Address by Mr Nqabayomzi Kwankwa, MP in the National Assembly
Debate: Consideration of Fiscal Framework and Revenue Proposals
Mister Speaker, Deputy President and Honourable Members,
Economies around the world, including ours, have since the financial crisis in 2008 struggled to return back to pre-subprime crisis economic performance levels. This decline in business activity has resulted in massive job losses, business closures and in many families finding it difficult to make ends meet.
Despite these challenges, good strides in economic and social development have been made to boost the economy, create jobs and reduce poverty.
One of the good things the Minister and the Department have done well over the past few months is that they have heeded the call to reduce costs by keeping an eye on and actively seeking ways to moderate the public sector wage bill. It has also introduced a wide range of cost cutting measures.
We also commend Government for ensuring that the consolidated budget deficit came down from the 4.2 per cent forecast in October last year to 4 per cent.
However, while it makes sense to, in light of the current general economic decline, run a budget deficit of 4 per cent in the medium-term to support our developmental objectives, the budget deficit viewed together with the rising public debt, which stands at just over 40 per cent of GDP, gives an impression that Government is struggling to embark on a fiscal consolidation programme.
Yes, we are aware that rising global interest rates have been a major contributor to the rise in debt service costs for Government.
We are also cognisant of the fact that significant steps have been taken to improve the management of public debt and that currently only about 10 per cent of public debt is in foreign currency.
However, the United Democratic Movement (UDM) believes that more needs to done to improve efficiency in Government. This is essential in reducing and bringing South Africa’s debt to sustainable levels.
Labour unrest is hurting the South African economy and results in the loss of our country’s competitiveness. Nowhere is this loss of competitiveness more evident than in the current account deficit of approximately 6 per cent and the fact South Africa’s net portfolio investments declined to R24.3 billion in 2013 from R88.8 billion in 2012.
Mister Minister, it concerns us that South Africa’s large current-account and budget deficits are beginning to attract the attention of rating Agencies, which already have a negative outlook on South Africa.
The UDM calls on Government to take steps to improve the depressing investment climate in South Africa in order to ensure private investment – both portfolio and in particular foreign direct investment – is rekindled. This is one of the most essential ways to achieve economic growth rates that are necessary to arrest poverty.
It makes us uneasy to see that Government’s debt and deficit reduction programme seems to principally depend on optimistic economic growth forecasts.
Output growth in South Africa has been sluggish for quite some time and judging by Government’s failure to achieve past targets, we are not convinced that the new targets will be achieved.
The UDM believes that output growth forecasts should be realistic so that we can begin the process of setting the country’s finances on a path to fiscal consolidation.
The UDM supports the Consideration of Fiscal Framework and Revenue Proposals.
I thank you.