#Budget2016

I have the honour to present the 2016 Budget of President Zuma’s second administration. 
We do so in a spirit of frankness, both about our challenges and the opportunity to turn our economy’s direction towards hope, confidence and a better future for all. 
Low growth, high unemployment, extreme inequality and hurtful fractures in our society – these are unacceptable to all of us. 
I have a simple message. We are strong enough, resilient enough and creative enough to manage and overcome our economic challenges. 

All of us want jobs, thriving businesses, engaged professionals, narrowing inequality, fewer in poverty. 
All of us want a new values paradigm, a society at peace with itself, a nation energised by the task of building stronger foundations for our future society and economy. 
We want our government to function effectively, our people to work in dignity, with resources for their families, decent homes and opportunities for their children. 
We want to see progress throughout our land, in agriculture, manufacturing, mining, construction, tourism, science and research, sport and leisure, trade and commerce. 
It is within our grasp to achieve this future. 

It requires bold and constructive leadership in all sectors, a shared vision, a common purpose, and the will to find common ground. Above all we need action, not just words. 
Let us unite as a team, sharing our skills and resources, building social solidarity, defending the institutions of our democracy and developing our economy inclusively. 

We do have a plan, to: 
• Manage our finances in a prudent and sustainable way, 
• Re-ignite confidence and mobilise the resources of all social partners, 
• Collectively invest more in infrastructure to increase potential growth, 
• Give hope to our youth through training and economic opportunities, 
• Protect South Africans from the effects of the drought, 
• Continuously improve our education and health systems, 
• Accelerate transformation towards an inclusive economy and participation by all, 
• Strengthen social solidarity and extend our social safety net. 
The Budget rests on the idea of an inclusive social contract, encompassing an equitable burden of tax and a progressive programme of expenditures. 
The Budget relies on institutions of good governance and a public ethic that values honesty and fairness. 

If we act together, on these principles, as public representatives, civil servants, business people, youth, workers and citizens, we can overcome the challenges of tough economic times and difficult adjustments. 

In acting together we can address declining confidence and the retreat of capital, and we can combat emerging patterns of predatory behaviour and corruption. 
We are conscious of the difficulties we face. Our resilience as a nation, black and white, can propel us to a better future if we make the right choices. 

Honourable Speaker, I hereby table before the House: 
• The 2016 Budget Speech, 
• The 2016 Budget Review, including 
- The fiscal framework, 
- The revenue proposals, customs and excise duties and estimates of national revenue,  
- Our responses to the Budgetary Review and Recommendation Reports, 
• The Division of Revenue Bill, 
• The Appropriation Bill, and 
• The Estimates of National Expenditure. 

In addition, I am introducing the Revenue Laws Amendment Bill 2016 to adjust certain provisions regarding to retirement funds, and related matters. 
These are our budget proposals, and I look forward to further engagement through the Parliamentary budget process. 

Overview of the Budget 
Honourable Speaker, the past year has seen a deterioration in the global economy. In our own region, weaker business confidence coincides with a severe drought, bringing with it rising prices and threats to water supply in many areas. 
In addition we are obliged to confront the impact of slow growth on our public finances, while continuing to respond to the expectations of citizens and communities for improved education, reliable local services and responsive public administration. 
The combination of multiple demands and constrained resources at times seems overwhelming. How does the state deal with such complexity? What should we prioritise? 

As in the past, we have sought advice from citizens. This year, I sought budget pointers on several specific things: What does government do well? What should we stop doing? How can we achieve inclusive growth? 
• On what we do well, South Africans have very clear views: Tax administration. And paying social grants. 
• What we should stop doing: Corruption and waste. Bailing out state entities. 
• How to support inclusive growth: Support for small business. Job opportunities targeting the youth. 

I greatly appreciate the response from so many South Africans – over 1500 in all. Mr Faiek Sonday, and Ms Thuli Ngubane are with us today. Mr Sonday’s advice was that “we should build more roads and train routes, because the sooner you get a worker at the desk or machine the more productive the economy will be”.
And Ms Ngubane expressed the views of so many tipsters: 
“Let our schools’ infrastructure be improved so that all schools are conducive to learning. This will ensure that we produce the quality of students that can take our country forward.”

We agree, and indeed these are central priorities of the National Development Plan. 
As points of departure for the 2016 Budget, Honourable Speaker, allow me to emphasise several broad principles that flow through our NDP: 
• It is a programme for inclusive growth – our social programmes, industrial action plan, promotion of agriculture and rural development, skills and training initiatives, investment in housing and municipal services are aimed at both prosperity and equity, creating opportunities for all and broadening economic participation. 
• It is a plan for a strong mixed economy – in which public services and state actions complement private investment, expansion of trade and social enterprise. 
• It recognises that improvements in the quality of education are the foundations of broad-based growth, productivity improvement and sustainable growth. 
• It acknowledges that investment in infrastructure has to be enhanced and sustained both to underpin economic growth and address the spatial inefficiency and fragmentation of the apartheid landscape. 
• It emphasises that employment creation has to be accelerated if growth is to be inclusive, and that income security for all relies also on appropriate social security, health services and social development programmes. 
• It prioritises building the capability of the state, and strong leadership throughout society, to drive development and promote social cohesion. 
• It highlights that partnership between government, business, organised labour and civil society is the key to policy coherence and more rapid development. 

The Budget tabled today is guided by the NDP. It is a budget for inclusive growth, it emphasises partnerships amongst role players in our economy, it prioritises education and infrastructure investment, it supports employment creation and it contributes to building a capable, developmental state. 

In brief, we propose the following: 
• Against the background of slow growth, rising debt and higher interest rates, the pace of fiscal consolidation will be accelerated. The budget deficit will be reduced to 2.4 per cent by 2018/19. 
• The expenditure ceiling is cut over the next three years by R25 billion, mainly by curtailing personnel spending. 
• Tax increases amounting to R18 billion in 2016/17 are proposed, and a further R15 billion a year in 2017/18 and 2018/19. 
• An additional R16 billion is allocated to higher education over the next three years, funded through reprioritisation of expenditure plans. 
• Taking into account projected increases in the cost of living, R11.5 billion is added to social grant allocations over the next three years. 
• Funds have been reprioritised to respond to the impact of the drought on the farming sector and water-stressed communities. 

In support of growth and development, Honourable Speaker, our initiatives are also aimed at enabling and mobilising private sector and civil society capacity. 
• Building on the success of our Renewable Energy initiatives, the 
Independent Power Producers Programme will be extended to include coal and gas power projects over the period ahead. 
• Measures to strengthen tourism, agriculture and agro-processing are in progress. 
• Collaboration with regional partner countries is being stepped up to improve border management, streamline trade flows and invest in transport and communications corridors. 
• Investment in our cities is being accelerated, creating opportunities for participation of developers and other partners in housing, infrastructure and commercial development. 
• Regulatory challenges that affect mining investment and employment are being addressed. 
• A pathbreaking study of the cost of doing business has been completed, and municipalities are working on identified reforms. 
• Progress has been made towards a minimum wage framework, and to reduce workplace conflict. 
• The National Health Insurance White Paper has been published, and proposals for comprehensive social security will be released by mid-year. 

Engagement with social partners needs to be intensified. Project plans and investments need to be managed and implemented. 

But I know you will join me in acknowledging that the real champions of our development are the activists and entrepreneurs, officials and facilitators, who get on with the job, day by day, of managing programmes and running businesses, serving communities and meeting needs. 

Our faith communities, non-governmental organisations and community volunteers all demonstrate daily that basic needs can be met with dignity. Initiatives like “Operation Hydrate” and “Gift of the Givers” have led the way in responding to the impact of the drought. The Gauteng Province’s 
Ntirhisano outreach programme similarly emphasises that communities can be co-partners with government in accelerating service delivery. We can strengthen these efforts as government, business, religious and community organisations, by working together. 

