President Cyril Ramaphosa: Reply to questions in National Assembly

22 Aug 2018

President Ramaphosa says land reform is key to stability

According to StatsSA, more than two-thirds of households in the lowest income quintile spend more than 20% of their monthly household income per capita on public transport.

But the progressive transformation of our urban spaces is not just about radically addressing social poverty and racial inequities.

We must make our cities generators of wealth and reservoirs of productivity.

We need to eradicate the economic inefficiencies of transporting a workforce from dormitory townships into centres.

The radical transformation of our urban spaces is, therefore, both a social and economic imperative.

Through instruments like the Spatial Planning and Land Use Management Act and the Integrated Urban Development Framework, we are approaching spatial planning guided by principles of social equity and economic efficiency.

We are focused on developing integrated human settlements located close to work and amenities, rather than just meeting housing targets.

At the same, through a significant investment in the township economy, we are working to bring economic activity to where most of our people live.

To accelerate spatial transformation, Cabinet resolved at its recent lekgotla on the rapid release of well-located, but under-utilised land to develop affordable, mixed-income human settlement.

Much of this land is owned publicly by national departments, provincial governments, municipalities and state-owned companies. Some of this land is privately held for purely speculative purposes.

We need to use every inch of underutilised land for our people to live on and to farm.

While extending title deeds to a greater number of households is a priority, we should also secure less expensive and less complicated forms of tenure for households in informal settlements, in rental arrangements and in areas of communal land tenure.

We need to develop a continuum of use and ownership tenure rights.

We are committed to using expropriation, where appropriate, to achieve social and economic spatial transformation in towns and cities.

To build the cities and towns that we want, it is critical that government, the private sector and the NGOs work together to create a sustainable growth model of compact, connected and coordinated urban areas by integrating and aligning investments.

This should form part of the broader social compact envisaged in the National Development Plan, and which, in many different ways and on many different fronts, we are working to build.

Elements of this approach are already found in the funding and fiscal framework of the Department of Human Settlements, which uses government grants, subsidies and investments to leverage private sector funding to make housing finance more accessible and affordable.

High unemployment

Creating employment, particularly for young people, is the most urgent and critical priority for our country at this moment in our history.

To succeed, it is essential that we understand the causes of the massive unemployment in our country.

The historical reliance on raw commodity exports and the deliberate underdevelopment and economic marginalisation of the majority of our people resulted in structural unemployment that has been a prominent feature of our economy since the early 1980s.

Following the dawn of democracy, we were able to create jobs on a scale not before seen in this country. In 1994, 8.8 million South Africans were employed. The latest employment data show that 16.3 million people are in employment. In other words, employment has doubled between 1994 and 2018.

Despite an absolute increase in the number of people employed, South Africa’s unemployment rate has remained stubbornly high, as the population has grown and more and more people have entered the workforce.

Put simply, we have not been creating enough jobs to meet the growing need for work.

That is why this government is working together with its social partners to address both the immediate economic challenges and, through far-reaching reforms, place the economy on a new path of inclusive growth and job creation.

We have prioritised the task of significantly raising levels of investment in the economy, since that is essential for growth and job creation.

There has been an enthusiastic response from South African businesses and international investors to our plans for an Investment Conference, which will be held in Johannesburg from the 25th to 27th October.

We have been approached by business leaders across the economy insisting that they will play their part, working together with government, to grow the economy and create jobs.

They too see that the platform is burning, and instead of throwing up their hands in despair, are determined to be part of the solution.

In the coming days, Cabinet will announce the details of a stimulus package to reignite growth and to establish the foundation for a sustained economic recovery.

This package reprioritises funds towards initiatives that are labour intensive, addresses infrastructual needs and boosts local economies.

Government will vigorously implement confidence-building measures to unlock private sector resources that have been sitting idle. We are addressing the chief constraints to greater investment and growth.

Government is making progress on addressing key policy and regulatory issues like visa requirements for skilled individuals, finalisation of the Mining Charter and the draft Integrated Resource Plan.

We will also soon be making announcements on the allocation of broadband spectrum, the Electronic Communications Amendment Bill and the single transport economic regulator.

