TUESDAY, 28 MARCH 2006 __

          PROCEEDINGS OF THE NATIONAL COUNCIL OF PROVINCES
                                ____

The Council met in the Moshaweng Local Municipality Hall, Kgalagadi District, at 14:11.

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.

                             NO MOTIONS

                           (Announcement)

The DEPUTY CHAIRPERSON OF THE NCOP (Ms P M Hollander): I would like to remind you that this is a full sitting of the House of the National Council of Provinces, and we request that people do not walk in and out.

Hon members, I wish to welcome you all to this sitting today. And I have been informed that the Whippery have agreed that there will be no notices of motion or motions without notice today.

                      DIVISION OF REVENUE BILL

            (Consideration of Bill and of Report thereon) The DEPUTY MINISTER OF FINANCE: Deputy Chairperson, Chairperson of the National Council of Provinces, colleagues, MECs, hon members, people of the Northern Cape and fellow South Africans, it would be indeed remiss of us not to express our sincere appreciation for the co-operation we have received from all those who participated in the thorough but speedy process of the 2006 Division of Revenue Bill.

In particular, I would like to note that we are indeed eternally grateful to the select committee – which was chaired by hon member Ralane – for the sterling work it has done. While the fast-tracking of the Bill might have limited the time that the NCOP had for processing the Bill, as we all know, that process was in the interest of democracy and definitely made it possible for members to participate fully in what I can describe as a highly successful local government election on 1 March 2006.

It is historic that the House adopts the 2006 Division of Revenue Bill in the Northern Cape, particularly in Kuruman. Firstly, this is a beautiful part of the country, with rich cultural and historical aspects, and from a heritage point of view. Secondly, and perhaps more importantly, one now fully comprehends the concerns raised by hon George Goeieman when he argued that the provincial equitable share formula should take account of the vastness of the Northern Cape and the resultant added costs of conducting business in this province. [Applause.]

Let me allay the fears of the hon member. The Division of Revenue Bill that is tabled and is to be adopted by this House takes into account, as the Finance and Fiscal Commission put it, “the cost disabilities associated with the vastness of this province” albeit in a limited way at this stage.

The Constitution enjoins our three spheres of government to co-operate. The Division of Revenue Bill is one of the most concrete expressions of co- operative relations between our three spheres of government. It is an outcome of extensive consultative processes amongst technocrats, between the political leadership of the three spheres of government and, generally, all those who participate.

That none of our organs of state has had to seek recourse in the courts of the land on matters pertaining to the resource allocation processes is, indeed, remarkable. That after only 11 years of democracy South Africa is able to publish three-year allocations for each sphere with breakdowns of each grant by province and municipality is a big plus for improved forward planning because indicative allocations published in each year are not changed on an ad hoc basis - there is certainty and predictability of the fiscal flows.

This creates a stability required to attain accelerated and shared growth. None of the organs of state has an excuse not to put together medium-term infrastructure investment plans that will lay the basis for sustained delivery of services to our people and put the economy on an even and higher growth path.

However, allow me to caution that certainty regarding fiscal flows alone is not sufficient to ensure that services are delivered to our people. It will not guarantee that no children learn under trees; it will not deliver clean water and cholera-free drinking water to our people; it will not build houses and roads.

In order to deliver services to our people, the resources that are allocated through this Bill must be spent; and to spend the resources we need good plans and project management. While we have done well on many aspects, we need to do more to ensure effective and efficient spending. This House has an exceedingly important role to play in overseeing the implementation of budgets.

From our side, as the National Treasury, we shall continue to furnish this House with more and better quality information in order to strengthen your oversight role. This Bill, with the wealth of information it contains such as the outputs set out in the framework for conditional grants, is but one of the tools we put before this House for exercising oversight over departments and provinces, including the National Treasury.

Let me now turn to the highlights concerning the deliberations of the select committee on the Bill that this House is about to adopt today. Although the Minister of Finance and I were not present during the hearings, we received thorough briefings. From what we were told, hopefully correctly, the discussions were quite vibrant. Some of the issues that were raised by those who made presentations to the committee point to the following pertinent matters about our budgeting, financial management and performance monitoring systems.

Firstly, and perhaps more importantly, the deliberations highlighted that the debate on the appropriate funding mechanism for national priorities that are implemented through provincial and local government programmes, the choices between equitable share versus conditional grant, is still very much alive and will take a while to resolve.

Secondly, the discussions brought to sharp focus matters of value for money and quality of spending. I am told members of the select committee asked the Department of Housing what it was doing to ensure that those who rip off our people by building poor quality houses are stopped and brought to book. These are legitimate questions indeed that need to be asked by members from time to time.

Thirdly, I am told that clause 16 nearly did not make it to the final version of the Division of Revenue Bill. From the briefing that I received it appears that, amongst other issues, the discussion on this particular clause, for instance, raised a question of whether we can take away from municipalities their constitutionally derived power to approve their budgets.

Lastly, and on a lighter note, I was also advised that if I want to know what the NCOP can do to you if you even try to take it for granted, I should check with the Department of Agriculture. I am told they were apparently sent packing because they had sent an inappropriate delegation.

The division of revenue set out in this year’s Bill gives effect to the priorities articulated by our President in his state of the nation address on 3 February 2006. The resources provided in this Bill will enable each sphere of government to step up its infrastructure spending in the period ahead as part of its contribution to the accelerated shared growth initiative, known as Asgisa.

Out of R106,2 billion additional resources, national departments will share about R30,5 billion; provinces will share R43 billion; municipalities R32,7 billion. Further details on the specific programmes and projects to be implemented in each province and municipality can be found in the budget statements for the Medium-Term Expenditure Framework.

The allocation in this year’s Bill reflect one of the major changes in this year’s budget framework: the shifting of funding for social security grants into a newly-established agency. The agency is taking up a major responsibility. The committee received a full briefing on the agency during the hearings on this Bill. With the shifting of the social security grant to the agency, provincial departments, hopefully, will be able to give focused attention to rebuilding and accelerating expansion of welfare services.

Schedule 1 of the Bill provides a summary of the allocation of funds to the three spheres of government. Out of R418,2 billion budgeted for 2006-07 financial year, national department functions amount to R215 billion. These include debt service costs amounting to R52,1 billion and a contingency reserve amounting to R2,5 billion. Provinces receive R176,7 billion and R26,5 billion is allocated to local government. The local government portion includes a replacement for the regional services councils levies which will be abolished at the end of June 2006, as announced by the Minister of Finance.

The 2006 MTEF allocations to provinces provide for a further strengthening of pro-poor social services. A substantial share of the additional resources is expected to go to education to fund a phased-in implementation of no-fee schools programme and further expansion of early childhood development programme to poor communities. The further education and training grant allocation of R1,9 billion over the next three years should go a long way to ensure that our FET colleges are equipped with state-of-the-art technology so that they can produce graduates who are capable of taking up key jobs in the industry immediately after graduating from these colleges. Provincial budgets will reinforce the strengthening of the health sector so that South Africans who do not have medical insurance can also enjoy good quality health services.

Once again, the housing programme is stepped up. Twenty-three billion rand will be spent on building houses over the next three years. The 2006 Bill retains the provisions for the accreditation of large municipalities to administer the housing function. This should contribute to accelerating the delivery of housing.

Let me now turn to local government allocations. Over the next three years municipalities will receive R97,3 billion and that includes R4,7 billion in allocations in kind or an additional R32,7 billion over the 2005 baseline. This includes R24 billion to compensate municipalities for their loss in the RSC levies. As a result, the local government share of nationally raised revenue increases from 4,6% in the current financial year to 6,3% in 2006-07, and to 7% in the outer year of the 2006 Medium-Term Expenditure Framework.

The substantial increase in the local share is mainly targeted towards the provision of free basic services, eradication of the bucket sanitation system and job creation through the extension of municipal infrastructure to areas that are presently not serviced. In total R36,3 billion over the MTEF period will be available for water, electricity, refuse removal and environmental health as part of the government’s commitment to providing free basic services to poor communities.

In addition, an amount of R584 million is made available to assist poor municipalities to remunerate their councillors appropriately. This will reduce the burden of these poor municipalities and allow them to direct their scarce resources towards service delivery. The 2006 MTEF also sets aside R31,3 billion for the provision of municipal infrastructure.

The public transport infrastructure and systems grant and the new local neighbourhood development partnership grant are allocated R2,9 billion and R2,5 billion respectively in the 2006 MTEF. The municipal infrastructure grant remains the key instrument to support the infrastructure budgets of municipalities, to support the extension of services to poor households, maintain and upgrade municipal infrastructure and also to support urban and rural development. The MIG, as it is known, amounts to R21,5 billion over the 2006 MTEF, reflecting an increase of R800 over the period.

Finally, allocation for capacity building and restructuring totalling R1,9 billion over the MTEF is also accommodated. The funding for capacity building and restructuring declined, as we all know, from R750 million in 2007-08 to R400 million in 2008-09, as the restructuring grant programme comes to an end and the funding is phased out into the local government equitable share.

In conclusion, whilst we believe that most of the provinces strive to improve administration over budget planning, execution and implementation, there remains significant weaknesses, as you all know, which specifically require corrective steps and corrective measures. The slow spending on infrastructure, particularly in education and health, remains a matter of major concern.

While there is great improvement in service delivery capacity of provinces, a lot needs to be done to ensure that the pace of delivery is stepped up and the quality of delivery further improved. Provinces have a key role to play in economic growth, especially within the context of Asgisa. However, it is equally important that this role should not overshadow their social service delivery responsibilities. As we know, in South Africa these remain the backbone of the transformation of our society.

As for provinces, a key balance between economic growth and the delivery of pro-poor services becomes very critical, as these social services themselves are key drivers to economic growth. Just as roads, power stations, ports and other infrastructure are important in driving economic growth, it is equally important that our education system be bolstered to deliver the requisite skills needed to build all of these things. It is also important that allocative efficiency be attained through the alignment of allocation to the ability to spend, particularly in as far as the preparation of the budget is concerned.

Government continues to increase allocations to reduce the backlogs regarding the social and economic infrastructure. Provinces will have to take steps to improve infrastructure, planning and delivery and are therefore encouraged to continue to participate in infrastructure delivery and the improvement programme managed by National Treasury.

Let me conclude by once again thanking this House for its forbearance in agreeing to fast-track the 2006 Division of Revenue Bill. Thank you. [Applause.]

The DEPUTY CHAIRPERSON OF THE NCOP (Ms P M Hollander): Thank you, hon Deputy Minister, for participating in this debate today.

