully before we do any more whistling. [Laughter.] To mitigate the impact on middle-income earners – there are a lot of details in the Budget Review – the various exclusion thresholds are increased so that the impact is minimised. 22 FEBRUARY 2012 PAGE: 23 of 78 With regard to relief for small businesses, Mr Speaker, I am pleased to advise that there will be further tax relief for small businesses and microenterprises. The tax-free threshold for small business corporations is increased to R63 556, the 10% rate of tax is reduced to 7%, and the threshold up to which this rate applies is increased to R350 000. For taxable income above R350 000, the normal 28% corporate rate applies. With effect from next month, qualifying microbusinesses – that is microbusinesses that have a turnover of less than R1 million — will be able to pay turnover tax, VAT and employees’ tax only twice a year. This means that the number of returns and payments a year will be reduced from about 18 to just two. That’s a major advance for them. [Applause.] Several measures are set out in the Budget Review to improve the corporate tax environment. Amongst them are the further steps to be taken to limit excessive debt financing. What happens here is that companies get into a lot of debt and then the state allows the interest to be deductable. This is then manipulated to ensure that the owners of the companies benefit but you, the taxpayer, suffer at the end of the day. Other steps are: amendments to the mark-to-market taxation of foreign currency and other financial instruments will be phased in; the governance and tax treatment of property loan stock entities 22 FEBRUARY 2012 PAGE: 24 of 78 will be aligned with the present treatment of regulated property unit trusts; and tax relief is proposed for housing developers and employers who provide housing below R300 000 a unit. This again is to feed in with what the President announced in regard to the gap market. The Minister of Trade and Industry has published draft legislation to provide for the creation of special economic zones. Tax relief is under consideration for businesses that invest in these zones, including a reduction in the corporate income tax rate and support for employment and training expenses. [Applause.] In respect of carbon tax, a revised policy paper on a carbon tax will be published this year for a second round of public comment and consultation. As set out in the National Climate Change Response White Paper approved by Cabinet in 2011, the need to price carbon emissions, and the phasing in of a tax instrument for this purpose, are accepted. As from 1 July 2012, the levy on electricity generated from nonrenewable sources will increase by 1c per kWh, without any major impact on consumers. This levy will replace the current funding mechanism for energy efficiency initiatives, such as the solar water geyser programme. As a result, there should, as I have said, be little overall impact on electricity tariffs. 22 FEBRUARY 2012 PAGE: 25 of 78 The general fuel levy on petrol and diesel will be increased by 20c with effect from 4 April 2012 ... [Interjections.] ... and the Road Accident Fund will increase by 8c to 88c per litre. With regard to the Square Kilometre Array, SKA, project, members of the House will know that under the guidance of the Minister of Science and Technology South Africa is bidding to host the Square Kilometre Array, an international collaboration to build the world’s largest radio telescope. I am happy to confirm that the project will qualify for VAT relief, which will, we hope, surely give Minister Pandor the winning edge in this contest. [Applause.] I don’t know how many of you are gamblers. Nevertheless, following the 2011 Budget proposal on gambling, it is proposed that a national tax based on gross gambling revenue should be introduced, effective from 1 April 2013, as an additional 1% levy on a uniform provincial gambling tax base. A similar base will be used to tax the National Lottery. Now, your favourite item: excise duties on tobacco and alcohol products. One of the tips we received, Mr Speaker, was from Mr D Naicker who said: “Raise the tax on alcohol and cigarettes so that people will stop drinking and smoking too much.” I’m sure you agree that this is good advice. [Interjections.] So we have taken the advice! [Laughter.] 22 FEBRUARY 2012 PAGE: 26 of 78 The increases in duties on tobacco products will be between 5% and 8% this year. In respect of beer and spirits – the one you drink — an increased benchmark tax burden is proposed, which is to be phased in over two years. The excise on spirits will increase by 20% to R36 for a 750ml bottle this year. [Applause.] Tax on beer goes up by 10% to R1,01 for a 340ml can and wine will contribute 8% more to the fiscus. [Applause.] Minister Motsoaledi says he is very happy. As far as tax on financial transactions is concerned, in South Africa we do have one on securities transfers at a rate of 0,25%. It is proposed that the current exemption for brokers should be abolished. Transactions for the broker’s benefit will be taxed at a lower rate. The inclusion of financial derivatives in the base of the securities transfer tax is also under consideration. In regard to ad valorem excises, with effect from October this year an ad valorem excise duty at a rate of 7% will apply to small aeroplanes and helicopters with a mass below 5 000 kg. A duty of 10% will apply to motorboats and sailboats longer than 10 m. There’s no comment – obviously, you guys don’t own boats! [Laughter.] Mr Speaker, I now turn to tax administration. Whereas several nations around the world are confronting severe austerity measures and significantly higher taxes, we are able to propose overall tax relief of R2,3 billion, in part because of the strength of our tax policy and administration, and in part — an important part — because 22 FEBRUARY 2012 PAGE: 27 of 78 millions of South Africans pay their taxes and duties in full and on time. Let’s thank them. [Applause.] The recent voluntary disclosure programme has attracted approximately 18 000 applications, and has yielded almost R1 billion in additional taxes so far. It has also provided very useful insights into areas of noncompliance, which will receive focused attention from Sars, including underdeclaration of income, such as rental and foreign income and capital gains; claiming of excessive income deductions; underdeclaration of VAT outputs and inflating of VAT inputs; abuse of share incentive schemes by corporate executives; abuse of benefits granted to foreign persons employed in South Africa; nonpayment of Pay As You Earn, PAYE, and failure to submit PAYE returns by employers. You don’t have to applaud for them! Poor tax compliance is also apparent in respect of trusts and in parts of the construction sector, and the role of tax practitioners and other intermediaries will come under the scrutiny of Sars. Analysis of compliance amongst the country’s 34 000 tax advisers shows practitioners owe some R260 million in outstanding taxes and have more than 18 000 income tax returns outstanding in their personal capacities. If that is their attitude towards their own tax compliance, one shudders to think what advice we poor clients are getting at the moment! 22 FEBRUARY 2012 PAGE: 28 of 78 Within the trade environment, customs officials will continue to focus attention on undervaluation of imports, especially in textiles, using a reference price database which industry is helping to update. During the current financial year, Sars has already confiscated 3,4 million articles of clothing and footwear valued at almost R580 million. In addition, Sars has seized drugs worth R139 million and 683 million sticks of cigarettes valued at R180 million. [Applause.] Since April over 230 taxpayers have been successfully prosecuted for a range of tax-related offences, resulting in sentences totalling 370 years and nearly R5 million in fines. A further 1 500 tax- related cases are awaiting prosecution with the National Prosecuting Authority. Since 1 April 2011 Sars has issued over 700 000 taxpayers with administrative penalties for failing to submit an income tax return on time, as required by law. These and other measures have helped to increase the proportion of on-time submissions. As a result, Sars received almost 5 million returns during the most recent tax season – a 23% increase over the year before. The Tax Administration Bill has been approved by Parliament. It incorporates the common administrative elements of current tax law into one piece of legislation, and makes further improvements in 22 FEBRUARY 2012 PAGE: 29 of 78 this area. The Bill is expected to be promulgated and most of its provisions brought into force in 2012. During 2012 South Africa will establish a dedicated ombud for tax matters. The office is intended to provide taxpayers with a low-cost mechanism to address administrative difficulties that cannot be resolved by Sars. In preparation for the Budget, various consultations occur, including receiving a wide range of tips from the public. This year, a pre-Budget consultation was held with the Nedlac constituencies. Amongst the issues raised very constructively and usefully were the following: the need to shift expenditure towards investment, rather than consumption activities; sustainability of increases in the public sector wage bill; rapid increases in administered prices; reinforcing taxes on luxury goods and more effective taxation of the super rich; budgetary support for rural development and more effective strategies for eliminating poverty; financial transactions tax; improving financial management; support for the Community Work Programme, and responding to rising food prices. Many of these recommendations find resonance in the contents of the Budget and our spending proposals. We thank the Nedlac constituencies for their contribution. 