Tag Archive | budget vote

Budget vote speeches: Out of touch with each other


DTI does flip flop on B-BBEE pointing…..

elephant and bayThere have clearly been were two big elephants in the room during budget vote speech time in the National Assembly over the last two weeks – Eskom and BEE.    Then, suddenly, with DTI reversing their decision to reduce B-BEE pointing award benefits for broad-based employment schemes – one of the elephants disappeared.  It was an amazing flip flop in government policy.

But in actual fact this represents no change, in reality – just simply the fact that the whole structure of what was proposed was seen by all as impractical, unenforceable and to industry, unacceptable.

Backstage dramas

Whether it was business and industry pressure that forced the change, the Chamber of Mines or even the trade union movement itself, after two surprising gazettes announcing reduced awards in terms of black empowerment for broad based shareholder schemes, including employee schemes so carefully Rob+Daviesworked out in the last two years, and the second gazette correcting the fact that such changes were not retrospective, what happened behind the scenes will never be known. We think it was minister Rob Davies himself who put his foot down.

In a private comment, when sympathising with the minister for having to reverse his department’s announcements so publicly, his answer was “When something goes wrong you have to put it right.”  We admire for that and told him so.

Energy issues remain at the core

As far as the first elephant in the room, the energy crisis, it remains.    Unusually, this year despite all the speeches, the amount of media briefings and portfolio committee debates, including the millions of rands spent on airfares with some forty odd departments and SOEs fielding full teams reporting, it was only the minister of energy, Tina Joemat-Pettersson, who really tackled electricity and the issue of Eskom – all the other ministers appearing avoiding the issue like the plague, even public enterprises.

Correcting the past

What indeed was noticeable, at portfolio committee level as well, that each reporting team and each minister seemed to be more anxious to report on transformation and state ownership issues, as if some very clear dictate had been received that the ANC was not delivering on its election mandate in these areas and this was really the main priority.

Whilst lip service seems to have been paid, and then only in some instances, to the need for foreign investment and issues of the country’s rating image, the lacklustre address by the minister of trade and industry gave only more credence to the belief that redress for past injustices was the only big elephant in their lives and in Union Buildings.

Transformation not economics at forefront

In the committees, where all departments have been reporting on progress towards annual targets, this now being the last quarter, the most important slide in any PowerPoint presentation (following clarity on the audit process) was always the racial makeup of the department concerned in terms of reaching transformation targets and what race ratios currently existed. The theme was obvious.

We have listened to many thousands of words spoken over the month and more is yet to come as we write, but it is all too evident that there is a massive discord between business and industry and President Zuma’s cabinet on priorities.

Final word

Trade and industry minister, Rob Davies, warned parliamentarians in his budget vote speech, when mentioning BEE matters , that members should  be aware that the President had indicated that the central task was to bring about radical economic transformation.      Which really said it all.

Posted in BEE, cabinet, Cabinet,Presidential, earlier editorials, Finance, economic, Fuel,oil,renewables, Trade & Industry0 Comments

Budget vote passed just in time

Committeemeeting smallMajor learning curve for new MPs….

Probably the most difficult parliamentary rule to explain to the new influx of MPs who have become members of the fifth Parliament is the time honoured and important fact that whilst they may debate and even disagree with various facets of the budget vote appropriations now passed by Parliament, they could not change the sums involved.

That is because the Appropriations Bill, which passes the money raised by taxes and from banks to the various government entities, is a money Bill.

All such money Bills emanate from national treasury and are tabled by the minister of finance.   In terms of section 77 of the Constitution, such are Bills that Parliament cannot alter by amendment, whereas with all other Bills they can exercise by majority vote any changes.

Three types of  Bill

The majority of proposed legislation that comes before Parliament is in the form of a Section 75 Bill, legislation that will make its way to the National Assembly (NA) for a final vote, the “concurrence” of the National Council of Provinces (NCOP) only being sought during its parliamentary passage. These can be altered by Parliament and Parliament usually holds its own public hearings on such Bills.

