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									21 February 2001                                              Page 1 of 90

               WEDNESDAY, 21 FEBRUARY 2001

                               ____



          PROCEEDINGS OF THE NATIONAL ASSEMBLY

                               ____



The House met at 14:00.



The Speaker took the Chair and requested members to

observe    a   moment     of    silence     for     prayers     or

meditation.



ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS - see

col 000.



                     APPROPRIATION BILL



                        (Introduction)



The MINISTER OF FINANCE: Madam Speaker, President

Thabo Mbeki, Deputy President Jacob Zuma, Cabinet

colleagues,    hon   members,     hon    MECs,     Governor   and

Deputy     Governors     of    the      Reserve     Bank,     Your

Excellencies,    ambassadors      and    high     commissioners,
21 February 2001                                      Page 2 of 90


distinguished guests, fellow South Africans, one of

Africa's great poets, David Diop, writes:



 Africa tell me Africa

 Is this you this back that is bent

 This   back   that   breaks   under   the   weight    of

 humiliation

 This back trembling with red scars

 And saying yes to the whip under the midday sun

 But a grave voice answers me

 Impetuous son, that tree young and strong

 That tree there

 In splendid loneliness amidst white faded flowers

 That is Africa your Africa

 That grows again patiently and obstinately

 And its fruits gradually acquire

 The bitter taste of liberty.



[Applause.] The bitter taste of liberty? Does the

lemon always ripen before the sweet plum? Or do we

have it in our power to determine for ourselves the

quality of the liberty we earn from struggle?
21 February 2001                                                          Page 3 of 90


The Budget we table before this House today is the

story         of      an         irrevocable            and          powerful

transformation. It is the story of a nation which

has worked without rest to build a new history for

its children. Like Diop's young tree at the edge of

the ancestral savannah, ours is a story of patience

and     obstinacy,         of    determination          and     hope,       of

activism, not atavistic tolerance, of choice, not

fate.    We    have     sought        to   remove       the     thorns      of

neglect       and     inhumanity,          to    restore        pride      and

dignity, to lift the crushing weight of poverty and

disempowerment. We have sought to heal the scars

and nurture the tree. We have sought to show our

children that we have the power to enjoy the sweet

fruit    of    liberty.         The   Budget      we    table    today      is

testimony      to     the       success     of    our     transformation

policies.



These processes of transformation are not complete

- the redress of past impoverishment and injustice

will take time. But they are firmly rooted in our

society    and      economy.       We   can      now    embrace       a   more

confident       and    expansionary             vision.       This     Budget

tells the story of the choices and decisions we
21 February 2001                                                     Page 4 of 90


have      made      and        which         have      advanced       the

transformation of our country and its economy to

the    point     where    we   can     now    begin     to   enjoy    the

fruit. It tells the story of a young and                           proud

democracy hard at work to improve the lives of all

its people.



The 2001 Budget brings to this House the fruit of

the macroeconomic transition we have undergone. Our

1996 strategy was designed to achieve stability,

fiscal reprioritisation and consolidation to create

the basis for sustainable growth and development.

It     focused    on     reversing         the      growth    of   debt,

unsustainable       deficits      and      the      rising   burden    of

interest       payments,       which       threatened        our   young

democracy. It was designed to ensure that a greater

share of resources went to key priority areas such

as education, health and social welfare targeted at

the poor. It aimed to put the economy on a sound

footing,       improve     competitiveness            and    strengthen

access to global markets. Today we can say that

macroeconomic       stability        and      fiscal    consolidation

have been achieved and we can move to the next

phase of economic reforms.
21 February 2001                                                               Page 5 of 90


It    is   instructive             to    reflect       on    how      different

things     might       have    been.          Debt    service      costs       rose

during the 1990s from 15% to over 20% of the Budget

in     1998-99,         steadily              eroding        the      resources

available        for    the        delivery      of     services.         If   the

trend      had     continued            the    headlines        for      today's

Budget might well have been: ``Interest on debt now

R10   billion       more      than       spending       on    education         and

rising.'' But we reversed that trend. In the Budget

we put before this House we will spend R10 billion

more on education than on debt. [Applause.] And by

the     third      year       of     the      Medium-Term          Expenditure

Framework,         that       figure          will     be     R15        billion.

Interest on debt in three years' time will have

decreased to but 16,4% of consolidated spending.



 In order to reverse the rising debt trend, we have

been prudent about overall spending, putting the

emphasis         firmly     on       reprioritisation              and     better

quality of expenditure. Now we can reinforce Public

Service          delivery          without           threatening           fiscal

sustainability, and our children and grandchildren

can look forward to a future unencumbered by debt.
21 February 2001                                                  Page 6 of 90


Eli     lixesha      lokuba      sonke      sixhamle      ubumnandi

beziqhamo zenkululeko. [Kwaqhwatywa.] [Now is the

time for us to enjoy the sweet fruit of liberty.

[Applause.]] We are saying that the tree bears not

the bitter but the sweet fruit of liberty.



The Budget here today heralds the beginning of a

new cycle. It is not the abandonment of anything.

We have built a foundation, and the most menial of

builders in the community will tell you that you

cannot build a foundation in one place and a house

in another place. You build on the foundation that

you have laid. [Applause.]



What    this    Budget    does   is   to    set   out    a    growth-

oriented agenda of improved spending, significant

increases in infrastructure allocations and ongoing

tax    reform    within   the    sound     framework     of   fiscal

management established over the past five years. It

signals a shift from macroeconomic stabilisation to

microeconomic reform. And in the new format of the

Estimates of National Expenditure we are tabling

here    today,       we   signal      not     just      substantial

increases       in   spending      allocations,        but    a   new
21 February 2001                                       Page 7 of 90


approach to accountability and management of the

resources   that   this   House   will   appropriate   for

public purposes.



International developments



Our economic prospects are inextricably linked to

developments in the global economy. Global economic

growth peaked in the first half of last year. There

is now considerable uncertainty about the likely

severity of the slowdown in world growth and how

long it will last. This will depend in part on the

reaction of the economy of the United States of

America to the interest rate cuts effected earlier

this year and monetary developments in Europe and

Japan. At this stage it is expected that growth in

the major industrialised economies will be in the

region of 2,8% for this year, rising marginally to

3% next year.



The large current account imbalances in the US and

the prospect of lower growth in Europe mean that

continued euro and US dollar volatility remains a

risk for the global economy. Implications for South
21 February 2001                                                         Page 8 of 90


Africa and other small emerging economies are hard

to assess.



Ours is more than just a cursory interest in the

growth statistics of the global economy for this

year. There are broader goals we share with many

other nations: to ensure that developing countries

share equitably in the benefits of globalisation,

to adopt more effective collective strategies for

overcoming     the      scourge    of      poverty,     and     to      place

these    issues      prominently        on      the    agenda      of    the

multilateral       financial         institutions,           the        World

Trade        Organisation            and        the         consultative

international groups with which we engage.



At     the   annual       meetings         of    the    International

Monetary Fund and the World Bank held in Prague in

September last year we drew attention to the rising

threat that growing inequality poses for the long-

term prosperity of the global economy. We raised

the    importance       of   ensuring        that     the    commitments

made    by   the   G7    nations      to     highly     indebted        poor

countries     should      be   met    in     full,     and    that      more
21 February 2001                                                     Page 9 of 90


effective and secure aid flows need to accompany

debt reduction.



Fair trade and access to markets are fundamental to

sustainable growth and development. It is shameful

indeed that so many of the wealthiest countries in

the    world    persist       with     barriers       to    trade    and

protective          subsidies,          effectively          excluding

millions of producers in poor countries from the

benefits of global trade. It is estimated that the

value of their tariff protection is something like

US$1 billion a day now, which is larger than the

combined GNP of all of the African continent. This

cannot be correct! The common agricultural policy

of    the    European     Union      and   similar     protectionist

measures      are    exceedingly       damaging       for   developing

countries.      It       is   now     critical    that      the     next

multilateral trade round should get under way, and

should address these injustices decisively.



 As    we    have    a   shared      interest    in    international

stability and economic progress, we have to attend

to     the     governance           structures    through           which

international reforms are pursued. The developing
21 February 2001                                                  Page 10 of 90


countries,      which    constitute        both    clients     of   and

shareholders in the International Monetary Fund and

the    World   Bank,    should      have     a   greater    voice     in

these    institutions.        We    will    continue      to   seek   a

common ground with other nations in democratising

the     institutions         on    which     responsibility          for

international collaboration rests.



On     our     own     continent,       President         Mbeki     and

Presidents Obasanjo and Bouteflika are spearheading

a partnership which will bring African governments,

the private sector and civil society together in

new ways, as we face our challenges honestly and

seek     to     mobilise          our      own    resources         more

effectively. The Millennium Africa Plan signals our

commitment to seeking solutions that will stand the

test of time, a way forward that recognises the

inextricable         links    between       democracy,     resolving

conflict and building the economy.



The President has just returned from Bamako in Mali

this    morning      where    he   attended       until    late     last

night a meeting with other heads of state and with

Mr James Wolfensohn, president of the World Bank,
21 February 2001                                               Page 11 of 90


and Horst Köhler, managing director of the IMF, to

discuss precisely these issues. This is not a World

Bank and IMF initiative, but an African initiative

spearheaded by three presidents involving the rest

of the continent, determining the pace and ensuring

that we can lock in all of ourselves as Africans

into a different set of outcomes. [Applause.] This

initiative    contributes    to   building       a    future     of

which our children can be proud.



We are saying: Re batla gore peo ya kgololosego e

re beele maungo a a botshe [We want the seed of

freedom to bear us sweet fruit], meaning that we

want our children to taste not the bitter but the

sweet fruit of liberty.