22 FEBRUARY 2012 PAGE: 30 of 78 What are the medium-term expenditure proposals? In our spending recommendations we have taken the advice of Amanda Mzulwini, and I quote: I think that you should spend money on things that matter, like improving health care, building more schools in the rural areas and building clinics. Therefore, as far as job creation is concerned, which is a central priority of government, an additional R4,8 billion over the 2012 period is provided for the Expanded Public Works Programme, bringing its allocation to a total of R77,8 billion. [Applause.] The Community Work Programme receives an additional R3,5 billion, which gives it a total of R6,2 billion, enabling the number of people employed to increase to 332 000 in 2014-15 from 90 000 in March 2011. We will continue to increase allocations to this programme over time. Working for Water and Working on Fire receive an additional R1,1 billion, bringing the total to R7,7 billion, providing a total of 135 000 jobs over the medium term. The Nonstate Sector Programme receives an additional R345 million, bringing its total to R1,1 billion. 22 FEBRUARY 2012 PAGE: 31 of 78 The National Rural Youth Service Corps receives an additional R200 million, bringing its total to R900 million over the next three years. R300 million is added to the arts and culture sector for job creation. With regard to education, spending on education will grow from R207 billion in 2012-13 to R236 billion in 2014-15. Additional allocations of R18,8 billion over the medium term are accommodated, including equalisation of learner subsidies for no-fee schools and expanded access to Grade R. An amount of R235 million is added to the baseline of the national department over the next three years to extend the national assessments system. An additional R850 million is allocated to improving university infrastructure – including student accommodation facilities, Mr Nzimande. Regarding health and social protection, medium-term priorities in health spending include hospital infrastructure, the comprehensive HIV and Aids treatment and prevention programme, and expanding health professional training. Progress in these areas will strengthen the public health system, paving the way for the introduction of the National Health Insurance. The health sector is allocated an additional R12,3 billion over the next three years. R1 billion is allocated for the National Health 22 FEBRUARY 2012 PAGE: 32 of 78 Insurance pilot projects and increasing primary health care visits. To improve health infrastructure, R450 million has been provided to upgrade about 30 nursing colleges. A further R426 million is allocated for the initial work on rebuilding five major tertiary hospitals. [Applause.] To accommodate provision of antiretroviral treatment at the CD4 threshold of 350, an additional R968 million — almost a billion rands — is made available over the medium—term. Social welfare priorities include early childhood development programmes and the Isibindi child care and protection programme. These are initiatives which have strong community-based employment benefits, and they are allocated an additional R1,4 billion over the Medium-Term Expenditure Framework, MTEF, period. [Applause.] Expenditure on social grants will grow from R105 billion in 2012-13 to R122 billion in 2014-15. At present, nearly 16 million South Africans receive social grants. With effect from April the monthly state old age pension and the disability and care dependency grants will rise by R60 a month to R1 200, or R1 220 for pensioners over the age of 75. [Applause.] Foster care grants will increase by R30 to R770, and the child support grant will increase to R280. We are mindful of the fact that these increases may need to be reassessed if inflation continues to rise. 22 FEBRUARY 2012 PAGE: 33 of 78 In respect of transport, energy and communications, the Budget provides for an increase from R84 billion in 2012-13 to R98 billion in 2014-15, rising by an annual average of 8,4%. A devolution of public transport services to metropolitan municipalities will be phased in over the period ahead, allowing for better integrated public service transport networks, including rail and bus rapid transit systems. [Applause.] An additional R4 billion is allocated to the Passenger Rail Agency of South Africa to begin purchasing new coaches. The agency also receives R1 billion to build three depots and upgrade signalling in Gauteng, KwaZulu-Natal and the Western Cape. Sentech will receive funding over the MTEF period for the dual illumination of analogue and digital television, and for digital broadcasting infrastructure. In energy, the focus is on demand-side management to address the impact of limited supply until new generation capacity comes on- line. An additional R4,7 billion is allocated to complete the installation of one million solar water geysers. An amount of R600 million goes to municipalities to install low-energy lighting and equipment, and R300 million is provided for the electrification of informal settlements. [Applause.] 22 FEBRUARY 2012 PAGE: 34 of 78 With regard to human settlements and community amenities, investment in municipal infrastructure and human settlements will grow from R120 billion in 2012-13 to R139 billion in 2014-15. Additional allocations of almost R10 billion over the medium term are proposed, including informal settlement upgrading, a waste water treatment plant in Sedibeng, bulk water systems in Sekhukhune and water systems in the O R Tambo district. Financial support for housing development is expanded over the period ahead, additional funding is allocated for the finance-linked individual subsidy programme, and further capitalisation of our housing finance institutions is proposed. A mortgage support facility is under consideration. As far as economic services and environmental protection are concerned, additional allocations of R15,8 billion are provided over the MTEF period for economic services and environmental protection. The Department of Trade and Industry receives the bulk of this funding – R5,8 billion for the Manufacturing Competitiveness Enhancement Programme and R2,3 billion for industrial development and special economic zones. Additional funds go to SanParks for tourism infrastructure, and to the National Metrology Institute of South Africa for equipment. An additional R1,9 billion goes to the Department of Agriculture, Forestry and Fisheries to improve agricultural support services. The 22 FEBRUARY 2012 PAGE: 35 of 78 Land Bank receives R1 billion to conclude its recapitalisation, and R150 million is made available for provincial and municipal agricultural colleges. The Department of Rural Development and Land Reform has prioritised the settlement of 4 000 restitution claims over this forthcoming MTEF period. Total expenditure on science and technology increases over the MTEF period to R12,1 billion in 2014-15. Additional funding is proposed for the Agricultural Research Council for vaccines research and support for extension services, and for science council initiatives in support of industry and mining development. [Applause.] The Department of Home Affairs receives additional funding for an integrated information technology system and upgrading border post infrastructure and housing. An amount of R350 million is earmarked for transfer to Alexkor for the finalisation of obligations to the Richtersveld community joint venture. Regarding defence, public order and safety, spending on defence, public order and safety increased by 9,7% a year from 2008-09 to 2011-12, and will grow from R140 billion in 2012-13 to R158 billion in 2014-15. The sector receives additional funding of R7,6 billion over the MTEF period to cater mainly for improved conditions of service, additional personnel and infrastructure. 22 FEBRUARY 2012 PAGE: 36 of 78 Additional funding of R300 million is allocated for court infrastructure, including new High Courts in Polokwane and Nelspruit. The Office of the Public Protector and the Independent Police Investigative Directorate are allocated additional funds to expand their important capacity. Funds are provided to the Defence Force to increase personnel deployment to border protection. The budget includes R700 million in 2012-13 to recapitalise Denel Aerostructures, hopefully for the last time. The National Health Insurance is to be phased in, as you know, over a 14-year period beginning in 2012-13. The new system will provide equitable health coverage for all South Africans. Over time, the new system will require funding over and above the current Budget allocations to public health. Funding options, as you know, include an increase in the VAT rate, a payroll tax on employers, a surcharge on the taxable income of individuals, or some combination of these. Alongside options for increased tax revenue, the role of user charges is also being investigated. It is expected that an additional revenue source will be needed in 2014-15, amounting to about R6 billion in that year, which is not currently provided for in the MTEF. Achieving an appropriate balance in the funding of the National Health Insurance is necessary to ensure that the tax structure remains supportive of economic growth, job creation and savings. A discussion