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Budget Speech 2020

4. Aligning spending priorities to the economic growth plan


For our Aloe Ferox to grow to its full potential, we need to do things that will help it in the medium to long-run — for example, augmenting the soil with the right amount of organic manure, providing the right amount of sun and the correct amount of water. For a fast-growing economy we need to make sure our children are well educated, our people are healthy and our money is invested properly.


4.1. Learning, health and social development


Consequently, the largest spending areas will be learning and culture, which receives R396 billion followed by health R230 billion, and social development with R310 billion.


In the education sector, investment goes to new schools, replacing schools constructed with inappropriate materials, and providing them with water, electricity and sanitation. In 2020/21 the maths, science and technology grant will introduce coding and robotics to learners in grades R to 3 as announced by the President.


Transfers to provinces support schooling for 13 million children and healthcare for 49.1 million South Africans. It is in this context that taking forward consultation on the NHI is important.


President Ramaphosa has been elected Chairperson of the African Union. We shall commence work on the Pan African University for Space Sciences Institute at the Cape Peninsula University of Technology. Funding can come from the Africa Renaissance Fund.


The Department of Higher Education and Training will reallocate existing funds to undertake a feasibility study for the establishment of a new university of science and innovation in Ekurhuleni.


Over the next three years, 48.2 per cent of nationally-raised funds are allocated to national government, 43 per cent to provincial government and 8.8 per cent to local government.


R500 million has been provisionally set aside for disaster management to respond to the impact of recent floods and the ongoing drought.


4.1.1. The Infrastructure Fund


Honourable members, Funanani Sikhwivhilu from Limpopo told us "Infrastructure development should be a priority for the government" and we agree.


In fact, capital spending is the fastest growing component of non-interest spending. This spending is complemented by the Infrastructure Fund. Over the next three years the Development Bank of Southern Africa will package blended finance mega-projects  of least R200  billion. Government has committed R10 billion over the next three years.


The public can now find information on infrastructure projects on the VulekaMali internet portal.


4.1.2. Youth Employment


8.2 million young people between the ages of 15 and 34 are not in education, employment or training. Government is committed to helping them. Raising skills and improving the matching of young people and jobs is an important focus of the Presidential Youth Employment Intervention.


To date, Jobs Fund projects have created more than 175 000 permanent jobs, and helped 21 000 people into internships and created 59 900 short term jobs. Of these, 65 per cent went to youth.


As the President announced, we will reprioritise resources to raise spending on this critical area. We will start work immediately! I will provide more details in the 2020 Medium Term Budget Policy Statement.


We intend to make this intervention a resounding success.


4.1.3. Social grants


We are a caring society. We are a caring government. More than 18 million people receive a grant, which is a lifeline for many.


Grants reduce inequality and protect the most vulnerable in society. I am happy to announce that grants are adjusted as follows:


1. R80 increase for the old age, disability and care dependency grants to R1860 per month
2. R80 increase in the war veterans grant to R1880
3. R40 increase for the foster care grant to R1040 per month
4. The child support grant will increase by R20 to R445 per month


Changing the way we provide social grants has generated about R1 billion per annum in efficiency savings, which will be partly used to raise the daily subsidy per child.


4.2. Modernising network industries and restructuring the SOEs


Madam Speaker, the next component of our plan is to modernise network industries and to restructure the state-owned enterprises.


4.2.1. Electricity


Government will do "whatever it takes" to ensure a stable electricity supply. As I said, it is our number one task. We have allocated R230 billion over ten years to achieve the restructuring of the electricity sector.


The current electricity shortfall will ease as Eskom finishes critical maintenance. Bid Window 4 of the renewable energy programme is being accelerated. The rapid decline in renewable energy prices will give new momentum to Bid Window 5.


Determinations to implement the Integrated Resource Plan of 2019 are finalised and await the concurrence of the National Energy Regulator.

It will shortly be possible for municipalities in financially good standing to purchase electricity from independent power producers.


4.2.2. South African Airways


The SAA Sword of Damocles has now fallen on us.


SAA has been placed under business rescue which will lead to a radically restructured airline. Over the medium term, Government has allocated R16.4 billion to settle guaranteed debt and interest. The associated restructuring costs will be reprioritised within the Budget.


It is the very sincere hope of many that this intervention will lead to a sustainable airline that is not a burden to the fiscus.


4.2.3. Rail


Cabinet approved the economic regulation of transport bill in November, which takes us toward a fairer process for third party access into the rail network.


4.3. Opening up our markets to trade with the rest of the continent


In 2019, South Africa signed the African Continental Free Trade Agreement, which comes into effect on 1 July 2020. This agreement will open up new markets, promote regional integration and contribute to economic growth. Today we announce complementary measures to make it easier to do cross- border financial transactions, which will support trade and investment.


We want to encourage South Africans abroad to keep their ties with the country. We will raise the exempt amount for foreign remuneration to R1.25 million. We will phase out the administratively burdensome process of emigration through the South Africa Reserve Bank.


4.4. Re-imagining our industrial strategy


To implement the reimagined industrial strategy:


1. An Innovation Fund will be capitalised with R1.2 billion over the next three years
2. Industrial business incentives worth R18.5 billion will create and retain approximately 56 500 jobs
3. An additional R107 million is reprioritised for the refurbishment of 27 industrial parks in townships and rural economies
4. R6.5 billion is allocated for small business incentive programmes of which R2.2 billion will be transferred to the Small Enterprise Development Agency



Together with the Department of Trade, Industry and Competition, we are considering various proposals from ITAC related to scrap steel and poultry.


4.5. Lowering the cost of doing business


Madam Speaker,


Steps are being taken to address South Africa's lagging productivity growth and reduce the cost of doing business.