We are improving governance across the public sector and have moved with speed to tackle state capture and corruption. We are also taking measures to improve the efficiency and effectiveness of government at all levels.

Beyond these measures, we must undertake a fundamental re-engineering of the economy.

We are working to build human capabilities through access to high quality early childhood development, access to higher education to produce skills needed for the future, youth employment interventions and improving outcomes in education and health.

We are reducing barriers to entry, especially for emerging black businesses.

We are doing this through stronger competition regulation, revitalising key state-owned entities, promoting agrarian reform, better spatial planning, improved public transport systems, development finance and industrial incentives.

We are developing the productive base of the economy, by enhancing current industrial policy measures, leveraging local procurement effectively, sharpening the Industrial Policy Action Plan, promoting export competitiveness and taking advantage of regional opportunities. We are promoting the growth of labour intensive sectors like agriculture, services and tourism.

As social partners, as a country, we must respond to the current economic difficulties with the same determination that we have confronted the seemingly intractable problems of our past. Working together, we must fight for every job and for every cent of investment.

Now is the moment to unite and work together.

BRICS partnership

The BRICS partnership offers South Africa significant opportunities to expand and diversify our trade, to attract investment and to develop our economic infrastructure.

With a combined GDP of approximately $15 trillion, BRICS countries account for around 20% of gross global product, over 40% of the world population, and have collectively contributed more than half of world economic growth during the last 10 years.

Trade between South Africa and its BRICS partners has grown from $28 billion to $35 billion over the last decade.

Combined, the BRICS countries account for 15% of South Africa’s exports, and 25% of the country’s imports.

Against the backdrop of unilateral measures taken by some developed countries to protect their domestic industries, BRICS countries are forging ahead with initiatives to expand intra-BRICS trade and investment.

One such initiative, is the China International Import Expo in Shanghai in November 2018, which South Africa will use to expand the basket of products it exports to China.

The BRICS countries have reaffirmed their commitment to work together to shape a multilateral trading system that supports industrialisation and economic diversification.

The BRICS countries constitute an important global voice in support of a rules based, transparent and inclusive multilateral trading system that promotes a predictable trade environment and the centrality of the WTO.

The BRICS countries are in agreement that development must remain integral to the WTO’s work and that developing countries should secure a share in the growth of world trade that matches their needs for economic development.

They support provisions for special and differential treatment, including in agriculture.

This provides the necessary policy space for developing countries to pursue their development objectives, including industrialisation, to promote their effective integration into the global economy.

Individual BRICS countries are important and influential globally, but it is when these countries stand together in the alliance formed through BRICS that we are in a better position to advance a fairer global trade agenda.

Economic growth

Underlying all the tax proposals that government has made since 1994, is the need to promote the growth of an inclusive economy, to redistribute resources to meet the needs of the poor, and to ensure sustainable management of public finances.

It was these considerations that informed government’s decision to increase VAT by 1 percent from 1 April 2018.

Based on all the available evidence, it emerged as the one revenue raising measure that would have the least negative impact on economic growth, which is essential for job creation and the reduction of poverty.

However, as we implement the VAT increase it is essential that this does not place an undue burden on the poor.

Government therefore set up an Independent Panel of Experts to review the current list of zero-rated VAT items.

The Panel’s report was submitted to the Minister of Finance on 6 August 2018, and subsequently released for public comment.

The report recommends the following additional items be included in the basket of zero rated goods:

White bread, bread flour and cake flour,
Sanitary products,
School uniforms,
Nappies, including cloth and adult nappies.
The Panel recommended that National Treasury conducts further work on each of the proposed additional items to ensure that there is no room created for VAT fraud by producers or retailers and that the benefit of zero-rating on these items indeed goes to the consumers.

It should for instance be ensured that a price of a zero-rated product is reduced from what it was with VAT included.

The process of public consultation will assist in evaluating the recommendations further to ascertain if they have the potential to significantly benefit poor households.

The report also highlights some programmes on the expenditure side that would assist poorer households, such as strengthening the National School Nutrition Programme and increasing the Child Support Grant and Old Age Pension Grant.

