House of Assembly: Vol100 - WEDNESDAY 24 MARCH 1982

WEDNESDAY, 24 MARCH 1982 Prayers—14h15. APPROPRIATION BILL (Second Reading) The MINISTER OF FINANCE:

Mr. Speaker, I move—

That the Bill be now read a Second Time.
WORLD ECONOMIC RECESSION

This year’s Budget is being presented against the background of a serious and long-lasting world recession. In the United States the rate of real economic growth was actually negative in 1980, less than 2% in 1981 and, according to the latest forecasts of the Organization for Economic Co-operation and Development, will be negative again in 1982. In the United Kingdom, the real economic growth rate was minus 1,7% in 1980, minus 2% in 1981 and is now expected to recover to a small positive figure in 1982. In West Germany a growth rate of minus 1% in 1981 is expected to be transformed into a positive rate of just over 1% in 1982. In addition, the countries behind the Iron Curtain and a number of important oil-producing states have been experiencing serious economic difficulties, which have forced some of them to sell large quantities of gold on world markets. At the same time, the economic plight of most Third World countries has reached critical proportions.

GENERAL DOMESTIC ECONOMIC CONDITIONS

In marked contrast to these depressed conditions in most other countries, the South African economy experienced what was perhaps the most vigorous boom in its history in 1980 and 1981. The facts now show that the upswing which had commenced at the beginning of 1978, continued until the third quarter of 1981 before reaching an upper turning-point. Indeed, after rising by more than 4% in 1979 and nearly 8% in 1980, the real gross domestic product registered a further increase of more than 4½% in 1981. But, as Chesterton remarked, “progress is the mother of problems”.

During the first three quarters of 1981, this moderate decline of the real growth rate was not due to any marked weakening of domestic monetary demand, but mainly the result of physical constraints, including the shortage of skilled and semi-skilled labour. Indeed, throughout 1981, total monetary demand continued to exert undue pressure on available resources, resulting in a measure of general demand inflation, rising imports and during the first three quarters of 1981, a marked further decline to historically low levels in rates of unemployment among all population groups.

In real terms, that is, after correcting for price increases, gross domestic expenditure increased by as much as 101/2% in 1981, after rising by 13½% in 1980. Real private consumption expenditure increased by 6,3% in 1981, real government consumption expenditure by 2,3% and real fixed investment by 6,7%. In addition, substantial further increases were recorded in industrial, commercial, strategic and agricultural inventories.

Inflation has remained a serious problem, as indicated by the increase of 13,6% in the consumer price index between February 1981 and February 1982, although I am glad to say that the rate of inflation has been falling for some months now. Among the factors contributing to this increase were the excess monetary demand to which I have referred, and the accompanying depreciation of the rand in terms of other currencies during 1981, with which I shall deal more fully later.

It is most gratifying, however, to note that, despite the inflation, real wages and salaries per worker in the non-agricultural sectors of the economy increased by 3,5% in 1980 and by a further 4,4% in the first nine months of 1981, by comparison with the corresponding period of 1980. To this must be added that real gross domestic product per capita increased by 4,9% in 1980 and by a further 2,2% in 1981. These figures reflect a significant rise in living standards generally. But let us heed the words of Russel P. Askue, when he cautioned “if living conditions don’t stop improving …, we’re going to run out of humble beginnings for our great men”!

BALANCE OF PAYMENTS

From the facts I have presented it is evident that, in the field of real economic growth, South Africa outperformed most other countries in the world in both 1980 and 1981. In the course of the latter year, however, it became increasingly evident that the decline in the gold price and the world-wide recessionary conditions were exerting adverse effects on the South African economy as a whole and on the balance of payments in particular.

The price of gold declined from an average of $613 per ounce in 1980 to one of $460 per ounce in 1981 and an average so far this year of $364 per ounce. In recent weeks the price has fluctuated around the $320 level. In view of the depreciation of the rand in terms of the US dollar since January 1981, the price of gold expressed in rand has, of course, declined by much less than the dollar price over this period.

Thus, compared with the decline of 25% in the average dollar price of gold between 1980 and 1981, the rand price declined by about 16%. Similarly, compared with the further decline of 21% in the dollar price of gold between the end of 1981 and 19 March 1982, the rand price declined by 14½%. The depreciation of the rand has therefore softened the impact of the gold price decline on the South African gold mining industry, the Exchequer and the economy in general.

Despite this cushioning effect, however, the rand value of South Africa’s net gold output still declined from R10,1 billion in 1980 to R8,3 billion in 1981, and, depending upon the behaviour of the gold market and the exchange rate during the rest of 1982, could show a substantial further decline this year. As I have indicated before, if the gold price falls on average over a period of a year by $100 an ounce, it means a reduction in South Africa’s earnings from the sale of gold abroad of approximately R2,1 billion, with a consequent loss in revenue to the Exchequer of perhaps R1,1 billion.

Quite apart from gold, South Africa’s other exports were also adversely affected by the stagnant conditions in world markets and declined in 1981 by about 3% in rand value terms and by nearly 14% in volume terms. In their case, too, the depreciation of the rand had a major cushioning effect upon export incomes expressed in rand terms.

Imports, however, behaved differently. As a direct result of the buoyancy of the domestic economy, they increased in 1981 by a further 28% in value and 16% in volume. As in former years, imports of capital and intermediate goods accounted for about 85% of total imports. It is significant, however, that after reaching a peak in the third quarter of 1981, imports began to level off in value terms and to decline in volume terms.

The net effect of these and other changes was that the surplus of R2,8 billion on the current account of the balance of payments in 1980 was transformed into a deficit of nearly R4 billion in 1981. As a percentage of gross domestic product the latter deficit amounted to 5,5%. In itself this ratio was not unduly large for the particular phase of the business cycle in which the economy found itself in 1981—two comparable figures, for example, were 6,6% in 1975 and 5,4% in 1976. What was exceptional, however, was the swing from surplus to deficit of nearly R7 billion between 1980 and 1981.

Since the net inflow of capital, excluding special reserve-related movements, amounted to R1,1 billion during 1981, this naturally placed considerable pressure on the exchange rate of the rand and on the gold and other foreign reserves. To deal with this situation, the Reserve Bank and the other banks availed themselves of short-term foreign credits to a net amount of about R2 billion during the year. This served to maintain the gross gold and other foreign reserves at a satisfactory level, but the resultant increase in the so-called “liabilities related to reserves” contributed to a decline of about R2,8 billion in the net reserves during 1981.

To support the foreign exchange component of its reserves, the Reserve Bank entered into new gold swap arrangements during the fourth quarter of 1981.

Against this background, the commercial rand showed an effective depreciation in terms of a weighted “basket” of foreign currencies of 13,9% during 1981, compared with an appreciation of 10,9% during the preceding year. In terms of the United States dollar the rand depreciated by about 22% in 1981. Thus far in 1982 the rand has depreciated further against the dollar by about 7,8% and in terms of the “basket” of currencies by about 3,8%.

MONETARY DEVELOPMENTS AND POLICY DURING 1981-’82

Although South Africa’s present balance of payments difficulties stem predominantly from the decline in the gold price and other external developments beyond our control, they must also be partly attributed to the inordinate rise in total monetary demand during 1980 and 1981. Under the impact of the huge increase in gold earnings, this rise, in turn, was fuelled by an excessive rate of increase in the broadly defined money supply (M2), which accelerated from an annual rate of 17% in the first quarter of 1980 to 41% in the third quarter, 25% in the fourth quarter and 46% in the first quarter of 1981, before showing a welcome decline to 26% in the second quarter and 10% in the third quarter.

The basic cause of this monetary expansion was the co-existence in 1979 and 1980 of an unexpectedly large surplus on the balance of payments on current account, and exchange control. In addition to raising the money supply directly, this brought about a substantial increase in the cash reserves and other liquid assets of the banks, which later enabled them to create large amounts of money by expanding their credit to the private sector. A further consequence of this situation was that interest rates declined sharply during 1979 and remained at abnormally low and somewhat distorted levels throughout the first three quarters of 1980. Given the existence at that stage of ceilings on bank credit, this understandably brought about large-scale so-called “disintermediation”, or borrowing and lending outside the banking system. The result was a weakening of the ability of the monetary authorities to influence the money supply, its velocity of circulation and interest rates.

From October 1980, however, following the abolition of the credit ceilings, the declining tendency of the gold price and the commencement of the downward trend in the net gold and other foreign reserves, the monetary and interest rate situation began to change fundamentally—a process which has continued up to the present. This transformation flowed directly from the Reserve Bank’s conscious policy of permitting natural economic forces, including the decline in the value of South Africa’s gold output and other exports, to bring about a tightening in the financial markets and a rise in interest rates. As an integral part of this policy, the Reserve Bank raised its Bank rate in four stages from 7% at the beginning of 1981 to 12½% last July.

The success of this strategy in reducing the annual rate of increase of the broad money supply to 10% in the third quarter of 1981, that is, to well below the rate of inflation, was most gratifying. A temporary setback then occurred as a result of two developments during the fourth quarter of 1981. The first was the financing of the record maize crop and other farming activities through clearing bank advances to the Land Bank. These advances rank as liquid assets for the banks and at one stage amounted to a record R2,3 billion. And the second was, under severe financial pressures, a temporary recourse to the use of bank credit by the government sector, to which I shall refer again.

Largely as a result of these developments, the banks gained additional cash reserves and liquid assets, which enabled them to continue expanding their credit to the private sector. The end result was that the annual rate of increase in the broad money supply rose to 21% in the fourth quarter of 1981.

To counter these influences, the Reserve Bank decided in November 1981 to take stronger corrective action and to permit interest rates to rise further in response to market forces. As part of this process, it not only raised its Bank rate by another 1% to 13%% in December but also allowed the Treasury bill rate to rise above Bank rate to more realistic levels. This resulted in an increase in the Treasury bill rate from below 12% in early November last year to 15,84% last Friday, 19 March 1982.

Another major policy change was the abolition, on 16 February 1982, of the previously existing direct link between Bank rate and prime overdraft rates. This step permitted the latter rates to rise in response to market forces to their present level of 20%. At the same time, the Reserve Bank discouraged banks and discount houses from excessive recourse to its discount window by applying severe penalty rates, well above Bank rate, to all such financial accommodation.

Together with the seasonal flow of tax funds to the government sector at the end of February, these measures were immediately successful in relieving the pressure on the exchange rate and the official gold and other foreign reserves by inducing the banks and the non-bank private sector to make more use of available overseas credits. The higher domestic interest rates, in particular, enabled the economy to absorb the adverse impact of the subsequent sharp decline in the gold price on the exchange rate and the official foreign reserves without undue disruption.

The key role played by interest rates in official stabilization policy during the past year and a half needs to be put into proper perspective. As recent experience in the United States, the United Kingdom, and many other industrial countries has demonstrated once again, a policy of curbing money creation at a time of excess demand will almost inevitably result in a rise in interest rates in the short term. This certainly was the case in South Africa during the past eighteen months. Indeed, the only effective way in which South African interest rates could have been prevented from rising during this period would have been for the Reserve Bank to have arranged the creation of even more credit and money—something which would, of course, have aggravated inflation and the balance of payments deficit.

Three further basic points have to be made regarding interest rates. The first is that the sharp increase in South African interest rates during the past eighteen months occurred from a level in 1979 and most of 1980 which was artificially and abnormally low.

The second point is that, even at their present levels, South African interest rates are not high in real terms, that is after correcting for the rate of inflation—and, of course, to measure the impact of any interest rate one must look at the real rate. If the consumer price index is used to deflate nominal interest rates, the present real yield on long-term government stock is only 0,7%, compared with, for example, 4,6% at the end of 1961 and 4,4% at the end of 1967. Similarly, the new maximum building society mortgage rate of 15,25% represents a real rate of interest of only about 1½%, compared with real mortgage rates of about 6% in 1961 and 1967, and over 4% in most years between 1955 and 1970. Even the present prime overdraft rate of 20% in nominal terms is not a record in South Africa at its present real level of about 5½%—in real terms it has often been as high or higher in the past.

The third point is that in real terms most South African interest rates are at present still considerably lower than those of our main trading partners. The present real rate of interest on long-term government stock in South Africa of 0,7% has to be compared, for example, with rates of about 5% in the United States, nearly 2% in the United Kingdom and 3½% in West Germany. Similarly, the present real prime overdraft rate in South Africa of about 5½% is still lower than its counterpart of over 7% in both the United States and West Germany.

From many points of view it is to be welcomed that most interest rates in South Africa are now once again positive in real terms. This not only contributes to more effective fiscal and monetary policies but also encourages thrift and provides a better return to the many holders of savings and time deposits with building societies and banking institutions. Redressing the balance between real wages, which have risen substantially in recent years, and real interest rates, should also contribute in the longer term to the creation of employment opportunities for our rapidly rising population. Now at least we are again in a position where we can in truth proclaim to the saver that “the best way to double your money is to fold it and put it back into your pocket”.

Nominal interest rates may confidently be expected to decline again as the economy cools down, the demand for loanable funds decreases and the balance of payments improves, particularly if this process is also accompanied by some decline in the rate of inflation. In the meantime, any attempt to reduce interest rates artificially by creating more money through the banking system, would undermine the official policy of financial discipline.

FISCAL POLICY DURING 1981-’82

In last year’s Budget Speech in August 1981, I described our fiscal policy as one of “consolidation and adjustment”—consolidation of the enormous economic gains of the immediately preceding years and adjustment to the adverse impact on the South African economy of the decline in the gold price and other external developments. In accordance with this policy, last year’s Budget provided for a modest increase in expenditure of 16,8% in nominal terms, which was expected to yield a relatively low real rate of increase.

In addition, although the “deficit before borrowing” was estimated at R2 707 million, or about 3,5% of gross domestic product, a total considerably larger than that of the previous year, provision was made for this shortfall to be financed without any recourse to net money creation by the banking system. Last year’s Budget was therefore designed to be a “moderately contractionary” one which would help in curbing inflation and in bringing about balance of payments adjustment without resulting in “overkill”.

In actual fact, as I shall indicate in more detail later, the economy was so buoyant that both expenditure and revenue turned out to be somewhat larger than expected, while the actual deficit before borrowing in the end amounted to only R2 060 million, which again was considerably smaller than the Budget estimate. This in itself was a satisfactory outcome.

As far as the financing of this deficit was concerned, however, the Public Debt Commissioners suffered unexpected withdrawals and smaller net inflows of funds and were therefore unable to invest as much in government stock as they had anticipated at the time of the last Budget. The situation was further exacerbated by the need to finance very substantial imports of strategic materials through the State Procurement Fund. The result was that the government sector had no option but to resort to the temporary use of bank credit.

Since this unintended money creation was in direct conflict with official policy, I deemed it essential to take early corrective action. In addition to the steps taken by the Reserve Bank, I therefore advanced the date of the introduction of the Part Appropriation Bill to 11 February 1982 and used that opportunity to increase the general sales tax from 4 to 5% and to impose a surcharge of 10% on imported goods.

I also introduced a new method of issuing Government stock by way of tender, which immediately yielded satisfactory results, and raised the interest rate on tax-free Treasury bonds. Following the increase in Treasury bill rates to realistic market-related levels, the weekly Treasury bill tender also enjoyed wider support, and it is particularly encouraging to see the non-bank private sector investing in Treasury bills on a significant scale again.