Macroeconomic performance



The economy grew by 3,0% last year. This was the

fastest rate of growth since 1996. It was buoyed by

a strong recovery in household consumption spending

and   an   increase   in   exports   of   over       7%   in   real

terms. Strong growth occurred in agriculture and in

several      specialised     manufacturing           industries,
21 February 2001                                                    Page 12 of 90


financial services and telecommunications. Over the

next three years, we expect growth to average 3,5%

a year, underpinned by a steady recovery in gross

fixed capital formation and continued robust trade

performance.



In    the   path    we   have   followed        since      tabling     a

macroeconomic strategy in 1996, our focus has been

firmly on building the foundations for sustainable

long-term     growth.       Taking    account       of    the     global

environment,        economic        growth     is        expected     to

continue     strengthening       across       most       sectors    next

year.



For improved long-term growth, we need to foster

higher levels of savings and investment. Over the

past year, the level of household debt has eased

and Government dissaving has been reduced. These

are both favourable developments in turning around

our     disappointing        saving     performance.            Several

measures     in     this     Budget,         together       with     the

favourable        outlook     for     interest           rates,     will

contribute     to    strengthening       investment          over    the

years to come. Within the wider public sector, our
21 February 2001                                           Page 13 of 90


restructuring     efforts       in    the    communications,

transport   and   energy    sectors    include   substantial

new      modernisation          and         capacity-building

investments.



Inflation and exchange rate trends



Price   stability   is     an    important     part   of    the

economic landscape. Inflation erodes the purchasing

power of the poorest and most vulnerable in our

society. It introduces uncertainty into decision-

making and colludes with debt to entrench poverty.

It was for this reason that we decided last year to

set the SA Reserve Bank an inflation target of 3%

to 6% for the year 2002.



Despite the sharp rise in international oil prices

last year, consumer price inflation in South Africa

remained moderate. The rise in oil prices and the

prices of imported goods led to an increase in the

CPIX inflation measure, that is, consumer prices

excluding mortgage interest, to 8,2% for the year

to October last year. By December CPIX had fallen
21 February 2001                                                   Page 14 of 90


to 7,6% and we expect a steady decline during the

course of 2001.



These developments provide a strong indication of a

structural       reduction    in    the     country's         inflation

pattern and the long-term downward inflation trend.

Lower      inflation       expectations          in       turn     have

contributed       to   the    decline       in     capital       market

interest    rates.     Yields      on    medium-term          government

bonds reached a seven-year low of 11,2% just a few

days ago. Interest rate reductions in the United

States and in Europe are also contributing to the

prospects for further easing of interest rates.



However, the rand came under considerable pressure

last year, depreciating by about 9,5% in real terms

during     the    year.    International         uncertainty        has

contributed       to   capital          outflows        and    currency

weakness in many emerging markets in recent years.

South Africa has actually adjusted well to these

pressures, partly because we have deep and well-

functioning financial markets. Over the year ahead

the   exchange     value     of    the    rand     is    expected    to

stabilise.
21 February 2001                                                          Page 15 of 90

International economic relations



Our   economic       restructuring          has       been     particularly

dramatic in our engagement with the international

economy.       Nongold      merchandise              exports    rose        from

11,5%    of    GDP    in    1990     to    nearly       19%     last      year,

testimony to the success of our trade policies in

stimulating exports in a wide range of industries

traditionally dominated by developed countries. A

rising      contribution        is       also    being        made   to     our

export      earnings       by   tourism         and     related      service

sectors.



Despite the strong recovery of growth last year,

the deficit on the current account of the balance

of payments remained low - less than 0,5% of GDP.

In    the     current      international             environment,         where

financial      flows       to   emerging        markets        remain       both

subdued        and      unstable,          this         clearly        is      a

considerable         strength.       South           Africa     experienced

large swings on the financial account last year: a

deficit of nearly R6 billion in the first half of

the   year,     followed        by   a    surplus       of     R10   billion

between       July   and    December.           In    this     context      the
21 February 2001                                               Page 16 of 90


improvement     in     reserves     recorded   by    the   Reserve

Bank and, in particular, the continued reduction in

the uncovered foreign exchange forward position of

the bank are significant achievements. Against this

background      we    are   able   to   take   several     further

steps towards the removal of controls on foreign

exchange transactions.



The restructuring of our financial relations with

the rest of the world in recent years has been

rapid. Both the bond and equities markets have seen

substantial flows of investment from abroad. At the

same time, South African firms and individuals have

diversified their investments, raising the level of

foreign assets held from about 15% of GDP to over

40%    today.        This   diversification         attracts    the

headlines when it involves major corporate mergers

or    acquisitions,         but    it   also   contributes       to

reducing the risks ordinary people face in their

pension funds or life savings and broadening the

markets within which our industries do business.

Exchange control liberalisation has played a role

in promoting this diversification.
21 February 2001                                                   Page 17 of 90


We have now reached a point where the foreign asset

holdings of the major financial institutions are

reaching levels in line with appropriate prudential

limits. With this in mind, the current limits on

the     foreign     asset        holdings         of    institutional

investors are to be retained as part of a broader

shift to prudential regulation. These limits are

15% of total assets for long-term insurers, pension

funds and fund managers, and 20% of total assets

for unit trusts.



The institutional asset-swap mechanism has served a

useful purpose in the past in facilitating a fairly

rapid    portfolio      rebalancing          after     many    years   of

exclusion    from       foreign       investment.        However,      it

suffers    from    a    lack     of    transparency         and   is   no

longer    appropriate       in    the       context    of     normalised

diversification        levels.        The    asset-swap        mechanism

pertaining    to       institutions          is   therefore       to   be

terminated. However, institutions will continue to

be able to invest in foreign portfolio assets, up

to the defined foreign asset limits, through cash

transfers based on a prescribed percentage of the

previous year's net inflow of funds. Details will
21 February 2001                                                         Page 18 of 90


be provided by the SA Reserve Bank in a statement

issued today.



The global expansion of South African firms holds

significant       benefits         for      the    economy:        expanded

market     access,      increased           exports       and      improved

competitiveness. In order to support this expansion

from a South African base, the limit on the use of

South African funds for new approved foreign direct

investment is increased from R50 million to R500

million.    As     part      of    Government's           commitment       to

African economic recovery, South African firms will

be permitted to utilise up to R750 million of local

cash     holdings      for    new        approved        foreign     direct

investments       in   Africa.         [Applause.]         In   addition,

firms will continue to be able to use local cash

holdings    to     finance        up   to    10%    of    the   remaining

investment outlay.



Shift      from        macroeconomic               stabilisation           to

microeconomic reform



Ten    einde     ekonomiese        groei      te    versnel        sal    ons

verder      moet       gaan        as       die      makro-ekonomiese
21 February 2001                                                         Page 19 of 90


stabiliteit      wat     ons       reeds       bereik      het.     Hierdie

Begroting       bevat     dan        ook       'n     aantal        fiskale

beleidsmaatreëls         ter       ondersteuning           van     sodanige

breë   ekonomiese       hervorming         wat      ons    wil    bereik     -

maatreëls wat die aantal en gehalte van beleggings

sal      laat         toeneem,           wat        werkskepping           en

vaardigheidsontwikkeling                 sal        aanmoedig            asook

maatreëls       wat     die        doeltreffendheid          van         bate-

aanwending sal verbeter. (Translation of Afrikaans

paragraph follows.)



[In order to accelerate economic growth, we will

have   to   move      beyond       the     macroeconomic          stability

that   we   have      already       achieved.       This    Budget        also

contains    a    number       of    fiscal       policy     measures        in

support of the broad economic reforms which we seek

- measures that will improve the number and quality

of    investments,      encourage          job      creation       and    the

development      of     skills,       as    well      as    improve       the

effectiveness of asset utilisation.]



In support of investments we are proposing:
21 February 2001                                       Page 20 of 90


 - A new tax incentive is proposed for companies

      embarking   on     approved     strategic   industrial

      projects.



 - The tax depreciation rules applicable to small

      businesses in the manufacturing sector will be

      favourably amended.



 - Substantially increased allocations for capital

      spending by national and provincial departments

      are proposed.



Our investment in people remains the cornerstone of

our   long-term   growth    strategy.    Education,   health

and welfare services remain the largest functions

in the consolidated budgets of national Government

and provinces. The skills levy goes up from 0,5% to

1%    of   payroll.    Already   27   sector   education   and

training authorities have been established and we

expect to see a range of new learnership programmes

get under way this year. In this Budget a new wage

incentive is proposed to be administered through

the income tax system.
21 February 2001                                                    Page 21 of 90


In promoting more effective use of assets, several

wide-ranging initiatives are in progress.



 - The    restructuring         of       public    enterprises       will

   reach a notable milestone this year with the

   initial public offer of shares in Telkom.



 - The Treasury's Public-Private Partnership Unit

   now    has     38    projects          of    both     national     and

   provincial          departments          under        review,     from

   ecotourism        parks     and       toll    roads    to   hospital

   equipment and prison management.



 - Perhaps most important of all, we have taken

   the    first      steps     today       in     the    Estimates    of

   National Expenditure - it is a large document

   of about 750 pages                -   to give effect to the

   requirement         of    the   Public        Finance     Management

   Act that by the 2004 Budget, the main divisions

   of     expenditure         appropriated          by     this     House

   should       be          accompanied           by      ``measurable

   objectives'', so that departments are properly

   held    accountable         and       their     service     delivery
21 February 2001                                                   Page 22 of 90


   performance          is    open        to     public     scrutiny.

   [Applause.]



Improved economic performance is, of course, the

outcome   of   a    wider     set    of    public      policies    than

those represented in the annual Budget papers. The

initiatives of Cabinet colleagues in many diverse

areas are as important:



 - Promoting            competition              and      appropriate

   regulatory oversight of public utilities.



 - Restructuring           municipal        governance      so     that

   household services can be effectively managed

   and financed.



 - Ensuring        an   appropriate        balance       between    the

   rights of employees and market adaptability in

   the labour environment.



