THURSDAY, 9 NOVEMBER 2000 __

          PROCEEDINGS OF THE NATIONAL COUNCIL OF PROVINCES
                                ____

The Council met at 10:07.

The Deputy Chairperson took the Chair and requested members to observe a moment of silence for prayers or meditation.

ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS - see col 000.

The CHIEF WHIP OF THE COUNCIL: Chairperson, by arrangement, Mr Adriaan van Niekerk will be moving a motion on behalf of the Council and there will be no further motions.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Hon Chief Whip, are you saying that there will be no further motions or notices of motion?

The CHIEF WHIP OF THE COUNCIL: Chairperson, other than the motion that is going to be proposed by the hon Van Niekerk on behalf of Council, there will be no further motions. TRAIN ACCIDENT

                         (Draft Resolution)

Mr A E VAN NIEKERK: Chairperson, I move without notice:

That the Council -

(1) takes note of the shocking train accident that occurred on Tuesday, 7 November 2000, in which four people were killed and at least 109 injured;

(2) sy simpatie uitspreek teenoor die naasbestaandes van die oorledenes en die hoop uitspreek dat hulle spoedig vertroos sal word en berusting sal vind;

(3) dié families en die beseerdes aanmoedig om by die SA Spoorpendelkorporasie eise in te dien, soos deur die Korporasie aangebied; (Translation of Afrikaans paragraphs follows.)

[(2) expresses its sympathy towards the next-of-kin of the deceased and the hope that they will be comforted soon and that they will find peace; (3) encourages the families and the injured to submit claims to the SA Rail Commuter Corporation, as was offered by the Corporation.]

(4) expresses its shock about the claim that the safety measures that were in place were, at the request of the SA Footplate Association, to be inspected on the same day that the accident occurred, and about the fact that members of the Association are concerned that profit margins were accorded preference over safety standards; and

(5) requests a copy of the report from Metrorail once the investigation has been completed.

Motion agreed to in accordance with section 65 of the Constitution.

FAST-TRACKING OF LOCAL GOVERNMENT: MUNICIPAL STRUCTURES SECOND AMENDMENT BILL

                         (Draft Resolution)

The CHIEF WHIP OF THE COUNCIL: Chairperson, I move the draft resolution printed in my name on the Order Paper, as follows:

That the Council ratifies the decision the Joint Programme Subcommittee took on 3 November 2000 in accordance with Joint Rule 216(2), namely that the Local Government: Municipal Structures Second Amendment Bill, 2000, be fast-tracked by, where necessary, shortening any period within which any step in the legislative process relating to the Bill must be completed, in order to make it possible for the Bill to be passed by both Houses of Parliament by 24 November 2000 (see Announcements, Tablings and Committee Reports, p 1068).

Motion agreed to in accordance with section 65 of the Constitution.

        UNLAWFUL RACIAL AND BRUTAL ASSAULT BY POLICE OFFICERS

                      (Subject for Discussion)

The CHIEF WHIP OF THE NCOP: The brutal, barbaric and brazen assault by certain white police officers attached to the dog unit two days ago on three black persons was witnessed by the nation on television in graphic detail. The conduct was racist, repugnant and repulsive. We were outraged by this incident, which involved a savage, merciless and deliberate canine attack on three black persons. The vicious assault by these officers on the three black persons, the offensive racist remarks and the sustained assault by these officers, who found pleasure in relegating the black victims to the status of subhumans, deprived them of their dignity, their security, their sense of self-worth and self-esteem.

It reflects very clearly the depths of depravity, disgrace and racism displayed by these officers through their conduct. That this incident occurred four years after we had established a nonracial and democratic dispensation increases the sense of outrage and distress.

What effects does such an incident have on the nation? Firstly, it depicts law officers as gross violators of human rights and diminishes the credibility and image of the SA Police Service. Secondly, it has the potential to act as a catalyst for racial tension. Thirdly, it impacts negatively on the sterling work done by many white women and men in the police and security services, who are committed to a nonracial and democratic society. Fourthly, it impedes our progress towards nation- building and reconciliation. Fifthly, it has the potential of tarnishing the image of the SA Police Service, which is committed to transformation and which seeks to project an image that is credible and acceptable as the protector of the dignity, the security and the rights of all its citizens.

How do we respond to such an incident?

I move without notice that we adopt the following resolution:

That the Council -

(1) supports Minister Steve Tshwete and the National Commissioner of Police, Mr J Selebi, for their swift and decisive action in directing the immediate arrest, suspension and prosecution of the perpetrators;

(2) urges that collectively as a nation across the political spectrum, we unequivocally and categorically condemn the brutal and barbaric acts of racism - in this way we can articulate our contempt against acts of racism and abuse of authority;

(3) empathises with the victims of the assault who were injured, tortured and traumatised; (4) condemns racist elements that exist in pockets within the security forces;

(5) acknowledges and recognises the good work and commitment of the majority of white members within the ranks of the SA Police Service and the SA National Defence Force;

(6) resolves that we must not let this incident, as repugnant as it is, detract us from the course of nation-building and reconciliation that we have embarked on; and

(7) appeals to the Ministers responsible for safety and security to intensify their campaign of developing a sound human rights culture within the security forces and services, and urges the nation to take active steps to uproot the demon of racism and brutality wherever it rears its ugly head.

[Applause.]

Mr L G LEVER: Chairperson, the act of using dogs to attack defenceless prisoners, ostensibly as a training exercise for the dogs, can only be described as barbaric.

We cannot shy away from the fact that this act of barbarity took place in the South African context. This is deeply disturbing, because the overwhelming majority of South Africans of all racial and ethnic groups turned their backs on violence and negotiated a system where all people within our country, regardless of whether they are citizens or not, would be treated with human dignity.

The scenes that the nation saw on television last Tuesday evening are a direct affront to the values of our nation. The barbarity and racism that were revealed in those scenes have no place in our society. The majority of South Africans took risks and continue to make sacrifices to build our new society. We cannot allow conduct of this kind to erode the goodwill that exists between all racial and ethnic groups in our country. Such goodwill between racial and ethnic groups is vital for us to succeed in our task of nation-building and reconciliation. We cannot afford to take this goodwill for granted. Therefore this sort of barbarity and racism must not only be condemned, but it must also be stopped.

Such barbarity is also disturbing because the majority of policemen and policewomen of all racial and ethnic groups have worked extremely hard in order to gain the trust of our people and rid the SAPS of the shadows of the past, as well as to uphold and protect the values of our society.

In order to achieve this goal, policemen and policewomen of all racial and ethnic groups need to have complete trust and confidence in each other. This incident undermines that trust and confidence. For this reason we must avoid making broad and sweeping generalisations when debating this racist incident.

Every effort must be made to restore the confidence of the public in the SAPS and enhance the esprit de corps within the SAPS. For this reason the DA commends the Minister of Safety and Security and the National Commissioner of the SAPS for their bold and decisive action in ensuring that justice takes its course.

We in the DA feel very strongly that every effort must be made to trace the victims of this barbaric act so that, firstly, they can assist the police and courts to ensure that justice is done; secondly, that they can see justice prevail in our country; and thirdly, that the presiding officer in the trial can assess whether it would be appropriate for the perpetrators to compensate their victims as part of any sentence the court might consider. Fourthly, in the event of the courts not awarding compensation, the state or a victims fund can pay appropriate compensation.

Finally, we need to find out why it took more than two years for this incident to come to light, when we have an Independent Complaints Directorate whose task is to investigate complaints against the SAPS. We need to assess whether the system broke down and if it did, where it broke down.

In conclusion, we need to take positive steps to foster a human rights culture within the SAPS. We need to be vigilant to ensure that the values of our nation are not undermined by conduct of this nature.

Lastly, on behalf of the DA, I support the motion proposed by the Chief Whip. [Applause.]

Mr K D S DURR: Mr Chairperson, we unreservedly condemn this unbelievably brutal display by members of the SAPS dog unit, which for some bizarre reason that, I have to say, no normal person can divine, motivated the perpetrators of this naked racist attacks to even film their activities.

This heinous, nauseating and godless display has shaken the nation, and strikes at the very image of the SAPS and that of its serving officers.

It is good that the Government acted swiftly against the perpetrators. We trust that they will speedily be brought to book and punished appropriately and mercilessly. In that regard, we commend both the Ministers involved for their very swift and immediate action.

A daily reading of the newspapers demonstrates that brutality and barbarism, unhappily, lurk just below the surface of South Africa. Standing between us and that barbarism is the thin blue line of the SAPS. It is vital that these good men and women do not become demoralised or brutalised in the dangerous process of protecting us.

Standing in sharp contrast to this hopefully untypical rogue behaviour, which the Chief Whip alluded to, are tens of thousands of decent personnel of the SAPS. It is in their vital best interests, as well as society’s as a whole, that we need to speedily excise these rogue elements which still pollute and obscure the valued work being done under dangerous circumstances, for which we are all grateful and of which we are all justifiably proud. We trust the law will take its course speedily.

We support the resolution, and I have to say that we also support the additional remarks and suggestions made by my hon friend Mr Lever. [Applause.]

Mr T B TAABE: Mr Chairperson, the ANC, like many other South Africans across the racial divide and spectrum, was horrified and indeed outraged after viewing scenes of blatant brutality and racism committed by a small rightwing lunatic fringe in the SAPS. What makes us more angry, is the fact that, while the three black men lay helplessly and defencelessly on the ground, these raving racists continuously kicked, punched and slapped them and one of them yelled at a badly hurt man saying:``Is jy n kaffir? Sê jy is n kaffir. [Are you a kaffir? Say you are a kaffir!]’’

Although this barbaric incident took place in 1998, as the ANC, we find it extremely difficult to believe that such a naked display of racism and brutality could occur four years into our democracy. For this reason, we want to urge all South Africans who respect human rights and the Constitution of our democratic order to unequivocally condemn such a blatant violation of human rights. We are also of the view that the worst of similar incidents are taking place daily and are not being reported.

The fact that certain sections of society and, indeed, political parties have been in denial of the fact that racism is still rife in society is very disturbing.

When we called for the national conference on racism in July, this party, the ANC, was criticised and our leaders, including the President, vilified and demonised by these political parties and, indeed, certain sections of the media. They argued, myopically, that such a conference was irrelevant and a waste of taxpayers’ money and that it would open the wounds of the past and would not help the process of reconciliation and nation-building.

As the ANC we feel vindicated and exonerated now that these kinds of things are continuously coming to light and that the demon of racism, as we have correctly said in the past, is continuously rearing its ugly head in many parts of our country. We know that it needed to be tackled head-on by all those who are committed to a free, democratic and nonracial society. Clearly, what we saw the day before yesterday on television was not an isolated incident, but a confirmation of the fact that racism is still rife in this society, and in the SAPS in particular.

Reconciliation, it must be pointed out, cannot and will never happen at the expense of black people in this country, who for decades suffered at the hands of successive racist and gangster regimes which certain political parties sitting in this Chamber actually defended and propped up for decades in this country. As the ANC we want to call on our white compatriots to continue to find ways of isolating such elements in our society for the sake of our country and its entire people.

To the overwhelming majority of police officers who are honest, dedicated and in fact, willing to sacrifice their own lives in defence of our Constitution and to provide safety and security to our people, I say: Let us work together to deal with these rogues within the SAPS. Let us ensure that we are able to flush them completely out of the SAPS, for they are a shame and disgrace to this nation. They do not belong in the SAPS, whose image they are continuously tarnishing and, as such, they must go.

The fact that they have been arrested is not enough. What must follow is that they must be prosecuted and sent to jail for long sentences, and the keys must be thrown away. This would show their racist masters, wherever they are, masquerading as born-again democrats, clubbing together in all manner of dysfunctional alliances, doomed alliances, discredited alliances, damaged alliances, that, indeed, we will continue to hunt them down wherever they are. If that means using the might of the state, they must know that the majority of the people of this country are fully behind the ANC on this matter. [Time expired.] [Applause.]

Mr J O TLHAGALE: Mr Chairperson, hon Minister and the honourable House, on behalf of the UCDP, I stand to support the motion by the Chief Whip relating to the horrifying and barbaric incident in which six police officers were shown in TV video footage using their dogs to torture illegal immigrants. The incident was not only outrageous and an offence to the eye, but it reopened the healing wounds of the past. It is calculated to render the efforts and initiatives on reconciliation and nation-building an exercise in futility.

The six SA Police Service police officers had, after four years of democratic change, not experienced any change of heart or spiritual transformation in their outlook on life. It appears that they were so hard- hearted, unsympathetic and brutal that the pleadings of suffering men, who even went to the extent of calling them ``my baas’’, did not move their stone hearts.

Whilst we, in this honourable House, are debating the issue, and would not like the racism aspect of it to be emphasised, our constituencies and support bases out there will make their own judgments. This issue is ugly; it has racial undertones, and whether we like it or not, it is not uncommon as an example of what was happening in the past.

One of the burning and unanswered questions is: Why has this video tape surfaced now, after two years? It is clear that the video tape was recorded by the dog unit itself during its dog training sessions, and was apparently put away in safekeeping. Then somebody inside, who was disgruntled, or had been spiritually born again, or had repented, could have leaked the video tape to the media for exposure to public notice.

It is an insult to the large majority of South Africans of all colours that in this instance the dogs were trained to know that their handlers would comprise a certain section of the population, and that their victims or targets would comprise the other section of the population. The dogs were taught that.

In conclusion, I wish to congratulate the hon the Minister of Safety and Security for his swift and decisive action in arresting the perpetrators of this ghastly deed, and hope that the law will now take its course. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Hon members, I have just been warned that if you see some interruptions on the screen as we discuss this important matter, you must know that seemingly there are some technical problems.

Mr P A MATTHEE: Chairperson, I saw some of the scenes of the police brutality last night in the 20:00 news bulletin for the first time. Although I have not seen the full video as it was shown in the Special Assignment programme the previous night, what I saw was so shocking and abhorrent that I believe it is very important for all of us in this council to publicly and unequivocally condemn this brutal and totally unacceptable incident, which could potentially seriously tarnish the image of SA Police Service, and seriously impede reconciliation and nation-building.

We therefore support the resolution by the Chief Whip. I just want to ask him to consider - if I can have the Chief Whip’s attention - including in paragraph 5, the word ``vast’’. We also support the Minister and the Commissioner of Police in their swift action. Brutality, violence and racism should not only be dealt with effectively wherever we find it. We should also take steps to prevent this kind of behaviour before it occurs.

Ons kan nie toelaat dat rassisme oorspoel vanaf die beperkte plekke waar dit nog bestaan nie. Ons moet daarom versigtig wees om nie te veralgemeen nie, hoe wat ons gesien het ons ook al met absolute afgryse vervul.

Ons moet egter ook baie versigtig wees om nie die sub judice-reël te oortree nie en daarom nie in te veel detail op die saak in te gaan nie, sodat die reg sy gang kan gaan. Die Onafhanklike Klagtesdirektoraat moet nou hierdie aangeleentheid behoorlik ondersoek en die regsproses moet sy gang gaan.

Ons moet rassisme beveg waar dit ook al sy aaklige kop uitsteek en ongeag van watter kant af dit kom. Hierdie tipe gebeure moet ons laat saamstaan teen rassisme van watter kant en watter aard ook al. Ons mag nie toelaat dat ons weer verdeel word volgens rasseskeidslyne nie.

Ons as openbare verteenwoordigers van al die mense van ons land het ook ‘n baie spesifieke plig en verantwoordelikheid om te alle tye só op te tree en sodanige uitsprake te maak dat dit versoening en nasiebou sal bevorder en nie op enige manier sal bydra tot rassespanning in ons land nie. (Translation of Afrikaans paragraphs follows.)

[We cannot allow racism to spill over from the limited places where it still continues to exist. We should therefore be careful not to generalise about how those things we saw filled us with absolute disgust.

We should, however, also be very careful not to transgress the subjudice rule and for that reason not to go into too much detail about the case, so that justice can take its course. The Independent Complaints Directorate should investigate this matter thoroughly and the legal process should take its course.

We should fight racism wherever it rears its ugly head, irrespective of its origin. Incidences such as these should unite us against racism irrespective of its origin or nature. We should not allow ourselves to be divided among racial lines again.

We, as public representatives of all the people of our country, also have a very specific duty and responsibility to at all times act in such a manner and to make such remarks which would promote reconciliation and nation- building and which would not in any way contribute to racial tension in our country.]

We will also have to take a firm stand against all forms of violent crime and insist that everything possible be done to free us from this scourge. Up to now we as a nation have failed in this as, according to HSRC survey data, almost three times as many South Africans in 1999 felt unsafe compared to 1994.

Let us constantly remind ourselves of and put into practice what we all committed ourselves to as a nation, which was formulated in such exemplary fashion by Mr Mandela in his inauguration speech as President when he said:

We enter into a covenant that we shall build the society in which all South Africans, both black and white …

I wish to add at this point ``and of all races’’ -

… will be able to walk tall, without any fear in their hearts, assured of their inalienable right to human dignity - a rainbow nation at peace with itself and the world.

[Applause.]

Mr R M NYAKANE: Chairperson, I rise to share the sentiments expressed by my colleagues. It is alleged that the police were on a training session with their dogs when the incident took place. The simulation training approach is popular amongst the majority of the companies. One wonders why the SA Police Service, large and dynamic as it is, could not emulate the simulation training approach which is popular because it is cost-effective, free from hazards, peaceful and, of course, crime free.

The word police'' is defined in many quarters of literature. One of the sources I observed defines apolice officer’’ as a law-inforcement agent and a peace officer. But on the basis of the incident, a police officer is a person who perpetrates unlawful, racial, brutal and barbaric assaults on innocent, defenceless, unarmed poor creatures. One wonders why the SA Police Service vehemently condemn the barbaric method practised by Mapogo- mathamaga while they do the same. [Interjections.] After seeing this video, a few questions emerged, such as: What prompted these white police officers to set police dogs on these guys? Was there any threat to the lives of the police by these guys, who we were told, were just simply hiding behind mine dumps? Had these guys been white, would these white police officers have behaved in the same manner? [Interjections.] Does this kind of behaviour not encourage racism? Does this kind of practise not discourage outside countries from investing in our country?

The actions of these six policemen are totally condemned. They acted unprofessionally, disgracefully and barbarically in the discharge of their official duties. Therefore we call upon for the law to take its course and for justice to be seen to be done.

In conclusion, may I express words of sympathy to those black guys and their families for the damage done to their physical bodies and to their personal integrity. There is no legacy as rich as integrity. [Applause.]

Mr M J BHENGU: Chairperson, I do not know where one should start, particularly when one has seen what we have seen on TV. I am sure that the whole world was left shattered, corroded and empty, and I, in particular, was actually shattered. It haunted me almost the whole night. As it comes on now and again on TV - even this morning it was shown - it keeps on shattering one. The one question that comes to mind is: Are we free? Are we really free in this country?

Professor Themba Sono, a member of the DP in the Gauteng legislature, writing in Frontiers of Freedom, a publication of the SA Institute of Race Relations had this to say:

One way to eliminate white racism would be to enforce the emigration of all whites by putting them on ships and sending them to Europe.

[Laughter.] Because I am a humanist I disagree with him. But another question that comes to mind is this: Was this an isolated case or was it the tip of an iceberg? We have seen reports. We have read reports about blacks being forced to eat their faeces and being painted all over their bodies, and many other atrocities meted out to them, particularly the Africans. We must emphasise that.

When we see these inhumane, insensitive, nefarious and iniquitous acts of naked racist brutality perpetuated by racist pigs, one question that comes to one’s mind is: Are we in control? Is our country really liberated?

Speaking in Ulundi, addressing the IFP conference, the President said to us that one thing which actually combined the African people, particularly the ANC and the IFP, was what one of KwaZulu-Natal’s poets expressed in isiZulu when he said:

Umfowethu omhlophe uyangiphundla Uthi ngiyanuka. [My white brother discriminates against me. He say I stink.]

Perhaps that is what we see on our screens these days, that we blacks are actually stinking.

I agree with others who have said that the challenge is to liberate our white brothers and sisters, not what Prof Sono says. When the white man dehumanises his black neighbour, he forgets one thing namely that he actually automatically dehumanises himself. Paulo Freire in his book, the Pedagogy of the Oppressed puts it quite clearly when he says that we must not, in the process of trying to liberate ourselves, repeat what the oppressors are doing to us, because we will, actually, be automatically dehumanising ourselves.

I therefore support the Chief Whip in his motion. We need to look forward and see to it that we reinforce our efforts in order to see reconciliation actually taking place in this country.

Otherwise, there will be no nation-building and our country will land up in ashes, and we do not want that. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! We shall now call upon the only woman on the speakers’ list, and she is from the ANC, I am told, namely the Rev M Chabaku. [Laughter.]

Rev M CHABAKU: Chairperson, I have been a member of the ANC since 2 February 1949 until today. [Applause.] That is more than 51 years of being in the struggle. I am very hurt and angry about the horror that we saw on TV, which showed the horrors that continue to happen in all parts of our country. They take place not only by these white police officers that we have seen; we have also our own African police officers who do exactly the same things. So it does not matter who does it, to whom - wrong is wrong! It does not matter who says it, who does it or when.

I am here to state vehemently that we in the ANC, that I know, have never stood for or compromised on issues of racism or violence. We could easily have been the ANC of the indigenous African people only. We could have been, but since inception we have been conceived as an ANC of all God’s people, even though the propaganda was always that the ANC was communist- inspired and only about black people.

Now here in the National Council of Provinces we condemn outright what happened there. We condemn also those people who have been viewing those videos quietly at their small parties and who never reported these records of crime. Shame on those people who used that medium in the language of Afrikaans when there are many people who are Afrikaans-speaking who do not support that, who are now beginning to change. If they really were true Afrikaners, they would have stood up a long time ago. They would have spoken a long time ago. We would have seen this in the media, in the papers, everywhere.

So if one is silent because one nurses one’s party, or one’s denomination one has actually been implicated in this. I am therefore urging here that we not only make statements of condemnation, we demand that those people must stand for what we stand for. We do not believe in racial separation or separate development. They must be locked up with the Africans together in the same cell and not be given any bail of any kind so that they will know what we stand for. They need to know that.

The people outside are tired of seeing people abusing our justice system, getting simple, easy bail when the Constitution was made for poor people who were often in jail for long periods, but who never had the chance to make bail easily. So we made it easy for the poor. But now we see the Terblanches and these other people getting bail very easily.

It is not that the law is weak. The law is right. They are abusing it, and we have been on the right track. We are all God’s people. We must begin to care for each other and share what we have as God’s gifts and we must say here: South Africa, we do not stand for that. We do not stand for Hitlerist activity. That is what the ANC stands for, and in the election campaign I will raise the issue that I will not support any party that has been quiet on this issue. I will not support anybody who has been silent on this issue.

One could have written to the paper or to one’s church organisation. With these words I want us to endorse and support what the Chief Whip has suggested, that there should be swift action, no bail and no access to the outside. Those countries looked after us when we were in exile or in jail and they gave us respect and dignity, but here they are being ill-treated so cruelly in our presence, as if we condone and support such things. With these words, I would like to support the Chief Whip. [Applause.]

Debate concluded.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! As hon members may have been aware, the Chief Whip has moved that this motion be adopted. I want him to verify for me that he still moves that the motion be adopted. I have also noted that the hon Piet Matthee wanted to effect amendments to the hon Chief Whip’s motion and I am waiting to hear the response from the Chief Whip.

The CHIEF WHIP OF THE COUNCIL: Chairperson, I understand that the amendment that is being sought is that we add the word vast'' beforemajority of white members within the ranks of the SA Police Service’’. I have no difficulty with the proposed amendment. I would like to propose that the resolution, as proposed by me, be adopted by this House.

Motion agreed to in accordance with section 65 of the Constitution.

                SECOND ADJUSTMENTS APPROPRIATION BILL

            (Consideration of Bill and of Report thereon)

The MINISTER OF FINANCE: Chairperson, hon members, in the 2000 Budget, which we tabled in Parliament in February this year, we budgeted for a total expenditure of R233,5 billion. The adjustment estimate before the House today seeks to raise the level of spending to R235,2 billion. This is the first adjustments estimate to be considered within the ambit of the Public Finance Management Act, the PFMA, which stresses better management of government moneys and assets. It introduces stronger measures of accountability to Parliament and the public.

Part of that accountability was seen in the select committee on Monday. There already was consideration of the in-year spending of the provinces, because that is what the PFMA allows us to do. It certainly strengthens oversight and accountability.

In terms of the Act, adjustments to the Budget are allowed only under certain narrow and specific conditions, the major one being unforseeable and unavoidable expenditure, that is, expenditure that we could not reasonably predict at the start of the financial year. This exercise is not primarily about policy choices, rather it is about adjustments to the main Budget. The adjustments estimate also provides for the roll-over of unspent funds from last year, and for several shifts of funds or reallocations.

The 2000 adjustments estimate tells a promising story for national department spending in the medium term. Firstly, recent trends show that certain national departments, including Trade and Industry, Water Affairs and Forestry, and Health are beginning to overcome capacity problems that contributed to underspending on those Votes in previous years. Secondly, the additional allocations proposed in the adjustments estimate show that, for the most part, national departments are managing their spending within their allocations voted by Parliament earlier this year.

We propose additional amounts of R300 million to national departments for flood-related expenditure. This includes extra allocations to the Department of Transport, which received R41 million for reconstruction of infrastructure, the Department of Water Affairs and Forestry, which was allocated R153 million to repair water-related infrastructure, and a further R50 million to the disaster relief fund, administered by the Department of Social Development.

Other departments involved in the postflood reconstruction were Agriculture and Health. Agriculture also received an allocation to deal with the outbreak of foot-and-mouth disease, and Health received one for combating the malaria epidemic. Both diseases were clearly exacerbated by floods.

An amount of R318 million rand is recommended for the IEC to run the local government elections. These allocations are set out in detail in the explanatory notes, tabled together with the adjustments estimate for members’ consideration. For each Vote, an explanatory memorandum is provided, outlining the function shifts proposed, the amounts rolled over from last year, unavoidable additional expenditure and other adjustments.

In respect of the provinces, the adjustments also primarily provide support for those provinces that were severely affected by floods last summer. Floods caused extensive damage to roads, schools, clinics, and other social and economic infrastructures.

An amount of R300 million was allocated to the Main Budget for infrastructure spending in provinces. This was allocated to the four provinces that suffered the most damage - Eastern Cape, KwaZulu-Natal, Mpumalanga, and the Northern Province. Now, the adjustments estimate makes available a further R595 million to provinces to continue rebuilding infrastructure which was damaged in the floods. This will be financed partly from unallocated funds initially reserved for poverty relief and infrastructure investment. The adjustments estimate also includes R600 million to cover other unforeseeable and unavoidable expenditure at provincial level.

We should remember that provinces are mainly responsible for the delivery of social services, and our Government puts heavy emphasis on this social spending. This allocation assists provinces in accommodating pressing spending pressures in education, health care and welfare services.

A substantial share of this allocation will go to the child support grant. This programme was introduced two years ago at a rate of R100 per child under the age of seven. At that time, it was projected that the grant could cover just over three million children across the country and the target would be reached by 2002-2003, which translates then into just over R3 billion.

As people are learning about the grant, and systems to register beneficiaries are improved, the take-up is accelerating. This has contributed to an increase in expenditure on Welfare from 17,8% of total provincial expenditure in 1996-97, to a budgeted level of 19% in the present fiscal year. It is gratifying to note that the improved service delivery capacity of provincial welfare departments has contributed to the increased take-up of the grant.

In respect of local authorities, we are providing R110 million to local governments to assist with the additional expenses occasioned by demarcation and amalgamation which will ensue after the elections.

It gives me great pleasure to place this piece of section 77 legislation before this House. [Applause.]

Ms Q D MAHLANGU: Chairperson, I would like to welcome the Minister of Finance, Comrade Trevor Manuel. This is not one of my best days to stand here and present all these thousands of things before this House. However, I am the only woman in the committee, so I do not have a choice.

Once again, we are asked to approve the allocation of resources to different departments and spheres of government. This should not be misconstrued as Government having more money now. What it means is that we are reallocating R2 billion for things which were not budgeted for at the time we were dealing with the Budget for the current financial year.

The allocation of resources is informed by unforeseeable and unavoidable circumstances. But, in some of the explanatory memorandums from the department, it is not clear why they fall under this category. For example, under Foreign Affairs, regarding the hostage crisis, the memorandum does not indicate how much money was used and for what purpose. One can only get clarity when one asks the presenters who come to the committee.

We also welcome the allocation to provinces for rehabilitation of infrastructure and related matters after the flood disaster. One of the critical things which is a source of concern to us is that the funds which are needed for implementation of legislation fall under this category. I think we have seen that under Justice for the legislation which we have passed now, there is a request for money to implement such legislation. In our view, this does not fall under this category.

We also want to call upon all departments which do not cost legislation to do so, because it does not show a sign of good management skills if one still receives vague explanatory memorandums.

I am convinced that with the implementation of the Public Finance Management Act some of these problems will fade away with the passage of time. I know that the Public Finance Management Act is not a panacea for all our problems, but it will assist a great deal.

We welcome the reallocation of the Poverty Relief Fund to more pressing problems. We further want to make an appeal to the National Treasury not to give or grant adjustments in such circumstances, because it defeats the purpose of such adjustments.

It is a pity that we are unable to ask questions from Ministers who were supposed to be asked questions in this House today. However, I hope that in future these things will be corrected and Ministers will come to this House and answer questions that members wanted to ask them on these adjustments that they are requesting.

I also want to call upon this House to approve and support these adjustments as requested by the National Treasury. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Hon member, members of this House are allowed to ask questions from Ministers. They must inform Ministers if they want to ask them questions. [Interjections.]

Mr L SUKA: Chairperson, hon members of this House, I want to say that we in the ANC support the Second Adjustments Appropriation Bill unreservedly. I believe that the intention of Government is to accelerate delivery and bring services closer to the people with speed, so that we can improve the lives of the majority in our country.

I will focus briefly on education. We commend the Department of Education for its adjustments because they are attributable to the additional allocation for the incorporation of colleges of education into the higher education system. This function will be transferred from the provincial education department to this department with effect from 1 January 2001. The allocation is for transfer payments to universities and technikons in order to cover tuition and residential fees that will be incurred by these different institutions, ie colleges of education and higher education institutions.

An additional allocation was received which provides for service bonuses payable to employees whose birthdays fall between January and March. They know that they are going to get it now. They used to get it in April each year, therefore this will be addressing that concern.

The concern which one needs to register is the roll-over from the 1999-2000 financial year on commitments in respect of the following projects: teacher resource materials for provincial education departments and text books - for the Eastern Cape, for instance, R9,4 million; the Free State, R1,1 million; and the North West Province, R2,7 million. We hope that these adjustments will help the national department in trying to address and redress backlogs and also speed up change. Our provinces also need to change into a faster gear by utilising the adjustments that they are receiving. I think the Eastern Cape has recently set the tone, for example regarding those officials who are lagging behind in assisting our government in implementing some of the policies that have been put in place.

We also want to commend the Department of Finance and its staff in respect of the child support grants that have been increased. That is very welcome, especially to those provinces who have the majority of their children in rural communities, where there is no work and life is very difficult for them. Without further ado, we do support the Bill. [Applause.]

Mnr J L THERON: Mnr die Voorsitter, agb Minister en kollegas, die Tweede Aansuiweringsbegrotingswetsontwerp moet objektief beoordeel word in die lig van die huidige ekonomiese en maatskaplike omstandighede in Suid-Afrika. Die vraag is watter kriteria aangewend kan word om die wetsontwerp so objektief as moontlik te beoordeel.