Mr T RALANE: Deputy Chairperson of the NCOP, Chairperson of the NCOP - I do not see the Speaker of the Northern Cape here – Premier, MECs present here, special delegates, members, ladies and gentlemen, the 94th anniversary of the ANC on January 8 saw an organisation at a pitch of power, influence and prestige higher than ever before in its history. It has established itself without doubt as the effective leader of the struggle of the poor and oppressed people, and of the struggle for liberation. The importance of its role in shaping the destiny of our country is acknowledged by friend and foe.

The recent overwhelming majority won by the ANC in the local election is an acknowledgement of the premier role of the movement of the people. This stresses that much of its appeal lies in its historical reputation, as the oldest African nationalist movement. I quote:

For the older generation, it is comparable to a church that one is born into; the organisation that has carried on while others have come and gone.

There were organisations in South Africa before and after 1912 which failed to survive the test of time. Yes, for some the ANC may be like a church that one is born into. Today it holds the loyalty of increasing numbers of people, not purely for reasons of sentiment or tradition but because it is a revolutionary movement with progressive policies, which have won and are winning ever-increasing numbers of recruits for its crusade for reconstruction and development.

It does not befuddle the people with pretty stories about happiness in the next world but offers salvation, justice and security for all in this world on the basis of sustained struggle for the achievement of the aims incorporated in its programme, the Freedom Charter. It has survived and grown in strength because it has been pragmatic and flexible, and is capable of adaptation to changed circumstances without departing from its fundamental principles.

The Division of Revenue Bill before the House today is the most important piece of legislation that the Select Committee on Finance handles annually. Through this legislation, the ANC-led government divides equitably nationally raised revenue amongst the three spheres of government. Allocations we see in the Bill will consolidate the ongoing work done by our government in the fight to eradicate poverty, underdevelopment and joblessness; and in growing the economy.

Key spending policy priority areas are: investing in people and ensuring that skills development complements employment creation; targeted welfare services; accelerated housing delivery; ensuring capacity-building of municipalities; and investment by both public and private sectors to improve the quality of life in poor neighbourhoods; economic infrastructure upgrades that will include new power generation, rehabilitation and expansion of roads and rail transport networks; improved water resource management; modernisation of communications; investment in science and technology and employment creation; promotion of small business development; crime reduction; improving the performance of courts and security services; defence modernisation and military skills development as well as focus on capacity-building for municipalities.

The sweet victory of the ANC in the local government elections poses painful challenges to us as members, public representatives and as committees to strengthen our capacity to do effective oversight regarding the funds allocated in the Bill that we are debating today. We urge all committees to be vigilant in carrying out their oversight role. We must critically interrogate both nonfinancial and financial information provided by the departments.

We must not compromise on the quality of spending and the impact of that spending on the communities. We urge the House to vote in favour of the Division of Revenue Bill, as amended.

Ms D ROBINSON: Hon Deputy Chair, Premiers, Ministers and all protocol observed, “dumelang!” [I greet you!] The annual promulgation of the Division of Revenue Act is a constitutional requirement and is necessary to determine the equitable division of the nationally raised revenue among the three spheres of government and among the provinces.

I believe there is a danger that we might dismiss the Division of Revenue Act as a mere routine annual process when, in fact, it goes to the very heart of our democracy. It is this Act that gives substance to the federal structure of our democracy, that provides a measure of protection against centralism, and that funds our constitutional mandate of providing houses, education, health care and basic services to our people.

This year the provincial equitable share accounted for R150 billion out of R472 billion of government spending. The division of the equitable share is done through a formula that takes into account the educational responsibility of the provinces - 51%; the health care burden - 26%; a basic share based on share of population - 14%; an equally divided institutional component - 5%; a poverty component of 3% which introduces a redistributionary bias to the formula; and an economic output component of 1% based on regional GDP data.

The DA believes that, in principle, this approach to the division of revenue among the provinces is absolutely correct. It attempts to find the right balance between growth and redistribution necessary to take our country forward. I have recently raised some concerns about the population and poverty component of the formulae and I will do so again.

It is a well-documented fact that the Western Cape is enjoying a massive influx of people from other parts of the country, particularly the Eastern Cape. It is also a well-documented fact that our cities all over are growing. This growth is fuelled by rapid urbanisation as people seek opportunities in the cities. The poverty component of the equitable share formula is based on the 2000 Income and Expenditure Survey, as well as on census data from 2001.

The basic share component of the formula is based on the census data as well as the general household survey data from 2003 and 2004. I believe that there is a strong case to be made for a review of the funding for different provinces based on recent demographic changes across our country, and the recent cross-boundary demarcations. Unfortunately, the next national census is only scheduled for 2011. If the division of revenue is still being promulgated using 10-year-old data, then by the time 2011 comes around I believe we would have introduced a significant distortion of public finances.

I would like to comment on the broader economic environment and the budget for 2006-07. Inflation is predictable within the inflation targeting range of the CPIX of 4,3%. This, despite the adverse conditions engendered by the persistently high prices which were at almost 5% last year. The rand weakened slightly from its highest level last year, and it is generally believed to be at a sustainable level. In many respect economic conditions are benign.

All these have helped the Minister of Finance rake in an extra R41 billion above what was expected, resulting in a budget deficit of about 0,5%. This embarrassment of riches raises some awkward questions about what to do with the money? By even the most conservative standards a 0,4% budget deficit is considered austere for a developing and growing economy.

The ANC government has decided to dedicate a sizable portion of our tax revenue to promoting the developmental state. In many ways, new investment in infrastructure will enable businesses to flourish and, hopefully, crowd in economic activity. But this developmental strategy also has costs. Government spending, as a percentage of the GDP, has crept up from 23,3% in 2002-03 to as much as 26,8% at present. Will government continue to take an even larger slice of the pie, nudging the private sector gently out of the way, by promising to spend almost R400 billion extra on infrastructure development? The private sector knows not to expect too much by way of improved tax competitiveness.

The debate about whether or not South Africa’s corporate tax burden is excessive has many technical and economic subtleties that I will not go into here. Nonetheless, we must applaud the elimination of the RSC levies which provided a R7 billion boost to the private sector, as well as the R13 billion-odd tax relief that was afforded to South Africans this year.

We also welcome the adjustment to the tax code aimed at assisting small and medium-sized businesses. At the same time, given the size of South Africa’s revenue overruns and the awful extent of joblessness, there is a strong case to be made for firing up job creation by way of further reductions in the corporate tax rate and other taxes, such as the skills development levy that may be impeding job creation.

Surely this need to create jobs and eliminate economic hardship is the single most important struggle that we face in contemporary South Africa. Ke a leboga. [I thank you.]

Mr D J BOTHA (Limpopo): Chairperson, the Limpopo budget of R23,008 billion is being debated in the Limpopo Legislature this week, where departments will set out their plans for the 2006-07 financial year. The equitable share comprises the bulk of the provincial allocation of 89,6%, the conditional grants comprise 8,7%, whilst the own revenue accounts for 1,71%. The provincial own revenue is mainly from motor vehicle licences and amounts to R145 million; it’s from interest dividends and rent on land which amount to R84 million; and it’s from the sale of goods and services amounting to R106 million.

The provincial budget declines by 17,7% in the 2006-07 financial year. The decline is due to the shifting of the social security grants from the provincial department of health and social development to the SA Social Security Agency, which takes full responsibility with effect from April

1. All measures have been taken to ensure that this takeover will be smooth and that all will receive their grants in time. According to the 2002 census, 64,81% of the provincial households were electrified. During this current year, more than 897 000 households received free basic water and 524 households have access to water at RDP standards. Furthermore, more than 127 000 households received free basic electricity. During this year alone and as at the end of December 2005, an additional 2 878 houses have been completed while 15 200 houses were under construction. We just have to monitor quantity versus quality regarding these projects.

Municipalities in Limpopo will receive R1,56 billion, which comes to 8,43% of the total equitable share allocated to all municipalities. Excluding the transfers to replace the RSC levies, the equitable share component grows by 7,7% per year in real terms over the MTEF period. Total allocations to local government, including conditional grants, amount to R26,5 billion for the financial year commencing on 1 April 2006. The municipalities in Limpopo will receive a total of R3,1 billion, which is 11,7% of the total allocation to municipalities in South Africa. New councillors must be trained in time to approve their budgets before the start of the financial year on 1 July 2006.

The social sector accounts for R16,75 billion, that is, 74% of the equitable share. Out of the R16,975 billion equitable share, education accounts for R11,066 billion; health accounts for R5,448 billion, social development accounts for R432 million, and safety and security accounts for R29 million. Education is power and that is why Limpopo invests close to 50% in education. Included in this R11,066 billion are conditional grants amounting to R588 million – of which R292 million is for provincial infrastructure, R202 million for the National School Nutrition Programme, R43 million for the sector for further education and training and R22 million for early childhood development.

Health gets an allocation of R5,448 billion or 23% of the total provincial budget, which includes the conditional grant of R509 million. The breakdown in terms of service provisioning is R176 million for HIV/Aids, R102 million for the provincial infrastructure and R72 million for training and development of health professionals. Social development gets an allocation of R432 million, or 1,8% of the budget. The budget intends to cater for the delivery of social welfare services, which is critical for the sustainability of communities.

A total of R29 million, which is 0,1% of the budget, is allocated to safety, security and liaison, mainly to co-ordinate the implementation of the provincial crime prevention strategy and the youth at risk projects. The economic sector is allocated 18,3% or R4,196 billion. Out of this amount, economic development and environment and tourism will account for R675 million, whereas roads and transport will account for R1,780 billion. Agriculture is allocated R1,029 billion; public works R589 million; and sports, arts and culture R123 million. A total of R675 million, or 2,9%, is allocated for economic development and this will be used to establish co-operatives. As we are also faced with the critical challenge of managing our environment, R7 million will be used for environmental impact management services, while R11 million will be used to promote the sustainable utilisation of the biodiversity resources of our province.

A total of R1,780 billion, or 7,7%, is allocated to roads and transport. This includes an amount of R100 million from the infrastructure reserve and a R282 million infrastructure conditional grant. Public works allocation is 2,5% of the budget, or R589 million. The budget will cater mainly for maintenance of government offices and the implementation of the Expanded Public Works Programme, which undoubtedly serves as one of the vehicles to reduce poverty. This budget aims to create jobs and in doing so reduce poverty.

The department will assist other departments in the implementation of capital or infrastructure projects, eg the building of schools, hospitals and clinics, provisioning of water and electricity, as well as the maintenance of government offices. An amount of R24 million has been allocated to make the above possible.