 - Encouraging          the     research           and     technology

   advances         that      will        keep     our    industries

   competitive.
21 February 2001                                                         Page 23 of 90


 - Extending             land        ownership       and     agricultural

     market         access      to        those    historically         denied

     these opportunities.



We   do      these      things       to    ensure,    as    we    say:      Eli

lixesha lokuba sonke sixhamle ubumnandi beziqhamo

zenkululeko. [Kwaqhwatywa.] [This is the time for

us     all    to     enjoy      the        sweet    fruit    of       liberty.

[Applause.]] For those not familiar with Xhosa, we

say that we do all these things so that we may all

taste the sweet fruit of liberty.



In   these,        amongst      many       other    aspects       of   public

policy,        it        is     frequently           the     details         of

legislation,            procedures,          regulations         or     market

structure that are decisive if long-term growth and

competitiveness are to be assured. Public-private

partnerships            can    contribute         significantly        to   the

extension       and      quality      of     services,      for       example,

while transferring a substantial portion of project

life    risk       to    the    private      sector.       However,      these

benefits are not automatic. They have to be earned

by     tough         performance            agreements,       appropriate

pricing rules and accounting standards, competitive
21 February 2001                                                       Page 24 of 90


tender processes, strong management of contracts,

and an appropriate assignment of risk and rewards.

In    other   words,     we     are       saying      you    cannot       just

outsource and walk away from it. There are a lot of

tough      negotiations       to     ensure      that       the    downside

risks are shared by the private sector and that we

can   in    fact   ensure       a    better      quality      of    service

rendered at the best possible price.



Outcome of the 2000-01 Budget



Before     outlining     proposals         for     next     year,     a    few

remarks on the outcome of the 2000-01 Budget are in

order. Revenue exceeded the main Budget estimate by

R7,7 billion in the budget year that ended on 31

March      2000,   and    is        expected     to    outperform          the

Budget this year by about R3 billion. [Applause.]

It seems as if hon members here are not too happy

when we collect more taxes than we have planned!

[Laughter.] Both company tax and secondary tax on

companies are expected                to exceed projections, as

are     value-added       tax       and    customs          revenue.       The

revised     revenue      estimate         for    the    present      fiscal

year is 7,5% more than last year's receipts.
21 February 2001                                                         Page 25 of 90


Expenditure in 1999-2000 was R830 million above the

original        Budget         estimate     -    less        than   0,5%     -

bringing the deficit down to R16,2 billion, or 2,0%

of     GDP.        This    year,       after     taking        account      of

appropriations approved in the Adjustments Budget,

expenditure is projected to be R1,6 billion above

the Main Estimate, bringing the budget deficit to

R21,7 billion, which is 2,4% of GDP. We should bear

in mind that the bulk of the additional expenditure

this     year       has    been       committed       to     flood-ravaged

infrastructure            resulting       from    the      floods   in     the

early part of last year.



The    revised       estimates        indicate       a   saving     of    R304

million       on    state      debt    costs     this      year.    At   this

stage,    departmental            savings       of    R1,7     billion     are

anticipated          and       disbursements          of     skills      levy

receipts       will       be    about     R430       million    less     than

budgeted. These funds remain earmarked for skills

development and will flow once sectoral and other

programmes are in place.



Nationally and in the provinces, the outcomes for

the past two years indicate more careful budgeting
21 February 2001                                             Page 26 of 90


and improved spending discipline, to the credit of

both   Ministers    and    MECs      and     their    accounting

officers.



2001 Budget framework



We turn now to the framework and proposals for the

2001 Budget. The Budget is always about finding a

balance between several broad objectives:



 - Providing       for      social         and   developmental

   expenditure     to     overcome    poverty        and   provide

   safety and security.



 - Enhancing investment in infrastructure and the

   maintenance of Government's capital stock.



 - Reducing the overall burden of tax, so as to

   lower the costs of investment and job creation,

   and release household spending power.



 - Stabilising the level of debt and reducing the

   budget deficit to contribute to lower interest

   rates and fiscal sustainability.
21 February 2001                                              Page 27 of 90


I could have used the phrases ``on the one hand,''

and ``on the other hand,'' but there are four issue

we have had to measure up, so I should say ``on the

one hand and the other hand,'' and ``on the one leg

and the other leg,'' but those are the four issues

we have considered.



This   year,    the   balance    shifts     decidedly      towards

promoting growth and strengthening investment. The

Main   Budget    provides      for   expenditure      of    R258,3

billion in 2001/02, increasing to R297,5 billion in

2003/04. Revenue increases from R233,4 billion to

R273,1 billion over the same period. A deficit of

2,5% of GDP is anticipated on the Main Budget in

2001-02, falling to 2,1% of GDP in the third year

of the Medium-Term Expenditure Framework.



Including      social    security         funds    and     foreign

technical       co-operation,        consolidated          national

expenditure     of    R267,1    billion     is    projected    for

2001-02, or 27,1% of GDP and 9,6% more than the

revised estimate for 2000-01. The revised economic

outlook   allows      Government     to    increase      allocated

spending on public services by R10,2 billion in the
21 February 2001                                                Page 28 of 90


new    fiscal   year,    and   R16,0   billion       in   the   year

thereafter, above the levels that we projected when

we stood here last year to table the Medium-Term

Expenditure Framework.



These    adjustments     compensate     for    somewhat       higher

anticipated     inflation      and   raise    real    noninterest

expenditure growth to 3,8% a year over the next

three years. Provinces receive 56% of the available

additional resources, national departments 38% and

the    local    sphere   6%.    Provision     for     state     debt

commitments amounts to R48,1 billion in the first

year. Interest on debt was 5,5% of GDP in the year

1999-2000, and will fall to 4,4% of GDP in the

fiscal year ending on 31 March 2004. As in the

past, the budget framework for the next three years

includes a contingency reserve to allow for future

uncertainty and unforeseeable spending commitments.

An amount of R2 billion is set aside in the first

year, rising to R8 billion in 2003-04.



Somlomo, Mongameli, malungu ePalamente abekekileyo,

zine     iziphakamiso      ezibalulekileyo           kolu     hlalo-

lwabiwo-mali.
21 February 2001                                          Page 29 of 90


Kwiminyaka        emine         edlulileyo          siphumelele

ekulithobeni ityala likaRhulumente. Inzala kwimali-

mboleko     ihlile.     Namhlanje   siyabona      ukuba   inene

ekunyamezeleni kukho umvuzo. [Kwaqhwatywa.]



Ngoku,    sinemali     yokuba   sakhe    izikolo,    iindlela,

amaziko ezempilo, izikhululo zamapolisa neenkundla

zomthetho,        neyokuba          sinyuse         inkam-nkam.

[Kwaqhwatywa.]



Sinazo neziphakamiso ezincumisayo kwirhafu. Sithoba

irhafu       kubantu       abanemivuzo         ephantsi     ...

[Kwaqhwatywa.]         siphelisa     irhafus      kwipalafini,

sithoba idizili ... [Kwaqhwatywa.] ... sikhuthaza

namashishini     ukuba      adale    amathuba       emisebenzi.

[Kwaqhwatywa.]



Ukusukela     kulo     nyaka    oomasipala      abatsha    baza

kufumana isabelo esithe nyi ukuze banikeze iinkonzo

ezithile fele-fele. [Kwaqhwatywa.]
21 February 2001                                      Page 30 of 90


Zonke ezi zinto zincedisa ukwakha ubomi obungcono

kuluntu   lonke.]   (Translation   of   Xhosa   paragraphs

follows.)



[Madam Speaker, Mr President and hon members, this

Budget accommodates four very important proposals.



In the last four years we have managed to reduce

the state debt. Interest on state debt has been

reduced. Today we can see that indeed perseverance

prevails. [Applause.]



Now, we have funds that allow for more schools to

be built, road construction and maintenance, more

health care centres, courts and police stations and

increased pension grants. [Applause.]



We also have some favourable income tax proposals.

Personal income tax has been reduced significantly

for   workers   earning   low   wages   ...     [Applause.]

Paraffin will be reduced, diesel will be reduced

... [Applause] ... and companies will be encouraged

to provide new job opportunities. [Applause.]
21 February 2001                                            Page 31 of 90


From this year new municipalities will have their

allocation increased so as to allow them to provide

certain free basic services. [Applause.]



All this contributes towards ensuring a better life

for all the people of the country.]



Expenditure proposals



The revised budget framework allows for substantial

additions   to     baseline   projections       for   the   next

three years:



 - Additional       allocations      of   R16     billion    are

   proposed      for     provinces   to   strengthen    social

   service delivery and other priority needs.



 - More     than    R4    billion    is   allocated    to    the

   criminal        justice      sector      for       increased

   personnel, additional vehicles and an improved

   salary dispensation for police. [Applause.] Is

   that all right?
21 February 2001                                                     Page 32 of 90


 - A     R7,8    billion       supplementary          infrastructure

   investment          and         maintenance        programme        is

   proposed, part of which will go to repair flood

   damage in poor areas.



 - More      than      R2      billion        will      go     to     key

   administrative            services,        including        the     SA

   Revenue            Service,          for       improved            tax

   administration            and     the     Department       of     Home

   Affairs      ...        [Interjections]       ...        sorry,    the

   Department         of    Foreign    Affairs        ...    [Laughter]

   ...          for          its           extended          diplomatic

   responsibilities.                Just      checking,         Shenge!

   [Laughter.]



 - An      additional        R2,6    billion     is     proposed       in

   support of local government restructuring and

   the delivery of basic services. [Applause.]



Details of the Main Budget spending proposals are

set out in this heavy tome called the Estimates of

National     Expenditure,            which     includes        relevant

policy     developments        and         proposed     outputs       and

service delivery indicators for the programmes or
21 February 2001                                                 Page 33 of 90


main divisions of each Vote. Parliament is invited

to agree to these proposals, as set out in the 2001

Appropriation Bill.