Daar is ten minste drie kriteria wat aangewend kan word om die aansuiwerings te beoordeel. Eerstens moet vasgestel word of die aansuiwerings redelik is in verhouding tot die oorspronklike Begroting wat ingedien is. Tweedens moet vasgestel word of die spesifieke uitgawes in die aansuiweringsbegrotingswetgewing noodsaaklik en volgens die prioriteite van ons huidige situasie is. Derdens moet vasgestel word of die aansuiweringsbegrotingswetgewing aan die wette van die land voldoen. (Translation of Afrikaans paragraphs follows.)

[Mr J L THERON: Mr Chairperson, hon Minister and colleagues, the Second Adjustments Appropriation Bill should be reviewed objectively in the light of the current economic and social circumstances in South Africa. The question is which criteria should be applied to review the Bill as objectively as possible.

There are at least three criteria which could be applied to review the adjustments. We should first determine whether the adjustments are reasonable in relation to the original budget which was submitted. Secondly, it should be determined whether the specific expenditures in the adjustments appropriation legislation are necessary and in accordance with the priorities of our current situation. Thirdly, it should be determined whether the adjustments appropriation legislation complies with the laws of the land.]

If we look at the first criterion, namely whether the total amount is reasonable in relation to the size of the original budget, in this regard we must say that the increased expenditure of R3,9 billion is 1,7% of the original budget of R231 billion, which is an acceptable level. This is an acceptable level because there were huge expenses with the extensive floods we experienced and also the public sector salary increases are included. These two amounts account for more than half of the total of the adjustments.

Regarding the second criterion, namely whether the additional expenses are desirable and necessary, there are some pertinent questions to be asked here, and because of the lack of time, I can highlight only a few aspects. For Defence, R192,807 million is to be voted; for Foreign Affairs, R259,470 million; for Public Works, R469 785 million; and for Water Affairs and Forestry, R303,901 million.

I have highlighted four areas where we do not think that the expenditure should be so high. I could go into the detail of these Votes, but maybe the Minister can indicate why the amounts of these Votes are so high and whether the increase is really necessary at this point in time.

The third criterion is whether the Bill complies with the law or not. Here we have serious reservations. Section 30(2)(b) of the Public Finance Management Act requires that a national adjustment budget may only provide for unavoidable expenditure. There is no provision for additional expenditure simply because the Cabinet or anybody else considers it desirable. In our opinion, a number of the items budgeted for do not meet this criterion. This criterion was deliberately included in the Act to ensure the integrity and credibility of our budgeting process and to discourage anybody from trying to scoop up some more of the cream.

Hier kan ek ‘n hele paar voorbeelde aanhaal waaruit ons kan sien dat die uitgawes nie onvoorsien en onvermybaar is nie. Die eerste voorbeeld is onder begrotingspos 14, waarkragtens Binnelandse Sake R318 miljoen kry vir die Onafhanklike Verkiesingskommissie.

Almal het met die oorspronklike Begroting geweet die plaaslike verkiesings gaan aan die einde van die jaar gehou word. Die OVK het herhaaldelik gesê - en dit is wyd in die media gerapporteer - dat die oorspronklike R450 miljoen wat in die Begroting toegeken is, te min is om ‘n behoorlike verkiesing te kan hou.

Nou word ‘n addisionele R318 miljoen - bykans 71% meer - toegeken, en nou is hierdie uitgawe onvoorsien en onvermybaar. Dit rym nie, en hierdie uitgawe moet liewer onder ‘n ander kategorie geplaas word, want dit is duidelik nie onvoorsien en onvermybaar nie.

‘n Tweede voorbeeld is die R4 miljoen wat toegeken word vir die konferensie oor rassisme. Die konferensie oor rassisme is deur die President by die opening van die Parlement aangekondig, wat duidelik voor die Begroting plaasgevind het. Dus kon hierdie uitgawe ook nie onvoorsien en onvermybaar wees nie. [Tussenwerpsels.] Dit lyk dus of die reëls gebuig word indien dit die Regering pas.

‘n Derde voorbeeld wat genoem kan word, is die inkorporering van kolleges by universiteite. Hierdie aspekte word tog duidelik al lankal beplan, en hoe kan dit nou onvoorsien en onvermybaar wees? Hierdie aspekte bring die integriteit en die geloofwaardigheid van ons begrotingsproses in gedrang, en sal beslis weer na gekyk moet word. (Translation of Afrikaans paragraphs follows.)

[I can quote quite a few examples from which we can see that the expenditures are not unforeseen and unavoidable. The first example is under Vote 14, under which Home Affairs receives R318 million for the Independent Electoral Commission.

At the time of the original Budget everyone knew that the local elections would be held at the end of the year. The IEC repeatedly said - and this was widely reported in the media - that the original R450 million which was awarded in the budget, was too little to have a proper election.

Now an additional R318 million - nearly 71% more - are being awarded and now this expenditure is unforeseen and unavoidable. This does not add up and this expenditure should rather be placed under another category, because this is clearly not unforeseen and unavoidable.

A second example is the R4 million which was awarded for the conference on racism. The conference on racism was announced by the President at the opening of Parliament, which clearly took place before the budget. Therefore this expenditure could also not be unforeseen and unavoidable. [Interjections.] It therefore seems as if the rules can be bent when it suits the Government.

A third example which can be cited, is the incorporation of colleges at universities. These aspects clearly are planned long ahead of time and how can this now be unforeseen and unavoidable? These aspects jeopardise the integrity and the credibility of our budgetary process, and should definitely be looked at again.]

A fourth example that I can highlight is the National Treasury Vote itself. Here there is provision for Sars to be given an additional R28,6 million for the implementation of new tax proposals.

Clearly this cannot be unforeseen and unavoidable. I think the hon the Minister will have to explain to us why these expenditures are unforeseen and unavoidable. Was there a planning problem or were the costs of the new tax proposal underestimated? This is not a good example for other departments of how to budget and how to plan one’s affairs.

As can be seen from these four examples, a lot of the expenditures are not unforeseen and unavoidable. Parliament can thus choose to ignore the laws of South Africa where it seems convenient to do so, but this is definitely not a good example. We therefore are of the opinion that a number of the adjustments contained in the Bill are not in accordance with the law and therefore we must oppose the Bill.

Parliament, of all bodies in our society, should be setting an example and adhering to the letter and spirit of the law. If we choose to ignore the law when it suits us, we can hardly complain when others indulge in corrupt or improper practices in defiance of the law. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! I take this opportunity to recognise and welcome our special delegates from Gauteng and the Free State. I also note that the hon Premier of the Free State is in our midst. I want to welcome her.

Mr B A MNGUNI (Free State): Chairperson, hon Minister Manuel and the hon Premier of the Free State, Mme Winkie, hon members, the adjustments, as far as I can see, are justified.

With regard to the R2,5 billion transferred to the provinces, the provinces have spent it because they are under pressure. Some of the provinces, speaking on behalf of the second poorest province in the country, the Free State, were hit by floods. Only R38 million was allocated to us in compensation for those floods. However, the investigation committee established by the MEC estimated that those floods cost well over R200 million. I am not here to complain, I just want to make hon members aware that we were victims of the floods. We are part of the group of poorest areas, especially QwaQwa, which is part of our province.

I am saying that the adjustments are justified and are value for money. Take, for example, the Department of Transport or Vote Nos 33 and 35. The funds were allocated to provinces that were damaged by floods. Their infrastructure needed to be repaired and also has to be maintained. It is not only necessary, but it is imperative for Government to repair infrastructure and to make sure that especially the poor provinces have proper infrastructure for proper delivery of services and for economic development. Hon members know that without infrastructure there is no way that our commodities or products can reach the markets. That is the situation in respect of our provinces that have been damaged or hit by floods.

When one looks at the outbreak of foot-and-mouth disease in KwaZulu-Natal, it not only damages the export image of our products, but it sets us back economically and it will take us time to regain the economic level we enjoyed abroad. It is therefore imperative for Government to make sure that such diseases are contained to ensure proper economic development and delivery.

Recently there was an outbreak of sheep scab in parts of the Free State and the Northern Cape. This will damage our whole export industry, unless we curb such diseases. Talking about the allocation to provinces, we need to be efficient and effective in the use of our funds.

Regarding the departments in our budget review, it has been suggested that a lot of wastage occurs because public servants are not properly trained or qualified to spend those moneys. There are also roll-overs in the province because there is no capacity to spend the money. On the other hand, it is because the Treasury does not sit when it is supposed to sit, that there are roll-overs.

That brings into question the efficiency of the Public Service in implementing Government policy. I wonder if all the roll-overs at national level are due to such delays or due to incapacity.

In conclusion, we have been allocated extra funds in the province. Most of those funds are conditional grants that are going to the poorest area in our region, which is Qwaqwa. That is one of the areas that was hit by floods. We therefore welcome those allocations, and we think that these unforeseen expenditures are justified. [Applause.]

Ms J M L FUBBS (Gauteng): Chairperson, members of this House, let me just digress from my prepared speech for a moment, and address one of the comments which I heard in the House this morning in this debate, and that is with respect to the adjustment for the National Conference on Racism. In view of the earlier debate that we had in this House, and all participated in, I would have thought that we would have been able to contextualise such an adjustment accordingly.

From my own interpretation of all this and also my own participation and involvement in that conference, it was quite clear that much of the expected financial support from business did not materialise. Yet, on the other hand, many South Africans had begun to recognise that racism had indeed been revived in this country in certain quarters. So the conference grew much bigger than, indeed, had been planned.

I myself would have considered that not unlawful, in terms of the adjustment, and I would have seen this as an unavoidable but very necessary expense. It is pertinent to note that had the conference been supported financially by business, this would not have arisen. One would certainly hope now that all quarters in South Africa will take a more positive approach to financially supporting efforts to eradicate racism in the country.

It is also constructive that the adjustments appropriation coincides, as it were, with the Medium-Term Budget Policy Statement, because it is through those adjustments that one gets a clearer picture of what can be done in the next three years. Quite clearly, as has already been pointed out, the adjustments involve very limited funds, comparatively speaking. This also indicates that the trajectory and trend towards fiscal discipline have been maintained. This also then leads to the continued reduction of the deficit, which continues to free up funds for more constructive use of revenue.

The disciplined approach by the Department and the Ministry of Finance in this regard is commendable and certainly illustrates sound planning.

However, it is certainly true that there are some areas in which one would question how sound the planning was. If one looks at the Revenue Laws Amendment Bill, which has, of course, already been referred to, one is somewhat surprised that the complexity and the financial implications of the implementation and the passing of this Bill were not clearly recognised by the department and by the SA Revenue Service. That is somewhat alarming. Nevertheless, again, one can see that while it should have been foreseeable, perhaps it was unavoidable.

Again we had the references to colleges of education, and, in fact, I believe that this is not just something that we knew about six months or a year ago. One is a little surprised and one would learn with interest why an adjustment has been incurred in this incorporation.

As I said earlier, one is informed by the actual purpose of the adjustments, and my own understanding of this purpose is, most definitely, to address what is unforeseen and unavoidable. Of course, on the other hand, we should not forget that adjustments include both positives and negatives, for instance expenditure that did not occur but was saved owing to efficiency. So one is not talking about underspending arising from a lack of capacity or from inefficiency, but, on occasions, about underspending for very positive reasons.

One is also aware, of course, of the fact that the creation of new services that are not unforeseeable and unavoidable should not be catered for in the adjustments.

One sees the Government and the Treasury, in many ways, as the custodians of the public purse, and over the years one has begun to appreciate the culture and the direction in which the Minister of Finance is taking his country. He has only succeeded in doing this because of a very firm resolve, commitment and consultation. Of course, this has reduced the size of adjustments over the years.

Nevertheless one had hoped that by the time we reached implementation of the Public Finance Management Act, all departments would have been more schooled or would have developed a greater commitment to planning, especially as the Medium-Term Expenditure Framework has developed and has given departments such an instrument.

I would certainly exhort the Treasury to be firmer about the criterion that has been established in this regard, and to ensure that departments use this, not as an instrument for poor planning, but for the purpose for which it was intended.

On the other hand, I wish to make it very clear that if one goes back to the track record of adjustments in this country, we are a long, long way ahead. We have moved in the direction of using them not only for the legal purposes, but also for the constitutional and social purposes for which they were intended.

What is remarkable about these adjustments, unlike the case in previous periods or eras, is the transparency that is clearly reflected there. What is also very evident is the fact that this has become a very accountable mechanism. However, it would also be useful from time to time, during the adjustments, for the Ministers of those departments that one would be concerned with to make themselves available for such a meeting. [Applause.]

The MINISTER OF FINANCE: Mr Chairperson, I would like to thank all the councillors for their contributions to the debate.

I would like to start with the last point raised by the hon Fubbs about the availability of members of the executive here today. It is a fact that the executive has moved to Pretoria. It is a fact that unless we can better align the sittings of the National Assembly and the NCOP, the availability of the executive will be exceedingly difficult. A number of my colleagues did make enquiries and there were discussions earlier in the week about people trying to make themselves available. However, in view of the fact that it was difficult for everybody, I think the Whippery agreed that there would not be questions today.

The point that we should have made in the introduction, and it is a point worth mentioning again, is that one could invite hon members here to look at any other dispensation, and one would see that it is inevitable that expenditures arise during a fiscal year, that it is almost impossible to try to budget as we do. Right now we are finalising national expenditure lines for the period up to 31 March 2002. It is almost impossible to budget with that kind of detail and that kind of accuracy. That is why we have built into the budget a contingency reserve, which largely takes up these kinds of events that are unforeseeable and unavoidable. In comparative terms, we have nothing to be ashamed of.

Let me deal just briefly with a few issues raised by the hon Suka, who is not here now. Firstly, in respect of child support grants, we have not announced an increase. That is something that is to be decided by the Department of Welfare and Population Development or Social Development, in consultation with the provincial departments. All that we are alive to is the fact that the take-up of the child support grants has increased, and this has placed provincial welfare budgets under strain.

The second issue that some people appear to misunderstand, or choose to misunderstand, is of birthday bonuses to public servants. At the moment all public servants get birthday bonuses. For reasons of bad financial management in the past, the first three months of the calendar year, being the last quarter of the fiscal year, were always difficult. It is similar to what happens in many homes where in the last week of the month there is no money, and so people borrow.

What the Government did then was merely to push back those birthday bonuses for people with birthdays in January, February and March to April so that, in cash flow terms, one always had this big peak in April in order to take account of that. Now that we have better management, sooner or later we will have to take the step of normalising this and normalising cash flow, because that impacts on all manner of issues. This is not something new, but an attempt to regularise something that was completely absurd.

I would also like to make a few comments by way of response to the hon Theron. Firstly, I am glad to see that the Democratic Alliance is working. Though it is not, at present, in Parliament, I am glad to see it is working, because the speech he read here today was read by the hon Ken Andrew of the DP in the House the other day. [Laughter.] So I am glad to see that even in the plagiarism it works in the way it does. [Laughter.] But having said that, the points that we raise about the Public Finance Management Act, clearly, are not understood by either the New NP or the DP.

Section 30(2) says that a national adjustment budget may only provide for -

… unforeseeable and unavoidable expenditure recommended by the national executive or any committee of Cabinet members to whom this task has been assigned.

This does not rule out the ability of the executive, or the Treasury committee in this instance, to make a judgment call. Indeed, the request this year, as in every year since I have been involved with this, has been substantially larger. There is a judgment call, and that judgment call is exercised. And it is perfectly - but perfectly - within the framework, letter and spirit of the Public Finance Management Act. For that reason I stand by these recommendations. I, too, would like to echo what the hon Fubbs said about the conference on racism, because certainly in the light of the discussion we had earlier I thought that the hon Theron would have at least expunged those lines from Ken Andrew’s speech, because it is wrong. We need more conferences and we need to educate all South Africans about the wrongs of racism. [Interjections.]

Let me also deal with the issues of the SA Revenue Service. Part of the difficulty of the revenue service is that it is undergoing enormous change, and this is an ongoing process. Within Sars we have launched a big project called Siyakha. In order to try and broaden the base, we are increasingly taking on more professionals. One cannot foresee all of these things, unless we change the way in which Sars is funded in the future. I think it is getting better at what it does: one just has to look at its recent successes. One of those was an acknowledgement of guilt by Metcash that they had defrauded Sars and a cheque of R128 million received was from them. It is the worst kind of white-collar crime and a very serious admission, yet people treat this as though it is just another thing that happened.

Only yesterday a huge importer of electronic goods who seemingly bypassed customs repeatedly was arrested, and certainly by this morning he was still in custody. A businessman who wears a suit and goes about his business and who is a wholesaler of electronic goods has been doing this, robbing people of jobs. We have seen this all over the place. The electronics factory in Atlantis has caused people to lose their jobs because of illegal imports. So as we get better at this, we then discover in the course of the year that we could not foresee and take account of all of the challenges. So clearly that needs to be taken into account.

In respect of the IEC - I thought that we should dispatch them to Florida to at least help count votes or something - I think we will have an ongoing tussle, because the IEC has very big eyes when it comes to money and we need to remind them that too often its eyes are bigger than its tummy. So there is that battle, because we also need to recognise that part of what we collect taxes for is to provide goods and services to the poor in South Africa. And democracy is not just about running elections - that is a complete distortion. It is about improving the quality of life of people. So that tussle arises in the context.

The last point that I would like to raise is that I hope the hon Theron was not serious when he suggested that placing an adjustments estimate like this before this House, with the recommendations that it contains, is akin to corrupt or improper practices. I think he is wrong. I think he is saying this intentionally in order to mislead this House. I would hope that he withdraws that statement, because, if anything, I will stand by our achievements in the improvement of public finances in this country. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! I will not call upon the hon Theron to respond now because I need to check what is contained in the Hansard. But it is important to deal with that particular issue and we will do so. We will look at the Hansard and then make an appropriate ruling.

Debate concluded.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! I have been informed that there are questions to the hon the Minister of Finance regarding this Vote. I shall now come to Vote No 10 and call upon any member who wishes to raise a question or make any comment in respect of this Vote to do so as advised. Ms Q D MAHLANGU: Mr Chairperson, I think the committee was advised that there would not be any questions because of the unavailability of Ministers. Therefore members withdrew all the questions they were going to ask, so we have been taken by surprise. We had questions, but we were told that the executive was not going to be around, so we did not proceed.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): My advice was that there would be questions in respect of Vote No 10. [Interjections.] I am talking about Vote No 10. That is the advice which I have. If there are questions in respect of Vote No 10, this is the opportunity if any member wishes to make any comment.

I wish to reiterate that as presiding officers we were not informed that Ministers were not available. We were just informed that there would be no questions, and therefore this is an issue which needs to be dealt with outside this Chamber.

Is there any member who wishes to raise a question or a comment in respect of Vote No 10? I will therefore assume that there are no questions.

The MINISTER OF FINANCE: Mr Chairperson, if there were a member who wanted to speak about Vote No 10, I would say, ``Please do not say bad things about the dead, because the Vote does not exist any more.’’ [Laughter.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): That is surprising, because Vote No 10 is also listed as one on which we must vote. I do not know where the mistake comes from.

Vote No 1 - Presidency - agreed to in accordance with section 75 of the Constitution (Democratic Party dissenting).

Vote No 2 - Parliament - agreed to in accordance with section 75 of the Constitution.

Vote No 3 - Agriculture - agreed to in accordance with section 75 of the Constitution.

Vote No 4 - Arts, Culture, Science and Technology - agreed to in accordance with section 75 of the Constitution.

Vote No 5 - Communications - agreed to in accordance with section 75 of the Constitution.

Vote No 6 - Correctional Services - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 7 - Defence - agreed to in accordance with section 75 of the Constitution.

Vote No 8 - Education - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 9 - Environmental Affairs and Tourism - agreed to in accordance with section 75 of the Constitution.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): I will skip Vote No 10 because I have just been advised that there is no such Vote.

Vote No 11 - Foreign Affairs - agreed to in accordance with section 75 of the Constitution.

Vote No 12 - Government Communication and Information System - agreed to in accordance with section 75 of the Constitution.

Vote No 13 - Health - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 14 - Home Affairs - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 15 - Housing - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 17 - Independent Complaints Directorate - agreed to in accordance with section 75 of the Constitution.

Vote No 18 - Justice and Constitutional Development - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 19 - Labour - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 20 - Land Affairs - agreed to in accordance with section 75 of the Constitution.

Vote No 21 - Minerals and Energy - agreed to in accordance with section 75 of the Constitution.

Vote No 22 - Provincial and Local Government - agreed to in accordance with section 75 of the Constitution.

Vote No 23 - Public Enterprises - agreed to in accordance with section 75 of the Constitution.

Vote No 24 - Public Service and Administration - agreed to in accordance with section 75 of the Constitution.

Vote No 25 - Public Service Commission - agreed to in accordance with section 75 of the Constitution.

Vote No 26 - Public Works - agreed to in accordance with section 75 of the Constitution.

Vote No 27 - SA Management Development Institute - agreed to in accordance with section 75 of the Constitution.

Vote No 28 - SA Police Service - agreed to in accordance with section 75 of the Constitution.

Vote No 29 - Sport and Recreation South Africa - agreed to in accordance with section 75 of the Constitution.

Vote No 30 - State Expenditure - agreed to in accordance with section 75 of the Constitution.

Vote No 31 - Statistics South Africa - agreed to in accordance with section 75 of the Constitution.

Vote No 32 - Trade and Industry - agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

Vote No 33 - Transport - agreed to in accordance with section 75 of the Constitution.

Vote No 34 - Water Affairs and Forestry - agreed to in accordance with section 75 of the Constitution.

Vote No 35 - Social Development - agreed to in accordance with section 75 of the Constitution. Vote No 36 - National Treasury - agreed to in accordance with section 75 of the Constitution (Democratic Party and New National Party dissenting).

Schedule agreed to in accordance with section 75 of the Constitution.

Bill agreed to in accordance with section 75 of the Constitution (Democratic Party dissenting).

                  BILLS OF EXCHANGE AMENDMENT BILL

            (Consideration of Bill and of Report thereon)

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! I am informed that only the chairperson of the Select Committee on Finance will be making a statement.

Ms Q D MAHLANGU: I shall use only two minutes of the time allocated.

Chairperson, members of this House, the Bills of Exchange Amendment Bill seeks to simplify and clarify certain provisions of the principal Act. It will also provide for the protection of users. The Bill aims to accommodate technological advances and, more importantly, to reduce the incidence of fraud in the banking sector.

In summary, the Bill wishes to instruct that whenever a person is issued with a cheque and the person who issued the cheque intended the payee of the cheque to be a fictitious person and that such a person does not factually exist. It is really to protect the person that paid a cheque that is made out under fraudulent circumstances by someone who takes the cheque for value to protect that person.

With technological advances, cheques can also now be printed by computer and will be taken as a form of payment. This Bill also seeks to prevent the writing of cheques that have no substance to them. This will then seek to prevent the liability falling squarely on the banks, as it does now. This means that if no mandate is given to the bank to pay out against the cheque, liability rests with the bank and not with the owner of the forged or stolen cheque.

Just one thing that I must mention is that all members of the committee were stamped ``non-negotiable’’ and therefore there is no reason why members should be afraid of this. [Applause.] Debate concluded.

Bill agreed to in accordance with section 75 of the Constitution.

              SOUTH AFRICAN RESERVE BANK AMENDMENT BILL

            (Consideration of Bill and of Report thereon)

Mr G A LUCAS: Chairperson, hon Minister, hon Deputy Minister, hon members and special delegates, it is a pleasure to issue a statement on behalf of the Select Committee on Finance on the South African Reserve Bank Amendment Bill. The Bill essentially empowers the Governor of the SA Reserve Bank to determine a percentage of the total amount of a bank’s holdings of Reserve Bank notes and subsidiary coin that may be taken into account in calculating the minimum reserve balance.

There are two issues here: firstly, the practice of maintaining reserve balances with central banks by commercial banks, and secondly, the inclusion or the noninclusion of vault cash in the calculation of reserve requirements to be held with the SA Reserve Bank.

On the first issue, the centralisation of reserve balances in a central bank is a source of strength for the banking system of a country for a number of reasons. The reserves can be employed effectively to meet seasonal fluctuations, or during a financial crisis. For instance, if circumstances arise in which a particular bank needs additional funds, the central bank can utilise part of the cash reserves of that bank to tide the bank over the period during which the circumstances prevail.

The centralised reserve balances facilitate the role of the central bank in supplying currency to banks. It also provides a central bank with a certain amount of funds with which it can operate and strengthen its financial position. Statutory provisions for banks to hold minimum reserve balances with central banks were introduced to secure such advantages of centralised cash reserves.

The present situation is that in many countries, irrespective of whether or not they have prescribed minimum reserve balances, commercial banks have grown accustomed to keeping most, if not all, of their cash requirements with the central bank. Commercial banks regularly draw currency from the central bank as required for operational purposes, and they deposit surplus currency as it accumulates. Therefore, the key argument for maintaining reserves with the Reserve Bank is linked to banks having access to assistance at the discount or accommodation window of central banks in the form of overnight loans.

Canada, for instance, is the only G7 - Group of Seven - country in which banks are no longer required to hold minimum reserve balances with the central bank. The United Kingdom, France, Japan, Germany and the United States of America all have relatively low percentage requirements. South Africa’s current minimum reserve requirement of 2,5% of total bank liabilities, excluding issued capital and reserves, is broadly similar to that of G7 countries.

On the second issue of whether vault cash must be included in the minimum reserve requirement held by the Reserve Bank, the Select Committee on Finance is aware that the IMF country report on South Africa strongly recommends the exclusion of vault cash in the calculation of reserve requirements. This makes sense since vault cash, for example, represented more than 50% of the total minimum reserve requirement at the end of December 1999.

In general, the evolution and application of minimum reserve requirements in South Africa compares well with international best practice. Therefore, the Select Committee on Finance endorses the South African Reserve Bank Amendment Bill before this House. [Applause.]

Debate concluded.

Bill agreed to in accordance with section 75 of the Constitution.

                   PRECEDENCE GIVEN TO ORDER NO 6

                         (Draft Resolution)

The CHIEF WHIP OF THE COUNCIL: Chairperson, may I move without notice that item no 6 on the Order Paper be given preference and be dealt with hereafter. I have consulted with the Whippery from the other political parties and they, as well as the chairperson of the select committee, have agreed to the preference being given. I regret the inconvenience, and may I, while I am on my feet, just clarify that the Ministers, - the executive’s - absence here today is not as a result of their failure to attend, but is as a result of a decision that was taken politically by all political party Whips.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Does that mean that Order No 6 comes before Order No 4?

The CHIEF WHIP OF THE COUNCIL: That is indeed so, Chairperson.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): I call upon the Secretary to read …

The MINISTER OF FINANCE: Order No 4 has no speakers’ list.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): That is what I have been told. I do not know which comes before which.

The CHIEF WHIP OF THE COUNCIL: Chairperson, my apologies. I am sorry. I was not clear enough. It would mean that we deal with Order No 4, and thereafter proceed to Order No 6. In other words, Order No 6 would be preferred to Order No 5. You will deal with Orders Nos 4 and 6, and then Order No 5.

               COUNCIL FOR MEDICAL SCHEMES LEVIES BILL

            (Consideration of Bill and of Report thereon)

Order disposed of without debate. Bill agreed to in accordance with section 75 of the Constitution.

                     REVENUE LAWS AMENDMENT BILL

            (Consideration of Bill and of Report thereon)

The MINISTER OF FINANCE: Chairperson, there always is more debate around tax than death, though we all accept the inevitability of both.

The Revenue Laws Amendment Bill deals primarily with the modernisation of our tax system, most importantly, the shift from a premise of source-plus to a premise of residence-minus. This is a change we sought in the budget table on 23 February this year, and one about which there has been very extensive discussion.

We were able to use electronic communication very effectively this year and thus, we were able to secure inputs from a range of groupings, including the Association of Black Accountants - Abasa; the Association of Unit Trusts of SA; Cosatu, the Johannesburg Stock Exchange, Life Offices’ Association of Southern Africa, SA Federation of Civil Engineering Contractors, SA Mining Contractors, and a whole range of others, including the various tax professionals located in the large accounting firms.

There are three areas in the new residence tax. Let me just cover them. Firstly, the reason for changing the system; secondly, some of the factors taken into consideration and, thirdly, some of the main features of the new system.

Now, the source-based system is premised on the old colonial days and, clearly, the limitation is that it narrows the country’s tax rights to income that is derived from inside the borders. We need to accept that, increasingly, a number of our firms are becoming globalised. I just saw in a newspaper this morning that two big South African retail firms have established a new presence in Uganda, for instance. As that happens, we need to ensure that we are able to see that as a contribution to our own resource pool in this country and as part of our tax base.

The existing system of source-minus does not offer the fiscus sufficient protection against international transactions, whereby profits are diverted from our local tax base. It does not deal with e-commerce transactions, and most of our trading partners have moved to residence-based taxation. When we consider this - I have mentioned the broad consultative process that involved not just Internet communication, but also meetings, workshops and parliamentary hearings - we think that the legislative package now represents a balance of differing interests in our country.

We should also keep in mind the unique circumstances of South Africa. We consider the potential revenue that may flow from the new system, the economic impact of the transition, South Africa’s international competitiveness, the administrative capacity of the revenue service and the international legitimacy of the proposed system. The legislation we have tabled is testimony to the earnestness with which we have considered objections. The proposed law imputes, in other words assumes, foreign income, in only a limited number of circumstances.

How will it work? Firstly, the law rests on the definition of ``resident’’. Who is a resident becomes critical as residents will be taxed on their worldwide income. Nonresidents will remain taxable only on their South African-sourced income. Residents will be defined in terms of the well- established international rule of a person who is ordinarily resident and a time rule in certain instances. In the case of companies, residency will be determined on the basis of incorporation or effective management.

Income of South Africans who earn money abroad will also be taxed in South Africa, but full credit will be allowed for foreign tax paid. However, there are important exclusions to this rule. We listened carefully to those who are concerned about the issue of South Africans working abroad on contract. This particularly affects construction workers and engineers. There were concerns that taxing these workers could jeopardise international competitiveness of South Africans involved in offshore projects.

To accommodate these concerns, the Bill now proposes that any resident working outside South Africa for a period exceeding 183 days in total during a twelve-month period will not be subject to paying tax on that income. However, residents must also be outside South Africa for a continuous period of 60 days within that year to qualify for the exemption.

We are mindful that our country needs foreign direct investment. We also believe our country offers an attractive base from which to do business in the region, on the continent and even in the world. For this reason, international companies who wish to establish their headquarters in South Africa will be subject to several exemptions. These include not being taxed on their foreign dividends; not being taxed on income of their controlled foreign entities; not being subject to secondary tax on dividends that flow through it as a conduit to its foreign shareholders; and not being taxed on other sources of foreign income.

The Bill has also changed to accommodate the increased access to US markets that some of our exporters will realise in terms of the African Growth and Opportunities Act, which was promulgated by President Clinton some months ago now. We recognise that taxes are always a source of unhappiness for those on whom they are imposed. A big change, such as the rebasing from source to residence, clearly made some people very unhappy. We hope now that through engagement we have made more people less unhappy. Happiness itself, though, is not a function of tax policy. There is a range of other policies to deal with that.