Together with the normal seasonal shift of tax and other funds from the private to the government sector, these new and closely co-ordinated fiscal and monetary measures succeeded, during the first quarter of 1982 to date, in sharply reversing the government sector’s earlier use of net bank credit. During January there was already a decline of R376 million in the net claims of the banking sector on the government sector, and when the February figures become available, they will almost certainly show a continuation of this favourable tendency. Most of the difficulties which arose in fiscal and monetary policy in the fourth quarter of 1981, have therefore now been overcome.

What has constantly to be borne in mind is that, as things turned out, the domestic economy was more buoyant than had been generally expected, whereas both the decline in the gold price and the world recession were more severe and lasted longer than most experts had predicted. In these circumstances, the authorities, if anything, perhaps did too much to shield the domestic economy from adverse external influences.

POLICY IMPLICATIONS FOR THE YEAR AHEAD

I turn now to the implications of the present economic situation for fiscal and monetary policy in the year ahead.

Like most other countries, South Africa is at present confronted by certain difficult economic problems. Moreover, in recent weeks and months our policy options for dealing with these problems have been narrowed by external developments beyond our control. In the long run it remains our aim to achieve an optimum combination of rapid economic growth, reasonable price stability and balance of payments equilibrium. In the short term, however, priority must be given to further consolidation of the domestic economy and adjustment of the balance of payments.

I am fully aware that the economy appears to have entered a gradual downward phase of the business cycle and that the rate of real economic growth will almost certainly be lower this year than last year. But the decline in the gold price and other adverse external developments of recent months rule out any possibility of “reflation” or “stimulation” at this point in time. On the contrary, the balance of payments adjustment process now needs strong support from fiscal and monetary policies, even if this means restraining demand at a time of slower real growth. The situation therefore calls for firm control over government spending, over the cash and liquidity base of the banking system and over the money supply.

In the present difficult circumstances, the imperative need to live within our means as a nation implies a process of adjustment which cannot be entirely without sacrifice. This process is already under way. It leaves little scope in the year ahead for a significant further increase, above its present record level, in real disposable income per capita, that is, in income adjusted for inflation and taxes. The laws of economics cannot be evaded. One way or another real disposable income will be affected. In recent months the adjustment has come about largely via inflation and currency depreciation on the one hand, and increases in interest rates on the other. What form the adjustment will take in the coming year will be greatly influenced by today’s Budget. But let us at least heed the advice of Samuel Johnson: “Resolve not to be poor; whatever you have, spend less”, he said. That is our approach.

The Government considers it essential that fiscal policy should play its proper role in assisting the economy to make the necessary further adjustments. If the Budget is too permissive, the adjustments in the South African economy will still take place, but then probably via a continuation of inflation, currency depreciation and further increases in interest rates. Higher inflation cannot be an acceptable outcome. What this country sorely needs, as the saying goes, is “a non-skid coin, guaranteed not to slip through the fingers”.

Recognition needs to be given to the “trade-off” which exists in the present situation between higher interest rates, higher tax rates (or lower government spending) and exchange rate depreciation. As matters stand today, some combination of these three remedies is probably unavoidable. But they can be combined in different proportions. Thus, the more fiscal policy there is in the so-called “policy mix”, the less use has to be made of monetary policy, and vice versa. Tax increases or restraints on government spending, for example, reduce the need for interest rates to rise or to remain high. Similarly, the more use that is made of domestic monetary and fiscal policy, the stronger will be the performance of the rand in the foreign exchange market and the lower the rate of inflation.

In framing today’s Budget I have therefore kept in mind the need to achieve the optimal combination of tax rates, interest rates and spot and forward exchange rates required for dealing with the present economic situation, always bearing in mind the financial capacity of the nation. Franklin D. Roosevelt expressed it well when he said, at the height of the Great Depression in 1932—and I quote—

If a nation is living within its income its credit is good. If in some crisis it lives beyond its income for a year or two it can usually borrow temporarily on reasonable terms. But if, like the spendthrift, it throws discretion to the winds, is willing to make no sacrifice at all in spending, extends its taxing up to the limit of the people’s power to pay, and continues to pile up deficits, it is on the road to bankruptcy.

That, certainly, is what we will never allow.

Against this background, I believe that today’s Budget must comply with three minimum requirements. In the first place, the increase in government spending should be restricted as much as possible without disrupting the provision of essential services. Secondly, in order to assist in curbing monetary demand and to prevent undue upward pressure on interest rates, the “deficit before borrowing” in the budget as a percentage of gross domestic product should be reduced to well below its average of 3,4% over the past 22 years. And, thirdly, this deficit should be financed in such a manner that not only the Exchequer but also the government sector as a whole, including the extra-budgetary funds, will be able to avoid a net recourse to bank credit.

To comply with these three requirements in a year in which gold mining taxation is expected to decline substantially, will obviously be difficult. It is a challenge, however, which must be met in the interest of the country as a whole.

Against this background of events, I shall now proceed to deal with the Government’s Accounts, and start with the 1981-’82 financial year.

FINANCIAL YEAR 1981-’82

Total revenue for the financial year now ending was originally estimated at R13 160 million. The current revised estimates indicate that collections will actually total some R1 130 million more, with Inland Revenue accounting for R673 million and Customs and Excise for R457 million of this increase. The Estimates of Revenue adequately anticipated the decline in the gold price, but receipts from income tax on individuals, and to a lesser extent on companies, together with customs and excise duties, exceeded expectations.

The under-estimates were due to the fact that the economy remained exceptionally buoyant, with the result that imports and consumer demand continued at high levels throughout the financial year. Higher profits and increased employment had a pronounced effect on income tax receipts. In these matters, as in most others, it is better to err on the conservative side. The resultant smaller deficit before borrowing assisted the monetary authorities in their task of curbing the money supply by reducing the extent to which the Exchequer had to make temporary use of bank credit facilities.

Particulars of the revised estimates for 1981-’82 are reflected in the comparative table of revenues which I shall Table today.

On the expenditure side, aggregate expenditure, which was originally calculated at R15 869 million in the Main and Supplementary Budgets, is now estimated to total R16 350 million. The main reasons for this limited overrun were an increase of R208 million for servicing the public debt, R100 million for defence, R76 million for the deferred payment of provincial subsidies, R50 million mainly for housing and R28 million for bus and train subsidies.

It now appears that the amount of R100 million for defence will not be spent in the current year and will thus be available in 1982-’83. This means that despite inflationary conditions the increase in the aggregate amount spent—that is, including the statutory provisions—is hardly more than 2½%.

The net result of these revenue and expenditure developments, including the timely action taken by the fiscal authorities during the latter part of the present fiscal year—raising the general sales tax by 1% and imposing a 10% surcharge on imports—is that the deficit before borrowing at R2 060 million will turn out markedly lower than the original Budget estimate of R2 707 million.

Loan redemptions exceeded the estimate of R2 842 million and eventually amounted to R3 072 million. The rapid rise in domestic market rates and the fact that the Exchequer did not adjust its offer rates immediately, resulted in bond redemptions of some R821 million compared with a budgeted amount of R571 million.

In total, the deficit before borrowing plus loan redemptions resulted in a financing requirement of R5 132 million, which also is notably less than the original Budget estimate of R5 549 million.

The borrowing programme of the Exchequer yielded sufficient funds to cover this financing requirement and produce a small surplus. Investments by the Public Debt Commissioners amounted to R1 152 million compared with an originally expected amount of R1 850 million. This shortfall is to be ascribed primarily to larger than normal withdrawals by para-statal institutions because of larger than expected cost increases, the general tightness prevailing in the money and capital markets, and the strict fiscal and monetary policies enforced by the authorities. Deposits received from the Strategic Oil Funds were less than anticipated, while the South African Transport Services effected large net withdrawals to fund increased investments in transport infrastructure.

The shortfall was partially offset by larger sales of Government stock into the domestic markets, primarily to the non-bank private sector, and the raising of an additional R151 million in foreign loans. The fact that the Exchequer has succeeded in drawing more in foreign loans than budgeted for, clearly underlines the confidence foreign investors have in the inherent strength of the South African economy.

There is an old Arab saying that is very apt in these circumstances: “According to the amount of money a man has in his coffers, so is he respected.” The respect for South Africa amongst overseas investors is high and it is my firm resolve to keep it high—hence the attempt to keep our coffers from running dry.

Sales of non-marketable debt instruments yielded some R152 million less than the original estimate of R550 million. Both Bonus Bonds and National Defence Bonds performed below expectations.

In the result, the borrowing programme of the Exchequer is expected to yield a total amount of R5 148 million, which is marginally higher than the financing requirement and leaves me with a small surplus of R16 million to carry forward to the 1982-’83 financial year.

I now wish to deal with the 1982-’83 Accounts.

THE FINANCIAL YEAR 1982-’83
EXPENDITURE

The printed Estimates of Expenditure which will be tabled today provide for total expenditure of R18 042 million. To this must be added my supplementary expenditure proposals, with which I shall deal shortly, amounting to R196 million. Aggregate expenditure will then add up to R18 238 million, only some 11,5% higher than the revised Estimate of Expenditure for 1981-’82, and on a main-budget-to-main-budget basis only 14,9% higher—remarkably low figures if one takes account of the inflation rate and the very heavy demands made on the Exchequer.

The pressure is always there to spend much larger sums, especially on the highest priority items. But, once again, we deliberately chose the course of firm financial discipline, which has served us so well for the last eight years in succession. The economic realities are such that it is, at this juncture, of paramount importance that we draw in our belts and live within our means. Samuel Butler remarked that “all progress is based upon a universal innate desire on the part of every organism to live beyond its income”. I do not know how far I can succeed in reversing universal innate desires, but so far as Government expenditure is concerned, I can try!

Our expenditure programmes must be adjusted accordingly. I should like to quote from a recent report of the authoritative Canadian Royal Commission on Financial Management—

… planning under the assumption of unlimited resources is very different from planning within fixed limits. In fact, planning is a misnomer for a process that focuses principally on new initiatives and how they might be realized. It is not planning if it does not require choices among new initiatives, and encourages the review and evaluation of on-going activities and the identification of cost reduction potential.

Inherent in the process of planning and determining priorities is the judgment as to which priority needs cannot be met. The fact that some needs will not be met or will only be met partially in the expenditure proposals before the House today, does not mean that the Government places no premium on them. On the contrary, it rather implies that although the services or expenditures may be highly desirable, they are beyond our financial means at the moment.

We must accept that, because of the parlous state of the world economy, the rapid decline in the price of our major export commodity, gold—and for that matter the prices of most other primary exports—and the deterioration in the terms of trade, it is necessary to pursue our declared policy of consolidation and adjustment in order to preserve the basic strength of the economy.

As I have already indicated, South Africa’s position is not unique at the present time. Elsewhere conditions are far worse. Many of the leading industrial countries are having to contend with vast unemployment and very low growth rates and most of the non-oil raw material exporting countries are experiencing falling living standards and a serious decline in their international purchasing power. Even some of the oil producing countries, until recently awash with cash, are today in straitened financial circumstances because of the recent easing off in oil prices. We in South Africa should not be sorry if the bottle is half empty. We should be grateful that our bottle is still half full! Indeed, a good deal more than half full! Thomas Paine said, and I quote—

Government money must be spent with utmost care. It does not only derive from the rich but also from the hard-earned pence of the poor. No beggar dies who has not also made his small contribution.

I am thankful that, with the co-operation of my colleagues and everyone else concerned, and the sustained efforts of the Treasury, I have been able to contain Exchequer expenditures to a level I feel we can afford. I owe a particular debt of gratitude to the hon. the Prime Minister. Winston Churchill once declared that no Chancellor of the Exchequer (Minister of Finance) could hope to carry through sound financial measures without the constant sympathetic ear of the Prime Minister. Not only has our Prime Minister been a tower of strength to the Treasury, but he firmly grasps the economic realities on which our strategy is built.

A proper control over expenditure has been achieved despite the effects of inflation and despite substantial increases in the cost of servicing the public debt, in salary and wage adjustments for the Public Service, in social and civil pensions, and in the equitable allocation of funds for a great variety of services according to carefully determined priorities, of which defence and security are the biggest.

I now wish to direct the attention of the House to certain Votes which I think deserve special mention.

MANPOWER

The favourable economic conditions prevailing in 1981 once again pinpointed the need to develop and maintain a high level of trained manpower as a prerequisite for economic growth. A very high priority was therefore once again accorded to improving the manpower situation.

The Manpower Vote reflects an increase next year of 22,8%, to R63 million, R7 million of which has been earmarked for the Manpower Development Fund.

EDUCATION

Five years ago, in 1977-’78, the total amount expended on education by the Exchequer and disbursed by the various educational authorities for all population groups aggregated R1,27 billion. In this coming financial year, that is, five years later, and notwithstanding serious constraints in overall Government spending, this total will rise to no less than R3,16 billion. This represents an increase of nearly 150% in only five years. This record clearly proves the Government’s belief that investment in education is the best long-term assurance of a rising standard of living for all.

HOUSING

An amount of R258 million was originally available in the National Housing Fund in 1981-’82 for the erection of dwellings and the provision of infrastructure. The comparative figure for 1982-’83 is nearly 28% higher, at R330 million.

The Housing Fund has been granted borrowing powers in order to enable the private sector to participate in the financing of this essential service. To give it an opportunity to do so meaningfully, provision has been made in the accounts of the Housing Fund for total outside borrowing of R150 million. I have little doubt that the private sector will make every effort to come up to expectations in this important field.

While on the subject of housing, I would like to refer briefly to the work of the Commission of Enquiry into certain Building Society Matters. This Commission received its terms of reference less than a year ago and was requested, amongst others, to consider the increases early in 1981 in mortgage rates, what alternative actions could have been taken by the building societies, and how such sharp and frequent increases might be avoided in future. Since then a number of related issues have also been referred to it for consideration.

In the course of its investigations the Commission found it necessary to undertake comprehensive statistical tabulations and analyses and to liaise frequently with the societies and with the De Kock Commission and others. I am informed that the final draft of its Report is now being prepared and that it will be submitted to the Government within the next few weeks.

DEFENCE

As in the past, defence and security must remain one of our highest priorities. In a military context it has been the Government’s aim, within the limits of the resources at its disposal, to place the Republic in as strong and secure a position as possible. It has done this not only by developing a well-trained and hard-hitting Defence Force, but also by building up a highly effective armaments industry.

The facts speak for themselves. At the beginning of the seventies, in 1970-’71, total expenditure on Defence amounted to less than R260 million. Today the figure is fast approaching R3 000 million.

THE PUBLIC SERVICE

A package of improvements in conditions of service costing a record R800 million has been approved for 1982-’83. Because an early decision was reached on the remuneration package, the greater part of the provision could be allocated to the various Votes, leaving a balance of some R200 million to be included in Vote 25: Improvement of Conditions of Service.

The major improvements contemplated are a substantial general salary adjustment, the implementation of a further phase of the programme to narrow the wage gap among the different population groups, and an extension of the practice of salary differentiation among selected professional categories.

The manning of the machinery of State with sufficient numbers of competent officers is one of our highest priorities. The Government trusts that the substantial salary and related improvements brought about in the present Budget will do much to alleviate the manpower problem in the Public Service, the smooth functioning of which is essential to the country’s administration.

South Africa’s public administration has a magnificent record of efficient and dedicated service, and every possible effort must be made to enable it to uphold its high standards.