With regard to agriculture, 4,4% of the budget, or the sum of R1,029 billion, is allocated to the department and will cater for smallholding irrigation schemes, as follows: four projects in Bohlabela, one project in Mopani, nine projects in Capricorn and 10 in Sekhukhune. These projects will have a positive impact on the 2 800 beneficiaries under the Comprehensive Agriculture Support Programme and land reform poverty alleviation projects. The allocation for this comes to R171 million. Sports, arts and culture is allocated 0,5%, or R123 million, of which R15 million is a conditional grant from Sport and Recreation South Africa.

The main purpose of the Bill is to fight poverty. Therefore members of the provincial legislature and the NCOP are earnestly requested to play a more active role in monitoring spending by provincial departments and also whether there are discrepancies regarding delivery as well. Moreover, MPLs and the NCOP should exercise extraordinary vigilance in order to monitor the spending patterns concerning equitable and conditional grants of provincial departments. Limpopo supports the Bill.

Mr P GOVENDER (KwaZulu-Natal): Mr Chairman, Deputy Minister, colleagues, observers, good afternoon to you all and thank you very much for having us here in the Northern Cape. We appreciate your hospitality and I am sure all of us feel very comfortable.

I am not going to read the Division of Revenue Bill, neither am I going to quote you a whole host of figures. At the end of a long day I am sure you do not need that. Suffice it to say that KwaZulu-Natal supports the Division of Revenue Bill but raises two areas of concern.

The first concern relates to the impact of the provisions of clause 38 of the Bill, which refer to the implementation of the Cross-boundary Municipalities Laws Repeal and Related Matters Act of 2005. Our concern centres around the determination of the spending of the equitable share of revenue in so far as it may affect KwaZulu-Natal negatively.

You might be aware that we have inherited the vast area of Mzimkhulu. In order for us to deliver to this community to serve our people, we require adequate funding, and funding must come to the province timeously. That is where our major concern lies.

The second area of concern submitted by KwaZulu-Natal relates to the strategic projects of the province such as the Dube trade port that should be considered on a similar basis as other projects like the Gautrain Rapid Rail Link, which is specifically provided for in the Bill, in clause 10.

Chair, I do not see why one of our colleagues finds the Dube trade port project amusing because it is a project that is going to benefit the country as a whole and not just KwaZulu-Natal.

The HOUSE CHAIRPERSON (Mr T S Setona): Hon member, can you take your seat. Do you want to address the Chair, hon Ralane?

Mr T RALANE: Chair, is the member ready to take a question?

The HOUSE CHAIRPERSON (Mr T S Setona): Hon member, what is your point?

Mr T RALANE: You see, Chair, the point is that we dealt with this matter with some delegates from KwaZulu-Natal. Now, the problem that we have here is that, apparently, KwaZulu-Natal changes delegates from time to time. Therefore somebody would then bring something else in the debate here, that is something that has been resolved during the deliberations … [Interjections.]

The HOUSE CHAIRPERSON (Mr T S Setona): No, hon Ralane, I learnt a lesson during the last debate of this nature. I want to remind the House that the hon Minister of Finance said we could not turn this House into an academic institution. It is a political House and I will only confirm an order if there is a fundamental deviation from the standing Rules of the House. But, if a member feels that Gautrain is good for the Free State, I think that is up to himself. [Laughter.] All of us must then debate that. So, I do not see anything wrong with that. Hon member, please proceed with your speech. [Applause.]

Mr P GOVENDER (KwaZulu-Natal): Thank you, Chair. I was not opening this up for debate. Probably, I should have brought a begging bowl with me. We are just saying: consider this in your next division of revenue. We need assistance and all we are saying is that you should give us that assistance when you are contemplating your equitable share in your next division of revenue.

At the same time I would just like to say that when the next division of revenue is contemplated, take into account the terrain of KwaZulu-Natal because the province itself is not an easy province in the geographical sense.

We support this Bill. We know that much thought and much consideration has gone into the Bill. As I said, I am not going to quote you figures, I am not going to look at all of that, but I am saying: Please take these issues into account when the next division of revenue is contemplated. I thank you very much. [Applause.]

Mr S GQOBANA (Eastern Cape): Chair, we move from the premise that the province had submitted its input during the stage at which we were deliberating on this Bill. We have just joined other provinces in accepting the Bill, informed by the objects of the Bill as reflected in clauses 2(b), 2(c) and 2(e), particularly when you read them in conjunction with clause 2(3)(b), which says that when a province allocates funding to various provincial departments it should take into account the capacity that exists in that particular department, and that in the event that such capacity is not there, 1% of that allocation must be set aside to ensure that the capacity prevails in a particular department.

I want to concur with the Deputy Minister that in the Eastern Cape as well we do have some challenges with respect to health and education, as the chairperson of the select committee might also be aware. However, we do have a challenge with respect to the legislature infrastructure and that is being approached through a separate route aimed at engaging the National Treasury. It is not something that is within this process that we are dealing with today but I felt that I must smuggle it in in the event that …

I think the challenge placed before all individual members of the various legislatures, including the NCOP, is what the chairperson of the select committee has put to us today. It is in line with the recent comments or statements by the national Minister of Finance about the vigorous nature of our oversight over departments, particularly on financial and nonfinancial issues.

I think, as the Eastern Cape, we are taking this challenge very seriously, as it is now becoming clearer. As you look on a month-to-month basis concerning what these allocations are moving in various departments, at one stage you do sense some underspending regarding the infrastructure and so on. I think that a situation where any province, including the Eastern Cape, should under spend on the entire infrastructure should not be allowed. So, we thank you very much. [Applause.]

Rre J O TLHAGALE: Motlotlegi Modulasetulo, motlotlegi Motlatsa-Tona wa Matlotlo, motlotlegi Mokhuduthamaga wa Peomolao ya Kapa Bokone le ditokololo tse di tlotlegang tsa Peomolao ya Kapa Bokone, ditokololo tsa NCOP tse di tlotlegang le batlotlegi botlhe ba ba fano, maikaelelo a Molaotlhomo wa Kabo ya Matlotlo o re o sekasekang ke go abela mafapha a a farologaneng matlotlo a mafapha ao a tla direlang setšhaba ka ona. Matlotlo kgotsa ditšhelete tse di dirisiwang go direla setšhaba le tsona di laolwa ke molao o mongwe wa matlotlo o o lebaneng tiriso ya ditšhelete.

Mo mabakeng a mangwe go utlwisa botlhoko fa puso ya bosetšhaba e abile madi a a lekaneng mme a sa dirisetswa boikaelelo jo madi ao a bo abetoweng. Mo mmasepaleng wa rona wa Moshaweng, bontlhanngwe jwa kago e re kokoanetseng mo go yona bo setse bo eme lobaka lo lo leele bo sa felela ka ntlha ya mathata mangwe a a rileng a a e dikaganyeditseng. [Nako e fedile.] [Legofi.] Ke a leboga. (Translation of Setswana speech follows.)

[Mr J O TLHAGALE: Hon Chairperson, hon Deputy Minister of Finance, hon MEC of the Northern Cape Legislature and hon members of the Northern Cape Legislature, hon NCOP members and honourable guests present here, the aim of the Appropriation Bill that we are discussing is to allocate funds that will be used for the nation to the different departments. The Appropriation Act also provides for the administration of the money that is being used for the nation.

On the other hand, it is hurtful when the national government has allocated funds and those funds are not used for the purpose they were intended for. Here, in Moshawaneng Municipality, the part of the building in which we have assembled has been incomplete for a long period because of some problems in this regard. Thank you. [Time expired.] [Applause.]]

Mr Z C KOLWENI: Hon Chairperson, Deputy Minister, Premier of the Northern Cape, my colleagues, special delegates from different provinces, in the absence of representatives from my province and in my capacity as a permanent delegate of North West, it gives me pleasure to take part in this debate in this House on the division of revenue which, in essence, constitutes the foundation of this House. [Interjections.]

The HOUSE CHAIRPERSON (Mr T S Setona): Hon members, can we maintain order in the House, please. I am going to mention members by name and I do not think that that augurs well. I will do that and I think some members know that I can do it. Please proceed, hon member.

Mr Z C KOLWENI: Chairperson, thank you for your protection. According to statistics in South Africa, the North West province registered economic growth of 4,9% last year. Whilst the current Budget makes it possible for our province to work towards a targeted growth of 6,6%, there are some challenges which we need to meet as a province, such as gold-mining and agriculture.

The Budget for this year indeed raises the hopes of our people because it has to work for them and do those things they perceive as critical to their well-being, be it new schools, rehabilitation of roads, clinics, clean water and so forth.

In our constitutional state democracy, in order to gain the confidence of our people, we must subscribe to good governance that does not have room for fraud and corruption. We are obliged to a system of government in which every citizen is a player, so to say. It is a participatory democracy.

I also want to mention some highlights concerning the allocations that have been made that make us happy in the province. They are allocations such as the provision for the improvement of sanitation in areas where we know we still have to deal with the bucket system, which still has to be phased out.

There is also some good news concerning the fact that government employees are going to benefit from the medical scheme. There is also an allocation that talks to the provision of no-fee schools. This is a very important policy, which will ensure that the province develops and will make the nation benefit, especially regarding children who are not able to pay some fees. There is also an allocation for the improvement of social workers’ salaries that is also aimed at improving the status of our service in the province, from which our people will benefit in terms of getting professional services.

It would be an offence if I do not mention the role that we have to play and the responsibilities that we have on our shoulders as members of provincial legislatures and Members of Parliament of the NCOP. Members of the NCOP as well as our counterparts in the provinces are duty-bound to play a more active role in monitoring spending by provincial departments. If a discrepancy exists in the provincial financial reporting, it is likely that that discrepancy will be revealed on delivery as well. Further, we are urged to exercise extraordinary vigilance in order to monitor the spending patterns of equitable and conditional grants to provincial departments.

The North West province unreservedly supports the Division of Revenue Bill. Thank you.

Mr P DIKGETSI (Northern Cape): Deputy Chairperson, Chairperson of the NCOP, hon Premier of the Northern Cape province, Deputy Minister of Finance, hon members of the NCOP, ladies and gentlemen, let me begin by taking this opportunity to commend the NCOP for taking its work to the people. By bringing the NCOP into the most rural and disadvantaged areas such as Kgalagadi demonstrates the commitment to entrenching participatory democracy as enshrined in our Constitution. It is even befitting because this year we celebrate 10 years since the adoption of the Constitution in 1996.

Through the Budget we tabled in February this year, government has given hope to many South Africans that, indeed, we are in a better position to tackle the challenges of unemployment and poverty. As noted, correctly, by the Minister of Finance during the tabling of the national Budget this year, the Budget gives practical effect to our programme of social cohesion and, in particular, prioritising the needs of the poor.