We have delivered on our promise to cut both corporate and individual rates. We will continue to deliver on that promise because we believe that it is good for the economy, for our citizens and for our companies. It is my pleasure to introduce the Revenue Laws Amendment Bill to the House. [Applause.] Ms Q D MAHLANGU: Chairperson, hon Minister and members at large, the Revenue Laws Amendment Bill - B70 - 2000 comes as a result of an announcement made by the Minister of Finance in his Budget Speech on 23 February 2000. It is this kind of legislation which becomes a permanent feature on our agenda. If South Africa wants to maximise its revenue collection, such a piece of legislation becomes inevitable.

The world in which we live is highly competitive and challenging. The tax system we have been using over the past years was making it possible for people or South Africans who have businesses abroad to evade tax. South Africa currently is using a source-based taxation system and some countries largely use a residence-based system. For an example, if Anglo-American, which is a South African company, elects to operate outside South Africa and in a country which has a residence-based tax system, they stand to benefit because neither of the two countries are going to tax them.

This legislation is aimed at closing such loopholes, and I believe that it will go a long way in doing so.

Comments were made to the effect that South Africa is a developing country, and therefore that legislation such as this will make it uncompetitive. I believe that we should approve this legislation and deal with the consequences if there are any. But also we must be aware of the fact that people generally do not want to pay tax and therefore try anything and everything to stop such processes or laws from being enacted. I regard as forces of darkness those who will do anything or come up with any technicality to prevent this, and yet at the same time are benefiting from not being taxed as the country loses revenue.

On the subject of international headquarters as defined in the Bill, it is excluded from the definition of a resident. An international headquarter company is defined as a company to which the following applies: Firstly, the entire equity share capital is held by persons who are not residents or trusts. Secondly, any indirect interest of residents and of any trust in such equity share capital does not exceed 5% in aggregate of the total equity share capital of such company.

As secondary tax on companies will now only be imposed on companies that are residents, the international headquarter company will also not be subject to STC on dividends declared. Their role in the country cannot be overemphasised and we can only continue to make South Africa competitive from all quarters by attracting such investment, which will be in the interests of our economic growth and job creation.

On the subject of individual contractors, we welcome a stance which is very accommodative to the construction sector. At the same time, we request the SA Revenue Service to give a progress report so that we can further close the loopholes if need be.

Key elements of the proposed tax structure relating to the worldwide basis of taxation include the following: The income tax base will be extended to include all income of residents of South Africa, subject to certain exclusions. Foreign taxes paid in respect of this income will be allowed as a credit against South African tax liability. The income of a controlled foreign entity which is a company will not be imputed if the income was subject to tax in a designated country on a basis substantially the same as that of South Africa at a statutory rate of at least 27%. Thirdly, foreign residents will continue to be taxed on their South African source income only.

My colleagues in the select committee will continue the discussion on the more detailed aspects of the Bill and draw hon members’ attention to the categories of income and activities undertaken beyond the boundaries of South Africa which will be exempted from South African tax. However, in my capacity as chair, I wish to address this House on the procedure adopted in reviewing the Revenue Laws Amendment Bill 2000 at present before this House.

I want to congratulate Sars on the manner they presented the Bill before Parliament. This Bill was tabled before us informally to both finance committees, and we interacted as we participated in the deliberations.

Mrs A M VERSVELD: Chairperson, on a point of order …

The DEPUTY CHAIRPERSON OF COMMITTEES: What is your point of order, hon member?

Mrs A M VERSVELD: I would just like to know from you whether a member is allowed to read a speech or to make a speech in this Chamber. [Interjections.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Please continue, hon member.

Mrs A M VERSVELD: Chairperson, on a point of order: I have not heard your ruling. [Interjections.] The DEPUTY CHAIRPERSON OF COMMITTEES: I am sorry, hon member. Continue, hon member. [Interjections.]

Ms Q D MAHLANGU: Thank you, Chairperson. Maybe the hon Versveld thinks I am going to talk about fishing. I am not going to address those issues. [Interjections.]

I think the process allowed Parliament to respond to key issues as raised in the Bill. As a result of this informal tabling of the Bill before the finance committees of Parliament, they were well-informed of all the negotiations between Sars and affected parties on the proposed amendments in this Bill.

Parliament did not rubber-stamp this Bill, although the Revenue Laws Amendment Bill, 2000, is classified as a section 77 Bill in our Constitution.

We thank Sars for their willingness to allow Parliament an expanded role in the deliberations on the Revenue Laws Amendment Bill. We express our sincerest thanks to Kosie Louw for diligent and insightful interaction. We are looking forward to the interaction on capital gains tax and other forms of legislation for future purposes. [Applause.]

Dr E A CONROY: Agb Voorsitter, agb minister en adjunkminister, hierdie is ‘n hoogs tegniese wysigingswetsontwerp en voor my agb kollega weer haar asem hierop gaan mors, moet ek sê ek sal my toespraak móét lees, want ‘n mens kan nie al dié goed uit jou kop onthou nie. [Tussenwerpsels.] [Gelag.]

Hierdie wysigingswetsontwerp vloei voort uit die Minister van Finansies se aankondiging vroeër vanjaar dat Suid-Afrika van ‘n brongebaseerde na ‘n inwonergebaseerde belastingstelsel gaan oorskakel. Ten einde hierdie doel te bereik, word wysigings aan nie minder nie as agt bestaande belastingwette ingevoer, onder meer die Doeane- en Aksynswet, die Boedelbelastingwet en die Inkomstebelastingwet.

Hierdie wysigingswetsontwerp beslaan 107 bladsye en dit sal nie moontlik wees om vandag, in die beperkte tyd tot ons beskikking, op die fyner besonderhede van elk van die voorgestelde wysigings in te gaan nie. Ek sal daarom merendeels na die meer algemene bepalings verwys.

Suid-Afrika se belastingstelsel is tans hoofsaaklik gegrond op die bronbeginsel waarvolgens alle inkomste met ‘n oorsprong, of geagte oorsprong, in die Republiek belasbaar is. Ten einde die belastingbasis egter te beskerm teen die uitwerking van die verslapte valutabeheer wat in 1997 in werking getree het, is bepalings in daardie jaar in die Inkomstebelastingwet van 1962 ingevoeg om inwoners van die Republiek te belas op hul wêreldwye passiewe inkomste of beleggingsinkomste.

Die wysigings was egter beperk tot die insluiting van sekere vorms van passiewe inkomste soos rente, jaargeld, huurgeld en tantième. Volgens die voorgestelde inwonerminusstelsel sal belastingpligtige inwoners vanaf 1 Januarie 2001 op hul wêreldwye inkomste belas word, hoewel sekere kategorieë inkomste en aktiwiteite buite die Republiek van Suid-Afrikaanse belasting vrygestel sal wees terwyl nie-inwoners steeds op hul binnelandse bronne van inkomste belas sal word.

Aangesien daar in die bestaande wet ‘n aantal verwysings is na persone wat woonagtig of gewoonlik in die Republiek woonagtig is en die omskrywing van ``inwoner’’ grondliggend tot die wêreldwye grondslag van belasting is, moet die verskillende bepalings en omskrywings in ooreenstemming gebring word. (Translation of Afrikaans paragraphs follows.)

[Dr E A CONROY: Hon chairperson, hon Minister and Deputy Minister, this amending Bill is of a highly technical nature and before my hon colleague wastes her breath on this again, I have to say that I must read my speech because one cannot remember all of it. [Interjections.] [Laughter.]

This amending Bill arises from the Minister of Finance’s announcement earlier this year that South Africa is changing from a source-based to a resident-based tax system. In order to achieve this objective, amendments to no less than eight existing tax laws are being introduced, inter alia, the Customs and Excise Act, the Estate Duty Act and the Income Tax Act.

This amending Bill comprises 107 pages and it will not be possible, in the limited time at our disposal today, to go into detail about every one of the proposed amendments. For the greater part I will refer to the more common provisions.

South Africa’s tax system is currently mainly based on the source principle, according to which income with an origin, or estimated origin, is taxable within the Republic. In order to protect the tax base from the effect of the relaxing exchange control which came into force in 1997, provisions were introduced in that year in the Income Tax Act of 1962 to tax residents of the Republic on their passive global income or investment income.

However, the amendments were limited to the inclusion of certain forms of passive income, such as interest, annual duty, rental and royalties. According to the proposed resident minus system, taxpayers will be taxed on their global income from 1 January 2001, while certain categories of income and activities outside the Republic will be exempted from South African taxation while non-residents will still be taxed on their domestic sources of income.

Since a few references in the existing Act are made to persons who are resident or usually resident in the Republic and the definition of resident is fundamentally based on the global basis of taxation, the different provisions and definitions should be brought in accordance.]

It is therefore necessary that it should be clearly defined what is meant with the concept of ``resident’’. The definition of resident covers both natural persons or individuals and legal persons or companies.

In the case of individuals, residence is determined in accordance with two rules. The first is ordinary residence, which is an objective test and which generally means a person’s permanent home or place of fixed abode to which he or she will normally return. This is an internationally accepted test and has been confirmed by the South African High Court. The second is the time rule, which is an objective test measuring, over a period of four years, the wording of which has been simplified in the sense that the 91- day rule will apply during each of the four years and the 183-day rule has been collapsed into a 549-day inaggregate rule during the first three years of the four-year period. In the case of companies, residence is determined by the place of incorporation or the place of effective management.

As already mentioned, the system of taxation is extremely complex, but has been adopted by most of our major trading partners, mostly in response to the problems arising from globalisation, e-commerce, etc. It is something that South Africa will most certainly want to move to at some stage and only time will tell if Sars has the administrative capacity to handle it at this stage.

What is heartening, however, is the fact that Sars was receptive when it felt that good cases had been made for amendments to the Bill at the numerous hearings and discussion sessions.

In closing, it is my pleasure to state that we support this Bill. [Applause.]

Ms J M L FUBBS (Gauteng): Chairperson, let me say at the outset that, certainly, one does give this Bill one’s full support. It puts South Africa right there in the vanguard among countries recognising that there are no borders as such where commerce and business prevail. Therefore issues such as passive income are best dealt with in a worldwide scenario recognising the reality of our economic environment.

One would also like to congratulate Sars on developing what can only be described, having looked at what they have in the US and in Germany, as a relatively simplified and accessible piece of legislation that, nevertheless, encompasses the principles of inclusivity while, at the same time, harmonising the interests of different sectors in our society to ensure that all who benefit from the services provided by Government and its agencies also accept the responsibility that such services need to be paid for in some way.

I have yet to come across any businessman or, for that matter, individual who has ever welcomed the payment of tax. That is not unique to South Africa; it is a worldwide phenomenon. Almost everyone that I know of does not even regard the evasion of tax as something to be ashamed of. But, as we started developing a culture of democratisation and the responsibilities alongside rights, it was quite clear that the revenue services would also have to develop a taxation system that would contribute to this culture of responsibility and inclusivity.

The principle and detail of this Bill lay a sound foundation for sustainable revenue streams while retaining the fundamentals of compliance within the economic environment. They also address the challenges South Africa faces in globalisation. At the same time it is quite clear that this is a deliberate intervention to ensure that equitability prevails and that inclusion, human security, sustainability and development are fostered.

While pilots can be seen as the pilots of our budgetary outcomes, ensuring the direct relationship between prioritised policy and allocative efficiency and identified outputs, certainly Sars plays a key role in identifying revenue and ensuring that adequate revenue is collected, and also that adequate revenue streams from companies and individuals are identified.

Revenue collecting is at an all-time high, and it was quite clear that the time had come to review fundamentals that would sustain our people’s democracy, fundamentals that would reconfigure the revenue stream to ensure that it remained an instrument that would benefit those who enjoy the governance in this country.

Another aspect is that we have been told that this will have a negative impact on investment in this country. Well, considering that this Bill has come before us only now, and that there have been many, many incentives to draw investment into the country, one is surprised that this is now seen or interpreted as the bogeyman of serious investors.

We have also been told that the important variable facing this country is not, in fact, a change in the revenue system, but that we should just continue to address the inflation rate and the Government deficit. Furthermore, I would say that if we do want to transform taxation in this country, we should look towards transforming it as an incentive for investment.

Those who make these statements, which one can only call statements of expediency, fail to recognise the fact that taxation is not to be used as an incentive for investment. The principal purpose of taxation, especially in our own new democracy, and so on, is to ensure that basic services are provided, that a sustainable economy is developed, that economic growth is encouraged, and that all who enjoy these benefits, whether they are citizens of the country or not, contribute in a responsible and equitable manner. We should no longer regard ourselves as pirates upon the high seas, seizing what we wish without paying for it.

Furthermore, we hear that there will be a brain-drain in the country as a result of this piece of legislation. We have already had a brain-drain under very flexible taxation regimes, so I am not sure now what would be a further encouragement. On the contrary, one would hope that bringing South Africa in line with the international community in this area may well convince those who left that it may serve their interests better to return to their home country and contribute here, where, indeed, they have their families, the sunshine, etc.

We have also heard that people who have retired here will move out very shortly. Suffice it to say that people who move here have many sunny spots and many climates such as ours to choose from, and better taxation regimes to choose from. Why have they chosen to come to South Africa of their own free will? There are other factors involved which go well beyond even that of the sunshine and climate, let alone taxation.

Another issue that has been raised here, of course, is that this new Bill is going to push out those companies that are already investing in South Africa, and that it would have a detrimental effect on our new trade agreements. One was heartened to learn that these trade agreements have, in fact, been taken into account, and that the whole 183-day situation has also been constructively addressed.

Suffice it to say, though, that when one gets Bills of this nature, it is only natural that people will initially oppose them, and one can expect that. What one does not expect is for people to behave irresponsibly in this particular regard. People cannot expect not to pay a cent for services that they do receive.

With respect to the insurance, and so on, we must accept that our own insurance packages are leading in some areas internationally. They are ahead of Germany’s and France’s, for example, in taking this into account. Yet when one sees submissions, one hears and sees no reference to the fact that South Africa has a far more positive approach. One would appeal to people who continue to feel that this would have a negative impact on South Africa to point out what other country they would expect to offer a better deal.

What we in Gauteng are further heartened to learn is that the Bill has dealt very constructively with the whole issue of transfer pricing, which in Africa has had a very negative impact on the economies here. This negative impact is not only in Africa, but internationally as well.

One hears members of the House referring to corruption or whatever in the adjustments. But I would like them to study, if necessary, obviously Ken Andrew’s works in this area. [Laughter.] Those make it quite clear that transfer pricing is directly related to corruption.

``Corruption’’ refers to unequal earnings, or dishonest earnings of any nature, and I cannot think of anything more closely related to that concept than transfer pricing, because it affects not just an individual, but an entire society. So I want to commend both the Department of Finance and the SA Revenue Service. [Applause.]

Mr B A MNGUNI (Free State): Mr Chairperson, I just want to comment on the foreseeable outcomes of what this Bill seeks to achieve. In general, this Bill broadens the tax base, and it includes income from individuals and companies that draw their income from investments. Broadening the tax base will increase revenue which will create room for Government to lower tax rates on companies and individuals, thus encouraging domestic savings. If domestic saving is encouraged, there will be an economic upturn, and more jobs will be created, with better service delivery.

The Bill focuses on income that is floating at global level and can be legitimately taxed by Government. This does not only make South Africa claim its stake in the world economy, but it makes it globally competitive in order to survive economically. Like the capital gains tax, the Bill tries to address unscrupulous companies and individuals and prevent them from making profits with impunity.

The Bill to some extent addresses the issue of the distribution of wealth. Most people who invest offshore, and have businesses offshore outside South Africa, are those people who enjoyed economic freedom in the previous regime, and were supported by the previous regime as far as their policies in those days were concerned, to the detriment of the previously historically disadvantaged people, who were not afforded those opportunities.

In conclusion, I wish to congratulate the Minister in charge, who is making every effort to ensure that the wealth of the country is shared by all who live in it. [Applause.]

Mnu L SUKA: Mgcinisihlalo, uMphathiswa wezeMali nesekela lakhe, neNdlu ngokubanzi, ndiyafuna ukuthi siyi-ANC siyawuxhasa lo Mthetho uYilwayo. Asizi kuyana nooqhimgqoshe abaza kufuna ukuba yimiqobo kwiinzame zokuphucula ubomi bethu. Bona abakhalazi abazange baphela,

Lo Mthetho uYilwayo siyawuxhasa, ngakumbi njengokuba uzama ukwenza uMzantsi Afrika omtsha ulingane nehlabathi ngokubanzi kwezoqoqosho. Siyayazi imbali yethu. Sisuka kwimbali yobukheswa. Ngoku sizama ukuzenza abantu.

Njengokuba sizama ukuba abantu boMzantsi Afrika babe yinxalenye yehlabathi ngokubanzi, sithi `phambili’ ngalo Mthetho uYilwayo werhafu kuba isivuno sawo siya ngokubonakala, ngakumbi kumaqumrhu oosomashishini nakumaqumrhu azama ukurhwebelana namazwe angaphandle.

Kodwa ke kuloo maqumrhu arhwebelana namazwe angaphandle, sifuna ukuthi xa irhafu ibekwa phezu kwamagxa awo, siya kuthi siwaxhase ukuba ayavumelana naloo rhafu.

Andizi kuba mde, ndiza kuba mfutshane. Ndiyaqonda ukuba namaphondo ethu aya kuzuza kulo Mthetho uYilwayo. Sizama ukuba umntu ngamnye arhume irhafu ngokufanelekileyo nangokusemthethweni, nokuba kuzanywe kubanjwe abo balinga ukuyibaleka, ukwenzela ukuba uphuhliso luqhube.

Ngaloo mazwi iANC elawulayo iyawuxhasa lo Mthetho uYilwayo. [Kwaqhwatywa.] (Translation of isiXhosa speech follows.)

[Mr L SUKA: Honourable Chairperson, Minister of Finance and your Deputy, honourable members, I want to say that we, as the ANC, fully support this Bill. We will not let ourselves be discouraged by those whose only intention is to stall the process of development of our lives. There will always be those who complain.

We support this Bill, especially because its objective is to uplift the new South Africa and put it on par with the international economies. This country has a history of sanctions. We say forward with the Bill as we are beginning to witness its advantages more especially with regard to commercial companies and corporations that are trying to establish or have already established trade links with outside countries.

We want to caution those companies, though, that if the capital gains tax comes into effect, they would have to adhere to the taxation rule and we will support them in their endeavours.

I am going to be brief. I understand that our provinces are also going to benefit from this Bill. We are trying to have everybody pay their taxes, as they are required to do that by law, and I further suggest that those who will try to avoid paying tax be prosecuted so as to keep the process of development going.

With those words, the ANC, which is the ruling party, fully supports this Bill. [Applause.]]

Mr K D S DURR: Chairperson, Minister, can I just first say how very grateful we are for the tremendously patient treatment we had from the Minister’s officials in getting to the point we have reached now. They have listened attentively, they have always responded to us, they have been open and helpful and we are grateful to them and to the department.

I agree with 99% of what has been said here by the Minister and also by my hon colleague here, Mrs Fubbs, but there is one matter I want to raise. It is not a huge matter, but it is something that I simply want the Minister to consider. I am not sure that I have the answer, but there is something that worries me, which I think we should look at.

We agree with the principles in this Act. We agree that it is a natural consequence of dismantling exchange controls, of globalisation, to move to a residence-based tax system for South Africans and immigrants. One can raise all kinds of political arguments - that is easy to do - but just let us think about whether it is wise to include people that one could describe more accurately as long-stay tourists, or to try to capture and place in the tax net income and assets earned by non-South Africans abroad from non- South African sources off capital that was earned or generated abroad, before they came to retire in South Africa. I simple pose the question.

I am a fan of simple tax systems with the net cast as wide as possible, with as few exemptions as possible, with tax rates held as low as possible. I welcome the Minister’s remarks in that regard. I am fully aware that capital moves from high tax jurisdictions to low tax jurisdictions, from high-risk environments to low-risk environments. But I am also aware that in the real world sometimes, often as a matter of political policy, one has to apply flexibility. Foreign tax jurisdictions and civil servants will clap their hands and compliment the Minister, and justifiably so, and we say that we are bringing ourselves into line with what foreign jurisdictions are doing, but are we? That is the question I have in my mind.

Foreign jurisdictions, in my experience, do everything to attract, hold and retain wealth and wealth creators. They have many mechanisms, some of which are obvious, but some are not so obvious. I am not advocating tax havens as I heard an hon member of the DA suggest to the Minister, but we should just think about this.

France, with a wink and a nod, tolerates Monaco, a tax haven with all kinds of special arrangements for the rich. As for Germany and Belgium and Holland, Northern Europe has Luxembourg, Austria has Liechtenstein and Switzerland has cantons for all circumstances. The UK has the Channel Islands, the Isle of Man, Gibraltar, British Virgin Islands and the Caymans, all working in upon London.

That is why they are the biggest foreign investors in the world. They are soaking up the capital from these tax havens and mobilising it and investing it through the City of London in the interests of their country.

Then there is another question which I want to come to, the device of domicile that they use. As the Minister will know, if one is resident in the UK, one pays taxes on all one’s income, but one can be resident in the UK and domiciled elsewhere, and then one only pays tax on one’s UK income. That is how the UK holds this huge concentration of high-net-worth individuals which plays such an important part in the economy.

Successive Labour governments have railed against this. I have heard them. I have attended Labour Party conferences where I have heard people talk about this and criticise it. But, as far as I know, they have never done anything about it, because they too do not want to lose these high spenders and big investors, men and women of influence from abroad.

Ireland is often held up to us as an example. We have sent delegations to go and see how they succeed in Ireland. But Ireland is a tax haven.

Even the US has Delaware and arrangements with some of the Caribbean islands. The great Chinese people use Hong Kong and Macao, and have not changed their tax status.

The DEPUTY CHAIRPERSON OF COMMITTEES: Order! Hon member, I am sorry, but your time has expired.

Mr K D S DURR: I am sorry that I do not have time to complete my argument.

The DEPUTY CHAIRPERSON OF COMMITTEES: Order! Hon Minister, we are skipping speaker number eight, so you may commence.

The MINISTER OF FINANCE: Mr Chairperson, I would like to express appreciation to members who have contributed to the debate.

Let me just briefly respond to some of the issues that the hon Durr raised. In respect of the taxation of retirees who have come to live here, it is clearly a matter we have considered at some length. Firstly, because they are in retirement they tend not to establish businesses. Secondly, and perhaps more importantly for reasons of transparency, some three years ago it was indicated that the window would shut during this fiscal year already, so there has been an expectation of a change. The only thing now is that the definition of ``residence’’ has been amended a bit, but it is clearly something that we have taken consideration of.

In respect of the various tax havens that have been constructed around the world, clearly we are mindful of that. One issue is that there is likely to be change in that area as we go forward. The OECD has come out very strongly against harmful tax practice and, in a recent report, actually listed a number of these jurisdictions so that whoever is responsible will cease such activity. I think we have a role to play in ensuring that there is fairness in the way the rules are applied, and that would be in our interests.

In respect of the last point I would like to respond to, the domicile'' andresidence’’ question, to some extent we have taken account of that because overriding the entire approach is a recognition of double taxation treaties as they exist and also the preferred list that was approved by Parliament last year so that for countries that are taxing at a rate similar to ours, there clearly is provision for a distinction between residence'' anddomicile’’.

However, one might have one has harmful tax practices operating in the region. Mauritius has very low levels of taxation, and it is not on the list. We have not even concluded a double taxation treaty with Mauritius for precisely this reason. It would be available to people who are domiciled in countries where there is fairness in respect of the tax system.

Let me just express my appreciation again to all the members. I am aware that this is a piece of section 77 legislation but it does help us when members here study the legislation in the detail that they have and contribute to the discussion and debate. Siyabonga. [Thank you.] [Applause.]

Debate concluded.

Bill agreed to in accordance with section 75 of the Constitution.

Business suspended at 12:37 and resumed at 14:05.

        CONSIDERATION OF MEDIUM-TERM BUDGET POLICY STATEMENT

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! I take this opportunity to welcome the hon Deputy Minister of Finance, Mr Mpahlwa, and call upon him to address this House.

The DEPUTY MINISTER OF FINANCE: Chairperson, hon members, we bring before this House today the Medium-Term Budget Policy Statement. It is a statement which in our view reflects our maturing democracy. It serves basically three functions. It advises Parliament on what has changed in the economic outlook since the Budget was tabled in February this year, it shares with the House the developments in public policy that will shape the budget to be tabled on 21 February next year, but, most importantly, it invites Parliament and the nation to reflect on our priorities, performance and plans, and to share with us in addressing the challenges we face in shaping the future of our country.

Looking very briefly at some of the changes that have taken place since the Budget was tabled in February this year, there are fairly positive prospects for growth globally at the international level. It is expected that there will be growth of about 4% globally, but there are threats and risks. Some of the threats are, of course, the sharp rise in oil prices, as we are all aware, and the decline in commodity prices, especially for developing countries because many of them depend solely on these commodities in order to earn foreign exchange.

Closer to home, there have been perceptions of instability in our own region which, of course, do have an impact. Since the 1998 crisis, we have seen a remarkable recovery in capital flows to developing countries, but those flows are still slower and lower than they were before the 1998 crisis. One of the big risks is that in the major economies of the world today, the three main currency areas - the US, the Euro zone and Japan - there are major divergences. There are also concerns about how the American economy is going to settle down. There are fears that it may actually crash, and if that happens it would have serious implications for the whole world. If the oil prices are sustained at the level that they are at currently, that will hit the poor and the developing countries the hardest.

As far as monetary policy and inflation are concerned, yes, our inflation is beginning to reflect the sharp rise in oil prices, and the floods that we experienced earlier this year have also had an impact, both on our inflation and growth. Interest rates have remained fairly stable.

Our balance of payments does reflect that our economy is on a sound footing. We have had strong exports for the period. We have also had a steep increase in the price of platinum, which is one of the commodities that we export. Imports have been fairly muted and, as a result of that, our balance of payments looks quite healthy, although we expect that as our economy picks up, that will begin to increase but still within manageable levels. We have seen substantial capital flows into our country, although this year there has been a slight reversal in that we have had a net outflow of $1 billion, as opposed to $4,1 billion in capital inflows in 1999.

Over the past five years, we have decisively addressed some of the structural barriers to growth in our economy, such as some of the protectionist trade policies, exchange controls, unsustainable fiscal position and the inequitable distribution of public services. We have strengthened revenue performance, restrained Government consumption expenditure and reduced the Budget deficit, and we believe we can now build on these achievements. Today, as we table this Budget policy statement, we also announce a bold programme of targeted public expenditure, which will focus on developing our own human capital and also on developing and maintaining new and existing infrastructure. There have been a number of shocks that have affected our own economy in this particular year. I have already mentioned the floods and the high oil prices. The price of gold has also been depressed, and there has been the perceived regional instability.

These factors have affected our own economic growth. As hon members would remember, when we tabled the Budget we projected that we would grow at about 3,5% this year. We have had to revise that downwards to about 2,6%. However, on the other hand, we have had positive developments as far as the export sector is concerned, and we also intend to accelerate investment spending so that that can take us to a higher growth rate.

Restructuring of state-owned enterprises is continuing apace, and our key objectives are to make sure that we can attract foreign investments, that the prices for services and infrastructure can be made lower, and that there can be an injection of private-sector capital, technology and expertise into our own economy.

I now want to turn to the questions of fiscal policy and the Medium-Term Expenditure Framework. Because we have not spent beyond our means, we have improved the way we collect and spend revenue; and because we have had receipts from privatisation, we have managed to bring the Budget deficit under control. This year it is projected to be at 2,6%, and it will fall to 2,1% by 2003-04. By reducing the deficit, we have reduced the share of revenue spent on servicing debt, thus freeing up resources for public expenditure. For the first time in 20 years debt service costs as a percentage of our gross domestic product are declining. These costs are projected to fall from 5,5% of GDP in 1999-2000 to 4,5% in 2003-04.

I think that we should begin to say to our people that some of the hard decisions that we had to take in the past are beginning to pay off, because the savings that we are making from declining debt service costs are actually enabling us to make more resources available for public spending. We also have declining debt as a percentage of GDP, and our real interest rates also are fairly stable. By reducing interest rates and containing inflation, we make it easier for businesses and firms to invest in the economy and create jobs.

The strong fiscal position, our enhanced capacity to collect revenue and the revised projections for economic growth contribute to upward adjustments to our revenue estimates for the Medium-Term Expenditure Framework period. By broadening the revenue base and improving tax collection, we have been able to lower tax rates which will lower the costs of investment and job creation and release household spending power, and, of course, there is an indication that in the 2001 Budget we will again include substantial income tax relief.

This brings us to our bottom line. The amount we are able to spend on goods and services, on developing the infrastructure, on creating jobs, on protecting our citizens and on alleviating poverty has increased. We can now project an increase in expenditure of R7,8 billion in 2001, R13,2 billion in 2002 and R18,3 billion in 2003. These are substantial increases on the amount that is going to be available for public spending.

Through this Medium-Term Expenditure Framework we signal that we are embarking on the bold extension of public expenditure, targeting investment in our people and the development of our own physical infrastructure.

On capital and infrastructure expenditure, capital spending and related infrastructure rehabilitation and maintenance is projected to increase from R24,1 billion this year to R32 billion by 2003-04, which is R8 billion more and represents a growth rate of nearly 18% per year. This is an important signal that shows that the issues of new infrastructure and the maintenance and rehabilitation of existing infrastructure are, indeed, important issues for which we are making resources available so that we can begin to intensify investment in infrastructure. That spending on physical infrastructure will also be targeted at our transport and communications network, our railways and rolling stock, and our hospitals, schools, clinics and other public buildings.

We also hope that some of this expenditure can be targeted towards building our capacity in the knowledge economy by ensuring that computers and the Web are more accessible, particularly to our schoolchildren.

On social expenditure, over half of national and provincial noninterest spending is on social services. Our social security fund also accounts for a substantial amount of money - about R8 billion. South Africa’s social service expenditure has increased strongly in recent years, and has been redirected towards poor provinces and towards meeting the needs of the poor first. Spending on the social services will increase by R21 billion over the next three years, or by 6,3% per year in education, 6,7% in health and 7,8% in welfare services. In addition to these increases, schools and health services will benefit from the planned increases in infrastructure spending.

What remains a challenge is improving the efficiency and quality of that spending. But because this is an important issue as well, believing that the youth are our future, we are also providing for investment in early childhood development initiatives.

We are also providing for provinces to be able to deal with the HIV/Aids epidemic. From this year, we have made a special allocation of R75 million that will grow to R300 million in 2003-04 to support more integrated Aids prevention strategies. Social expenditure is therefore one other big area of focus in the coming years.

The third area is justice and protection services. We are providing additional resources, and growth in this sector will be R5,2 billion or an average of 6,6% per year between now and 2003-04. The key areas of focus are increasing the efficiency of our criminal justice system, upgrading the police vehicle fleet and physical infrastructure, improving the efficiency of courts and providing more resources to prosecution services, and we are also providing more money for the Scorpions. Let us now look at the intergovernmental fiscal system and social expenditure. Over the period of the Medium-Term Expenditure Framework, we will be increasing transfers to the provinces by over 7% per annum, and to local government by over 15% per annum. This should allow provinces to budget adequately and deal with the pressures they face, particularly in the health and education sectors. They will now be able to budget better for textbooks, teacher training, school buildings and medical services. Education will also benefit from the R250 million allocation over the next three years for early childhood development.

Last year we introduced a provincial infrastructure grant. We will increase this next year by R500 million and by an estimated R1,2 billion and R2,3 billion over the following two years. This is in addition to new allocations for flood reconstruction and the Pretoria academic hospital. Again, what is going to be important is how provinces and municipalities spend these funds.