Supplementary allocations



The    budget    framework        also   accommodates          several

spending        proposals        not     yet      allocated         to

departmental Votes:



 - A    further      R85    million      in    2001-02    and     R100

      million in the year thereafter for repairs to

      flood-damaged         infrastructure         of         national

      departments.



 - R1,2        billion     for    rehabilitation         of    flood-

      damaged    provincial        infrastructure,        of     which

      R600 million is expected to be spent in the new

      fiscal year.



 - R120 million in 2001-02 for short-term poverty

      relief    measures,        including     interventions        in

      response to cholera outbreaks.
21 February 2001                                                    Page 34 of 90


 - Amounts of R300 million in 2002-03 and R313,5

   million        in    the    year    thereafter        for   targeted

   HIV/Aids interventions.



 - An      amount       of    R3,75    billion       for    provincial

   infrastructure             spending     over    the     next     three

   years      -     road      construction        and      maintenance,

   school      building,           hospitals      and    clinics      and

   rural development. [Applause.]



 - R2,5     billion          for    infrastructure         projects    of

   national departments over the next three years.



Spending     in        2001-02      from     these       supplementary

allocations will be brought to the Assembly in the

Adjustments         Estimate,          once       likely          project

disbursements have been finalised.



Of the supplementary amounts available to national

departments        over       the     next     three        years     for

infrastructure:



 - R863 million is set aside for police stations,

   courts and prisons. Clearly, I am trying to get
21 February 2001                                               Page 35 of 90


   on     the   right      side       of     Minister    Tshwete!

   [Laughter.]



 - R580    million     will      go    to     water   supply      and

   sanitation      projects,          particularly      in     areas

   affected by cholera. [Applause.]



 - R390 million is for key infrastructure projects

   in support of industrial development.



 - R100    million   is    for    the       refurbishment    of   SA

   Rail Commuter Corporation rolling stock.



 - R50 million will go to complete the new Lubombo

   road linking northern Kwazulu-Natal, Swaziland

   and Mozambique. [Applause.]



 - R80 million is allocated for the development of

   emergency    call      centres      by    the   Department     of

   Communications.



Spending policy objectives
21 February 2001                                          Page 36 of 90


In formulating spending plans for the 2001 Medium-

Term Expenditure Framework, Government has sought

to balance a number of broad policy objectives:



 - Economic growth



 - Job creation



 - Equity and social development



 - Strengthening the safety and justice sector



Promoting growth and employment



By   setting         aside     substantial        supplementary

resources      for     infrastructure        investment      and

maintenance,     we     seek       to   broaden     access    to

opportunities,       lower   the    costs   of   transport   and

communications, and improve standards of living in

poor communities. In implementing this investment

programme, Government will also contribute directly

to the creation of jobs. In addition, R1,5 billion

a year is being allocated to a range of targeted

poverty relief programmes, many of which contribute
21 February 2001                                                       Page 37 of 90


to employment and construction in support of local

economic development.



Government's        rural     development,         land       reform    and

agricultural policies are also designed to reduce

rural    poverty        by    supporting       access           to    land,

investing      in   rural     infrastructure            and    broadening

access to markets. Poverty reduction priorities are

evident in the provision of resources to subsidise

basic    services.       Funds      for     low-cost      housing       and

subsidisation of public transport reduce the costs

of     these     household          requirements.         Government's

approach to financing local government and pricing

of basic services recognises that some municipal

services       should    be   available       to    poor       households

free of charge.



Social development



The social services - education, health and welfare

- take up about 58% of the consolidated national

and    provincial       noninterest       allocations,          and    will

grow    steadily     over     the    MTEF    period.          The    largest

single    redistributive         programme         of    Government      is
21 February 2001                                             Page 38 of 90


the system of social grants delivered by provincial

welfare    departments.      These   include   the     old    age,

disability     and   child     support   grants     and    provide

support to more than 3 million South Africans every

month.



Kulo   nyaka   izimpesheni      zabadala    nezabakhubazekile

zikhushuliwe kusuka ku-R540 ngenyanga kuya ku-R570

kusukela      mhla    ka-1     Julayi.     [Ihlombe.]       Nemali

yokondla izingane ikhuphukile ukusuka kwi-R100 kuya

kwi-R110 ngenyanga. [Ihlombe.]



Eminyakeni emithathu ezayo lezi zimali zizokhuphuka

ngokuhambisana       nezinga    lokwehla    kwamandla       emali.

(Translation of Zulu paragraph follows.)



[On 1 July 2001 old age pensions will be increased

from   R540    to    R570.   [Applause.]     Even    the     child

support grant will be increased from R100 to R110 a

month. [Applause.] Over three years these moneys

will be increased in proportion to the inflation

rate at the time.]
21 February 2001                                                   Page 39 of 90


Wat ons sê, is dat die maksimum toelae vir bejaarde

en gestremde persone met ingang van 1 Julie vanaf

R540    na    R570    per     maand     verhoog      word,    en     die

kinderonderhoudstoelae            sal   van   R100     na    R110    per

maand   verhoog      word.    Hierdie       toelaes    sal    oor    die

volgende drie jaar met ten minste die inflasiekoers

aangepas word. (Translation of Afrikaans paragraph

follows.)



[What we are saying is that with effect from 1 July

the maximum grant for elderly and disabled people

will be increased from R540 to R570 per month, and

that the child support grant will be increased from

R100 to R110 per month. Over the next three years

these    grants      will    be    adjusted    by     at    least    the

inflation rate.]



The    maximum    old   age       and   disability     grants       will

increase from R540 to R570 a month in July this

year,   and    the    child       support   grant     will   increase

from R100 to R110 a month. The MTEF allows for

inflation-related adjustments to social grants in

subsequent years.
21 February 2001                                                       Page 40 of 90

Justice and protection services



This   Budget    recognises         that       the     services       of    the

integrated      justice       sector       are       critical     to        the

quality of life of all our people. Raising spending

capacity and improving its quality in the justice

system    are     clear         priorities             of     Government.

Additional      allocations          go     to       the      Safety        and

Security Vote in support of the restructuring of

its    specialist      units        and    the       strengthening           of

operational       activities              at         police       stations

throughout      the     country.          The        more     streamlined

operation of the Legal Aid Board is recognised in

its    increased        funding           level        and      additional

allocations are made for the prosecution service

and special investigations.



Members   of    this        House    will       know     that     we       have

unfinished       business            in        relation          to         the

recommendations        on    reparations          of    the     Truth       and

Reconciliation         Commission.             Allocations        to        the

President's Fund on the Justice and Constitutional

Development      Vote        for      2001-02          and      the        year

thereafter      will    bring       the    amount        available          for
21 February 2001                                                       Page 41 of 90


final reparations to about R800 million. These will

be    paid    in    once-off       settlements       and      the    Budget

allows the programme to be concluded over the next

two years.



Measuring improved service delivery



Once-off      allocations         are    also    being     made      on    the

Statistics SA Vote to provide for the 2001 census,

and I would like to take this opportunity, echoing

the   President's          words    of    last   week,        to    ask    all

South Africans to participate voluntarily in Census

2001 to be conducted in October of this year to

ensure that we can more accurately know the profile

of    South    Africa      and     its    people   and        be    able   to

target resources in that direction. This in itself

is an important step in developing our capacity to

measure       progress       in     the     social       and       economic

challenges this Budget seeks to address.



Changing the way in which Government operates is a

key element of improved service delivery and better

value    for       money    in     the    purchase       of    goods       and
21 February 2001                                             Page 42 of 90


services outlined in the Budget. Improving service

delivery means confronting poor management:



 - Getting teachers to teach with enthusiasm is

      partly   about      strengthening      discipline    in   the

      classroom, but it is also about diligence in

      the school district office.



 - Reinforcing the ethic of care and compassion in

      our clinics and hospital wards is also about

      combating   theft      of    medicines    and   imposing   a

      cost-effective laundry or building maintenance

      regime. [Applause.]



 - Respect for the rights of both the victims and

      the accused means that court backlogs must be

      shortened     and     the    criminal     justice    system

      modernised.



The    2001     Budget      substantially        increases      the

resources      available     for    Public     Service    delivery

over the next three years. It does so without fear

of the crushing burden of debt. And, in doing so,

it challenges us to focus more keenly on ensuring
21 February 2001                                                 Page 43 of 90


that the funds we appropriate impact on the quality

of    people's     lives:   that       more    infants    live   past

their     first     birthday,     that        more    children     pass

successfully through our schools, that our roads

become    safer      and   that   every       family    should   have

access to clean water. [Applause.]



The    form   and     content     of    the     new    Estimates    of

National Expenditure invite all of us in this House

and all South Africans to be vigilant in ensuring

that we meet the goals we set ourselves.



And we do so to ensure that the tree bears not the

bitter but the sweet fruit of liberty, or as we

say: Gore peo ya kgololosego e re beele maung a a

botshe. [So that the seed of freedom bears us sweet

fruit.]



Provincial and local government finance



Improved provincial finances



Turning       to     provincial        and      local     government

finances,      our     Constitution          provides    for     three
21 February 2001                                                   Page 44 of 90


spheres of government. For the tree to grow strong

all three branches have to be healthy.



The equitable share to provinces rises by 7,7% a

year   for     the     next    three     years,        providing    for

significant real growth in critical spending. This

is supplemented by a variety of grants, bringing

the    total         provincial        share      of      noninterest

allocations on the national Budget to 56,4% in the

new year.