paper will be published by 22 FEBRUARY 2012 PAGE: 37 of 78 the end of April 2012 to help us to get into the detail of this particular matter. With regard to the Gauteng Freeway Improvement Programme, I am mindful that the introduction of tolling to finance this programme has caused considerable public reaction. We have listened carefully to the various suggestions and appreciate the difficulties that might be faced. The total debt associated with this project, as you know, is R20 billion. In order to contribute to a further reduction in the toll burden, a special contribution of some R5,8 billion is now proposed, to be included in 2011-12 expenditure. This will reduce the debt to be repaid through the toll system, and will make a steeper discount possible for regular road users. [Applause.] [Interjections.] A little bit of patience. It is important to remember that road-user charges also serve an important demand management function on roads that are heavily congested. Users benefit through lower vehicle operating costs, time savings and improved safety. In addition, improved maintenance of regional and provincial roads is made possible by the additional revenue that our toll roads actually generate. Going forward, government will carefully evaluate future road infrastructure funding. In addition, the further development of efficient, cost-effective public transport systems will receive the urgent attention of the Department of Transport. What I can tell you 22 FEBRUARY 2012 PAGE: 38 of 78 is that this morning Cabinet looked at a package of proposals to take this matter further. Let me outline this package for you, on behalf of the Minister of Transport. The first part of the package is what I have just announced: that from the fiscus – and we are fortunate to have additional revenue from Sars and some other additional money available – we make available R5,75 billion for the SA National Roads Agency Ltd, Sanral, to reduce their debt. This contribution by government will ensure that tariffs are reduced for vehicles with e-tags from 66c to 30c for light vehicles. You will find the rest of the details in a statement that will be issued. Taxis and other public transport operators will be exempted from paying toll fees on this network. [Applause.] We have also decided, very importantly ... Mr M WATERS: And ministerial cars — are they exempted? The MINISTER OF FINANCE: ... that the maximum toll fees payable per month will be R550. In other words, even if you are a frequent user and your bill turns out to be R1 000, you will only pay R550 – it is capped at that level. [Applause.] [Interjections.] In addition, there will be a 15% discount after R400 per month to remove uncertainty and provide relief to frequent users. 22 FEBRUARY 2012 PAGE: 39 of 78 In addition to that, there will be what is called a “time-of-day saving” of 20% for heavy vehicles. Sanral will announce the times. For example, from 10:00 in the morning to 15:30 in the afternoon, when the roads are not likely to be congested, if these heavy vehicles travel during this period, there will be a 20% discount. As I indicated earlier, the upgrading of provincial roads which link the metropolitan municipalities — such as the R55 and the R101 — will be prioritised by the province over the short to medium term. Government itself will invest further and speed up public transport upgrading so that the public has alternatives. As a result of these important announcements, the debt of Sanral will increase to R59 billion, and an appropriate piece of legislation will be tabled by the Minister of Transport shortly. Tolling will start on 30 April 2012. [Interjections.] I believe that this is a very important and constructive outcome of a long set of interactions that have taken place between government and the South African public. We have learnt a lot of lessons. These lessons will be applied in plans for future roads and their construction, and I believe it is time for all role-players to set aside their differences, settle on this very generous compromise, and go forward to a new future. [Applause.] Following on announcements made previously in regard to introducing measures to improve financial management and help combat corruption, 22 FEBRUARY 2012 PAGE: 40 of 78 I can now report that there has been progress on many fronts. The National Treasury has issued new regulations which require departments to submit annual tender programmes, limit variation orders, and require disclosures of all directives of companies applying for tenders. Significant progress is being made in identifying and dealing with those who have abused the system and whose activities fall within the category of priority crimes. The Justice, Crime Prevention and Security cluster, JCPS, made an announcement on priority crimes and corruption statistics earlier this week. I want to thank Ministers Mthethwa and Radebe for the co-operation of the departments and agencies under their management. Our joint multidisciplinary approach to investigations is beginning to bear fruit. I also want to express strong support for the Congress of SA Trade Unions, Cosatu, initiative, Corruption Watch. We call on ordinary South Africans not to sit back and not to accept bribery when they come across it, whether it is in the public or the private sector. [Applause.] Contact the hotlines that are available in government departments. Contact Corruption Watch. Do not accept bribery. Do not become part of any corrupt activity. [Interjections.] There are further steps National Treasury will soon take to improve our procurement capability as a government. We will strengthen fragmentation in the system and strengthen the national procurement 22 FEBRUARY 2012 PAGE: 41 of 78 architecture. The Treasury will appoint a chief procurement officer who will have overall responsibility for monitoring procurement across all spheres of government. We will review the competencies and capabilities required to perform the procurement function and, as indicated by the President, there will be strict vetting of all the procurement officers who are either in office or to be appointed. [Applause.] The Treasury plans to develop a national price reference system to detect deviations from acceptable prices. So, if a particular laptop is supposed to cost R7 000 and a government department pays R10 000, they should be called to account for that. HON MEMBERS: Hear, hear! [Applause.] The MINISTER OF FINANCE: But, of course, the business whose invoice was for R10 000 must also be called to account. HON MEMBERS: Yes! [Applause.] The MINISTER OF FINANCE: The tax clearance system will be strengthened to ensure that those who have defrauded the state cannot do business with the state in the future. HON MEMBERS: Hear, hear! [Applause.] 22 FEBRUARY 2012 PAGE: 42 of 78 The MINISTER OF FINANCE: The Minister of Public Works and I have agreed to undertake a joint review of the validity and cost- effectiveness of all government property leases. [Interjections.] [Applause.] Steps will also be taken to improve the ability of departments to set specifications for tenders. During the past year, Mr Speaker, it has been necessary to take steps to address financial management weaknesses that have undermined service delivery and put financial sustainability at risk in several provinces. The interventions in all three provinces are under way, as you know. The cash crises have been averted, I hope. We shall continue to work hard at building up institutions and systems where weaknesses have been identified, and we must do this in order to restore the trust of our people in our capacity to govern. There are several lessons of general application from these interventions. We as government need stronger rules to ensure that legitimate creditors are paid within the legally prescribed 30-day period — not more, not less. [Applause.] We need better procedures to ensure that staff appointments are not made without the necessary budget allocations and cash availability. [Interjections.] [Applause.] We also need to reduce administrative staff in our system in favour of frontline teaching, nursing and service delivery personnel. [Applause.] 22 FEBRUARY 2012 PAGE: 43 of 78 We need to improve financial management capability across national and provincial departments. We need stricter oversight of supply chain management processes, and I wish to acknowledge the efforts of Cabinet colleagues who are addressing these challenges in their respective areas of responsibility, in collaboration with provincial MECs. These colleagues will report further on the progress they are making during their respective Budget Votes. Now, with respect to the financial sector, I am pleased to announce that progress is being made on several financial sector reforms. There is now agreement between stakeholders on enhanced targets for empowering financing and access to financial services. A revised financial sector charter code will be gazetted by the Minister of Trade and Industry shortly for public comment. This has been an intractable negotiation but it is now concluded, and congratulations go to everyone concerned. More appropriate and balanced capital adequacy and liquidity standards are being phased in for banks, and similar reforms are planned for the insurance sector. As announced last year, we intend to shift towards a twin-peaks system of financial regulation, where we separate prudential from market conduct supervision of the financial sector. Consultations will continue this year, with a view to tabling legislation in early 2013. 