The remaining but small balance of Bills, which are quite often of greater importance and interest to the general public, are “tagged” as section 76 Bills. This is because they affect provincial and local administration and constitutionally must go before each provincial legislature to obtain a simple majority for amendment, rejection or approval from the nine provinces. Public hearings occur right down the line accordingly.

Hence, the argument over the Mineral and Petroleum Resources Development Amendment Bill and the e-tolling issue, both of which have both described by opposition members as Bills passed unconstitutionally because, in their view, the subject matter was not purely “national” but involved provincial legislation, taxes and provincial citizens.   In other words, they maintain the Bills were incorrectly “tagged” as Section 75.

No money amendments

But back to the very different section 77 money Bills which are introduced direct to the NA by the minister of finance. Why, ask new MPs, should we sit debating the budget vote in portfolio committees when we cannot change the Bill?

The reason goes to the whole root of the parliamentary process and why the Appropriations Bill, as the first Bill that a new crop of MPs has to deal with, forms the basis in the learning curve of why they are there at all.

This is because this is where the process of financial oversight starts.

When the budget vote comes before Parliament, each department, headed by the minister involved, also comes before the relevant portfolio committee and explains what they will be doing with their allocation of the total budget for the current year, their objectives and targets.    This commitment is accompanied by a five year strategy plan for the particular department.

The annual cycle of accountability has therefore started and this is why it is so important that director-general posts are substantiated and not filled by those “acting”. These processes are explained to MPs during their training of two weeks now completed.

Final stages

Following the budget presentations by each government department to each portfolio committee in the NA (and select committee in the NCOP), the Appropriations Bill then goes to a joint sitting in the NA, all MPs from both Houses being present and each minister, with a speech on intent, targets (with, hopefully, some indication of any legislation that ministry intends tabling) the budget vote is then proposed in the knowledge that it will indeed be passed.

Numbers, targets and objectives have therefore all been vocalised and minuted as a result and now the financial facts and objectives are “set in concrete” with all present.  Failure or success can be measured.

As a matter of fact, this process is usually the first interface between a new MP and the government department to which the MP has been allocated, which is also an important part of the democratic and oversight process.    In the case of the budget vote it is, in essence, for most MPs a financial initiation.

By coming before the committee, consequently, the director general of each department is also committed both on policy and in monetary terms.  Each cabinet minister is subsequently asked to sign a presidential delivery contract which, in public service terms, is followed up upon by the department of performance, monitoring and evaluation – part of the Presidency.

Marker put down

However, none of this is so important as the parliamentary monitoring process itself, which both enables all political parties to “grill” under performing departments during the year; debate legislation supporting policy and also, importantly, to provide a transparent window during the oversight process to both media and monitors, who exercise their constitutional right to observe such meetings but with no speaking role.

Other money Bills involve taxation matters, which are specifically dealt with by the portfolio committee on finance, and a special report submitted to the NA. An example of this would be the budget proposals in April.

It is this long and somewhat complicated process that protects us all – emanating from one of the better constitutions in the world.      And long may we be so protected.


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Parliament votes on 2014 budget

Editorial _

Men and women at work…

Parliament  is currently a place of learning, particularly bearing in mind the 2014 budget is the first oversight task.   With so many new parliamentarians and newly re-structured committees with new chairpersons, insofar as learning is concerned,  it is more than just simply a new school term but a new school term in a new school.

As in the past, it will be a little time before things settle down and MPs gather enough understanding to perform the role with which they are entrusted; the role of oversight.

Most are savvy enough to understand the separation of powers even though party whips can become quite intimidating at times.  In any case, the system soon sorts out those with nothing useful to say and those with critical and questioning minds.

Approving the budget

The learning curve is steep. Many have been thrust straight into a committee programme where the task of each committee is to approve the national budget allocated to each of the many government departments according to their performance for the last five years. All of this departmental knowledge MPs have to read up on, study their plans for the next five years and listen to the same departments giving briefings presented at working committee level.  This is  currently where Parliament is.

To not contribute and not to perform is a quick trip to political oblivion.