Global outlook 
Honourable Members, South Africa’s economic prospects are intertwined with global economic developments. A period of unprecedented monetary stimulus in response to the 2008 recession is not yet over, and global volatility and structural imbalances are far from resolved. 

The pace of economic growth has slowed in many countries. The price of oil has fallen by 50 per cent since December 2014. 
Our major exports – platinum, gold, iron ore and coal – have seen substantial declines in global demand and in prices. The effects on our economy are widespread: 
• lower export earnings, 
• lower revenue, 
• declining investment, 
• job losses, and in some cases business failures. 

For the world as a whole, growth declined from 3.4 per cent in 2014 to an estimated 3.1 per cent last year. In sub-Saharan Africa, the decline was from 5 per cent to 3½ per cent. A moderate recovery is expected over the next two years. 
It is notable that faster growth is being achieved in countries which have undertaken bold structural reforms, such as India’s scaling back of subsidies for industry and opening up of trade opportunities, and the promotion of skilled immigration, urban investment and labour-intensive manufacturing and agro-processing in South-east Asian and several African economies. These efforts have helped boost investor sentiment and reduce economic vulnerabilities. Our own structural challenges and reforms are articulated in the National Development Plan. Our economic recovery depends on our ability to convert the plan into actions that deliver on the promise for a better life for all. 

South African economic outlook 
Fellow South Africans, growth rates of below 1 per cent fall short of what we need to create employment and reduce poverty and inequality. The Treasury currently expects growth in the South African economy to be just 0.9 per cent this year, after 1.3 per cent in 2015. This reflects both depressed global conditions and the impact of the drought. 

It also reflects policy uncertainty, the effect of protracted labour disputes on business confidence, electricity supply constraints and regulatory barriers to investment. 

However, the institutional foundations of our economy remain resilient: 
• Macroeconomic policy is effective, 
• The inflation targeting framework provides an anchor for price and wage setting, 
• Our banks and financial institutions are well-capitalised, and we have liquid rand-denominated debt markets, 
• The architecture of our Constitution, justice system, public and private law and dispute resolution mechanisms is robust, 
• We have excellent universities and research centres, 
• We have a strong private sector, 
• We are a resourceful people, committed to contributing to a better South Africa. 

Mr Raymond Wesley wrote to me as follows: “As South Africans, we don’t have an appreciation of the strides we’ve made. Minister, show South Africans, especially the rich, that people’s lives have changed for the better.”

This is true, yet there is more to be done. 
We are resilient, we are committed, we are resourceful. We know how to turn adversity into opportunity. 

In the numbers, Honourable Speaker, there are indicators that an economic turnaround is possible if we build confidence and make the right choices. 
• Business services, tourism and communication services continued to expand over the past year, contributing positively to job creation. 
• While overall agricultural output has declined under severe drought conditions, there has been strong growth in several export products: including nuts and berries, grapes and both deciduous and citrus fruits. 
• Overall export growth by volume was over 9 per cent last year, and will continue to benefit from the competitiveness of the rand. South African exports to the rest of Africa now exceed R300 billion a year, up from about R230 billion just three years ago. 
• Retail trade data for the last quarter of 2015 indicate growth of over 4 per cent in real terms, signalling that consumer spending remains buoyant despite declining confidence. 
• Investments amounting to over R20 billion have recently been announced in the automotive sector. 

Yet our economy is not growing fast enough to raise employment or improve average incomes, Honourable Speaker. Investment growth must be substantially scaled up. 

Growth and development 
So we are resolved to restore the momentum of growth, to ensure that it is inclusive and sustainable, and to preserve our economy’s investment-grade status. 

As Minister Nene put it in his October Medium Term Budget Policy Statement address: 
“If we do not achieve growth, revenue will not increase. If revenue does not increase, expenditure cannot be expanded.”

This means we must address institutional and regulatory barriers to business investment and growth. It means we must give greater impetus to sectors and industries where we have competitive advantages. And it means being bold where there is need for structural change, innovation and doing things differently. We need agility and urgency in implementation. 

International experience has demonstrated that growth is ignited by strong and stable political and economic institutions, sound infrastructure that reduces the cost of doing business and facilitates trade, competition between firms and openness to trade and an environment where firms invest and undertake research and development. We also know that the more inclusive the economy the greater its scope for growth. 

These are the challenges we hear in South Africa today. 
• We are responding to appeals from the business sector for greater certainty in respect of policies that affect investment decisions. 
• We are engaging with proposals from organised labour for a minimum wage policy, and for progress on opportunities for young people. 
• We are responding to action in communities where services are missing or badly managed. 
• We are crafting solutions to the voices of students regarding fees and housing. 
• Minister Joemat-Pettersson is overseeing our renewable energy, coal and gas IPP programme, and preparatory work for investment in nuclear power. 
• Minister Pandor’s department is leading work on beneficiation initiatives, including titanium, fuel cells, fluorochemicals and composite materials. 
• Minister Motshekga is working with social partners on the National Education Collaboration Trust to identify and implement school improvement initiatives. 

In recent weeks, President Zuma, other Ministers and I have engaged with business leaders to understand their concerns and views. Confidence and shared understanding have been reinforced. These engagements are clearly critical to boosting our economy, and must be extended to include regional forums and other stakeholders. 
We particularly welcome the working groups that have been established and several practical proposals for joint action. These include a collaborative initiative to combat corruption and abuse of tender procedures, a new fund to accelerate small and medium enterprise development and measures to build investor confidence and  contribute to social cohesion. 

By removing constraints, supporting innovation, protecting jobs, diversifying our economy and exploring new opportunities, we can expand growth prospects. 
Our economic outlook is not what it should be, global uncertainty and the drought are very real challenges, but our efforts to build a better future continue. 

We are resilient, we are committed, we are resourceful. 
By working together we can increase growth, broaden participation and inspire confidence in our economy and society. 

Investment and sustainable growth 
Honourable Members, the economist Dani Rodrik has recently noted that in those countries that are still growing rapidly, despite global economic headwinds, public investment is doing much of the work. To finance the investment needed for sustainable growth, we have the institutional capacity to blend international and domestic savings, and to combine public and private sector financing to mitigate risk and reduce the cost of capital. 

The Presidential Infrastructure Coordinating Commission, under Ministers Nkwinti and Patel, has brought greater coherence to our strategic investment plans. They have drawn attention to the need for multi-year appropriations for major capital projects. Reform in this regard is under consideration. 
• Energy investment amounts to R70 billion this year and will be over R180 billion over the next three years, as construction of the Medupi, Kusile and Ingula power plants is completed. 
• Transport and logistics infrastructure accounts for nearly R292 billion over the next three years under Minister Peters’ oversight. Transnet is acquiring 232 diesel locomotives for its general freight business and 100 locomotives for its coal lines. There is R3.7 billion to upgrade the Moloto Road, R30 billion for provincial roads maintenance, R18 billion for bus rapid transit projects in cities and refurbishment of over 1700 Metrorail and Shosholoza Meyl coaches. 
• R62 billion is allocated for the housing subsidy programmes of Minister Sisulu’s department, and R34 billion for bulk infrastructure and residential services in metropolitan municipalities. 
• R28 billion will be spent over the MTEF on improving health facilities and R54 billion on education infrastructure. 
• Under Minister Mokonyane’s leadership, the next phase of the Olifants River water scheme is in progress, completion of the supply to Lukhanji Municipality in the Eastern Cape, completion of the Wolmaransstad wastewater treatment works and construction of the Polihali Dam as part of the Lesotho Highlands project. 