As a province, we are also encouraged by the fact that gains made through good macroeconomic management and fiscal discipline, more services can be extended to the poorest of the poor. We are confident and hopeful that our government is in a good financial position to address the prevailing socioeconomic challenges as well as give expression to the commitment, spirit and letter of our ten-year-old Constitution.

Notable amongst our reasons for confidence and positive spirit is the fact that our provincial economy is performing very well. Amongst other things, we are able to report that, in 2004, the provincial economy grew by 3%. This represents a promising improvement on the 2% average growth between 1994 and 2004.

Regarding these improvements in economic growth, we are pleased to report that, according to recent Statistics SA figures, unemployment in the province declined from 26,4% in September 2003 to 24,7% in September 2005. This demonstrates the fact that the interventions by our government are beginning to bear fruit, as enshrined in the people’s contract to fight poverty and create work. Nonetheless, our efforts to ensure accelerated and sustainable economic growth levels continue, as enshrined in the various growth and development plans.

One of the challenges that require immediate attention is the striking inequalities that are so glaring in areas such as the Kgalagadi district. Despite the huge economic activity taking place in this area concerning mining in particular, our people continue to live in poverty and without benefits. To this end, we continue our calls to big businesses operating in these areas to invest and plough back into these communities.

Furthermore, we are encouraged by the fact that our province has been identified as a hub for mining and mineral beneficiation as part of the Accelerated and Shared Growth Initiative for South Africa, or Asgisa, processes. Apart from the diamond-cutting and polishing factory, which is to be established in Kimberley, our provincial government, together with its partners in business, is working towards establishing a manganese smelter to ensure beneficiation of the mining of manganese in the Kathu- Postmasburg area.

We remain mindful of the fact that much more needs to be done in order to improve the quality of lives of our people. In this regard, we welcome and commend the fact that over the Medium-Term Expenditure Framework, the equitable share for the Northern Cape increased by R106,4 million in 2006- 07 to R487,7 million in the last year of the MTEF.

Conditional grants increased by R149,8 million to a total of R419,8 million over the Medium-Term Expenditure Framework period while provincial revenue increased by R65,5 million over the same period. These increases put us in a better position to address some of the challenges facing our province.

Through the increased equitable share, we will be able to further expand and extend service delivery to some of the areas that continue to face challenges in this regard. Most importantly, this would allow us to reduce backlogs in school equipment and expand a new curriculum in education for Grades 10 to 12. This also provides us with an opportunity for enhancing human resources in health by recruiting personnel with requisite professional skills, and improve services in the rural areas.

We are mindful of the fact that accelerated economic growth must be supported by the requisite infrastructure in both communication and technology. It is for this reason that we welcome increased allocations to infrastructure development. Through the infrastructure grant, we have been given an opportunity, amongst other things, to improve our road infrastructure in order to facilitate effective transportation of goods and products to their market destinations.

In addition, we are encouraged by the fact that, due to our performance, our province received an additional allocation during the 2005 adjustments estimates for the hospital revitalisation programme. Amongst other things, major projects for the hospital revitalisation programme include a construction of the psychiatric hospital in Kimberley, a hospital in Barkley West, and construction of Upington Hospital and De Aar Hospital. Further, the department of housing and local government will deliver approximately 3 000 houses in the 2006-07 financial year.

In order to give effect to the objects of infrastructure development, our provincial government will continue to focus on the Expanded Public Works Programme as part of our programme to extend and build new infrastructure, as well as strengthen participation and inclusion of those trapped in the second economy.

The developments around investment and infrastructure development are expected to contribute significantly to the creation of job opportunities in the various regions of our province. Through demands for goods and services generated by increased economic activities, our province is set to achieve and maintain economic growth between 4% to 6%, as enshrined in the provincial growth and development strategy.

Although we note with great enthusiasm the progress made and opportunities emanating from the division of revenue, it is important that we also reflect on the prevailing challenges. Amongst other things, the equitable share formula currently being used to allocate financial resources poses a number of profound challenges for the Northern Cape in particular.

We agree, Deputy Minister, that the 2006 data does take into account the cost of delivering services as per the Financial and Fiscal Commission recommendations. However, we feel that we need to engage further on this matter as it is our belief that there is a number of factors that still confront us as the Northern Cape, and issues such as distance, remoteness and gravel roads are indeed impacting on our ability to reach every part of the province.

Further, this scenario is also exacerbated by the fact that the rural nature of our province creates challenges related to recruitment and retention of skilled personnel, especially in the health and education sectors. These factors make service delivery more expensive in the Northern Cape. Nonetheless, we have no doubt that an appropriate solution to this situation may be arrived at in the near future and hence our support for this Bill.

Many of you know that the Northern Cape has inherited some areas in the Kgalagadi district and in Phokwane Municipality, as a result of the eradication of cross-boundary municipalities. This means that more work needs to be done to ensure that budgets of the provinces affected by the eradication of cross-boundary municipalities are aligned with the implementation protocols signed by the Premiers.

In conclusion, let me take this opportunity to express my heartfelt condolences to the family of the late mayor of Ga-Segonyana municipality, Mr Emmanuel Kgopodithate. His contribution to the struggle waged by our people against the unjust system as well as the commitment and zeal he demonstrated regarding the development and improvement of the lives of our people will be sorely missed. I thank you. [Applause.]

Ms A N T MCHUNU: Hon Chairperson, hon Deputy Minister of Finance, hon Chairperson of the NCOP, hon Deputy Chairperson of the NCOP, hon guests and our friends here in the Northern Cape, the hon Chairperson of the NCOP, Mr J Mahlangu, stated yesterday that a budget is a tool for service delivery. This afternoon, all of us here have to consider this Division of Revenue Bill, that is, whether it will enhance service delivery for poverty eradication or poverty alleviation, job creation and accelerated shared economic growth in South Africa spearheaded by our hon Deputy President as Asgisa.

As South Africans we are, or have to be, part of the budget system. I am not going to mention the figures because I think we have been fed with a lot of figures so far. But, we know that budgeting has to start from the people at grass-roots level and that it should be a bottom-up and not a top- down method.

We have to make use of our further education and training colleges to train our people on the budget system. Otherwise, we may find that we give people information which may not really be of help to them, whereas if they had given us all the information according to their felt needs we would be able to conduct a better budget system.

These FET colleges, which have been given R1,96 billion, have to assist by training our people to prepare business plans and to go through the budget system. People at local level have to identify their own felt needs such as hunger, unemployment and lack of craft skills to help themselves.

Having done that, it is essential for communities to forward and discuss their needs with their leaders at community level. There are community development workers and community health workers who should be contacted by the people to assist them with their needs so as to facilitate the process of budgeting.

Budgeting for poverty alleviation and economic growth on a small-scale starts in every household with a patch of a garden for feeding a family. Excess vegetables may be dried or sold to neighbours and thus small-scale savings may be achieved. We start small and grow big.

Consumerism has contributed a lot to the revenue we are discussing at the moment. But, that has to be changed because revenue has to be accumulated through production. I think the hon Deputy Minister of the Trade and Industry is going to help us a lot as South Africans to be motivated producers.

Our revenue cake has been baked by all South Africans, because we all contribute to tax and VAT. Today, we recommend the cutting of the cake according to the people’s needs, particularly in impoverished areas.

For economic growth, consideration has to be given to projects such as the Gautrain, but we will also have to think about the 2010 activities that will be taking place. We also have to consider the Dube trade port in which KwaZulu-Natal has already put down a sum of R1 billion and we are asking for R1 billion from our National Treasury. Developmental projects such as goat, ostrich and chicken farming and dam building have to be considered as these assist women who are in need, and the youth as well.

The Division of Revenue Bill will facilitate service delivery in all spheres of government through competent and trustworthy servants of the people. Our task, as members of the NCOP, is to do oversight work with all the hon members and people on the ground to give people hope as envisaged by our hon President.

Corruption and nepotism have to be minimised in order for all people to share this budget…

The HOUSE CHAIRPERSON (Mr T S Setona): Hon member, I am afraid your time has expired.

Ms A N T MCHUNU (Western Cape): The IFP supports this Budget. [Applause.]

Mr G STRACHAN: Hon Chairperson, hon Deputy Minister, hon Premier of the Northern Cape, hon members, ladies and gentlemen, on behalf of the Western Cape, allow me to express our appreciation to the NCOP for this opportunity and to say that we have a lot to learn from the NCOP about the extent to which it carries out its public participation processes, going to the lengths that it has today. I also want, on behalf of the Western Cape Legislature, to thank Mr Ralane and the portfolio committee for the work which they did with our standing committee and the legislature.

The Western Cape Provincial Legislature supports the Division of Revenue Bill without reservation. The standing committee, after a briefing by the provincial treasury, raised a number of technical issues. The hon Ralane will be pleased to note that I am not going to raise these technical issues now, although we will say that we reserve the right to raise them in future. And we make no apology for the fact that we are briefed by the Treasury and assisted to gain an understanding of some of the technical questions.

In the Western Cape, three issues crop up historically in relation to the Division of Revenue Act. They are raised consistently by the DA and their ideological bedfellows, the ACDP. [Laughter.] It is interesting that the hon Ms Robinson agrees with the principle of the equitable share. It has not always been the case. For many years the DA did not agree with the equitable share. [Interjections.]

They always said that another formula should be used. In fact, even today some of them still say that. They suggested that a formula should be based on relative contribution to the economy of each province and the slightly above-average provincial growth rate. This obviously ignores the fact that, as we all know, we are one country with one history and it is a history characterised by growth inequality, which has to be and will be addressed by the national government. [Applause.]

The hon member Ms Robinson put this slightly different spin on the matter and referred to a federal structure of our democracy. Perhaps the hon member has read a different Constitution to the one that I have read. [Laughter.] But my understanding is that it is a Constitution based on co- operative governance and spheres of government.

This brings me to the second issue, which is much talked about by the DA - that is the issue of inward migration. And the hon Robinson has not been as subtle in this regard as she was with the equitable share. She said that that does not take into account inward migration to the province from the Eastern Cape. We can debate the accuracy of the data provided by Statistics SA. We should also debate the issue that she has raised about the data, which is historically used in planning going forward.

However, what we won’t accept is an issue that the DA and the ACDP raise consistently. The data issue is one thing, but it is another thing to use inward migration from the Eastern Cape as migration of Africans to the Western Cape, which allows the DA to have slogans such as: “Take back your city” or “Fight ANC racism”. [Interjections.]

