Response by the Minister in The Presidency responsible for Planning, Trevor Manuel, on the occasion of the debate on the President's State of the Nation Address, June 5 2009

Honourable Speaker
Mr President
Mr Deputy President
Honourable Ministers and Deputy Ministers
Honourable Members

We should all agree that the State of the Nation Address has launched this Fourth Parliament in a decisive and determined way. The positive and pensive contributions of the 44 members who have contributed bode well for parliament. I trust that this is an expression of the hope of renewal and not merely a honeymoon for a brand new President. The Address on Wednesday did what it set out to do - provide a high level overview of the strategic choices that this government has made. I know some Honourable Members are chomping at the bit, demanding detail of the various programmes - I must plead that this was not an omission. Parliament will, in the course of the next few weeks, engage individually with Ministries and Departments on their implementation plans, making the picture will be much, much clearer.

The essential message from the Address is that, notwithstanding our best endeavours of the past fifteen years, we must now redouble our efforts to ensure even better outcomes. Also, that we must understand that the prevailing circumstances are now much tougher than any we have had to confront hitherto. The President confirmed that we are now in recession, and deep as it is, our policies have spared us the worst ravages of this global recession. The contraction of 6.4% of GDP seen in the first quarter, is still much lower than that of almost the entire industrialised world.

The global economic downturn has been worse than any forecast a year ago. OECD economies are expected to experience no or declining growth for nearly two years. For many developed economies, the slowdown started in about the second quarter of 2008 and will continue at least until the third quarter of 2009, perhaps longer.

The IMF revised down its world growth forecast 6 times in 2008, and 3 more times in 2009. By April of this year, the Fund's forecast for world growth had turned resolutely negative, -1.3 for the global economy in 2009. Advanced economies are expected to contract by -3.8% in 2009, and experience zero growth in 2010.

For the developing world, the forecast looks somewhat different, but the experience of decline has been widespread and damaging. Developing economies are expected to grow by 1.6% in 2009, compared to the robust 6.1% achieved in 2008.

The slowdown in the developing world has been driven by sharp contractions in export manufacturing and the sharp declines in oil and commodity prices. For Mexico, Korea, South Africa, Brazil, and Malaysia, manufacturing production declined in the first quarter of 2009 by an average of 14%. Exports have typically dropped by about 25% in the first quarter.

In recent weeks, indicators of activity in the developing and developed world have stabilised. In some instances they have even improved, as in China, where industrial output for the first quarter was up strongly after a sharp drop in the 4th quarter of 2008.

Despite these ‘green' and ‘brown' shoots, some major risks loom perilously large. These include still high levels of indebtedness of households and the rising interest burden of governments, the negative effects of governments having to reduce their debt burdens, and the fact that employment may continue to fall for some time even after economic output recovers.

For South Africa, the growth forecast remains subject to the vagaries of the world economy and our own domestic risks. So while inflation has made some progress in coming down from the highs of 2008, and this has enabled a decline in interest rates, oil prices and nominal wage pressures present further risks.

The recently released results for the first quarter of 2009 were considerably worse than expected, but we do need to recognise that they are now water under the bridge, and we should see somewhat better figures in the latter part of this year. Sustained growth in public infrastructure, government consumption, better commodity prices, and the improving interest rate cycle, will tend to support the economy in the months ahead. A stronger recovery in the rest of the world would feed-through into improvements in our domestic view as well.

Difficult as these issues to deal with are, they do not come as a surprise. In the Budget Speech on 11 February this year we said:

"The storm that we spoke of last year has broken, and is more severe than anyone anticipated... Our response to the present crisis is to face the challenges before us boldly, and as a nation united. Our duty is to construct a South African approach, founded on our own vision for a shared future. This approach can only be built on an engagement between social partners, not just at the level of national dialogue, but on factory floors and in community halls. Our resolve will be tested to the limits. We have to put self-interest aside. We have to face each other honestly and openly. Our task is to see through the challenges of economic vulnerability today to the construction of the new South Africa that is our passion and our pride. We can do this all the better as a united people."