These are some components of the R870 billion public sector infrastructure programme over the next three years. 
But our growth and development depends also on an expanding envelope of enterprise investment in industry, mining and mineral beneficiation, agriculture and agro-processing, housing, commercial development and tourism facilities. There are also initiatives in progress to reinforce financing of these projects. 
• The Industrial Development Corporation continues to play a leading role in financing manufacturing and beneficiation. It plans to invest R100 billion over the next five years, including R23 billion set aside to support black industrialists. 
• We have completed a R7.9 billion capital transfer to the Development Bank of Southern Africa, approved in 2013, which enables it to expand lending and implementation support to municipalities, and to complement private sector funding of strategic infrastructure projects. The Bank aims to increase lending by R48 billion over the next three years. Initiatives to reinforce municipal implementation capacity have been prioritised. 
• The Land Bank has set aside a concessionary loan facility to assist farmers in recovering from the impact of the current drought conditions. Over the next three years R15 billion is allocated for land acquisition, farm improvements and expanding agro-processing opportunities. 
• I am also pleased to confirm that the New Development Bank will open its Africa Regional Centre in Johannesburg next month. Our first instalment of R2 billion was paid in December last year, and the Budget makes provision for our further commitments over the medium term. This initiative gives impetus to our role as a financial centre for Africa, and will facilitate access to global finance by African investors and institutions. 

So the capacity to mobilise finance is in place. Amendments to bank regulations are proposed, furthermore, which will facilitate lending for long term infrastructure investment. 

In energy, transport, telecommunication and urban development, there are many opportunities for joint public and private investment and facilities management. 
Corporate investment and participation by trade union funds in infrastructure development needs appropriate policies and market structure frameworks, clarifying the roles and linkages between public and private sector service providers. Progress in these regulatory arrangements is the key to more rapid investment and more inclusive growth in these sectors. 

Our working partnership with business leaders and social stakeholders, under President Zuma’s initiative, is about implementing these and other aspects of the National Development Plan. 

Fiscal consolidation 
This year’s Budget, Honourable Speaker, is focused on fiscal consolidation. We cannot spend money we do not have. We cannot borrow beyond our ability to repay. 
Until we can ignite growth and generate more revenue, we have to be tough on ourselves. A central objective is to stabilise debt as a percentage of GDP. To achieve this, the new budget framework sets deficit targets for the next three years which are lower than the October Medium Term Budget Policy Statement projections. Spending plans are reduced, a higher revenue target is set and net national debt is projected to stabilise at 46.2 per cent of GDP in 2017/18, and to decline after that.  These budget proposals signal government’s commitment to a prudent, sustainable fiscal policy trajectory, and respond directly to the changed circumstances since the 2015 MTBPS was tabled. 

Honourable Members, we have had to take into account the slowdown in revenue associated with slower economic growth over the past year. In last year’s Budget we projected total tax revenue of R1 081 billion. The revised estimate is R11.6 billion short of this total, but nonetheless about 8.5 per cent more than the 2014/15 outcome. This is a most commendable effort in the circumstances: all South Africans have contributed, and the 14 000 staff of the Revenue Service have done a sterling job. A consolidated revenue target of R1 324 billion is set for 2016/17, or 30.2 per cent of GDP. Expenditure will be R1 463 billion, leaving a budget deficit of R139 billion, or 3.2 per cent of GDP. The deficit will decline to 2.4 per cent in 2018/19. Details of the proposed adjustments are set out in the Budget Review.
I have highlighted key spending priorities already. I need to emphasise that additional spending on higher education, small business development, and amounts set aside for responding to the drought and other contingencies, are accommodated through stringent cost containment measures across all departments. 

These include: 
• Restrictions on filling managerial and administrative vacancies, subject to review of human resource plans and elimination of unnecessary positions; 
• Reduced transfers for operating budgets of public entities; 
• Capital budgeting reforms to align plans with budget allocations while strengthening maintenance procedures; 
• Mandatory use of the new e-tender portal, thereby enforcing procurement transparency and accessible reference prices for a wide range of goods and services; 
• A national travel and accommodation policy and instructions on conference costs; 
• New guidelines to limit the value of vehicle purchases for political office-bearers; 
• Renegotiation of government leasing contracts; 
• New centrally negotiated contracts for banking services, ICT infrastructure and services, health technology, school building and learner support materials. 

Initiatives of the Chief Procurement Officer will be extended to include monitoring of state-owned companies’ procurement plans and supply chain processes, and reviews of contracts above R10 million to ensure value for money. Centrally negotiated contracts will be mandatory with effect from April 2016. 

As Ms Nobuntu Mbelle advised me: “Minister, government should also tighten its belt.”

The OCPO’s mandate is to achieve savings of R25 billion a year by the third year of the current MTEF period, out of a government procurement budget of about R500 billion a year. Our reform proposals draw on a consultation programme last year that reached over 7 000 suppliers and 2 500 supply chain practitioners, and attracted over 27 000 responses to a national survey. It is clear that we can achieve considerable savings to government, while also ensuring that procurement processes are streamlined and service providers are paid on time. I need to acknowledge the valued cooperation of Minister Ramatlhodi in addressing our personnel management challenges. Government procurement reforms also rely on collaboration with my colleagues and their respective departments: Minister Nxesi at Public Works, Minister Davies and Minister Zulu in respect of industrial participation, supplier development and black economic empowerment, and Minister Cwele on telecommunications and the rollout of broadband services, which is both an area of cost-saving in itself and an enabling condition for more efficient procurement systems and electronic communication. In saying this, Members of the House, I want to draw attention to the broader opportunities that well-managed public administration reforms offer. Investments by telecommunication partners in fast internet connectivity for schools, clinics and government buildings brings down the costs, over time, for internet connectivity for neighbouring homes and businesses. When government office accommodation projects are well planned, they create opportunities for commercial and residential development in the surrounding precinct. And government as an employer contributes to training and organisational development across the wider economy. Inclusive growth is in part about these linkages between public and private sector development. 

Tax proposals 
Inclusivity is also an important principle in our tax system, Honourable Speaker. 
South Africa has built one of the most effective tax authorities in the developing world. The Revenue Service has made huge strides over the past decade in enforcing the law while providing assistance to small businesses and individuals. Public compliance with tax obligations is high. I am deeply mindful that we have a corresponding obligation, as government, to improve the impact of every rand spent, and to eliminate waste and corruption. Inclusivity is also about the details of tax design, how it supports or hinders small and growing businesses, how the burden of tax is shared across individuals and households in different circumstances and in different income brackets, and how taxes contribute to environmental and health objectives. This year, in view of the need to raise additional revenue and reduce the budget deficit, we have paid special attention to the fairness and inclusivity of the tax system. We have also been mindful of the need to moderate the impact of tax increases on households and firms in the present economic context. 

Our tax proposals include the following: 
• Personal income tax relief of R5.5 billion, which partially compensates for inflation, focused mainly on lower- and middle-income earners; 
• An increase in the monthly medical tax credit allowances; 
• An increase of 30 cents a litre in the general fuel levy; 
• Introduction of a tyre levy to finance recycling programmes, increases in the incandescent globe tax, the plastic bag levy and the motor vehicle emissions tax; 
• Introduction of a tax on sugar-sweetened beverages; and 
• Increases of between 6 and 8.5 per cent in the duties on alcoholic beverages and tobacco products. 