22 FEBRUARY 2012 PAGE: 44 of 78 Proposals will be published for simplifying and modernising procedures for cross-border investments into and out of South Africa. After taking public comments, Treasury recognises that some of the barriers identified also apply to domestic investors. We intend to consult further to explore how we can lower costs and barriers to all investments in South Africa. A series of discussion papers will be released this year on promoting household savings and reforming the retirement industry. Consultations on these reforms with the industry, employers and trade unions will take place. Among the issues is improved governance over pension funds – too much money is still being stolen from pension funds — including more effective interventions to eliminate corruption and fraud, and ways to improve preservation of retirement fund assets to ensure higher levels of income for our people in retirement. Fees for many products in the financial sector remain too high. HON MEMBERS: Hear, hear! The MINISTER OF FINANCE: High costs in savings products undermine the national objective of getting our people to save more. [Interjections.] The financial industry must take more urgent steps to reduce costs and introduce more appropriate and transparent savings and investment products, including annuities. [Applause.] 22 FEBRUARY 2012 PAGE: 45 of 78 There is also much to be done to improve market conduct practices in the financial sector. The Treating Customers Fairly initiative of the Financial Services Board will be accelerated to protect customers more vigorously. Our financial institutions should also recognise the important role of women in our economy. The progress of this amongst the companies needs to be reported more transparently. I thought the women would be happy with that! [Applause.] Allow me to return briefly to the central policy challenges we face: growth of our economy, more rapid job creation and reducing poverty. Initiatives in progress to strengthen support for business sector growth include the following. Small enterprise financing has been consolidated and is a new subsidiary of the Industrial Development Corporation, IDC. In October 2011, a procurement accord was signed with business and labour; government procurement rules include incentives for both black economic empowerment and designated local supply sectors. The tax regime for small businesses has been simplified, as I indicated earlier. 22 FEBRUARY 2012 PAGE: 46 of 78 A new competitiveness enhancement programme has been initiated, which we also indicated earlier, building on existing production incentives in the automotive and clothing and textile sectors. A support programme is being developed in the capital goods sector, leveraging large state procurement programmes. The National Tooling Initiative is under way in support of accelerated apprentice training. A draft policy framework and legislation have been published for special economic zones. Technology investment is supported, both through partnerships between science councils and industry, and through research and development tax incentives. A venture capital incentive is available for junior mining companies. Recognising that assistance to the private sector goes beyond the provision of incentives, government is looking at wider interventions to lower the cost of doing business. Improvements are being made to economic infrastructure, such as ports, roads and electricity generation, to cater for the needs of business, as the President indicated. In addition, operational efficiency in ports 22 FEBRUARY 2012 PAGE: 47 of 78 and rail has been prioritised. There is a review of the regulatory regime and its effects on business in a number of sectors, as well as interventions in some institutions to speed up the issuing of licences and to improve transparency in government processes. Various strategies are also in place to deal directly with sector- specific issues. Given the current global economic context, there is understandable caution in the business sector about investment and future growth prospects. Many firms have accumulated large cash balances instead of investing them or distributing them to shareholders. The time has come to confront uncertainty. From government’s side, we are committed to an environment that will encourage business investment. From the side of business we seek investment for the long term, enhanced competitiveness and training commitments. We must all invest in our future, and that is the key as we go forward. In respect of job creation, a wide range of government programmes and policies have come under scrutiny over the past year. Expansion of further education and skills development is a key long-term priority, alongside improving the quality of basic education and broadening access to adult education programmes. At this time last year funding was allocated to a new Jobs Fund, aimed at supporting innovative public and private sector projects with the potential to create sustainable job opportunities. The fund 22 FEBRUARY 2012 PAGE: 48 of 78 began operating in June, received over 2 500 applications, and project allocations of over R1 billion have been committed to. A second round of project applications will be announced shortly. We released a discussion paper proposing a youth employment incentive last year. It is under discussion at the National Economic, Development and Labour Council, Nedlac, where the labour constituency has expressed reservations. In our view, these concerns can be addressed in the design and implementation of the incentive. We would all like to see greater urgency in resolving this matter and making sure we do concrete things for our young people. There are many ways in which job creation for young people may be accelerated. Last year I asked the Nedbank and Old Mutual Budget speech competition winners to participate in a second, mini contest, on the question of how we might reduce youth unemployment. Several great ideas emerged in addition to what we have on the table. Ms Kagee argued that students should be offered practical internships as part of their curriculum to narrow the gap between education and the workplace. Mr Mashishi suggested using communities to arrest youth unemployment by revitalising townships through gyms, sporting teams and leagues, tutoring projects and clean-up operations. Ian Mrozek offered an interesting variation on the idea of a youth subsidy. He proposed that it should go to new business start-ups as a tax incentive, which would encourage entrepreneurs and business innovation and, of course, job creation. 22 FEBRUARY 2012 PAGE: 49 of 78 It is right that we should look for many ways of supporting enterprise development in many different settings and circumstances – in urban and rural areas, in agriculture, in manufacturing and in the service sector. We have to move beyond debate, however, and find the policy levers that will make a difference to the pace and dynamics of job creation across the whole of our economy. In addressing poverty and inequality, reducing unemployment is the centrepiece of our approach to reducing poverty, Mr Speaker, but it is not the only measure. Social spending comprises 58% of the government expenditure for 2012-13, up from 49% 10 years ago. The Budget provides social grants to almost a third of the population and pays for largely free services at public health facilities and no-fee schools for 60% of learners. It also pays for housing, water and electricity in poor communities. The average value of the “social wage” for a family of four in 2012-13 is about R3 940 a month. This represents a substantial investment in household living conditions financed through a broadly progressive tax structure. This is the contribution that all South Africans make to the poor in our society. Social security reform and the phasing in of the National Health Insurance will improve the effectiveness and coherence of redistribution through the fiscus. 22 FEBRUARY 2012 PAGE: 50 of 78 But, of course, redistribution is not a substitute for economic growth and job creation. And so the quality of poverty reduction we achieve over the decades ahead will depend on our success in broadening development to include historically disadvantaged sectors and communities, as envisaged in both the New Growth Path and the draft development plan. In conclusion, Mr President, we have a Budget that gives effect to the challenges you have set us: to accelerate growth, expand investment, support economic development and confront poverty and inequality. My profound appreciation goes to President Zuma and Deputy President Motlanthe for their support and wise counsel in finalising the Budget and, of course, throughout the year. I thank my Cabinet colleagues for their backing, even when further haircuts, as I described earlier on, were proposed. The Budget is our collective statement, and it has benefited from many constructive contributions from all of you. The members of the Ministers’ Committee on the Budget have engaged with the policy choices that have had to be made with vigour and wisdom. This has been a great team effort on the part of that committee. Can we congratulate them, please? [Applause.] Deputy Minister Nene – he says that he is the Minister of substance – has taken on an expanded set of responsibilities over the past 22 FEBRUARY 2012 PAGE: 51 of 78 year, and he has been a very valuable deputy. I thank him. [Applause.] I am grateful for the efforts and support of the MECs for finance who oversee 40% of our spending. I think they know as well as we do that they