So, we must forge this South African response and the State of the Nation Address speaks directly to this. A South African response must take account of the nature of the domestic impact of this global recession, must take account of our domestic institutional arrangements and must proffer distinctly South African solutions. The State of the Nation Address dealt with this in large measure, saying:

"We take as our starting point the framework for South Africa''s response to the international economic crisis, concluded by government, labour and business in February this year. We must act now to minimise the impact of this downturn on those most vulnerable. We have begun to act to reduce job losses. There is an in-principle agreement between government and the social partners on the introduction of a training layoff. Workers who would ordinarily be facing retrenchment due to economic difficulty would be kept in employment and re-skilled for a period of time.

Discussion on the practical detail is continuing between the social partners and the institutions that would be affected by such an initiative, including the Sector Education and Training Authorities.

So there are the beginnings of firm plans and proposals on the table. These must be fully costed and tested, and wide spread support and ownership generated to ensure success.

But, in addition, we are now committed to a significant improvement in outcomes by a focus on improved planning and performance management. There are at least five distinct reasons for this:

Firstly, in recognising that we have a great, modern Constitution, we must acknowledge that the powers and functions in respect of service provision are highly dispersed across the three spheres of government. If we desire better outcomes, then we must improve on the co-ordination of effort.

Secondly, we will have to institutionalise the linkages between the three spheres of government to ensure appropriate initiation of programmes, and improve on the mechanisms for equalisation so that we can counteract the mass exodus from rural areas.

Thirdly, we must all agree that there is no market for public services -issues such as employment, distribution, infrastructure, environment and human skills development demand a better co-ordinated push, because often the momentum is towards fragmentation.

Fourthly, we have to concentrate on building a more competent public administration which is both more focused and more accountable.

Fifthly, we have to deal with resources today to meet tomorrow's needs.

This will be the focus of our work over the next period. This will not be done in secret. I hope, Mr President, to place a Green Paper before parliament in the course of the next few weeks to engage Honourable Members on where and how planning would fit into the government system, what role we hope to play, what linkages are required and what thematic areas would be covered by the planning function. I repeat, that we will forge a distinctly South African approach. Right now, we can recite chapter and verse on the operations and successes of Planning Commissions in countries as diverse as South Korea, India, Turkey, Brazil, Chile and many others. In acknowledging their efforts, we want to avoid the risk of merely attempting to supplant their experiences - we will forge a distinct approach tailored to the needs of our own situation.

In order to succeed, parliament will have to be more involved in all areas of planning and oversight. There must be a shift in emphasis from a cursory discussion on the allocation of resources to an intensive discourse on the outcomes. As we traverse this path, the luxury of talking past each other will have to be a speck in our collective history.

Let me admit here, Mr President, that I have been assigned many tasks that are easier than the challenge to develop a planning framework. Let me briefly share
some of what the planning process will entail:

First, the longer term vision, for at least a 15-year horizon must be developed as a statement that is clear, widely supported and eminently attainable.

Second, we will then have to develop a series of shorter term plans for 10 and 5-year periods that are more detailed, better costed and which contain more measurable development targets.

Third, the coordination of the development of the Medium Term Strategic Framework and its unpacking into detailed plans for each of the strategic priority areas. Cabinet, advised by the Minister of Finance, would then align the Medium Term Expenditure Framework with the strategic priorities of government.

Fourth, though not quite in this sequence, we will have to ensure that the planning frames of the two other spheres of government are synchronised.

Fifth, we will continually undertake research to ensure that our choices are informed by evidence and good research on long term trends and plans. While in many areas or sectors we have good quality long term plans, we need to do more to encourage long term planning throughout government and the state owned enterprises.

Sixth, we recognise that this approach will indelibly alter the way in which government operates, enhancing the sense of mutual accountability of Ministers, of public servants, of departments and of spheres of government to each other.

Finally, while doing all of this, we must attempt to remain sane and tolerated.

The development of good and coherent plans is only half the work. We need concerted action to avoid or prevent fragmentation in government. As such, there is a coordination function that is essential, driving this plan through all of the spheres and tentacles of government and ensuring that we are all singing off the same hymn sheet.