The Income Tax Act already contains measures to encourage provision of bursaries by employers to employees or their relatives. It is proposed that the income eligibility limits and qualifying bursary values should be increased. Inclusion of industry-based training organisations in the list of activities qualifying for tax-exemption is also under consideration. Our current taxes on wealth are under review by the Davis Committee. Higher capital gains inclusion rates are proposed, together with an increase in the annual amount above which capital gains become taxable. The transfer duty rate on properties above R10 million will increase from 11 per cent to 13 per cent, and measures are proposed to strengthen the estate duty and donations tax. We will continue to act aggressively against the evasion of tax through transfer pricing abuses, misuse of tax treaties and illegal money flows. Drawing on the work of the OECD, the G20 joint project on base erosion and profit shifting and independent bodies such as the Tax Justice Network, further measures will be taken to address such revenue losses, including inappropriate use of hybrid debt instrument. In taking the comprehensive social security agenda forward, we have to recognise that existing social security arrangements are fragmented, which raises costs and leaves several social needs unaddressed. 
Minister Dlamini and I have a shared responsibility for the social security reform programme, which has to draw on both international good practice and interdepartmental work of recent years. 
Tighter regulation of the retirement funding industry is part of this reform effort. The intention is to protect members’ interest and ensure that funds are not dissipated by unnecessary administration and financial costs, and that an income in retirement is assured. Our engagements with stakeholders will continue this year. 
To support a greater national savings effort, we introduced Tax Free Savings Accounts last year. The response has been most gratifying – about 150 000 accounts have been opened, with savings totalling R1 billion. For those who have not yet taken this opportunity, you have until the end of this month to take advantage of this year’s R30 000 limit for special tax treatment in these accounts. 
Let me assure public servants, again, that reform of the retirement system will not affect their accrued pension rights. Indeed, I am pleased to report that the investment portfolio of the Government Employees’ Pension Fund grew by 12.2 per cent to R1.6 trillion in the year to March 2015. GEPF pensioners will receive a 5.3 per cent increase in April this year. 
The Revenue Laws Amendment Bill 2016 introduced today gives effect to the decision by Cabinet last week to postpone the annuitisation requirement for provident fund members for two years to allow for further consultation with key stakeholders. 

The tax benefits will continue to be implemented from 1 March 2016 for all retirement fund contributions, including for provident funds. State-owned Entities State-owned companies, Honourable Speaker, have important roles to play in boosting growth and development. But there are issues to address in their governance, mandates, financing and operations. 
The recently-released report of the Presidential Review Commission on State-Owned Enterprises is a very welcome guide to the path ahead. It rightly emphasises that effective leadership is central to progress. It notes that our infrastructure financing requirements are huge, and require effective co-funding arrangements between SOCs and other investors. 

The asset base of state owned entities is over R1 trillion, equivalent to about 27 per cent of GDP. They maintain networks and provide services – power, roads, transport, water, communications – on which the rest of the economy depends. 
But the PRC report indicates that the mandates of some of our entities overlap, some operate in markets that should be more transparently competitive and some are no longer relevant to our development agenda. Some are in perpetual financial difficulties. So we must take decisive steps to ensure that they are effectively governed and that they contribute appropriately to the attainment of the National Development Plan. 

Firstly, as President Zuma has indicated, entities that are no longer necessary should be phased out. The resources raised or saved will be redirected to the balance sheets of SOCs that should grow. 

Secondly, where entities have overlapping mandates, rationalisation options will be pursued. The merger of our housing DFIs is already in progress. There are entities with regulatory responsibilities where capacity should be combined. We have national and provincial entities with diverse property holdings, interests in farming or trading or manufacturing enterprises – often inherited from the pre-1994 dispensation, typically buried in subsidiary companies that are not publicly accountable. These are unnecessary state investments, and often a drain on government resources. They are also assets with potential for growth in independent hands. 

It seems clear, furthermore, that we do not need to be invested in four airline businesses. Minister Brown and I have agreed to explore the possible merger of SAA and SA Express, under a strengthened board, with a view to engaging with a potential minority equity partner, and to create a bigger and more operationally efficient airline. 

Thirdly, the balance sheets of several entities with extensive infrastructure investment responsibilities are now stretched to their limits. Government has provided support in the form of guarantees, which now total R467 billion or 11.5 per cent of GDP. This is a source of pressure on the sovereign rating. Yet we need to accelerate infrastructure investment in the period ahead. So we must broaden the range and scope of our co-funding partnerships with private sector investors. This requires an appropriate framework to govern concession agreements and associated debt and equity instruments, and appropriate regulation of the market structure. 

In taking this forward, we are able to draw on our experience in road funding concessions, in building the renewable energy market, and in promoting broadband telecommunications. Across these and other sectors we have much to learn from each other, both nationally and through provincial and local initiatives. 

Minister Brown is in discussion with Transnet’s leadership on measures to accelerate private sector participation in the ports and freight rail sector. The intention is to improve efficiencies, reduce the cost of doing business and increase investment in new port facilities and inland terminals. This will complement investments that 

Transnet has already initiated through its Market Demand Strategy. 
Our aim is to strengthen our state entities so that they can play a propulsive and dynamic role in our development. Further financial support to state-owned companies will depend on clarity of this mandate and firm resolution of governance challenges. 

Our regulatory agencies have a special responsibility in this regard: in setting prices for electricity, transport and water utilities, they have to ensure that investment can continue to be financed and that costs are properly managed. 
The strength of our major state-owned companies does not lie in protecting their dominant monopoly positions, but in their capacity to partner with business investors, industry, mining companies, property and logistics developers, both domestically and across global supply chains. 

The 2016 Budget: Government’s Action Plan 
Before concluding, Honourable Speaker, allow me to return to the main elements of the 2016 Budget, our spending plans and their contribution to growth and broadening development. 

Our approach is to build on our strengths, directly address weaknesses and be bold where new initiatives are needed. 
• The budget framework brings forward our fiscal consolidation, reducing the budget deficit to 2.4 per cent by 2018/19. 
• Taxes are raised moderately, across a broad base, while limiting the impact on lower-income families. 
• Personnel spending has been curtailed and cost containment measures are reinforced. 
• Expenditure growth is focused on post-school education and training, economic infrastructure, social protection and health services. 

Economic infrastructure 
Budget allocations for water infrastructure this year take into account the special needs of drought-affected areas and the need to address water losses in critical supply networks. 

The Regional Bulk Infrastructure Grant programme has been allocated R15 billion over the medium-term for the construction of the bulk water and sanitation infrastructure. 
Public transport improvements in our cities are again prioritised, alongside better road maintenance and rehabilitation plans. 

Over the MTEF period R1.6 billion is allocated to the SA Connect broadband programme to support access in remote areas and of schools, health care facilities and government institutions. 

Business support and empowerment 
Steps to reduce the regulatory burden for business investors are in progress. These include the establishment of Invest South Africa as a partnership with the private sector and concerted efforts by our largest cities to reduce the administrative costs of starting businesses. 
A review of business incentives has been initiated, to strengthen their impact on growth, productivity, competitiveness, trade and competitiveness. 

R475 million has been reprioritised to the Department of Small Business Development for assistance to small and medium enterprises and cooperatives. 

Agriculture 
Programmes aimed at revitalizing agriculture include spending on small-scale farming and developing agri-parks in rural economies. 
An amount of R2.8 billion is allocated over the medium term to Fetsa Tlala, a food security initiative. The Department of Agriculture, Forestry and Fisheries aims to bring 120 000 hectares of land into productive use in the period ahead, benefitting 145 000 subsistence and smallholder producers each year. 

Already this year, the department of Water and Sanitation has reprioritised R502 million to deliver water, protect springs and refurbish boreholes in response to drought conditions. Funds have also been provided for feed and support for livestock farmers, and disaster relief measures. Additional drought response allocations will be made, as required, in the Adjustments Appropriation later this year. 

Higher education 
An additional R16.3 billion has been allocated for higher education over the next three years. R5.7 billion of this addresses the shortfall caused by keeping fees for 2016 academic year at 2015 levels, and the carry-through costs over the MTEF period. R2.5 billion goes to the National Student Financial Aid Scheme to clear outstanding student debt, along with a further R8 billion over the medium term to enable current students to complete their studies. 

