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Consideration of Fiscal Framework and Revenue Proposals 2018 & Report of the SC on Finance thereon Dikeledi Mahlangu MP (ANC)

Topic: Quality of Social Expenditure and Revenue 7 March 2018

Guided by Tata's example, we call on all role players within government, agencies, SOEs and private sector commit to ethical behaviour and ethical leadership. Let me remind you that we are also celebrating the centenary of another giant of our struggle, Mama Albertina Nontsikelelo Sisulu, who through her outstanding contribution defined what it means to be a freedom fighter, a leader and a diligent and disciplined servant of the people.

Since the end of apartheid, South Africa has made significant progress in alleviating the plight of the poor through social spending, creation of employment, access to education, housing, clean water, electricity and health care. The 1996 Constitution mandates the State to see to the welfare of its citizens. Chapter 2 of the Constitution of South Africa requires social provision to correspond with the spirit of a democratic society. It establishes in Section 27(1) that every citizen has the right to "health care, food, water and social security". In terms of boosting economic participation, government's social grants have improved the incomes of those at the bottom of income distribution by more than ten fold. The impact of these transfers in raising the income of the poor in South Africa is far larger than in other middle-income countries. Child support grants, old age pensions, and disability do an effective job of enhancing the incomes of the poor. Without social grants, the level of poverty would be much worse. Social grants are essential for lowering economic risks for the most vulnerable in society.

The ANC government is not focusing on social grants as an ultimate solution to address the challenge of high unemployment and inequality in our country. President Ramaphosa highlighted that this government will accelerate measures to create employment for the youth. In line with the President's commitment to free the youth and all South Africans from poverty, education received the highest increase in the 2018 budget. The ANC government believes that education is an instrument to break down the stubborn walls of poverty in our country. The ANC government is working hard to ensure that South Africans have access to education from early childhood.

The success of South Africa's education as an instrument to reduce poverty and unemployment is boosted by the ANC's resolution to phase in free higher education and training to first year students from households

The ANC government has always prioritised healthy and has worked hard to improve access to health facilities and improve conditions of public facilities. Access to health is a human right enshrined in our constitution. The ANC government is respected globally when it comes to fighting HIV and Aids. As our President announced during the SONA, we are taking this battle a step further to eliminate HIV/Aids in our midst. An increased amount is allocated for health, with greater focus on HIV/Aids, TB and other chronic infections. On this note, let me complement the Minister of Health, Comrade Arron Motsoaledi for moving fast to deal with the Listeriosis is issue. The caring government of the ANC is working hard to curb the spread of this disease.

The improvement in South Africa's debt-to-GDP ratio (relative to the October 2017 MTBPS numbers) is largely based on higher economic growth, a narrowing in the fiscal deficit, a firmer currency and lower borrowing rates in the past few months. However, the country still need to ensure that revenue collection responds to additional spending pressures. The State has made various adjustments to tax policy measures in a bid to boost revenue.

The government is concerned about the proportion of the fiscus spent on servicing the debt. The government had to consider another instrument to fund the deficit other than increasing the country's debt. PIT has been increased repeatedly in recent years and is now the main contributor to the revenue shortfall. South Africa's CIT rate and CIT to GDP ratio are high by international standards.

VAT is an efficient tax provided that its design is kept simple and will have the least detrimental effects on growth and employment. At 14 per cent, the current VAT rate is lower than the global and African average. The government is aware that VAT proposal increases the cost of living for all households. However, the wealthiest 30 per cent of households contribute 85 per cent of VAT revenue. The government therefore considered a one per cent VAT increase to have a least detrimental effect on economic growth and employment over the medium term. The ANC will be seized with the issue of VAT increase in this financial year in line with rules and in consideration of the submissions made by civil society organisation to parliament. We also call on Treasury to further engage citizens and civil society on this issue. In the meantime the impact on the poor will be partially mitigated through: Zero rating of basic food items and paraffin and above-inflation increases in social grants The ANC NEC also called on Treasury to consider expanding zero rated products to include more basic and essential products to protect the poor from the impact of VAT increase.

The citizens of South Africa entrusted us with a mandate to lead and turn their lives for the better and we must do this by "running as others walk" as said Julius Nyerere. The President of the ANC and the republic called on all of us to commit to this new dawn by quoting the legendary late Hugh Masikela's "Thuma Mina" and committed us as follows:

"I wanna be there when the people start to turn it around
When they triumph over poverty
I wanna be there when the people win the battle against AIDS
I wanna lend a hand
I wanna be there for the alcoholic
I wanna be there for the drug addict
I wanna be there for the victims of violence and abuse 14
I wanna lend a hand
Send me."



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