have much more work to do to get that spending under control, but thank you. [Applause.] Our thanks go to Governor Gill Marcus and the Deputy Governors of the SA Reserve Bank for steadily managing the mandate of the bank, and to Commissioner Oupa Magashula and the 15 000 staff of the SA Revenue Service for the excellent work they continue to do so that we can dish out money today, and for helping us to sustain our fiscal sovereignty. [Applause.] I also thank Jabu Moleketi, chair of the Development Bank of Southern Africa, DBSA, and its chief executive officer, Paul Baloyi, who have a major contribution to make to the infrastructure programme; the Financial and Fiscal Commission and its acting chairperson Bongani Khumalo for their useful advice and inputs; the leadership of the Public Investment Corporation, the Land Bank, the Financial Services Board, the Financial Intelligence Centre and the Government Pension Administration Agency, all of whom play a very valuable role in our overall system; and Nedlac, its managing director Alistair Smith, and representatives of the business, labour and community constituencies for their contributions and for the 22 FEBRUARY 2012 PAGE: 52 of 78 vigorous debates we have – we just need a bit more action rather than talking, but we will get there, I am sure! I thank the hon Thaba Mufamadi and Charel de Beer who chair the Standing and Select Committees on Finance respectively, and the chairpersons of the Appropriations committees, the hon Sogoni and Chaane, who continue to maintain rigorous oversight and encourage very constructive public participation. [Applause.] Of course, we have a brand new director-general in the National Treasury, Lungisa Fuzile, from Mnqanduli, who has provided refreshing and frank leadership ... [Applause.] ... and, of course, this is his first Budget. The National Treasury team, whose hard work sets the high standards of our Budget documentation and the management of our fiscus and our financial status as a country, remains a source of pride. So, thank you very much. [Applause.] I thank the staff of the Ministry who always work extremely hard and are very supportive. Of course, I thank my family who provide invaluable support. [Applause.] Most importantly, I would like to express our sincere appreciation to the many South Africans who provide the encouragement, criticism and ideas that keep us alert and agile, and assist in making the government work better and, more importantly, differently. Thank you very much. [Applause.] 22 FEBRUARY 2012 PAGE: 53 of 78 I table these Budget documents before us: the speech of the Minister of Finance on the national annual budget – 22 February 2012 [RP03 — 2012]; the Budget Review 2012 [RP02 — 2012], including: the Fiscal Framework; Revenue Proposals for 2012, inclusive of the customs and excise duties; the Estimates of National Revenue for 2012; and Replies to recommendations in reports referred to in sections 5(2), 6(7) and 6(12) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (No 9 of 2009); Division of Revenue Bill [B4 – 2012]; Appropriation Bill [B3 – 2012]; Finance Bill [B5 – 2012]; Additional Adjustments Appropriation Bill (2011-12 financial year) [B6 – 2012]; and Estimates of National Expenditure 2012 [RP01 – 2012]. I want to conclude on two notes. In former President Mandela’s words, and I quote: The future of our country is in your hands ... Not just in this Chamber, but outside as well. Let me repeat: The future of our country is in your hands. It will be what you make of it today. In the competitive international market-place to which we are opening our economy, success and even survival of the nation will depend on you. 22 FEBRUARY 2012 PAGE: 54 of 78 We have demonstrated excellent resilience during the post—2008 crisis. We now need to introduce this new dynamism that we spoke of earlier amongst all South Africans. All of us need to ask ourselves: What can I do for my country, my people and our future? Thank you. [Applause.] The SPEAKER: I thank the hon Minister of Finance. I now see the Chief Whip of the Majority Party. The CHIEF WHIP OF THE MAJORITY PARTY: Hon Speaker, hon President and Deputy President, I move: That, notwithstanding the relevant provisions of the Rules on money Bills, the fiscal framework and revenue proposals, as well as the Minister of Finance’s speech, be referred to the Standing Committee on Finance for consideration and report. Agreed to. The House adjourned at 15:27. __________ ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS National Assembly and National Council of Provinces 22 FEBRUARY 2012 PAGE: 55 of 78 The Speaker and the Chairperson 1. Draft Bills submitted in terms of Joint Rule 159 (1) Division of Revenue Bill, 2012, submitted by the Minister of Finance. Referred to the Standing Committee on Appropriations and the Select Committee on Appropriations. National Assembly The Speaker 1. Introduction of Bills (1) The Minister of Finance (a) Appropriation Bill [B 3 – 2012] (National Assembly – proposed sec 77). (b) Division of Revenue Bill [B 4 – 2012] (National Assembly – proposed sec 76). Introduction and referral to the Joint Tagging Mechanism (JTM) for classification in terms of Joint Rule 160. 22 FEBRUARY 2012 PAGE: 56 of 78 In terms of Joint Rule 154 written views on the classification of the Bills may be submitted to the JTM within three parliamentary working days. (c) Finance Bill [B 5 - 2012] (National Assembly – proposed sec 77). (d) Additional Adjustments Appropriation Bill (2011/12 Financial Year) [B 6 – 2012] (National Assembly – proposed sec 77). Introduction and referral to the Standing Committee on Appropriations of the National Assembly, and to the Joint Tagging Mechanism (JTM) for classification in terms of Joint Rule 160. In terms of Joint Rule 154 written views on the classification of the Bills may be submitted to the JTM within three parliamentary working days. 2. Withdrawal of Private Member’s Legislative Proposal (a) A letter dated 15 February 2012 has been received from Dr W G James, withdrawing his legislative proposal to amend the Labour Relations Act, 1995 (Act No 66 of 1995) to define the limits under which teachers can go on strike that was tabled on 8 November 2011. Referred to the Committee on Private Members’ Legislative Proposals and Special Petitions. TABLINGS National Assembly and National Council of Provinces 22 FEBRUARY 2012 PAGE: 57 of 78 1. The Speaker and the Chairperson (a) 2011 Fourth Quarterly Report of the National Conventional Arms Control Committee (NCACC), tabled in terms of section 23(1)(b) of the National Conventional Arms Control Act, 2002 (Act No 41 of 2002). Referred to the Joint Standing Committee on Defence. 2. The Minister of Finance (a) The Speech of the Minister of Finance on the National Annual Budget – 22 February 2012 [RP03-2012]. (b) The Budget Review 2012 [RP02-2012], including — • the fiscal framework; • revenue proposals for 2012, inclusive of the customs and excise duties; • the estimates of national revenue for 2012; and • replies to recommendations in reports referred to in sections 5(2), 6(7) and 6(12) of the Money Bills Amendment Procedure and Related Matters Act, 2009 (No 9 of 2009). (c) Division of Revenue Bill [B4—2012], tabled in terms of section 10(1) of the Intergovernmental Fiscal Relations Act, 1997 (Act No 97 of 1997). 22 FEBRUARY 2012 PAGE: 58 of 78 (d) Appropriation Bill [B3—2012]. (e) Finance Bill [B5-2012] (f) Additional Adjustments Appropriation Bill [2011/2012 Financial Year] [B6-2012]. (g) Estimates of National Expenditure for 2012 [RP01-2012] The fiscal framework and revenue proposals, as well as the speech of the Minister of Finance, are referred to the Standing Committee on Finance for consideration and report. 3. The Minister of Justice and Constitutional Development (a) Particulars of the allocation of funds and assets from the Criminal Assets Recovery Account as approved by the Cabinet on 7 September 2011, tabled in terms of section 69A(3)(ii) of the Prevention of Organised Crime Act, 1998 (Act No 121 of 1998). 4. The Minister of Trade and Industry (a) General Notice No 45, published in Government Gazette No 34968, dated 23 January 2012: Policy on the Development of Special Economic Zones in South Africa, 2012: For public comments. (b) General Notice No 46, published in Government Gazette No 34968 dated 23 January 2012: Special Economic Zones Bill, 2011: For public comments. 22 FEBRUARY 2012 PAGE: 59 of 78 COMMITTEE REPORTS National Assembly 1. Report of the Portfolio Committee on Public Enterprises on the oversight visit to the Department of Public Enterprises and state-owned companies, dated 25 January 2012 1. Introduction The Portfolio Committee on Public Enterprises (the committee) undertook an oversight visit to the Department of Public Enterprises (the department), Infraco, Safcol and Transnet from 29 November to 2 December 2011. The main purpose of the visit was to understand the department’s monitoring systems and how the department executes its oversight responsibilities over state-owned companies. Furthermore, the committee’s intention was to assess the department’s oversight tools such as the Isibuko Dashboard, including the department’s staff and especially their sense of responsibilities in enhancing the department’s oversight responsibilities over state-owned companies (SOCs). Furthermore the committee’s visit to state-owned companies such as Transnet, Safcol and Infraco was premised on the constitutional mandate of the committee to oversee these entities, to familiarise itself with the challenges faced by these entities, to assess working conditions of workers, job creation and skills development initiatives and developmental projects of these entities. 