MPs must also understand the views expressed of the auditors general on the previous year’s financial performances of the particular department and of state utilities; how the plans interlock, or don’t interlock properly, into a cluster of associated departments; a fair idea of what the presidential ministry of performance, monitoring and evaluation thinks of them and the party line on the issues of the day dealt with by the particular section of state machinery.

At this stage in the new Parliament the whole question of current legislation in process has probably not arisen but shortly, for many MPs, it will just be a case of listening and absorbing viewpoints, particularly of those who drafted the legislation and why they did.

Implementation of NDP

Two important things are therefore happening at the moment. Each government is justifying not only its past performance but committing itself to a plan with targets for the next five years together with strategies for a longer term and medium and long terms budgets. Secondly, they will learn what legislation is in draft and in the pipeline and the policy reasons for such legislation.

Consequently, question time in debate is critical and whilst questions from MPs can range from probing enquiries to the frankly banal, the change is refreshing. Witness minister Hanekom’s turnaround on immigration visas; the cabinet turn around on independent power producers; and on the affirmation of nuclear power in the energy mix and the sending back of the improbable Gender Equality Bill – all as examples of changes in thinking.

More interesting are the questions being asked by new MPs. Such as the new ANC energy committee member when she asked candidly of the DG for clean energy whether he thought all the “greening” regulations and air quality capital costs might be scaring off investors. Or the EFF MP who demanded a list of all Eskom blackouts and the reasons for the interruption in service.

Where it happens

To a certain extent the questions might appear naïve but a more candid and new perspective does no harm.  The parliamentary system still remains the crucible of political policy and legislative debate, despite the undermining effect that can take place with a heavily weighted political opinion coming from a strong political majority.    Nevertheless, South Africa is protected by one of the strongest constitutions in the world and the parliamentary process fortunately basks in its strong light.

Once the budget vote is debated, the Appropriations Bill – a section 77 money Bill protected from amendment by any party but Treasury by the same Constitution – Parliament’s attention will move towards the legislative landscape, hopefully tackling with as much vigour some of more the contentious issues facing the country.



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Gill Marcus, Reserve Bank, says it straight from the shoulder

We are different from Europe……

gillmarcusThe economic crisis facing South Africa, although vitally affected by the Eurozone crisis, is a completely different issue than that facing Europe, said Gill Marcus, governor of the Reserve Bank when addressing parliamentarians of the standing committee on finance. In fact South Africa has dealt with the systemic banking issue facing world banking extremely well, she said, but now faces the problem of low growth and rising inflation.

Speaking during her presentation on the Reserve Bank budget vote, she warned that administered price inflation, a matter involving the state, was a worry. “As the figure remains well above the inflation target range, greater moderation and discipline are needed”.

We have our own crisis to deal with

Ms. Marcus said she had broken with tradition and had decided not to summarise the bank’s quarterly report, as this was already well covered by the document itself and was on the website. She instead outline her perspectives on key economic issues affecting South Africa at this moment, as these were more dynamic and could change on a daily basis. “Our crisis is still on, but it is different in nature from that in advanced economies but still not helped by the Eurozone chaos”.

“Whilst  Europe is still in extreme austerity”, she said, “which has the consequence of very high unemployment, we have to carefully watch the situation at Reserve Bank because of the reduced capital flows to emerging markets generally such as South Africa.  We are down to watching this daily and we have to change monthly our policies to counter the situation for which there are no precedents whatsoever”.

Regulatory environment top-notch

In comparison to Europe, she said, South Africa has not had any banks in trouble and in comparison with other countries “we have a good regulatory environment and in fact at times quite intrusive compared to other countries but this is a good thing as it turns out”, she said. “Our banks are strong if not short in number.”

When asked if this was a good thing, she commented that it was a not a worry at the moment and relationships were good but what South Africa often did not realize was the very high number of smaller and medium size banks and the number of foreign representative banking institutions in South Africa. “These local larger banks do, of course, make it very difficult for foreign banks to gain a foothold but all foreign banks are welcome if they meet our strict and I believe effective regulations”.