For example, the BIZPortal will provide a streamlined way to register a new business with the CIPC, SARS, the UIF and the Compensation Fund in one day.


The Competition Amendment Act came into force on July 2019, strengthening the Competition Commission's powers. The Commission has conducted inquiries into a number of sectors to strengthen competition.


South Africa is moving with the fourth industrial revolution. We are determined not to be left behind. We are relaxing regulations to help our flourishing FinTech sector.


The spectrum licensing plan was released in November, preparing the way for auctioning high demand spectrum. ICASA will be appropriately capacitated for this. A voucher system will be introduced to allow households to acquire digital devices.


4.6. Supporting agriculture and tourism


Over the medium term we will support Agriculture and Tourism. Government has allocated R495.1 million to the Department of Agriculture, Land Reform and Rural Development to improve compliance with biosecurity and support exports.


An additional R500 million is reprioritised over the medium term for the department to finalise land claims.


To support tourism, we will engage with the tourism industry on formalising the tourism levy.


4.7. Enforcing justice


Madam Speaker, fighting corruption is a priority of this Administration.


The NPA, Special Investigating Unit and Directorate for Priority Crime Investigation get an additional R2.4 billion in this Budget.


This will enable the appointment of approximately 800 investigators and 277 prosecutors who will assist with, among other things, the clearing the backlog of cases such as those emanating from the Zondo commission.


The disruptive actions of those who storm construction sites or mines harm growth and lead to job losses. Communities should expose such people to allow Ministers Cele and Lamola to ensure that the law takes its course. I hope all South Africans join me in condemning this.


4.8. Off-budget initiatives to grow the economy


4.8.1. Supporting lending

Working with the financial sector, a pilot of the Help to Buy scheme has supported over 2 000 families to buy their own homes. For every R1 subsidy provided by government, the scheme crowds in R8 from the private sector. In a single year, the Help to Buy scheme has supported nearly R1 billion in new lending.


4.8.2. State Bank


Last year, this House passed legislation which will allow state-owned enterprises to apply for banking licences. In July 2019, I tasked the Deputy Minister of Finance with the responsibility to undertake the state bank project. Madam Speaker, I am pleased to inform the House that preferred options for the establishment of a bank are now ready.


The architecture will be that of a retail bank operating on commercial principles. The state bank will be subject to the Banks Act, and will have an appropriate capital structure and performance parameters on investments and loan impairments. It will be regulated by the Prudential Authority on its own merits.


We will also consolidate the currently fragmented system of national and provincial Development Finance Institutions.


4.8.3. Sovereign Wealth Fund


Mr President, a Sovereign Wealth Fund is an important long-term tool for saving and investment for future generations. It can also contribute to strengthening the fiscal framework. We must learn to save during the good times, and a Fund can play an important role as a counter-cyclical fiscal tool.


Today we announce the formation of the South African Sovereign Wealth Fund with a target capital amount of about R30 billion, which converts to about US$2 billion or so. Given the legal, administrative and procedural issues involved, a relevant bill will be submitted during the course of this Parliament. There are a variety of possible funding sources, such as the proceeds of spectrum allocation, petroleum, gas or minerals rights royalties, the sale of non-core state assets, future fiscal surpluses and money we set aside. This will ensure that we continue to invest in the future generations of this country in a fiscally-prudent manner.


4.9. An efficient and capable state


The National Development Plan calls for a capable and efficient state that creates the right environment for the private sector to flourish.


Taxpayers deserve to feel that their money is going to a government that is efficient and capable. We thank all South Africans for paying their taxes.


SARS is an integral part of the capable state. We are focused on re-establishing institutional integrity and fighting criminal activity. Just this past week two individuals were convicted for up to 168 years' imprisonment for tax fraud.


4.9.1. Strengthening Municipalities


For all South Africans, the "state" is their municipality.


Allocations to local government help municipalities provide basic services and are a powerful redistribution tool.


Mr President, the National Treasury asked members of the public to provide tips to guide our thinking as we shaped this Budget. Today we are joined by Ms Akhona Mgwele from Gauteng who advised us to "support greater local economic development in municipalities." We agree with her!


I am therefore pleased to announce that local government  is allocated R426 billion from nationally-raised funds over the MTEF.


The Minister of Cooperative Governance and Traditional Affairs and I have agreed that our officials will find ways to use the allocations made through the Municipal Infrastructure Grant to ensure that municipalities not only build new infrastructure but also maintain the infrastructure they already have.


The O.R. Tambo aerotropolis in Ekurhuleni is at an advanced stage of implementation and King Shaka airport in eThekwini is progressing in that direction. Cape Town shall join them soon. Meanwhile Lanseria has been identified as a potential smart city.


4.9.2. Strengthening Provinces


Provinces provide health care and education and are at the frontline of service delivery. I wish to thank my colleagues in the provinces, the MECs for Finance, for the work they are doing and inputs they have shared with me on fiscal consolidation and economic growth.


All these steps build a capable state.


4.9.3. Strengthening Regulatory Oversight


Madam Speaker, there are a number of entities that report to the Ministry of Finance.


The report into the Public Investment Corporation highlights important lessons, including the need to implement and adhere to governance and financial controls, and to reduce risk appetite.


This House has passed legislation to strengthen the Independent Regulatory Board for Auditors, and further legislation is planned. We will shortly appoint an independent panel of experts to review practices in the auditing profession.


The country's money laundering system is currently undergoing a peer review, which will help strengthen the fight against illegitimate and illegal flows. The South African Reserve Bank will in future play a more integral part in this fight.


The Financial Sector Conduct Authority has repositioned itself as a market conduct regulator, and we will shortly appoint a new Commissioner.


The National Treasury will take steps to strengthen the budget process.