In fact, in the most recent debate that hon member’s colleague, hon Brynard, who represents the DA, said there were no electricity cuts under apartheid, and Hansard will bear me out on this. We agree with him, although I do not really know. But it did not matter for 90% of the population because they had no electricity at all. [Interjections.] [Applause.]

The HOUSE CHAIRPERSON (Mr T S Setona): Order, members! Hon Robinson, on what point are you rising?

Ms D ROBINSON: I am just questioning the relevance of that member’s speech regarding the debate on the division of revenue.

The HOUSE CHAIRPERSON (Mr T S Setona): Order! Hon Strachan, please continue with your speech.

Mr G STRACHAN (Western Cape): Thank you. It would be useful if the hon member and her colleagues spent more time in the standing committee. The third issue is that the Western Cape is treated unfairly because it has three teaching hospitals and because individuals from other provinces come to the Western Cape where there are better services. As we know, this is such a stale and outdated argument because the conditional grants given under the hospital revitalisation programme have gone a long way to addressing the problem.

Of course, there are challenges with respect to the conditional grants. The Finance and Fiscal Commission pointed out some of the challenges, including the Western Cape. We are mindful of them and we have to have an ongoing check and oversight to ensure that those grants are used precisely for what they are specified for.

These arguments - and I have outlined only three of them - are bogus arguments. They are often advanced by the DA in a province where it feels that it would like to have…

The HOUSE CHAIRPERSON (Mr T S Setona): Hon member, I am afraid your time has expired. [Interjections.] [Applause.]

Mr E M SOGONI: Hon House Chairperson, hon Chairperson of the NCOP, hon Premier of Northern Cape - I can’t see her - hon Deputy Minister of Finance, the leadership of all legislatures and people of Northern Cape, I must really thank the hon member, Strachan, who spoke before me. I think he really put paid to a lot of debates that were raised by the DA.

The Bill before us shows a commitment by the democratic government to bettering the lives of the people in rural areas of the Northern Cape, and those in informal settlements of Gauteng, Umlazi in Durban, Limpopo and all over the country. The Minister of Finance said that money is not a problem in South Africa; the challenge is ensuring that these monies are utilised as allocated, and not saved in the banks as that is not the function of government.

Incidentally, Gauteng is passing its appropriation budget today so that it can become a better place to live in. The budget they are passing today will go a long way in ensuring that unemployment is halved by 2014. Gauteng has undertaken to grow its economy by 8% by 2010. The Premier said that the budget had been drawn up in the context of Asgisa.

My contribution today will address two areas and some of them are areas that the Deputy Minister referred to, that is the objective of the conditional grants, and clauses 16 and 49 of the Division of Revenue Bill. Clause 16 deals with accountability and clause 49 deals with cross-border allocations during transition.

The whole intention of these grants is to supplement provincial and municipal grants. They are not intended to replace equitable shares of any department. Through conditional grants, the government also addresses certain priorities such as backlogs in infrastructure. I would like to refer to some of these grants.

The first one concerns the Comprehensive Agricultural Support Programme, which is commonly known as Casp. This grant is intended to promote and facilitate participation by all households in rural areas who may be experiencing financial difficulties, and it is about participating in small- scale farming. Our experience in oversight is that provinces have not succeeded in spending all these funds received last year. In fact, the Casp grant is a modest one. Some provinces have applied for roll-overs and those have been granted.

The other grants are those that concern education. They have already been mentioned but I will go into some detail. The Further Education and Training College Sector Recapitalisation Grant is the new grant intended to improve capacity, in order to improve skills development and training in FET colleges. The staff of the FET colleges will benefit as they will be reskilled to address the skills shortage required by the economy.

The Select Committee on Education and Recreation will have to watch the above-mentioned grant closely, as there might be teething problems when the grant is being phased in, and there could be challenges regarding spending in provincial education departments.

There is also another education grant which focuses on HIV/Aids. Its objective is to skill educators to deal with challenges concerning infected and affected teachers and students at schools. Again, from our experience, it has become clear that co-operation is needed between the provincial departments of education and provincial department of social development, who are better equipped to assist with these grants. There are already teachers who are trained but have no resources or support systems which can assist them to apply their skills. Obviously, the provinces’ capacities to respond differ, but they could share experiences in order to improve the usefulness of these grants.

Another important grant concerning education is the nutrition grant. Some provinces are doing much better. However, others, especially …[Interjections.] There is a province, Comrade Kopane, that has informed us that they feed students three times a week. The requirement of this grant is that students must be fed 156 days a year – which is almost equal to the number of school days. Many delays experienced have also deprived the needy kids of this nutritional requirement. These delays resulted from the timing regarding putting of tenders. The officials wait until implementation time. Planning is a problem for many of our officials in the departments.

There is also another grant that is administered by Health. The HIV grant is intended for intervening in the fight against HIV/Aids that is ripping off our country. Again, there have been problems in relation to spending in these grants. The Northern Cape MEC mentioned the Hospital Rehabilitation Grant. Northern Cape has done well regarding this grant. However, there are still challenges in many provinces.

As the finance committee, we advise that the provincial departments of health and education, on one side, and Public Works on the other side, should, in the next quarterly expenditure programme, bring service level agreements to the finance committee. This exercise would go a long way towards resolving some of the problems that contribute to low spending in infrastructure.

Government has agreed to devolve the housing grant to local government because it is the best place to accelerate delivery of houses. In the state of the nation address, the President announced measures taken to capacitate local government, including the intervention by the Development Bank of South Africa and Project Consolidate. Local government currently cannot deliver on this obligation, unless this intervention is realised soon.

The HOUSE CHAIRPERSON (Mr T S Setona): Hon member, your time has expired.

Mr E M SOGONI: Thank you. [Applause.]

Mr D SINGH (Salga): Hon Chairperson, hon Chairperson of the NCOP, hon Deputy Chairperson, hon Premier, Speaker of the Northern Cape province, hon members, special delegates, ladies and gentlemen, the division of revenue should, in terms of the South African Constitution, seek to strengthen the ability of provinces and municipalities to provide basic services and perform the functions allocated to them, thereby promoting the improvement of the living environment and livelihoods of all the constituents by means of providing for developmental and other needs. The President, in his state of the nation address, said and I quote:

While we must indeed celebrate the high levels of optimism that inspire our people, who are convinced that our country has entered its age of hope, we must also focus on and pay particular attention to the implications of those high levels of optimism with regard to what we must do together to achieve the objective of a better life for all our people. We must ensure that the machinery of government, especially the local government sphere, discharges its responsibilities effectively and efficiently, honouring the precepts of Batho Pele.

These high levels of optimism and expectation have once again been demonstrated by the way in which our people voted in the 1 March 2006 local government elections.

The Minister of Finance reported a positive economic growth of about 5% last year, and expressed the anticipation of continued growth of about 5% per year over the period ahead. The 2006 Budget, through Asgisa, begins to demonstrate the government’s move to respond to the hopes of the people by doing everything possible to meet their expectations.

It is most appreciated that the government, through its Budget, continues its efforts to accelerate the pace of employment creation by focusing on economic policy; introducing a number of monetary thresholds and adjustments; simplifying tax arrangements for small businesses; consolidating its achievements regarding skills and education; and improving the capacity and effectiveness of the state with regard to municipal development planning, combating crime and promoting service- orientated Public Service administration.

Section 14 of the Bill seeks to ensure that delivery of housing services is enhanced through the accreditation of municipalities with capacity. On the other hand, Section 16 is meant to address the spending of the infrastructure grant, which currently seems to be negatively affected by the many unnecessary delays and conditions attached to the transfer of funds by the transferring officers.

While Salga welcomes and supports fully the provisions of this section, the NCOP should strengthen its oversight responsibility and ensure that the duties or obligations stipulated on these sections are carried out effectively within the prescribed requirements and timeframes.

Clause 24 (1)(b), which requires the National Treasury to approve the monitoring of expenditure and nonfinancial performance information of the municipal infrastructure grant funds, is supported because Salga believes that the National Treasury will assist in eradicating the current MIG transfer practices, which result in delays in the roll-out of projects and huge underspending on capital budgets by municipalities.

Regarding the equitable share, local government receives R8,3 billion in 2006-07; R10,5 billion in 2007-08; and R13,9 billion in 2008-09, which is an upward revision of the baseline by R1,6 billion over the next three years. It is noted with appreciation that the revised equitable share also makes provision for a revised remuneration framework for councillors, and the environment health care services.

Government will also provide R7 billion in 2006-07; R8 billion in 2007-08 and R9 billion in 2008-09 to compensate local government for removal of the regional services council levies. The National Treasury, during our engagement, correctly pointed out that there had been an element of underestimation and overestimation of the income of these levies by certain municipalities, and that led to difficulties in putting together the allocations, as reflected in the Bill. However, Salga would like to believe that the National Treasury, in arriving at the transfer allocations to districts, took into consideration that the RSC levies were the major source of revenue for this category of municipalities.

Salga notes as positive that the transfer to local government concerning infrastructure, which amounts to R8,2 billion and will run up to R9,8 billion in the MTEF years, includes, over and above municipal services infrastructure, the funding for public transport infrastructure.

The largest portion of the infrastructure transfers goes to MIG, the funding structure which was established to supplement municipals’ own revenue in delivering basic service infrastructure and stimulating local economic development and job creation over the medium term.

Chairperson, Salga believes that the role of national and provincial government is to support and monitor the outcomes of municipal infrastructure investment. The efforts of these spheres of government should focus on improving the capacity, efficiency, effectiveness, sustainability and accountability of the local government sphere, and on making the integrated development plans the primary mechanisms for intergovernmental co-ordination.

Good municipal governance is built upon effective interface between councillors and officials, strong links between financial and technical support functions and an appropriate organisational structure. It is appreciated that national government continues to commit funds to capacity- building and restructuring initiatives.

The newly-introduced neighbourhood development partnership grant to provide municipalities with technical assistance to develop appropriate project proposals for property developments in townships and new residential neighbourhoods is most welcome.

Completion of the process of reviewing the local government fiscal framework is crucial. The process focuses on the replacement of the regional services council levies, the introduction of new property rating and the assessment of the impact of the restructuring of the electricity redistribution industry on municipal finances. This includes the alignment of functional and fiscal division of powers and functions between category B and category C municipalities.

Viewed as positive is the National Treasury, which has already released a document on the work in progress with regard to finding a suitable replacement for the regional councils levy fees and finding additional revenue source for local government.

One of the revenue sources, namely VAT and zero-rating of municipal property rates, will be applied from 1 July 2006 and it is estimated that it will result in just under R1 billion benefit for category A and category B municipalities.