PUBLIC DEBT

Prudent as we have been with our borrowing programme, the cost of the public debt service shows an increase of 29,5% on a main-budget-to-main-budget basis. This is largely due to the often unpredictably sharp increases in interest rates, both here and abroad. The cost of public debt was originally estimated at R1 771 million in 1981-’82, but is now expected to reach approximately R1 978 million, compared with an estimate for 1982-’83 of R2 294 million. The policy to offer investors realistic market-related interest rates is a sound one and I propose to continue with it.

LOCAL AUTHORITIES

In my Budget Speech last year I announced that the Government had accepted the recommendation of the Croeser Working Group to the effect that the State would in future assume responsibility for the payment of assessment rates to local authorities in respect of Government property. For this purpose I made available a sum of R20 million as a first instalment in the phasing-in process agreed upon. Despite the Exchequer’s constrained financial position, a further amount of R14 million is being proposed for 1982-’83, bringing the Treasury’s total direct allocation to local authorities in the coming year to R43,6 million.

To this amount must be added the transfer payments already being made to local authorities for ambulance and fire protection services, as well as the additional burden accepted by Government in respect of the loss of revenue for commuter services resulting from the decision to allow administration boards to retain their full profits from the sale of liquor. The upshot is that a total amount of some R92 million will in the 1982-’83 financial year accrue to local authorities.

This is indeed a significant financial contribution by central Government to assist the third tier of Government and has, in fact, already had the effect that in some cases local authorities have been able to reduce their property rates and in others to avoid increasing them, as many of them would have had to do otherwise.

The Croeser Working Group has completed by far the largest part of its comprehensive and difficult task. The only significant matters still outstanding relate to the restructuring of existing and the identification of additional sources of local authority revenue, the broad co-ordination of conditions of service with those in the rest of the public service, and certain other technical matters. None of these can be completed until such time as the Government has announced its decisions on the forthcoming recommendations of the President’s Council on these and related matters. In the meantime the Working Group will continue its important work based on the sound foundations laid by the Browne Committee.

Finally, in this regard, there is the question of local authority expenditures which, in the nature of things, have assumed considerable proportions in recent years. While central and provincial government expenditures are subjected to clearly defined control procedures, the same cannot be said of local authorities. After careful consideration the Working Group recommended, and the Government accepted the recommendation, that there should be a measure of surveillance by Treasury over the aggregate expenditures of local authorities. The best way to do this will be worked out after further consultation with those concerned.

It is clearly essential these days that all levels of government adopt and maintain effective financial discipline over their expenditures. To this end local authorities have been asked to limit the increase in their overall expenditures to a figure somewhat below the current inflation rate. This will not be an easy objective to attain, but with the active co-operation of all concerned it should be possible to limit the demands made on ratepayers, on users of municipal services, and on the capital and money markets to more realistic and sustainable levels.

Apart from the amounts already included in the printed Estimates, I now wish to propose a few additional items of expenditure to be included in the Supplementary Estimates.

SOCIAL, MILITARY AND CIVIL PENSIONS

The Government is fully aware of the financial problems which the rising cost of living poses for our senior citizens and less privileged persons. Furthermore, as 1982 is the Year of the Aged, I deem it a special privilege once again to be able to announce meaningful concessions to social pensioners and other social beneficiaries, as well as to military and civil pensioners.

The details of these concessions are set out in the document I will table this afternoon.

(a) Social Pensions and Allowances

The concessions I propose include an increase of R16 per month in the case of Whites, R12 per month for Coloureds and Asians, and R9 per month for Blacks. This means that the social pension for Whites will rise to R138 per month, that of Coloureds and Asians to R83 per month, and that of Blacks to R49 per month. These increases are the largest absolute amounts proposed since the inception of the respective schemes and, as is customary, will apply from 1 October 1982. The cost of these concessions will amount to a record R77,2 million in 1982-’83 and to no less than R154,4 million in a full financial year.

During the past few years it has been customary to pay bonuses to social pensioners and other social beneficiaries, and it affords me great pleasure to be able to announce that another two bonus payments will be made in the coming financial year. A total of R30 for Whites, R24 for Coloureds and Asians, and R18 for Blacks will again be paid to all social pensioners and other social beneficiaries in May 1982 and again in November 1982. The cost of these bonuses will amount to R47,3 million in 1982-’83.

(b) Military Pensions

All military pensions will be adjusted by 15% from 1 April 1982, which means that in cases where there is a 100% disability an increase of R50,40 per month will be forthcoming. The cost of this concession is R3,3 million.

(c) Civil Pensions

The Government is well aware of the problem experienced by former employees of the State, now retired. There is special regard and sympathy for the “old guard”, that is, those persons who retired some time ago on relatively low pensions.

The Government has decided, by the application of a special formula, to increase, as from 1 April 1982, the pensions of all ex-employees and other civil pensioners of the State by 10%, plus 1% in respect of each complete year of retirement as at 31 March 1982.

The cost of these increases is estimated at R66,4 million. The Civil Pensions Stabilization Account and the various pension funds will carry R62,4 million of this cost and the Exchequer the balance of R4 million.

In addition to this formula adjustment, it has been decided to help civil pensioners who have not been members of an official medical scheme by enabling them to become members of one of the official medical schemes as from 1 October 1982. An additional R5,2 million will be provided for this purpose during 1982-’83.

LAND CONSOLIDATION

After due consideration of official commitments in respect of the purchase of land for the consolidation of the Black states, I am pleased to be able to propose that apart from an amount of R52 million included in the printed Estimates, a further R12 million be provided in the Supplementary Estimates for this purpose. I may just interpolate here that that is not the full total because there are also certain other sources of revenue accruing to the fund. These increases will enable the Department of Co-operation and Development to make meaningful progress with the consolidation programme.

SUBSIDY ON BREAD

In the tight financial situation we are now experiencing, a reduced amount of R113 million was provided for bread and bread meal subsidies in the printed Estimates. It has been decided that the bread subsidy should in future be determined on a more rational basis. The present system of subsidization will remain in force until 30 September 1982, whereafter, always subject to the Treasury’s ability to pay in any given year, the subsidy will be calculated at 5% of the total cost of a loaf of white bread, including the retailer’s margin, and 20% of the cost of a brown loaf.

In order to implement this new system, projections of total bread consumption for 1982 have been obtained, and projected cost increases have also been taken into account. Based on these projections, I wish to propose that the amount already provided for bread subsidies be increased by R45 million. This brings the 1982-’83 subsidy on bread and bread meal to within a couple of million rand of the current year’s figure.

The decision to subsidize white bread by 5% is based on the premise that the buyer of white bread be subsidized to the extent of the general sales tax applicable—at present 5%. Buyers of brown bread, however, will have the benefit of a much bigger subsidy and will therefore pay a considerably lower price per loaf.

Someone once said that “a subsidy is a formula to return your own money to you with such a fanfare that you regard it as a gift”. Whether a gift or not, to my way of thinking a contribution from the Exchequer, if it can be afforded, to the consumers of bread is very desirable in the times we live in.

But we must also have regard to the total cost involved. It must be accepted that, notwithstanding the high rate of subsidization, a rise in the price of bread as from 1 October 1982 nevertheless seems inevitable at this point.

AGRICULTURE

Dried Fruit Industry

It is well known that the State is at present assisting the canning industry financially. The assistance is based on a system of marketing quotas in order to discourage overproduction and the accumulation of unsold stocks of canned fruit. In the short term, however, this policy resulted in an oversupply of fruit to the dried fruit industry and caused temporary dislocations in that industry.

In order to assist the dried fruit industry to finance the acquisition of new processing facilities and to market its surplus of dried fruit, Government has decided to extend a 5-year interest-free loan of R2 million to the sole registered packer of dried fruit in the industry. I propose that this amount be included in the Supplementary Estimates.

Tobacco Producers

Tobacco producers in certain areas are experiencing serious marketing problems resulting from, among other things, an excessively high chlorine content in their irrigation water. To date a number of the tobacco farmers affected have been forced out of the industry.

Representations made on behalf of these producers by the South African Agricultural Union and the Tobacco Board are receiving attention at present. As soon as the results of investigations which need to be completed come to hand, the Government will be in a position to take a final decision on the nature and extent of assistance to affected producers. No specific financial provision can be made at this stage, but this aspect will be dealt with in due course.

Drought Relief

After last year’s bountiful crops and favourable agricultural conditions in general in most parts of the country, South Africa is now experiencing increasingly serious drought conditions in certain areas. As is the case with producers in other sectors of the economy, the farming community is additionally faced with rising input costs, including the high cost of money. Apart from the hardship caused to the farmers affected, this combination of factors will adversely affect our food production potential, at least in the short run, and that is a serious matter for the country as a whole.

Together with the hon. the Minister of Agriculture and Fisheries and certain other colleagues, I was present when the president and other executive members of the South African Agricultural Union recently called on the hon. the Prime Minister to acquaint him of the latest position, and I can attest to the constructive and sympathetic discussions which took place. The Government lost no time in referring the matter to the Jacobs Committee for urgent study and report. As soon as the Committee’s recommendations are received, the necessary steps will be taken for the relief of what is plainly a serious situation, subject only to the financial means at the Government’s disposal.

Since the extent and nature of financial assistance required still needs to be determined, funds for this purpose are not provided for in these Estimates, but will in any case be made available at the right time.

The supplementary expenditure estimates outlined above add up to R196 million. If this amount is added to the printed Estimates of Expenditure of R18 042 million, aggregate expenditure for the year 1982-’83 will amount to R18 238 million.

Let us next consider the revenue side of the Government’s Accounts.

*REVENUE 1982-’83

Estimated total revenue on the current basis of taxation amounts to R15 417 million, which is 7,9% higher than the revised 1981-’82 estimate of R14 290 million. Receipts both from Inland Revenue and from Customs and Excise are expected to increase—Inland Revenue by R912 million and Customs and Excise by R215 million. These estimates already include the increased proceeds to be collected from the one percentage point increase in general sales tax and the 10% import surcharge announced last month.

The additional revenue from these two sources, now estimated to amount to about R1 235 million, will in itself only partly offset the decrease in the collections from income tax on gold mines and gold mining leases. Estimated receipts from the gold mining industry during 1982-’83 most probably will amount to no more than R900 million, compared with R2 171 million in 1981-’82—a reduction of nearly R1 300 million in one year. This huge loss in revenue is the direct result of the adverse effect that the drop in the gold price and cost escalations are expected to have on the operating results of the gold mines.

Uncertainty regarding the future behaviour of the gold price makes it extremely difficult, if not virtually impossible, to predict with any degree of accuracy Exchequer revenues from this source. While I am certainly not pessimistic on the longer term outlook for gold—anything but—it would only be prudent to assume that the average gold price for the year 1982-’83 will be significantly below the average realized during the current financial year, and I have framed my estimates accordingly.

To sum up, on the current basis of taxation, total tax revenues of R15 417 million are available to finance total expenditures of R18 238 million. The deficit before borrowing at this stage thus amounts to R2 821 million.

Despite the financing problems we are faced with now, I wish to announce the following concessions.

FINAL PAYE DEDUCTION SYSTEM

In my Budget speech last year I announced that, with effect from the tax year which commenced at the beginning of this month, persons in the lower income categories who derive their income entirely, or almost entirely, from salaries, wages or pensions, will no longer be required to submit annual returns of income. In the majority of such cases the PAYE, which will be deducted in terms of the new deduction tables which came into operation on the first of this month, will represent a final settlement of their tax liability. A substantive amendment was included in last year’s Income Tax Act to make this possible.

Persons affected by this measure are those whose taxable incomes, that is, net salary after deduction of medical expenses, pension and retirement annuity fund contributions, and the allowance in respect of the earnings of a spouse, do not exceed R7 000.

The new measure cannot, of course, be applied to persons who receive substantial investment income not taxed at source, or to those whose income is received in a form other than fixed salaries, wages or pensions.

It is gratifying to note that even at the relatively low income levels, many persons are still able and willing to save, and in order to encourage savings and not to deprive them of the benefits of the new system, I furthermore propose that the first R100 of their aggregate income derived from interest and dividends be exempt from tax. This exemption will, in fairness, be granted to all taxpayers irrespective of their income, and I estimate the concomitant loss of revenue to the Fiscus for the 1982-’83 financial year at R13 million.

Although taxpayers in the category I have mentioned will not in future be required, as a matter of course, to submit returns of income for assessment purposes, I realize that factors, such as the birth of a child or abnormally high medical expenses may result in over-deductions of PAYE. In such cases, taxpayers will still be entitled to ask for an assessment and a refund of tax overpaid.

There is a point which I would like to stress in regard to the new system, and that is that it does not affect the year of assessment which ended on 28 February this year. Income tax returns in respect of that year were recently mailed and must still be completed by all taxpayers. The Commissioner for Inland Revenue will in due course advise all those taxpayers who will not in future be required to complete returns of income.

The adjustments and simplifications which I have referred to will make the tax collection system that much more cost-effective and is a further positive step in our overall tax reform programme.

PRIMARY REBATE

It is apparent from the new normal tax rate table which will be tabled today, that the rate of tax applicable to the first R7 000 of an individual’s taxable income is 10%. Previously the rate of tax for the first R6 000 was 8% and from R6 001 to R7 000 it was 10%. The proposed new rate results in an additional R120 gross tax payable, before the deduction of rebates. The increase in the rate is not intended to be an additional impost on taxpayers but has been decided upon as part of the scheme for the elimination of unnecessary income tax assessments in the case of salary earners whose taxable incomes do not exceed R7 000, as explained. To neutralize the increase in the gross rates, an additional rebate of R120 was provided for in last year’s Income Tax Act as part of the scheme to put into operation the PAYE final deduction system as from 1 March 1982.

The sacrifice of revenue, which is confined to the R0—R7 000 income sector, is estimated at R40 million and has also already been taken into account in the printed Estimates of Revenue.

The increase in the primary rebate, taken together with the standard deductions for medical and certain other expenses and the standard insurance rebate provided for in last year’s Income Tax Act, will have the effect of raising the tax thresholds of individuals without children or dependants as follows:

Present threshold

Proposed threshold

Married person

—under 60

R2 500

R3 800

—60 but under 70

R4 000

R5 000

—70 and over

5 000

5 800

Unmarried person

—under 60

R1 500

R2 850

—60 but under 70

R3 000

R4 050

—70 and over

R4 000

R4 850

MARRIED WOMEN

Honoré de Balzac once said that “women are always afraid of things which have to be divided”. This does not seem to be the case with the vexed question of the taxation of the income of married women, a matter which continues to enjoy the attention of the Department and the Standing Commission on Taxation Policy.

It has still not been possible to formulate a preferable alternative to the present system whereby the incomes of married persons are aggregated for taxation purposes. However, as I announced during my 1981-’82 Budget Speech, one of the consequential adjustments which would be necessary to facilitate the introduction of the Final PAYE Deduction System referred to, is that the deduction allowed from the earnings of a married woman would need to be increased in two stages, from the R1 200 applicable in the 1980-’81 tax year, to R1 400 in 1981-’82, and to R1 600 in 1982-’83.

I trust that this concession will further reduce the real tax burden of women engaged in gainful employment or in a trade or profession. The loss of revenue for the 1982-’83 financial year is estimated to amount to R19 million.

I may add that the total loss of revenue as a result of the introduction of the Final PAYE Deduction System, including amounts already accounted for in the printed Estimates of Revenue, will aggregate no less than R109 million in a full year.

