Malusi Gigaba must use his “maiden” medium-term budget policy statement to give hope to the 9.3 million people who do not have jobs in SA

David Maynier MP, DA Shadow Minister of Finance, and Alf Lees MP, DA Shadow Deputy Minister of Finance, preview of the Medium-Term Budget Policy Statement 2017 can be found here.
The Minister of Finance, Malusi Gigaba, delivers his “maiden” medium-term budget policy statement on Wednesday 25 October 2017 in Parliament.
The medium-term budget policy statement is normally an opportunity for the minister to make adjustments to the main budget requiring the approval of Parliament.
However, we believe the minister should use the medium-term budget policy statement to deal decisively with the “big five” challenges to reversing the economic decline as follows:
boosting economic growth by announcing a package of structural reforms to build business confidence and stimulate private sector investment;
stabilizing public finances by announcing a “haircut” on all mandatory cost containment items and implementing a Comprehensive Spending Review;
supporting the independence of financial institutions by making a strong statement in support of the institutional independence of the South African Reserve Bank, Public Investment Corporation and National Treasury;
reforming “zombie state-owned enterprises by putting the national airline into business rescue with a view to stabilizing and then privatizing South African Airways; and
mitigating significant long-term fiscal risks by terminating the nuclear build programme.
What will define the success, or the failure, of the minister’s “maiden” medium-term budget policy statement will, in the end, be whether he can give hope to the 9.3 million people who do not have jobs, or have given up looking for jobs, in South Africa.

BOKAMOSO | Vrede Dairy Farm: A corruption crime scene

Last week I visited the Estina dairy farm in the tiny town of Vrede in the Free State. This picturesque rural setting has in recent weeks been exposed as the scene of a crime that has enraged the nation and shocked us all awake to the reality of corruption. It has also introduced us to the people, mostly poor and black, who are the real victims of this corruption. For years we have said that Jacob Zuma is corrupt and that it is the poor who suffer most when public resources are stolen for elite personal benefit. But now we could put names and faces to those previously anonymous victims.

The Estina farm has taken centre stage in an international money laundering scandal that saw R180 million in public money being funnelled through a complex web of local and international companies, all controlled in one way or another by the Gupta family. In the end, some of this money eventually made its way back to South Africa to pay for the costs of the extravagant Sun City wedding that the Gupta family hosted in 2013. This was the same wedding of Waterkloof Airforce Base infamy, when the Guptas showed enough clout in government to land their private charter plane at a state airforce base.

When you examine the detail of the project, you appreciate the full scale of the crime. The Vrede dairy project was a community project contracted between the Free State Provincial Government and the Estina dairy farm. The ostensible purpose of the project was to build a successful large scale dairy farm that would be owned by 80 beneficiaries from the local community, who would share in profits and have real say in management of the farm. This would make real business owners of poor, black South Africans and would boost agriculture output in the area. A win win!

On paper, this is a laudable model of economic empowerment, which is a necessary and urgent imperative for our country. The forced dispossession of black South Africans under apartheid caused a profound sense of loss, and severed all economic opportunity. The ramifications of this trauma continue to reverberate in society today.

As is often the case, this redress imperative was usurped by corruption and looting by the ANC government. The details show that from the start, it was nothing but a corruption scheme hidden shamefully behind the fig lead of empowerment. Estina was given a free 99-year lease to a 4 400 hectare farm, as well as a guaranteed R 114 million per year for the construction and running of the farm. In truth, this cash was siphoned out of the country as quickly as the South African  public payed it over.

None of the beneficiaries have had any actual involvement in the project. Some of the beneficiaries told me that they had sold off their own livestock in anticipation of their participation in this project.

The idea for this project came from Mosebenzi Zwane – whose hometown is Vrede – and who was the then MEC of Agriculture in the Free State. Zwane and officials from the Free State Department of Agriculture enjoyed a Gupta funded trip to India in October 2012, just months before the project was launched. This trip included multiple stays at Oberoi Hotels in India and a dinner at the Guptas’ house. Zwane is now the Minister for Mineral Resources, and his favours to the Gupta have only grown in scale and brazenness.

The awarding of the contract to Estina failed to follow many required legal steps. The Free State Government didn’t follow supply chain procedure when they agreed to fund the project, there was no due diligence done on Estina or its partnership with Indian Dairy company Paras, and money was deposited directly into Estina’s bank accounts with no verification process for where the money was being sent. In total, Estina was given R183 950 000 without having to invest a cent of their own money.

I am proud of how the DA has worked to expose the truth of Estina and fight on behalf of the rightful beneficiaries.