The increased allocation to local government is intended to ensure that all households have access to a basic level of services. It will assist municipalities in securing provision of basic services to households earning less than R800 per month. In the coming year the local government equitable share will stand at R2,2 billion. It will rise to R2,5 billion and R3,1 billion over the following two years.

In conclusion, there have been a number of reforms that have been introduced on the budget process, the intergovernmental financial system and the tax system, enhancing our ability to meet the needs of our people. The success of those reforms is reflected in the reduced share of revenue that now goes to servicing our debt. It is reflected in the turnaround of the financial position of the provinces from a deficit of R5,5 billion in 1997-98 to a surplus of R3 billion in 1999-2000. It is also reflected in the increase of 3,7% a year in real spending on public services that we are able to plan for for the next three years.

The challenges we face are still immense. We laid claim to our democracy in our country at exactly the time that winds of globalisation were buffeting developing countries most harshly. It was one of the most difficult times to be integrating into the global economy. But we believe that we should not be disturbed by those pressures and should remain focused on the course that we believe is in the long-term interest of our country. I would like to invite the National Council of Provinces to debate and talk to us around the budget policy statement. [Applause.]

Ms Q D MAHLANGU: Chairperson, and the Deputy Minister of Finance, it is a pity the hon Versveld is not here. I was going to assure her that I would try my best not only to read as slowly as possible, but also to read all the things I have written here. This is the first time that the NCOP is discussing the Medium-Term Budget Policy Statement. We welcome this opportunity and we are looking forward to meaningful and useful discussions.

This document gives us an overview of the state of the economy within South African borders and outside our borders. It also refers to the division of revenue and, lastly, to local government as an important sphere of Government. It is also interesting to note how the elections in the United States are affecting emerging economies, because our rand has gone down as a result of the presidential election.

The picture as projected in the Medium-Term Budget Policy Statement is promising. This shows that we have stabilised our economy, and we want to commend the National Treasury for its sterling leadership on this matter. I also want to commend the Cabinet for continuously identifying infrastructure development and maintenance as one of the priorities of government. This will not only improve the above, but also create the jobs that this country needs most.

I just want to read a quotation from a book called Can Africa Claim the 21st Century? It raises several questions, and I will read them, and their answers. The first question reads: What does Africa's low infrastructure development matter?'', and the second one reads:Does Africa have a significance beyond that of any other type of production?’’

The answers to these questions are, yes, because the value of infrastructure for growth and development lies in its consumption, not its production. Also, infrastructure is an input to all other production. This is a clear case of economic infrastructure, such as power and transport. But even social or household infrastructure, such as sanitation facilities, affects people’s productivity and therefore directly affects production. Africa pays a high price for its inadequate infrastructure in lost opportunities for growth, poverty reduction and for access to services that could improve people’s lives.

The above statement clearly gives an illustration that we need to build more infrastructure because it is in our interest to do so. People often get worried when they are supposed to go to rural areas where roads are not in good shape at all. Good infrastructure will bear many positive spinoffs for our country and the economy at large.

The second priority which was identified in the Medium-Term Budget Policy Statement was that of human capital development. Before I continue, let me relate this to a course I attended some time ago. One of the professors who gave a lecture at that course said that the more women were educated, the less society was going to grow, because women became more conscious of their rights and all those things. I think this was a serious indictment of women, so I want to relate it to human capital development. I do not believe that this is true. There is a need for South Africa to have a concentrated, co-ordinated human development strategy, primarily because in the past nobody ever cared about the quality of education that we, as black South Africans, were receiving. This problem is a result of that.

The other point I would like to talk about is the provision for the impact of HIV/Aids. This is a clear indication that Government is still committed to fighting the scourge of HIV/Aids, which will have a negative impact if we do not pay more attention to it. Besides what Government is doing, we need to change our behaviour as human beings, but also continue to raise awareness throughout the country. There is a slogan which the country has adopted. Let us practise it: Abstain, be faithful or condomise. If one is unable to do that, then one does not belong in this country.

About the division of revenue, table 6.1 shows that there will be steady growth in the provincial allocation over the MTEF period and a large increase for local government. This is welcome because local government will be able to take shape under favourable conditions. Furthermore, we hope that these newly demarcated municipalities will improve a great deal on what they used to be.

I cannot overemphasise the importance of having such a debate in this House, because the NCOP has never had a debate on the state of the economy. Some of my colleagues are going to touch on some of the very important aspects. In the coming years we will engage better and thoroughly with the Medium-Term Budget Policy Statement, and in particular on issues that affect our provinces.

Mr Z S KOLWENI: Chairperson, hon members, at the very outset, please allow me to compliment the National Treasury on its release of a well-received Medium-Term Budget Policy Statement. However, I wish to raise two points in relation to the statement. They are as follows: The Medium-Term Budget Policy Statement is not clear on the distribution of funds raised by the skills development levy. The statement simply states that the levy will be 0,5% of payroll for the current year, and will increase to 1% in the year 2001-02.

However, the National Treasury would be pleased to know that an attempt was made to pursue the national Department of Labour in this regard. The National Department of Labour informed us that a total of 730 retrenchees of Anglo-Gold Mine in the Carletonville, Klerksdorp and Welkom areas have been trained in vocational and task-related courses. In addition, 95 unemployed young people have been trained in building-related courses and accommodated in the Umtata Academic Hospital building project of the Department of Public Works. We were also informed that 480 unemployed persons have been trained in agriculture-related projects after the January 1999 tornado in the Mount Ayliff area.

Public perception of our Government is at an all-time low in relation to the continuous increases in the price of liquid petroleum. Public perception is that our Government is not doing much to reduce the price of petrol. Government is regarded as being most insensitive to the needs of the poor due to the high cost of transport fuel.

Although the Medium-Term Budget Policy Statement is correct when it reports that global external factors are responsible for the high fuel cost, Government’s acceptance of this external phenomenon does not dress the wound of the consumer. Since South Africa’s position in the world is enhanced and, in view of the recent membership of Saudi Arabia, the major producer of crude oil, of the WTO, what measures are taken by South Africa and other international players to apply pressure to the oil-rich countries to review their pricing policies in forums such as the WTO and the IMF? Perhaps, with the advantage of having the Deputy Minister with us, he may comment on that in due course. [Applause.]

Mr J L THERON: Chairperson and hon Deputy Minister, the hon the Minister of Finance, and also the hon the Deputy Minister, sketched a very positive picture when they presented the Medium-Term Budget Policy Statement. Indeed, one can say that there are some very positive indications and some welcome prioritisation due to take place if one looks at the Medium-Term Budget Policy Statement.

Among the most important are the substantial increases in the allocations to local government and the increased capital expenditure on infrastructure, both critical areas in urgent need of more money.

Natuurlik verwelkom ons ook die Minister se aankondiging dat daar ‘n vermindering sal wees in die belasting wat individue moet betaal.

Hier moet ons egter dadelik sê ons hoop dit sal nie weer ‘n kwessie wees van gee met die een hand en neem met die ander nie. Dit is beslis so dat die gemiddelde Suid-Afrikaner baie hard geslaan word deur die petrolprys wat soveel verhoog het. Verder maak die verswakking van die randwisselkoers alle ingevoerde goedere soveel duurder en dit tref alle verbruikers nadelig. In die lig hiervan is dit dus noodsaaklik dat die belastingverligting substansieel sal wees om as teenwig te dien.

‘n Verdere positiewe faktor wat beslis genoem kan word, is dat die verklaring oor die begrotingsbeleid vir die medium termyn voorspel daar sal oor die volgende drie jaar volgehoue ekonomiese groei wees. Hierdie groeineiging is egter baie matig, aangesien die groeikoers in die BBP soos volg geprojekteer word: vir 2001, 3,4%; vir 2002, 3,7%, en vir 2003, 3,3%. Soos die agb Minister self sal erken, is ‘n groeipersentasie van minstens 5 tot 6% noodsaaklik om die ekonomie sterk te laat groei en meer werkgeleenthede te skep. Dit wil dus hier blyk dat die stimulering van die ekonomie deur die fiskale maatreëls te matig is en nie genoeg groei en werkskepping sal bevorder nie.

Dit is te betwyfel of werkloosheid en armoede in die volgende termyn van die verklaring oor die begrotingsbeleid vir die medium termyn, wat oor drie jaar strek, genoegsaam bestry sal word. In die lig van groot werkloosheid en armoede wat onder ‘n groot deel van die bevolking heers, is dit betreurenswaardig. Dit moet ook duidelik hier gesê word dat die beoogde belastingverligting en verhogings in sekere besteding, soos aan infrastruktuur, slegs kan realiseer as die ekonomie volgens plan groei.

Idasa, in sy ontleding van die verklaring oor die begrotingsbeleid vir die medium termyn, stel dit duidelik dat hy dink die groeivooruitskattings is onrealisties as gevolg van die onrealistiese uitvoer- en beleggingsgroeiprojeksies. Met die verswakking van die randwisselkoers is Suid-Afrika beslis in ‘n gunstige posisie vir verhoogde uitvoere, en indien hierdie verhoogde uitvoerpotensiaal nie realiseer nie, is daar beslis ekonomiese probleme te voorsien. Indien ons hierby nie ‘n gunstige klimaat vir buitelandse investering kan skep nie, sal die vooruitgeskatte BBP-groei beslis nie realiseer nie. (Translation of Afrikaans paragraphs follows.)

[Of course we also welcome the announcement by the Minister that there will be a reduction in the tax which individuals must pay.

However, we must immediately say that we hope this will not once again be a case of giving with the one hand and taking with the other. Indeed the average South African has been hit hard by the petrol price that has increased so much. Furthermore, the weakening of the rand exchange rate leads to all imported goods becoming more expensive, and this has a negative effect on all consumers. In the light of this it is necessary that the tax relief be substantial in order to counterbalance this.

Another positive factor which could definitely be mentioned is that the Medium-Term Budget Policy Statement projects that there will be continued economic growth over the next three years. However, this growth tendency will be moderate, because the rate of growth in the GDP is projected as follows: For 2001, 3,4%; for 2002, 3,7%, and for 2003, 3,3%. As the hon the Minister himself will acknowledge, a growth percentage of at least 5% to 6% is necessary for sound growth in the economy and for the creation of more job opportunities. Therefore, it would seem that the stimulation of the economy through fiscal measures is too moderate and will not promote enough growth and job creation.

It is doubtful whether unemployment and poverty will be combated adequately during the next term of the Medium-Term Budget Policy Statement, which will extend over three years. In the light of the high levels of unemployment and poverty which exist among a large portion of the population, this is deplorable. It should also be stated emphatically that the envisaged tax relief and increases in certain types of expenditure, such as infrastructure, will only be realised if the economy grows according to plan.

Idasa, in its analysis of the Medium-Term Budget Policy Statement, clearly states that it believes the growth projections are unrealistic due to unrealistic export and investment growth projections.

With the weakening of the rand exchange rate, South Africa is definitely in a favourable position for increased exports, and if this increased export potential is not realised, economic problems are definitely foreseeable. In addition, if we cannot create a climate which is conducive to foreign investment, the projected GDP growth will definitely not be realised.]

Another problem area that can be identified in the Medium-Term Budget Policy Statement is that not enough money is budgeted for the HIV/Aids pandemic. Hopefully by now we all realise how much the HIV/Aids pandemic is going to cost South Africa, both socially and economically, but one looks in vain for a projection of the financial effects of the HIV/Aids pandemic on health, education and welfare budgets.

Does Government want us to believe that HIV/Aids is not going to have a major effect on, for example, hospitals and clinics over the next three years? When one looks for details of the funds that have been allocated to Health for HIV/Aids, one finds that the total health expenditure is to reduce in real terms per capita over the next three years.

So here we have an item identified as, I quote, a critical area'' and, I quote again, apriority for the medium term’’, yet the funds allocated to it simply do not match up to the claim made in the document.

Provincial budgets are all projected to decrease as a share of total noninterest spending. Given the increasing demands for social services, the allocation of additional resources to poorer provinces is crucial. The impact of HIV/Aids will increasingly put strain on provincial health, welfare and education budgets over the medium term.

Given this decline and a higher demand for social services, it is of particular importance that Government redistribute more funds to the provinces as their share of revenue.

I think it is also necessary to look at the proceeds from privatisation and how this could stimulate the economy. The projected privatisation proceeds are extremely modest, reflecting an ongoing inability to get on with it with a sense of urgency. At this point in time we cannot accept contradictory messages on privatisation and much more emphasis will have to be placed here. Of course, this is also a rich potential source of foreign investment that could be attracted to South Africa.

In a number of places in the document the Minister correctly identifies serious problems with skills shortages, but no solution to the problem is offered. The document states that:

The skills shortage places a supply constraint on the rate of growth of the economy.

Skills shortages may become an even greater challenge than at present unless measures are taken to address the loss of skills through emigration.

This is a critical area as South Africa is suffering from a massive skills loss which will prevent us from achieving the growth rates which we require. Nowhere in the document is anything mentioned about what is to be done to make skilled people feel comfortable and welcome in the country and what should be done to attract more skilled people.

To conclude, in the final analysis, the Medium-Term Budget Policy Statement establishes a sound framework for future budgeting, but it does not give enough confidence that plans are in place to bring about the economic growth, the job creation and the poverty eradication that South Africa so desperately needs. I think more progressive stimulation of the economy and job creation initiatives should receive more serious attention.

Mr G A LUCAS: Mr Chairperson, hon Deputy Minister, hon members of this House and special delegates, I just hope that Mr Theron’s speech was not actually Ken Andrew’s, because the Minister indicated earlier that the speech that Mr Theron had read was by Mr Ken Andrew. I hope this one was his own creation. [Interjections.] Otherwise the problem is that they would not be investing in him, but depriving him of the right to think, which creates problems. [Laughter.]

Nonetheless, the Medium-Term Budget Policy Statement is a demonstration by our Government of upholding the spirit of our Constitution, the spirit of participatory democracy, accountability and transparency, which is a trademark of our new democracy. These are the basic principles which I believe led to the progressive action and exemplary leading role by the Ministry of Finance in producing this very useful policy document.

To many people, the Medium-Term Budget Policy Statement is a very informative and useful document to facilitate constructive input by all South Africans in the budgetary process. It also creates space for all of us to set the agenda for how our nation’s resources should be used, which in the past even the privileged, except a few, did not have access to or make input in.

Indeed, the step we are taking is very historic, and I believe that in the near future many countries will follow our model in dealing with their national budgets. However, the only matter which still needs proper engagement is how we make sure that provinces and local authorities also implement strategies to involve society in a more proactive manner in the budgetary process.

We should also ensure that these approaches are more uniform in terms of the national process, and I do believe that the Medium-Term Budget Policy Statement, the Medium-Term Expenditure Framework and other national budgetary processes can act as a guiding basis for an evolution of provincial and local budgetary systems.

Precisely because of the shortcomings of provincial and local government fiscal relations, the national fiscal reforms taking place do not exert enough influence on all our people. Only a certain section of our society is involved in these budgetary issues, and the majority of our people are left on the periphery or are without substantial influence in the budgetary process.

The prospects of rapid economic growth estimated to take place in the next three years are quite encouraging and provide hope for the millions of our people who continue to experience the harsh realities of poverty, underdevelopment and unemployment. However, we should also not be overconfident about real growth, in the light of the current global economic trends, the continuous escalation of oil prices, the instability of major currencies and the perceived regional conflicts, all of which count negatively against us. Above all, the perceived lack of commitment by the developed nations to making meaningful investment in the developing nations is a factor which continues to impede our developmental agenda.

Furthermore, our private sector also needs to come out clearly in support of our reconstruction and development goals. As currently experienced, this sector is not responding positively to the challenges that confront us collectively as a society. Henceforth, informed by all these issues, we should be cautious in speculating about real growth for the next three years.

However, we should, all of us, collectively respond to the urgent matter that confronts our society, namely fighting poverty, unemployment and a whole range of social factors that affect our country. Economic growth does not serve any purpose, if it happens, when, on the other hand, we cannot get rid of unemployment and underdevelopment. We should all channel our energies and creativity into this daunting challenge, as our people, who are poor, look to us for answers and solutions to their plight.

As the MTBPS states, for the next MTEF cycle the Government will focus on infrastructural development, which I believe will largely deal with socioeconomic backlogs that our country is faced with. In particular, the Government will be seeking to address the absence of infrastructure in our rural communities, thus enhancing our commitment to the matter of rural development and providing our rural masses with adequate infrastructure to further enhance their true potential to develop as citizens.

This clear commitment and others by our Government will greatly address the scourge of unemployment, underdevelopment and poverty, which are prevalent in our society. Accordingly, we should take this opportunity to call upon our private sector to make real investments in our own country, because it serves no purpose for the Government alone to seek to address these issues of national importance without the necessary support from the private sector. Indeed, we need to say that before investing outside the country the private sector should first invest in South Africa, our own country, so that we are able to make real, meaningful change.

The division of revenue reflects a real increase with regard to the provincial equitable share over the next financial year. This, to a large extent, brings relief to our province, the Northern Cape. This is because we have, ourselves, been experiencing an uptake in the social security grants.

Furthermore, this increment will enhance our programme to rebuild our provincial economy in such a manner that it addresses the socioeconomic situation of our province.

It is therefore commendable that all provinces are going to experience increases in their allocations, which will make their budgetary priorities more flexible - more so to those provinces that have been identified as the poorest.

Added to this, the second adjustments estimate further allocates R600 million to the Northern Cape province, specifically for flood relief purposes. I believe this will bring comfort to the small communities of Kenhardt, Keimoes and Williston, which, at some point, were isolated from the rest of the country because of the tragic floods that ravaged them.

Furthermore, the fact that the new law, the provincial revenue-raising powers Bill that seeks to give provinces powers to raise their own revenue, will be coming to Parliament early next week will assist the provinces to have more resources with which to address our people’s needs. This matter will put to rest much speculation about the extent to which provinces will have influence in their tax terrain in our society, and also seek to ease the overreliance of provinces on the national Budget for provision of their constitutional mandate.

In conclusion, one needs to say that we have laid a very strong foundation for the evolution of a fiscal regime that will set our country on the road to success. What remains for us is to take advantage of those new ways of doing things to benefit our people. I do hope that early in the new year we will, as the NCOP, dedicate more time to seeking inputs and consensus on the Medium-Term Budget Policy Statement so that we can provide leadership to our provinces and local government. [Applause.]

Mr K D S DURR: Mr Chairperson, may I just thank the hon the Minister and his officials for the manner in which he has worked with us in the select committee. His accessibility and the way in which he conducted himself really made our work much easier.

The Minister has mentioned the problems of oil prices, slow commodity prices, or low commodity prices and poor perceptions and so on. I think the point is that if we do the things that we can do something about in South Africa, then the things that we cannot do anything about will not hurt us so much. There are things that are within our power. I have to say, disappointed as I was in the lack of follow-up to the President’s inaugural address when he first took office, I have been most encouraged, in recent days, by the President’s remarks after the global review workshop retreat, which included the World Bank President, the International Monetary Fund and senior South Africans, and which was attended by the hon the Minister himself.

The President is reported as saying that Government intends to move more vigorously, and to place greater focus on areas such as job creation, skills development, generating investment, equity issues and information technology.

Against that background, I have more confidence in the possibility of us achieving the goals in the medium-term budget. If we move vigorously now, some of the growth targets on which it is premised do not look as forbidding as they might have looked at the beginning, because our challenge is less directional and more a question of speed of implementation. Although there are stones to be rolled out of the way, we know what the stones are that need to be rolled out of the way. The President mentioned some of them, and the conference identified many.

Humanly speaking, the ball is entirely in our South African court. We have the opportunity to turn things around, and if we fail, we will have only ourselves to blame.

The problem and obstruction to growth are either of our own making or within our power to change. We need to unleash the locomotive of growth that will uncouple the Afropessimism that the Minister spoke about and sideline it forever, if we are going to meet our budget targets.

But the Minister knows that if he looks at the savings rates under 15% of the GDP, that is not going to do it, if we look at the foreign investment he mentioned - below pre-1998 levels - that is not going to do it and if we look at business confidence in South Africa, that is not going to do it.

The fact is that we need to suck in foreign investments on a big scale, suck in the foreign business community for a sustained roll-out of the restructuring of state assets, or privatisation - call it what you like - in the next five to ten years. That will result in growth, investment, technology transfers, greater efficiencies, widening of the shareholder base, increased better delivery and more latitude on the budget that he spoke about for the vitally important social expenditures which my hon colleague here also spoke about earlier, which we believe are understated in his budget. My colleague mentioned Aids.

The reality is that one has a linear budgeting process for an exponentially growing plague. Those two indices are just not going to meet. But I think the Minister knows that - he is cutting his suit according to his cloth. I say to him that there may be more cloth available if we do the right things now. This will restore confidence, including the confidence of our own people which is so necessary, if one is to retain the skills in South Africa and unlock the talents of our own entrepreneurs which, in turn, will allow us to meet the MTB targets and perhaps even surpass them. The Minister’s department has done very well on a macro side. They are not part of the problem, but part of the solution. What has been the one beacon of light is the excellent macro management of the economy. But some of the Minister’s colleagues will need to come to the party, and judging from the President’s speeches, we think that now is the time. We will then generate the resources to uplift all our people in a virtuous cycle that will feed upon itself and feed the expansion so necessary for employment, wealth creation and upliftment.

In conclusion, this talk of tax reduction is like music to my ears. I know the Minister has constraints, but can he indicate to us whether the kind of tax cuts we are talking about are purely compensating for bracket creep or are we talking about real tax cuts in real rands? [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Can we please switch off our cellphones, if three are any in the House.

Mr A MARAIS: Chairperson, hon Deputy Minister and colleagues, I hope that some day Cassandras such as the hon Mr Theron will realise that criticising political efforts without offering better or workable alternatives is tantamount to the criminalising of criminalisation of politics. [Laughter.] We echo the good sentiments directed at the department, especially on the aspect of transparency and participation.

Budgets are about making hard choices. In an ideal situation, the figures contained in this statement would have been dwarfed. However, even in such a situation, not everybody would have been pleased. Some of these choices might even lead to irreparable losses. First and foremost, the Free State fully supports the Medium-Term Budget Policy Statement. However, from a provincial perspective we do deem it necessary to sensitise the Deputy Minister to some of the contemporary realities.

On matters socioeconomic, the following can be said. The Free State was identified as one of the provinces with the lowest income per capita, in fact, the second poorest in the country. What aggravates this situation even further is that we have also been identified as the province with the highest Aids incidence.

The decline in agricultural activities and especially the maize industry has a significant impact on the possibility for the province to generate additional financial resources. Furthermore, as 51% of the GDP is derived from agricultural activities, the scaling down of this sector will have a major impact on poverty alleviation programmes in our province.

On our road networks, the following can be said. It is most important to realise that our province forms the central hub, all road traffic must go through the province. The economic development of other regions generated a drastic increase of freight and light vehicles making use of our road infrastructure without contributing to the economic development of the area.

Since 1975 the budget for provisioning and maintenance has declined to the extent that the 2000 budget is only 26% compared of that of 1975. During the same time traffic volumes have increased by nearly 120%. This has caused the backlog to increase to nearly R2,3 billion. At this point nearly 60% of our road network is in a poor to very poor condition. It will now cost eight times more to rehabilitate it.

Mnr K D S DURR: Skande!

Mnr A MARAIS: Dit is nie ‘n skande nie, mnr Durr.

Met u toestemming mnr die Voorsitter, ek dink as ek met verwysing na die swak toestande van ons paaie praat, dan neem ek dit alreeds van 1975 af. Ek dink die skande het daar begin, en ons is nou besig om ontslae te raak van die skande. [Tussenwerpsels.]

Ek dink dit is ook belangrik dat ons die Minister en die Adjunkminister se departement bewus maak van die toestande in ons provinsie. (Translation of Afrikaans paragraphs follows.)

[Mr K D S DURR: It is a disgrace!

Mr A MARAIS: It is not a disgrace, Mr Durr. With your permission, Mr Chairperson, I think that when referring to the poor conditions of our roads, I include the period from 1975 to the present. I think the disgrace started then and we are now trying to rid ourselves of the disgrace. [Interjections.]

I think that it is also important that we create an awareness with the department of the Minister and the Deputy Minister about the conditions in our province.]

The contents of the policy statement are commendable, with the programme of targeted public expenditure focused on the development of our people and the physical infrastructure, putting the needs of the poor first. Ek dink ek het dit nou net gesê. [I think I have just mentioned that.]

There is synergy between the national focus areas and the provincial strategic themes of job creation, poverty alleviation, human resources development and the acknowledgement of educational needs regarding early childhood development and social infrastructure backlogs, which affect the poor communities markedly. I cannot read my own handwriting today, Mr Chairperson. [Interjections.]

The synergy is further evidenced in the reflection of the nationally mentioned intervention strategies, that is the provision of textbooks, teacher training, etc.

In order to give effect to these national policy statements and provincial strategic objectives, the following have to be noted. With regard to education the following MTEF baseline allocations have been received: for the period 2001-02, R3,2 billion; for the period 2002-03, R3,3 billion; and for the period 2003-04, R3,4 billion. These amounts include the improvements in conditions of service and conditional grants.

After the above has been taken into consideration, the amounts available for personnel and nonpersonnel expenditure will be as follows: for the period 2001-02, R2,9 billion; for 2002-03, R2,9 billion; and 2003-04 R2,98 billion.

With regard to some of our backlogs, the situation is as follows: on personnel, approximately R60 million; on computer training, approximately R30 million, if one supplies every school in the province with one computer and one printer; on physical facilities, approximately R1 billion, including renovation and upgrading, installation of water on site, electricity and telephones; and on learning and teaching resources, approximately R160 million.

The Medium-Term Budget Policy Statement refers to the focus areas of Government expenditure and the making of medium-term plans to ensure that needs-based programmes are designed, developed and implemented as funds become available. Money allocated in the MTEF cycle should be made available for expenditure over the MTEF cycle and expenditure not linked to expenditure trends in the previous years. This will allow for needs-driven planning and more effective service delivery.

The statement continues to place us ahead of many countries. It encourages overall policy debate and interaction. We should now move to do the same at local level. An opportunity beckons with the transformation now under way. While I was talking, I was asked where the plans were. Actually, the plans are all contained in measures here and in the various provinces. So I do not understand how some of our colleagues interact with the publications and material that are made available to them. The problem I have when hon Conroy asks me where the plans are …

Dr E A CONROY: It was not me. [Laughter.]

Mr A MARAIS: If the hon Theron asks me where the plans are, I am getting a bit concerned, because what is it that he was criticising?

The Free State supports the statement. [Applause.]

Die ADJUNKVOORSITTER VAN DIE NRP (Mnr M L Mushwana): Orde! Dankie, mnr Marais. Dit is jammer dat u nie u eie handskrif reg kon lees nie. Miskien raak u nou oud! [Tussenwerpsels.] [Gelag.] (Translation of Afrikaans paragraph follows.)

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Thank you, Mr Marais. It is a pity that you could not read your own handwriting properly. Perhaps you are getting old! [Interjection.] [Laughter.]

Ms J M L FUBBS (Gauteng): Chairman, members of the House and hon Deputy Minister of Finance, it has been interesting to listen to the debate so far. I am also just a little concerned. When people commented, I asked myself if they read the assumptions, because it may be that they have been too heavily influenced by TV and so on. I would suggest that we do read the assumptions. Reading the assumptions will not tell us if what we see in this Medium-Term Budget Policy Statement is what we want, but it will tell us what risks have been taken into account, what the premises are and what has informed these figures. I heard all kinds of talk of fuel prices, inflation, whatever. The reality … [Interjections.]

No, hon members should wait a minute. We must talk about contextualising statements. That is why one wants half an hour, because one makes one little phrase and then one has to contextualise it way back. What I actually said is: I heard in the debate from colleagues here - I would have referred to the Deputy Minister as a comrade - that we, or the Ministry of Finance had forgotten the fuel prices. As a matter of fact, high oil prices are exactly part of these assumptions. I do not think anyone, least of all countries in Europe, the United States anywhere else, could tell me now if I were to ask them, what will be the price of crude oil. What will be the price of Brent? I ask anyone now and nobody will be able to give me that figure.

So what we will get is an estimate based on cycles, and that is exactly what Finance has done. It is actually indicated that they expect to see high oil prices and that this factor has been taken into account. They have also taken into account the problems of floods, the impact of that and the financial implications. They have also taken into account the perceptions of regional instability. Perceptions, most unfortunately, as we all know, sometimes speak louder than reality.

Coming to the next thing, yes, Zimbabwe is a reality. So are we, and it is time we stop living in the virtual reality that some people want us to live in. [Laughter.] What I want to come to is the following. This is a Medium- Term Budget Policy Statement, so the first thing we need to ask is: What is the policy? Once we know what the policy is we may not agree with it. That is another debate. But once we know what that policy is, the next question is: Are we going to allocate sufficient funds within the constraints?

We examined the information at our disposal and we listened, of course, to the Minister the other day when he unpacked this in a workshop. We learnt that there is investment, maintenance and rehabilitation of economic and social infrastructure, human capital development, and commitment to the criminal justice cluster and increased spending on social services with a focus on targeting the poor. We are told that provision has been made, but will be fine-tuned with respect to HIV. So we aught not to look here to see the fine-tuned figure, but to see the trend that has been developed. I must say Mr Durr was somewhat qualified there, and one heard that concern, but I would suggest that we all examine the information we have been given as well.

The other aspect is the division of revenue. Does this reflect, for the provinces, any increased share? Is there a clearer understanding of the needs of provinces? Indeed, there has been. But perhaps the biggest statement this budget policy statement is making is the emphasis on infrastructure. As we all know, infrastructure will contribute to job creation. We all know, and it has been referred to in this book, that infrastructure will contribute to the nation’s physical asset. I say that the twin side of that coin is the human resource asset, not only the physical asset.

We also learn that there will be an acceleration of skills in this regard. Not only has this Government, but also international institutions and other governments as well, have said that South Africa needs to address at least two issues, and they are human resource development and infrastructure. When we start addressing these two issues our own Government and other governments have identified, and which other parties were talking about probably in the honeymoon period four or five years ago, they are suddenly not issues.

I also heard that, in fact, our economy is not going to grow at the pace and thrust that is indicated here. Then I ask my hon colleagues: What is it that infrastructure will generate? We sometimes talk about this as capital expenditure. There has been a mantra coming throughout the Houses of Parliament and legislatures that capital expenditure is directly linked to economic development and growth. But suddenly now these two are delinked. We learn that the Government’s projection of economic development and growth is in fact unsustainable and far too optimistic, to say the least.

Another factor one would like to look at here is that it is true that when Gauteng examined this there was a note of concern. We did many extrapolations on the figures in the last 15 hours. We were very concerned as to whether we were going to get, in colloquial terms, our cut, as it were, and whether the national Government had honoured their commitment to Gauteng to take into account various anomalies in the data over a period of time, and then we learn, in this budget, that the increases will also address issues such as the child grants.

Well, I must say, after two researchers and myself exhausted ourselves through the night, we came to the conclusion - and I have got a package of that data here - that actually both of these factors have been addressed and that there has been a slight acceleration in that projected division to Gauteng which would take account of the anomalies that arose due to certain data. So we are happy to say to the Department of Finance and the hon the Deputy Minister of Finance that, certainly, we are persuaded that the equitable division of revenue has occurred, or will occur in due course with respect to Gauteng, anyway.

There is another aspect that we would look at here in a statement such as this, which we have not had before. I think no member in the House would disagree that this increases transparency. It certainly does. There are very few legislatures and parliaments that have this. Having come from behind, we are now leading the pack in this regard.