The effect of the final deduction system with its inbuilt standard deductions and rebates and increased deduction from a married woman’s earned income, can best be illustrated by an example. Take the case of a married couple under the age of 60 years with no children, where the husband earns R4 000 and the wife R2 500 per year, a total of R6 500. In the tax year which ended on 28 February 1982, tax amounting to some R210 had been deducted in their case. In the present tax year ending 28 February 1983, total tax deductible will only amount to R109, and no further tax returns or adjusting assessments will be issued. I regard this to be a very meaningful concession to the lower income groups in South Africa.

HOUSING

As indicated earlier, the provision of adequate and sufficient housing remains a problem which enjoys a very high priority with the Government. Not only have substantial public funds been allocated over the years for the provision of housing, but employers have also been encouraged by means of tax concessions to assist employees in either acquiring their own homes or in obtaining rented accommodation.

The provision of adequate financial resources, particularly for housing for the lower income groups, is at present being studied in depth by an expert committee representing the private and public sectors under the chairmanship of the Deputy Minister of Finance.

The private sector will be called upon to make a much more substantial contribution towards solving this problem, but in the meantime I feel it appropriate for the Government to offer further tax concessions specifically to encourage the construction of new accommodation for rent, at present at a premium throughout the country.

Various schemes and suggestions have been researched, but most were found to be either impracticable, too open to abuse, or even in conflict with sound taxation principles.

I am prepared, nevertheless, to offer the following concessions to investors who plan on erecting accommodation for rent: The annual depreciation allowance of 2% at present applicable to new industrial buildings will be extended to include all new housing projects which offer not less than 5 family housing units for rent. This will apply to all qualifying housing projects the erection of which commences on or after 1 April 1982.

In addition I wish to propose that an initial allowance of 10% of the cost of the project be allowed as a deduction from income in the year in which the project is completed and the accommodation is first let to tenants.

If the developer of the housing project should dispose of such property either by means of an outright sale of the whole project or through sectional title selling of individual units, or in any other way, the allowances previously granted will be recouped and included in his taxable income. Details of the allowances will be contained in the Income Tax Bill which will be presented to Parliament later in the session.

I am confident that these concessions will stimulate the provision of accommodation for rent for the benefit of those dependent on such accommodation, and will assist investors materially with their cash flow problems and return on investment.

It is estimated that the loss of revenue which this concession will entail in 1982-’83 will not exceed R1 million, but it could amount to approximately R500 000 for each R10 million invested in such projects in a full year.

CINEMATOGRAPH FILMS TAX

The cinematograph films tax has been in operation in its present form since 1960. It is imposed at the rate of 3 cents on admission tickets of more than 35 cents, and has remained unchanged over the years. The tax has never been a substantial contributor to the State coffers and, in fact, the yield has declined dramatically over the last five years; from R1,9 million in 1975 to R0,9 million in 1980, no doubt mainly due to the advent of television.

The Standing Commission has recommended that the tax be abolished. I am in agreement with this recommendation and, in the interest of more efficient administration, accordingly propose that the tax be abolished with effect from 1 April 1982. The loss of revenue will amount to some R1 million.

The total of the concessions I have just outlined amount to R34 million and will reduce receipts from Inland Revenue from the printed figure of R13 198 million to R13 164 million.

Before turning to certain proposals for relief from excise duties, there are two further inland revenue matters to which I should like to refer.

FRINGE BENEFITS

The taxation of fringe benefits arising from employment or from the holding of an office, which has been part of our income tax law ever since its inception, has in principle been reaffirmed by the Government. The question in regard to the uniform valuation of such benefits is, however, one which should be approached very circumspectly.

Certain proposals were first put forward by the Franzsen Commission in 1970. The matter was subsequently investigated by Inland Revenue and the Standing Commission on Taxation Policy. After protracted and wide-ranging discussions, it was decided that the Standing Commission’s valuation proposals should form the basis of an in-depth inquiry by a Parliamentary Commission.

Although reports have appeared in the Press to the effect that the proposals for the taxation of fringe benefits have been shelved, I wish to give the assurance that this is not the case. The recommendations of the Parliamentary Commission, will, upon receipt, be considered by Government without delay and, if found to be acceptable, will be notified to employer and employee organizations in good time so that any legislation which may be required can be introduced early in the next year in order to ensure that the recommendations take effect as from 1 March 1983, that is for the 1983-’84 tax year.

FISCAL INCENTIVE MEASURES

In my Budget Speech on 26 March 1980 I indicated that I had directed the Standing Commission on Taxation Policy to investigate the initial and investment allowances accruing to manufacturers and to make recommendations to me in this regard. The matter is one of extreme complexity and, as I previously said, caution is needed before any change is made to the status quo. I am informed that the Standing Commission has made good progress in its task and am hopeful that it will be possible for the Commission to submit its recommendations to me within the next few months. It appears unlikely, however, that any consequential legislation will be introduced during the current session of Parliament.

I wish now to propose two concessions in regard to excise duties.

EXCISE DUTY CONCESSIONS

Natural Wines

The agricultural industry in the Western Cape is one of the main supports of the regional economy and provides an important impetus to development and growth. It is also true that agriculture in this region is much dependent upon the weal and woe of the products of the vine.

At the same time wine provides the State with not inconsiderable excise revenues and in this way assists in financing necessary expenditures. Yet it is also true that in the case of natural wines, notwithstanding a slight, albeit consistent upturn in demand, consumption per capita today is still below the 1975 level and this despite an annual average producers’ price rise of less than 9% during this period.

I wish to propose, therefore, that the full excise duty of 3 cents per litre on natural wines be abolished. Though the incidence of this duty may be small, I am told the concession will bring South Africa into line with other wine-producing countries such as West Germany, Italy, Austria, Switzerland and Australia.

The loss of revenue is calculated to amount to R6 million in 1982-’83.

In the case of natural fermented apple, pear and orange beverages I propose that the excise duty be similarly withdrawn. The loss of revenue in this case will be minimal.

Natural fruit juices are, of course, not subject to any excise duty.

Non-alcoholic Beverages

This industry has had to cope in recent times with substantial increases in input costs, one of the latest examples being an increase in the price of sugar of some 13%. Any tax concession will grant a measure of relief not only to the producer and the consumer but will also, I understand, tend to be helpful to the small businessman in the rural areas. I wish to propose, therefore, that the excise duty on non-alcoholic beverages be reduced by 1 cent per litre. This will mean an estimated loss of revenue in 1982-’83 of some R10 million.

Government notices to give effect to these proposals will appear tomorrow.

The total cost of these two concessions will amount to R16 million and will reduce the income from customs and excise duties in the printed Estimates of Revenue to R2 203 million.

FINANCING OF DEFICIT

The estimate of total revenue is now R15 367 million, which leaves me with a deficit before borrowing of R2 871 million at this stage.

After adding to the deficit an amount of R1 246 million to provide for loan redemptions and other loan expenditures—the latter figure is very substantially lower than total redemptions for the 1981-’82 financial year—the total financing requirement will amount to R4 117 million.

I propose that this amount be financed as follows:

R million

Public Debt Commissioners

1 290

Reinvestment of maturing stock

614

New stock issues

800

Non-marketable securities

550

Foreign loans

250

Surplus carried forward from 1981-’82

16

R3 520

This still leaves me with a shortfall of R597 million.

National Defence Bonds and Defence Bonus Bonds

I should explain that the non-marketable securities I have just mentioned comprise tax-free Treasury Bonds, tax-free Defence Bonus Bonds and taxable National Defence Bonds.

Recently in my Part Appropriation speech I announced an increase in the interest rate on Treasury Bonds and indicated that I would also deal with improvements in the terms of issue of National Defence Bonds and Defence Bonus Bonds in due course.

It has now been decided that the interest rate payable on fully taxable National Defence Bonds—which have a minimum currency of twelve months—be raised from 11% to 14% with effect from 1 April 1982 to make them more attractive and competitive in the market.

From the same date the method of calculating interest on the tax-free Defence Bonus Bonds will also be changed from the current 5% simple interest basis to a 5% monthly compounded basis, which will yield an effective 5,66% per annum over a five-year term. This compound rate of interest will also apply to all existing unredeemed investments made since the inception of the scheme provided that the Bonds are not redeemed before 1 April 1983. Interest on redemptions made before that date will continue to be calculated at the existing simple interest rate. These adjustments should at least ensure a positive flow of investment funds into these two investment media.

The loan programme set out above presupposes that funds be obtained in the domestic market in a non-inflationary manner at realistic market-related rates and care will therefore be taken to limit the individual stock issues to smaller amounts obtainable without undue difficulty and without placing undue pressures on the money and capital markets and thus on interest rates. Smaller stock issues will also ensure a more even distribution of cash flows to the Treasury throughout the year.

I also believe that the Exchequer should approach the markets for its loan requirements on a more regular basis than hitherto. The success of the Treasury’s first tender issue has been most heartening considering the difficult conditions pertaining in the market at the time, and this method will again be used for the April issue and probably for further issues during the year.

It is imperative that the shortfall of R597 million be financed in a non-inflationary manner, most suitably by way of taxation. Various options are open to me in this respect, but considering all the positive and negative effects of the various taxes, a choice had to be made as to the most desirable package under present-day and expected conditions.

I wish to turn, then, to the additional taxation proposals. As Henry Ward Beecher so aptly states it: “In this world it is not what we take up, but what we give up, that makes us rich”. Let us not give up grudgingly for the rewards will be plentiful.

AD VALOREM EXCISE DUTIES

In 1978 certain ad valorem duties were imposed on less essential goods such as jewellery, photographic equipment, furs and the like. I feel it essential for these items to make a further contribution to the State coffers and wish to propose that the present ad valorem duties on certain locally produced goods as well as their imported equivalents be raised from 20% and 25% to 25% and 30%, respectively.

This proposal is expected to yield additional revenue of some R28 million in the 1982-’83 financial year and should also assist in curbing consumer demand. The increased duties will become effective as from 25 March 1982 and will be applicable to all imported goods concerned which have not been cleared for home consumption before that date and to all similar locally manufactured goods which by tomorrow have not been removed from the premises of manufacturers and owners of warehouses licensed by the Commissioner for Customs and Excise.

ADVERTISING SERVICES

General sales tax

General sales tax is levied on a wide variety of commercial and industrial services, for example repair services, the services of tailors, hairdressers, launderers, photographers, signwriters and printers, to mention only a few. The omission from this list of advertising services is somewhat anomalous and I feel that the taxation of such services for the purpose of producing revenue is fully justified and will not prove to be unduly burdensome.

It is, therefore, proposed to amend the Sales Tax Act to bring advertising services within the ambit of the Act as from 1 August 1982. There may be certain practical problems in this regard and I have, therefore, instructed the Commissioner for Inland Revenue to liaise with the advertising industry and media in order to iron out these problems before the legislation is drafted.

The additional revenue from this source is estimated at R31 million for a full year and at R20 million for the current financial year.

COMPANY TAX

During 11 of the last 14 years a surcharge ranging from 2,5% to 10% was imposed on the income tax payable by companies. In addition, in most of these years a loan levy was also applied. The present surcharge on the basic rate of 40% amounts to 5%, which makes the effective rate of tax on all companies excluding gold and diamond mining companies—42%.

This is a low rate by world standards. In view of the fact that basic company tax rates have remained unchanged since 1970, I propose that the present 5% surcharge be incorporated in the basic rate. I propose, further, that a surcharge of 10% be levied on the new basic rate for all companies excluding gold and diamond mining companies.

The additional tax that will be collected by the increase in the effective rate from 40 to 42% and the 10% surcharge is estimated at R400 million for a full year and at R300 million for the 1982-’83 financial year.

I do not propose to increase the basic rate of tax applicable to gold or diamond mining companies. Gold mining companies pay tax according to a formula which varies with profitability, and to which is added a 5% surcharge, while the tax on diamond mines is 45% plus a 5% surcharge, an effective rate of 47,25%.

In the circumstances prevailing, however, I consider it is not inappropriate to increase the surcharge in the case of the gold mining as well as the diamond mining companies by 10%, that is, from 5% to 15%, to provide in this way much needed additional revenue from which to meet, inter alia, the increased demands which will be made on the Exchequer in the form of assistance to the marginal gold mines. In this way the more profitable mines will contribute partly to the strengthening of the total gold mining industry.

The yield from the additional surcharge on gold and diamond mining companies is estimated to amount to R115 million in a full year and R105 million in the 1982-’83 fiscal year.

LONG-TERM INSURANCE COMPANIES

The taxable income of companies carrying on long-term insurance business cannot, because of the nature of their business, be determined according to normal accounting principles and it has always been necessary to provide special rules for this purpose. Since 1959 the basic measure for the determination of taxable income from life insurers has been 30% of gross income derived from investments.

Over the years the long-term insurance industry has grown enormously and I feel it is only fair that it should make a greater contribution to the Exchequer. I propose, therefore, that the percentage of gross investment income used as a yardstick for measuring taxable income be increased from 30 to 40%.

The taxation position of the long-term life insurance industry is a matter which requires further investigation and I have instructed the Standing Commission on Taxation Policy and the Commissioner for Inland Revenue to consider the matter in depth during the recess in consultation with the whole industry and to report as soon as practicable.

The additional revenue to be collected during the current financial year as a result of this proposal is estimated to amount to R38 million.

LOAN LEVY ON INDIVIDUALS

The total additional tax that can be collected based on the proposals I have just made amounts to R491 million, which still leaves me with a deficit of R106 million.

Few will differ from Thomas Jefferson when he remarked: “The purse of the people is the real seat of sensibility. Let it be drawn upon largely, and they will listen to truths which could not excite them through any other organ.”

I wish thus to propose, finally, the imposition of a 5% loan levy on income tax payable by individuals, but subject to exempting the following taxpayers:

  1. (a) Persons of all age groups whose incomes are R7 000 or less. These taxpayers, the majority of whom will fall under the Final PAYE Deduction System to which I referred earlier on, will be taxed at a fixed rate. I do feel that no further loan levy should be added to their tax;
  2. (b) Persons, other than those I have just mentioned, whose basic normal income tax before the addition of loan levy amounts to R150 or less; and
  3. (c) in the Year of the Aged, persons who are 70 years of age and older and whose taxable incomes exceed R7 000 but do not exceed R15 000 per annum, though remaining liable for normal income tax, will not be liable for loan levy.

Not only will the levy yield the revenue required to leave me with a small surplus for the 1982-’83 financial year, but it should also contribute, albeit moderately, to curb consumer demand by reducing personal disposable incomes and thus help in the fight against inflation. Additionally, it has the advantage that it does not presuppose an increase in the marginal rates of tax which I have striven so hard to bring down to, and keep at, lower and more realistic levels.

The levy is a compulsory loan to be repaid within a maximum period of 7 years, at simple, tax-free interest. Up to now the rate of interest has been 5% per annum, but I now propose that this rate be raised to 8%.

The yield expected from the loan levy in the 1982-’83 financial year will amount to around R115 million and R157 million for a full financial year.

After all these revenue proposals have been taken into account, there will remain a small surplus of R9 million.