Taking the recommendations and the public comments, as well as the evaluation of the recommendations by National Treasury and the South African Revenue Service, the Minister of Finance will then determine which of the panel’s recommendations to implement by including them in current or future tax legislation for the consideration of Parliament.

Land reform

The proposal is informed, among other things, by the views of our people in public hearings and by the members of the ANC.

It is based on an understanding that the Constitution, as it currently stands, allows for expropriation without compensation in certain circumstances. The proposal is intended to make explicit what is currently implicit in the Constitution.

This announcement does not undermine nor does it preempt the outcome of the public consultation process.

Once Parliament has adopted a position on the matter, it will become government’s responsibility to implement.

As I indicated during the 2018 State of the Nation Address, government is determined that land reform should be implemented in a way that increases agricultural production, improves food security and ensures that the land is returned to those from whom it was taken under colonialism and apartheid.

I have appointed an Inter-Ministerial Committee on Land Reform, led by the Deputy President, which has been tasked with coordinating measures to accelerate the redistribution of land, the extension of security of tenure, the provision of agricultural support and the redress of spatial inequality.

This should take place within a broad and comprehensive land redistribution and agricultural development programme.

The acceleration of land redistribution is necessary not only to redress a grave historical injustice, but also to bring more producers into the agricultural sector and to make more land available for cultivation.

In dealing with just and equitable compensation in the case of expropriation, for example, Section 25 calls for an equitable balance between the public interest and those affected.

It lists among the relevant circumstances to be considered in deciding on such a balance, such things as the history of the acquisition of the property, its current use, and the extent of direct state investment in the property.

The late Andre van der Walt, one of South Africa’s leading constitutional property scholars, has argued that Section 25 (3) makes non-compensation permissible in appropriate circumstances.

Furthermore, Section 25 (8) of the Property Clause explicitly states: “No provision of this section may impede the state from taking legislative and other measures to achieve land, water and related reform, in order to redress the results of past racial discrimination”.

The intention of the proposed amendment is to strengthen the property rights of all South Africans and to reinforce the transformative nature of our Constitution.

It gives greater force to the requirement in the Bill of Rights, which says: “The state must take reasonable legislative and other measures within its available resources, to foster conditions which enable citizens to gain access to land on an equitable basis.”

It will provide certainty to those who own land, to those who need land and to those who are considering investing in our economy.

For its part, government will continue to pursue a comprehensive approach to land and agrarian reform that ensures transformation, development and stability.

Independent Power Producers (IPP) agreements

The successful bidders for the 27 Independent Power Producers agreements that the Minister of Energy signed on 4 April this year had already been selected and announced in 2015.

The three year delay was the result of a delay in the finalisation of the Power Purchase Agreements that needed to be signed by Eskom.

The 27 projects from bid windows 3.5 and 4 of the Renewable Energy IPP Programme were all procured during 2014 in accordance with long standing government energy policy and statutory mandate.

The commissioning dates of these projects correspond with demand and supply projections of the Integrated Resource Plan.

In line with the IRP projections, the majority of the 27 projects will start generating power and be paid for their output as from late 2020.

The 27 projects do not negatively affect Eskom’s current capacity but will supplement and support stable supply as and when Eskom commences with the decommissioning of its aged fleet, as projected in the IRP.

As a country we need to build new reliable power plants to grow our economy.

The energy planning process for securing new generating capacity is not only directed at immediate short-term issues but rather towards medium to long-term objectives.

Increasing renewable capacity is a cost effective means of reducing carbon emissions.

International research forecasts that new photovoltaic prices will fall to around 20 cents per kilowatt hour by 2030 compared to the average Eskom’s prices that will rise to over 100 cents per kilowatt hour, as a result of among others, the full capital and generation cost of Medupi and Kusile.

The benefits of the Renewable Energy IPP Programme will continue to grow.

By March 2018, a total of 64 projects were in operation and under construction representing a total investment of R142 billion.

Renewable IPPs have created over 35,000 job years for youth, women and citizens from local communities and have invested around R766 million on education, health, social welfare and enterprise development projects in these communities.

South Africa’s ground-breaking renewable energy programme is firmly rooted in the National Development Plan, is guided by the Integrated Resource Plan and has been part of ANC policy for over a decade.

It is not new and it is not being rushed.