Provincial governments have made striking progress

in improving financial management. It is easy to

forget now that in 1997 a number of provinces faced

serious      financial        difficulties.        The      overdraft

problems in the Eastern Cape and KwaZulu-Natal have

been dealt with, and the need to set aside funds to

deal with the debt overhang is no longer holding

provincial     spending       plans      back.     [Applause.]       In

Gauteng alone, over R1 billion has been reserved

for major capital projects, and in all provinces

the next three years will see growth in both the

main social services and targeted investments in

social and economic infrastructure.
21 February 2001                                           Page 45 of 90


The sound state of provincial finances is testimony

to the commitment of the Budget Council to working

together as a team. With patience and clarity of

vision, much can be achieved, even over a three-

year time horizon. The nine MECs of finance will

sit next to one another, and, again, we would like

to    commend    them     for      that    sterling      effort.

[Applause.]



Local government challenges



For     local    government,         the     challenges       of

transformation largely lie ahead. We have to merge

different   local   authorities       with   diverse      needs,

financial systems and procedures, and we must build

a new ethos of financial responsibility. As Team

Finance,    we   stand     ready     to    work   with     local

government to manage this complex and challenging

transition. The aim is to nurture this branch, so

that the whole tree can bear sweeter fruit.



Local government is responsible for providing many

basic    services       such    as    water,      electricity,

sanitation, refuse collection and basic household
21 February 2001                                                  Page 46 of 90


infrastructure, all of which impact directly on the

lives of people. The local government elections in

December   last   year     marked     the     completion        of    the

process      of    rationalising              the        number        of

municipalities      from     843      to      284,       laying       the

foundations for the emergence of better-managed and

delivery-focused      organisations.             The     process       of

merging municipalities will take time to complete.

The financial viability of some municipalities is

not secure at this stage, and the pressing need to

provide     universal      access        to      basic        municipal

services remains.



However, our metropolitan and bigger cities have

considerable      capacity      and      have       already       taken

significant steps on the road to stabilising their

finances. This can be seen in the transformation of

Johannesburg,     which    is    moving       away     from     crisis

management and beginning to find the resources for

capital    spending   once      again.      It   can     be    seen    in

Durban, which is demonstrating how to provide free

basic services like water to the poor.
21 February 2001                                                     Page 47 of 90


To    support        municipalities            in    addressing          the

challenge     of     providing          free   basic   services,         the

national      Government          is    increasing     the     equitable

share    to        local     government         significantly.           The

allocation         now     rises       to    R2,6   billion,       and     is

projected      to    increase          to    R3,6   billion    over      the

period to 2004. This represents an average annual

increase      of    11%     over       the   period.   The     equitable

share    formula         favours        poor    municipalities           with

limited revenue-raising capacity.



But that is only part of the story. Total revenues

to local government rise from R6,5 billion in 2001-

02 to R7,8 billion in 2003-04. These funds include

R2,2 billion in allocations specifically for the

extension of basic municipal infrastructure to poor

households.



The     primary          source        of    financing       for     local

government remains local taxes and other revenues

levied and collected by municipalities themselves,

including property taxes, levies and user charges.

The equitable share and other transfers that go to

local government supplement these revenues and are
21 February 2001                                                           Page 48 of 90


targeted at the poorest municipalities whose local

tax base is limited.



The   additional      allocations           to    municipalities               and

the     provincial       infrastructure                grants          underpin

Government's        commitment         to        urban       renewal           and

integrated rural development. Municipalities in the

nodal      points   identified        by    the    President             in    his

state of the nation address will, for the first

time, be able to budget for the full extent of

resources at their disposal, and provide national

and provincial departments with a focal point for

the        co-ordination        of         development                projects.

Moreover, the improved reporting systems proposed

in the Division of Revenue Bill that we are tabling

today      will     enable      all    spheres              of       government

regularly      to    monitor      progress             in        these     nodal

points.



It    is    important,     however,         not    to       think        of    the

challenges ahead only in fiscal or monetary terms.

There is a larger challenge of developing capacity

and     governance     systems,        for        which          I    am      sure

Minister      Mufamadi     is    gearing          up     more        strongly.
21 February 2001                                                   Page 49 of 90


Improving     the     credibility       of     municipal      budgets,

adapting     strategies        to      meet     local      needs     and

enhancing the quality of service delivery within

affordable bounds are immense projects.



We must think of innovative ways of strengthening

the    capacity      of   local     government       and    tap     into

experiences elsewhere in the world. An example of

this is a project that the World Bank is running

with about 150 mayors of cities and towns in Latin

America who meet in Internet conversations every

Saturday morning to deal with a whole series of

issues relating to local government - from how to

collect taxes, how to provide refuse collection,

how to ensure that they spend on infrastructure, to

running efficient fire brigades. All of these kinds

of    experiences     are     shared    -     not   inputed    by    the

World Bank - but shared among these mayors who meet

in    this   way    every     Saturday       morning,      sitting   in

their    respective          offices     in     their      respective

cities. It is this kind of experience that we need

to draw on to build the capacity that will make a

difference,        because    local    government       touches      our

people in a very direct way.
21 February 2001                                               Page 50 of 90

Revenue issues and tax proposals



Over the past five years, considerable attention

has been given to improving the structure of the

South African tax system and the system of revenue

administration, which are critical to Government's

fiscal    and    macroeconomic        policy   initiatives.      The

income tax changes introduced in the Budget last

year were the cornerstone of a general tax reform

process that enhances the equity, efficiency and

international competitiveness of the South African

tax system. These are important building blocks on

the path to sustainable economic development and a

better life for all South Africans.



Since    1995,    personal      and   corporate    income      taxes

have been reduced significantly. Before this year's

tax proposals, we had put R25 billion back into the

pockets   of     South   Africans.      Today,    we    are   giving

more    back.    A    further    R8,3    billion       in   personal

income tax relief is being devoted to ensuring that

all South Africans share in the successes of fiscal

discipline       we   have      achieved.      [Applause.]      But,

perhaps more importantly, we are making good on the
21 February 2001                                                 Page 51 of 90


pledge    we   have      made    here   before,       a    pledge    to

taxpayers: ``Pay your taxes now, and everyone will

pay less in the future.'' [Applause.]



The    package      of     tax     reforms       announced          here

complements    other       economic     reform    initiatives         by

releasing fiscal resources for investment, economic

development and job creation.



Income tax proposals



Ditshitshinyo       tsa     lekgetho      la     badiri        ba     ba

amogelang lotseno lo lo kwa tlase ga R80 000 ka

ngwaga le tlaa fokodiwa. Badiri ba lotseno lo lo

kwa tlase ga R23 000 ka ngwaga ga ba kitla ba duela

lokhetho. [Legofi.] Modiri wa lotseno lwa R70 000

ka ngwaga o tlaa bona poelo ya R140 ka kgwedi.

[Legofi.]



Lekgetho la tlaleletso mo leokwaneng la parafene le

tlaa     fokodiwa     ka     disente     di      le       40   litara.

Phokoletso eo e tla thusa bao ba leng dikobo di

magetleng. [Legofi.]
21 February 2001                                            Page 52 of 90


Phokoletso ya lekgetho e tla tsenngwa tirisong go

dikgwebo-potlana         tse        di     itlamelang,        go

tlhofofaletsa dikgebo tseo go itirela didiriswa tse

di maleba. Kokeletso ya lotseno lo lo kwa tlase e

tla tsenngwa tirisong go simolola ka 1 Diphalane

2001, go ka thusa ka tlhongo ya ditiro.



Leokwane la disele, leo le dirisiwang ke balemirui,

le tlaa fokodiwa ka disente di le 42 litara go

simolola ka 4 Phukwi 2001. [Legofi.] (Translation

of Setswana paragraphs follows.)



[Income tax for workers earning below R80 000 a

year will be decreased. Workers who earn below R23

000   a    year   will      no    longer   pay     income   tax.

[Applause.] A worker who earns R70 000 a year will

receive a return of R140 a month. [Applause.]



Additional tax on paraffin will be decreased by 40c

a litre. This decrease will help the poorest of the

poor. [Applause.]



A   tax   decrease   will    be   effected   for    independent

small businesses, so as to lighten the production
21 February 2001                                            Page 53 of 90


costs of their particular products. A low income

increase will be effected as of 1 October 2001, to

help job creation.



The price of diesel, which is used by farmers, will

be decreased by 42c a litre as from 4 July 2001.

[Applause.]]



Regarding the income tax proposals, personal income

tax   reductions   accrue    mainly      to   workers   earning

below R80 000 a year and improve the equity of the

overall   tax   system.     This   has    been   achieved     by

raising the primary rebate by 8,9% and changing the

tax brackets, ensuring sizeable benefits for lower

and middle-income taxpayers. Workers earning less

than R23 000 a year will now pay no personal income

tax ... [Applause] ... and a worker earning R70 000

will pay about 12% less tax, increasing her take-

home pay by about R140 a month. [Applause.]



In his address at the opening of Parliament, the

President indicated that Government would explore

the feasibility of ``reducing the cost of labour

without   reducing   workers'      wages''.      In   the   2001
21 February 2001                                                        Page 54 of 90


Budget,      R600    million       is       set    aside     for   a    wage

incentive to encourage job creation by reducing the

cost      of     hiring          new        workers      and       offering

learnerships. Over the next couple of months, Sars

and    the     national      Treasury         will      develop     a       tax

measure      that    is    both    economically            efficient        and

simple    in     administration             and    compliance.         It    is

envisaged       that      this    will       be    introduced      from      1

October this year.



The tax exemption on interest and dividend income

is raised by R1 000 to R4 000 for people under 65

and R5 000 for taxpayers aged 65 and over. This

provides       further     tax     relief         to   those   living       on

modest fixed-interest and dividend incomes.



Investment      in     strategic        industrial         projects      that

promise significant direct and indirect benefits to

the South African economy are critical to placing

South Africa on a higher sustainable growth path. I

have   agreed       with    my    colleague,           the   Minister       of

Trade and Industry - under duress, Alec - that R3

billion be set aside over the next four years for

incentives          targeted           at     strategic        industrial
21 February 2001                                                        Page 55 of 90


projects     which      meet    agreed       criteria,     and     one    of

which      is,    of     course,           very    importantly,          job

creation.