The good news is that all of this will only work if Parliament is differently involved - not merely waving support to a passing 15-year vision, but actively participating in debating the options and overseeing its implementation. We will have to break through the tunnels down which we peer. The objective is what has loosely been termed "joined-up government". For us, this is about the massive construction of the developmental state that places the emphasis on those outcomes measured in the regular and significant improvements in the quality of life of the nation's poorest.

I repeat that this is the more difficult path to pursue. It would be far easier to chirp from the sidelines, because that has defined the modus of too many for too long. Let me highlight a few examples from the debate over the past two days:

The President in the his address, spoke to the challenge of education when he said, "To improve the learning environment, we have to ensure during the term of this government, that all public schools have water, sanitation, electricity, as well as critical facilities such as libraries, sufficient classrooms, laboratories and ICT infrastructure." Yet the Hon Dandala, claimed that the President did not touch on the matter of classrooms and learning under trees.

The President, in dealing with healthcare matters said, "We are seriously concerned about the deterioration of the quality of health care, aggravated by the steady increase in the burden of disease in the past decade and a half. We have set ourselves the goals of reducing inequalities in health care provision, to boost human resource capacity, revitalise hospitals and clinics and step up the fight against HIV and AIDS, TB and other diseases by 2014. We will introduce a National Health Insurance scheme in a phased and incremental manner. In order to initiate the NHI, the urgent rehabilitation of public hospitals will be undertaken through Public Private Partnerships." Yet, the Honourable Meshoe spoke as though the matter of healthcare transformation was not raised as a detailed priority.

The issue of jobs is, of course, uppermost on the list ANC priorities. At the same time, there's a realism that explains that, while the objective remains the creation of the maximum number of decent jobs, in order to get there and to ensure that there is food on the table of more households, there will have to be a short-term emphasis on sustainable livelihoods. On this score, the President said, "As part of Phase 2 of the Expanded Public Works Programme, the Community Works Programme will be fast-tracked. It offers a minimum level of regular work to those who need it, while improving the quality of life in communities. The economic downturn will affect the pace at which our country is able to address the social and economic challenges it faces. But it will not alter the direction of our development. The policy priorities that we have identified, and the plans that we placed before the electorate, remain at the core of the programme of this government."

He also said, "Another important element of our drive to create job opportunities is the Expanded Public Works Programme (EPWP). The initial target of one million jobs has been achieved. The second phase of the programme aims to create about four million job opportunities by 2014. Between now and December 2009, we plan to create about 500 000 job opportunities."

The intention is clear - these are not permanent jobs, they are job opportunities and they serve to provide durable infrastructure or essential services, sustainable livelihoods and training opportunities. There is no promise of immediate industrial or service sector jobs. This is the reality - despite what both self-styled analysts say and what the Hon Trollip raised here. Public works job opportunities are not the first prize, but they are important in dealing with the ravages of poverty. Virtually every country across the globe is instituting emergency measures such as this, and I want to plead with this august House not to dismiss this initiative - on the one hand, it pays more than what most farm-workers earn, but more importantly, it stands between poor families and absolute hunger.

The debate on economic policy will remain topical way beyond our lifetimes. It could not have been the intention of this State of the Nation Address to attempt to resolve it. I wish to express the hope that parliament will afford itself adequate time to have the economic debate. There are certain inescapable realities, among them the fact that we have not been as badly affected as many other countries.

His Excellency reminded us of this and pointed to a way forward in saying," While South Africa has not been affected to the extent that a number of other countries have, its effects are now being clearly seen in our economy. We have entered a recession. It is more important now than ever, that we work in partnership on a common programme to respond to this crisis." That partnership cuts across all that divides us - race, class, gender, geography and political party lines. The theme was raised on 11 February when we said, "Our resolve will be tested to its limits. We have to put self-interest aside. We have to face each other honestly and openly." This spirit is even more necessary now.

Thank you very much.

Issued by The Presidency, June 5 2009

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