THE DEFICIT BEFORE BORROWING

When I last mentioned the “deficit before borrowing” the figure was R2 871 million. This deficit is actually the shortfall between the finally adjusted estimates of aggregate revenue and aggregate expenditure. To the estimates of revenue on the existing basis of taxation, R15 417 million, must be added the proposed increases in taxation, R491 million, and from this aggregate must be subtracted the proposed tax concessions, R50 million, to give a finally adjusted aggregate revenue estimate of R15 858 million. Likewise, to the printed Estimates of Expenditure, R18 042 million, must be added the amount of the proposed supplementary expenditures, R196 million, to give a finally adjusted aggregate expenditure estimate of R18 238 million.

The deficit before borrowing is then the difference between R15 858 million and R18 238 million, a shortfall of R2 380 million.

SUMMARY

As is customary, a summary of the Government’s accounts is subjoined in the printed version of the Budget Speech.

COMPARATIVE STATEMENT OF THE STATE REVENUE ACCOUNT

Revised figure 1981-’82

Budget figure 1982-’83

Percent age change

Expenditure:

Rm

Rm

Rm

%

Printed Estimate (R.P. 2—’82: First Print):

18 042

Plus: Supplementary appropriations in respect of:

Social pensions

77,2

Pension bonuses

47,3

Military pensions

3,3

Civil pensions

4,0

Medical aid contributions for civil pensioners

5,2

Land consolidation

12,0

Subsidy on bread

45,0

Dried fruit industry

2,0

196

Total Expenditure

16 350

18 238

11,5

Revenue:

Printed Estimate (R.P. 3—’82: First Print):

Customs and Excise at existing rates:

2 219

Less: Taxation proposals in respect of:

Excise duty on natural wine

6

Excise duty on mineral water

10

16

2 203

Plus: Taxation proposals in respect of: Ad valorem excise duty

28

28

Total for Customs and Excise

2 004

2 231

11,3

Inland Revenue at existing rates (excluding loan levies):

13 198

Less: Taxation proposals in respect of:

PAYE final deductions

13

Married women

19

Construction of accommodation for rent

1

Cinematograph Films Tax

1

34

13 164

Plus: Taxation proposals in respect of:

Surcharge on companies and other mines

300

Surcharge on gold and diamond mines

105

General Sales tax on advertisements

20

Tax on Investment income of insurance companies

38

463

Total for Inland Revenue

12 286

13 627

10,9

Total Revenue

14 290

15 858

11,0

Deficit: (before borrowing)

2 060

2 380

15,5

Loan Redemptions:

Domestic Loans:

Stock

2 068

614

Bonds

821

351

Foreign Loans

69

32

Loan levy

90

239

Other loan expenditures

24

10

3 072

1 246

–59,4

Financing Requirement:

5 132

3 626

–29,3

Financing:

Domestic loans:

Public Debt Commissioners

1 152

1 290

Re-investment of maturing Stock

614

New Government Stock issues

2 963

800

Non-marketable Securities:

Treasury Bonds

300

Bonus Bonds

200

National Defence Bonds

50

398

550

Foreign loans

501

250

Loan levy

44

115

Surplus carried forward from previous year

90

16

Total Financing

5 148

3 635

Surplus

16

9

CONCLUSION

I believe that the Budget I have presented today complies with the three minimum requirements to which I referred earlier.

First and foremost, in nominal terms it provides for an increase in total expenditure of only 11,5% above the revised estimate for 1981-’82. At the present rate of inflation this implies an actual decline in expenditure in real terms. Since additional appropriations later in the year will have to be kept to the absolute minimum, the final expenditure outturn should therefore show little, if any, increase in real terms in 1982-’83.

Secondly, the deficit before borrowing is estimated to rise only moderately from R2 060 million in 1981-’82 to R2 380 million in 1982-’83. These amounts both represent 2,8% of gross domestic product, compared with the average of 3,4% over the past 22 years.

Thirdly, provision is made to finance this expected deficit in such a way that not only the Exchequer but also the government sector as a whole, including the extra-budgetary funds, will be able to avoid a net recourse to bank credit. In other words, the Budget is designed to ensure that the government sector’s financial operations do not contribute to any increase in the liquidity base of the banking system or in the broad money supply over the financial year as a whole.

The Budget is therefore a strict and conservative one which should achieve its basic objective of contributing to the consolidation of the domestic economy and the adjustment of the balance of payments—the two main economic policy priorities at this time. It has signally succeeded in its twin objectives of keeping the deficit before borrowing to a minimum in order to place as little pressure as possible on interest rates; and in keeping a firm hand on government spending, both because of the huge drop in gold mining revenues and the imperative need to counter inflation.

To design such a Budget in the face of the expected decline of some R1 300 million in tax and lease payments by the gold mining industry and the increased cost of maintaining essential government services, was no easy task. It inevitably meant a combination of restrictions on government expenditure and increases in tax rates. Such budgetary measures are never popular, but in situations like that of today they are clearly essential to preserve the basic strength of the South African economy.

I believe furthermore that the Budget spreads the burden of adjustment in a fair and equitable manner. The increase in general sales tax from 4 to 5% and the imposition of the 10% surcharge on imports introduced in the Part Appropriation Bill last month are, of course, indirect taxes, which affect a broad spectrum of people. These steps have now been supplemented, firstly, by increases in ad valorem excise duties on mainly non-essential goods and, secondly, by increased direct taxes or surcharges on companies, including gold and diamond mines, as well as on the investment income of insurance companies. I have refrained from raising the rate of income tax on individuals, mainly because of the incidence of “fiscal drag” or “bracket creeping”, which results from the combination of inflation and a progressive tax system—although I have made concessions in the case of married women and those earning salaries, wages and pensions below R7 000 per annum. I have preferred, rather, to impose a loan levy of 5% on individual taxpayers, which is a compulsory savings measure.

Another major feature of this Budget is that, by increasing the fiscal component in the policy “mix”, it should in due course ease the burden of adjustment currently being carried by monetary policy. It should, in particular, counteract the upward pressure on interest rates and assist in maintaining the strength of the rand in the foreign exchange market.

In this regard it might be argued that the Budget is still not strict enough and that it should have provided for even larger tax increases, particularly in view of the recent further decline in the gold price and the urgent need to curb monetary demand with a view to balance of payments adjustment. It is my considered opinion, however, that the Budget is adequate for the task at hand. Of course, we shall have to continue relying on a strict monetary policy with full acceptance of the relatively high level of nominal interest rates which that implies. But in our present circumstances, I believe that is preferable to further increases in tax rates.

Although monetary demand is still high, the economy is now finally “cooling down” and the real growth rate is gradually declining. The balance of payments adjustment process is well under way and will certainly be accelerated by today’s Budget. In these circumstances, I believe that further tax increases above and beyond those already included in this Budget, might prove to be more contractionary than necessary. Hence our preference for continuing with the present tight money and high interest rate policy as part of a broader and well co-ordinated fiscal and monetary strategy.

If, however, conditions were to change materially as a result of unexpected external or internal economic developments in the months ahead, I shall not hesitate to take such further fiscal measures as might be necessary to safeguard the basic strength of the economy.

Today’s Budget once again underlines the recognition by the Government of the changed economic realities of the present time. It also signifies our resolve to take the steps necessary to ensure that the South African economy makes the required adjustments to these realities timeously and in a fundamentally sound way. Given the present parlous state of the world economy, this will inevitably entail a measure of sacrifice on our part. But if we have the courage and determination to persist with the cohesive package of economic stabilization policies we now have in place, we shall undoubtedly reap the benefits. We shall then find ourselves in a position to take full advantage of the next world economic recovery, which cannot be too far in the future.

South Africa’s economy is basically so strong and so versatile that I have no doubt that, whatever the state of the world economy and the vagaries of the business cycle, our economic future is assured. As it is, our economic performance in the world depression of the last two years and more bears comparison with the very best.

In conclusion, I wish to pay tribute to Mr. W. G. Schickerling, who retires as Auditor General on 30 April 1982 after a long and distinguished career in the Public Service. I trust that he and Mrs. Schickerling will enjoy a long and well-deserved retirement. I congratulate Mr. A. P. Ellis on his appointment as Auditor-General as from 1 May 1982. I also wish to pay tribute to my staff, to the Treasury as a whole under the leadership of Dr. De Loor as Director-General and to the Reserve Bank under the leadership of Dr. De Kock as President, for the able and dedicated way in which they have acquitted themselves of their numerous tasks.

TABLING

Mr. Speaker, I now lay upon the Table—

  1. (1) Estimate of Expenditure to be defrayed from State Revenue Account during the financial year ending 31 March 1983 [R.P. 2—’82];
  2. (2) Estimate of Revenue for the financial year ending 31 March 1983 [R.P. 3—’82];
  3. (3) Statistical/Economic Review [W.P.B—’82];
  4. (4 Comparative figures of Revenue for 1981-’82 and 1982-’83;
  5. (5) Taxation proposals [A. 2—’82];
  6. (6) Proposals for improved social pensions and grants, military pensions and civil pensions.

REVENUE 1981-’82 (R1 000)

Head of Revenue

Printed Estimate 1981-’82

Revised Estimate 1981-’82

Increase

Decrease

Inland Revenue:

Tax on income:

Normal tax:

Gold mines

1 620 000

1 582 000

38 000

Diamond mines

2000

2000

Other mines

160 000

116 000

44 000

Individuals

2 707 500

3 130 000

422 500

Companies (other than mining)

2 810 000

3 050 000

240 000

Interest on overdue tax

8000

8 000

7 307 500

7 886 000

662 500

84 000

Loan levy

45 000

44 000

1000

Other taxes and receipts:

Gold mining leases

540 000

589 000

49 000

Other mining leases

15 000

18 200

3 200

State ownership revenue on diamond mines

2 000

5 000

3 000

Export duty on diamonds

10 000

22 000

12 000

Non-resident shareholders’ tax

350 000

350 000

Non-residents’ tax on interest

13 000

13 000

Undistributed profits tax

2 500

2 500

Donations tax

2 000

2 000

Stamp duties and fees

130 000

140 000

10 000

Transfer duties

120 000

150 000

30 000

Estate duty

64 800

67 000

2 200

Tax on purchase of marketable securities

25 000

25 000

Licences

3 000

3 000

Cinematograph films tax

1 000

1 000

Other

2 500

2 500

1 280 800

1 390 200

109 400

Departmental and miscellaneous receipts:

S. A. Reserve Bank

19 400

19 922

522

S.A. Mint

12 000

28 000

16 000

State diamond diggings

4 900

3 537

1 363

Forest revenue

40 000

40 000

Water revenue

60 000

61 000

1 000

Fines and forfeitures

14 000

14 500

500

Recoveries of advances

7 800

10 152

2 352

Sale of state land

2 700

1 000

1 700

Rentals of state property

15 700

17 360

1 660

State Trust Board

4 000

4 800

800

General

170 000

170 000

350 500

370 271

22 834

3 063

Interest and dividends:

Interest on state loans and investment of cash balances:

Border area development

2 790

2 699

91

Richards Bay coal terminal

3 500

4 555

1 055

Housing loans

400

643

243

Universities and colleges

7 000

8 000

1 000

South African Broadcasting Corporation

910

910

South African Coal, Oil and Gas Corporation

1 710

1 710

Shipbuilding industry

2 000

2 000

Cash balances

2 500

2 500

S.A. Transport Services

399 000

399 000

Posts and Telecommunications

27 040

27 038

2

Land and Agricultural Bank

13 860

13 860

Local Loans Fund

8 400

8 395

5

Other

11 780

13 000

1 220

Dividends:

South African Broadcasting Corporation

2 280

2 280

Weza Timber Company

150

150

483 320

486 590

3 518

248

Repayment of loans:

Shipbuilding industry

4 150

4 370

220

Posts and Telecommunications

10 320

10 321

1

Redemption Fund Contribution

18 000

18 000

Currency adjustment:

I.M.F.

1 480

1 480

Miscellaneous

8 710

13 730

5 020

41 180

47 901

6 721

General sales tax

2 150 000

2 105 000

45 000

Total for Inland Revenue

11 658 300

12 329 962

804 973

133 311

Customs and Excise:

Customs duty

850 000

1 090 000

240 000

Surcharge

70 000

70 000

Sales duty

100

250

150

Excise duty

1 384 940

1 529 040

144 100

Miscellaneous

37 000

40 000

3 000

Gross total for Customs and Excise

2 272 040

2 729 290

457 250

Less:

Amount to the credit of the Central Revenue Fund (sec. 22(1)(d) of Act 25 of 1969)

250 000

250 000

Payments in terms of Customs Union Agreements (sec. 51(2) of Act 91 of 1964)

475 000

475 000

Total for Customs and Excise

1 547 040

2 004 290

457 250

Grand Total

13 205 340

14 334 252

1 262 223

133 311

Net increase: R1 128 912 000

REVENUE 1982-’83 (On existing basis of taxation) (R1 000)

Head of Revenue

Printed Estimate 1982-’83

Revised Estimate 1981-’82

Increase

Decrease

Inland Revenue:

Tax on income:

Normal tax:

Gold mines

680 000

1 582 000

902 000

Diamond mines

2 000

2 000

Other mines

140 000

116 000

24 000

Individuals

3 940 000

3 130 000

810 000

Companies (other than mining)

3 450 000

3 050 000

400 000

Interest on overdue tax

8 000

8 000

8 220 000

7 886 000

1 236 000

902 000

Loan levy

44 000

44 000

Other taxes and receipts:

Gold mining leases

220 000

589 000

369 000

Other mining leases

8 000

18 200

10 200

State ownership revenue on diamond mines

5 000

5 000

Export duty on diamonds

22 000

22 000

Non-resident shareholders’ tax

300 000

350 000

50 000

Non-residents’ tax on interest

13 000

13 000

Undistributed profits tax

2 500

2 500

Donations tax

2 000

2 000

Stamp duties and fees

120 000

140 000

20 000

Transfer duties

120 000

150 000

30 000

Estate duty

60 000

67 000

7 000

Tax on purchase of marketable securities

20 000

25 000

5 000

Licences

3 000

3 000

Cinematograph films tax

1 000

1 000

Other

2 510

2 500

10

899 010

1 390 200

10

491 200

Departmental and miscellaneous receipts:

S.A. Reserve Bank

19 922

19 922

S.A. Mint

28 000

28 000

State diamond diggings

3 374

3 537

163

Forest revenue

40 000

40 000

Water revenue

62 000

61 000

1 000

Fines and forfeitures

15 000

14 500

500

Recoveries of advances

9 233

10 152

919

Sale of state land

1 000

1 000

Rentals of state property

18 063

17 360

703

State Trust Board

300

4 800

4 500

General

180 000

170 000

10 000

376 892

370 271

12 203

5 582

Interest and dividends:

Interest on state loans and investment of cash balances:

Border area development

2 699

2 699

Richards Bay coal terminal

4 000

4 555

555

Housing loans

200

643

443

Universities and colleges

8 500

8 000

500

South African Broadcasting Corporation

910

910

South African Coal, Oil and Gas Corporation

1 710

1 710

Shipbuilding industry

1 294

2 000

706

Cash balances

2 500

2 500

S.A. Transportservices

425 000

399 000

26 000

Posts and Telecommunications

26 180

27 038

858

Land and Agricultural Bank

13 860

13 860

Local Loans Fund

9 000

8 395

605

Other

13 354

13 000

354

Dividends:

South African Broadcasting Corporation

2 280

2 280

511 487

486 590

27 459

2 562

Repayment of loans:

Shipbuilding industry

3 396

4 370

974

Posts and Telecommunications

11 179

10 321

858

Redemption Fund Contribution

18 000

18 000

Currency adjustment: I.M.F.