My colleagues Patricia Kopane, our leader in the Free State, along with Dr. Roy Jankielsohn MPL, have been persistently following the money trail in this case and exposing every new bit of information they have found. The DA called for an investigation into the project by the Public Protector, and the report on that investigation is due to be released imminently – within weeks, we are told.

Last week, DA Shadow Minister of Finance, David Maynier, laid criminal charges (racketeering and money laundering) against Mosebenzi Zwane, Atul Gupta, Ajay Gupta, Rajesh Gupta, and others.

Finally, I am determined that the beneficiaries should be given a full hearing in Parliament. We will arrange for the beneficiaries to travel to Parliament in Cape Town where they can tell their story, and so that ANC MPs can see for themselves the very human face of the victims of the corruption. Then, we hope, they will be less inclined to continue protecting and defending those within their party that continue to perpetrate that corruption, particularly President Zuma.

National Assembly speaker Baleka Mbete refuses “snap debate” on the economic crisis in SA

Note to Editors: Copies of the correspondence between David Maynier MP, DA Shadow Minister of Finance, and the Speaker of the National Assembly, Baleka Mbete, can be found [here].
We should be debating the fact that we are in deep economic trouble in South Africa.
However, the Speaker of the National Assembly, Baleka Mbete, has refused my request for a debate on an urgent matter of national public importance, in terms of National Assembly Rule 130, to debate measures to deal with the economic crisis in South Africa.
The reason my request for a “snap debate” on measures to deal with the economic crisis was refused is absurd. The Speaker of the National Assembly, Baleka Mbete, believes “the matter can be considered by some other means in the near future”. However, she must know:

  • the debate on the Appropriations Bill [B5-2017] was an opportunity to debate a R767 billion appropriation, to fund 40 national departments in 2017/18, and provided no opportunity to properly debate the economic crisis; and
  • the next opportunity for Members Statements is 22 August 2017; the next opportunity for oral questions is 23 August 2017; and if a written question was submitted today it would, at best, be replied to on 14 July 2017.

The Speaker of the National Assembly, Baleka Mbete, knows there is absolutely no prospect of this matter being dealt with by other means in the near future and is simply protecting President Jacob Zuma and Finance Minister, Malusi Gigaba, from a tough debate on measures to deal with the economic crisis in South Africa.
We are not going to take this lying down and will continue to fight to schedule a national debate on the economic crisis in South Africa.

National Treasury’s search for a new Director-General must be Gupta proof

The Director-General of National Treasury, Lungisa Fuzile, who was central to the fight against state capture, looting and big spending, retires today after twenty years of service at National Treasury.
The process to replace him is reportedly already well underway with more than thirty applications having been received, including some applications from internal candidates within National Treasury.
There is a real risk that the appointment process will be hijacked and that a person who is more committed to serving President Jacob Zuma’s and his most important clients, the Guptas’, private interests, rather than the public interest, will be appointed as the next Director-General of National Treasury.
I will, therefore, submit a series of parliamentary questions probing the appointment of the new director-general to ensure the appointment process is “Gupta proof”, and that the successful candidate does not come with the Guptas’ “stamp of approval”.
In the end, Lungisa Fuzile served his country well for the past twenty years at National Treasury. We wish him well in his retirement and have a sneaking suspicion that he will not be farming for long. We hope he will bounce back and play an important role, perhaps in the financial sector, in South Africa.

“Malikanegate”: Time to fire Professor Chris Malikane immediately!

The Minister of Finance, Malusi Gigaba, must now act decisively and fire his economic advisor, Professor Chris Malikane, for suggesting that people “take up arms” to achieve “radical economic transformation” in South Africa.
The minister says that Professor Chris Malikane has been “reined in” and told to “keep quiet”. But Professor Chris Malikane says the minister cannot tell him to “keep his mouth shut”. Up until now, Professor Chris Malikane has made a fool of the minister by ignoring his instruction to “keep quiet”.
However, things have now come to a head: Professor Chris Malikane crossed a “red line” in our constitutional democracy when he pivoted from warning about “civil war” to calling for “civil war” in South Africa. Speaking at an event last night, Professor Chris Malikane reportedly suggested that people may have to “take up arms” to achieve “radical economic transformation” in South Africa.
The fact is that it is complete madness for the minister’s economic advisor to be allowed to suggest that people “take up arms” to achieve “radical economic transformation” in South Africa.
These are exactly the kind of reckless statements that undermine investor confidence and discourage private sector investment, which are desperately needed to boost economic growth and create jobs in South Africa.
The minister must now try to save himself by acting decisively to stop the bleeding by immediately: making a public statement distancing himself from his economic advisor’s mad ideas; and firing Professor Chris Malikane as his economic advisor at National Treasury.
In the end, the minister can run but he cannot hide from “Malikanegate” because I will be holding the minister’s feet to the fire for his reckless decision to appoint Professor Chris Malikane during “Question Time” on Wednesday 10 May 2017 in Parliament.