1.1 Delegation 22 FEBRUARY 2012 PAGE: 60 of 78 The committee delegation included the following members: Mr Peter Maluleka (Chairperson of the committee (ANC)), Ms G Borman (ANC), Mr C Gololo (ANC), Dr GW Koornhof (Committee Whip (ANC)), Miss C September (ANC), Mr A Mokoena (ANC) and Mr JK Dikobo (Azapo). The delegation was accompanied by the following parliamentary officials: Mr D Mocumi (Committee Secretary), Mrs X Mnyute (Committee Assistant) and Mr E Boskati (Researcher). 2. Visit to the Department of Public Enterprises (Hatfield, Pretoria) The delegation of the department was led by the Deputy Minister, Hon B Martins, and the Director- General, Mr Tshediso Matona. The department made a presentation on the oversight model of the department and the tools that it used to exercise that responsibility. It also highlighted the legislative challenges that the department was facing. These are some of the matters raised in the presentation: 2.1 Legislative challenges The committee was informed that the Companies Act does not refer to state-owned companies and that SOCs have to comply with various pieces of legislation enacted by departments other than the Department of Public Enterprises. Such departments include the Department of Energy (Eskom), the Department of Mineral Resources (Alexkor), the Department of Trade and Industry (Procurement), as well as the Constitution. Legislation such as the Preferential Procurement Framework Act, Broad- Based Black Economic Empowerment Act and the Companies Act made it difficult for entities to efficiently advance their developmental role as they are treated as private companies. The department was the only one that had no legislative basis for its existence, and there was no government policy on state-ownership. 22 FEBRUARY 2012 PAGE: 61 of 78 The Shareholder Management Bill was initiated by the Department of Public Enterprises aimed at addressing some of these discrepancies to centralise and provide legislative guidelines for all SOCs under the auspices of the Department of Public Enterprises. The department hoped that the Presidential Review Committee would address these areas of concern. 2.2 Oversight tools for Monitoring and Evaluation Tools for effective oversight from the side of the department do exist. The challenge however is the tension between the interests of the shareholder and those of the state-owned companies. The challenge was that SOCs do not give adequate information to make oversight efficient and effective. A study has been commissioned and a report was underway to assess the effectiveness of the department’s oversight function over SOCs in terms of what was working or not working. The Isibuko Dashboard (data capture screen) has been operating for the past three years in the DPE system. The dashboard has been developed by the department but has external backup. The department reviews SOCs’ performance quarterly in accordance with National Treasury Regulations (TR29.3) and annually in accordance with section 55 of the Public Finance Management Act (PFMA) and section 286 of the Companies Act through the Isibuko Dashboard. The dashboard requires SOCs to report on financial performance, job creation and skills development, risk management and progress on capital expenditure projects. The Minister also issues investor briefs to SOC boards on emerging SOC performance trends, risks that have been identified and highlighting the need for corrective action in the event of any deviation from agreed key performance areas and indicators. The department does not tamper with the information provided by the SOCs but measures it against set targets. 2.3 Departmental Premises and Signage 22 FEBRUARY 2012 PAGE: 62 of 78 The committee raised a concern that the building that housed the department did not have adequate signage, especially the name of the department which was not visible to the public. Furthermore, the committee asked the department to update itself with the contents of the lease agreements in order to ensure that the department was not overcharged for occupancy. The department informed the committee that it had considered moving to a new building due to lack of adequate space, but due to budget constraints it was forced to renew the lease. The rent for the building was reasonable in terms of what the market could offer and the department was satisfied with the arrangement. 2.4 Meeting the Departmental Officials The committee walked about the offices of the department to interact with staff, assess the morale of staff and also encourage them for the important responsibilities that they had. 2.5 Committees observations 2.5.1 The committee acknowledged the monitoring systems of the department, but was concerned that the cases of financial and management irregularities were too prevalent in SOCs such as Transnet, Infraco and South African Express Airways (SAX). Why could the department not detect such irregularities timeously? 2.5.2 What would the department do in order to sharpen its oversight to detect irregularities and discrepancies? 2.5.3 The committee raised concern that not all SOCs were audited by the Auditor- General and about the lack of legislation that guides SOCs to be what they are intended to be. 22 FEBRUARY 2012 PAGE: 63 of 78 2.5.4 Clarity was sought on why the committee could not access the shareholder compacts and corporate plans. 2.5.5 The committee raised concern at the slow pace of finalising the executive remuneration recommendations report. 2.5.6 The view of the department was that SOCs, which have the same mandate, should be consolidated and those which are commercial in nature should be clustered. 2.6 Responses In response the department stated the following: The executive remunerations report with recommendations was still outstanding and was awaiting Cabinet approval. There was reluctance by SOCs with regard to oversight, and some withheld information from the department. There was an independent investigation by the Auditor-General on the oversight mechanisms of the department. The problem was that the department was relying on the effectiveness of the board to ensure effective oversight. The department analysed information on the dashboard and gave feedback where risks had been identified. Most pieces of legislation are not harmonised and SOCs must comply with all conflicting pieces of legislation. 2.7 Recommendations 22 FEBRUARY 2012 PAGE: 64 of 78 The committee resolved that the department should consider better premises conducive for the work of the department. Furthermore, the signage on the premises should be improved to ensure that the department is clearly identifiable and accessible to the public. 3. Oversight visit to Broadband Infraco (Johannesburg) The committee was welcomed by the Acting CEO, Dr A Shaw, who informed the committee that the board meeting was in session, hence the board would not be part of the oversight visit. The committee met briefly with members of the board of Infraco. The committee was given an overview of the mandate and business of the entity, its operations, challenges and networks nationally and internationally. 3.1 Visit to Network Operation Centre The committee visited the network operation centre, which is a 24-hour monitoring centre. Through the centre Infraco is able to do the following: Assess information about traffic on the network (24 hours) Detect where there is a loss of signal or power failure Inform the client/company to dispatch a technician to address the problem. 3.2 Visit to Minerva – Point of Presence (POP) The committee was informed that Minerva was one of the major containers in Johannesburg. The containers enabled Infraco to synergise information. There was a field engineer who was responsible 22 FEBRUARY 2012 PAGE: 65 of 78 for the operation of each POP. The containers were highly secured, as any movement in the vicinity of the container could be detected by the network operation centre. 3.3 Conclusion and Recommendations The committee raised concern about the safety of field engineers, especially women who had to respond to calls at night. The committee proposed that Infraco should ensure that women are protected and should be accompanied by security when they visit the POPs at night. The department should ensure an enabling legislative environment for Infraco to deliver on its public mandate as intended by the Broadband Infraco Act (No 33 of 2007). 4. Oversight visit to Safcol (Mpumalanga) The committee visited plant operations, interacted with employees and visited research and training centres. 4.1 Visit to the Komatiland Forests (KLF) Komatiland Forests owns and manages the prime softwood saw log forestry assets in the Mpumalanga, Limpopo and Kwazulu-Natal provinces and consists of 18 plantations covering a total area of 187 320 hacters. Its main business is the conducting of forestry, timber-harvesting, timber-processing and related activities. KLF is one of the largest producers of high-quality saw logs in South Africa. The plantation stock consists of about 91% pine, 7% Eucalyptus and 2% Acacia trees. 