An allowance of either 50% or 100% of an approved

investment will be granted to companies undertaking

strategic        projects.           The     allowance           will     be

calculated       with    reference          to    the     cost     of    the

investment undertaken. The national Treasury, Sars

and   the     Department        of    Trade       and   Industry        will

finalise the details of these incentives before the

end   of    March,      including          the    stringent       criteria

against which projects must be assessed.



Government continues to support small businesses,

which   are      key    engines       of    job    creation.       In    the

Budget we tabled here last year, a reduced tax rate

of 15% of the first R100 000 of taxable income was

introduced for certain small businesses. The tax

privileges       for    small    businesses         are    extended       in

this Budget to allow for the immediate deduction of

investment expenditure in manufacturing assets in

the year in which the investment is made. This will

cost R40 million.
21 February 2001                                                    Page 56 of 90


So the fruits are truly much sweeter. I think by

this time everybody knows what they have got the

apples for. These are very sweet apples - sweet

fruits       -   that     we    have     earned    from    the     tough

decisions we have taken in the past.



Structural reforms to the tax system



In     the       2000     Budget        several     proposals       were

introduced         with        prospective      effect,         including

residence-based           income    taxation       and    the    capital

gains tax. The residence-based income tax came into

operation on 1 January this year. This structural

change to the income tax is necessary to ensure

that the South African tax system keeps pace with

globalisation and the integration of South Africa

with the world economy.



Capital gains tax, estate duty and donations tax



Capital gains tax was to be introduced with effect

from   1     April      this    year.    Government      has     listened

carefully to the proceedings of Parliament's Joint

Committee        on     Finance,        which     has    held     public
21 February 2001                                         Page 57 of 90


hearings     on   the   draft   legislation.    While   it   is

imperative that this fundamental change be made, it

is proposed that the implementation be deferred to

1 October 2001. This will give the private sector -

the financial services sector in particular - ample

time to amend its management information systems to

ensure effective implementation.



I would like to stress to the President that the

commitment we made here that Sars would be ready by

1 April has been kept. So we are ready to roll. But

it     is   important    that   we   allow     the   financial

services sector time to get their systems in order

so that the tax works effectively.



A key strength of the proposed capital gains tax is

that it is levied when the owner of an asset dies

or the asset is donated. To counter any perceived

double taxation of these assets, it is proposed to

reduce the estate duty and donations tax rates to

20%.



Closing tax loopholes
21 February 2001                                           Page 58 of 90


Our ongoing tax reform programme aims to widen tax

bases and reduce statutory rates. As in the past,

this will include identifying and closing potential

loopholes in the company income tax. Items to be

investigated include:



 - Section 24C of the Income Tax Act, which allows

      for   the      immediate      deduction     of     future

      expenditure.



 - Provisions allowing deductions for contingency

      reserves of short-term insurers.



 - The taxation of intangibles.



 - The      possibility        of   bringing    all     company

      directors   into        the   pay-as-you-earn       (PAYE)

      income tax system.



Unbundling transactions



Unbundling provisions were introduced to facilitate

the    dismantling       of     South   African        corporate

structures. The internationalisation of the South
21 February 2001                                                    Page 59 of 90


African       economy       means     that    non-South           African

residents      are    benefiting       from    these        provisions.

Sars    and    the        national    Treasury       will    therefore

review the unbundling provisions to ensure they are

still       appropriate        in      the     current         business

environment.



Review of tax on banks



Government is concerned about the low effective tax

rate on banks. Banks are able to defer and avoid

tax    by   using     derivative       financial       products      and

structured, asset-based finance techniques, amongst

other devices. In 2001 Government will engage with

the    industry      to    address    this.    The     initial      focus

will be on increased audit and possible legislative

changes,       including        clarifying       the        distinction

between capital and ordinary income for the sale of

financial      instruments,          reviewing       the    tax    rules

regarding       financial        leases       and     ensuring       the

immediate accrual of certain income receipts that

are postponed through artificial contingencies.
21 February 2001                                                               Page 60 of 90


A number of countries have limited the scope for

banks       to    avoid         tax   by      introducing         alternative

minimum          taxes     or     presumptive            taxes       on    easily

identifiable and audited tax bases, for example on

gross assets. We will engage with the banks on the

appropriateness of this measure for South Africa.



Indirect tax proposals



Vat zero-rate on illuminating paraffin



Illuminating paraffin is an important energy source

for        low-income           households          in     this           country,

especially in rural areas. As with other fuels, the

price       of     illuminating              paraffin       has       increased

dramatically             over     the        past   year        or    two.       To

alleviate         the     plight        of    these      poor     households,

Government is zero-rating paraffin for VAT purposes

from 1 April 2001. [Applause.] This will reduce the

price by about 40 cents a litre. We trust that the

R400 million we are giving up will be passed on to

consumers,         thereby        providing         tax    relief         to    the

intended beneficiaries. Let me appeal to all of us

to    be    vigilant       about      ensuring        that      the       benefits
21 February 2001                                               Page 61 of 90


accrue to the very poor who use paraffin in their

everyday lives. [Applause.]



Specific excise duties



Revenues from specific excise duties have been a

buoyant    source    of    revenue.       Changes    to     specific

excises,     informed           by    revenue        and      health

considerations, include:



 - Beer and cider taxes are raised by 6% or 2,3

   cents     a      can,        in   line     with        inflation.

   [Applause.]



 - I know I am going to get into trouble for this:

   Sorghum       beer     and    sorghum    flour     duties      are

   raised    by     5%,    which     is    below    the    rate   of

   inflation. [Interjections.] [Laughter.] Duties

   on these products have - under protest from the

   Minister of Home Affairs - not been raised for

   two years now.



 - Duties    on     all    other     alcoholic      beverages     are

   raised by 10%. [Applause.]
21 February 2001                                             Page 62 of 90


 - Taxes on tobacco products are raised by between

   11,8%     and    20,2%      to    maintain   the    50%     tax

   incidence. This increases the price of a packet

   of 20 cigarettes by 33,8 cents. [Applause.]



 - Duties    on    soft    drinks    and   mineral    water    are

   reduced by 25%, or 2 cents a litre.



These measures will raise estimated revenue by R779

million. This is not so sweet!



In terms of section 58 of the Customs and Excise

Act of 1964, I lay on the Table for consideration

by the House the proposals in respect of customs

and excise duties.



Fuel levy



Fuel prices have increased considerably over the

past two years. Government is aware of the pressure

this   has   placed       on   the    disposable      income    of

household and business budgets.
21 February 2001                                                    Page 63 of 90


Fuel taxes serve a variety of purposes. First, they

are    a   significant       source     of    general        Government

revenue.     Second,      they   play    an    important       role   in

limiting the demand for fuel products, which has

important      environmental       and       balance    of     payments

benefits.



Given that the fuel levy is a specific excise tax,

it is imperative for the sake of consistent tax

policy that it be reviewed in the annual Budget, in

line       with    macroeconomic         projections           of     the

inflation rate. In this context and recognising the

impact of rising fuel prices on the economy, we are

proposing     to     raise   the   fuel       levy     by    less   than

inflation. The following increases in the general

fuel levy are proposed:



 - 2,4       cents    a    litre   on     leaded       and     unleaded

      petrol; and



 - 1,9 cents a litre on diesel.



These represent increases of only 2,5% on the tax

rate, which is well below the anticipated inflation
21 February 2001                                                     Page 64 of 90


rate. These increases will be implemented with the

normal price adjustments on 4 April 2001 and will

raise an additional R363 million.



Since    the    octane       levels   of    leaded      and    unleaded

petrol      were      equalised,          there    has        been     an

equalisation levy of 3 cents a litre on unleaded

petrol. It is proposed that from 4 April 2001 this

be included in the general fuel levy. Thus, the

general levy on unleaded petrol is raised by an

additional      3    cents    a   litre    and    the    equalisation

levy is reduced by 3 cents a litre, with no net

impact on the overall levies and, hence, the pump

price.



Road Accident Fund



To   meet      the    ongoing      liabilities          of    the    Road

Accident Fund, the levy on petrol will be increased

by 2 cents a litre from 4 April 2001. When the

diesel concessions which I referred to earlier and

will elaborate on shortly are introduced on 4 July

2001, the Road Accident Fund levy on diesel will be

brought in line with that on petrol at 16,5 cents a
21 February 2001                                             Page 65 of 90


litre. These measures will increase revenue to the

Road Accident Fund by R437 million.



Diesel fuel concession for primary production



In the Budget last year, a diesel fuel concession

was reintroduced for fishing and coastal shipping.

Government     committed         itself    to    exploring    the

possibility    of     extending     this    to    other   primary

producers,          contingent       on         developing     an

administrative regime to minimise the risk of fraud

and   ensuring      that   the    concession      is   affordable

within the broader fiscal framework.



The bulk of diesel fuel used in farming, forestry

and mining is used off road. Given this, and to

encourage     the     international        competitiveness     of

especially our farmers, foresters and miners, the

following diesel fuel concessions are proposed:



 - 25,6 cents a litre of the general fuel levy on

      qualifying consumption; and
21 February 2001                                            Page 66 of 90


 - the full 16,5 cents a litre Road Accident Fund

   levy    on   qualifying      consumption   -     that   is   42

   cents a litre.



Qualifying      consumption     will    be    80%    of     total

consumption. Diesel concessions will be implemented

on 4 July 2001 and will cost us R417 million a

year.



Furthermore,     the   following    additional      concessions

are proposed:



 - Offshore      mining   and    the   National     Sea    Rescue

   Institute will receive a 100% concession of the

   general fuel levy and the Road Accident Fund

   Levy.



 - Spoornet will receive a 100% concession of the

   Road Accident Fund levy.



Ad valorem excises



The national Treasury and Sars have reviewed the

administrative system for ad valorem customs and
21 February 2001                                              Page 67 of 90


excise       duties.    It    is   evident    that   considerable

savings      will    result     from   reforming     this   system.

