WEDNESDAY FEBRUARY by jolinmilioncherie


									22 FEBRUARY 2012                                 PAGE: 1 of 78

                       WEDNESDAY, 22 FEBRUARY 2012




The House met at 14:02.

The Speaker took the Chair and requested members to observe a moment

of silence for prayers or meditation.


                            APPROPRIATION BILL

                               FINANCE BILL



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


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


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


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?

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,


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


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

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


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


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


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

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


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


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


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


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

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


   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


R300 million is added to the arts and culture sector for job


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


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


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


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


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.


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 –


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.


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.



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


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.


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


     (b) The Budget Review 2012 [RP02-2012], including —

           •     the fiscal framework;

           •     revenue proposals for 2012, inclusive of the customs and excise


           •     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


     (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


     (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


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

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


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


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


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


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


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


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.



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


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


   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.

To top