1 480

1 480

Miscellaneous

8 314

13 730

5 416

40 889

47 901

858

7 870

General sales tax

3 150 000

2 105 000

1 045 000

Total for Inland Revenue

13 198 278

12 329 962

2 321 530

1 453 214

Customs and Excise:

Customs duty

850 000

1 090 000

240 000

Surcharge

605 000

70 000

535 000

Sales duty

50

250

200

Excise duty

1 637 041

1 529 040

108 001

Miscellaneous

41 000

40 000

1 000

Gross total for Customs and Excise

3 133 091

2 729 290

644 001

240 200

Less:

Amount to the credit of the Central Revenue Fund (sec. 22(1)(d) of Act 25 of 1969)

250 000

250 000

Payments in terms of Customs Union Agreements (sec. 51(2) of Act 91 of 1964)

664 000

475 000

189 000

Total for Customs and Excise

2 219 091

2 004 290

644 001

429 200

Grand Total

15 417 369

14 334 252

2 965 531

1 882 414

Net increase: R1 083 117 000

Mr. H. H. SCHWARZ:

Mr. Speaker, perhaps I should start by joining with the hon. the Minister in the tribute paid to Mr. Schickerling, and also to Dr. De Loor and the President of the Reserve Bank, Dr. De Kock.

Having said that, I think what one needs to say about this budget of the hon. the Minister is that while it is rich in quotations, it is very poor in attractions. [Interjections.] Apparently hon. members on the Government side seem to enjoy paying taxes, and paying them when perhaps they have to pay them due to the Government’s actions in this regard. That is their privilege. If they like to pay the taxes, let us move an amendment that only members of the NP must pay taxes. [Interjections.] I am sure that as far as the public are concerned, they would be very happy to support such an amendment. [Interjections.] It is remarkable, Sir, but there has seldom been such a violent reaction from the NP members to the first few words of a reply to a budget speech. [Interjections.] Even the hon. the Prime Minister gets his twopence worth in, and that demonstrates the sensitivity of the Government in respect of the manner in which the financial affairs of this country have been conducted by them. That is the reality, Sir. [Interjections.] Nothing is more clear that the hon. the Prime Minister has to lead them all in this chorus of noises and interjections. He is the cheerleader of this whole show that is being put on. [Interjections.] Just listen to them, Sir! It is absolutely remarkable, and it demonstrates the weakness of this budget.

Let us look at this budget from the point of view of the ordinary citizen of South Africa. In the last 72 hours the ordinary citizen has been hit three times, three times in 72 hours! If we go back a little further, we see the manner in which he has been hit at every turn, and then one has to ask oneself: How is it that a year ago things were so good, while today they are said to be so difficult? [Interjections.] Is it only due to external factors? Is this the result of the long tale of everything being wrong in the world? Or is there something wrong with the administration of the NP government of the economic affairs of this country? That is the question that we have to ask.

When we look at the value of the rand, we have to ask why, for example, the internal purchasing power of the rand is so much less today than it was a year ago. How is it that the value of the rand is so much less in the international markets of the world today than it was a year ago? Where must we look for the cause of the economic ills that have now struck South Africa? And when we examine those ills, we have to ask ourselves whether the hon. the Minister of Finance has in fact succeeded in getting the balance that is needed in this budget between the degree of growth that we need in order to maintain the economy on a reasonable level and the fight against inflation which is required. There, I think, we will find upon examination that the hon. the Minister has been found wanting in regard to the package that he has presented here today.

The one thing that one must grant him, and grant him immediately, is that the level of Government expenditure certainly appears at first glance to have been kept within reasonable limits. To that extent I think the hon. the Minister deserves congratulations, because if upon examination these figures are what they appear to be, then he has kept Government expenditure within reasonable limits.

Perhaps there are a few more compliments that one could pay the hon. the Minister at this stage. The concession that has been made in order to encourage the erection of multi-dwelling buildings, something that we on this side of the House have asked for over many years, is a breakthrough and something that we welcome because we feel this will assist in regard to the housing situation.

This brings me to the question of bonus bonds and national defence bonds. In this connection one must express a degree of disappointment, because the rates that the hon. the Minister has announced are certainly not market-related rates at this juncture.

When it comes to the question of taxation, we have to look at the picture not only in the light of what has been said today, but also in the light of what was said in the discussion of the Part Appropriation Bill. That package is a very formidable one as far as the ordinary taxpayers of South Africa are concerned.

Let us, for example, look at company tax. I must express our disappointment at the fact that this has taken on the form that it has. If it were necessary at all, it would have been a far more satisfactory thing to have imposed a savings levy so that the money could have been re-injected into the economy at the right time, when it was needed. We would certainly like some explanation, in due course, because the reason for this having been done will certainly be taken further.

The other taxation provision that one finds quite remarkable is that now being imposed upon gold and diamond mines. Because assistance has to be provided for some marginal mines, we are proposing to take money away from other mines and give it to the marginal mines. In other words, those mines have to finance their competitors, and that at a time when the markets for those commodities are not in as good a position as they have been for some time.

Nor can one fail to comment on the fact that the increase in taxation is going to affect life insurance companies to such an extent that the man in the street is going to have very real problems when it comes to providing for his old age and for other contingencies.

The personal tax savings levy gives us much to quarrel with. Even the ad valorem duty will tend to hit industries and businesses, and that at a time when demand has dropped significantly. So the actual tax package does not appear to have any attractions at all, nor does it seem to achieve the balance that we believe it should be achieving. We shall certainly have more to say about this when the debate continues.

Mr. Speaker, I move—

That the debate be now adjourned.

Agreed to.

BUSINESS OF THE HOUSE (Statement) *The LEADER OF THE HOUSE:

Mr. Speaker, hon. members of the House have already been informed that the main budget debate, which commenced today, will be continued on Monday.

I also wish to announce that the House will not sit tonight, nor on Friday. For the remainder of today’s sitting and tomorrow, Thursday, the House will deal with the Order Paper, as printed.

QUESTIONS (see “QUESTIONS AND REPLIES”). CRIMINAL PROCEDURE AMENDMENT BILL

Bill read a Third Time.

PRISONS AMENDMENT BILL (Second Reading) *The MINISTER OF JUSTICE:

Mr. Speaker, I move—

That the Bill be now read a Second Time.

It happens from time to time that temporary commissions have to be conferred in the interest of efficiency, for instance where a non-commissioned officer has to be placed in control of staff and he has the same rank as his colleagues, but at that stage does not yet satisfy all the requirements for a permanent commission. The practice at present is that promotion to the rank of temporary or acting commissioned officer, as in the case of permanent commissioned officers is submitted to the State President for ratification. As this procedure causes a considerable amount of administrative work, we propose that the appointment of temporary commissioned officers be done by the Minister. The aim of clause 2 of the Bill is to empower the Minister to do so. Consequential amendments are contained in clauses 1 and 4. Since the ranks in question are conferred on a temporary basis there should not, in my humble opinion, be any objection to this proposal. The proposal is in conformity with the Government’s endeavour to make the Public Service more streamlined and to eliminate unnecessary red tape.

I shall now deal with another leg of the Bill. The Commission of Inquiry into the Penal System of the Republic of South Africa under the chairmanship of the hon. Mr. Justice Viljoen (now Judge of Appeal) recommended during 1976 that statutory provision be made for the establishment of a centralized or national parole board under the chairmanship of a judge of the Supreme Court to consider the release on parole of prisoners and to advise the authorities in certain cases. The recommendation was aimed at eliminating the lack of co-ordination between the release board and the judiciary in connection with the release of prisoners. Initially, however, there were 28 different prison boards and it was foreseen that the proposed parole board would function with difficulty in practice. Consequently, the proposal was not taken any further at the time. Meanwhile, the set-up has changed in that the functions of the then prison boards have been divided between the institutional committees and the release boards. At present, there are only two release boards, which will facilitate the practical functioning of an advisory board to a considerable extent. What is being envisaged is to retain these release boards as entities in the Prisons Service, but at the same time to give the judiciary and other institutions a say, in an advisory capacity, in the release policy by firstly, on request, giving advice in respect of remission of sentence and the release policy in connection with specific categories of prisoners and secondly, to review the recommendations of the release board when specific offences and groups of sentences are under consideration. To accomplish these objects, provision is being made in clause 3 of the Bill to establish a new body to be styled the advisory release board. The functions and duties of the board are set forth in clause 6.

The Chief Justice, the various Judge-Presidents, as well as Judge of Appeal, Mr. Justice Viljoen, were approached for comment on the Bill as far as the establishment and functions of the advisory release board were concerned, and favourable comment was received throughout.

The establishment of the proposed advisory release board will ensure that those persons and bodies that, in the first place, were involved in criminal investigation and imposition of penalties, will also have a say in the release of prisoners in general, and in individual cases when requested to do so. Clause 6 also provides that any particular case which is submitted to the Minister by the release board, may be referred to the advisory board for comment. This does not imply an automatic remittal in all cases, but merely aims at establishing a mechanism for obtaining the advice of the advisory release board in special cases, when it is deemed necessary. A further instrument in the hands of the Minister is that any matter pertaining to the release policy may be referred to the advisory release board for comment and advice which may be considered when policy has to be determined in general. The interaction between the various institutions which will be represented on the board should prove to be of great value to all those concerned. Above all, the advice coming from such an institution will be of inestimable value to the Minister in particular, and the community in general.

Mrs. H. SUZMAN:

Mr. Speaker, as I believe the hon. the Minister mentioned in his speech—I happened to be out of the Chamber when he began it—this Bill emanates from the Viljoen Commission’s report. I am very pleased that we are getting on with implementing the recommendations of that excellent report to some extent. We have already had a number of amending Bills since that report was tabled way back in 1976. Since that time we have had a Bill practically every year amending the Prisons Act. I may mention that the major amending Act was the one passed in 1978, which introduced a number of important changes to the penal system in South Africa. I do not think the other pieces of amending legislation were of very great importance although there were one or two acceptable changes. I may say that there are some very important recommendations that remain to be implemented if not by this hon. Minister then perhaps by some of his colleagues. For instance, the hon. the Minister cannot be held responsible for the fact that nothing has been done about the Viljoen Commission’s recommendation that pass laws or influx control infringements be decriminalized. That is not his business, but it would in fact have a tremendous effect on the prison system if that were done, because one of our major problems is overcrowding of the gaols.

The MINISTER OF JUSTICE:

Is that still the situation?

Mrs. H. SUZMAN:

Yes, I think it is still the situation even though they get parole.

The MINISTER OF JUSTICE:

Is that a fact?

Mrs. H. SUZMAN:

Yes, they are given parole, but a large number …

The MINISTER OF JUSTICE:

Get your facts straight before you start criticizing.

Mrs. H. SUZMAN:

Why is the hon. the Minister so up-tight about it? [Interjections.] The fact is that the pass laws have not been decriminalized and that thousands of Blacks—I think it was 88 000—were arrested by the Administration Boards alone last year. Therefore we still have the problem of the overcrowding of the gaols. The hon. the Minister knows pretty well that the last report showed that of the 100 000 daily average prisoners in our prisons, a large number are those who are serving short-term sentences. I think it is reasonable to assume that a good number of those are pass law offenders.

The MINISTER OF JUSTICE:

What are the exact figures? The report is superannuated.

Mrs. H. SUZMAN:

That is not entirely the case as far as the Viljoen Commission’s report is concerned. If I were to use the figures at the time of the Viljoen Commission’s report, I would have been talking about 250 000 people. Although the numbers have certainly dropped, the gaols are still overcrowded. There is no doubt about it. The hon. the Minister knows that some other changes have had to be introduced in order to keep down the gaol population, such changes as the removal of minimum sentences, minimum mandatory sentences, which was a very important improvement as far as drug abusers were concerned.

However, I do not want to quarrel with the hon. the Minister; in fact, I want to tell him that we are supporting the Bill.

The MINISTER OF JUSTICE:

Are you?

Mrs. H. SUZMAN:

Yes, we are supporting the Second Reading of the Bill.

The MINISTER OF JUSTICE:

Why did you not say so?

Mrs. H. SUZMAN:

Had the hon. the Minister listened and not interrupted my introductory few remarks and if he had not got so irritable, he would have learnt that we are supporting the Bill. My colleague, the hon. member for Green Point, has one or two amendments on the Order Paper which will simply extend the personnel of the new advisory board which the hon. the Minister will appoint in terms of clause 3 of the Bill. Other than that we have some other comments to make, not comments, however, which in any way will imply that we do not give our approval to the Bill.

I want to say that I was a little perturbed at the immediate response of the hon. the Minister when I commented on the Bill and stated that I hoped that this new advisory board on parole and remission, would also advise the Minister, in terms of its functions as set out in clause 6, to increase the categories of prisoners for whom parole, probation or remission of sentence is to be recommended. I know that in the long run it is the Minister’s decision, but I presume he is not going to appoint an advisory release board and then take no notice whatever of the recommendations of the board.

I have never understood why it is that the regulations lay down for instance that there should be no remission of sentence in so far as prisoners who are convicted of what are known as crimes against the State are concerned. I think it is time now that the hon. the Minister revised this, and if he is so advised by this board, that he gives the matter his serious consideration.

I want to tell him that there were at the last count 486—that is the last figure I got in this House and that was last year—prisoners on Robben Island who fall into the category of prisoners convicted for crimes against the State. There are throughout the country 38 prisoners, again according to the last figure that I have, serving life sentences. Not all of them were sentenced because of crimes against the State. To the best of my knowledge lifers do not get remission. I should like the hon. the Minister to consider adopting the practice which is followed in some other countries where a sentence of 20 years is generally considered to be a life sentence and where a prisoner be released after serving 20 years, unless for very definite reasons he is a danger to the public or is a psychopath who cannot be let loose on society. Apart from these reasons, in most countries of the world a maximum of 20 years—in some cases even a shorter period—is considered a life sentence.

To these few remarks, which I am asking the hon. the Minister to react to, I simply want to add that the official Opposition supports this Bill.

*Mr. Z. P. LE ROUX:

Mr. Speaker, it is a pleasure to react to what the hon. member for Houghton had to say. She was level-headed and, very wisely, she tempered her remarks. This represents a very commendable change on her part, and therefore it is a pleasure to speak after her.

I think it was Winston Churchill who said that the level at which a society deals with its offenders is also an indication of the level of development of that community.

Mrs. H. SUZMAN:

That is quite right.

*Mr. Z. P. LE ROUX:

If one looks at the Bill, that is just the impression one gains. The matter of the release of prisoners has two legs. The first is unconditional release. This occurs after a sentence has been served in full. A very difficult situation is created here, as this implies that the prisoner has not been rehabilitated properly. If he had been properly rehabilitated, he would in all probability have been released on parole earlier, or his sentence would have been curtailed.

The second leg, conditional release, is something which we have often discussed here. In this regard I want to congratulate the prison authorities on the system and policy which they adopt. If one studies the figures, one realizes that over the past 13 years the incidence of recidivism has been a mere 23%. This attests to the judicious handling of the conditional release or release on parole of prisoners. However, the problem is that this recidivism is not dependent solely on the methods of rehabilitation of the prison authorities, but also on the way in which the community receives the released prisoner. Often the fact that a person returns to crime is not attributable to any specific method of treatment as such, but to the fact that the community does not always accept the release in the right way, despite effective handling by the prison authorities. Today the philosophy of the penologist is concerned more with the rehabilitation of the prisoner than anything else.