I spend so many hours on the Internet, and it is amazing what rubbish one gets from the States. However, we are in the lead in this regard. When it comes to the imbalances of the past, or what is now being called the injustices, it is quite clear that we would need to address this. The question is: Has the statement addressed it, and will the Budget address it? Without a doubt, there has been an increased percentage towards social expenditure. I heard from some colleagues that, in fact, that is not so. It has slightly decreased. Certainly some of the Idasa figures do seem to indicate that.

However, once again, one needs to ask oneself: If one runs a household and one has R5 000 this year, and one wants to spend more on the children’s education in the following year, will one spend 10%, which is R500, or will one spend 5% if one had the good fortune to increase one’s salary to R7 000 or R8 000? One may find that one arrives at a slightly higher figure. While I am the first to say that percentages can be misleading, I would also ask all of us to examine the real figures and the needs that they are addressing. When one examines the information here, it is clear that a lot of work needs to go into it. The positive aspect here is that we actually have a preview of the Budget. So we have this extra time to study the implications of the Budget.

I want to congratulate the Department of Finance and the Deputy Minister on the focus of Government on infrastructure and human resource development. These twin issues can only take South Africa further. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! I have been advised that the ninth speaker, Mr Makoela, has withdrawn. I shall now call upon the hon the Deputy Minister to respond.

The DEPUTY MINISTER OF FINANCE: Chairperson, I would like to thank members who have participated in the debate. There are a few issues which have been raised by members on which I would like to make a few comments. I think that the submission of the hon Joan Fubbs from Gauteng makes an important point in saying that this is a Budget policy statement. In a sense we are coming out openly and transparently about the things that are going to go into shaping the Budget of the year 2001-2002.

It is important to have this understanding of what this document is about. Also important is the extent to which it empowers Parliament and the legislatures as they execute their function of ensuring accountability and transparency. I would urge all members to really go into the document and read the document. It is fairly simple to read.

Some of the issues that have been raised here are contained in the document. If one were to speak about the problem with the fuel prices, one could refer members to pages 55 and 56 of the document, where one would actually see the composition of the fuel price in South Africa.

Hon members will see from that that the percentage that we levy remains constant, whatever happens to the price. As a result of that, the volatility of the fuel price in South Africa is far less than is being experienced in Europe. This is what explains the demonstrations in Europe by truck drivers and others, because there the levy changes as the fuel price changes. Yes, we have volatility and the fuel prices are beyond our control, but we do not have as much volatility as other parts of the world. Also, the money that is raised through the levy really goes towards important public functions. I think that this year R610 million of that will go towards road maintenance. That is a lot of money, and other money goes to other important public functions.

On the skills development levy, as members would know, this is a levy that was introduced at half a percent and will grow to one percent next year. The route that it goes is one that does not have those amounts appropriated in Parliament, and again, if we were to go to page 39, members would see that route and the different components of the skills development levy.

On the issue of HIV/Aids, I think the important point to make is that the amount we have referred to as a special allocation for HIV/Aids is not all the money that is spent on HIV/Aids. Government has a comprehensive programme on HIV/Aids. Since about 1998, for example, all departments have been called upon to budget for anti-HIV/Aids programmes. So there is this money, but there are other finances that go towards HIV/Aids programmes. In fact, there is work going on to try to put together a consolidated report on all the spending on HIV/Aids.

The issue about linear budgeting for something that is growing exponentially may be a valid point, but it might be missing the point because, quite frankly, resolving the HIV/Aids issue is not only going to come about through throwing money into the problem. It is really going to depend on the extent to which we are successful in ensuring prevention.

There were questions regarding education in our schools and programmes aimed at the youth, and this is what the R75 million allocated this year is doing. It is for an integrated HIV/Aids programme with various components. Part of it is a primary school life-skills programme that involves HIV/Aids education. There is also a secondary school life-skills programme. There is a range of programmes targeted at the youth. This money is managed by the departments of education, health and welfare.

I think the basic point is that that is where our success is going to lie, in ensuring that we can get those who are not infected now to be able to prevent, or rather avoid, infection.

Regarding privatisation, I think there is a very clear outline on page 45 of the document on what the programme looks like. Perhaps one point that one must make is that we are embarking on a comprehensive programme, and that programme has objectives. Some of the objectives that we have are to ensure that we can deliver services and infrastructure at a lower cost, to attract foreign direct investment into our country, to have a fresh injection of capital, and to attract technology and expertise from other countries.

These are the objectives we have, because some of the parastatals and the work that they do are closely aligned with important objectives that the country has at the moment, for example ensuring that one expands infrastructure and access to infrastructure for all people, such as electrification programmes. We do not want to lose those objectives.

Yes, in some cases we do sell outright, such as the forestry programme which has just been completed, but in other cases we enter into partnerships, because we still have important objectives that we need to meet as a country in order to improve the quality of life of our people.

What our programme is not is a fire sale. Our programme is not a fire sale where we would almost give away the assets that we have. Our view is that these assets must help us in a number of respects. They must help us deliver services in a much more affordable manner. They also help us to the extent that the proceeds that we get from them help us to recapitalise the entities themselves, but also to reduce our debt. This is part of the reason our debt as a percentage of our GDP has been falling for the last few years.

With regard to the issue of skills, and without going into a lot of detail on this issue, the one thing that we must understand is that this is a structural problem. One of the things that began to impact on growth in South Africa from the seventies was the shortage of skills, because the skills pool was limited as regards people who were given the critical skills that are needed by a growing economy. It is a deep and a structural problem, and we must understand that the solution to the problem is really in the medium to long term. What is important is that we begin to address the problem of skills shortages in our economy. There are all the indications that we are doing so. The skills development levy is going to be an important contribution in dealing with the problem of skills shortage.

With regard to the question of attracting foreign direct investment, that issue has been studied. What has actually been found is that foreign direct investment normally piggybacks on strong domestic investment. Unless people out there see South Africans themselves investing in their own economy, they will not come. One of the important things that we need to do is to intensify investment in the economy by South Africans. As the House would know, the President has working groups with big business, black business, the trade unions and commercial agriculture. I remember that in one of the meetings we had with big business, one of the issues we were dealing with there was a paper looking at how we can promote domestic investment. We are talking about these issues, but it is important to make the point that we have got to intensify investment by South Africans.

I agree with the member who said that we have achieved macro stabilisation. That is correct. Indeed, we need to begin to move more now towards microeconomic changes, and this is what the retreat with the World Bank and the IMF was all about. It was really about examining the policy initiatives we have taken over the last six years, to examine the outcomes but also to begin to answer nagging questions: Why are we growing at low rates? Why can we not grow at higher rates so that we can begin to absorb a lot of the labour that is in excess in our own economy and begin to deal with those kinds of issues? We have dealt with a range of issues, and of course the outcome is subject to further work that must be done by us as Government.

The member was right in saying that the problem is not the direction, because, broadly speaking, the direction is good. We have recorded impressive results in a short space of time in terms of stabilising at the macroeconomic level.

We need to begin now to focus on those things; so skills, savings and a range of other things come in there. The matters are in hand, and I think that one of the outcomes of that gathering was that perhaps we need to add a bit more urgency, because we are doing some things already, but perhaps more vigour is needed on those issues.

The hon member from the Free State will know that currently there is a phase-in programme that is going on. It is a five-year programme which was largely influenced by the outcome of the 1996 census, because some provinces were found to have a larger or smaller population. It was felt that we need to phase this in so that we do not cause unnecessary disruptions. I think that the recent poverty study is perhaps an issue that we may need to engage more closely in terms of how we are going to deal with it.

I think that those are some of the important issues that were raised by members. A member raised the issue of tax reduction, and suggested that we should not give with one hand and take with the other. I do not know whether this is our record. We have been reducing tax rates consistently, and we have made a commitment to peg the tax-to-GDP ratio at 25%. I do not think that our record is that we give with one hand and take away with the other.

Chairperson, thank you very much and thanks to all the members. [Applause.]

Debate concluded.

CONSIDERATION OF REPORT OF SELECT COMMITTEE ON FINANCE - INTERGOVERNMENTAL FISCAL REVIEW

The DEPUTY MINISTER OF FINANCE: Chairperson, I suppose that perhaps, properly speaking, we should be hearing the voice of the committee of the House on the Intergovernmental Fiscal Review, but we lose nothing in highlighting some of the important issues around the Intergovernmental Fiscal Review. I think the first point to make is that this is the second Intergovernmental Fiscal Review that we are tabling, and we believe that the review makes an important contribution to understanding and analysing the budgets of provincial and local spheres of government, given that a lot of the basic services and social expenditures take place at that level. The other point to make is that the Intergovernmental Fiscal Review must be read together with the Budget Review that we tabled with the Budget in February, as it complements that document. What must be understood as well is that the information that is contained in the Intergovernmental Fiscal Review is largely historic, in that it does not go beyond February 2000. It does not even include some of the adjustments that have taken place this particular year.

Furthermore, the review paints a fairly good picture to the extent that provinces have been able to turn around their finances. We have emerged from a situation where various provinces were running large deficits and carrying huge debts, to a situation where provinces are able to even budget for surpluses that then help them to reduce the debt that they incurred in the previous period. I think this makes the important point that if one incurs a debt, one takes responsibility to service that debt. I think that is an important message that is coming out. So the provinces have responsibility for eliminating the debts that they ran up in the earlier period.

Various trends are referred to in the document, such as growth in spending in the provinces - perhaps slightly less growth than revenue, but we expect that in the medium term there is going to be a recovery in spending at the provincial level.

One of the other important trends that the document makes reference to is the issue of growth in personnel spending. In the medium term we see this trend changing, with personnel spending stabilising and beginning to decline.

The social services sector has grown quite strongly over the last few years. Again, while we will still see growth in social services spending, quite clearly we have to begin to slow down that growth, because there are other important challenges, such as our spending on economic services. We have to boost that, and we have already given an indication about spending on infrastructure.

Capital spending is an area that is set to grow quite strongly in the medium term. Important challenges are around balancing spending between social services and spending on infrastructure. We will also have to decide how we are going to deal with some of the pressures on social services or pressures relating to social services, such as a rise in demand for some of the grants, for example the child support grant. The take-up on that is increasing quite remarkably in some of the provinces. We will also have to take note of the pressure that HIV/Aids is going to place on health services and so on, and the continuing pressure from personnel spending.

The document has got various chapters. Chapter 2 deals with all aspects of provincial spending. I think that perhaps an important point to make here, if we look at some of the sectors like education, is the continued problem of the pressure that personnel spending in education has been exerting on all other education expenditures. It has been 91% of all the money that goes to education, but we see that that spending is beginning to decline. We hope that in the medium term it will come down to 87% of all money spent on education. In that way we will be able to spend more on school buildings, textbooks and other teacher-support programmes.

The document also shows, of course, that there are important variances between provinces so that, while one may have provinces spending on average 40% on education, some spend more and some spend less. This tends to be related to the relative state of a province. The poorer provinces tend to spend above the average and some of the more well-to-do provinces spend below that average.

Health services are also experiencing pressure from personnel spending as a result of automatic promotions. This practice is being phased out and we hope that it will at least enable the health sector to manage some of the personnel spending pressure. One of the issues around health has been the role of conditional grants. The health sector has the largest conditional grants and there have been a variety of problems with conditional grants, ranging from nontransfer of the money from the national level to the provinces to, in some cases, the stringent conditions that national departments place on provinces. A review is taking place at the moment which will deal with the problems around conditional grants.

Regarding welfare, I have already made mention that the take-up on the child support grant is growing and putting increased pressure on provincial budgets. We also have to deal with the pressure to ensure that we can effect inflation-linked increases in the welfare grants. Those are all going to put pressure on the budgets of provinces. The provinces get about 95% of their resources through the equitable share and conditional grants, which is quite different from local government, where almost the opposite applies.

The issue of provincial own revenue has been a source of concern because there has been a consistant decline in provincial own revenue raised. So far the provinces are able to raise about 4% of their total revenues. There are measures that are being taken to improve the situation. I think the importance of the issue is that there is a possibility that in the year 2002 there may be new provincial taxes that will be introduced, hence the importance of ensuring that the current revenues that provinces can raise are raised effectively.

The new feature about this document, this year, is that it also has three chapters on local government. Of course, one would find, in looking at the document, that there may be a bit of an imbalance in terms of information on provinces and on local government, because information on local government has been quite difficult to get. But we are publishing the information that we have, signalling a commitment and intention to continue to intensify our efforts to improve the information that is available on local government.

Again, there are important issues around local government. Firstly, one should give an indication that municipal budgets in 1999-2000 totalled R57,4 billion, but there are huge variances among the different municipalities. In general, municipalities are able to raise about 92% of their own revenue, but, as I say, there will be variances because we have some that are weak and have a very weak revenue base.

The other important point that the document makes is that the equitable share is not the only resource that flows to local government. There are other resources that flow to local government, like community water supply and sanitation programmes, the consolidated municipal infrastructure programme, and a range of other programmes that flow from national to local government, thus boosting the total amount of resources that flow to local government.

The issue about the ability of local authorities to have effective billing and collection systems is an important issue as well which is highlighted in the document. The issue of declining capital spending at local government level is also an issue that the document makes reference to, as is the fact that there has been a very sharp increase in the amount of resources going to personnel spending. There has almost been a 12% increase over the past few years in the money that goes towards salaries.

Generally, however, there is a process that seeks to regularise the intergovernmental fiscal system as it relates to municipalities. There are important principles that have been outlined in the document which we believe should underpin the intergovernmental fiscal relations system as far as municipalities are concerned.

Those are just some of the salient points and I am sure that members will actually be highlighting some of those issues. [Applause.]

Ms Q D MAHLANGU: Chairperson, as the Deputy Minister has said, this is the second Intergovernmental Fiscal Review to be tabled. I just want to indicate that the National Treasury is not obliged to publish this document. The document is very important to the NCOP because we can largely see how provinces spend money and for what purposes.

The document gives us trends in terms of provincial spending. For instance, the amount of resources that can be allocated to deliver a particular service in the Eastern Cape will be different from what the Northern Cape will be allocated. That is point number one.

Let me just indicate that in yesterday’s Announcements, Tablings and Committee Reports is included the report of the select committee with its recommendations, which I will be speaking to later on.

Furthermore, the document deals with the raising of revenue and problems at provincial and local government levels, which the Deputy Minister has talked about. Let me just backtrack a little and say that the first Intergovernmental Fiscal Review also reflected on this matter, but we cannot perpetually complain about it. Provinces need to jack up their efforts in collecting revenue.

As we will be considering legislation some time next year, we need to ask a very pertinent question: Why do we have to have legislation if we cannot optimise the window of opportunity that we have right now? [Interjections.]

Chairperson, could you protect me from the hon Versveld? [Interjections.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Order!

Ms Q D MAHLANGU: I believe that if one wants to be rich one day, one should begin by saving every cent one collects today, so that one can realise one’s goal. This is what I believe about provincial revenue issues.

On a more positive note, the provincial finances are looking good and we need to give credit where it is due.

I just want to address the recommendations of the committee. First of all, recommendation 1(5) in our report refers to infrastructural development. As I said earlier, when we were discussing the Medium-Term Budget Policy Statement, the infrastructure will have positive impacts if we invest more resources in them. Furthermore, we should call upon provinces that have not reprioritised their budgets towards this aspect to do so, in order to accommodate infrastructural development. Provinces should utilise their infrastructural grant to attend to this problem, because I think it is a pertinent issue to be addressed.

Other pertinent issues are going to be raised by other hon members, in particular the local government issue. I think, as we have noted in our recommendation - there are about five recommendations - we intend to undertake a study tour to all provinces to investigate certain issues which are a source of concern to us.

Let me also just indicate that we dealt with the report in a very short space of time because of the pressures we all have, owing to the local government elections. I just want to thank all the provinces that have participated. We see this exercise as a very important and a valuable tool for provinces, but particularly for the NCOP, in terms of the oversight function.

I want to thank the committee members for their diligent and insightful interaction throughout the year, and all the members that represent their parties on the committee: Mr Durr, Mr Theron and Dr Conroy, and all other ANC members of the committee. In particular, I want to thank the committee clerk, the researcher on the study group and everybody else. Without everybody else we would not have achieved what we have achieved this year. [Applause.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Order! I am told that speaker number three has withdrawn.

Dr E A CONROY: Mnr die Voorsitter, agb Minister en Adjunkminister en kollegas, die doel van die interregerings-fiskale oorsig wat deur die Tesourie geproduseer word, is om verslag te doen oor mediumtermynneigings in die begrotings en dienslewering van die provinsies.

Deur die voorlegging van ‘n verslag van hierdie aard word die lede van hierdie Parlement, en meer spesifiek hierdie Huis, en nog meer spesifiek die agb lede van die Gekose Komitee oor Finansies, ‘n instrument in die hand geplaas waarmee ‘n oog gehou kan word oor die fiskale en finansiële stand van sake in die provinsies; ‘n instrument waarmee deursigtigheid bereik word en wat sorg dat daar nie verrassings, of altans groot verrassings, met die jaarlikse begroting uit die hoed getrek word nie.

Die 2000-oorsig is ‘n lywige dokument en leen hom nie daartoe om in die kort tydsbestek wat tot ons beskikking is deur my, en selfs elkeen van die kollegas wat vanmiddag oor hierdie onderwerp gaan praat, in oënskou geneem te word nie.

Die feit dat ek slegs ‘n enkele aspek van die verslag uitlig, moet daarom nie gesien word as sou hierdie aspek veel belangriker as die ander geag word of selfs dat die ander ewe belangrike aspekte nie vermelding of kommentaar verdien nie. (Translation of Afrikaans paragraphs follows.) [Dr E A CONROY: Mr Chairperson, hon Minister and Deputy Minister and colleagues, the purpose of this intergovernmental fiscal review, which was introduced by the Treasury, is to report on medium term trends in the budgets and service delivery of the provinces.

Through the submission of a report of this nature the members of this Parliament, and more specifically this House and even more specifically the hon members of the Select Committee on Finance, are given an instrument with which an eye can be kept on the fiscal and financial state of affairs in the provinces; an instrument with which transparency can be reached and which will ensure that no surprises or at least big surprises can be drawn from the hat with the annual budget.

The 2000 review is a thick document and lends itself to be reviewed, in the short time at our disposal, by myself and even everyone of my colleagues who are going to talk about the topic this afternoon.

The fact that I am only highlighting a single aspect of the report should not be regarded as this aspect being much more important than the other or even that the other equally important aspects do not deserve mentioning or commentary.] Under the heading: ``Key observations and trends’’, it is mentioned that many smaller municipalities do not have significant fiscal capacity, and are in fiscal distress. In the briefings it also came to light that some of these municipalities do indeed find themselves in a situation in which they cannot honour their obligations towards their suppliers and creditors.

One, however, wonders whether these distressing fiscal situations were in all cases caused by really necessary spending or by executive officers who did not know how to keep a prudent and tight hold on the municipal purse strings, so to speak.

It is therefore heartening to be informed by the Treasury that significant institutional and legal reforms are being implemented to improve financial management, accountability and efficiency, and that new policy, legislative and financial initiatives are aimed at the development of a more predictable and stable environment which should enhance municipal creditworthiness.

I did ask the Deputy Minister at the briefings whether the proposed institutional reforms would also include the possibility of the Office of the Auditor-General being enabled to recover some of the outstanding audit fees owed to it, even before transfer payments are made to local government in future. Although I do not wish to, and am not even attempting to, speak on behalf of the Deputy Minister, I understood that this aspect was or had been quite a big problem for the Treasury, and although it is not the policy of the Treasury to throw financial lifelines to individual entities, some arrangements are being made to alleviate this problem - news which, I am sure, the Auditor-General will welcome.

In closing, I wish to commend the National Treasury on a quality publication, which goes a long way towards creating transparency in the annual budgeting process. [Applause.]

Mr A MARAIS: Chairperson, I am not going to be long. [Interjections.]

Asseblief! [Tussenwerpsels.] Ek het nie gehoor nie. Ek hoop daardie agb lid sê dit harder. [Please! [Interjections.] I did not hear. I hope that hon member will say it louder.]

The inclusion of local government data in the Intergovernmental Fiscal Review is to be commended. Its publication will greatly support municipalities after election in establishing a vibrant local government system.

In anticipation of some disturbances which will be occasioned by the remodelling, some leniency will have to be considered. In other words, the production of spreadsheets should not serve as prerequisite for the analysis of local government finance in the short to medium term.

The knowledge and experience available at council level, and indeed in provincial representatives of Salga, could serve the same purpose as hard data. The impressions of councillors and officials at local level are very important in bringing life to the cold numbers produced by spreadsheets. It is from this premise that we would urge, or appeal to the Deputy Minister to work closely with the Minister for Provincial and Local Government in ensuring that provincial intergovernmental forums become repositories of such reliable data. [Applause.]

Mr K D S DURR: Chairperson, I have to be very brief, as I only have two minutes. [Interjections.]

I believe the Minister and his department have done very well in settling the provinces down into much more acceptable administrative patterns and budgetary trends. I have to tell the Minister that it is like a breath of fresh air to listen to him and to read the documents - really, honestly. That does not mean that I agree with everything, but the process is such a very good and healthy process, and is bound to lead to great improvements in our national life. I really do not take it for granted, and I am deeply impressed by the process.

I believe the real challenge will come in the short and the medium term from the transformation of the unicities and our capacity to deliver. That is where it is going to come, and I do not believe that we have sufficient financial expertise in the public sector of our country to cope easily with the transformational, developmental and planning demands of the much larger unicities and local authorities. They are going to bring enormous pressures and demands. I wonder whether we have the personnel.

Public-private sector partnerships are going to have to play a much larger role for us, if we are to have any hope of success. Of course money is a problem - wise budgeting and prudential arrangements are important - but it is not a central problem. There is a definite skills shortage in the rest of the Public Service which will hamper their ability and that of government generally to deliver. We have a shortage of 300 000 to 500 000 managers at the moment, and there has been a significant decline in the training of people to become technical workers as well as in engineering and in the sciences. I have to say the enrolment figures at our universities are truly alarming.

The whole thing is aggravated by the brain drain, which the Minister referred to also, as did my colleague here. According to the SA Institute of Chartered Accountants, they had lost 19% of their 17 591 signed-up members to emigration by November of 1998 - that is 19% of registered chartered accountants lost by 1998, and I think it has gone a lot worse since. One of the vital things one can see if one looks at any of the economies of the world that grow is the dynamic movement of people. The reason that the US is a champion nation is that they attract champions. Champions are fighting to get into that country. We have to get people fighting to get into this country, those who want to come. We should train our own people - yes, that is the first priority - but let us also make it easy for people to come and to stay. That dynamism of the movement of people and information, and of the knowledge and energy they take with them, is absolutely vital in the whole process.

These realities of capacity to deliver will place huge demands upon the provinces, the Treasury and the Finance department generally. My hope is that the department has already started expanding and training the teams that will have to cope with the exciting possibilities that are opening up for us. I trust and I am confident that they will rise to the challenge.

Of the performance of the three tiers of government over the past years, the third tier, with notable exceptions, has been the most disappointing. It is here that delivery and so much else has often failed and sometimes fails spectacularly. Of course there have been successes also, but we must win here if we are genuinely to improve the lives of our people.

May I end on a positive note? If we all do our duty, South Africa, as is its habit, will solve its problems. We wish the Minister, his Deputy and his department well during the post-election period, when huge demands will confront them with the reforming and aggregation of the great new unicities. [Applause.]

Mr T B TAABE: Mr Chairperson, I must say to the hon Kent Durr that I do not really want to respond to the kind of remarks he has just made. [Interjections.] No, it is him. I do not really want to sink to the level of the gutter. As you, Chairperson, and members of this House would know, it is amazing how much political baloney and rubbish he normally says in this Chamber. So I am not surprised at all.

However, let me take this opportunity to congratulate the national Treasury on its prompt release of the intergovernmental fiscal review for the year 2000, and also to congratulate the national Treasury on breaking new ground in relation to its release of very detailed information, on local government finances in particular.

We are heartened by the fact that the national Treasury has kept its word and that when it released the previous intergovernmental fiscal review in September of the previous year, we were given assurances as the Select Committee on Finance that it would also be releasing information on local government finances this year.

The very fact that that has happened is quite unprecedented in the history of this country. Members of this august House would know that no previous government in this country has ever made such a revelation. This revelation is yet another first for the ANC Government. We are also quite mindful of the difficult times ahead for all of us. The other point that must be made is that while the biggest 10 municipalities account for 65% of municipal budgets, we are also equally mindful of the fact that the smaller and unviable municipalities may not be well placed to expand service delivery, owing to the points I made earlier on.

As the ANC, being a movement with a proud history of struggle, we will not give up on this struggle either and will ensure that we do everything in our power to facilitate speedy reforms in the area of municipal budgeting and finances as also espoused in the Municipal Finance Management Bill.

In addition, we are also convinced that we are on course towards accomplishing the kind of clear objectives we have set for ourselves. We also acknowledge, as other members have pointed out, the difficulties in obtaining precise and reliable municipal data. We must say that this problem can only be realistically solved in the medium to long term.

In so far as the area around reliable municipal data is concerned, I will also be addressing this pertinent aspect when we deal with the Fiscal and Financial Commission’s recommendations.

Otherwise, we want to thank the Minister, the Deputy Minister and the national Treasury for a job well done. [Applause.]

The DEPUTY MINISTER OF FINANCE: Chair, there is not much that has been raised. I think this has been a positive debate overall. Perhaps the point that one needs to make is that the debate should help all of us to focus our minds on how best this document assists this House as the National Council of Provinces. It is an issue we need to pay some attention to. We spoke about it in the committee earlier in the week. I am really just re- emphasising the point.

To the hon Marais, let me say that we do acknowledge, firstly, the difficulties in getting information on local government, but we also acknowledge the variations between different municipalities, and so I think that the process has to continue to do a much closer and deeper analysis of the various budgets of the different local authorities. We are, of course, working fairly closely with the Department of Provincial and Local Government. For example, the work around the redemarcation process led to a lot of intense interaction between Finance and the Department of Provincial and Local Government, so that even where we are today, in terms of how we support the process, reflects that reality. Of course, the problem of skills in South Africa is a big one. We spoke about it in the earlier debate in relation to the economy. As far as the public sector is concerned it is also an issue, because the sorts of things that we want to do require certain types of skills. If one says that one wants integrated delivery, with departments working more closely together, that does also call for a certain type of skill in terms of managing and planning for cross-cutting programmes. It is an issue, and all we have to do, really, is to continue to train, train and train people. That is the best way.

We are looking, as Government, at the issue of how one makes it easy for skilled people to come into the country. Hon members would know that the kinds of provisions that we have in our immigration system are archaic and meant for a particular era, but that is all undergoing change. As hon members would know, there is an immigration Bill currently under discussion, or in fact making its way towards Parliament. So it is an issue that is under discussion.

Let me point out to the hon Taabe, that one issue that he will pick in the document is the fact that for some of the stronger local authorities there is a decline in the equitable share, and this recognises that we have some really weak local authorities that have a weak revenue base and really do not have the capacity to raise a lot of revenue. It is a recognition of that. [Applause.]

Debate concluded.

Report adopted in accordance with section 65 of the Constitution.

    CONSIDERATION OF REPORT OF SELECT COMMITTEE ON FINANCE - FFC
                           RECOMMENDATIONS

Ms Q D MAHLANGU: [Inaudible.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Order! It seems as if the hon member is having a problem with the sound system. I wonder if we could get some help with it, because we just cannot hear her.

Ms Q D MAHLANGU: Chairperson, this is my last speech for the day, and it has not been easy for me. I just want to thank members for their attention for the whole day by listening to the select committee report. The report we are considering today is a very important report on the intergovernmental fiscal relations in our country.

The Financial and Fiscal Commission tabled its report on recommendations for the 2001-2004 MTEF cycle in May 2000. The select committee then held public hearings around August for about two days. First of all, I want to commend the Financial and Fiscal Commission for the thorough research and work that has gone into compiling the report. I think they have gone a long way in trying to come up with alternative ways of doing things and in improving the current formula we are using. The select committee had the following questions to raise: Firstly, whether the current formula impedes the delivery of services in the provinces; secondly, whether we have explored or exhausted the current formula to its full potential in terms of resource allocation; and, thirdly, whether the introduction of the new formula is the panacea to our difficulties in respect of resource allocation.

Raising the third question did not mean that the committee is blind to the critical issues that are raised in the document. We are raising this issue against the background that we are a new democracy and that this formula has only been implemented for a few years. As the formula is beginning to mature there are now new proposals for it to be changed or updated. Therefore, it is against this background that we are asking this question.

The committee had several observations to make, as they were raised in the document and also as they were raised in the public hearings by relevant stakeholders who attended. One can see from the ATC report who the stakeholders were who attended.

One of the issues which was raised was around local government. In the document there is no mention made of local government by the Financial and Fiscal Commission. The fact that the Financial and Fiscal Commission does not make any recommendations regarding local government as the third sphere of government, was a source of concern to the committee.

We are also alive to the fact that we are approaching the elections. At the time we did not know when the elections would be held, but we now know that they will be held on 5 December.

Therefore, the Financial and Fiscal Commission had to say something on local government, but they did not say anything. So we said that the Financial and Fiscal Commission should work on some of the issues around local government and then come back to report to the select committee, in particular on the impact of the costed-norms approach to the local government sphere. Regarding the data, the issue has been raised from time to time in the committee about the complexity of the data. The IMF raised concerns around the quality of data from provinces when they visited the committee some time last year. I think this ia a mechanism and an issue that the select committee should be working on in partnership with all stakeholders involved, and also with other statistics organisations in the country, in particular, Statistics SA, if we want to improve data collection in the country.

Another point which was raised, and which I think is being attended to with the introduction of the Public Finance Management Act, is that of unfunded mandates. Section 35 of the Public Finance Management Act deals with unfunded mandates. It goes like this: If any department wants to introduce legislation, it must cost that type of legislation and raise the financial implications to this effect.

Therefore, the FFC’s fears, in our view, are not genuine, because the PFMA is beginning to deal, largely, with the problem. We also cannot pre-empt what difficulties there are going to be when the PFMA is implemented. We are yet to see that. We want to give this implementation phase a chance. We can then evaluate or monitor from time to time and improve, because no policy is cast in stone.

There were a number of suggestions that we should move away from the form of budgeting that we are using now, and move towards performance-based budgeting. The PFMA deals largely with the matter, and we need also to give an opportunity to the PFMA to kick in and therefore to realign and make sure that all institutions of Government, and also public entities, align their budgeting formats to this effect, so that we can see whether we are achieving the desired objective. If we are not, we will have to come back at some point. However, we feel that we should give this provision a chance.

We are also alive to the fact that the FFC is suggesting a number of issues around the costed-norms approach, but there are macroeconomic constraints in the country. There is no open-ended fiscal envelope, so within those parameters the resources get allocated. We are saying that we should look at the costed-norms approach within those parameters, namely whether it is going to be cost-effective for us when we move from the formula we have to the new formula. If it is not going to be cost-effective, why then move away from that?

Regarding conditional grants, this is an issue which has been raised from time to time. I think even in the intergovernmental fiscal review it has been raised that there are discussions to improve the conditional grants issue. People have raised the fact that grants are not dispersed to provinces at the required time. They are only dispersed to provinces late in the financial year. People are then forced to spend for the sake of spending without a desired objective. All those things lead provinces to overspend, etc.