There is now a risk Malusi Gigaba may delay the implementation of the Fica Bill

There is now a risk that the Minister of Finance, Malusi Gigaba, may delay the implementation of the Financial Intelligence Centre Amendment Bill [B33D-2015], which is one of the most important legislative weapons in the fight against corruption in South Africa.
The Financial Intelligence Centre Amendment Bill provides for the ongoing monitoring of the business relationships, sources of wealth and sources of funds of “domestic prominent influential persons”, and family members and close associates of “domestic prominent influential persons”, in South Africa.
What this means is that President Jacob Zuma and his most important clients, the Guptas, are going to feel the heat as their business relationships, sources of wealth and sources of funds are subjected to ongoing monitoring by financial institutions in South Africa.
However, the battle is far from over and there could still be significant delays in implementing the legislation because, despite being signed into law by President Jacob Zuma, the legislation only actually commences on a date to be determined by the minister and published in the Government Gazette.
The Financial Intelligence Centre must, for example, still produce an official list of “domestic prominent influential persons” and of family members and known close associates of “domestic prominent influential persons”.
This will be a massive task because the list of “domestic prominent influential persons” includes, for example, senior executives, as well as family members and close associates of senior executives, of all companies supplying goods and services above a threshold amount, which must be determined by the minister and published in the Government Gazette.
There are also doubts about whether the Financial Intelligence Centre, which only has a budget of R289 million for 2017/18, will have the resources to effectively implement the Financial Intelligence Centre Amendment Bill.
The minister will no doubt be under political pressure to delay the implementation of the legislation to protect his political master’s most important clients, the Guptas.
The minister should, therefore, take decisive action and set out clear timeframes and budgets for the implementation of the Financial Intelligence Centre Amendment Bill.
Whatever the case, we will have to very carefully monitor the implementation of the Financial Intelligence Centre Amendment Bill.
And I will, therefore, be requesting the Chairperson of the Standing Committee on Finance, Yunus Carrim, to schedule a meeting to probe the readiness of the Financial Intelligence Centre to implement the Financial Intelligence Centre Amendment Bill in South Africa.

Malusi Gigaba’s maiden press conference likely to cause more policy uncertainty in SA

Newly appointed Minister of Finance Malusi Gigaba’s maiden press conference to “restore confidence and restore calm” is likely to have exactly the opposite effect and create even more policy uncertainty when it comes to the economy in South Africa.
The minister expressed his commitment to “radical economic transformation” with almost religious zeal, but then did not seem to be able to explain exactly what it means and conceded that there was still “a whole lot of clarification that we have to do”.
This is unlikely to go down well with what the minister called the “credible ratings agencies”, with one ratings agency already warning that a change in policy may signal a ratings review of South Africa.
The real concern is that the minister was appointed with the Guptas’ stamp of approval and the real test of the new minister will not be his words, but his deeds when it comes to decisions that may have an effect on the Gupta empire’s interests in South Africa.
These include, but are not limited to, the following: the appointment of the Chief Procurement Officer at National Treasury; the approval of the joint venture or partnership with VR Laser Asia; the review of coal contracts entered into between Eskom and Tegeta Exploration and Resources; and any action in respect of the control over the Habib Overseas Bank.

President Jacob Zuma’s handling of the finance ministers’ recall is a monumental shambles that is damaging the economy in SA

Roughly twenty-four hours ago President Jacob Zuma announced he had instructed the Minister of Finance, Pravin Gordhan, together with the Deputy Minister of Finance, Mcebisi Jonas, to cancel their international investor roadshow and return immediately to South Africa.
The fact is that this bizarre instruction, cancelling the international investor roadshow without any explanation, is turning into a monumental shambles and is damaging the economy in South Africa.
The bizarre instruction, which was issued in the middle of an international investor roadshow designed to boost international investor confidence, must have severely compromised international investor confidence in the world’s financial capitals, and has triggered speculation that the finance minister is about to be fired, which would be a disaster for South Africa.
However, since issuing the bizarre instruction without any explanation there has been absolute “radio silence”, which proves that President Jacob Zuma has learned nothing from his reckless and disastrous handling of “9/12” and that either he does not care or he does not understand the consequences of his decisions for the economy in South Africa.
If President Jacob Zuma issued the instruction to cancel the international investor roadshow for a reason other than a cabinet reshuffle, including the fact that the trip may not have been authorised, then why does he simply not tell South Africa?