4.1.1 Land claims 22 FEBRUARY 2012 PAGE: 66 of 78 Safcol and KLF do not hold the title deeds for the majority of the land on which it operated. The State held the title deeds to the claimed land on which KLF operated. Safcol has been instructed by the shareholder to facilitate the speedy resolution of land claims. The process of resolving land claims rests with the Department of Rural Development and Land Reform. According to Safcol’s records 61% of the forests under KLF’s management are subject to land claims. Various communities, families and individuals have lodged claims against the state in terms of the provision of the Restitution of Land Rights Act, 1994, as amended, with respect to forestry land upon which the Safcol Group conducts its business. The magnitude of these claims is in different stages of the restitution process. All these impacted on the future of Safcol. 4.2 Visit to Vlakfontein village Vlakfontein is a small village of hostels built by Safcol to house its workers. The hostel has quarters for both married and single workers and has 144 occupants in total. The common practice is that every weekend workers will leave their quarters to visit their families in and around Mpumalanga. A supervisor paid by Safcol plays the role similar to that of a headman by overseeing the welfare of villagers. The history of the villagers is no less than 40 years and, according to the supervisor who was well over 50, has been there since he was a young boy. Villagers use communal toilets which, at the time of the committee’s visit, were faulty and not in good condition. Not a single worker in the small village ever benefited from SAFCOL’s study opportunities to become a manager in any of SAFCOL’s business enterprises. There is no school in the small village, and learners from the village are transported (subsidised by government) to a school in another 22 FEBRUARY 2012 PAGE: 67 of 78 village. There were a number of children in the village who were idle because there were no recreational parks to play in during their leisure time. 4.3 Visit to Beketelani Primary School Safcol, through Komatiland, built an additional block for Beketelani Primary School using its own product, namely timber. The block comprised three classes. The school had a total of seven classes. The school starts from grade R and goes up to grade 7. There are 144 learners in the school and about 7 teachers; five paid by government and two paid by the school governing body (SGB). Komatiland works with community forums to identify community needs, especially those communities that are adjacent to Safcol’s plantations. The committee was informed that Safcol had built similar structures for early childhood development centres in the communities. 4.4 Visit to Jessievale plantation The Jessievale plantation is a highly contested piece of land. The surrounding community claims ownership of the land and also sees the piece of land as suitable for cattle grazing while Safcol treats it as one of its plantations. In an apparent act of protest and defiance, the community burnt down the field, destroying Safcol’s newly-planted pine trees. The community’s belief is that while the land is still under dispute, Safcol continues to make a profit. For this reason, the community expects Safcol in the meantime to pay rent. Safcol is unable to do so as the community does not have the title deed for the land and the land is still under dispute. 22 FEBRUARY 2012 PAGE: 68 of 78 The committee also had the opportunity to engage one of the residents in the Albert Luthuli Village, an illegally occupied Safcol plantation not very far from the Jessievale plantation. Although the land belongs to the state, villagers were occupying the land illegally. According to one of the women, a previous councillor allocated plots to villagers. Another reason for occupying the land was because parents wanted to bring their children closer to the school as they were struggling during heavy rains to cross three rivers. Even RDP houses were being built and villagers received water from a nearby school and a nearby tank. 4.5 Visit to Lochiel Primary School Komatiland has donated 20 computers to Lochiel Primary School. The school has about 548 learners and 18 teachers. The computer lab is also of benefit to all the learners from other schools in the village. Komatiland rained the teachers who in turn had to train learners. The long-term objective from Komatiland’s side was to make the lab accessible to members of the community as well. The lab is safely secured with burglar proofing and an alarm system, and with the help of members of the community (as stakeholders) Komatiland is of the view that the lab will remain safe. 4.6 Visit to Pitskop plantation On visiting one of Safcol’s plantations called Pitskop plantation, the committee learned that the plantation occupies about 54 hectares of land. The plantation has about 680 workers in total and about 381 of them were on contract while the rest were permanent. At the time of the visit by the committee, workers were busy felling (cutting) pine trees. 22 FEBRUARY 2012 PAGE: 69 of 78 Felling is one of the dangerous activities in forestry and for that reason it is best to mechanise it. One person can operate a felling machine and cut about 500 trees a day. Females also operate felling machines. The committee witnessed a female who was busy felling trees. The machine cut the logs according to the customer’s needs or specifications. Although the use of a machine goes against job creation efforts, Komatiland believes that more jobs are created in the value chain of processing the product. Members were concerned about workers who were in the field, especially during bad weather conditions (heavy rains or heat). A supervisor in the field pointed out that besides workers protective gear, workers had to look after themselves. This included bringing their own food and taking their lunch under trees. The supervisor however alluded to the Brazilian practice where a mobile container with all the basic kitchen facilities (microwave to warm food) and shelter needs were on site, something they were looking at introducing in the long term. 4.7 Visit to Sabie When the committee visited the Sabie plantation (nursery), workers were at the seed planting stage of the plantation. 4.7.1 Interaction with workers The committee interacted with workers in order to familiarise itself with the conditions under which they worked and to assess the morale of the workforce. The workers were affiliated to the Food and Allied Workers Union. In the interaction, workers raised the following concerns: 22 FEBRUARY 2012 PAGE: 70 of 78 Unhappiness with the low wages and lack of benefits. Unnecessary delays in the implementation of salary increases. Workers being overlooked for opportunities such as learnerships and bursaries. Lack of implementation on the part of management on agreed principles and matters. 4.8 Visit to Research Centre The research centre is situated at Tweefontein plantation, about 6 km from Sabie, and is staffed by a diverse group of dedicated scientists and technicians. The centre consists of divisions such as the tree improvement division which runs breeding programmes aiming to improve the growth quality of future generation trees. An important task of the research team is to ensure that improved techniques, processes and genetic material emerging from the research efforts reaches production staff for possible implementation. The seed centre serves to supply the KLF nurseries with seeds for planting and for generation of hedge plants which are used to produce cuttings. 4.9 Visit to Platorand Training Centre The Platorand Training Centre’s main objective is to promote forestry as a career of choice. In an effort to achieve this, KLF invests in education and skills development of employees, communities living adjacent to KLF’s plantations and women and youth from previously disadvantaged communities. The training centre facilitates and co-ordinates the following learning programmes: Skills programmes Short courses Leadership development programmes 22 FEBRUARY 2012 PAGE: 71 of 78 Mentoring and coaching Adult basic education and training (ABET) Learnership in silviculture, harvesting and processing development Artisan/apprenticeship training Internship In-service training. The learning and development division, in conjunction with enterprises development and Socio- economic development, is responsible to ensure that the group renders skills development interventions to the adjacent communities. These programmes included furniture making, entrepreneurships skills, carpentry, and many other skills programmes. Challenges due to external factors and over which the company has no control include: Availability of funds as a result of the devastating fires of 2007 as well as the global recession that started in 2008, resulting in a dramatic decrease in the demand for timber by the construction industry. Insufficient capacity of Platorand Training Centre in meeting all training needs Artisan training restricted by Merseta requirements that allow only two trainees per mentor in the workplace. The learning centre and development section remain crucial and if funding permits future plans will be to expand: Training of the unemployed (specifically adjacent communities) Increase in bursaries, learnerships and artisan training. 22 FEBRUARY 2012 PAGE: 72 of 78 4.10 Challenges faced by Safcol The entity highlighted the following key challenges: The uncertainty regarding the future of the entity makes it difficult to invest in new strategies in order to ensure the profitability of the entity. The Cabinet memo on privatisation has still not been revoked and the future of Safcol depended on a cabinet decision. The slow pace of the resolution on the land claims has caused tension between the community and Safcol. The lack of support from the provincial and local leadership in resolving conflict between the entity and the community. 