I am sure we have discussed other issues like infrastructure and social services during the course of today. I want to reflect for about two minutes on the recommendation that the committee has come up with. The difficulty we had was that provinces did not respond to the FFC document, as required. One of the hiccups was that there was no clear and defined relationship among the FFC, Parliament and the provincial legislatures. The select committee then agreed that we were going to make sure that we developed the proper and necessary protocols for this relationship to be well defined, so that we know how to channel future documents of the FFC. As a result of the fact that provinces did not participate actively in making meaningful inputs on all the implications that this costed-norms approach would bring, we decided that we wanted all the provinces to workshop this document. If we rejected or agreed with this document, we would then know exactly what we were rejecting or agreeing to. The select committee is going to work hard on those things to make sure they are realised.

We also want to continue our interaction with local government, in particular organised local government, Salga, in this instance, to engage them on the issues and to find amicable solutions. At past committee meetings, Salga has raised critical issues, and we think that those issues should be solved one way or the other. I think we are alive to the fact that in the medium-term Budget policy statement, as tabled, and in other documentation, the national Treasury has tried to address some of those issues, but some of them are works in progress.

I want to thank the FFC, again, for giving us this opportunity to interact with this document. We might not have done justice to it, but I think we began a process which we are going to build on. We might do justice to the next documentation. We might also just wait and see the end product of the workshops that we are going to be having, and what the results are going to be.

The last recommendation that I want to talk about relates to the fact that we wanted to engage the National Treasury in developing norms and standards to guide service delivery. The point was raised in the public hearing that the FFC could not come up with these national norms and standards because they are of the Government, and that politicians must draw them up. That is why we suggest that we interact with the National Treasury to develop such norms and standards.

We welcome the views that were expressed. We are not closing the door to provinces’ inputs in this process because we regard the recommendations from provinces, in particular the legislatures, as being just as important as all the research that went into this document.

Without wasting any more time, we just want to thank members of the committee again for having been so kind throughout the year and for participating in all the committee meetings without fail. We also thank the National Treasury, and everybody else who made the work of the committee successful. Let me thank you very much, Chairperson, as this is my last speech for the year. [Applause.]

The DEPUTY CHAIRPERSON OF COMMITTEES: That is why I gave you two more minutes. [Laughter.]

Ms J M L FUBBS (Gauteng): Hon chairperson, I just want to preface my input in this debate by saying to the Whippery, yourself and the chairperson of the Select Committee on Finance that certainly from Gauteng’s side we welcome the fresh structures of engagement and approaches that we have experienced this year, for example the debate on the recommendations of the FFC itself and that on the Medium-Term Budget Policy Statement earlier. Clearly we are moving in a direction that will allow us to constantly underpin the democratic structures created by the Constitution.

With respect to the FFC, I must say that one has had so many things to make an input on during the course of the year. We requested so often to do this with the FFC, but at the 11th hour it was not always possible to submit what could be called a formal, written input. This is one of the areas that, I am sure, the structure of the NCOP and the respective legislatures would have to pursue.

Suffice it to say that we see these recommendations of the Financial and Fiscal Commission, as far as Gauteng is concerned, as a complementary tool with which to ensure that allocative efficiency and the mandates that we have committed ourselves to, through the Constitution, can be effectively implemented. We say we see this as a complementary tool because, indeed, if one looks at the National Treasury’s formulae and approach to the division of revenue and so on, it is quite clear that they are taking broader parameters into account, and that there are constraints of data and capacity at this moment in time that could possibly be a limiting factor.

Nevertheless, from Gauteng’s perspective, we believe that the costed-norms approach does not replace sound planning and robust budgeting. Instead, it is viewed as an instrument to assist in these processes, and, indeed, it complements political decision-making.

We have heard it said in this Chamber before that information is absolutely vital, and that, without it, there is a greater danger of making the wrong decisions. As such, the approach cannot simply be imposed, but is rather part of the hamornisation of medium-term budgeting to provide basic services and promote economic development and growth in all provinces within the constraints of the Budget.

The costed-norms approach underpins benchmarking in the provision of services, which contributes to performance budgeting and, in turn, to more effective delivery and greater accountability of resources.

What one should emphasise is that this approach is not at all prescriptive, but that it works within the principle of progressive realisation of basic rights and an acknowledgement of norms and standards in this regard. This also increases transparency.

As provinces recognise the need for more efficient and effective budget planning, the need for a more effective method of costing becomes a critical component in the value for money delivery and meeting basic needs. There is less fudging of figures.

The move towards programme budgeting would also benefit from the costed norms approach. But let me hasten to say that this is a tool, and unless one has the policy in place, one would find that simply using this in an ideological manner would move one away from the direction of prioritised policies. It would also be a fallacy to single out this approach as a miracle instrument, as some would have us believe. Just as we are not employing only zero-based budgeting, a performance-based budget system, or a programme-based budget system, instead, we are employing a combination of the advantages of all of these systems.

In fact, our own Constitution which talks about co-operative governance is a totally new concept internationally. I think South Africa has made it clear that it is charting or pioneering a number of concepts away from what in the past were rigid and ideological policies. As long as we keep that kind of concept or principle in mind we will appreciate this particular tool that is in the process of being developed. And one may say there is a lot of fine-tuning still to be done.

Certainly, the costed-norms approach will contribute much in the long term to sound budgeting processes and planning. It is also or could be constructive to pilot it against some of the larger votes. It has the capacity to promote efficiency by recognising opportunity costs of reallocating resources.

One of the problems that we ought to recognise when we look at a tool is that one cannot use the same tool for everything. If one is a carpenter - my uncle is a carpenter - one has a bag of tools. One looks at what job has to be done and then selects the right tool. So it is in this particular instance: We must recognise one of the shortcomings of a costed-norms approach at this stage or this phase of our history, and that is the fact that it puts undue pressure on the capacity of personnel in the various departments.

The question that we would have to ask as we begin to employ it is whether we have the capacity in that particular unit. I would like to thank the hon Chairperson for giving us the opportunity to speak on this topic. [Applause.]

Mr G A LUCAS: Chairperson, I am sure it is not necessary to thank the hon members again, because it is the third time that I am standing up to speak. Perhaps members are feeling bored now, because since we started this morning we have been dealing with issues of finance and the finance committee, and the launch of the dictionary. The only distraction was the discussion that we had earlier on about police brutality. Except for that, it has only been discussions about issues of finance. Other chairpersons are feeling threatened because they think that the Chairperson of the Select Committee on Finance is trying to recruit members into the finance committee, something which might put her in a very difficult position. I think she must just clarify that it is not her intention to recruit members into the finance committee. The Northern Cape province congratulates the Select Committee on Finance on hosting a very successful public hearing on the recommendations of the Financial and Fiscal Commission. We also congratulate the Financial and Fiscal Commission on changing our mindset regarding the budgetary process. Once more, these recommendations reaffirm the important role that the FFC can and must play in our budgetary process.

We in the province are mindful of the obstacles to an immediate adoption of the proposals of the Financial and Fiscal Commission, but argue that such approach will have more relevance in the longer term as it is most basic and simple and very helpful.

We suggest that the Select Committee on Finance should, in the interim period, actively intervene in the process of data enhancement, precisely because of the weaknesses in the accuracy of data, which create problems with regard to the allocation of resources. Hence we are unable to adopt these recommendations from the FFC. We are aware that the quality of data at present available in the provinces is poor, and therefore the implementation of this information-intensive approach to horizontally equitable shares, known as a norms-costed approach, is doubtful at least in the short to medium term. Therefore the Select Committee on Finance needs to interact with Statistics South Africa and the various national departments, with a view to devising ways of improving financial data at provincial and local level.

On the subject of the conditional grant, the public hearing was informed that the FFC had not yet completed its work on conditional grants, and the National Treasury currently has a study under way relating to the same issue. We therefore think that it would be appropriate for the FFC and the National Treasury to complete this work, because this is one area which continues to create problems for us in the provinces. It is one area which continues to ensure that we experience financial difficulties in accessing conditional grants, but also in their disbursement according to the timeframes which are involved in this process.

Whilst conditional grants provide another source of funding programmes to meet the norms and standards related to provincial needs, they should be limited and used to promote decentralisation and the principle of good governance as applicable to subnational governments.

Conditional grants are a component of the national equitable share for which national Government must be accountable.

The FFC acknowledges that conditional grants may be appropriate in certain circumstances. The Northern Cape is of the view that to categorise learners in nine distinct components is useful for provinces since certain categories of learners require additional resources. We, however, have reservations about the clustering of personnel and nonpersonnel expenditure cost for education in the education formula. This is a serious shortcoming, and our province would like the FFC to explore in greater detail the implications of the proposal.

The Department of Education has established norms on funding of schools with implications for personnel and nonpersonnel expenditure. The Financial and Fiscal Commission should engage with the Department of Education in order to obtain clarity about some of these proposals.

While it is clearly understood that the Financial and Fiscal Commission’s recommendations do not address themselves to local government, consideration will have to be given in the not-too-distant future to the role played by the costed-norms approach in the finances of local government, in line with the demarcation that is currently taking place, and ensuring that the financial sustainability and also the allocation of resources to local government become more professional, reaching local government in time for local authorities to perform their functions when they are unable to raise their own revenue.

The Northern Cape province looks forward to the views of the FFC in relation to local government. We in the province would like to request the FFC to investigate the extent to which the iterative process may end up substantially similar to the existing budgetary allocation. The ``iterative process’’ refers to the alignment of the norms and standards approach with the MTEF. The result of this study will reveal the validity of the costed- norms approach.

We recommend further engagement with the FFC, in terms of its recommendations, by provinces and in particular by the NCOP, so that much more clarity is brought, but with a better understanding of the FFC recommendations, and therefore a better input from all stakeholders to ensure that they are enriched, and therefore that whatever recommendations come forward will be better accepted by all stakeholders to ensure that our national revenue is well spent, and also that our provinces and local government benefit from this national revenue. With these few remarks, I thank the FFC and the select committee for a job well done. [Applause.]

Dr E A CONROY: Chairperson … [Interjections.] I cannot speak English! [Interjections.]

Chairperson, hon Deputy Minister, members, a comprehensive new approach to the division of revenue between the three levels of Government has been proposed by the Financial and Fiscal Commission.

The present approach, as far as the division of revenue is concerned, has been a bone of contention in the past between some provinces and central Government when the former alleged that they were not receiving their fair share of the revenue cake. The current equitable share formula of the Treasury is based on the demographic and economic profiles of the various provinces, which are taken as indicators of the relative need in each province for social service delivery, while the rest of the formula consists of components reflecting other provincial spending pressures.

According to the FFC the new suggested approach will go a long way towards a fairer and more just division of funds between central Government, the nine provinces and local government. The FFC’s point of departure in their new proposal is that the indicators of relative need are, for various reasons, inadequate for the purposes of a horizontal split. They have therefore proposed the costed-norms approach, which would, in the first instance, cost the service delivery mandates and determine whether provinces are adequately funded to provide the basic services as required by the relevant national norms and standards; secondly, determine the relative sizes of each of the components on the basis of unavoidable costs instead of actual expenditure; and, lastly, estimate the variable provincial costs in service delivery.

The Treasury, however, argues that although it agrees with the costed-norms approach in principle, insufficient information is available to apply this approach to the horizontal division of revenue and that, in the absence of sufficient public sector performance data, there is no information about the links between the inputs and outputs in social service delivery.

Secondly, the Treasury argues that not all social service norms are sufficiently defined and that, in the absence of uniformly clear input norms, it would be unclear how the relative sizes of the social service components in the formula will be determined. Madam Chair … sorry! Mr Chairman, we are of the opinion that the costed- norms approach makes a lot of sense. We feel, however, that although it may be the way to head in the future, there is no point in moving in that direction at this stage if we do not have the capacity and the information to ensure the successful application of the suggested approach. [Applause.]

The DEPUTY CHAIRPERSON OF COMMITTEES: Thank you, Dr Conroy. I take that as a mistake.

Mr T B TAABE: Chairperson, the Select Committee on Finance, the National Treasury and the FFC, as I pointed out earlier on when we were discussing the Intergovernmental Fiscal Review, are basically aware of the fact that the quality of data at present available in provinces is poor. This observation was also made by the IMF when it briefed the Select Committee on Finance. However, I wish to remind hon members of this House that the implementation of the horizontal equitable shares in our provinces by what is known as the norms-costed approach is in fact information-intensive.

Top-quality data is an essential requirement for the implementation of this approach, as other members of the select committee have observed, and I would like to respond regarding the aspect that deals with data collection in relation to the costed-norms approach.

The members of this House will know that in a perfect world of perfect information the Financial and Fiscal Commission’s costed-norms approach would undoubtedly be a key tool for the allocation of resources across all spheres of government rather than the current approach used by the National Treasury.

However, the point must be made that in the world we live in such quality information is not readily available, taking into cognisance the fact that the cost of research to obtain such information is indeed very high.

In the context of our own country, regarding the approach as suggested by the FFC, in relation to it being a better intergovernmental resource allocation than the one suggested by the National Treasury, I must also point out that in an ideal world the Financial and Fiscal Commission’s formula would be based on the costed-norms approach, which would be irreconcilable with the National Treasury’s approach.

Moreover, it is likely that the costed-norms approach may not be implemented in all education, health and social services, in the short term, for a number of reasons. Firstly, the national norms and standards have not been defined in these areas. For instance, what kind and type of medical treatment would constitute a minimum, primary or secondary health care standard? This has not been defined.

Secondly, the required information is not available, and both the National Treasury and the FFC acknowledge that. We heard that when we had the public hearings and also in various other interactions as a committee with the FFC. Thirdly, it could be argued that there may very well be good reasons for not defining such minimum national norms for service provisions.

The concluding point that I want to make is that this approach, the costed- norms approach, should not be implemented unless and until sufficient quality information is available to support its fruitful application. We argue that since information is not easily available and the cost of researching such information is very high, the use of proxies may be necessary under the circumstances, in which case the FFC formula may not be an improvement on the existing one.

With these few remarks on data collection as against the costed-norms approach, I wish to thank the Chairperson and members of this House for according me the opportunity this afternoon to address them on this very important matter. Our heartfelt thanks must also must go to the Deputy Minister for the way in which he has interacted with the committee and this House on these very pertinent issues. [Interjections.] [Laughter.]

I also want to wish Kent Durr and his ilk and the Therons and Dr Conroys of this world a happy Christmas. We want to wish them a merry Christmas and indeed a wonderful new year. [Interjections.] Probably they will come back to this Chamber, next year, as sharp as a razor, given the kind of outburst one normally hears from such unintelligent old men who sit in this Chamber. [Laughter.]

Mr Z S KOLWENI: Chairperson, hon members of this House, the North West province congratulates both the Select Committee on Finance and the Financial and Fiscal Commission on their performance over the past month. However, we have to raise a few points, some of which have, in fact, been touched on by various speakers across different Ministries.

In the past, both Cosatu and the provinces have voiced the opinion that allocations to provinces and to line departments are insufficient to provide the minimum levels of basic social services. Cosatu often argues that this is the result of the determination of financial resources on the basis of meeting microeconomic objectives, as opposed to any reference to actual resource requirements. Therefore, in these circumstances, the Select Committee on Finance is of the view that it should host public hearings on the implications of expanding budget deficits for the provision of basic services.

However, as members of this House, we are aware that the national executive determines the size of the Budget, and we would not want to infringe on this right. But my province feels that hearings would clear up some of the concerns that the various constituencies have. We also expect to be briefed on some of the adverse implications of a larger Budget deficit.

On the subject of interacting with civil society, the Select Committee on Finance will have to devise ways of engaging with various members of society on a more regular basis.

On the subject of rationalising the Public Service, transformation is a key challenge facing the Public Service. The Public Service has to respond to the requirement of changing its composition to become representative of the overall population. The key issue, within this context, is the pattern of expenditure within the Public Service in relation to personnel. The dominant theme is efficiency achieved versus expenditure.

The Government is concerned about the rapid rise in the disproportionate share of personnel spending in the Budget. In the development of personnel spending, two phases have emerged clearly in the recent past. Between 1994 and 1996 personnel costs rose rapidly, outstripping the growth in budgets. After 1996 real growth, measured by the consumer price index, slowed significantly, but since total budgets lagged behind the consumer inflation, the share of personnel continued to rise.

The North West province is eager to hear the views and comments of the Financial and Fiscal Commission in its future studies, particularly on the question of norms and standards. Otherwise the province accepts the recommendations. [Applause.]

Debate concluded.

Declaration of vote:

Mr A MARAIS: Chairperson, on behalf of the Free State, I would like to say that the interaction with the FFC report has really assisted in revealing what an important institution the NCOP really is. What is required of us as members is to enhance intergovernmentalism.

Yesterday at the committee meeting we initially declined to vote in favour of the report, but we would like to retract that. [Applause.]

Report adopted in accordance with section 65 of the Constitution.

                        FIREARMS CONTROL BILL

            (Consideration of Bill and of Report thereon)

The MINISTER OF SAFETY AND SECURITY: Chairperson, hon delegates, the Firearms Control Bill introduces a new dispensation of decisive action against violent crimes in South Africa. It is the prelude to a series of practical measures which will empower the criminal justice system to root out the evil of firearms violence from our society. These measures include the training and deployment of designated firearms officers at police station level, the utilisation of advanced information technology to implement a reliable and integrated central firearms database which will be updated on line, and efficient measures to ensure the competence of private individuals and Government employees who are allowed to possess firearms.

The Bill sets a new standard for effective gun control without compromising the right of honest law-abiding citizens to arm themselves against the callous conduct of criminals. The standard of excellence and practical efficiency achieved in the final version of the Bill pays tribute to the high integrity of our democratic process.

I would like to thank all interest groups and individuals who have participated in this process for their contribution. They were indispensable to the creation of a well-balanced and legitimate legislative instrument. I am convinced that we can count on them to render the same level of assistance in the open and transparent process which is in progress for the drafting of regulations in terms of this new legislation.

Mr Mahlangu and the delegates who have participated in proceedings of the select committee deserve a special word of sincere appreciation. Under the chairmanship of Mr Mahlangu, the select committee has succeeded in supplementing the excellent work of the portfolio committee. They have not only scrutinised the provisions of the Bill from a new perspective to ensure its political and practical integrity, but they have also demonstrated their commitment to participate in the implementation and further development of the new firearms dispensation.

This commitment is embodied in the resolutions which we have formulated and which will be invaluable to the drafters of the regulations and to all others who will be involved in the development and implementation of the new dispensation. The resolutions cover a range of matters varying from suggested safeguards against perpetrators of domestic violence who might escape the scrutiny of the register to measures ensuring that applicants for firearms licences will not be prejudiced in the evaluation of their competency to possess firearms. This demonstrates a firm commitment to unbiased objectivity which is essential to the achievement a true democracy.

After the introduction of a series of positive amendments in the course of the democratic process before Parliament, we have, on the one hand, come up with strong and efficient control investigative powers so as to ensure that criminals are deprived of easy access to firearms and that they will be prosecuted successfully for their reprehensible deeds, and, on the other, with full and proper accommodation of the legitimate needs of law-abiding citizens to possess firearms for self-defence, hunting and sporting activities, as well as for lawful business purposes.

The Bill serves the need of responsible law-abiding citizens and is not against them. It targets the criminals who maim and kill our people at will. The Bill is also a tribute to the defenceless victims of violent crime, whose voices echo in the strong measures created by the provisions of this legislative instrument. We owe much gratitude to these interest groups who have demonstrated their unqualified support for our endeavour to leave no stone unturned in our battle against violent criminals.

Only competent persons will in future be licensed to possess firearms. Competency training and testing is introduced as a basis for consideration of every application. This requirement will ensure that firearms are not lost or stolen from licence holders because of their incompetence to store, carry and use their firearms responsibly. Criminals will be disqualified from the privilege to possess firearms. The Bill requires a high level of integrity and responsibility from persons who wish to qualify for firearm ownership.

An inclination to violence, unstable mental condition and dependency on drugs or alcohol are disqualifying factors. Special precautions are taken in the Bill to ensure that perpetrators of domestic violence and sexual abuse are not allowed to possess firearms. The competency of firearm owners will further be guaranteed by measures calculated to detect the development of incompetency to possess firearms and to allow for the appropriate cancellation of licences. These measures include periodic relicensing and the empowerment of the courts and the registrar to inquire into the fitness of a person to possess a firearm.

Designated Firearms Officers will be deployed at station level to ensure that firearms are stored appropriately in prescribed safes and to guarantee proper investigation of matters in terms of the new firearms legislation. Investigation of arms-related crimes will be enhanced by an arsenal of additional investigative powers guaranteed in the Bill. These powers will facilitate procedures such as seizures ballistic testing of firearms and taking of fingerprints, other body prints, genetic samples and other bodily samples. Police powers granted in other legislation will remain intact and will be supplemented by the provisions of the Bill.

Full and efficient use will be made of the latest advances in information technology to enhance police investigation and eliminate the need for an excessive personnel infrastructure to implement the legislation. Online updating of an integrated database and a new electronic finger print identification system will contribute substantially to the integrity, cost effectiveness and efficiency of the new dispensation.

For the sake of the efficient prosecution of criminals who possess firearms without a licence, the state is armed with a number of presumptions. Internal as well as external constitutional experts were consulted to ensure that the constitutional rights of individuals were afforded due consideration in accordance with the principles contained in the Constitution and in the decisions of our Constitutional Court.

Accordingly, no reverse-onus presumptions which could place a burden on an accused to disprove possession of an illegal firearm were created. Instead the right to silence of such an accused is limited by the presumptions, placing a burden on him or her, in appropriate circumstances, to adduce evidence which would create a reasonable doubt. This excludes the possibility of a finding of guilty in the absence of proof beyond reasonable doubt. Additional constitutional safeguards provided for in the Bill include an obligation on the police to conduct a full and comprehensive investigation as well as other prerequisites before the presumptions become operative.

Abuse of the presumptions by the police to effect arbitrary arrest will be impossible or at least extremely difficult. Official institutions do not escape from the scope of the strict control measures in the Bill. An entire chapter of the Bill is devoted to guaranteeing efficient control over state- owned firearms. I shall reinforce the provisions of the Bill with appropriate regulations imposing strict competency requirements which will be tailor-made to address the current problems of firearms issued to irresponsible or poorly trained state employees.

The pool of firearms, firearm parts and even ammunition available to criminals who steal these articles to further their heinous occupation will be reduced. The Bill imposes general limitations of only one firearm to be licensed to an individual on a motivation of self-defence and a maximum of four firearms to be licensed to an individual in the absence of special needs.

Strict scrutiny of applications will ensure that only those with a real need to possess a firearm are awarded a licence. We will also contribute to preventing the unnecessary proliferation of firearms. Control over the possession of ammunition and certain firearm parts is an additional safeguard against the easy access of thieves to large supplies of these items.

Firearm-free zones is another novel concept introduced by the Bill. The safety of these zones will not be compromised because armed security will be allowed. Firearm-free zones have, to some extent, been implemented by certain organisations and individuals in control of premises. The Bill provides more comprehensively for this particular need.

Penalties provided for in the Bill will fit the gravity of the offence concerned. Severe penalties of up to 25 years’ imprisonment may imposed on criminals who are found guilty of illegal trafficking in firearms or who are caught with unlicensed firearms.

It is no secret that our criminal courts are overburdened with work. The new dispensation will alleviate that burden while ensuring that reckless practices endangering our community will not escape the long arm of the law. Administrative fines will, in appropriate instances, be imposed on transgressors by the registrar unless the suspect insists on being tried in criminal court. Such a matter will be finalised without burdening the criminal justice system.

The final content of the Firearms Control Bill also bears witness to the participation of the firearms industry, firearm collectors, farmers and hunting and sports-shooting enthusiasts, whose contribution to our economy and tourism in South Africa is valued very highly. Many amendments have been made to the original draft in the course of the parliamentary proceedings to accommodate the legitimate needs expressed by these interest groups.

I would like to thank them for their willingness to work hard with both the drafting team and the members of Parliament to enhance the quality of the Bill by a well-managed combination of political and practical expertise, and to express my gratitude for the hard work of everybody who has participated in the legislative process. We have achieved synergy resulting in a legislative instrument which recognises a legitimate need for firearms without derogating from the ideal of depriving criminals of easy access to their preferred instrument of violent crime.

Ample provision is made for the necessity to use firearms to accommodate lawful business needs. Certain business uses of firearms are mentioned by name and the provisions of the Bill are flexible enough to address all other legitimate business needs that might merit accommodation. The provisions will not stifle business, but will rather empower businesses which may need firearms in the course of their activities. Even the age limit of 21 years will, in appropriate instances, be reduced to accommodate the needs of young entrepreneurs and employees, as well as dedicated hunters and sportpersons to obtain firearm licences.

Due consideration is also afforded to the need to enable full participation in hunting and sport-shooting activities by both local and international participants. Dedicated hunters and sportpersons will not be limited to a fixed number of firearms, but will be allowed all the firearms they need to practise their sport. They will also be allowed to use these firearms for self-defence and for other legitimate purposes. Special provision is made to ensure that the ammunition control provisions do not impede them in their sporting activities. Important permits issued to international participants in these activities will constitute temporary licences to possess the firearms concerned. There will be no unnecessary bureaucratic procedures which might suppress international participation.

Private individuals who have no extraordinary need for firearms are also accommodated in the Bill. An individual would normally be allowed one firearm motivated for the purpose of self-defence. Licences for an additional three firearms will be granted to applicants who have a need to participate in occasional hunting or sport-shooting activities. These provisions limit the number of firearms normally available to individuals to a total of four. A maximum of two of these firearms may be handguns, in view of the propensity of criminals to steal the handguns of lawful owners. All four firearms may be used for self-defence and for any other legitimate purpose, although an individual will normally be allowed to possess only one firearm motivated specifically for self-defence purposes. In dangerous circumstances where a handgun or a normal shotgun will not provide sufficient protection, a second firearm motivated for purposes of self- defence will be licensed to an individual who needs a semiautomatic rifle or shotgun.

Another novel feature of the Bill is the introduction of the concept that a firearm may be licensed to more than one competent person residing at the same premises. This will allow different persons to use the same firearm without any additional authorisation requirements. Competent licence holders older than 21 years are furthermore authorised to allow someone else to use their firearms under their direct supervision. A parent is accordingly allowed to teach his or her children to use firearms without fear of contravening the law.

The Bill provides for the deregulation of antique muzzle-loading firearms manufactured before 1 January 1900 and replicas of such firearms. Similarly, airguns with a calibre smaller than .22 are deregulated and will not need to be licensed. Although these devices are dangerous, they do not constitute a significant threat in the sphere of firearm violence. Existing licences to possess firearms will remain valid for a period of five years after the implementation of this legislation. During that period the information in the central firearms database will be updated and existing licence holders will be required to submit applications for licences in terms of the new law or to dispose of their excess firearms in a lawful manner.

In conclusion, I would like to pay tribute one again to all those who have contributed to the processes which will now culminate in the final enactment of this legislation by the South African Parliament. To everyone who will be responsible for the practical implementation of the provisions of the new law, I pledge my unqualified support. The South African nation is waiting expectantly to harvest the fruits of our endeavour: an unfailing culture of responsible firearm ownership and a new standard of safety and security. [Applause.]

Mr J L MAHLANGU: Chairperson, my address on this Bill will look at its consequences and the impact that the Bill will have on our society. The debate around the Firearms Control Bill takes on a special significance for me because of the role a firearm played in a tragedy that struck my family two years ago. It was on 27 July 1998, when I went down to my province for meeting. When I switched on my cellphone at about four o’clock in the afternoon my voicemail was full. On listening to the messages, I was told that I should rush home. I had to drive 380 km to arrive home because they would not disclose to me what had happened.

On arriving home, I was told that my father was no more. This was as a result of the actions of one young man who had stolen a gun two days earlier and used that gun to shoot and kill my father. This gun had been legal two days earlier. It fell into illegal hands, and within the space of 48 hours my dad was no more. This tragedy has not been confined to my family alone, but has been experienced by thousands of other families in the past, and will continue to devastate many more families in the future unless we put a stop to the spread of firearms.

The urgency with which we need to stop the spread of firearms can only be appreciated if one takes into consideration the enormous social and economic consequences which could befall our country if we do not act speedily in countering the proliferation of firearms. Gun violence has social consequences. It diminishes the quality of life of citizens and it creates fear in society, which undermines our people’s ability to function normally in the family, at school, at work or even when moving around in the local community. We have seen that happening here in the Western Cape.

How many times have we read in the newspapers about gangsters invading shools, of innocent schoolchildren being caught in the crossfire in gang fights during school hours or while playing outside their parents’ homes? What makes things worse is the fact that many of the firearms used to gun down these innocent children were not illegal firearms, but were legal firearms that were stolen from their lawful owners.

This also has economic consequences. The cost of firearm injuries and death is enormous in terms of direct health care costs and lost productivity from premature disability and death. In addition, they divert health care resources and overload scarce hospital resources.

We have heard the finance debate, and I think what I am saying explains exactly some of the things that we listened to this morning.

In terms of a study done in 1997 the indirect cost of firearm murders in the Cape metropole alone was calculated to be between R12 and R47 million. If one takes all the firearm-related murders and injuries of the whole country together, the financial cost involved can only be described as staggering.

Moreover, these costs will have to be carried by the taxpayer, which may explain why most people, interviewed in a South African survey, were in favour of stricter gun control. The result of this survey corresponds with the result of surveys in other countries, indicating an international trend towards stricter gun control measures. For example, in 1999, in a national gun policy survey in the US, 80% of respondents supported the mandatory registration of handguns and an age restriction of 21 years for any person who wishes to buy a handgun, which is exactly what the Minister was saying.

It is quite clear that we need to get a grip on the situation. One way of doing so is to strengthen the hand of the police to reduce the number of firearms in circulation. It would be futile to have legislation restricting the ownership of guns if we cannot enforce it. That is why we should welcome the powers given to the police, including the Minister, in terms of this Bill. I know that my colleagues from the other parties are indeed objecting to this kind of approach.

Some people argue that by making guns available to more South Africans we will be able to reduce crime. This is a dangerous assertion which should strongly be opposed. Instead of reducing crime, it will lead to an internal arms race, with more and more South Africans arming themselves out of fear of becoming crime victims. This, in turn, will increase the opportunity for criminals to get their hands on firearms, because there will be more guns available which they can steal.

Furthermore, statistics have proved that it cannot be argued that an increase in legal gun ownership will reduce crime. Our Constitution contains no barriers to reasonable regulation of gun ownership. If we can register and license cars, or register land owners, we can indeed license and register guns. If our Constitution, as others would argue, provides absolute constitutional protection of the right to own guns, then it must also allow individuals to possess bazookas, torpedoes, missiles and even nuclear warheads, for they, like handguns and rifles, are arms.

The one issue I would like to address is stockpiling and compensation. One of the main problems with our existing Firearms and Ammunitions Act is the fact that it allows South Africans to stockpile weapons. According to the records of the central firearms registry, about 13 000 people own more than 10 guns each, while about 660 000 people own more than one firearm each. Why do people need so many guns? It cannot be for self-defence, or to make them feel safer, because studies have consistently shown that firearms are seldom used in self-defence. Furthermore, studies have also shown that there are more people who think guns in the home reduce safety than those who think they increase safety.

The stockpiling of weapons by individual gun owners increases the likelihood of their becoming the targets of gun thieves and victims of their guns. We have witnessed some of those things happening in our country.

In terms of the new Firearms Control Bill, the Government is prepared to compensate gun owners who wish to get rid of their excess guns. It would be advisable for gun owners to do so before the Bill becomes operational, because they will be entitled to compensation. I also invite members of this House to hand over their guns whilst there is time.