False hopes with China

From a global perspective, Marcus said, confidence is very fragile worldwide as to the future. The world had looked at China to be the catalyst to pull the world out of its recession “but it didn’t happen and China made 7,6%” growth  instead of 7.9% whilst the world was really hoping for more.” A re-think became necessary, she said.

When asked about the realities of dealing with China and whether the investment had any economic effects other on the infrastructure project itself, Marcus said that with China a better formula for working together had to be found in partnerships, which were rather more a win/win for South Africa as distinct from what had gone on elsewhere in Africa. This was possible, she said. China was changing, she noted.

However, if the US can maintain its growth figures, which again are fragile, there is some hope but nobody really knows what to expect, short term or long term”.

We are about jobs

Meanwhile, we in South Africa, said Marcus, have slower growth with inflation. Our crisis is again all about jobs but not for the same reasons. Meanwhile, Russia is doing quite well but Brazil is not, despite not having a major unemployment problem, but instead a very serious trading problem which is working against their economy. In fact, South Africa, in a gloomy world, has a relatively positive outlook compared with worldwide economic scenarios in other areas, she said.

“In essence we see three financial markets in the advanced economies from a Reserve Bank perspective. Those countries in crisis; those were there is some faint hope like the US and those where the situation is recovering well.”

She commented that the challenge for overseas major global central banks is where to from here?   “In South Africa we can really only be reactive and unfortunately there are still some unrealistic expectations around in some circles locally of what a central bank such as ours in an emergent economy can do about things” .

Unclear what is happening

Taking a general look at the economic situation, Marcus said,  “We are daily moving into somewhat unchartered seas.”

The advanced economy as we know it, she said, has registered a shrinkage is 2.9% and events in Cyrus had undermined confidence and cohesion further. Meanwhile in Japan, aggressive expansionary policies seem credible and there are expectations of growth. The US fiscal dilemmas has been partly resolved she said, but added, “I am afraid this is mostly postponement”.

Sub-Saharan growth is buoyed by favourable process of most export commodities and had experienced some infrastructure spending but this was countered by mining difficulties affecting exports. “In the end we are still hoping for 2,6% growth. South Africa is still facing up to its problems well and down the line, growth can still be expected”.

Consumer debt could be a worry

On the domestic front, she said, bank loans to households (unsecured loans) used to be for mortgages but this has now gone up rapidly in the last two years for different reasons and the mortgage debt, whilst increasing, has stabilized but unsecured lending forms 16% of total lending.

Growth in household remuneration has been very robust although slowing slightly in recent years. This remains the overall factor fuelling the figures, she said. Some months are good, some months are not so good, she said in answer to questions.

Chris Hart, Bank researcher and consultant to the Reserve Bank, added that low interest rates were not having the effect on growth that was hoped for but the inflow of savings from the rest of the world in the last ten years had been very robust and SA has been able to borrow from the rest of the world on an improved basis as a result compared with many other countries.

Is big good?

Globally, Gill Marcus commented that with so many of the global banks “taken out”, there are now a lesser  number of banks but they are now so much bigger and the question now arises with them being so big, should they broken up?

In conclusion, Gill Marcus and Chris Hart commented that SA has become more robust in the face of external global shocks and the large exchange rate movements may he implications for inflation in SA. This, they said, is a typical example of an emerging market having to deal with different issues from established markets. But at least, Marcus commented, we had a sufficiently healthy and strong trading market that was able to do this as compared with some more unfortunate countries.

“Sadly, we have not taken advantage of a commodity export boom environment because we have not got the products to export. We have think more long term in South Africa.”

Knows nothing

Asked why there was a cloud of secrecy over Zimbabwe and the R100m paid or to be paid to that country and was this was not good in terms of the country’s record on human rights or in terms of UN?    Gill Marcus said, “the Reserve Bank knows nothing more than you on conditions or anything about this money.”

Members responded that it was not good that neither treasury or the reserve bank knew nothing of these matters. Clearly it was implied that this was a cabinet issue alone.

When asked what she thought of NERSA’s decision on Eskom’s tariff application, she responded that NERSA appears to have done “a good job” and reminded members that without energy security “we shall never see any kind of investment here”.

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