From     1    July     this    year    the   value-determination

formula      for     domestically      produced   goods     will   be

eliminated and duties will be levied on the invoice

price of dutiable items. In addition, the maximum

statutory rate will be decreased from 10% to 7% and

the duty rate on cosmetics will be reduced from 10%

to 5%. This will result in a revenue loss of R210

million.



Tax administration



It is also important to deal with issues of tax

administration. The SA Revenue Service is committed

to   improving       tax     administration    and   nurturing     a

climate of voluntary compliance with the objective

of broadening the tax base so as to reduce the tax

burden on all our citizens. As citizens, meeting

our tax obligations and acting within the letter

and spirit of the law are not optional. They are

part of understanding that, in a democracy, rights

and obligations are two sides of the same coin.

[Applause.]
21 February 2001                                                 Page 68 of 90


Corporate and private citizens who evade the law

are committing a crime and depriving the Government

of the resources needed to address poverty, fight

crime     and    achieve       other       social    and    economic

objectives. [Applause.] Tax evasion also undermines

investor    confidence         and    increases     the    burden    of

ordinary taxpaying citizens. I want to commend the

actions taken by Sars to curb tax evasion and fraud

in the past year, including efforts to root out

corruption within the organisation itself. We must

signal    that   we     will    not    tolerate     this    type     of

criminal activity anywhere. [Applause.]



Sars is also committed to making it easier for our

people to meet their tax obligations, by providing

a better service. The groundwork for a new taxpayer

charter has been laid, giving us important feedback

about    taxpayers'      needs       and   concerns.      The   survey

results     have       informed       a     major    restructuring

project, which has now entered its implementation

phase. KwaZulu-Natal taxpayers will benefit first

from    Sars's   new    way     of    doing   business      with    the

opening in October this year of a processing centre

to improve turnaround times. This centre will be
21 February 2001                                                   Page 69 of 90


supported     by     a   compliance          centre    and    service

centres.



Other initiatives include electronic submission of

certain tax returns, such as provisional tax and

pay-as-you-earn,         and    a    call     centre    focused      on

recovering    outstanding           debts.    More     than   17    000

taxpayers were contacted in the call centre's first

week of operation and more than a million taxpayers

can expect a call from us this year. Sars's budget

will be supplemented over the next three years to

enable us to provide better services to taxpayers

and to reduce tax evasion and avoidance. Also, in

the context of the reorganisation of Sars, we will

be   concentrating       on    better   port     and    border     post

administration to ensure that illegal goods do not

enter our country, that back-door routes are shut

down, and that jobs in South Africa are protected

from    the        illegal      activities        of     smugglers.

[Applause.]



Financing proposals
21 February 2001                                                      Page 70 of 90


After taking account of our spending proposals and

revenue    estimates,      there     is     a   budget      deficit     of

R24,9 billion to finance next year, or 2,5% of GDP.

We expect to finance the deficit largely through

restructuring proceeds.



To date, total investment of R19 billion has been

raised through the restructuring of state assets,

mainly from international equity partners, of which

R12,4 billion has been used to reduce debt. Given

the accelerated pace of implementation, some R18

billion      from      the        restructuring             of    public

enterprises is expected in the new fiscal year - is

that right, Minister Radebe? - decreasing the net

borrowing requirement to R7,5 billion.



We   propose     to   raise       R3,5    billion      in    short-term

loans     next    year,      contributing        further         to    the

liquidity of this market. Net foreign borrowing to

the value of R11,3 billion is proposed. This will

allow   domestic      long-term          debt   to    be    reduced     by

about R7,4 billion. In effect, we propose to repay

about   R7,5     billion     in    long-term         rand-denominated

debt next year.
21 February 2001                                                 Page 71 of 90


At the end of 2000-01, total net loan debt will

amount to R397,5 billion, or 44,3% of GDP, down

from over 48% four years ago. Debt will steadily

decline as a share of GDP to a projected 39,1% by

the   end     of   2003-04.      We   say    again:    Eli     lixesha

lokuba        sonke      sixhamle         ubumnandi        beziqhamo

zenkululeko. [Kwaqhwatywa.] [This is the time for

us    to      enjoy      the     sweet      fruit     of      liberty.

[Applause.]] It is clear that the fruits of our

decisions      gradually        acquire     the    sweet   taste    of

liberty.



Conclusion



Before concluding I have two tasks to perform. The

first    is   to   lay    the    following        documents    on   the

Table:



(1) Budget Speech - 21 February 2001 [RP 28-2001].



(2) Estimate of National Revenue 2001 [RP 34-2001].



(3) Taxation proposals: Income Tax.
21 February 2001                                           Page 72 of 90


(4) Taxation      proposals      in   respect     of   specific

      excise duties (customs and excise) [tabled at

      15:12].



(5) Division of Revenue Bill          [B 11-2001].



(6) Budget      Review   2001,    including      ``Annexure   E:

      Explanatory    Memorandum       on   the    Division    of

      Revenue Bill'' tabled in terms of section 10(5)

      of the Intergovernmental Fiscal Relations Act,

      1997 (Act No 97 of 1997) [RP 27-2001].



(7) Estimates of National Expenditure, 2001 [RP 30-

      2001].



(8) Appropriation Bill           [B10-2001].



I would also like to take a moment to pay tribute

to about 500 South Africans who probably are not in

this House today, people who participated in a wide

programme called ``Tips for Trevor'' through the

departmental      website,    radio   stations,     newspapers,

and    who     offered   their     bits    of    advice.   South

Africans from the widest possible cross section -
21 February 2001                                                    Page 73 of 90


from   somebody    who    describes    himself      as        a    humble

traffic officer, to people who have jobs, such as

radio station talk show hosts; from individuals who

are    employees    somewhere    and    stole       a    moment        of

Internet time to communicate with us, to people who

are pensioners and borrowed e-mail facilities from

their children; from tax professors and workers -

spoke to us about what they wanted. Many of them

spoke about tax proposals.



I am sure that they will find that their views are

expressed    in    the    decisions    that    we       are       placing

before this House today. Others will find that we

are in disagreement with the fundamentals of what

they proposed. On the expenditure side, many would

be happy with the kinds of decisions that we are

placing before this House today. Yet others raised

matters     that    are    outside     of     the       Budget        but

important for us to be alive to, such as the amount

that South Africans spend on gambling in casinos,

on Lotto and so on, asking that we examine and re-

examine these kinds of issues to ensure that we all

have a better quality of life. To all of those

South Africans, too many to name, I want to say
21 February 2001                                                    Page 74 of 90


thank you. I want to give them the assurance that I

have personally read every message they have sent

to me, and I am very grateful for the time and

effort that they took to talk to us in this way.

[Applause.]



Madam   Speaker,    allow    me    to    express     my       profound

appreciation to:



 - President       Mbeki    for    his   leadership           and    the

   challenges he puts before us - he does not let

   us get off easy - and for the challenges he

   placed before all of us in this House in his

   opening of Parliament address, and for the work

   he is doing on the continent that continues to

   draw us into a continually expanding view of

   what     our    responsibilities            are   as       Africans

   involved in Government. [Applause.]



 - Deputy      President          Zuma     and       my        Cabinet

   colleagues,       particularly        the    members        of    the

   Ministers' Committee on the Budget                     -    however

   much some of them whinge, Essop [Laughter.] -

   for their initiative in bringing forward budget
21 February 2001                               Page 75 of 90


   suggestions and their good humour when these

   could not be accommodated.



 - Of course, to Deputy Minister Mandisi ``Sipho''

   Mpahlwa for sharing the duties we carry and for

   friendship.



 - My Team Finance - the MECs for finance - who

   have led with courage and professionalism, and,

   I think, the fruits of their efforts will be

   very sweet in the provinces as well.



Our task has been greatly facilitated by several

others:



 - Governor Tito Mboweni and his team at the SA

   Reserve Bank;



 - Murphy Morobe and members of the Financial and

   Fiscal Commission;



 - Philip Dexter and Nedlac;



 - Prof Michael Katz and the tax commission;
21 February 2001                                              Page 76 of 90


 - Ms     Barbara    Hogan       and    Ms   Qedani    Mahlangu,

      chairpersons    of     the       Portfolio   and    Select

      Committee      on      Finance         in       Parliament,

      respectively. [Applause.]



This Budget is largely the fruit of the efforts of

the national Treasury and the SA Revenue Service.

[Laughter.] Special thanks are due to Maria Ramos

and   Pravin   Gordhan     for   the    leadership     they   have

given. [Applause.]



I would also like to thank my family for their

support, the Mpahlwa family for continuing to keep

Sipho in good spirits, and perhaps last but not

least, the staff of the Ministry who tolerate us

with such good cheer. [Applause.]



The SPEAKER: Order, hon members. The Appropriation

Bill and the papers tabled ...



The MINISTER OF HOME AFFAIRS: Madam Speaker, I am

the only one who did not get an apple. I did not

get an apple. [Laughter.]
21 February 2001                                          Page 77 of 90


The    SPEAKER:   Minister,   I   will   intercede   on   your

behalf.



The Appropriation Bill and the papers tabled will

be referred to the Portfolio Committee on Finance

for consideration and report in terms of Rule 291.



Hon members, the Minister has been very generous,

but obviously not generous enough with his gifts

today. As hon members are all aware, we have a code

of conduct. Now I am investigating whether I can

make a declaration on Parliament's behalf for the

apples, or whether you each have to declare your

apple. [Laughter.] [Applause.]



The House adjourned at 15:28.