In conclusion, Salga supports the 2006 Division of Revenue Bill. Let me reiterate that the basis on which these inputs have been made is to indicate that there is significant progress with regard to achieving the mandate of local government. However, in consolidating the co-ordination and integration between government’s spheres, it should be made clear that, irrespective of how government operates, the impact of its work is understood as being that of an entity called government.

On behalf of Salga, we would also like to take this opportunity to convey our condolences to the family of our former colleague, Mayor Kgopodithate of Ga-Segonyana municipality, who left us on 25 March this week. We thank you. [Applause.]

The DEPUTY MINISTER OF FINANCE: Chairperson, hon members, clearly it was quite a vibrant debate and I would like to thank all the members who participated in it. But, hon members, allow me also just to raise a few issues. Maybe the starting point is the statement that was made on this podium that went as follows: “Increased government infrastructure spending means no tax relief for business.” That statement was made as though there’s something wrong in that.

I’ll assume that hon Robinson detected an anomaly in this government’s endeavour to increase infrastructure spending, because she said increased infrastructure spending means there is no tax relief for business. Let’s understand what this infrastructure spending is meant to do, as contained in the Budget document and also in the speeches of a number of members.

This increase in infrastructure spending ensures that there are schools for children; this increased infrastructure spending means that there’s clean water – things that we take for granted because some of us have never had to face a situation where you drink water out of the river. Increased infrastructure spending means access to medical facilities. Those of us who grew up in communities where there was always access to these facilities might take that for granted, but that is what it means.

Quite obviously, in addressing this situation, all of us as South Africans ought to make a contribution. We can’t have a situation where some parties have given themselves the mandate to speak on behalf of business, because business in South Africa understands that, in order to sustain this democracy and to ensure that we improve the wellbeing of all citizens, a contribution ought to be made – and a reasonable contribution.

We all understand if we read the Budget document and the speech of the Minister that the taxes have been on the decline through and through. The tax reform has basically been premised on ensuring that there’s equity, that we all contribute equally and increase the base, and that we alleviate the tax burden on those members of society that are at the bottom end of the income scale. If anyone says that that is not justice, then I will ask: What is justice then?

However, it is also up to us who have the capacity to earn more to do something. Hence, we have to contribute more – and that includes the members of this House. [Applause.] We accept this because by doing it we increase the possibility that this government will ensure, yes, indeed, that there is a better life for all citizens, irrespective of whether they are in rural areas or informal settlements in our own country. By doing this we increase the possibility that the dream of attaining a better world will basically move from the realms of imagination into concrete reality. We can only achieve that through this infrastructure spending.

But, there is a bigger picture to infrastructure spending. Businesses that are not short-sighted understand that you don’t just look at increased government spending, but you look at what government is spending on. Investment spending is good for economic growth and this government has increased infrastructure spending because by doing that, it increases investment spending. Once you increase investment spending, it means you don’t just build schools and all that but you also increase the basic infrastructure that would crowd in private sector investment – and we have seen that happening.

Once the private sector also invests because of increased infrastructure spending, this economy grows; and once this economy grows, it means there are, to a larger extent, bigger profits because more people would be earning and would be able to buy those goods and services produced by the very same private sector. So, an enlightened business person says: “A growing economy means a bigger profit for me”, but citizens of South Africa say that bigger profit means bigger revenue and then more resources to spend on the vulnerable.

That’s a simple model of the ANC. [Applause.] That is how we are going to transform this society. We are not going to transform this society by any unsustainable means but by basically following a very rational and simple economic model of increasing the growth of this economy while spending, not just anyhow, but by ensuring that the benefits are also felt by the most vulnerable.

If the DA is worried about those business people and all that, they must basically articulate that more clearly because, at the end of the day, no head rests peacefully when a neighbour is hungry. That, you must always remember. [Applause.]

The other issue that I will use my time to deal with is around the preparations for 2010. We all know that South Africa has been given the honour and responsibility to host the 2010 Soccer World Cup.

It is the major event that not only will put South Africa but the whole of the African continent on the map. We will ensure that this biggest sporting activity to be conducted in this country of ours, in this continent that is called Africa, will be conducted in a manner that is going to match any other venue anywhere in the world. Hence, South Africa has the responsibility, not only for ourselves as South Africa, but for the whole continent, to ensure that there is, indeed, a successful hosting of the Soccer World Cup in 2010.

We must host in a way that will show the efficiency, capacity and professionalism of Africa; and that will show the infrastructure that is equal to any other infrastructure in the world. [Applause.] It is on that basis that we said it is important for this government, as contained in the Budget, to set aside resources to ensure that this infrastructure, which is called a stadium, is built across the board.

In doing that, we must also understand that it is important for us to ensure that there’s a collaborative and a co-operative effort between the different spheres of government in putting together this infrastructure. Because there are always choices in terms of revenue, we must also approach this very difficult thing with a sensitivity of ensuring that we don’t air our opinions - no matter how short-sighted those opinions are - through the media because, in so doing, we dampen the spirit and the hope that the world has of South Africa.

It is on that point that South Africa took a decision to say that, at the end of the day, it’s important also to build a venue – a multipurpose venue in Green Point, Cape Town. That venue must be utilised not just for soccer but also to increase the capacity of Cape Town to host other sporting events, because at this point we all know that soccer fans are irritants in communities. In Newlands, for instance, as soccer fans our vuvuzelas seem to be disturbing the peace of some people who stay there. [Interjections.]

We are saying soccer has always had a problem finding an appropriate venue in Cape Town. We are not making this thing up and, hence, it has become a difficulty. It is on that basis that this decision was taken to say that when you talk about equity, equal access and equal facilities in South Africa, that goes to sport too.

Soccer must not be at the mercy of rugby or any other sporting fraternity. [Applause.] Therefore we hope that the new Mayor of Cape Town, Her Worship Zille, would seriously think and consider her response going forward because, at the end of the day, we cannot be narrow and myopic in terms of approaching matters of national interests. [Applause.]

We can’t just play to the gallery of seeking to portray a situation where we say these resources could have been utilised elsewhere – we all know that. But, at the end of the day, we must count the benefits, in the long run, of what such a facility would do to Cape Town. Thank you very much. [Applause.]

Debate concluded.

The HOUSE CHAIRPERSON (Mr T S Setona): Order, members! Hon members, I just want to remind you that this is the NCOP’s sitting. I don’t think we have to whistle in this House.

That concludes the debate. I shall now put the question. The question is that the Bill be agreed to. As the decision is dealt with in terms of section 65 of the Constitution, I shall first ascertain whether all delegation heads are present in the Chamber to cast their provinces, votes. Are all delegation heads present?

HON MEMBERS: Yes.

The HOUSE CHAIRPERSON (Mr T S Setona): In accordance with Rule 71, hon members who are going to vote … [Interjections.] I think provinces should listen and listen carefully. In accordance with Rule 71, I shall first allow provinces the opportunity to make their declarations of vote if they so wish.

HON MEMBERS: None.

USIHLALO WENDLU (Mnu T S Setona): Sizoqhubeka-ke sibheke ekuvoteni. Sizovotela lo mbuzo osubekwe phambi kwale Ndlu. Ngizokwenza lokho ngokulandelana kwezifundazwe. Abaholi bamathimba ezifundazwe kufanele bakhombise uSihlalo ukuthi ngabe bakhona bonke lapha eNdlini nanokuthi bavota ngokuvuma noma bayaphikisa noma abavoti kwasampela. Sizoqala ngeMpumalanga Koloni. Mpumalanga Koloni? (Translation of isiZulu paragraph follows.)

[The HOUSE CHAIRPERSON (Mr T S Setona): We are going to proceed to voting. We are going to vote on the question before House. I am going to do that in alphabetical order per province. Leaders of provincial delegations must indicate to the Chairperson if they are present and indicate if they are voting in favour, abstain or vote against the Bill. We are going to start with the Eastern Cape. Eastern Cape?]

Ms B N DLULANE: Oos-Kaap Steun. [Eastern Cape supports.]

The HOUSE CHAIRPERSON (Mr T S Setona): Free State?

Mr C J VAN ROOYEN: Vrystaat steun. [Free State supports.]

The HOUSE CHAIRPERSON (Mr T S Setona): Gauteng?

Mr E M SOGONI: IGauteng iyawuxhasa. [Gauteng supports.]

The HOUSE CHAIRPERSON (Mr T S Setona): KwaZulu-Natal?

Mr Z C NTULI: IkwaZulu-Natali ithi elethu. [KwaZulu-Natal supports it fully.]

The HOUSE CHAIRPERSON (Mr T S Setona): Limpopo?

Mr D BOTHA: Limpopo steun. [Limpopo supports it.]

The HOUSE CHAIRPERSON (Mr T S Setona): Mpumalanga?

Ms F NYANDA: Mpumalanga supports it.

The HOUSE CHAIRPERSON (Mr T S Setona): Northern Cape?

Mr M A SULLIMAN: Enyakatho Kapa siyawuvuma. [Northern Cape supports it.]

The HOUSE CHAIRPERSON (Mr T S Setona): North West?

Mr Z S KOLWENI: North West ke a rona. [North West supports it.]

The HOUSE CHAIRPERSON (Mr T S Setona): Western Cape?

Mr G STRACHAN: INtshonalanga Kapa iyawuvuma. [Western Cape supports it.]

The HOUSE CHAIRPERSON (Mr T S Setona): Zonke izifundazwe zivotele ukuthi ziyawuvuma lo Mthethosivivinywa. [All the provinces voted in favour of the Bill.]

I therefore declare the Bill agreed to in terms of section 65 of the Constitution. [Applause.]

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

USIHLALO WENDLU (Mnu T S Setona): Manje ngifuna ukubonga iPhini likaNgqongqoshe ngokuthi lisinike ithuba lokuba nathi lapha eNyakatho Kapa namhlanje. Yize kukude nasesikhumulweni sezindiza kodwa ukuhloniphile ukuthi wakhethwa abantu. NgokukaSomqulu weNkululeko, ukubeke kwaba sobala ukuthi yebo abantu bayabusa kuleli zwe. Ngakho-ke siyabonga kakhulu Phini likaNgqongoshe. (Translation of isiZulu paragraph follows.)

[The HOUSE CHAIRPERSON (Mr T S Setona): I would like to thank the Deputy Minister for sacrificing his time to be with us here in the Northern Province. Although it is far away from the airport, he respected that he was elected by the masses. In the Bill of Rights, it clearly states that “the people shall govern” in this country. Therefore, thank you very much, Deputy Minister.]