Basic education and early childhood education 
Our expenditure on basic education will increase from R204 billion this year, to R254 billion in 2018/19. By 2018, 510 inappropriate and unsafe schools will be rebuilt, 1 120 schools will be supplied with water and 916 schools with electricity. 

An additional allocation of R813 million for early childhood development is proposed to increase the number of children in ECD centres by 104 000 over the MTEF period. 

Health and welfare services 
R4.5 billion is budgeted over the medium term for revitalizing health facilities in the eleven NHI pilot districts, and related health system reforms. An additional R740 million has been allocated to strengthen TB programmes to encourage early detection and treatment, and R1 billion for expansion of the antiretroviral treatment programme. 
Additional funds are allocated for new substance-abuse treatment centres in the Northern Cape, Free State, Western Cape and North West provinces. 

Social grant increases 
Our overall expenditure on social assistance will increase from R129 billion this year to R165 billion in 2018/19. 
• The old age, disability and care dependency grants will rise by R80 to 
R1 500 in April 2016, and by a further R10 to R1 510 in October. 
• The child support grant will rise by R20 to R350 in April and the foster care grant by R30 to R890. 

Defence, public order and safety 
Spending on defence, public order and safety services will rise from R172 billion this year to R204 billion in 2018/19. 
Taking into account recommendations of the Farlam Commission of Inquiry, an amount of R598 million is allocated to enhancing capacity of Public Order Policing units over the MTEF period ahead. Allocations are also made to strengthen institutions supporting Constitutional democracy and to combat corruption, and to enhance the independence of the judiciary. Funds are allocated for the Information Regulator established in terms of the Protection of Personal Information Act of 2013. 

Provincial expenditure management 
Honourable Speaker, our Constitution requires an equitable division of nationally collected revenue between national, provincial and local government. 
Taking into account the current fiscal framework, the Provincial MECs for Finance have agreed to a Joint Action Plan to address expenditure management and service delivery improvement challenges. 
Key measures include: 
• Containment of administrative personnel expenditure while protecting education and health service staff; 
• Improved revenue collection; 
• Rationalisation and closure of redundant and underperforming programmes and entities; 
• Intensification of cost-containment measures, in keeping with national guidelines. 

Municipal financial management 
We are mindful that municipalities face growing pressures from both the rising cost of bulk services and rapidly growing numbers of households. 

Municipal capital spending exceeded R53 billion in 2014/15. 
Yet we continue to see underspending of infrastructure grants in many local authorities. A review of these grants has led to several proposals for improvement: 
• Grant frameworks will in future allow for refurbishment of assets, recognising the long-term nature of municipal infrastructure. 
• Water sector grants will be restructured to reduce duplication and the associated administrative burden. 
• Refinements are proposed to take into account the diverse challenges of urban and rural areas, and different-sized towns and cities. 
• Public transport transfers to cities will now be allocated through a formula, bringing greater certainty and sustainability to these funding arrangements.

This year brings our fourth fully democratic local government elections. In recognition of this, the National Treasury will launch a data portal to provide all stakeholders with comparable, verified information on municipal financial and non-financial performance. I hope this will further stimulate citizen involvement in local governance. 
The elections will also see a significant change in municipal demarcations. The number of municipalities will be reduced from 278 to 257, with the objective of improving their viability and sustainability. Local government allocations will be revised to take account of these boundary changes and over R400 million is allocated over the next two years to assist with the transition. 

The “Back to Basics” programme launched in 2014, aimed at improving service delivery performance of municipalities, is entering its second phase of implementation. It involves active monitoring of performance in governance and service delivery, support to struggling municipality and stronger accountability measures. 

Investment in cities and urban networks 
Cities are already taking steps to encourage higher land use density and inner city redevelopment, under the authority of the new Spatial Planning and Land Use Management Act. This will unlock significant further private sector development potential across our cities, focussed on strategic corridors. 

Bus rapid transit systems are operational and expanding in Johannesburg, Tshwane, Cape Town and George, and will be extended to Ekurhuleni and eThekwini this year. About R6 billion is allocated to this programme in 2016/17. Improvements to rail rolling stock and infrastructure will begin to improve the daily travel experience for commuters. 

Associated with these transport investments, over 90 integrated land development projects valued at more than R130 billion are in progress to reshape our cities in partnership with the private sector. 
• In eThekwini, the Cornubia node comprises 25 000 housing units. An inner city regeneration programme is also underway, including projects at Bridge City, Centrum, the Point and the interconnecting corridor. 
• In the Tembisa Corridor in Ekurhuleni, R6.5 billion in public investment will leverage R8 billion in private sector investment to deliver housing, commercial and office facilities. 
• In Cape Town, the N2 Gateway housing programme is continuing, together with redevelopment of the Voortrekker Road Corridor, Conradie Hospital, the Athlone Power Station and other sites. 
• In Tshwane, investments are focused on the Mabopane Station Hub which is the gateway to the north for more than 150 000 passengers a day and has an informal market accommodating approximately 2500 traders. 
• In Manguang, the R2.6 billion mixed use Airport Development Node is in construction. An inner city residential development is planned and the Vista Park and Brandkop projects will yield over 8 500 housing units at a total development cost of over R1.9 billion. 
• In Johannesburg, the “Corridors of Freedom” connecting Soweto, Alexandra, Sandton and the Johannesburg CDB bring together public transport improvements, social amenities and partnerships with property developers to increase settlement densities and improve social mobility. 

Growth, Inclusion and Social Cohesion 
Honourable Speaker, our economic imperative is to ignite inclusive growth. 
This is central for jobs, for lowering debt, for delivering services and building infrastructure for a 21st century economy. Let us chart a new course for the economy and well-being of all South Africans, particularly for those hardest hit by unemployment – the low-skilled and the youth. This is not only crucial to address social imbalances and inequality, it is also fundamental to encouraging investment. 

The recent tremors felt by emerging markets are a warning that we need to take corrective steps urgently or we will be worse off. At the same time, we need to move forward to mobilise the resources and capacity of all our people, large and small enterprises, civil society organisations and public-private partnerships. 

The joint actions we need will not always be easy. All too often, bureaucrats and businesspeople speak past each other; the needs of the young are not the same as those of the elderly; the rhythms of the township differ from those of the suburb. 

Race, class and language differences interfere with progress, even when we have shared aspirations. We need to bridge these divides. 
Yet we are resilient, we are committed, we are resourceful. 

We can turn today’s adversity into opportunities. 
We can address the weaknesses that create policy uncertainty, we can build on the strengths that are our resource base, our institutions and our workforce. We can do things differently where we need to innovate. 
We have avoided reckless policies which might have dragged us into recession or reversed the capital flows we need. We have a sound macroeconomic and fiscal framework, and the will to work together for faster and inclusive growth

#SONA2016

State of the Nation Address by Jacob G Zuma, President of the Republic of South Africa on the occasion of the Joint Sitting of Parliament on 11 February 2016

Good evening, sanibonani, molweni, dumelang, goeie naand, lotshani, riperile, ndimadekwana,

Today marks the 26th anniversary of the release of President Nelson Mandela from prison, which was one of the most remarkable episodes in the history of our country.

It is also the 50th anniversary of the declaration by the National Party regime that District Six would be a whites only area, leading to the forced removals of more than 60 000 residents.

The year 2016 also marks the 20th anniversary of the signing into law by Madiba, of the Constitution of the Republic. The signing took place in Sharpeville on 10 December 1996.

We are proud of our democracy and what we have achieved in a short space of time. Our democracy is functional, solid and stable. 