                        __________



      ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS



ANNOUNCEMENTS:



National     Assembly    and      National     Council      of

Provinces:
21 February 2001                                                  Page 78 of 90


1.   The Speaker and the Chairperson:



     (1) The Minister for Justice and Constitutional

          Development on 19 February 2001 submitted a

          draft   of      the    High   Court     Amendment       Bill,

          2001,     and     a    memorandum       explaining       the

          objects of the proposed legislation, to the

          Speaker    and       the    Chairperson    in    terms    of

          Joint Rule 159. The draft has been referred

          by the Speaker and the Chairperson to the

          Portfolio        Committee        on      Justice        and

          Constitutional         Development      and    the   Select

          Committee       on    Security    and     Constitutional

          Affairs,     respectively,       in     accordance       with

          Joint Rule 159(2).



TABLINGS:



National     Assembly           and     National        Council     of

Provinces:



Papers:



1.   The Speaker and the Chairperson:
21 February 2001                                                     Page 79 of 90


     Report of the Auditor-General on the Financial

     Statements of Vote No 15 - Health for 1999-2000

     [RP 124-2000].



2.   The Minister of Finance:



     (1) The   Budget       Speech     of     the        Minister         of

         Finance [RP 28-2001].



     (2) Estimate of National Revenue for 2001-2002

         [RP 34-2001].



     (3) Taxation Proposals: Income Tax.



     (4) Taxation proposals in respect of custom and

         excise duties laid upon the Table at 15:12.



     (5) Division      of   Revenue    Bill        [B    11     -    2001]

         tabled   in    terms   of     section          10(1)       of    the

         Intergovernmental           Fiscal     Relations                Act,

         1997 (Act No 97 of 1997).



     (6) Budget Review 2001 [RP 27-2001], including

         "Annexure     E:   Memorandum        to    accompany             the
21 February 2001                                            Page 80 of 90


       Division of Revenue Bill", tabled in terms

       of section 10(5) of the Intergovernmental

       Fiscal Relations Act, 1997 (Act No 97 of

       1997).



   (7) Appropriation Bill [B 10 - 2001].



   (8) Estimate of National Expenditure 2001 [RP

       30-2001], which includes:



       1.   Memorandum on Vote No 1 - "Presidency",

            Main Estimates, 2001-2002;



       2.   Memorandum on Vote No 2 - "Parliament",

            Main Estimates, 2001-2002;



       3.   Memorandum   on   Vote    No    3       -   "Foreign

            Affairs", Main Estimates, 2001-2002;



       4.   Memorandum   on    Vote    No       4       -   "Home

            Affairs", Main Estimates, 2001-2002;
21 February 2001                                                Page 81 of 90


       5.   Memorandum on Vote No 5 - "Provincial

            and Local Government", Main Estimates,

            2001-2002;



       6.   Memorandum on Vote No 6 - "Government

            Communication and Information System",

            Main Estimates, 2001-2002;



       7.   Memorandum    on   Vote   No    7       -       "National

            Treasury", Main Estimates, 2001-2002;



       8.   Memorandum    on   Vote   No        8       -     "Public

            Enterprises",      Main   Estimates,               2001-

            2002;



       9.   Memorandum    on   Vote   No        9       -     "Public

            Service      and    Administration",                Main

            Estimates, 2001-2002;



       10. Memorandum     on   Vote   No     10         -     "Public

            Service   Commission",         Main         Estimates,

            2001-2002;
21 February 2001                                            Page 82 of 90


       11. Memorandum   on    Vote    No   11       -      "South

           African       Management             Development

           Institute", Main Estimates, 2001-2002;



       12. Memorandum on Vote No 12 - "Statistics

           South   Africa",    Main    Estimates,          2001-

           2002;



       13. Memorandum   on    Vote    No   13       -      "Arts,

           Culture, Science and Technology", Main

           Estimates, 2001-2002;



       14. Memorandum on Vote No 14 - "Education",

           Main Estimates, 2001-2002;



       15. Memorandum on Vote No 15             -       "Health",

           Main Estimates, 2001-2002;



       16. Memorandum on Vote No 16 - "Housing",

           Main Estimates, 2001-2002;



       17. Memorandum   on    Vote    No   17       -     "Social

           Development",      Main    Estimates,           2001-

           2002;
21 February 2001                                       Page 83 of 90


       18. Memorandum on Vote No 18 - "Sport and

           Recreation       South          Africa",        Main

           Estimates, 2001-2002;



       19. Memorandum      on       Vote      No      19      -

           "Correctional            Services",             Main

           Estimates, 2001-2002;



       20. Memorandum on Vote No 20 - "Defence",

           Main Estimates, 2001-2002;



       21. Memorandum on Vote No 21 - "Independent

           Complaints           Directorate",              Main

           Estimates, 2001-2002;



       22. Memorandum on Vote No 22 - "Justice and

           Constitutional        Development",             Main

           Estimates, 2001-2002;



       23. Memorandum on Vote No 23 - "Safety and

           Security", Main Estimates, 2001-2002;
21 February 2001                                              Page 84 of 90


       24. Memorandum    on      Vote       No              24    -

           "Agriculture",     Main   Estimates,              2001-

           2002;



       25. Memorandum    on      Vote       No              25    -

           "Communications", Main Estimates, 2001-

           2002;



       26. Memorandum    on      Vote       No              26    -

           "Environmental     Affairs      and      Tourism",

           Main Estimates, 2001-2002;



       27. Memorandum on Vote No 27             -       "Labour",

           Main Estimates, 2001-2002;



       28. Memorandum   on    Vote    No    28          -     "Land

           Affairs", Main Estimates, 2001-2002;



       29. Memorandum on Vote No 29             -       "Minerals

           and Energy", Main Estimates, 2001-2002;



       30. Memorandum   on    Vote   No    30       -       "Public

           Works", Main Estimates, 2001-2002;
21 February 2001                                                    Page 85 of 90


           31. Memorandum on Vote No 31 - "Trade and

               Industry", Main Estimates, 2001-2002;



           32. Memorandum on Vote No 32 - "Transport",

               Main Estimates, 2001-2002;



           33. Memorandum       on    Vote    No     33    -     "Water

               Affairs and Forestry", Main Estimates,

               2001-2002.



National Assembly:



1.   The Speaker:



     The   President      of   the    Republic     submitted         the

     following letter, dated 19 February 2001, to

     the    Speaker       informing      Parliament            of    the

     employment     of     the       South    African          National

     Defence Force:




     EMPLOYMENT     OF     THE       SOUTH    AFRICAN          NATIONAL

     DEFENCE      FORCE        IN     COMPLIANCE          WITH       THE

     INTERNATIONAL       OBLIGATIONS     OF    THE    REPUBLIC        OF
21 February 2001                                                              Page 86 of 90

   SOUTH    AFRICA          TOWARDS          THE     GOVERNMENT          OF    THE

   REPUBLIC        OF        MOZAMBIQUE               FOR       HUMANITARIAN

   ASSISTANCE DURING WIDESPREAD FLOODING



   This    serves       to    inform          the     National         Assembly

   that the President authorised the employment of

   South    African         National          Defence          Force     (SANDF)

   personnel           to      fulfil               the        international

   obligations         of    the        Republic          of   South     Africa

   towards       the    Government             of     the       Republic        of

   Mozambique      for       humanitarian             assistance          during

   widespread flooding in the Zambezia Province.



   This    employment         was       authorised             in   accordance

   with    the    provisions             of        Section      82(4)(b)(ii)

   read with Section 227(1)(d) of the Constitution

   of the Republic of South Africa, 1993 (Act No

   200 of 1993), [which Sections continue to be in

   force in terms of Item 24(1) of Schedule 6 to

   the     Constitution            of        the     Republic       of     South

   Africa,       1996       (Act        No     108     of      1996)],        read

   further with Section 3(2)(a)(iv) of the Defence

   Act, 1957 (Act No 44 of 1957).
21 February 2001                                       Page 87 of 90


   (a) Personnel.    A   total   of   13   personnel    have

         been deployed to Mozambique: 3 x pilots, 2

         x navigators, 2 x flight engineers, 3 x air

         loadmasters,    1   x   interpreter    and    2   x

         medical personnel.



   (b) Aircraft. 1 x C-130 cargo aircraft and 2 x

         medical personnel aircraft.



   The SANDF members were deployed for a total of

   three days over the period 10 February 2001 to

   12 February 2001.



   FINANCIAL IMPLICATIONS



   The   estimated   financial    implications    are      as

   follows:



   (a) 18 hrs Flying Time @ R26 641 per hourR479

         538

   (b) Fuel required is 53 000 litres @ R3.00 per

         litreR159 000
21 February 2001                                             Page 88 of 90


   (c) Subsistence and Travelling Allowance for 13

         personnel    at US $62.00 per day per person

         @ R7.90 to a US$R19 102

   (d) Accommodation     @     US   $100.00    per     day    per

         personR30 810

   (e) Total cost of a 3 day deploymentR688 450



   The    cost   indicated     above    does    not    include

   landing, parking, navigational, ground support

   equipment and lighting surcharge fees.



   The     Department     of        Foreign     Affairs        is

   responsible for the costs of this Deployment.



   I   will   also   communicate      this    report    to    the

   Members of the National Council of Provinces,

   and wish to request that you bring the contents

   of this report to the notice of the National

   Assembly.



   Regards
21 February 2001                                             Page 89 of 90


     S V TSHWETE

     ACTING PRESIDENT




     Dr F N Ginwala, MP

     P O Box 15

     CAPE TOWN

     8000



COMMITTEE REPORTS:



National Assembly:



1.   Report       of    the   Portfolio    Committee    on   Arts,

     Culture, Science and Technology on the National

     Council      for    Library   and    Information    Services

     Bill [B 44B - 2000] (National Assembly - sec

     75), dated 21 February 2001:



            The Portfolio Committee on Arts, Culture,

            Science     and   Technology,    having    considered

            the    National      Council    for   Library      and

            Information Services Bill          [B 44B    -   2000]
21 February 2001                              Page 90 of 90


       (National Assembly - sec 75), recommitted

       to it, reports the Bill without amendment.

								
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