President Jacob Zuma must explain the bizarre recall of Pravin Gordhan

The fact that President Jacob Zuma has instructed the Minister of Finance, Pravin Gordhan, together with the Deputy Minister of Finance, Mcebisi Jonas, to cancel their international investor roadshow and return to the country immediately is a major setback for the economy in South Africa.
The instruction to cancel the international investor roadshow without explanation is so bizarre that it appears, at best, calculated to humiliate the minister or, at worst, to suggest that the minister is about to be fired in a cabinet reshuffle.
Whatever the case the instruction to cancel the international investor roadshow could not have come at a worse time as the minister battles to restore investor confidence among international investors in one of the financial capitals of the world.
The fact is that President Jacob Zuma must provide a public explanation for the fact that he has instructed the Minister of Finance, together with the Deputy Minister of Finance, to cancel their international investor roadshow and immediately return to South Africa.

We need a super committee on inclusive economic growth in Parliament

Note to editors: The following speech was delivered in Parliament today by the DA’s Shadow Minister of Finance, David Maynier MP, during the debate on the Fiscal Framework 2017.
1. Introduction
Two weeks ago, the Minister of Finance, Pravin Gordhan, tabled the main budget in this Parliament with both hands tied behind his back and with very little political space, fiscal space and policy space to give hope to the 8.9 million people who do not have jobs, or have given up looking for jobs, and who live without dignity, independence and freedom in South Africa.
2. Main Budget 2017
The minister tabled the fiscal framework, outlining government’s revenue, spending and borrowing projections over the medium term, which envisages economic growth recovering to 2.2%; revenue of R1.66 trillion, or 30.1% of GDP; expenditure of R1.81 trillion, or 32.7% of GDP; and most importantly a budget deficit of R145.8 billion, or -2.6% of GDP, by 2019/20.
2.1 “Fiscal Target”
Whatever the case the central fiscal policy objective of government is to stabilize net loan debt, which is projected to reach R2.67 trillion, or 48.1% of GDP, in 2019/20.
To illustrate the magnitude of net loan debt, consider the fact that a net loan debt of R2.67 trillion is the equivalent of:
• a debt of R47 000 per person in South Africa; or
• a debt of R6.68 billion per Member of Parliament.
Because of the “debt mountain”, debt service costs are now the fastest growing expenditure item on the budget and are projected to reach R197.3 billion in 2019/20.
To illustrate the magnitude of debt service costs, consider that in three years’ time we will spend more on debt service costs than we will spend this year on:
• on Health (R170.8 billion); or
• on Defence, Police and Justice (R190.03 billion); or
• on Higher Education (R68.95 billion); or
• on Social Protection (R164.93 billion).
However, the fact is government has a “slow bleed” and simply cannot seem to stabilize net loan debt.
We were told that in Main Budget 2016 net loan debt was going to stabilize at R2.19 trillion in 2017/18, or at 46.2% of GDP.
Then we were told in Medium Term Budget 2016 that net loan debt was going to stabilize at R2.63 trillion in 2019/20, or at 47.9% of GDP.
And now we are told in Main Budget 2017 that net loan debt is going to stabilize at 48.2% of GDP, in 2020/21.
And that is why we propose that government consider implementing a debt-ceiling in South Africa.
2.2 “Slow Bleed”
The “root cause” of the “slow bleed” is stagnant economic growth, which is projected to average 1.83% between 2017 and 2019, and which is below what is required to stabilize our public finances.
Economic Growth: The economic growth projection is 1.3% for 2017, up from 0.3% in 2016, due to a moderate recovery, though it is insufficient to reduce unemployment.
Revenue: However, the moderate economic recovery is not only insufficient to reduce unemployment, it is also insufficient to generate the required revenue, because to borrow a phrase from former Minister of Finance, Nhlanhla Nene, “without economic growth, revenue will not increase. Without revenue growth, expenditure cannot increase”.
The minister penciled in revenue of R1.41 trillion, or 29.8% of GDP, for 2017/18. However, because of lower-than-expected revenue collection, due to stagnant economic growth, and poor tax administration, the minister was forced to announce tax proposals to raise an additional R28 billion in 2017/18.
What the minister chose to emphasize was the formation of a new “super tax bracket”, for personal income tax payers with a taxable income of more than R1.5 million, to be taxed at a new marginal tax rate of 45%, to raise an additional R4.4 billion in 2017/18.
However, what the minister chose not to emphasize was that:
• an additional R12.1 billion would be raised from all personal income tax payers as a result of limited relief for fiscal drag; and
• that an additional R3.2 billion would be raised from the general fuel levy in 2017/18.