Compatriots,

The Constitution, which has its foundation in the Freedom Charter, proclaims that South Africa belongs to all who live in it. A lot has been done to promote inclusion and a non-racial society.

However, the journey to a non-racial society has not yet been completed. 

The nation was shaken last month when racism reared its ugly head on social and electronic media, causing untold pain and anger. 

There is a need to confront the demon of racism. Human Rights Day, March 21, will be commemorated as the national day against racism this year. It will be used to lay the foundation for a long-term programme of building a non-racial society.

Compatriots, I would like to remind you of a few other important anniversaries.

The year 2016 marks 60 years since the women’s march to the Union Buildings to demand an end to the pass laws. We are happy to have in our midst Ms Sophie de Bruyn, who was among the heroic leaders of that historic march. 

We also acknowledge the former President of the Black Sash, Ms Mary Burton. We acknowledge the organisation’s track record in fighting for human rights, justice and equality.

This year also marks 40 years since the landmark June 16 student uprising in Soweto. 

We welcome the photographer who shot the famous photograph of Hector Peterson carried by Mbuyisa Makhubu with his sister Antoinette, Mr Sam Nzima.

We also salute the class of 1976 for their bravery in standing up against the brutal apartheid regime. We acknowledge one of the activists of that era, the Deputy Secretary of Parliament, Ms Baby Tyawa, who is in our midst. 

This year we also mark 30 years since the ambush and brutal killing of the Gugulethu Seven by the apartheid police in March 1986.

The University of Fort Hare celebrates its centenary, which is a critical milestone in the liberation history of not only our country but the continent. The national celebrations will take place on the 20th of May. 

Let me recognise uMntwana wakwaPhindangene, the leader of the IFP who is a former student of the university. 

The year 2016 also marks the centenary of the battle of Deville Woods in France, which took place during the First World War. 

Scores of Black soldiers fought in the war but were treated badly due to the colour of their skin.

A memorial that will restore their dignity and humanity is scheduled to be unveiled in July this year in France.

Madam Speaker and Madam Chairperson,

A resilient and fast growing economy is at the heart of our radical economic transformation agenda and our National Development Plan.

When the economy grows fast it delivers jobs. Workers earn wages and businesses make profits. 

The tax base expands and allows government to increase the social wage and provide education, health, social grants, housing and free basic services - faster and in a more sustainable manner. 

Our economy has been facing difficulties since the financial crisis in 2008. We embarked on an aggressive infrastructure development programme to stimulate growth. 

Our reality right now is that global growth still remains muted. Financial markets have become volatile. Currencies of emerging markets have become weak and they fluctuate widely. 

The prices of gold, platinum, coal and other minerals that we sell to the rest of the world have dropped significantly and continue to be low. 

The economies of two of our partners in BRICS: Brazil and Russia - are expected to contract this year. The third, China, will not register the kind of robust growth that it is known for. 

Because our economy is relatively small and open, it is affected by all of these developments. 

Our economy is also affected by domestic factors such as the electricity constraints and industrial relations which are sometimes unstable. 

The IMF and the World Bank predict that the South African economy will grow by less than one per cent this year. The lower economic growth outcomes and outlook suggest that revenue collection will be lower than previously expected. 

Importantly, our country seems to be at risk of losing its investment grade status from ratings agencies. If that happens, it will become more expensive for us to borrow money from abroad to finance our programmes of building a better life for all especially the poor. 

The situation requires an effective turnaround plan from us. 

It is about doing things differently and also acting on what may not have been acted upon quickly before. 

I will share a few points that we believe would make a difference.

First, our country remains an attractive investment destination. It may face challenges, but its positive attributes far outweigh those challenges.

We must continue to market the country as a preferred destination for investments. This requires a common narrative from all of us as business, labour and government. 

If there are any disagreements or problems between us, we should solve them before they escalate. This is necessary for the common good of our country.

We have had fruitful meetings with business, including the high level meeting with CEOs on Tuesday this week.

We have heard the suggestions from business community on how we can turn the situation around and put the economy back on a growth path. 

We have heard the points about the need to create the correct investment support infrastructure.

Government is developing a One Stop Shop/Invest SA initiative to signal that South Africa is truly open for business. We will fast-track the implementation of this service, in partnership with the private sector.

Such an initiative requires that government removes the red tape and reviews any legislative and regulatory blockages. 

We have established an Inter-Ministerial Committee on Investment Promotion which will ensure the success of investment promotion initiatives.

Compatriots, we have heard the concerns raised about the performance of state owned enterprises and companies.

Many of our SOCs are performing well.

Sanral has built some of the best roads in Gauteng and in many parts of the country. These make us the envy of many parts around the globe.

The Trans Caledon Tunnel Authority has constructed dams of varied capacities, thus making it possible for our people to have access to safe drinking water.

Transnet has built rail infrastructure which has enabled our country’s mines to move massive bulk of commodities through our ports to markets around the globe.

Eskom, in spite of the challenges, still manages to keep the economy going, against all odds.

Our development finance institutions such as the Industrial Development Corporation (IDC) or Development Bank of Southern Africa and others have provided finance for infrastructure, various industries and agricultural businesses without fail, even in the aftermath of the global financial crisis.

For the state owned companies to contribute to the successful implementation of the National Development Plan, they must be financially sound. 

They must be properly governed and managed. We will ensure the implementation of the recommendations of the Presidential Review Commission on State Owned Enterprises, which outlines how the institutions should be managed.

The Deputy President chairs the Inter-Ministerial Committee which is tasked with ensuring the implementation of these recommendations.

We have to streamline and sharpen the mandates of the companies and ensure that where there are overlaps in the mandates, there is immediate rationalization. 

Those companies that are no longer relevant to our development agenda will be phased out. 

Government departments to which they report, will set the agenda and identify key projects for the State owned companies to implement, over a defined period. Proper monitoring and evaluation will be done.

These interventions are essential for growth and also for the reduction of national debt levels. 

Compatriots, We must take advantage of the exchange rate as well as the recent changes of visa regulations, to boost inbound tourism.

SA Tourism will invest one hundred million rand a year to promote domestic tourism, encouraging South Africans to tour their country.

We have heard concerns from companies about delays in obtaining visas for skilled personnel from abroad. While we prefer that employers prioritise local workers, our migration policy must also make it possible to import scarce skills.

The draft migration policy will be presented to Cabinet during the course of 2016. 

We have heard the appeals for policy certainty in the mining sector, especially with regards to the Mineral and Petroleum Resources Development Bill.

The Bill was referred back to Parliament last year. We await Parliament to conclude the processing, which we trust will be done expeditiously. 

Compatriots

We need to empower SMMEs to accelerate their growth. Access to high-quality, innovative business support can dramatically improve the success rate of new ventures. 

The department of small business development was established to provide such targeted support to small business.

Economic transformation and black empowerment remain a key part of all economic programmes of government.  One of our new interventions is the Black Industrialists Scheme which has been launched to promote the participation of black entrepreneurs in manufacturing.  

We urge big business to partner the new manufacturers including businesses owned by women and the youth, as part of broadening the ownership and control of the economy.

Compatriots 

We are proud of our Top 10 ranking in the World Economic Forum competitiveness report with respect to financial services. 

Maintaining and indeed improving our ranking is important to our competitiveness as a country. 

It is also fundamental to our ambition to become a financial centre for Africa. 

The banks, through the Banking Association of South Africa, are to launch a project aimed at establishing a centre of excellence for financial services and leadership training. 

This will ensure that as a country we can attract, nurture, develop and retain the best talent in financial services in our country and across our continent. 

They will work with the Minister of Finance and the National Treasury to get this done. We believe that this will over time ensure that we can expand the pool of financial skills and broaden the job opportunities for many young people. 

This strategic project from the banking sector is a positive and encouraging outcome of our engagement with business this week. 