The Bill before this House in fact has two legs. The first is the establishment of a functional and effective administrative arrangement to deal effectively with disciplinary matters within the prison. This concerns, for instance, the temporary officers. The second leg of the Bill is aimed at dealing with the interests of the community to ensure that there is a proper policy in respect of remission of sentence and early release.

Three parties are intimately involved in this matter. Firstly, there are the police. The police investigate the crime and bring the prisoner to court. The second party involved is the judicial officer. The third is the prison authority which has to deal with the prisoner. It is therefore proper and very interesting that the composition of the proposed advisory release board incorporates these same three parties.

As the hon. member for Houghton rightly said the amendments, as contained in the Bill, have their origin in the Viljoen Commission. This commission brought out its report as far back as 1976. I shall return to this matter again in due course, after I have dealt with the various clauses.

As the hon. the Minister rightly said, the function of the first clause is, in fact, to award a temporary commissioned rank. Personally, as one with some experience of these matters, I find a temporary commissioned rank a strange kind of business. As a matter of fact, after I had investigated and asked questions about the circumstances in the Prison Service, it seemed to me indispensable. In fact, it has to do with disciplinary matters at training centres, and the appointment of a person as a temporary officer to evaluate him for a possible permanent appointment. In the circumstances of the Prison Service, it seems as if this is a particularly sound, timely and wise proposal.

Clause 2 is consequential to this.

Clause 3 refers to the advisory release board, and here there are some things I should like to point out. This board will consist of a judge of the Supreme Court of South Africa and a magistrate of a regional division. Together they form the legal element. This is in line with Mr. Justice Voljoen’s recommendations. The person who has to perform the court prosecutions for the board is an Attorney-General. The problem here, as I see it, is that there is only one Attorney-General in every province, and these people are very busy. I shall therefore move an amendment in the Committee Stage to the effect that after “attorney-general” the words “or a deputy attorney-general” be inserted. When the next member of the board is mentioned, viz. a member of the South African Police of or above the rank of brigadier, it is very clear that we are dealing here with a high ranking man with very wide experience of the practical side of criminology. This person not only has experience of the theoretical side, but has had practical experience and therefore knows how criminals work. It is very important to remember that we are not dealing here with an academic matter, but, in fact, with practical experience. The next member of this board is a member of the Prison Service of or above the rank of brigadier. The Viljoen Commission refers to a penologist, i.e. a person who has made a study of the prisons department. In 1976 there was a course in criminology at Unisa, with alternative fields of study to choose from, viz. either police science or penology. After 1976, these became more fully-fledged subjects, but the fact is, that there are many officers who are studying in this field. The argument I wish to put forward is that penology means the practical experience of the person in prison. A brigadier in the Prisons Service is just such a person who has had many years of experience. I say this with a view to a possible amendment in this regard. It is also true that no mention is made of a psychiatrist, as is referred to in the report of the Viljoen Commission. The reason is that a profile report by a psychiatrist is available as an input to the institutional committee in respect of the majority of prisoners. The institutional committee makes certain recommendations to the release board and this means, in effect, that as the system operates today, the psychiatrist makes his input, but at a much earlier stage. The report of the psychiatrist as well as other reports are considered. Perhaps this is a sound reason why it does not appear in the Act. The last person on this board is a member of the release board, which is, of course, quite understandable. That is why I think that the composition of this board, as set out in clause 3, is very sound.

The next clause I wish to refer to briefly, is clause 6. It is true that there were something like 28 prison boards, and that most of them have now been done away with, so that there are now only two release boards. In addition, we now have an advisory release board. All these boards are advisory boards which, as such, advise the hon. the Minister. The hon. member for Houghton requested the hon. the Minister that under certain circumstances, certain categories of people, who are at present excluded, should also become involved, in release, for instance. I do not see anything in this legislation which would prohibit this. I am not saying that it will happen, but I see nothing that will prohibit it. That is why I think that this is why the hon. member for Houghton agrees with this.

The general policy to be followed with regard to the release of prisoners, is a broad and open one. The panel of people, who are really people with experience, will all consider this aspect from not only a theoretical but also, and in particular, a practical point of view. This is what one wants in practice. One is not dealing with a theoretical person, but a real, live person. One is not dealing with a theoretical situation, but with a real, practical situation. I could continue in this vein, but I think the point that I wanted to make, has been made, viz. that this board that is envisaged is a fortunate choice. I shall move an amendment in the Committee Stage in this regard. However, when one sees this in a balanced way, one sees that the prisoner is not merely going to be let loose in a community. Not at all. The community’s interests will also be looked after, and this will be done primarily by this very body which is to furnish advice on this policy. One also sees, however, that the individual prisoner’s personal and special circumstances also receive attention. Therefore it is my pleasure and privilege to support this Bill.

*Mr. L. M. THEUNISSEN:

Mr. Speaker, when one looks at the Bill which is before this House, one sees that the first part is merely an administrative measure, as is set out in clauses 1, 2 and 4 of the amending Bill. For this reason I am not going to say anything further about this part of the Bill. However, when one looks at the second part of the Bill, one comes to the establishment of an advisory release board. I think it is as well for us to consider the establishment of such a board. When one considers its functions and duties, one sees that clause 6 of the amending Bill inserts a new section 61B into the principal Act, a section which reads—

The advisory release board shall when required by the Minister advise the Minister as to—
  1. (a) the general policy which ought to be followed in connection with the release of prisoners;
  2. (b) the basis upon which remission of sentence ought to be granted to different categories of prisoners; …

As the hon. member for Houghton and the hon. member for Pretoria West have already pointed out, the second part of this amending Bill puts into effect the recommendations of the Viljoen Commission. I think that while we are referring to the functions and duties of the proposed advisory release board, we should also examine its background, from the Viljoen Commission’s report to the creation of this advisory board. If one wants to put this matter into perspective, one must read the terms of reference of the Viljoen Commission, which include the following—

To inquire into the penal system of the Republic of South Africa and to make recommendations for its improvement.

We all know that as soon as an offender has been sentenced to a term of imprisonment, he is committed by warrant to one of the Republic’s prisons. There he must serve his sentence as specified in the warrant. One of the many responsibilities of the prisons authorities is to apply treatment to the prisoner which will lead to his reform and rehabilitation.

The Viljoen Commission says in its report that it was solely interested in the effect which a prison sentence has on the prisoner, from a penological point of view, and whether the effect achieved or aimed at corresponds to the object or objects which the person who imposed the sentence, i.e. the judge or the magistrate had in mind in imposing the sentence.

After a thorough study of all the steps taken by the prisons authorities to reform and rehabilitate prisoners, the Viljoen Commission stated in its report that in its opinion there was one shortcoming, which had nothing to do with the treatment of the prisoner while he was in prison, but which involved the period after his release on parole. This shortcoming lies in the fact that the supervision of offenders released on parole is to a large extent inadequate.

The Viljoen Commission also found that there was a lack of co-ordination between the judiciary and the prisons authorities, more specifically in respect of the release of prisoners on probation or on parole. The Viljoen Commission also found that there was a feeling of dissatisfaction among the sentencing officials, sentence, i.e. the judges and magistrates, in the sense that the judiciary decides on a certain sentence policy, for example, and the executive then adopts a completely different approach. In the opinion of the Viljoen Commission, this caused great confusion, particularly when the judiciary followed one policy or principle as regards the sentencing of an offender, and the executive followed another principle in executing the sentence, expecially with regard to the release of prisoners on parole. In this regard the Viljoen Commission suggested the following (par. 6.3.54)—

To promote uniformity in the imposition and execution of sentences, there should be more communication between the judiciary and the prison authorities. To that end some system must be devised whereby the judiciary may be kept advised of the manner in which the sentences imposed by them are executed. One possibility is to confer some representation of the judiciary on a parole board.

We know that to a certain extent the recommendations of the Viljoen Commission have already been implemented, and here we now have the establishment of an advisory release board. As far as the composition of this board is concerned, one can also see at once that the commission’s recommendations are being put into effect. The hon. member for Pretoria West indicated that a judge and an attorney-general would serve on the board, and I have no objection to his recommendation that a deputy attorney-general should also serve on the board. The composition of the board indicates that it will be able to give the hon. the Minister the necessary advice when it comes to principle and policy, even as regards the duties and responsibilities of the board itself. As has already been mentioned, certain amendments will be moved in the Committee Stage and we shall therefore comment on them at that stage. However, it gives us pleasure to support this legislation.

*Mr. J. J. LLOYD:

Mr. Speaker, the hon. member Mr. Theunissen of the CP confirmed his party’s support of this Bill. I should like to thank him and his colleagues for this.

It is definitely a novelty for this House to see the hon. member for Houghton introducing such a calm atmosphere here that she even took it amiss of the hon. the Minister for allegedly being annoyed with her. However, there is one thing that that hon. member cannot get away from when she talks about prisons. When she sees the word “prison” or “gevangenis”, she thinks of one island only. Today, too, she could not get away from Robben Island.

*Mr. S. S. VAN DER MERWE:

No one can get away from Robben Island. [Interjections.]

*Mr. J. J. LLOYD:

Perhaps we should be grateful for that. [Interjections.] The hon. member Mr. Theunissen did not pass any comment on the first portion of the Bill in connection with the temporary commissioned ranks that can be granted by the hon. the Minister. I should just like to spend a few moments on this. Suppose there are three or four non-commissioned officers at a certain prison, but there is no one who can be appointed as commanding officer. In the past one had to apply to the State President in order to be able to grant such a temporary commissioned rank. The procedure is simply being made more streamlined now so that in a case like this the hon. the Minister can grant a commissioned rank on a temporary basis. Actually this temporary commissioned rank is merely temporary because it is not permanent. This may sound very strange, but basically it means that although it is a temporary commissioned rank, no time restriction is being attached to it. Therefore, the rank is not being granted for a specific period of time. The reason for this is that sometimes it takes a shorter and sometimes a longer time to take such a temporary officer through all his courses so that he can receive the proper commissioned rank. I think this is a great improvement. I definitely think the hon. the Minister has a very useful instrument here.

This brings me to the question of the proposed advisory relief board. I think this is the culmination of the recommendations that the Viljoen Commission made at the time. The hon. member Mr. Theunissen referred to the report of this commission. I should like to take a brief look at paragraph 6.4.8(a) and (b), and I quote—

To eliminate the shortcomings in our parole system, viz. lack of co-ordination between the prison boards and the judiciary, a twofold remedy should be applied: (a) the parole system must be centralized by the establishment of one parole board for the entire Republic to deal with the more complicated cases, to lay down a uniform policy to be followed by prison boards in the less serious cases and, in general, to give guidance to these boards;

Then there is the second section which is very important—

(b) the judiciary must have representation on the central parole board so that complete co-ordination between the prison boards and the judiciary may be effected.

Surely we have had a number of these release boards. Particularly those who are in interested in manpower utilization, get cold shivers when they read about a new commission, committee or board. If one looks at the proposed composition of this board, one has even more reason to have cold shivers, because just look at the people serving on that board. There is a Supreme Court judge, a regional magistrate and two brigadiers. Therefore, the first impression that one has is that this new board is loaded or “heavy”, because there will be people on the board that we cannot easily spare. I think the reason for this is that the prison system in South Africa is increasingly becoming geared to moving away from the term “gaol”, which has had a very negative connotation for many years. We are moving closer to the idea of rehabilitation. We have moved away from penal measures as retaliatory measures or deterrents. We are more inclined to view our prisons as rehabilitation centres where we can try to bring these unfortunate people back into the community with the best means at our disposal. If this is our premise—I think this is what the hon. the Minister has in mind—then I believe that there is even less cause for an accusing finger to be pointed at our prison legislation and the way in which it is being implemented. I think the hon. member for Houghton is already accepting this, too. I think this is a manifestation of the advanced nature of our prisons legislation. Therefore I want to felicitate the hon. the Minister on this and I am pleased to support the Bill.

*Mr. W. V. RAW:

Mr. Speaker, the NRP supports the Second Reading of this Bill. I do not intend repeating everything which was said by other speakers. I agree with the hon. member for Roodeplaat as regards the appointment of temporary officers. If he had been a little older, he would have remembered that the Defence Force had similar arrangements during the war. First of all the people concerned were appointed on a temporary basis; originally the rank of temporary second lieutenant was conferred on them, and then the rank of temporary lieutenant. After two years they received “hard luck pay” if they had not been promoted by that time and were still alive—the choice lay between the two. Fortunately the choice in the Prisons Service is a little wider than either “hard luck pay” or a small cross on a mound of earth somewhere. We support this provision.

†I want to refer to the amendment printed on the Order Paper in the name of the hon. member for King William’s Town. I shall be moving that amendment in the Committee Stage, but I raise the matter now. It concerns the composition of the advisory release board. I accept that the appointments which are planned are top-level appointments and I have no quarrel with any of those appointments at all. The object of the amendment we wish to move is to bring in someone who is not in the employ of the State to help advise on releases, policy, etc. If one looks at the release board itself, one finds that apart from the five non-official members, it consists of a brigadier, who is an Assistant Commissioner of Prisons and eight officers of the Prisons Service itself. Those five non-official members are an ex-Assistant Commissioner of Prisons, an ex-brigadier of the Prisons Service, an ex-major of the Prisons Service and two ex-public servants. So, although technically they are not part of the Public Service, they are all persons who were members and were associated in one way or another with the Prisons or Public Service. We believe that there should be at least one, if not more, representatives of independent organizations concerned with the welfare of released prisoners so that the point of view of those who deal with the prisoner after release is also taken into account in planning, in advising and in establishing policy regarding the release of prisoners as such. Once a prisoner has been released, there are the social welfare services to take care of him. However, the people who are going to decide, who are going to lay down policy, who are going to advise the Minister are all people involved with the prisoner—in respect of his trial, the judge or magistrate, involved in respect of his prosecution, the attorney-general, involved in his arrest, the S.A. Police as well as one member of the Prisons Service and one member of the release board. Therefore, there are people who do the arresting, people who do the trying, people who do the judging and people who deal with him in prison. However, the critical period is the period after he has left prison in order to see whether he has in fact been rehabilitated. We believe that to have a proper balance, the proposed advisory release board should have appointed to it at least one and preferably more representatives of organizations dealing with prisoners after their release from prison. These representatives are aware of the pitfalls, the temptations and the influences which enable a prisoner to become successfully rehabilitated in society or cause him to backslide. We feel that this is essential. Such a person could be a representative of Nicro or of the churches. The Viljoen report itself speaks very highly of the work done by these organizations and I should like to refer briefly to some of its comments in this regard. In paragraph 7.16 on page 157 of its report the commission states specifically—

The Commission is satisfied that machinery does exist for the smooth changeover from care in prison to after-care upon release. The practical implementation of the change-over still leaves much to be desired, however, especially in regard to the Coloureds and Blacks. There are a number of welfare organizations and churches which render services for the Whites, among the most active of which, as far as this aspect of our penal system has come to the notice of the Commission, are Nicro and Die Christelike Maatskaplike Raad (CMR).