61% of the land is under claims, which brings the sustainability of the entity into question. 10 – 13% of plantation has been damaged by baboons, resulting in financial losses. The community demands a share of the profits, but the problem is that they have not been issued with the title deeds by the Department of Rural Development and Land Reform. 4.11 Conclusion and Recommendations The committee raised serious concerns regarding the lack of certainty regarding the future role of Safcol, and recommended that the department resolve this urgently. The department should forward a report to the committee on this matter as soon as a cabinet decision has been taken. The committee acknowledged the developmental projects of the entity, but urged Safcol to engage more on developmental programmes in order to improve the lives of the immediate communities and its workers. The committee proposed that there was a need for a peaceful co-existence with the community. 22 FEBRUARY 2012 PAGE: 73 of 78 Safcol should provide sanitary facilities for women working in the plantation nurseries and ensure their physiological health due to the nature of their work. The committee resolved to convene a meeting with the Provincial and Local Government of Mpamulanga in order to resolve the conflict that existed in the communities and the illegal occupation of state land. Safcol should renovate the houses of workers and ensure that the sanitary facilities were in working order. Safcol should construct recreation facilities for the children who stayed in Safcol villages. The committee would expect a progress report on the implementation of these recommendations by the end of March 2012. 5. Oversight visit to the Transnet The committee was welcomed by the chief Executive of Transnet Pipeline, Mr Charl Moller, and the Chief Executive of Transnet Ports Authority, Mr Tau Morwe. The committee explained the purpose of the visit to the Transnet delegation and made an appeal that Transnet should not make presentations and that time should be spent on observing the entity’s operations. A brief overview was done on the layout of the harbour, the extent of the expansion project and progress made thus far. Similarly an overview of the New Multipurpose Pipeline was done, which showed the extent of the project and progress as far as the project was concerned. 5.1 Visit to Durban Harbour 22 FEBRUARY 2012 PAGE: 74 of 78 The first site the committee visited was the automotive terminal which has a capacity of 14 000 units. Cars are transported by Transnet’s freight rail mainly from East London to the terminal for export. There are also cars in the terminal that were imported from other countries. Brands of vehicles at the terminal included BMW, Toyota, Mercedes Benz, Ford, etc. The terminal has a 24-hour security system that guarantees the safety of the cars. As a job creation measure, Transnet has made an arrangement for the cars to be washed (waxing and dewaxing) from time to time to keep them clean while still in their terminal. From the automotive terminal the Transnet team took the committee around the harbour to further familiarise it with Transnet’s operations. Very close to the harbour was the wharf road. Transnet indicated that one of the challenges of that road was traffic congestion as it accommodated not only cars destined for the harbour but also those passing through. According to Transnet, the road needed to be maintained but Transnet could not do that because the road belonged to the City of Durban. 5.2 Visit to the Container Terminal The committee was also made aware of the container and break bulk terminals, including refrigerated containers, that store fresh products for import and export purposes. There was also a ship maintenance workshop not far from the break bulk terminal, and a crane mechanical workshop opposite the container terminal. Within the harbour South African Revenue Services was scanning some of the containers. Transnet indicated that the refurbishment of the container terminal was underway and R9 billion had already been spent. A total of R20 billion would be spent to complete the project. 22 FEBRUARY 2012 PAGE: 75 of 78 In the container terminal the committee had an opportunity to engage with the workers, especially crane operators, their trainers and mentors. One trainer in particular who had been working for Transnet port terminal for the past 38 years explained to the committee the process of recruiting crane operators. He explained that they advertised in newspapers stating the requirements and usually matric and a driver’s licence were the pre-requisites. Those selected were trained for four months and the training included theory and mentorship. Transnet indicated that they were using new cranes and that with the old ones, container movement was 26 containers per hour. With the new cranes, container movement increased to 35/6 container per hour. As for crane drivers, they took a break of two hours to rest. Transnet commissioned a study of their employees’ sick leave focusing on ergonomics. The study recommended the two-hour break and that improved employees’ sick leave days. 5.3 The Multi-Purpose Pipeline The committee travelled to Kwamakuta and Adam’s Mission to one of the pipeline’s pump stations. In Durban, Transnet had three pump stations: the first one was Twini (the one which the committee visited), the second one was in Hilltop and the third one in Mnambithi. The pipeline’s length is 550km from Durban to Johannesburg and has a capacity of 150 million litres of petroleum. On the way to the pump station Transnet indicated that on the surface the pipeline was marked by white cement stump indicating its direction. On arrival at the pump station the committee was taken to the control room. In the control room the screens showed how the product travelled through the pipeline. It also showed the speed at which petroleum travelled through the pipeline. The site manager explained that through the control room Transnet can easily pick up leaks or damage caused and can dispatch technicians to fix the problem. 22 FEBRUARY 2012 PAGE: 76 of 78 Outside the control room the committee was shown how the pump station worked and which components (e.g. receiver) of the pipes stored the petroleum during maintenance and which components purified it. When rain water gets into contact with the pipes or some of the pump station’s facilities, it is contained, then sampled and tested before it goes to the spill dam. This practice is to ensure that the pump station adheres to the country’s environmental regulations. 5.4 Conclusions The committee was impressed with Transnet ports and pipelines infrastructure programme and appreciated the fact that funding came from their balance sheet rather than from the shareholder. Report to be considered. 2. REPORT OF THE COMMITTEE ON PRIVATE MEMBERS’ LEGISLATIVE PROPOSALS AND SPECIAL PETITIONS Report of the Committee on Private Members’ Legislative Proposals and Special Petitions (Committee) on the legislative proposal to prohibit contracting between an organ of state in the national sphere of government and companies whose directors are partly-political office bearers of public representatives of political parties (Honourable I O Davidson , Democratic Alliance), dated 22 February 2012 22 FEBRUARY 2012 PAGE: 77 of 78 The Committee, having considered the legislative proposal to prohibit contracting between an organ of state in the national sphere of government and companies whose directors are partly- political office bearers of public representatives of political parties in terms of rule 211 of the Rules of the National Assembly, and having sent out letters to the Portfolio Committee on Justice and Constitutional Development, the Presidency, the Members Ethics Committee, Powers and Privileges Committee, however all of them failed to respond, and having heard the presentation by Honourable I O Davidson, recommends that permission not be granted to the member to proceed with the proposed legislation. The committee wishes to make the following observations with regard to its recommendation: 1. In considering legislative proposals the committee needs to confine itself to rule 235A of the National Assembly which stipulates the following six principles which the committee has to apply when considering legislative proposal. a) Does the legislative proposal go against the spirit, purport and object of the Constitution; b) sought to initiate legislation beyond the legislative competence of the National Assembly; c) duplicated existing legislation or legislation awaiting consideration by the Assembly or Council; d) pre-empted similar legislation soon to be introduced by the national executive; e) would result in a money bill; or f) was frivolous or vexatious. 2. The Committee deliberated on the above criteria and resolved that there are constitutional implications which may result in the infringement of the rights of smaller party-political office bearers in freely participating in business. Due to the nature of our proportional electoral system, these would be some of the practical issues in allowing this legislative proposal to proceeed. 22 FEBRUARY 2012 PAGE: 78 of 78 3. Having consulted the above named Committees, the Committee is of the view that the Constitutional implications posed by Hon. Davidson’s legislative proposal are such that the Committee recommends that permission not be granted to the member to proceed with the proposed legislation. Report to be considered.
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