What this means is that whether you are rich, and taxed directly, or whether you are poor, and taxed indirectly, the minister will reach into your pocket and help himself to the R28 billion, required to plug the fiscal hole in 2017/18.
That is why it is a pity that government seems to have abandoned the sale of non-strategic assets to raise revenue.
The former minister began a process of selling non-strategic assets, and made a good start by selling government’s stake in Vodacom, which raised R25.4 billion in revenue in 2015/16.
The fact is that substantial revenue could be raised by disposing of non-strategic assets, including the sale of government’s stake in Telkom, which could raise about R14.7 billion.
And that is why we propose that government considers selling non-strategic assets to raise revenue that could, for example, be “ring fenced” to fund infrastructure expenditure.
Expenditure: The minister pencilled in expenditure of R1.56 trillion, or 33.0% of GDP, for 2017/18.
However, because of lower-than-expected revenue the minister announced that the expenditure ceiling would be lowered by R10.2 billion and expenditure of R16.9 billion would be reallocated in 2017/18.
We welcome the R151 billion that will be spent on social grants and the R77.5 billion that will be spent on higher education.
However, new spending pressures loom in the form of the public sector wage bill, which will consume R550.3 billion in 2017/18, and irregular expenditure has skyrocketed, reaching an all-time high of R46 billion in 2015/16.
The Minister of Mineral Resources, Mose(wabenzi) Zwane, became a powerful symbol of the let-them-eat-cake style wasteful expenditure, when days before the budget was presented, it was revealed that he had purchased a new Mercedes Benz E400, at the cost of R1.35 million, in violation of cost containment measures implemented by National Treasury.
We have to get on top of reducing expenditure, but the minister employs a fragmented arsenal of “fiscal tools” to contain spending, including an expenditure ceiling, cost containment measures, procurement reform, and performance and expenditure reviews.
We need to do things differently and implement a Comprehensive Spending Review that would require National Treasury, working together with national departments, provinces, municipalities and state-owned entities, to review the composition of spending, the efficiency of spending, and future spending priorities with a view to reprioritizing expenditure in the medium term between 2017/18 and 2019/20.
And that is why we propose that government considers implementing a Comprehensive Spending Review which has proved successful in Australia (Comprehensive Spending Review 2010), Canada (Strategic Operating Review 2011) and the United Kingdom (Comprehensive Spending Review 2010).
2.2.4 Borrowing: There has been considerable “fiscal slippage” with the fiscal deficit of R149 billion, or 3.1% of GDP, being pushed up by R1.9 billion; and net loan debt of R2.22 trillion, or 47% of GDP, being pushed up by 17.1 billion, in 2017/18.
3. Conclusion
However, in the end the “root cause” of the “slow bleed” and the fact that government is unable to achieve the central fiscal objective and stabilize net loan debt is that private sector investment has collapsed in South Africa.
Who would invest:
• when President Jacob Zuma, ditches his own policy of “inclusive economic growth”, set out in the National Development Plan, and inspired by Trevor Manual, in favour of “radical economic transformation”, inspired by the likes of Hugo Chavez;
• when you have an aspirant Deputy-Minister of Finance, Sifiso Buthelezi, who seems to believe that corporate income tax should be increased to punish the private sector for not investing in South Africa; and
• when you have another aspirant Deputy Minister of Finance, Brian Molefe, who is committed to destroying the private sector, or what he calls, the “monstrous beast” in South Africa.
We cannot stop the “madness”. But we can start doing our jobs.
And that is why will propose that parliament establishes an ad hoc multi-party committee to provide scrutiny and oversight of the implementation of the structural reforms necessary to boost economic growth and create jobs in South Africa.
Because a multiparty ad hoc committee holding governments feet to the fire on the implementation of structural reforms to boost economic growth and create jobs will give hope to the “lost generation”, which includes millions of young people, who do not have jobs, or have given up looking for jobs, in South Africa.
When we look back the minister did not apportion blame for government’s failures, but what he did do was apportion the burden for government’s failures, in the form of a R28 billion tax hike in 2017/18.
The fact is that last year the minister reached into your left pockets and helped himself to R18 billion, and this year the minister reached into your right pockets and helped himself to R28 billion.
And that is all because President Jacob Zuma, and his cronies inside, and outside the ruling party, are reaching into your back pockets and are helping themselves to billions of rands.
That is why, unless the corruption and waste stops in this country, it is not going to be long before people say, “we are prepared to pay our fair share, but this far and no further” and we have a “tax revolt” on our hands in South Africa.