 ADDITIONAL ADJUSTMENTS APPROPRIATION BILL (2005-06 FINANCIAL YEAR)

            (Consideration of Bill and of Report thereon)

Mr M O ROBERTSON: Chairperson, Deputy Minister, MEC, all protocol observed, the Public Finance Management Act, Act 1 of 1999, makes provision for a national adjustments budget. In terms of this Act, the Minister of Finance may table an adjustments budget in the National Assembly. The Adjustments Appropriation Bill of 2006 appropriates adjusted amounts of money for the requirements of national departments, for the financial year ending 31 March 2006.

The objective of this Bill is to appropriate an additional amount of money for the requirements of the Department of Public Enterprises and the Department of Transport. An amount of R2 billion is appropriated out of the National Revenue Fund for the Department of Public Enterprises, for the financial year ending 31 March 2006. The money will be transferred to Denel for the recapitalisation of the entity and to assist restructure and refocus the business.

In addition, an amount of R2,7 billion is appropriated out of the National Revenue Fund for the Department of Transport, for the financial year ending 31 March 2006. The money will be transferred to the Road Accident Fund in order to proceed with the scheduled payments to successful claimants and to settle an outstanding payment to the SA Revenue Service.

I would like to add that we could all probably play a role in helping the Road Accident Fund cut down the number of road accidents we have in this country. I also appeal to our law enforcement people on the roads to enforce proper travelling behaviour, and to take action regarding the licensing of vehicles that shouldn’t be licensed.

Lastly, I would also like to warn the unscrupulous lawyers out there who take millions and millions from the Road Accident Fund and keep the major percentage of that money to themselves, while the claimants get 10% to 15%.

The Select Committee on Finance appeals to the NCOP to support this money Bill. Ke a leboga. [I thank you.] [Applause.]

Debate concluded.

The HOUSE CHAIRPERSON (Mr T S Setona): Thank you, hon member. That concludes the debate. I shall now put the question. The question is that the Bill be agreed to. In accordance with Rule 63 I shall first allow political parties the opportunity to make their declarations of vote if they so wish. None. We shall now proceed to voting on the question. Those in favour will say “Aye”.

HON MEMBERS: Aye!

The HOUSE CHAIRPERSON (Mr T S Setona): Those against will say “No”.

HON MEMBERS: No!

The HOUSE CHAIRPERSON (Mr T S Setona): All members voted in favour. I therefore declare the Bill agreed to in accordance with section 75 of the Constitution. [Applause.]

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

The HOUSE CHAIRPERSON (Mr T S Setona): Hon members, I want to thank all the members who have attended this session, particularly the special delegates from various provinces and also the members of Salga. I also want to make the announcement that tomorrow morning all the groups are going on site visits. They should be here at 8:30 because we will be leaving at 9 o’clock for the site visits.

The Council adjourned at 16:09. ____

            ANNOUNCEMENTS, TABLINGS AND COMMITTEE REPORTS



                       THURSDAY, 23 MARCH 2006

ANNOUNCEMENTS

National Assembly and National Council of Provinces

The Speaker and the Chairperson

1. Translation of Bill submitted

 (1)    The Minister of Finance
     (a)     Begrotingswetsontwerp [W 2 – 2006] (National Assembly –
         sec 77)


     This is the official translation into Afrikaans of the
     Appropriation Bill [B 2 – 2006] (National Assembly – sec 77).

National Council of Provinces

The Chairperson

1. Message from National Assembly to National Council of Provinces in respect of Bill

 (1)    Bill amended and passed by National Assembly on 23 March 2006
    and returned for concurrence:
      a) Older Persons Bill [B 68D – 2003] (National Council of
         Provinces – sec 76)


         The Bill has been referred to the Select Committee on Social
         Services of the National Council of Provinces.

1. Referral to Committees of papers tabled

(1)     The following papers are referred to the Select Committee on
    Finance for consideration and report:


      a) International Convention on Mutual Administrative Assistance in
         Customs Matters adopted in Brussels on 27 June 2003: Your
         Customs Johannesburg Convention dated 13 July 2004, tabled in
         terms of section 231(2) of the Constitution, 1996.


      b) Explanatory Memorandum on International Convention on Mutual
         Administrative Assistance in Customs Matters.

(2)     The following papers are referred to the Select Committee on
    Land and Environmental Affairs for consideration:

      a) Strategic Plan of the Department of Land Affairs for 2006 to
         2009.


      b) Strategic Plan of the National Agricultural Marketing Council
         for 2006 to 2011.


      c) Strategic Plan of the Ncera Farms (Pty) Ltd for 2006/07.


(3)     The following paper is referred to the Select Committee on
    Economic and Foreign Affairs for consideration:

      a) Strategic Plan of the International Marketing Council (IMC) for
         2006 to 2009.

(4)     The following papers are referred to the Select Committee on
    Finance and the Select Committee on Local Government and
    Administration:

      a) Government Notice No 44 published in Government Gazette No
         28411 dated 18 January 2006: Exemptions from Supply Chain
         Management Regulations in terms of the Local Government:
         Municipal Finance Management Act, 2003 (Act No 56 of 2003).


      b) Government Notice No R.1105 published in Government Gazette No
         28226 dated 14 November 2005: Amendment of prescribed fees in
         terms of the Pension Funds Act, 1956 (Act No 24 of 1956).

(5)     The following papers are referred to the Select Committee on
    Social Services for consideration:

    (a)      Strategic Plan of the South African Social Security Agency
         for 2006/07 to 2008/09.

c) Memorandum by the Minister of Public Works setting out Particulars of the Building Programme for 2006-2007 [RP 25-2006] . (6) The following paper is referred to the Select Committee on Labour and Public Enterprises for consideration:

    (a)      Amendment to Eskom’s pricing structure, tabled in terms of
         section 42(4) of the Local Government: Municipal Finance
         Management Act, 2003 (Act No 56 of 2003) and supporting
         documents required in terms of section 42(3) of the same Act.

(7)     The following paper is referred to the Joint Committee on
    Ethics and Members’ Interests for consideration:
      a) Report of the Auditor-General on the Declarations of Interest
         by Ministers, Deputy Ministers and Government Employees [RP 19-
         2006].


(8)     The following paper is referred to the Select Committee on
    Security and Constitutional Affairs for consideration:


      a) Strategic Business Plan for the Department of Defence [RP 33-
         2006].

TABLINGS

National Council of Provinces

1. The Chairperson

   (a) Notice of Investigation in Richmond Municipality, in terms of section 106 (1)(b) of the Local Government: Municipality Systems Act, 2000 (Act No 32 of 2000).

   Referred to the Select Committee on Local Government and
   Administration.
   

COMMITTEE REPORTS

National Council of Provinces

1. Report of the Select Committee on Finance on the Appropriation Bill Division of Revenue Bill [B 3 - 2006] (National Assembly - sec 76), dated 23 March 2006:

   The Select Committee on Finance, having considered the subject of the Appropriation Bill Division of Revenue Bill [B 3 - 2006] (National Assembly - sec 76), referred to it, reports the Bill with amendments [B 3A-2006].

2. Report of the Select Committee on Finance on the Additional AdjustmentsAppropriation Bill (2005/06 Financial Year) [B 4 - 2006] (National Assembly - sec 77), dated 23 March 2006:

   The Select Committee on Finance, having considered the subject of the Additional Adjustments Appropriation Bill (2005/06 Financial Year) [B 4 - 2006] (National Assembly - sec 77), referred to it, and classified by the Joint Tagging Mechanism as a section 77 Bill, reports that it has agreed to the Bill.

3. Report by the Select Committee on Economic and Foreign Affairs on a Study Tour to the World Trade Organisation (WTO) in Geneva, Switzerland: 7 to 14 October 2005, dated 8 March 2006:

A. TERMS OF REFERENCE

The Committee agreed on 10 August 2005 to undertake a study tour to Geneva to visit the World Trade Organisation. It is practice for the Department of Trade and Industry to invite delegates of the Committee and that of the Portfolio Committee on Trade and Industry to attend the WTO Ministerial Conferences. The last Ministerial Conference attended by Parliament was held in Cancun. The next one was scheduled to take place in December 2005 in Hong Kong.

B. BACKGROUND

The objective of the trip was to get a better understanding of the functioning of the WTO; meeting with WTO directors and country representatives on issues relating to administering WTO trade agreements and WTO as a Forum for trade negotiations and disputes and monitoring national trade policies.

C. LOGISTICAL ARRANGEMENTS

The delegation consisted of the following persons:

Ms N D Ntwanambi (Chairperson) Ms S Mabe Mr J Sibiya Ms A N T Mchunu Ms S Chen Ms G Abdullatief (Committee Secretary)

The DTI office based at the South African Embassy in Geneva assisted in arranging the meetings and drafting the programme based on the delegation’s terms of reference.

D. FINDINGS

1. Overview of the WTO

The World Trade Organisation (WTO) is the only global international organisation dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.

The WTO was established in 1995 and is a successor to the General Agreement on Tariffs and Trade (GATT). Every two years the WTO holds a major summit called a ministerial meeting. The next ministerial meeting will be held in Hong Kong in December 2005. Previous meetings took place in Cancún (Mexico) in 2003, Doha (Qatar) in 2001 and Seattle (USA) in 1999.

1. Structure and Membership of the WTO

The WTO currently has 148 member countries, with 32 observer governments. Its top-level decision-making body is the Ministerial Conference, which meets at least once every two years. Below this is the General Council (normally ambassadors and heads of delegation in Geneva, but sometimes officials sent from members’ capitals), which meets several times a year in the Geneva headquarters. The General Council also meets as the Trade Policy Review Body and the Dispute Settlement Body.

At the next level, the Goods Council, Services Council and Intellectual Property (TRIPS) Council report to the General Council. Numerous specialised committees, working groups and working parties deal with the individual agreements and other areas such as the environment, development, membership applications and regional trade agreements.

1. General Agreement on Tariffs and Trade (GATT)

The GATT was formed in 1948 as a ‘provisional’ instrument initially intended to pave the way to an International Trade Organisation (ITO). However, the Havana Charter, which would have established the ITO, was never ratified and the GATT remained the only multilateral instrument governing international trade. An informal organisation was built around the GATT to discuss trade-related issues and negotiate further liberalisation.

Taking place in ‘rounds’, these negotiations at first concentrated on lowering tariffs before moving on to additional issues such as subsidies, anti-dumping and non-tariff measures. The eighth trade round, called the Uruguay Round, ran from 1986-94 and was the most extensive of all, covering trade in goods, services, and intellectual property and establishing the WTO as a permanent organisation. GATT and the WTO have helped to create a strong and prosperous trading system contributing to unprecedented growth. The system was developed through a series of trade negotiations, or rounds, held under GATT. The first rounds dealt mainly with tariff reductions but later negotiations included other areas such as anti-dumping and non-tariff measures. The last round, the1986-94 Uruguay Round led to the WTO’s creation. Some negotiations continued after the end of the Uruguay Round.