Together we move South Africa Forward!

Compatriots,

We have made an undertaking to spend public funds wisely and to cut wasteful expenditure, but without compromising on the core business of government and the provision of services to our people. 

In 2013, the Minister of Finance announced a number of cost containment measures. 

Excessive and wasteful expenditure has been reduced, but there is still more to be done to cut wastage.

I would like to announce some measures this evening. 

Overseas trips will be curtailed and those requesting permission will have to motivate strongly and prove the benefit to the country. 

The sizes of delegations will be greatly reduced and standardised. 

Further restrictions on conferences, catering, entertainment and social functions will be instituted.

The budget vote dinners for stakeholders hosted by government departments in Parliament, after the delivery of budget speeches will no longer take place. 

The Minister of Finance will announce more measures and further details in the budget vote speech on the 24th of February.

The executive management and boards of public agencies and state owned companies must undertake similar measures. 

I also invite Premiers of all nine provinces as well as mayors to join us as we begin eliminating wasteful expenditure within government. 

I trust that Parliament and the Judiciary will also be persuaded to consider the implementation of similar measures.

Compatriots

A big expenditure item, that we would like to persuade Parliament to consider, is the maintenance of two capitals, Pretoria as the administrative one and Cape Town as the legislative capital. 

We believe that the matter requires the attention of Parliament soon.

Compatriots

We all have a lot to do to turn the economy around and to cut wastage. We will go through a difficult period for a while, but when the economy recovers, we will be proud of ourselves for having done the right thing. 

Compatriots,

I would now like to report back on the undertakings made last year. During the State of the Nation Address in February 2015. I announced the Nine Point Plan to respond to sluggish growth.

The nine point plan consists of: 

a. Revitalisation of the agriculture and agro-processing value-chain;

b. Advancing beneficiation adding value to our mineral wealth; 

c. More effective implementation of a higher impact Industrial Policy Action Plan;

d. Unlocking the potential of SMME, co-operativess, township and rural enterprises; 

e. Resolving the energy challenge;

f. Stabilising the labour market;

g. Scaling-up private-sector investment;

h. Growing the Ocean Economy;

i. Cross-cutting Areas to Reform, Boost and Diversify the Economy;

i. Science, technology and innovation

ii. Water and sanitation

iii. Transport infrastructure

iv. Broadband rollout 

v. State owned companies. 

We have made significant progress in the implementation of the plan. 

Progress has been made to stabilise the electricity supply. There has been no load shedding since August last year which has brought relief for both households and industry alike. 

Government has invested eighty three billion rand (R83 billion) in Eskom which has enabled the utility to continue investing in Medupi and Kusile, while continuing with a diligent maintenance programme.

Additional units from Ingula power station will be connected in 2017, even though some of them will begin synchronisation this year.

The multiple bid windows of the Renewable Independent Power Producer Programme have attracted an investment of one hundred and ninety four billion rand. 

This initiative is a concrete example of how government can partner with the private sector to provide practical solutions to an immediate challenge that faces our country.

In 2016, government will select the preferred bidders for the coal independent power producer. 

Request for Proposals will also be issued for the first windows of gas to power bids.

The nuclear energy expansion programme remains part of the future energy mix. 

Our plan is to introduce nine thousand six hundred megawatts of nuclear energy in the next decade, in addition to running Koeberg Nuclear Power Plant. 

We will test the market to ascertain the true cost of building modern nuclear plants. 

Let me emphasise that we will only procure nuclear on a scale and pace that our country can afford.

Compatriots,

Our government through the Department of Trade and Industry introduced a number of incentives in the past few years to boost investments in the manufacturing sectors especially textiles, leather and the automotive sectors.

Progress has been made in these sectors.

The incentives for the automotive sector have attracted investments of over twenty five billion rand over the last five years. We welcome key investments from Mercedes, General Motors, Ford, Beijing Auto Works, the Metair group, BMW, Goodyear and VW. 

The clothing and textile sector has also been successfully stabilised after a difficult few years. 

Multinational companies such as Nestle, Unilever Samsung and Hisense have also affirmed South Africa as a regional manufacturing hub. 

They have retained and expanded their investments in new plants. 

Indeed the progress made in manufacturing has certainly demonstrated that the incentive programmes are effective and attractive to investors.

Compatriots,

I announced programmes for the revitalisation of agriculture last year. We introduced the Agri-Parks programme, aimed at increasing the participation of small holder farmers in agricultural activities.  

Construction has begun in at least five agriparks, which are: Westrand in Gauteng, Springbokpan in North West, Witzenberg in Western Cape, Ncora in the Eastern Cape and Enkangala in Mpumalanga. 

The agricultural programmes must empower women farmers as well. Allow me to introduce the winner of the Female Entrepreneur of the Year 2015, Ms Julia Shungube, from Nkomazi municipality in Mpumalanga. 

Honourable Speaker and Chairperson,

Land reform remains an important factor as we pursue transformation.

I spoke about the fifty/fifty policy framework last year, which proposes relative rights for people who live and work on farms. 

Twenty seven proposals have been received from commercial farmers and four are being implemented in the Eastern Cape and the Free State.

I also announced the Regulation of Land Holdings Bill which would place a ceiling on land ownership at a maximum of 12 000 hectares and would prohibit foreign nationals from owning land. They would be eligible for long term leases. The draft Bill will be presented to Cabinet in the first semester of the year.

We also announced the re-opening of land claims for people who had missed the 1998 deadline. The number of new land claims that have been lodged stood at close to one hundred and twenty thousand as of December last year.

Compatriots,

As we are aware, five provinces have been seriously affected by drought, namely North-West, KwaZulu-Natal, Free State, Limpopo and Mpumalanga. 

Government provides relief to affected communities. Isomiso sixakile impela ezifundazweni eziningi. Imfuyo iyafa kanti nezolimo zisele emuva. Isikhathi esinzima lesi. 

Uhulumeni uzoqhubeka nokuxhasa abalimi kanye nokusiza imiphakathi ngezimoto ezithwala zamanzi.

Let me take this opportunity to commend the civil society initiative, Operation Hydrate  and others for the provision of water relief to many communities in distress.

The building of water infrastructure remains critical so that we can expand access to our people and industry.

The first phase of the Mokolo and Crocodile Water Augmentation project in Lephalale area in Limpopo is fully operational. It will provide 30 million cubic meters of water per annum.

The raising of the Clan William Dam wall in the Western Cape entails raising the existing dam level by 13 metres to provide additional water supply. 

To curb water wastage, the Department of Water and Sanitation has begun its programme of training fifteen thousand young people as artisans. 

Madam Speaker, Madam Chairperson,

On improving labour relations, we welcome the agreement reached by social partners at NEDLAC on the principle of a national minimum wage. 

Deliberations continue on the level at which the minimum wage must be placed.

It is important to emphasise that the national minimum wage should be implemented in a manner that does not undermine employment creation, the thriving of small businesses or sustained economic growth.

We are also encouraged by reports from NEDLAC that a framework to stabilize the labour market by reducing the length of strikes and eliminating violence during strike action is being finalized.  

We have heard the concerns of labour about the Tax Amendment Act that I signed into law in December, following its passing by Parliament.

Government is in discussion with COSATU about the matter and a solution is being sought.

Discussions are also on-going within government, led  by the Department of Social Development and National Treasury, with regards to finalising the comprehensive social security policy.

Compatriots,

Only a few years ago, our mining sector was in turmoil especially on the platinum belt. 

The situation has improved and we commend business and labour for the progress made. 

Another positive development in the mining sector was the Leaders’ Declaration to Save Jobs which was signed by mining industry stakeholders in August 2015. 

We urge the parties to implement the agreement and to continue seeking ways of saving jobs. 

