Date: 11/05/2010
Source: The Democratic Alliance
Title: DA: George: Speech by DA Member of Parliament on the Finance budget vote, National Assembly

Mr. Chairperson. May 2nd was Tax Freedom Day. The average South African taxpayer worked for 121 days to settle their annual tax obligation. This is a long time and a lot of money for people who are getting less and less in return.

The social contract between taxpayers and government is fairly simple. The people should pay their taxes and government should deliver efficient and effective, value for money, services. The National Treasury, as custodian of the people's money, must ensure that the social contract is maintained and strengthened.

Although government talks about rooting out waste and promoting cost efficiency, it fails to act. The DA's wasteful expenditure monitor has already breached one billion rand, in one year, and this only includes wasteful expenditure that we have uncovered by digging through piles of paperwork often intended to hide the most basic financial details.

In my recent interaction with a major international bank, I was informed by their economists of their view that actual wasteful expenditure by the ANC government in South Africa is at least 20 times higher than our monitor suggests. This does not inspire investor confidence, especially when our debt requirements are rapidly increasing.

In assessing the effectiveness of government spending, we need to look at various macroeconomic indicators and activity in the micro economy. Our GDP growth lags behind that forecast for the global economy. We also lag behind growth forecasts for the emerging markets and other African economies. Although the deficit on the current account of the balance of payments improved in 2009, we still are not exporting enough, given our capabilities.

Unemployment remains on the increase, and the income gap continues to widen. This all despite one grand economic plan after another, compounded by the dismal failure of so-called black economic empowerment to reach the broad-base of people that it was intended to uplift into economic activity.

We are still waiting for the Poverty Line Index and for decisive action on dismantling the barriers that have left millions of our young people out of employment, out of education and out of hope.

We are also waiting for detail on the wage subsidy for new entrants to the labour market and action to promote literacy.

The so-called Developmental State lurks ominously as it waits, in vain, for the state owned enterprises to energise our economy.

ESKOM and the Land Bank's raid on the people's money has impacted heavily on the national budget. Just imagine how much service could have been delivered to the people with just a fraction of R43 billion.

How long are the people expected to wait for service delivery, while the ANC government pours the people's money into the trough so that its cadres can feast while the people become more and more restless and impatient?

They will not wait forever.

Fortunately they have a viable alternative in the DA, achievable through the ballot box.

The National Treasury also needs to explain to hardworking taxpayers why extremely beneficial electricity pricing arrangements are permitted for some while the average South African household struggles with the double burden of spiralling tariff increases and tax payments to finance transfers to ESKOM.

More than a year has elapsed since the 2009 national election and we still do not have clarity on the direction of economic policy. The Minister of Economic Development has established an advisory panel to produce papers on micro and macro economic matters. The Minister of National Planning has established a National Planning Commission to develop a long term economic plan.

The Minister of Economic Development claims that his advisory panel will make recommendations to the National Planning Commission. This seems to ignore the fact that the purpose of the National Treasury's programme 6 is to provide specialist policy analysis and advisory services in several areas including micro- and macroeconomics. This is not cost effectiveness.

My parliamentary question on the cost of the so-called Harvard Papers, commissioned in 2008 and largely ignored, was never answered.

Why is it so difficult to understand that economic stability is strongly influenced by sentiment and that positive sentiment needs certainty?

The ANC government talks about the need for consensus on a long term economic prosperity plan, but then it sends out mixed and confusing signals.

Obviously this is a reflection of the confusion in the ANC about what its various factions want to achieve. A clear example is that of nationalisation; President Zuma tells the world and parliament that nationalisation is not ANC government policy.

He is directly contradicted, without correction, by the ANC Youth League President Julius Malema who calls for the nationalisation of everything from mines to banks without any understanding of what this does to investor confidence, let alone any understanding of the public financial implications.

These contradictions are like a virus infecting our economic growth prospects and play directly into the hands of those who do not have the interests of ordinary South Africans at heart.

The noise around proposed improvements to governance structures at the South African Reserve Bank is far louder than it would have been had calls for its nationalisation not been made.

Parties intent on raiding our 40 billion US dollar national reserves - the people's assets - have their case strengthened by the noise on nationalisation generated by fools who have no understanding of even the most basic principles of economics and finance.

The Minister of Economic Development has proposed that pension funds should be forced into apartheid-era prescribed assets in the form of development bonds, the Minister of Finance says that these bonds are not necessary.

Pension fund members need clarity on what is actually intended. They also need to know progress on long awaited social security and retirement reform, especially on plans for a National Retirement Fund and whether this will be another pot for government to underwrite its wasteful spending.

Billions of rands were stolen from pension fund members when the Financial Services Board failed to properly govern surplus apportionments during pension fund transfers in the 1980s and 1990s. The FSB needs to be strengthened to ensure that it can properly protect pension fund members and other investors.

The National Treasury must ensure transparency, accountability and sound financial controls in the management of the country's public finances.

Approximately 60% of the people's money is spent on procurement of goods and services through the tender process. The rise of the so-called tenderpreneur clearly demonstrates how badly the procurement process is broken.

Tenders worth hundreds of millions are awarded to tenderpreneurs who then outsource the work at a fraction of the amount awarded and steal the difference.

The National Treasury does not have this problem under control. The database for tenders awarded is not maintained, nor is it audited. The register for tender defaults is empty.

In our report to Parliament, the Standing Committee on Finance undertook to engage with National Treasury on the procurement and tendering reform process.

In particular, the Prevention and Combating of Corrupt Activities Act needs to be amended to state that parties found guilty of tender default MUST be named in the register, to prevent them from perpetuating their crimes as they do now.

A fairly simple way to apprehend those who steal the people's money is to subject known tenderpreneurs to lifestyle audits.

Our committee has recommended that SARS should put a programme in place to identify the mismatch between declared income and actual income of individuals in the economy who do not pay their taxes.

Al Capone, the notorious American criminal, guilty of many offences, was finally brought to book on charges of tax evasion. This is a very powerful tool and SARS must not be inhibited from its ruthless pursuit of economic criminals, irrespective of their political affiliation.

SARS has already conducted almost 4 800 lifestyle audits leading to 234 criminal prosecutions. This must be encouraged. We will never know whether a report, circulated in the media and detailing a so-called ghost unit at SARS established to place various ANC politicians under surveillance for tax evasion, has any substance in reality.

But we do know that politicians have benefitted from the abuse of the tender process and have lifestyles that do not match their incomes. Such parasitic behaviour must be identified and stopped.

SARS is often accused of bullying law abiding tax payers whose cash flow sometimes inhibits their ability to settle their tax obligation. This is misguided because payment arrangements can usually be agreed.

SARS has much, necessary, power, but must not forget that it is a servant to the people. SARS needs to listen more carefully to its customers when it consolidates its services and our Committee has recommended that SARS should provide the Committee with its consolidation strategy so that we can ensure that effective communication takes place before SARS office consolidations are implemented.

Government has committed itself to a review of the business and funding models applicable to the state owned enterprises. Hopefully, this will be completed honestly and realistically to ensure that the drain on the public finances can be plugged. It is only a matter of time before the ANC realises that its so-called Developmental State model cannot work and that government's role is to facilitate economic activity and not to control it.

The economic model as envisaged by the DA's Open Opportunity Society for All can create a virtuous cycle of prosperity for all and is the only, viable, alternative.

In conclusion, the DA would like to thank the National Treasury and SARS for their service to the people of South Africa. Your contribution to the well-being of our economy is noted and appreciated.

Thank you, chairperson.