In 2000, new talks started on agriculture and services. These have now been incorporated into a broader agenda launched at the fourth WTO Ministerial Conference in Doha, Qatar, in November 2001. The work programme, the Doha Development Agenda (DDA), adds negotiations and other work on non-agricultural tariffs, trade and environment, WTO rules such as anti-dumping and subsidies, investment, competition policy, trade facilitation, transparency in government procurement, intellectual property, and a range of issues raised by developing countries as difficulties they face in implementing the present WTO agreements.

GATT is now the WTO’s principal rulebook for trade in goods. The Uruguay Round also created new rules for dealing with trade in services, relevant aspects of intellectual property, dispute settlement, and trade policy reviews. The complete set runs to some 30,000 pages consisting of about 30 agreements and separate commitments (called schedules) made by individual members in specific areas such as lower customs duty rates and services market-opening.

From 1947 to 1994, GATT was the forum for negotiating lower customs duty rates and other trade barriers; the text of the General Agreement spelt out important rules, particularly non-discrimination. Since 1995, the updated GATT has become the WTO’s umbrella agreement for trade in goods. It has annexes dealing with specific sectors such as agriculture and textiles, and with specific issues such as state trading, product standards, subsidies and actions taken against dumping.

Banks, insurance firms, telecommunications companies, tour operators, hotel chains and transport companies looking to do business abroad can now enjoy the same principles of freer and fairer trade that originally only applied to trade in goods. These principles appear in the new General Agreement on Trade in Services (GATS). WTO members have also made individual commitments under GATS stating which of their services sectors they are willing to open to foreign competition, and how open those markets are.

The WTO’s intellectual property agreement amounts to rules for trade and investment in ideas and creativity. The rules state how copyrights, patents, trademarks, geographical names used to identify products, industrial designs, integrated circuit layout-designs and undisclosed information such as trade secrets — “intellectual property” — should be protected when trade is involved.  

1. Policy review  

The Trade Policy Review Mechanism’s purpose is to improve transparency, to create a greater understanding of the policies that countries are adopting, and to assess their impact. Many members also see the reviews as constructive feedback on their policies.

All WTO members must undergo periodic scrutiny, each review containing reports by the country concerned and the WTO Secretariat.

Over three quarters of WTO members are developing or least-developed countries. All WTO agreements contain special provision for them, including longer time periods to implement agreements and commitments, measures to increase their trading opportunities and support to help them build the infrastructure for WTO work, handle disputes, and implement technical standards.

The 2001 Ministerial Conference in Doha set out tasks, including negotiations, for a wide range of issues concerning developing countries. Some people call the new negotiations the Doha Development Round. Before that, in 1997, a high-level meeting on trade initiatives and technical assistance for least-developed countries resulted in an “integrated framework” involving six intergovernmental agencies, to help least- developed countries increase their ability to trade, and some additional preferential market access agreements.

A WTO committee on trade and development, assisted by a sub-committee on least-developed countries, looks at developing countries’ special needs. Its responsibility includes implementation of the agreements, technical cooperation, and the increased participation of developing countries in the global trading system.

The November 2001 declaration of the Fourth Ministerial Conference in Doha, Qatar, provides the mandate for negotiations on a range of subjects and other work, including issues concerning the implementation of the present agreements.

The negotiations include those on agriculture, Non Agricultural Market Access (NAMA), trade and environment, trade facilitation, services and Special and Differential Treatment for developing countries addressing, for example, the difficulties they face in implementing WTO agreements.

The Fifth Ministerial Conference in Cancún, Mexico, in September 2003, was intended as a stock-taking meeting where members would agree on how to complete the rest of the negotiations. But the meeting was soured by discord on agricultural issues, including cotton, and ended in deadlock on the “Singapore issues”. Real progress on the Singapore issues and agriculture was not evident until the early hours of 1 August 2004 with a set of decisions in the General Council (sometimes called the July 2004 package). The original 1 January 2005 deadline was missed. After that, members unofficially aimed to finish the negotiations by the end of 2006.

The negotiations take place in the Trade Negotiations Committee and its subsidiaries. Other work under the work programme takes place in other WTO councils and committees. Ministers also approved a linked decision on implementation — problems developing countries face in implementing the current WTO agreements.

1. The Agriculture Agreement

The WTO’s Agriculture Agreement was negotiated in the 1986–94 Uruguay Round. It includes specific commitments by WTO member governments to improve market access and reduce trade-distorting subsidies in agriculture. These commitments are being implemented over a six-year period (10 years for developing countries) that began in 1995.

Participants have agreed to initiate negotiations for continuing the reform process one year before the end of the implementation period, i.e. by the end of 1999. These talks have now been incorporated into the broader negotiating agenda set at the 2001 Ministerial Conference in Doha, Qatar.

Because of its crucial importance to almost all members, agriculture is often seen as the key to the entire package of negotiations. From time to time delays in agriculture have held up progress in other subjects as negotiators waited for an outcome in agriculture.

The agriculture negotiations are difficult because of the wide range of views and interests among member governments, the large number of active participants, and the complexity of many issues. The aim is to contribute to further liberalisation of agricultural trade, allowing countries to compete on quality and price rather than on the size of their subsidies. That is particularly the case for many developing countries whose economies depend on an increasingly diverse range of primary and processed agricultural products, exported to an increasing variety of markets, including to other developing countries.

At the heart of the talks are the “three pillars”:

• Market access: cutting tariffs, expanding tariff-quotas and various
  flexibilities for these.
    
• Exports subsidies (officially “export competition”): eliminating these
  and disciplining export credit, food aid and state trading enterprises
  to eliminate hidden export subsidies.
    
• Domestic support: cutting supports that distort trade (by stimulating
  over-production and artificially raising or lowering prices) and
  disciplining forms of support that could distort trade.    The talks also cover a number of other issues, including special    treatment for developing countries and “non-trade concerns”    (agriculture’s role in providing food security, rural development,    environmental protection, etc).  

1. Accession

For a country to accede to the WTO, a working party is formed which examines all aspects of the prospective member’s trade and economic policies that have a bearing on WTO agreements, to ensure their compatibility with the obligations of membership. There are also detailed negotiations over the market access guarantees the acceding country can offer. Once the terms of accessions have been finalised, they are presented to the WTO General Council or the Ministerial Conference.

If a two-thirds majority of WTO members vote in favour, the applicant is free to sign the protocol and to accede to the organisation. In some cases, the country’s own parliament or legislature has to ratify the agreement before membership is complete.

1. Dispute settlement 

As well as acting as a forum for trade negotiations, the WTO provides an arbitration service for countries embroiled in trade disputes. The WTO’s procedure for resolving trade quarrels under the Dispute Settlement Understanding is vital for enforcing the rules and therefore for ensuring that trade flows smoothly. Countries bring disputes to the WTO if they think their rights under the agreements are being infringed. Judgments by specially-appointed independent experts are based on interpretations of the agreements and individual countries’ commitments.

The system encourages countries to settle their differences through consultation. Failing that, they can follow a carefully mapped out, stage- by-stage procedure that includes the possibility of a ruling by a panel of experts, and the chance to appeal the ruling on legal grounds. Confidence in the system is borne out by the number of cases brought to the WTO — around 300 cases in eight years compared to the 300 disputes dealt with during the entire life of GATT (1947–94).

E. RECOMMENDATIONS

    a) The Select Committee on Economic and Foreign Affairs should
       request the Minister of Trade and Industry and or relevant
       officials to brief its members on the outcomes of the WTO
       Ministerial Conference in Hong Kong that took place in December
       2005.


    b) The Select Committee on Economic and Foreign Affairs should
       request the relevant officials from the Department of Trade and
       Industry to brief its members on how the WTO as an international
       body is beneficial to the people at grassroots level.

    c) Further to point (b) above, the Committee to consider how the
       WTO could be popularized to people in the provinces, so that
       they could understand how it would be a benefit to South Africa
       and ultimately to them as a people.

F: APPENDIX

The delegation wishes to thank the following persons who availed themselves to meet with the group:

Mr Rob Davies, Deputy Minister: Trade and Industry (DTI). Mr Faizel Ismail, SA representative to the WTO: South African Mission. Mr Xavier Carim, DTI Official: South African Mission. Ambassador Sun, China. Ambassador Hugeney: Brazil. Ms Solveig Crompton, DTI Official: South African Mission. Ms Mpho Leseka, DTI Official: South African Mission. Mr Peter Pedersen, Councillor: WTO Secretariat. Mr Pierre Latrille, Councillor: WTO Secretariat. Mr Adrian Otten, Head, Intellectual Property Division: WTO Secretariat. Mr Hamish Smith, Economic Affairs Officer: WTO Secretariat. Mr Hans Peter Werner, Secretary for Trade and Economic Development: WTO Secretariat.

                        FRIDAY, 24 MARCH 2006

TABLINGS

National Assembly and National Council of Provinces

1. The Minister of Finance

   a) Government Notice No 115 published in Government Gazette No 28469 dated 3 February 2006: Determination of the daily allowance in respect of meals and incidental costs for purposes of the Act, 1962 (Act No 58 of 1962).

2. The Minister of Public Works a) Strategic Plan of the Department of Public Works for 2006-2010.

3. The Minister of Health

 a) Cooperation Agreement between the Government of the Republic of
    Tunisia and the Republic of South Africa on Public Health and
    Medical Sciences, tabled in terms of section 231(3) of the
    Constitution, 1996.



                       TUESDAY, 28 MARCH 2006

ANNOUNCEMENTS

National Assembly and National Council of Provinces

The Speaker and the Chairperson

1. Bill passed by Houses – to be submitted to President for assent

 (1)    Bill passed by National Council of Provinces on 28 March 2006:


      a) Additional Adjustments Appropriation Bill (2005/06 Financial
         Year) [B 4 – 2006] (National Assembly – sec 77).

TABLINGS

National Assembly and National Council of Provinces

1. The Minister of Finance

 a) Government Notice No 177 published in Government Gazette No 28550
    dated 24 February 2006: Fixing of rate per kilometer in respect of
    motor vehicles for the purposes of section 8(1)(b)(ii) and (iii) of
    the Income Tax Act, 1962 (Act No 58 of 1962).

1. The Minister of Correctional Services

 a) Report of the Judicial Inspectorate of Prisons for 2005-2006 [RP 27-
    2006].