We appeal to business again that retrenchments should not be the first resort when they face difficulties.

Compatriots,

In 2014 we launched the popular operation Phakisa Big Fast results methodology and implemented it in the ocean economy, health, education and mining sectors.

Seven billion rand has been committed in new port facilities, following the adoption of a Public- Private-Partnership model for port infrastructure development by Transnet National Ports Authority.

Compatriots, we were concerned that South Africa did not own vessels while we are surrounded by about three thousand kilometres of a coastline. 

Through the oceans economy segment of Operation Phakisa, we are trying to solve this challenge.

I am pleased that two bulk carrier vessels have been registered in Port Elizabeth, and a third tanker in Cape Town under the South African flag. 

Another positive Operation Phakisa development has been the launch of a fuel storage facility here in Cape Town, bringing an investment of six hundred and sixty million rand.

Aquaculture appears to be an important growth area within the oceans economy segment of Operation Phakisa. 

Close to three hundred and fifty thousand rand private sector investment has thus far been committed in the Aquaculture sector. Nine aquaculture farms are already in production.  These farms are located within the Eastern Cape, KwaZulu-Natal, Western Cape and Northern Cape.  

We continue to promote innovation within the Nine Point Plan programme. 

The Department of Science and Technology will finalise the Sovereign Innovation fund, a Public private funding partnership aimed at commercialising innovations that are from ideas from the public and the private sectors. 

Government will fast track the implementation of the first phase of broadband roll-out to connect more than five thousand government facilities in eight district municipalities over a three year period.

Funding to the tune of 740 million rand over a three year period has been allocated in this regard.

Compatriots

A lot of work was done in the social sector as well in the past year.

Government has responded to the financial shortfall arising from the zero per cent university fee increase, as agreed in meeting with students and vice-chancellors last year.

The Minister of Finance will provide the details of education shortfall funding in the Budget speech. 

I have appointed a Judicial Commission of Inquiry into higher education. We urge all stakeholders to cooperate with the Commission and help ensure its success.

On the health front, the life expectancy of South Africans for both males and females has significantly improved and is currently 62 years across genders, which is an increase of eight and a half years since 2005.  

The HIV policy turnaround in 2009 led to a massive rollout of HIV testing and treatment for 3.2 million people living with the virus. 

This has contributed immensely to healthier and longer lives for those infected. 

We acknowledge the contribution of partners in the South African National Aids Council which is chaired by the Deputy President.

Our next step is to revive prevention campaigns especially amongst the youth. The Minister of Health will soon announce a major campaign in this regard.

I am also happy to announce that the state-owned pharmaceutical company, Ketlaphela, has been established. The company will participate in the supply of anti-retroviral drug to the Department of Health from the 2016/17 financial year.

Meanwhile, the White Paper on National Health Insurance was released in December aimed at improving health care for everyone in South Africa. 

Compatriots,

Local government elections will be held within three months after the 18th of May, the date of the last elections. 

We urge all citizens who are over the age of 18 to register to vote during the first registration weekend, 5 and 6 March 2016. 

We urge the youth in particular who are turning 18 years of age this year, to register in their numbers for this first ever opportunity to cast their votes.

Our Back to Basics local government revitalisation plan was launched in September 2014 and 2015 has been the year of intensive implementation. 

In this second phase of implementation, national government will engage in more active monitoring and accountability measures. 

This includes unannounced municipal visits, spot checks of supply chain management processes, the implementation of recommendations of forensic reports, site visits of Municipal Infrastructure Grant funded projects, and increased interventions to assist struggling municipalities.

A 10 point plan of Back to Basics priority actions has been developed to guide this next phase.

The plan includes the promotion of community engagement, which is absolutely critical to enable communities to provide feedback on their experience of local government.

I already undertook a walkabout at Marabastad taxi and bus rank in Pretoria on Monday to speak to informal traders and commuters.

The majority of complaints and issues raised related to municipal services.

They would like the Tshwane municipality to clean the area and also to fix some broken sewerage pipes. Traders said they needed and were prepared to pay.

They alerted me that many people in Elandspoort receive RDP houses but instead of occupying them, they either sell them or rent them out other people. 

Mrs Baloyi who runs a stall complained about nyaope drug addicts who steal goods from traders.

Other commuters said I must visit Kwaggafontein in the former KwaNdebele and see the lack of service delivery. I will visit the area soon.

I was also able to speak to foreign nationals who said they queue daily to apply for documentation from the Department of Home Affairs. We will continue to visit communities to hear their concerns and suggestions. Issues raised during the visit will be followed up by the respective departments.

Compatriots

The South African Police Service is undergoing a turnaround and has adopted the Back to Basics approach to management to rebuild the organisation and to improve performance at all under-performing police stations.

We note sadly, as well that fifty seven police officers have been murdered to date during the 2015/16 financial year. We condemn this criminality strongly.

We urge the police to defend themselves when attacked, within the confines of the law.

Compatriots 

The African continent remains central to our foreign policy engagements. 

South Africa continued to support peace and security and regional economic integration through participation in the African Union and the Southern African Development Community initiatives.

We continued to assist sister countries in resolving their issues for example in Lesotho and South Sudan. 

The South African National Defence Force represented the country bravely and remarkably well in peacekeeping missions on the continent.  We are truly proud of our soldiers. They will be showcasing their capability in Port Elizabeth from the 13th to the 21st of February, the celebration of Armed Forces Day.

The Agreement by BRICS nations on the New Development Bank or BRICS Bank came into force and the bank is envisaged to approve its inaugural projects in April this year.

We participated in the India-Africa Summit as well as the Forum on Cooperation between Africa and China as we strengthened these important partnerships.

China announced investments of fifty billion US dollars of which South Africa will receive ten billion US dollars for infrastructure, industrialisation and skills development. 

On North-South cooperation, we continued our engagements with the European Union as a bloc which is our largest trading partner and foreign investor. 

Over 2000 EU companies operate within South Africa creating over three hundred and fifty thousand jobs. 

South Africa’s relations with the USA and Canada continue to strengthen, especially in the areas of economy, health, education, energy, water, safety and security, capacity building and the empowerment of women.

The renewal and expansion of the African Growth and Opportunity Act (AGOA) provides a platform for the enhancement of industrialisation and regional integration. All outstanding issues around AGOA are being attended to.

Compatriots 

We extend good wishes to all athletes who have qualified for the Olympic Games to be held in Rio de Janeiro. 

We encourage participation in several programmes aimed at promoting healthy lifestyles and nation building.

These include the National Recreation Day, the Nelson Mandela Sports and Culture Day; the World Move for Health Day, the Golden Games and the Andrew Mlangeni Golf Development Day.

Compatriots,

A committee has been established to coordinate the participation of our performing arts legends in nation building activities in the country.

The Living Legends committee is chaired by playwright Mr Welcome Msomi working with music icon, Ms Letta Mbulu, as deputy chairperson.

We are also happy that musicians and actors amongst others heeded our call to unite and have formed the Creative Industries Federation of South Africa. The Presidency has established the Presidential Creative Industries Task Team to support our artists.

Compatriots,

To achieve our objectives of creating jobs, reducing inequality and pushing back the frontiers of poverty we need faster growth. 

In the National Development Plan, we set our aspirational target growth of five per cent per year, which we had hoped to achieve by 2019. 

Given the economic conditions I have painted earlier on, it is clear that we will not achieve that growth target at the time we had hoped to achieve it. 

The tough global and domestic conditions should propel us to redouble our efforts, working together as all sectors. In this regard, it is important to act decisively to remove domestic constraints to growth. 

We cannot change the global economic conditions, but we can do a lot to change the local conditions. 

Let us work together to turn the situation around. It can be done.

I thank you.