Madam Speaker,
Minister of Finance,
Colleagues.

Last week, the National Treasury revised our economic growth estimate for next year from 5,1% to 4,5%.

Much of this deterioration is due to an expectation of poor performance in the global economy, and in response to this the Finance Minister presented a cautious Medium Term Budget Policy Statement with built-in stabilisers.

The Democratic Alliance supports this approach.

We do believe, however, that the State should be doing more to let market-led development lift our growth rate. Like many analysts and economists, we are increasingly concerned about the sustainability of the current account deficit and the lack of progress with respect to corporate tax relief, privatisation and the final abolition of exchange controls.

The current account deficit is increasingly worrying with its projected widening to 7,7% of GDP in 2007 and 7,8% in 2008. Both of these rates are the biggest since 1951.

The Director General of Treasury has indicated that South Africa now relied on R2bn of capital inflows a day to finance its current account shortfall - which is most worrying when most emerging markets have current account surpluses, thanks to high commodity prices.

It is also a worry in the light of the global credit crunch sparked by problems in the risky U.S. mortgage market as well as a tendency of global investors to reduce their exposure to the global "carry trade".

We believe that the persistently high current account deficit is driven by three factors which the Minister has influence over:

Firstly, the bottlenecks in the economy prevent local production from meeting burgeoning demand. The AsgiSA initiative has correctly identified the majority of these constraints but little progress is being made in these constraints being dismantled. The last AsgiSA Annual report bares eloquent testimony to this.

Secondly, the growth in government spending continues to outstrip economic growth. This is a concerning trend that will further worsen the deficit unless the Minister reigns it in soon. We stand by our position that public sector wage hikes should be linked to increased productivity.

Thirdly our chronic lack of domestic savings and investment compromises our ability to finance our expenditure. This situation needs to be turned around with incentivising cuts in the corporate and retirement fund tax rates. In addition, the long-awaited abolition of exchange controls will help to counter-balance our significant dividend outflows.

In addition we are alarmed that, while the Minister Manuel was happy to continue to pour taxpayers money into state-owned entities like Denel, Alexkor and SAA - which should have been privatised years ago - he is mum on the fact that tax payers could face energy tariff hikes of around 18% for the next few years to fund Eskom's infrastructure catch-up program.

Would it not make more sense that Eskom's biggest shareholder - the State, should fund this expansion? The inflationary effects of passing these infrastructure costs directly onto consumers could undo the positive effect the fiscally conservative policy statement before us has on inflation. Our view is that the national budget is better placed than the South African consumer's pockets to absorb these costs in an inflation-neutral manner.

I must point out here that we believe the new approach of a "cyclically-adjusted budget balance" to be a level-headed policy reform that improves our view of the real state of the South African fiscus, provides some insurance against future financial instability and continues the Finance Minister's successes in prudent management of the budgets.

It is a fiscal policy development that the DA supports.

The problem is, although the Medium Term Budget Policy Statement is meant to be a statement on broad policy direction, there are virtually no other announcements on fiscal policy directions with which we could agree, or disagree.

Minister Manuel's speech makes reference of Monetary Policy, Microeconomic and Trade Policy - policies in the domain of the Reserve Bank and the Department of Trade and Industry respectively.

I understand the Minister's frustration. Because of sound macro economic policies he has secured funding. It is in the delivery that his colleagues are often found wanting.

Little surprise therefore that the Policy statement went far beyond the Minister's normal announcement of changes in expenditure and emphasis

In this statement we heard the Minister sound off on trade and industrial policy, the public service, health, education, crime and even South Africa's social behaviour.

The speech was over-reaching and I am sure cabinet colleagues found it intrusive and divisive. But I understand the Ministers frustration.

The other Cabinet Ministers are clearly not taking the Finance Minister's intrusions lying down: last week's ugly public spat between Minister Manuel and Minister Mpahlwa was just the latest in a long-running feud between the Treasury and DTI that is creating widespread uncertainty and holding up policy implementation.

It may be that the tensions in the ANC are now filtering though to Cabinet - and it would be truly alarming if this were so - but, whatever the cause, it is clear to us that the ANC Cabinet Ministers responsible for the economy are at odds with one another.

But what are the costs of this rift?

There is a well-worn saying that sums it up: "When elephants fight, the grass gets trampled". For it is clear to us that those South Africans who are most vulnerable are the ones paying the price for this dispute.

When the Finance Minister made his Budget speech in 2006 4,2 million of our people were unemployed. By the time he announced this year's budget, the ranks of the unemployed had risen by 61 000.

If we include those people who have given up their futile search for work, there are over 7,8 million unemployed people in our country. These numbers have not changed materially in over six years. Unemployment is our national crisis.

The Ministries of Finance and Trade and Industry should be working together to combat the scourge of unemployment and make it easier for businesses to grow, trade, and create jobs.

Instead they are paralysed on a variety of critical issues because they are unable to agree on their broad ideological and policy positions.

The result of this is that any initiatives that require the collaboration of the two departments - and they are many - are either shelved or massively delayed.

The examples are numerous:

As last week's headlines showed, our national trade policy is paralysed while Treasury and the DTI fight it out in the media over whether we should go for state-based interventions or the eminently more sensible market-driven tariff reforms.

The long awaited and much anticipated National Industrial Policy which has finally been released by the D.T.I. has emerged in the form of broad conceptual brush stokes. Now a debate may well be had as to whether it is government's role to pick winners, but leaving that debate aside, the framework announced requires the Treasury's direct input and support in no less than 27 separate initiatives.

Key to these initiatives is the unresolved debate as to the nature and extent of sector as apposed to broad based incentives - a debate around which the D.T.I. and Finance Ministies are unable to agree. Hence delay

It is no secret that Treasury is reluctant to accept the extension of the Motor Industry Development Programme, effectively blocking efforts by the President and the DTI to provide certainty to foreign and domestic investors in the motor industry - one of our key industrial anchors.

The D.T.I. handling of the Chinese Textile quota issue have been shambolic with the Department being unsure of whether to retreat into protectionism or encourage efficiencies via competition. All at the cost of local consumers who have seen final costs rise.

Despite the fact that the DTI's finalised Codes of Good Practice reward BEE based on a new, broad set of measures, Treasury has yet to reconcile this with the Preferential Procurement Policy Framework Act - presumably for ideological reasons. This means government departments are out of line with the BEE Act and still procuring on principles of narrow-based BEE even while they insist that the private sector applies the broad-based scorecard.

I will not comment now on the merits of these relative positions but the point is, ordinary South Africans who are affected by these policies don't want to take sides in the standoff in the Cabinet, and they shouldn't have to. But if you ask me my money is on the Treasury and the Minister of Finance. For lets face it any department that bungles something as small as the lottery surely can't be trusted to be the key driving force behind our so-called developmental state.

Ministers Manuel and Mpahlwa should stop holding the South African economy hostage over their ideological differences.

I hope that our President is not too busy with internal ANC affairs to stick his head over the parapet on this issue - but he needs to take a position of leadership here.

He urgently needs to resolve this clash of dogma and personality between two of our most important ministries.

Our nation's economic development is at stake.

I thank you.