If this Bill becomes law, they would, in any event, be obliged to get rid of guns if they have more guns than they are legally entitled to possess. Then Government would not be obliged to compensate them, because Government cannot pay compensation to people who are contravening the country’s law.

In closing, I would like to thank the officials of the department, Adv Kok and company, as I normally would call them, the interested parties that participated in the deliberations on this Bill, the Minister of Safety and Security for steering the process of this legislation, members of my committee and my colleagues in the NA for sterling work done. [Applause.]

Mrs C NKUNA: Chairperson, hon Minister and hon members, we are busy writing the history of South Africa in this Council. For it to be done properly and appropriately, we must understand the background, which is the past - I mean what transpired during the apartheid era - and we will be able to determine the future.

When looking at the present, we might ask ourselves questions such as: Why are video cassettes that were hidden and record evil deeds now put to the fore? We look at such situations when we talk about the present. Moving from this, then we will be able to determine the future. The present situation in which we are right now, in which we are legislating for firearms control, is a direct result of the past ideologies.

Allow me to quote a few extracts from a speech by a former president of South Africa, or prime minister as he was called then, Pieter Willem Botha, to his cabinet, which was published in the Sunday Times dated 18 August 1985:

I have a committee working on finding better methods of inciting blacks against each other and encouraging murders amongst themselves. Murder cases amongst blacks should bear very little punishment in order to encourage them. By now every one of us has seen it practically that the kaffirs cannot rule themselves. Give them guns and they will kill each other. Come to think of it, what would happen one day if you woke up and on the throne sat a kaffir? Can you imagine what will happen to our women? Does any one of you believe that blacks can rule this country?

Our days will remain forever haunted by the frightening numbers of women and children of our country who have fallen victim to rape and other crimes of violence at gunpoint. For those who care about reality, it is wise to remember that anything they hear from the ANC is designed to advance our aims, which are for the people of South Africa.

We cannot run away from the fact that in order to control illegal firearms and firearm-related crimes, it is necessary to shut off all sources of new illegal firearms and, at the same time, mop up the existing pool of illegal firearms. This stems from the fact that the sources of new illegal firearms are identified as being theft from private owners, theft from the state, and firearms smuggled across the borders. The aim of this legislation is to tighten control over the possession of firearms so as to prevent these from entering the illegal market.

The Bill seeks to ensure that those who are not classified as fit and proper will not be in possession of firearm license, and that the bottom line is drawn if a person has been found guilty of drunken driving, domestic violence, rape or child abuse. Such persons will be barred from obtaining a firearm licence.

The concern of women to have a final protection order as provided for by the Domestic Violence Act of 1998 regarded as a disqualification in the Firearms Control Bill has, by necessary implications, been taken care of.

Any person who has a final protection order against him or her will not be considered a fit and proper person. A person who has a final protection order against him or her, will not be considered to have an inclination to violence, which factor will be taken into account by the registrar if such a person applies for a competency certificate. Section 14 of the Constitution of the Republic of SA of 1996 provides that everyone has the right to privacy, which includes the right not to have one’s person or home searched, one’s property searched, one’s possessions seized or the privacy of one’s communication infringed.

Section 113 of this Bill provides that any police official may without warrant take fingerprints, palmprints, footprints and bodily samples of a person or group of persons, if there are reasonable grounds to suspect that that person has or more persons have committed an offence punishable with imprisonment for a period of five years or longer. Section 36 of our Constitution provides that the rights in the Bill of Rights may be limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom.

It is indeed disturbing that the official opposition party is opposed to clause 113 of this Bill. In the apartheid era and on a daily basis, the majority of the people of South Africa were subjected to searches and seizures, had their prints and bodily samples taken and had no Bill of Rights to protect them against a so-called invasion of privacy. I would like to put it clear that the people of South Africa trust the measures being put in place by this Bill, because section 113 will only apply when there are reasonable grounds to suspect otherwise, and the offence will be punishable with imprisonment for a period of five years or longer.

In conclusion, with this piece of legislation we anticipate a better South Africa where the whole community will love and view each other as fellow citizens. We also anticipate a quiet and free South Africa without the sound or symbol of a gun, where, like in other countries, police officers, security staff and everybody else can their work without carrying a gun. [Applause.]

Mr L G LEVER: Chairperson, the Firearms Control Bill has generated a great deal of public debate. To place the debate in its proper context, one has to make the point that even in terms of the existing gun laws in South Africa, citizens have never had an absolute right to own a firearm. The right to own, carry and use a firearm has always been subject to the issuing of a valid licence.

The DA believes that only a fit and proper person should be licensed to own, carry and use a firearm. We further believe that persons who own a firearm should know what their duties and obligations are under this Bill. The ownership, carrying and use of a firearm places a heavy responsibility on a person. Only people who have the emotional maturity to understand and deal with this responsibility should be competent to obtain a firearm licence.

The DA agrees that a person who manifests violent tendencies … The CHIEF WHIP OF THE COUNCIL: Chairperson, on a point of order: It happened earlier today and it is happening again now, and that is the use of the term ``Democratic Alliance’’. No such party is registered, not in Parliament, anyway. If at all they want to utilise that as a term referring to the New NP and the DP, then they should also speak with one voice. Yet, if one looks at the speakers’ list, we find the New NP speaking and the DP speaking. Are we saying that the voice of views of the one party are exactly the same as the other? I believe that the Rules do not provide for reference to their party, the DP, as the DA. I therefore urge the hon member to refrain from doing that.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Chief Whip, there has been no ruling specifically with regard to that one. Perhaps we need to check whether the continued use of that term is appropriate. It is true that we only have the New NP and the DP, and perhaps it is necessary that we look at the whole procedure and give an appropriate ruling. The hon member may proceed. I will look into this matter tomorrow. [Interjections.] You are recorded here as a member of the DP.

Mr L G LEVER: Thank you, Chairperson. We agree that only a person of emotional stability has the right to obtain a firearm licence.

The select committee felt that in circumstances where a final protection order in terms of the Domestic Violence Act had been granted, this should be taken into account at the stage where an application for a competency certificate is lodged. After discussions with the department, the committee was persuaded that this could be adequately dealt with in regulations. A firearm should not be allowed into a household where domestic violence has manifested itself. In this regard the select committee has adopted a resolution to ensure that the regulations adequately deal with this concern. Those are the positive features of the Bill. There are, however, a number of negative features which need to be raised as well.

Firstly, the focus and effect of this Bill is almost entirely on the law- abiding gun owner. Little if any attention is paid to those individuals who possess firearms but have never had any intention of complying with the law relating to the possession of such firearms. This sends out the wrong message to both the law-abiding citizens and those who will continue to evade the law even after this Bill is enacted. I have heard the argument that a sizeable proportion of illegal firearms are stolen from or lost by licensed firearm owners. Therefore, the argument goes, if this source of illegal firearms dries up, the problem is solved. There is certainly merit in this argument, but it does not tell the whole story. There is no evidence to show that theft and loss of firearms will stop once this Bill has been enacted. There is also no escaping the fact that the only way to deal with the existing pool of illegal firearms is increased and more focused intelligence and police work. Further, this argument ignores the fact that a significant number of illegal firearms are smuggled into our country across poorly guarded borders.

The DA agrees that illegal firearms are a real and pressing problem. However, there is a tendency, whenever a problem is encountered, to go out and write a new law. This is not always the best or most cost-effective manner to deal with the problem. We believe that if a cost-benefit analysis is undertaken, it will show that the tens of millions of rands it will require annually to set up and maintain the bureaucracy required to administer this Bill would have been better spent if it were invested in frontline policing.

We do not believe that it is feasible to relicense approximately four million firearms every five years. Even if this process is staggered, it would not be possible to carry out the detailed investigations necessary to give real effect to the requirements of the proposed Bill. Anything less than giving full attention to each application for renewal would negate the stated purpose of drafting this Bill. This would require a central bureaucracy of significant proportions. It would also tie up the resources of the police at local level, who would be tasked with doing the groundwork of processing these renewals.

Other worrying features of this Bill are that a police official can, without a warrant, force a group of people to provide fingerprints and other bodily samples where such police official has reasonable grounds to suspect that a member of such a group has committed an offence punishable with a period of imprisonment in excess of five years, and such a police official has reasonable grounds to believe that the prints or bodily samples would be of use in his investigations. This provision is open to a wide range of abuses and the Bill makes no provision to sanction any police official who abuses the powers granted in this clause.

It is important to note that this provision is so broadly phrased that it would apply to any offence, even those unrelated to firearms. This is a serious inroad into individuals’ rights. If the intention is to diminish individuals’ rights in this way, it should have been done in the Criminal Procedure Act and not in the Firearms Control Bill. Clause 119 of the Bill creates a presumption that a person has failed to take reasonable steps to prevent another person from bringing a firearm onto certain vehicles or premises owned or controlled by him.

In relation to a designated firearm-free zone, such a presumption can lead to a five-year jail term if the accused is unable to educe evidence to raise a reasonable doubt. This can raise untenable problems for school principals, the governing bodies of churches, and other premises likely to be declared firearm-free zones which are also open to the public.

For these reasons, amongst others, the DA cannot support this Bill. [Interjections.]

Mr T S SETONA: Chairperson, hon Minister of Safety and Security Mr Steve Tshwete, today marks yet another milestone in the history of our country in its offensive against the legacy of apartheid colonialism where the rule of the gun was the order of the day with total disrespect for the right to life and bodily integrity.

With the passage of this Bill this afternoon, Government will be bringing hope to many of our people in this country that tomorrow will be better than today. No more shall children be orphans, no more shall women be widows and no more shall men be widowers at the hands of trigger-happy criminals. [Interjections.] [Laughter.]

The Bill is aimed at enhancing the constitutional right to life and bodily integrity, and preventing the proliferation of illegal firearms by providing for the removal of these firearms from society and by improving the control over legally possessed firearms to prevent crimes involving the use of firearms.

During the introduction of this Bill by the Ministry of Safety and Security some sections within our society charged that this Bill was aimed at disarming the law-abiding citizens of this country in the face of escalating gun-related crimes.

They further charged that the Bill was aimed at disarming the Afrikaner farmers at the height of constant farm killings. Quite clearly these charges were nothing else but typical grand apartheid propaganda tactics of surviving and triumphing through lies and the distortion of facts.

There is no doubt that this country has never had any effective gun control regulations prior to 1994 because, by its very nature, apartheid was based on the rule of the gun and terror, which permeated all facets of our society.

The Bill does not only deal with the prohibition of illegal firearms, but, more importantly, also deals with legally owned firearms, placing heavy responsibilities on owners of legal firearms. The Bill further places restrictions on people with records of domestic violence and prevents them from acquiring firearm licences. This will bolster the country’s efforts against domestic violence, which has become one of the main challenges facing our country today.

It emerged quite clearly this afternoon that those amongst us who have charged that, with this Bill, we are denying some sections of our population the right to ownership of firearms, had their own funders and sources within this Chamber. The hon Mr Lever has pointedly manifested that reality by alluding to the fact that this Bill is aimed at denying law- abiding citizens their right and protecting criminals, which I believe is not the truth. The reality of the matter is … [Interjections.] [Laughter.]

Mr L G LEVER: Chairperson, on a point of order: Is it parliamentary for the hon member to distort what I said in my speech in such a blatant way?

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Hon member, unfortunately you did not disclose what has been distorted. You give no explanation or statement. Do you want to make a correction?

Mr L G LEVER: Yes, Chairperson, I will then amplify my objection.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Is it just a correction, a statement of correction of what he has said that you think is wrong?

Mr L G LEVER: Chairperson, I never said that anybody has a right to own a firearm, an absolute right. In fact, I opened my speech by saying that.

I never supported any grand apartheid scheme, which he is implying I supported. [Laughter.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Hon member, you have explained your statement. Can you proceed, Mr Setona.

Mr T S SETONA: Mr Chairperson, when I joined the ANC in 1990, I was conscious that many generations, even after me, will not judge me from 1990 onwards, but by the history of the ANC. Therefore, it become very ridiculous for a person who joins a political party which has got a particular history to deny the history of that particular political party and to dissociate himself from that history.

I just want to say that there is no way in which Mr Lever can dissociate himself from the history of the DA, and the history of the New NP and the DP. Mr Lever has said this Bill is focusing on law-abiding citizens and not on the criminals. This suggests that, in his view, the Bill is aimed at disarming the law-abiding citizens. He suggests that criminals are left to run amok. [Interjections.]

Mr L G LEVER: Mr Chairperson, on a point of order, … [Interjections.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Mr Lever, can we allow somebody to express his opinion?

Mr L G LEVER: Mr Chairperson, I am sorry, I could not hear you because of the noise.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr L M Mushwana): Order! Hon member, I think we need to allow other members to express themselves. If they are expressing an opinion, it does not necessarily mean that they are right.

Mr L G LEVER: Mr Chairperson, but it is still distorting what I said in my speech. I never said that we aim at disarming the law-abiding citizens. [Interjections.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr L M Mushwana): Order! Hon member, I did allow members to express their opinions. We are not saying that he is correct. We have not said that he is stating the correct fact.

Mr T S SETONA: Mr Chairperson, he also mentioned that significant number of guns are smuggled in from outside South Africa. I think it is very important that he should provide such information to the relevant authorities. In that regard, I want to suggest that he must meet the relevant authorities in the SAPS about those people who are smuggling guns into South Africa. I do not think that it is relevant for him to come and make cheap political statements in this House on this particular issue.

With regard to the issue of fingerprinting … [Interjections] … today we are told by some born-again democrats and human right activists that they are more human rights conscious, after only six years since this country was liberated, and that it is a human rights violation to take the fingerprints of a person in pursuit of an investigation, an investigation that is protecting the law-abiding citizens.

However, the same people forget that they introduced all forms of discriminatory laws in this country. One of those laws had to do with enforced fingerprinting. The dompasses were introduced by the apartheid government, and Mr Lever and some of the political parties were part of that particular process. [Interjections.] We are saying that for many years since 1994, one of the trumpcards of the DP in its propaganda on the issue of crime has been the accusation that this ANC-led Government is not serious about combating crime. Throughout the debate at the level of the select committee, nothing has been forthcoming from Mr Lever and his colleagues. All they are telling us this afternoon is that there are some inadequacies in the formulation of some clauses and, because of that, they are opposing this Bill.

It is understandable why their behaviour is like that this afternoon. They are telling our people in the townships of Soweto and Guguletu that because the people that they represent in this Parliament are not affected by these levels of crime, they do not care about it. It is quite clear that it is a racial issue, and it is important that the DP be exposed for that. [Interjections.]

Another issue is the issue of sanctions against police who abuse their powers in enforcing this Bill. [Interjections.]

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Hon members, you are drowning out the hon member’s voice. I cannot even hear what he is saying.

An HON MEMBER: His time has expired!

Mr T S SETONA: Mr Chairperson, my time has not expired. I am sitting with an old guard from apartheid here, and he is disturbing me. [Laughter.][Interjections.] We are talking about presumptions.

We are told about school principals and schools. I do not think there is any relevance in these examples - with due respect, hon Lever. Nowhere in the Bill does it say that when there is a presumption that the gun was found in the school, the principal or the children will be arrested. I do not think there is any suggestion of that nature in the Bill.

I think this is opportunistic of the hon member, on behalf of his party, to give this kind of example, because the history and record of his organisation has shown them up for being the worst kind of terrorists who have disrupted schools through the military forces and the police. [Time expired.] [Applause.] [Laughter.]

Mr P A MATTHEE: Chairperson, I want to make it clear from the outset that we are wholeheartedly committed to the promotion of responsible gun- ownership in South Africa. [Interjections.] We are convinced that only fit, proper and competent persons should be allowed to own firearms, and we want people who abuse firearms for criminal purposes or are negligent in safely storing their firearms to be severely punished.

However, in our opinion this Bill is flawed, because it is based on the assumption that a reduction of the number of legal firearms will also lead to the reduction of illegal firearms. Although there is no convincing proof thereof, this is the argument that is used most often in defence of this Bill.

The regulation of legal firearms and the reduction of the number of illegal firearms are two separate issues, which have to be resolved by different methods and instruments. Illegal firearms and the availability thereof are major contributors to the totally unacceptable levels of violent crime in South Africa, and not legally owned firearms as assumed by this Bill.

The central focus of control measures should therefore be the reduction of the number of illegal firearms in criminal hands, something this Bill, in our opinion, fails to accomplish. Instead of being aimed at illegal firearms, this Bill makes it very difficult, and almost impossible for some law-abiding citizens and fit and proper persons, to obtain firearms legally. Another presumption underpinning this Bill is that a significant proportion of violent crime is committed with licensed firearms. This is wrong, as licensed firearms are reportedly responsible for only 0,5% of violent crime in our country.

This Bill, in our opinion, also discriminates against the poor. The actual cost of processing a licence application is estimated at R495. This puts legal gun-ownership beyond the reach of many people in the lower income groups, unless subsidised by the state, which is highly unlikely owing to the lack of funds.

These people are the very people who are dependent on having a licensed firearm to protect themselves and their families because they cannot afford bodyguards, or alarm systems with armed response, or electric fences.

What does one do to defend oneself and one’s family when one wakes up during the night and finds that there are armed housebreakers in one’s house, and one does not have a firearm? Does one defend oneself and one’s family with one’s bare hands? What do elderly people and women do under such circumstances?

The fact of the matter is that during 1999 there were more than 663 housebreakings per 100 000 people in our country. It is an indisputable fact that a person armed with a firearm has a much better chance of surviving an attack than an unarmed person. In our country this is not simply a nice-to-know fact; it is a daily truth, because between 1998 and 1999 the number of reported violent crimes increased by 9,3%, and between 1994 and 1999 violent crime increased by 21,6%.

According to the Human Sciences Research Council, almost three times as many South Africans felt unsafe in 1999 as in 1994. In 1999 some 47% of South Africans felt unsafe or very unsafe - up from 16% in 1994.

Under these circumstances it should be not necessary for anybody to prove that one needs a firearm for self-defence, and that one cannot reasonably satisfy that need by means other than the possession of a firearm. The mere fact that one lives and works in South Africa should be enough proof of that need. Of course, one will then have to prove also that one is competent and fit and proper to have a firearm.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Order! Hon member, can you take your seat? On what point are you rising, Mr Marais?

Mr A MARAIS: Mr Chairperson, is the hon member prepared to take a question?

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): Are you prepared to take a question, Mr Matthee?

Mr P A MATTHEE: Mr Chairperson, if at the end of my speech there is enough time, I will certainly do that.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): I will definitely not give you extra time.

Mr P A MATTHEE: Then I would like to finish my speech, Mr Chairperson.

The DEPUTY CHAIRPERSON OF THE NCOP (Mr M L Mushwana): You may continue.

Mr P A MATTHEE: In his book More Guns, Less Crime published in 1998, John Lott found that crime in the United States was generally lowest where responsible private citizens were allowed to own firearms for self-defence, and where the concealed carrying of such firearms was permitted. High arrest and conviction rates, combined with a responsible armed citizenry, were found to be the most effective mix for addressing all categories of crime. These conclusions were based on the most comprehensive research yet carried out into firearm ownership in relation to crime, and were consistent with earlier findings.

In conclusion, we are of the opinion that this Bill, in our present circumstances, is also unaffordable. We believe that instead of our spending millions of rands on what, in our opinion, is the overregulation of law-abiding citizens, the money could rather be utilised much better in properly empowering an ill-equipped, understaffed and underpaid SA Police Service to enable them to do their job. [Time expired.] [Applause.]

Mr T B TAABE: Chairperson, it is quite amazing that hardly six years into our new democracy, those who propped up and mercilessly defended a morally repugnant system of apartheid in this country, presided over by successive gangster regimes that maimed and killed our people - 1960 in Sharpeville, 1976 in Soweto, their cross-border raids in the mid-1980s, their train violence in the early 1990s, the so-called black-on-black violence which they masterminded in their smoke-filled boardrooms in Pretoria, where racists like P W Botha and company presided over these gangster regimes - today suddenly want to tell us that they are the spokesmen of the poor. So amazing!

They also want to tell us that the kind of pieces of progressive legislation we are trying to enact as the ANC-led Government would lead to some kind of violation of human rights. Since when do they understand a human rights? It is us and us alone, ie the ANC, who ensured that when we got into power in 1994 we were able to bring about a human rights culture in this country. What do they know about human rights? They are not qualified to tell us what we should respect as human rights and what we should not. It is quite amazing.

I am honestly not going to respond to the kind of errant twaddle and poppycock that came from the hon member Van Niekerk. To me it is basically nothing less than an empty political tin that makes the loudest noise in this Chamber. Every time he opens his mouth he says substance, and we will remember him for that. [Laughter.] The kinds of responses he normally makes in this Chamber are somewhat myopic and naive; so much so that we would not really waste our precious time engaging in all sorts of trivialities with that member. There are much more important matters that we want to deal with in this Chamber.

Others are taking offence at the fact that statements were made by the hon Setona to the effect that they did, in fact, benefit from the grand apartheid scheme. That is a fact. When some of us went to prison at the age of 12, they went to the best schools. This gangster regime provided all sorts of opportunities for them to go to the best schools, and they ensured that the kind of privileges they were given were, in fact, intact when those of us, the majority of the people of this country, suffered untold suffering in this country. So, clearly, whether he was not there with the National Party, the fact that the gangster regime was in power means that he benefited from it, whether he likes it or not. [Laughter.]

Mr A E VAN NIEKERK: Chairperson, when is the hon member going to get on with his speech? Doesn’t he have one?

Mr T B TAABE: Chairperson, having said that, I am going to deal with the aspect of this legislation which specifically deals with the area of domestic violence. Although the mix of firearms within a domestic violence related context is not a new phenomena, the lack of research around this in South Africa has cost us to fail to recognise the danger of firearms in domestic violence situations. International studies have repeatedly shown how guns profoundly affect the dynamics of domestic violence. They can be used to intimidate or frighten a spouse or partner, and to maim and kill, because their presence substantially increases the lethality of a violent interaction in the home.

Over the last couple of months we have witnessed a number of incidents in which whole families have been wiped out. Wives have been killed by their husbands, girlfriends by their boyfriends, and even parents by their children.

To illustrate this point much more clearly, I would like to refer to an article in the Sunday Independent of 4 June 2000, according to which a certain Solomon Mhlongo was sentenced to an effective 23 years imprisonment for the murder of his common-law wife, Elizabeth, and five-year-old daughter, Tlaleng.

Two years earlier he emptied a magazine of bullets into Elizabeth and Tlaleng, stopped to reload and then continued firing until the gun jammed. Elizabeth was left sprawled at the side of the bed, her chest, head, thigh and hand peppered with bullets, while her daughter lay slumped sideways in a blood-spattered chair.

Only a week before this man was sentenced, a similar drama was played out in Port Elizabeth when an SAPS inspector, Jeffery Sampson, shot and killed his wife, mistress, four-year-old son and three-year-old daughter before turning the gun on himself. This proves that guns are a major threat to the health and lives of women in society.

It is a fact that gun-related violence is not only perpetrated by those in possession of stolen weapons, but also by responsible citizens who own guns and commit or continue to perpetrate such acts of violence against women and children. It is therefore not true, according to members of certain political parties who come to this Chamber and lecture us, that legal gun owners are responsible enough not to perpetrate such acts against women and children in society. This is a problem for some of us in that it is as if we are not South Africans ourselves, as if we do not see the kind of violent crimes being perpetrated against women and children in this country.

Gun ownership may also provide a false sense of security that can be fatal. Women may own a gun or guns to protect themselves and their families, but once such guns are brought into the home, they put women and children at a greater risk of gun murder, suicide and unintentional shooting. That is a fact. [Time expired] [Applause.]

Nkk J N VILAKAZI: Sihlalo, mhlonishwa uNgqongqoshe womnyango nabahlonishwa bonke, egameni le-IFP, angizukwanda namazwi ngalo mThetho-sivivinywa osezithebeni ngaphandle kokuthi siwushayela elikhulu ihlombe.

Empeleni uphuzile ukuthi ushaywe. Baphelile abantu yizibhamu. Izibhamu ziqothe imiphefumulo eminingi kakhulu. Amathuna amaningi agcwele abantu abahambe ngezibhamu. Isibhamu siyingozi kumniniso siphinde sibe yingozi nakwabanye abantu. Amacala okugqekeza, awokubanga izikhundla, awomona, awobuqembu kanye nawezingxabano emisebenzini nasemakhaya enziwa ngokusebenzisa isibhamu. [Ubuwelewele].

Kuyaziwa ukuzivikela uma uhlaselwa. Kulungile lokho. Ukuvikela impilo yakho, ibhizinisi lakho kanye nomndeni wakho, lokho kuyinto elungile. Ukuvikela izwe, ngumsebenzi wezibhamu-ke lowo, hhayi ukubulala noma kuphi nanoma yikanjani. Ngubulwane lobo. Ngubuxhwanguxhwangu lobo. Ngububi obungenakulinganiswa nalutho. [Ubuwelewele.] (Translation of Zulu paragraphs follows.)

[Mrs J N VILAKAZI: Chairperson, hon Minister and hon members, in the name of the IFP I will not be long when I talk about this Bill except that we applaud it.

Actually it has been delayed, it should have been passed a long time ago. Many people have been killed with guns. Guns have taken many lives. Many graves are the graves of people who were shot. A gun is dangerous to the owner and to other people as well. Cases of burglary, power struggles, jealousy, politics, conflict in the workplace and domestic violence are all committed with guns. [Interjections.]

It is understandable and acceptable when one defends oneself. Protecting one’s life, one’s business and one’s family is acceptable. The function of guns is to protect the country, not to kill anywhere and anyhow. That is inhuman. It is criminal. It is the highest evil on earth. [Interjections]]

The IFP supports the Bill on the table. We cannot remain silent when people are being destroyed on a daily basis through the use of firearms.

Heroes of the nation have gone, brilliant politicians have disappeared, families have been wiped out by their loved ones through the barrel of the gun. Competent workers - I can name a lot. No, enough is enough. We cannot live and get on with this dangerous, vulnerable and inconducive life situation.

The Firearms Control Bill is highly supported by the IFP. Firearms are for nothing, but prevention and protection, hence the designation ``Minister of Safety and Security’’. When firearms are used outside these parameters, control measures and heavy discipline must be enforced on the users and lawbreakers. The IFP supports the Bill. [Applause.]

Mrs E N LUBIDLA: Chairperson, as the hon member Mahlangu said, the tragedy not only happened to his family. It also happened to my family and thousands of others. I lost a cousin and a family member through a game of Russian roulette. I want to say to the hon member Matthee that if he had received a phone call informing him that his daughter was no more, that her husband had shot her and the kids and then killed himself afterwards, I am sure if he had heard that days before this debate he would have changed his mind.

There is such a furore going on in such little circles about the presumption relating to the failure to report the loss, theft or destruction of a firearm. Despite the doomsayers and the desperate cries of its detractors, this Bill very deliberately sets out to prevent unwarranted proliferation of illegal firearms by introducing stricter measures for the safekeeping of firearms. The presumption in clause 118 of this Bill provides that whenever a person if charged with an offence in terms of this Act of failing to report the loss, theft or destruction of a firearm and it is proved that such person was, at the time, the licensed or authorised possessor of the firearm alleged to have been lost, stolen or destroyed, proof that the person has failed to produce such firearm within seven days of the request by a police official will, in the absence of the evidence to the contrary which raises reasonable doubt, be sufficient evidence that the person has lost, or destroyed the firearm and failed to furnish such information or particulars.

The fact about presumptions is that some may be justifiable as being rational in themselves, requiring an accused person to prove only facts to which he or she has easy access and which it would be reasonable to expect the prosecution to disprove. The PAC has abstained because, although they understand the rationale for these clauses, they did not approve of the shift of the burden of proof, arguing that persons are now required to prove their innocence. To those parties who are voting against this presumption clause, I have this to say: The effect of requiring the state to bear the burden may mean that the offence would only be effectively prosecuted in extremely rare circumstances, if at all. For that reason, the presumption we have in clause 118 also falls within a class of exceptions identified by Acting Justice Kentridge in the case of State v Zuma and Others, 1995(2) SA642(cc), where the learned judge stated as follows, and I quote:

… there may be presumptions which are necessary if certain offences are to be effectively prosecuted, and the state is able to show that for good reasons it cannot be expected to produce the evidence itself.

The Supreme Court of Canada, in the case of R v Downey, upheld the presumption that a person who habitually consorts with prostitutes is living off the proceeds of prostitution on that basis. A similar presumption in a United Kingdom statute was upheld by the European court of Human Rights in the case of X v United Kingdom.

If we can weigh the scope of the infringement of the presumption of innocence against the purpose, importance and effect of clause 118, it is the ANC’s view that the scale tilts in favour of the presumption, and we acknowledge that clause 118 does not infringe the presumption of innocence. There can be no doubt that, as a general rule, it is appropriate for an obligation to be placed on all gun-owners to exercise due care in keeping their firearms and to take responsibility for reporting a stolen, lost or destroyed firearm.

These presumptions are in line with recent Constitutional Court judgments regarding presumptions and reverse onus provisions. The burden we seek to prove may impact on the rights of the accused to remain silent, and here I quote with approval the words of Justice Langa, in the case of State v Mbatho (CCT19/95) and State v Prinsloo (CCT35/95), where he refers to evidentiary burdens in the context of the Arms and Ammunition Act of 1937:

… on the assumption that the rampant criminal abuse of lethal weapons in many parts of the country would justify some measured rethinking about time-honoured rules and procedures, some limitation on the right to silence might be more defensible than the present one on the presumption of innocence. The accused could of course be exposed to the risk of being convicted if he or she fails to offer an explanation which could reasonably possibly be true, regarding physical association with weapons; there would however be no legal presumption overriding any doubts that the court might have. At the end of the day and taking into account all the evidence, the court would still have to be convinced beyond doubt that the accused was indeed guilty.

The ANC supports the Bill. [Applause.]

The MINISTER OF SAFETY AND SECURITY: Chairperson, I would like, first of all, to thank all the hon members who have spoken in support of this progressive piece of legislation, which ushers South Africa into the realm of all civilised countries across the face of the globe. We made the point, even at the stage when we were preparing the policy document from which flowed this piece of legislation, that the argument that the main focus of the Bill is on legally owned firearms is not true. We have made that point umpteen times, and we have demonstrated beyond doubt that it is not our intention to do so.

In my main presentation here today I again made that point abundantly clear, which is that the target is the criminal. When we were working on a policy statement around this Bill, we obviously had to do a lot of research. Where do criminals get guns from? We researched these areas. We employed people, even outside the ambits of our departments, to look into this whole issue. On the basis of what was reported to us we formulated the positions that are enshrined in the Bill. It is not true to say that we are targeting a certain group. Initially there was a lot of propaganda being brandied about by very irresponsible elements in South African society, who said that the aim of the Bill was to disarm white people. That was silly in the superlative degree. We get a milder version of that today, in both Houses, that in fact the legal owners of firearms are the target. I am not going to get into what research has pointed out, but there is something that I do want to state once again, albeit not with the aim of convincing people like the hon Lever and the rest of them. I have no time to do that kind of thing. They are incorrigible. One will never change them. They will remain stuck to those ideas. [Laughter.] I have no intention of doing that.

However, the one thing I am interested in putting forward is that the right to responsible ownership of guns by South African citizens is entrenched in this Bill, not denied. The right to have a gun for self-defence purposes is a refrain throughout the Bill. Even the concessions that we made were made around the concept of self-defence. It is very misleading for anybody to stand up in this House and say that that right is being undermined.

One may even ask the question for the umpteenth time: Why does one need an arsenal of guns in one’s little home or one’s big mansion for self-defence purposes? Why does one want a whole arsenal there? Some people I know have over 90 guns in their own homes. [Interjections.] Even cowboys out on a raid do not need two guns. [Laughter.] Roy Rogers would have been quite happy as the king of cowboys with one gun. [Laughter.] Why does one need this arsenal for self-defence? Why? What is one going to do with 101 guns for self-defence purposes? One can never use more than one gun at one single point in time for self-defence purposes. Why does one have to have more than that for self-defence?

That argument is flawed. There is nothing like that. A person does not want these guns for self-defence purposes, because one is not going to use 10 guns for self-defence at any single moment. What does one want them for? That is what we need to research. Once that has been done, we are going to be able to unmask these people who are arguing around this concept that we are attacking legal gun owners. They are unmasked.

The point of the matter which this country, this House and Parliament must address, with political parties as a backdrop, is the culture of adoration for dangerous weapons in this country. It is a terrible thing, because I am asking right now: What is one doing as a parent with a display of 100 guns of all kinds, which are being admired and smiled at? [Laughter.] They are weapons of death! What is one going to do with these thing, seriously speaking?

The problem here is not self-defence, but the adoration of deadly weapons which has become intertwined with our entire system. We just cannot divorce ourselves from it. We have accumulated these weapons out of panic and a desire, Not for self-defence in the first instance, but a desire to uphold a particular status quo, which has now vanished. For sentimental reasons, we still want to cling to them, even at this present moment in time. That is out.

The second point that I wish to advance is the opportunism regarding the arguments of opponents against this Bill. They talk of the poor, but they do not have their eye on the poor. They have their eye on the rich. [Laughter.] They are using the poor to whip up sentiments and support. Unfortunately, they have not been able to do so, because the poor people in this country have no desire to own guns. They have a desire to own homes in the first instance. Self-defence for the poor with the use of a gun! Where? In a shack?

For over 48 years, the opposition parties built them shacks in Langa and Khayelitsha. They threw them away from where they were supposed to be working. They had to struggle even to come to work. But, in order to plead their case for this culture of adoration of deadly weapons, they present the case and parade as champions of the poor people. That is hypocrisy, because the NP and the DP - whatever names they may give themselves - have never been champions of the poor people of this country. Absolutely not. Even the pluck that they have in their going to these townships and saying they want the people’s vote is the height of arrogance. Like Van Schalkwyk was saying last night, the rich were getting richer, that is, the ANC, and the poor were getting poorer. [Laughter.] It is they who created that environment, even the environment of crime, lawlessness and the lack of respect for law. It is these two parties whose fortunes are now combined - the party of J B Vorster and the party of Suzman. They have become one thing now. Their fortunes are intertwined and cannot be separated. They are one thing and one history. That is what has inspired them. [Interjections.] They must forget about the poor.

They always talk about the SAPS being underpaid. Again, they are whipping up emotions and sentiments. The SA Police Service knows that today their conditions of service are 100 times better than they were during the apartheid era. Those parties underpaid them. [Laughter.] When the ANC and the IFP Government took over in 1994, the lot of the SA Police Service improved and we are working on that. Time and again, these parties harp on this. Again, the idea is to drive a sense of demoralisation into the SA Police Service, because what they would like to see is destabilisation of the country and our failure to come to terms with the situation.

We aim at criminals and we have budgeted sufficiently for this Bill for it to be implemented, and we are enforcing responsible ownership. For their information, some people in this country, besides those who are prone to violence, get their guns stolen and the story is, at any rate, that these guns are seldom used for self-defence.

One can never own 101 guns. They sit and watch TV with their families, the thief gets through the window, takes a poker and beats them. The thief asks them where the safe is, and they say: Here are the guns, and the thief takes them away. [Laughter.] Responsible owners do not leave their place of residence without reporting where they are. They do not stay wherever they do without indicating to the police that their gun has been stolen.

In many instances these things are not done. People do not report. They do not even report that they have changed addresses. We want to restore that kind of responsibility when we are talking about these things. For example, here is a Kombi full of AK-47s, and we ask, Whose firearms are these?'' and someone answers,Andiyazi [I do not know]’’. When that happens, should one leave it at that or simply take the guns and go away?

We have to get a piece of legislation which makes provision for the creation of some gadget which will make it difficult for criminals to ferry arms. They should know that if they carry arms in the boots of their cars the onus is on them to prove their innocence. We are limiting that particular right. We have deliberately done so, and the Constitution does concede that there will be limitation in certain instances. That is what we are doing here.

Right now the situation is that if we find people with guns in their cars, we cannot fingerprint them. But from now on we are going to be fingerprinting them and they must know that. We will use DNA tests and everything that will prove beyond a reasonable doubt that the weapons in a particular vehicle do not belong to them. We are not going to play games with criminals and pretend that we are living on Mars. The reality is that we need this kind of legislation to come to terms with the situation that we are addressing here.

The last point that I would like to make, because members have indeed amply argued the case for this Bill, is that we need to come to terms with the reality that South Africa should on matters of this nature speak with one voice. If, for instance, someone has reservations about this Bill, what can be done to accommodate those reservations? The aim here is not inspired by a sense of political gain on the part of any of the two parties that are behind this Bill, but is to maximise the security and safety of the people of the country. That is all there is to it.

There is nothing the ANC is going to gain as an organisation or as a party out of this Bill. There is nothing the IFP is going to gain as a party out of this Bill, other than the sense that we are moving in the right direction. Ideally, in order to address this culture of gun adoration, we should be saying that we do not even need these weapons, that they belong to the army and the police. That would have been an ideal situation, which we would be nurturing as a people. We are very lucky that in South Africa there is already a nucleus which is beginning to speak along these lines, and that is that a gun-free South Africa will be an ideal place to live in. There is nothing wrong with that. I know, of course, that we are being attacked left, right and centre, but that is not the position that we are upholding in this Bill. We are saying let us take control and be on top of the criminals who possess these illegal arms, most of which are obtained from legal owners of firearms. [Applause.]

Debate concluded.

Bill agreed to in accordance with section 75 of the Constitution (Democratic Party, New National Party and African Christian Democratic Party dissenting).

The Council adjourned at 18:26. _____

            ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS

                      TUESDAY, 7 NOVEMBER 2000

TABLINGS:

National Assembly and National Council of Provinces:

Papers:

1. The Speaker and the Chairperson:

 (1)    Reports of the Auditor-General on the -


     (a)     Summary of Statements of Moneys kept in Trust in the
          Guardians' Funds for 1998-99 [RP 162 - 2000].


     (b)     Financial Statements of the Health Donations Fund for 1999
          - 2000 [RP 164 - 2000].


     (c)     Financial Statements of the Council on Higher Education
          for 1999 - 2000 [RP 165 - 2000].


 (2)    Reports of the Public Service Commission on -


     (a)     Management of Probationary Appointments within Public
          Service Departments at National Level [RP 153 - 2000].


     (b)     The State of Representativeness in the Public Service [RP
          154 - 2000].


     (c)     Career Management in the Public Service [RP 152 - 2000].

1. The Minister of Finance:

 Government Notice No R.1025 published in the Government Gazette No
 21671 dated 27 October 2000, Amendment of the Regulation 5 of the
 Regulations under the Associated Institutions Pension Fund Act, 1963,
 made in terms of section 2 of the Associated Institutions Pension Fund
 Act, 1963 (Act No 41 of 1963).

COMMITTEE REPORTS:

National Council of Provinces:

1. Report of the Select Committee on Security and Constitutional Affairs on the National Prosecuting Authority Amendment Bill [B 39B - 2000] (National Assembly - sec 75), dated 6 November 2000:

   The Select Committee on Security and Constitutional Affairs, having considered the subject of the National Prosecuting Authority Amendment Bill [B 39B - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

   The Committee wishes to report further, as follows:

   The Committee noted that Clauses 8 and 11 of the Bill, respectively, make provision for the determination of salaries and the making of regulations, by the Minister (for Justice and Constitutional Development), in consultation with the National Director of Public Prosecutions. The Committee is of the opinion that, in the circumstances in question, it may possibly be inappropriate for these powers to be exercised only with the concurrence of the National Director of Public Prosecutions. It might be more expedient for these powers to be exercised after consultation with the National Director of Public Prosecutions. The Committee therefore recommends that the Minister for Justice and Constitutional Development be requested to consider this matter and, if necessary, submit an appropriate amendment to Parliament for consideration.

2. Report of the Select Committee on Security and Constitutional Affairs on the Judicial Matters Amendment Bill [B 63B - 2000] (National Assembly - sec 75), dated 6 November 2000:

   The Select Committee on Security and Constitutional Affairs, having considered the subject of the Judicial Matters Amendment Bill [B 63B - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

3. Report of the Select Committee on Security and Constitutional Affairs on the RSA/Australia Extradition Treaty, dated 6 November 2000:

   The Select Committee on Security and Constitutional Affairs, having considered the request for approval by Parliament of the Treaty on Extradition between the Government of the Republic of South Africa and the Government of Australia, referred to it, recommends that the Council, in terms of section 231(2) of the Constitution, approve the said Treaty.

 Report to be considered.

1. Report of the Select Committee on Social Services on the Council for Medical Schemes Levies Bill [B 61 - 2000] (National Assembly - sec 77), dated 7 November 2000:

   The Select Committee on Social Services, having considered and examined the Council for Medical Schemes Levies Bill [B 61 - 2000] (National Assembly - sec 77), referred to it, and having conferred with the Select Committee on Finance, reports that it has concluded its deliberations thereon and that it has agreed to the Bill.

2. Report of the Select Committee on Land and Environmental Affairs on the Marine Living Resources Amendment Bill [B 68B - 2000] (National Assembly - sec 75), dated 7 November 2000:

   The Select Committee on Land and Environmental Affairs, having considered the subject of the Marine Living Resources Amendment Bill [B 68B - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

3. Report of the Select Committee on Public Services on the Home Loan and Mortgage Disclosure Bill [B 53B - 2000] (National Assembly - sec 75), dated 7 November 2000:

   The Select Committee on Public Services, having considered the subject of the Home Loan and Mortgage Disclosure Bill [B 53B - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

4. Report of the Select Committee on Public Services on the South African Rail Commuter Corporation Limited Financial Arrangements Bill [B 64 - 2000] (National Assembly - sec 75), dated 7 November 2000:

   The Select Committee on Public Services, having considered the subject of the South African Rail Commuter Corporation Limited Financial Arrangements Bill [B 64 - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

                  WEDNESDAY, 8 NOVEMBER 2000
   

COMMITTEE REPORTS: National Council of Provinces:

1. Report of the Select Committee on Finance on the South African Reserve Bank Amendment Bill [B 62 - 2000] (National Assembly - sec 75), dated 7 November 2000:

   The Select Committee on Finance, having considered the subject of the South African Reserve Bank Amendment Bill [B 62 - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

2. Report of the Select Committee on Finance on the Bills of Exchange Amendment Bill [B 47B - 2000] (National Assembly - sec 75), dated 7 November 2000:

   The Select Committee on Finance, having considered the subject of the Bills of Exchange Amendment Bill [B 47B - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

3. Report of the Select Committee on Finance on the Revenue Laws Amendment Bill [B 70 - 2000] (National Assembly - sec 77), dated 7 November 2000:

   The Select Committee on Finance, having considered and examined the Revenue Laws Amendment Bill [B 70 - 2000] (National Assembly - sec 77), referred to it, reports that it has concluded its deliberations thereon.

4. Report of the Select Committee on Finance on the Second Adjustments Appropriation Bill [B 67 - 2000] (National Assembly - sec 77), dated 7 November 2000:

   The Select Committee on Finance, having considered and examined the Second Adjustments Appropriation Bill [B 67 - 2000] (National Assembly - sec 77), referred to it, reports that it has concluded its deliberations thereon.

5. Report of the Select Committee on Local Government and Administration on the Redetermination of the Boundaries of Cross-Boundary Municipalities Bill [B 69 - 2000] (National Assembly - sec 75), dated 8 November 2000:

   The Select Committee on Local Government and Administration, having considered the subject of the Redetermination of the Boundaries of Cross-Boundary Municipalities Bill [B 69 - 2000] (National Assembly - sec 75), referred to it, reports that it has agreed to the Bill.

6. Report of the Select Committee on Security and Constitutional Affairs on the Firearms Control Bill [B 34D - 2000] (National Assembly - sec 75), dated 31 October 2000:

 The Select Committee on Security and Constitutional Affairs, having
 considered the subject of the Firearms Control Bill [B 34D - 2000]
 (National Assembly - sec 75), referred to it, reports that it has
 agreed to the Bill.


 The Committee wishes to report further, as follows:


 1.     The Committee considered carefully whether to propose amendments
     to the Bill, in view of the possible delay in implementation which
     might be caused by such amendments. As a result, the Committee
     resolved not to propose amendments now, but to agree to the Bill
     and to make recommendations, set out in paragraph 2. below, on
     regulations to be made and implementation of the Bill. The
     Committee also urges that the implementation of the Bill be
     monitored by the Ministry.


 2.     The Committee therefore recommends as follows:


     (1)     Clause 8


          Provision should be made for participation by the firearms
          industry in oversight of the accreditation of institutions.


     (2)     Clause 9


          The regulations should impose an obligation on the Registrar
          to give due consideration to the effect of the granting of a
          final protection order in terms of the Domestic Violence Act,
          1998 (Act No. 116 of 1998), against a person who applies for a
          competency certificate on the question of whether he or she is
          a fit and proper person to possess a firearm, to trade in
          firearms, to manufacture firearms or to conduct business as a
          gunsmith, as the case may be. This obligation should relate to
          all final protection orders granted within a period of five
          years before receipt of the application for a competency
          certificate by the Designated Firearms Officer.
     (3)     Clauses 24, 35 and 63


          The Registrar should be empowered by regulation to consider
          the granting of condonation for late applications for the
          renewal of licences in appropriate circumstances.


     (4)     Clause 98


          Provision should be made for review, at least every two years,
          of the competency of employees of official institutions who
          are allowed to possess firearms under the control of such
          institutions.


     (5)     Clause 103


          A person who has been convicted of a crime or an offence
          disqualifying that person from obtaining a competency
          certificate, should be allowed to apply to the court for a
          declaratory order that he or she is not unfit to possess a
          firearm, if the court did not exercise a discretion in this
          regard at the trial. If the court would not allow such an
          application without explicit authorisation, consideration
          should be given to an amendment which would allow it.


     (6)     Clause 107


          The Department should direct its attention to the
          implementation of measures to protect citizens from persons
          pretending to be police officials.


     (7)     Clause 108


          A person should not be prosecuted simply for refusing to give
          information to a police official upon request therefor in
          terms of this Clause. In due course, Schedule 4 should be
          amended by the deletion of the reference to section 108(1) and
          the corresponding penalty of one year's imprisonment.


     (8)     Clause 128


          The Department should closely monitor the efficiency of the
          Appeal Board to ensure that no substantial backlog develops.
          If it cannot cope with its workload, consideration should be
          given to an amendment allowing for more members. Provision
          could then be made for a number of smaller appeal committees
          to exercise the appeal function.


     (9)     Clause 151


          Consideration should be given to the appropriateness of
          allowing magistrates to impose all the maximum penalties
          provided for in the Bill. This must be done with due regard to
          the current jurisdiction of magistrates and regional court
          magistrates.


 Report to be considered.

1. Report of the Select Committee on Economic Affairs on the SADC Trade Protocol, dated 7 November 2000:

   The Select Committee on Economic Affairs, having considered the request for approval by Parliament of the Amendment Protocol on Trade in the Southern African Development Community, referred to it, recommends that the Council, in terms of section 231(2) of the Constitution, approve the said Protocol.

 Report to be considered.

1. Report of the Select Committee on Finance on the Intergovernmental Fiscal Review, dated 7 November 2000:

 The Select Committee on Finance, having considered and examined the
 Intergovernmental Fiscal Review, reports as follows:


 A.     Introduction


     1. On 6 November, the Committee held a meeting to consider the
          Intergovernmental Fiscal Review (IGFR), during which the
          National Treasury and the Deputy Minister of Finance made
          presentations. The Committee also invited IDASA to make a
          presentation.


     2. Executive summary


          The Committee was guided by the input from the National
          Treasury and the submission by IDASA:


          (1) The presentation by the National Treasury was on each of
              the chapters contained in the IGFR.
          (2) The submission by IDASA focused on financial shortfalls
              not reflected in the IGFR.


 B.     Meeting on IGFR on 6 November


     1. National Treasury and Committee discussion


          The IGFR is a document that seeks to provide a snapshot of how
          IGF relations are currently evolving, highlighting the
          successes and shortcomings and indicating the variances that
          exist between provinces and municipalities.


          The Provincial Equitable Share has declined as a result of
          Defence acquisitions. This will be corrected and reflected in
          the Budget Policy Statement. However, a healthy picture is
          emerging: The budgetary overspending incurred during 1996-97
          and 1997-98 has been turned into a budget surplus, which will
          assist provinces in dealing with debt incurred by way of
          overdrafts. This will assist provinces to deal with macro
          aspects like quality and effectiveness of spending and
          improving quality of delivery. A balance has to be struck
          between social services and capital/infrastructure spending in
          the provinces.


          As regards Health, conditional grants seem to be a big
          problem, due to a large portion of the Health budget being
          dominated by conditional grants. Problems range from non-
          transfers by national departments to stringent conditions that
          national departments place on provinces as a condition to
          transfer funds, as well as underspending by provinces or local
          authorities.


          Provincial revenue seems to register a decline as a result of
          a lack of capacity. A good example is the inability of
          provinces to manage licence fees. There are, however,
          initiatives to improve this. The quality of infrastructure at
          provincial level seems to be better than at local level.


          A range of reform mechanisms is under way to improve local
          government finances. These include a local government version
          of the Public Finance Management Act, known as the Municipal
          Finance Management Bill, and a range of other initiatives.
          Surplusses should not be viewed as unspent money, but as funds
          to be used to pay off deficits which provinces have incurred
          during the first few years since their establishment.
          Provinces that are using surplusses to their benefit should be
          commended, and those that are lagging behind in this regard
          should start following suit. The problem seems to be that
          provinces are not classifying their deficits in a uniform way.


          Provinces still face the challenge of reducing classroom
          backlogs, increasing quality of teaching, expanding early
          learning opportunities and furthering literacy programmes. On
          average, provinces spend 40% of their budgets on education.
          Poorer provinces usually have a higher proportion of children
          than richer provinces, and have inherited an education system
          that has higher repetition rates. Gauteng, the Western Cape
          and the Northern Cape have fewer children, higher pass rates
          and hence spend less of their budgets on education.


          Health expenditure at provincial level has been one of the
          fast-growing areas of spending in the government since 1995.
          Although personnel expenditure is of concern, the key
          challenges that face provincial health departments are the
          impact of HIV/AIDS, better hospital management and achieving
          greater equity in health delivery while maintaining standards
          of quality.


          The social security grants are the government's most
          significant poverty alleviation programme (R18,2 billion in
          2000-01). It constitutes 86% of provincial welfare
          expenditure. Welfare expenditure grew at 5% in 1999-00, and is
          projected to grow at 3,8% in respect of the MTEF. As the
          applications for of child support grants increase and the
          pressure to provide inflation-linked increases in respect of
          welfare grants mounts, balancing the expansion of a social
          security net while maintaining the real value of grants will
          provide a major challenge.


          The general understanding is that if a department does not
          spend its funds this year, it will be fruitless to allocate
          the same amount of money for that particular department next
          year. The challenge is to spend the allocated budget well in
          order to address the backlogs, repair roads and ensure
          delivery.


          The view during the Committee discussion was that the budget
          should be directed at outputs, more specifically on those
          within provinces. With the implementation of the Public
          Finance Management Act, this issue will be addressed in time.


     2. IDASA


          IDASA feels that a new expenditure pressure is placed on
          provinces and does not appear in the IGFR numbers. The
          National Treasury indicated to provinces not to overspend and
          to pay off their debt. Where previously indicated spending
          pressures increase, provinces tend to neglect certain
          important basic services that should be funded.


          There is clearly a need for education development, and the
          national Department of Education will clearly fund this
          training. The problem is that, when you train a teacher, you
          will have to pay that teacher more. Where will these funds
          come from? Early childhood development will be phased in from
          next year onwards, which will also have financial
          implications. Another priority is the phasing in of national
          norms and standards (spending on books and school maintenance)
          - where will these funds be taken from? More money will have
          to be allocated in this regard, and it is not reflected in the
          numbers.


          As regards Health, AIDS is the primary cause of concern. The
          other is the Basic Conditions of Employment Act, which will
          have implications for personnel expenditure.


          The Welfare budget is undergoing a decline of 7%, and
          unemployment has also risen, so social security payments
          should not be below 7%. Only 27% of children eligible for the
          child support grant have applied for it. What would happen if
          the other 73% were to apply? In respect of the disability
          grant, only about one third receive it. What would happen if
          all others participants apply for it? Linking these grants to
          inflation is another problem. HIV/AIDS victims will also have
          to be allocated certain grants as the AIDS crisis unfolds.
          The report does not say to whom provinces owe money and at
          what interest rates funds are allocated, who the creditors are
          and what the maturity structure is or when they have to repay
          the money. These are some of the questions that undermine the
          credibility of the figures contained in the IGFR.


 C.     Recommendations


     1. A study tour should be undertaken to start to understand what
          the provinces are facing and what they are experiencing. They
          should look at the following:


          (1) Monitoring the trends and ensuring that they reflect the
              policy commitment.


          (2) Monitoring the flow of funds to provinces, in particular
              the conditional grants, through mechanisms such as
              quarterly reports submitted by accounting officers.


          (3) The impact of social spending on HIV/AIDS.


          (4) Revenue collection and its lack of capacity.


          (5) Infrastructure development.


          (6) Capacity problems.


     2. The IGFR should be tabled at a more appropriate time, to place
          the Committee and the provinces in a much better position to
          peruse it.


 D.     Conclusion


     The Committee commends the National Treasury for instituting the
     second IGFR. It reflects their commitment to be transparent in the
     way that provincial and local finances are dealt with. The
     document is a clear indication that we are heading in the right
     direction. As much as the National Treasury is not obligated to
     produce this information, it serves as an important tool to
     execute oversight in the National Council of Provinces.


     The Committee expresses its appreciation to the Deputy Minister
     and Mr Mommonioat (Chief Director: Intergovernmental Fiscal
     Relations) for their insight and the informative discussion. We
     are looking forward to the year ahead.


 Report to be considered.

1. Report of the Select Committee on Finance on the FFC Recommendations, dated 7 November 2000:

 The Select Committee on Finance, having considered and examined the
 Financial and Fiscal Commission (FFC) Recommendations  on the 2000-04
 MTEF Cycle, as at May 2000, reports as follows:


 A.     Introduction


     The Committee held public hearings on Monday, 21 August, and
     Wednesday, 23 August, in order to consider the FFC's report. The
     following stakeholders participated: The FFC, IDASA, COSATU, the
     Applied Fiscal Research Centre (AFReC), the Foundation for
     Education, Science and Technology, the School of Public Management
     and Administration, University of Pretoria, and provincial finance
     standing committees (of the Northern Province, Free State,
     Gauteng, Eastern Cape, Northern Cape and Mpumalanga).


     Although the Norms-Costed Approach is welcomed by the Committee,
     there are areas within this approach that require further
     research. The Committee would like to pose some very elementary
     questions in this regard:


     1. Whether the current formula impedes delivery of services in the
          province?


     2. Whether we have explored or exhausted the current formula to
          its full potential in terms of resource allocation?


     3. Whether the introduction of a new formula is a panacea to our
          difficulties in respect of resource allocation?


     The Committee is also mindful that South Africa's fiscal
     environment and the inter-governmental relations is shaped by an
     obligation to service the national debt, which we cannot escape
     from, and a division of revenue which distributes the nationally-
     raised revenue to all spheres of government equitably.


     Bearing these introductory comments in mind, the Committee raises
     some key issues.


 B.     Key issues for Committee consideration


     1. Local government


          The Committee holds the view that, since we are faced with the
          mammoth task of transforming local government, the FFC will
          have to apply its mind to the role played by the costed-norms
          approach in the finances of local government. The Committee
          looks forward to the comprehensive study by the FFC so that we
          can apply our minds to this sphere of government. The
          Committee notes that organised local government did not submit
          its response to the FFC's recommendations.


     2. Expenditure on delivery of services versus personnel


          The Committee argues that the FFC is silent on the dilemma
          between spending on delivery of services and/or personnel
          costs. The costed-norms approach does not offer a solution in
          resolving this dilemma.


     3. Data Collection


          The Committee fully appreciates the extent to which the FFC
          raises questions around the quality of data in the provinces.
          The Committee is aware that planning is adversely affected,
          and therefore it needs to interact with the relevant
          authorities  with a view to devising ways of improving
          financial data at provincial level. The Committee also notes
          that this was also a concern of the IMF when it last briefed
          the Committee.


     4. Unfunded mandates


          While the FFC argued that the costed-norms method imposes
          desirable constraints on both national and provincial
          governments, unfunded mandates are less likely to occur.
          However, the public hearing was informed that the National
          Treasury feared that the reintroduction of unfunded mandates
          would be a likely outcome of the costed-norms approach. It
          also emerged that section 35 of the Public Finance Management
          Act (PFMA) goes a long way towards dealing with the problems
          of unfunded mandates, and all concerns arising from adoption
          of the costed-norms approach in relation to unfunded mandates
          would be addressed by the PFMA.


     5. Performance based budgeting


          Since the PFMA refers to performance-based budgeting, the
          Committee is yet to witness the implementation of such
          performance-based budgeting. In our view, the essence of
          performance-based budgeting is to allocate resources in line
          with policy and in terms of objectives to be met and to
          correlate results. It is hoped that this form of budgeting
          would result in more effective monitoring of allocative and
          delivery efficiency. Service delivery becomes more transparent
          and accountable. In other words, performance budgeting
          measures the economic effectiveness and efficiency of
          converting input-mix to outputs. Performance-based budgeting
          makes a further distinction between outputs and outcomes. This
          is best understood by way of a hypothetical example: If X
          amount of financial resources is used to immunise children,
          then output would be a Y number of children immunised.
          However, outcome would be to reduce the infant mortality rate
          in respect of immunisable conditions.


          The Committee would like to see this form of budgeting being
          used increasingly in South Africa, since it is relevant for
          attaining our national priorities. The FFC and other
          stakeholders should continue with their explorations of
          performance budgeting.


     6. Macro-economic constraint


          The FFC has not taken the rationale of the costed-norms
          approach to its logical conclusion. The identified norms and
          standards are based on the  Constitution and does not ignore
          the need for progressive implementation. The costed-norms
          approach developed by the allocative protocols of the National
          Treasury does not conflict with current macro-economic
          parameters. Key constituencies, such as Cosatu, may renew
          their call for expansion of the macro-economic parameters with
          regard to the budget deficit and greater flexibility in macro-
          economic policy to accommodate meaningful implementation of
          the costs and norms approach. The Committee should devise
          means of addressing any calls for adjustment to the existing
          macro-economic parameters.


     7. Unconditional/conditional grants


          The FFC argues that conditional grants should be squeezed out
          or removed, thereby implying that the provincial share of
          nationally-raised revenue will increase. This perspective is
          not correct, because if we make available additional
          resources, simultaneously financial sacrifices or compromises
          will occur elsewhere.


     8. Infrastructure and capital backlogs


          The key proposal is to supplement provincial capital spending
          through the use of a conditional grant. At present there is an
          allowance system, which makes it possible for provinces, when
          under duress, to use resources, designated for capital
          expenditure, for the social sector. The FFC's proposal allows
          and ensures that provinces are allocated an amount for capital
          expenditure. The FFC needs to continue exploring possibilities
          in this regard and share their findings with the Committee.


     9. Validity of using one province as proxy in costing analysis


          The Committee questions the validity of using the Northern
          Cape as a benchmark to determine the cost of providing a
          legislative institution and the administration of government.
          The Committee would recommend that similar studies be
          conducted for each province.


          In addition, there is an urban bias in the report  in respect
          of service delivery. The FFC does not deal with the
          urban/rural bias by adopting the Northern Cape as a proxy. The
          Committee argues that the Northern Cape cannot be used as a
          proxy because it is not classified as a rural province.
          Moreover, spending on Health, Education and Welfare squeezes
          out other forms of spending, which further aggravates the bias
          in respect of urban versus rural development. The FFC's
          approach does not help us in resolving these complex
          development issues.


     10.     Social Service sector


          The Committee takes the strong view that much more research is
          required in the social service sector. The beneficial effects
          of the costed-norms approach will be recognised only if there
          are tangible improvements in the social service sector. The
          social service sector provides the terrain for testing the
          usefulness of the costs and norms approach.


          While the National Treasury allocates the welfare component on
          the basis of the need of recipients of three grants, the FFC
          takes six grants into account. This refinement allows a more
          equitable distribution of revenue. The foster care grant in
          the calculation of the welfare component is to be commended,
          since the demand for this grant is likely to increase
          commensurate with the increase in HIV/AIDS-related deaths. As
          a result, the FFC's proposal would reflect new demands on
          provincial service delivery. Moreover, the welfare-costed
          norms, as proposed by the FFC, adopt a different strategy with
          the national Department of Social Development, which is
          considering restructuring the definition of recipients of
          social welfare in order to give consideration to the extended
          family. The provinces also argue that it is still unclear
          whether primary health care is a provincial or a local
          government competency. This component of basic service is
          difficult to cost.


          With regard to the other social sector, Education, which has
          been disaggregated into nine distinct components, both IDASA
          and the FFC support the suggestion to distribute education
          resources according to nine different learner groups. Each
          group will have its own needs and cost implications. The
          Committee also wishes to remind the FFC that it does not
          incorporate adult basic education and early childhood
          education, although providing such services is an extension of
          human rights.
          The cost implication of disaggregating the social service
          sector is still not clear, and more research is required.


     11.     Relationship between FFC, Parliament, provincial
          legislatures and local government


          In future relations with the FFC, it may be necessary to
          establish and design appropriate protocols for the Committee
          and the FFC. Since the Constitution also expects provincial
          legislatures to receive reports from the FFC, the question
          arises whether the National Council of Provinces (via the
          Select Committee of Finance) should co-ordinate interaction
          between the provinces and the FFC, or whether the FFC should
          report directly to each individual province. These mechanisms
          remain to be resolved.


          However, in the case of local government financing, the
          Committee would propose that the FFC interface jointly with
          the parliamentary committees on finance and local government
          as well as with Salga. A series of meetings should be set up,
          involving the four parliamentary committees and the FFC, on
          the recommendations on local government financing.


 C.     Recommendations


     The Committee recommends as follows:


     1. Public hearings on the implications of an expanding budget
          deficit should be hosted.


     2. The National Treasury should be engaged on developing
          nationally-determined norms and standards which will guide
          service delivery.


     3. Workshop should be held with provinces to scrutinise the
          recommendations of the FFC.


     4. The FFC should continue with its work on the implication of the
          costs and norms approach for local government.


 D.     Conclusion


     The Committee congratulates the FFC on changing the mindset in
     respect of the budgeting process. The FFC has been extremely
     innovative in its budgetary analysis, and has laid the basis for
     doing things differently. It has worked extremely hard on
     developing the costs and norms approach, and the Committee would
     like to engage with them on an on-going basis. The Committee,
     together with the FFC, has to draft a schedule of meetings
     according to which time-frames can be attached to all outstanding
     issues on a formal and agreed basis.


     The Committee expresses appreciation to all the participants for
     their contributions, and looks forward to a long and lasting
     association with them.


 Report to be considered.