It goes on to talk of the work done by these organizations and the important role that they play in this regard. I want to say here that because of the reasons that I have advanced, we shall be moving an amendment at the Committee Stage to the effect that one or more representatives of those organizations should be appointed to the board. As I have shown, the members of the release board are all officials. They are all people involved with prisons or else are former public servants. I do not believe that the Governent has a monopoly in respect of wisdom or knowledge or experience in regard to decision-making. It is in this respect particularly that we feel that some expansion is required. There is another amendment on the Order Paper seeking to include on this board a criminologist or a penologist and a psychiatrist. Again, these could be officials of the State. What we are seeking to do is to have people appointed who are not under the control of the State and are not involved in the system; in other words, people who can adopt a fresh and independent approach to the problem.

Therefore, with those few remarks …

Mr. J. J. LLOYD:

What about the hon. member for Houghton?

Mr. W. V. RAW:

No Sir. I think that the hon. member for Houghton is too popular. She is not in the House at the moment. She has her fans inside and outside the prisons and I think we need somebody independent who will not be biased in any way in this regard. We shall leave her to continue with the work that she is doing in this connection. We want to introduce somebody who is independent. We will support the Second Reading of this measure and we give the Bill our blessing.

*Mr. W. N. BREYTENBACH:

Mr. Speaker, it is a pleasure for me to speak after the hon. member for Durban Point. I must say that it is also pleasant to discuss and argue this matter this afternoon, particularly if one does so in such a calm atmosphere and with the concurrence of all hon. members who have thus far participated in the debate. I do not want to react further to the arguments advanced by the hon. member for Durban Point on the amendment his party would like to move. We can argue about this during the Committee Stage.

This afternoon a great deal of reference was made to the release policy of the S.A. Prisons Service. It is also true that a great deal of confusion, and even misunderstanding, exists in connection with this policy. In the next few minutes I shall therefore try to clear up some of these misconceptions. There is confusion and misunderstanding because there is uncertainty in regard to certain concepts which in reality have nothing to do with each other. Terms such as parole, probation, pardon or reprieve, amnesty and even unconditional release, are frequently used interchangeably by the media, the public and even by officials. Of course this leads to confusion. The mere fact that different meanings are attached to these concepts, of necessity also means that the release policy of the S.A. Prisons Service is sometimes attacked in an irresponsible and even unfair way. As a result of this confusion, release on parole is frequently attacked and shortcomings that do in fact exist in other release procedures are imputed to it. Other release procedures, for example unconditional release, are sometimes confused with conditional release. In reality the former has nothing to do with conditional release or parole.

I want to draw the attention of the House to the fact that provision also exists for the conditional release of prisoners. This has been approved by Parliament. Moreover it has also been the policy of some Ministers over the years—a policy laid down either by them or by the Cabinet—to free some prisoners on this basis. In the third instance the release of long-term prisoners may also take place by way of consent by the Minister, and in some cases by way of the personal consent of the State President.

When one considers the word parole, it appears that the word as such does not fully describe the conditions, the special conditions and circumstances attached to it. The word parole is derived from the French la parole d’honneur which literally translated means “word of honour”. Nowadays few people are prepared to accept the so-called word of honour of a prisoner.

In the philosophy of penal reform parole is seen as a relic of the rehabilitation ideas and general views of the nineteenth century, when the emphasis shifted from punishment for the sake of punishment to another approach, namely that of rehabilitation. Punishment as a form of retribution and as a deterrent did not solve the problem of crime in all respects. A new theory on crime then evolved, a theory in which attention was no longer focussed on the crime as such but on the offender and the specific conditions which gave rise to the situation in which he found himself.

Therefore, when we speak of rehabilitation, we should really see it in its correct perspective. It is not only unfair but also quite unrealistic to send people who are sodally maladjusted or even emotionally disturbed to prison, and then expect the prisons authorities to turn them into new people. Consequently it would be a good thing for us to consider precisely what “release on parole” or “conditional release” involves. Release on parole is conditional release granted to an offender on the basis of attitudes unique to the Western philosophy of life. It has nothing to do with an offender being forgiven for his crime or crimes. Nor does it mean that the Prisons Service is 100% convinced that that person will not lapse into crime again because humanly speaking that is in any case not possible. What is in fact involved is mercy, which is not based on an irresponsible humanistic or philanthropic tendency, but on the conviction that crime cannot be combated solely by means of punishment. It also involves a conviction that prisoners—I must say this is unfortunately not true of all prisoners—are capable of experiencing mercy as human beings. The result of this experience is quite frequently reflected in the good behaviour of prisoners after they are released.

One gets a better perspective of the Prison Services’ release policy if one reads an article written by a certain L. Fox in the Prisons Service publication Nexus of July 1978—

It has been said, and well said, that it is easy to imprison a man; the difficulty is to release him.

There is a great deal of truth in these words.

The hon. member for Pretoria West has already pointed out that there are two ways in which prisoners may be released, namely unconditional release and conditional release. Unconditional release involves on the one hand cases where the full sentence has been served, with or without remission, and on the other hand those cases where prisoners are also released unconditionally on medical grounds and are therefore not subject to any further conditions.

Conditional release, however, goes hand in hand with conditions which have to be complied with within the period prescribed in the conditions. Restrictions are therefore placed on that person’s actions and he must comply with certain obligations during that period. The object is, on the one hand, to help people to find their feet in a society which, possibly as a result of the long sentence they had to serve, they now experience as being completely alien and changed. On the other hand the conditions the person has to comply with for a specific period also imply that if he does not or cannot do so he will be recommitted to prison to serve his full sentence. What is basically involved is the prisoner’s re-introduction into society on a controlled basis.

Constant attempts are made to weigh up his interests against those of the community. This may not be influenced by a one-sided obsession with the welfare of the prisoner only the security of the community and the current demands with regard to crime in general and the treatment of criminals in particular, must also be borne in mind.

From time to time there are doubts about the power the Prison Services has to release an offender before his term of imprisonment has expired. It is felt that the meting out of punishment as such is being violated, in the sense that its aims are being frustrated. A well-known judge had occasion to say something about this, and I should like to quote briefly from what he said—

Ek moet ’n oortreder vonnis, en wanneer ek dit doen, het ek onder meer ook sy rehabilitasie in gedagte. Met ander woorde, as ek hom die straf oplê, sou ek graag ’n realistiese verwagting wou koester dat die straf wat hom opgelê word, bevorderlik sal wees vir sy rehabilitasie. Daar moet gestraf word ook met die oog op boetedoening. Die oortreder moet ook voel dat hy deur die straf gereinig is van sy skuld, en die volgende belangrike oogmerk is dan die beskerming van die gemeenskap.

The Prisons Service does its best to get to know every prisoner well. This is why the Prisons Service is in the best position to judge, when all the available institutional treatment has been utilized to the optimum, whether it would be in the interests of the community to release the prisoner into society again, I want to make it quite clear that conditional release is not aimed at watering down the demands of the community with regard to protection, retribution, deterrence and absention from crime. As a matter of fact, one of its aims is to comply with those demands by rehabilitating the prisoner. The unconditional release of a prisoner is frequently not only desirable, but absolutely essential for his rehabilitation. One must admit that there are failures, but the success achieved with conditional release, depends only in part on the judgment of the Prisons Service and other persons involved. A great deal of the success or failure of such an action lies in the hands of the community to which a released prisoner returns. Theoretically a prisoner released on parole is legally subject to certain restrictions to which he must confine himself. The point I want to make is that the fact that an offender has served his full sentence does not necessarily mean he is a better person. We frequently hear criticism from our courts that prisoners are being released too soon. However, I want to repeat: The fact that an offender has served his full sentence does not necessarily mean he is a better person.

In conclusion I want to refer to what a former Deputy Commissioner of Prisons had to say in this connection. He said: “The prison is the worse place imaginable in which to rehabilitate a prisoner. Other factors must also be taken into account.” When referring to the rehabilitation of an offender one must bear in mind in the first place that that person was not imprisoned at his own request. He was imprisoned because the court sent him to prison. In the second place one must also remember that the offender is withdrawn from society and placed in an artificial milieu in which there is a unique sub-culture and unique values and norms. Even if a reasonable measure of success is achieved with the rehabilitation of an offender while he is in prison, this does not necessarily mean that the pattern of behaviour he has just accepted will continue to exist after his release. It must be accepted that the final chapter in the story of the rehabilitation of a prisoner is not written in the prison, but in society as such. A tremendous responsibility rests on society to help prevent someone who has been released from prison from returning to a life of crime.

It must also be borne in mind that all the factors that were present in the community before that person was sent to prison, will still be present in society after his release. These could influence him to return to a life of crime after his release. If he is again subjected to rejection, unemployment and negative influence of friends or other individuals and his immediate environment, the chances of his successful reintegration into society are remote. This amending Bill, which is aimed, inter alia, at refining this release process and the release policy of the Prison Services, is a good step in the right direction which will enable us to help reintegrate such people into society after their release. Closer attention will also have to be given to people who are in fact let loose into society again. For these reasons it gives me great pleasure to support the Second Reading of this Bill.

*Mr. S. S. VAN DER MERWE:

Mr. Speaker, as most of the other members have done so far, I should also like to concentrate primarily on the section of the Bill dealing with the establishment of the advisory release board. The hon. the Minister of Justice indicated that the establishment of this advisory release board was a consequence of the recommendations of the Viljoen Commission. I should like to add that I think that it also has something to do with the agitation … or rather with the feeling—agitation is perhaps not the correct word—which has existed for many years that prisoners are being released from our prisons in an injudicious way. I do not want to suggest that that is necessarily the case. I am only saying that that is something which is often felt. This feeling—this agitation—has often emerged in the form of court verdicts in our provincial divisions in South Africa. Let me hasten to add that in my opinion this irritation which gave rise to these judgments was often justified because it is simply not easy to understand why a person who had committed a very serious and dangerous crime and who had been imprisoned because of that crime, shortly afterwards finds himself in court again, charged with a crime committed in the very period before his original sentence would in fact have expired.

More than ten years ago the late Mr. Justice Andrew Beyers was already complaining about this matter. He often complained about it. On one occasion he told the astounding story about a person who had appeared before him on his third murder charge, and that was within a few years after he had been imprisoned for his second murder. The annoyance of the courts was such that the opinion was often expressed that their function of imposing punishment was being totally undermined by the parole authorities or release authorities and that in this way the courts were being made subordinate to the bureaucracy. I want to repeat that this is a feeling which has developed and has occasionally been expressed. I am not saying that that was necessarily the right attitude to adopt. As a result of the release policy of the hon. the Minister of Justice, the judiciary will now be given a say in the matter by way of the establishment of this advisory board. This will undoubtedly improve this situation. Earlier on in this debate hon. members mentioned that previously there had been a lack of adequate communication between the Bench and the Prisons authorities. The Viljoen Commission confirmed this in their report, as the hon. member Mr. Theunissen quoted to us. The proposals contained in this Bill will definitely bring about some improvement and will lead to the adoption of a more balanced approach to release. In spite of what I have said so far and in spite of the fact that I mentioned that the feeling existed among judges and magistrates that release was often granted in an injudicious way, I nevertheless want to state that it is no foregone conclusion that up to now the Prisons authorities have injudiciously released persons on a large scale. It is simply not easy to arrive at a meaningful decision concerning the release or otherwise of a prisoner. It must be one of the most difficult decisions with which any authority could possibly be charged. It requires making a psychological prognosis of people who must be the most complex and the most difficult people in our society. It requires an assessment of the possible future conduct of a released prisoner. It also requires an assessment of possible future influences on such a prisoner. It is an unenviable task and one should not lose sight of the fact that it is so simply because the opposite standpoint, viz. that a prisoner should serve his whole sentence, is often the most popular one.

To my mind, when one looks at the composition of the proposed advisory release board—hon. members have already dealt with this aspect and amendments in this regard have already been placed on the Order Paper—a deficiency becomes apparent at first glance, because there will not necessarily be a person with a psychiatrical or psychological background serving on the board, although it is indeed possible that a person who represents the Prisons Service on this advisory board may well have such a background. Therefore it is possible, but not necessarily so. In this regard I should just like to say that no matter how strong the feeling may be that a prisoner has to serve his full sentence because of the repulsiveness of his crime and because his term of imprisonment must match the extent in which society condemns his crime, the intimate analysis, the personal analysis and opinion of a psychiatrist or a psychologist who has had contact with the prisoner should never be disregarded. We can only trust that the hon. the Minister will not, on the strength of the views of the proposed advisory board and in pursuance of the policy which they will lay down, in any way take less cognizance of the evaluation of a particular case as presented by the members of the Prisons authorities who have the necessary psychological background.

As far as the composition of the council is concerned, it would be a good thing if a provision were inserted in the Act to the effect that a person with a psychiatrical, psychological, criminological or penological background be appointed as a member of the advisory board. I think such a provision would only contribute towards making the policy which will be laid down for release a more balanced policy and it would also prevent a situation occurring where a policy is laid down by a board of which the majority of its members are involved in the administration of justice and where the psychiatrical and psychological aspects of the prisoner as an individual are taken into consideration only when that policy is actually being applied. It could only be to the good if that professional input were made at the earliest possible stage of the determination of a release policy.

The hon. member for Durban Point referred to the amendment appearing in the name of the hon. member for King William’s Town on the Order Paper, and let me say at once that I believe that much could be said in favour thereof. Organizations such as the National Institute for the Prevention of Crime and the Rehabilitation of Offenders have no doubt acquired a lot of knowledge and expertise concerning the treatment of offenders and particularly their reassimilation into society, and could, as such, definitely make a valuable contribution. Whether such organizations should be represented on the council and whether a psychiatrist, a penologist or a psychologist should also be appointed to the council will probably not make much difference. I shall therefore move my own amendment during the Committee Stage, but in the event of its not being accepted we on this side of the House will be prepared to support the amendment of the hon. member for King William’s Town. However, I should like to point out at once that not only has an organization such as Nicro acquired knowledge and expertise over the years, but impressive progress has also been made with the study of crimonology, particularly in South Africa. There are still a few faculties at universities which offer this course, and no doubt the lecturers concerned also possess knowledge and expertise that may be utilized by the advisory release board. I should therefore like to make a strong recommendation to the hon. the Minister that he give serious consideration to the amendment I intend to move.

We support the legislation.

*The MINISTER OF JUSTICE:

Mr. Speaker, I was interested to hear the exposition given by the hon. member for Green Point of his party’s approach to this matter. I also listened with great interest to his arguments as well as to those of the hon. member for Durban Point and the hon. member for Pretoria West. They indicated that they were going to move amendments which in their opinion would greatly improve this Bill. It was an informative discussion. The motivation given by the hon. member for Green Point for the amendment he is going to move excited my interest. While it is difficult for me to tell him at this stage whether I shall be able to accept his amendment as it reads at the moment, he finds himself on firm ground, of course, when he invokes the report of the Viljoen Commission, because reference is made in this report to a penologist, a criminologist and possibly a psychiatrist as well. This indicates that the commission itself did not feel very strongly about a psychiatrist being included in the board.

As regards the point raised by the hon. member for Durban Point, I must point out that the commission was certainly not suggesting that any of the organizations involved in the after-care of prisoners should serve on the board. When we ask ourselves what a penologist or a criminologist is, we find that we are faced with a multi-disciplinary situation, because it involves criminal law, sociology and so forth. Therefore it would be difficult to appoint to the board a person who is exactly covered by that definition, because the definition is very vague. One could appoint a person who does not necessarily have any training in criminal law. What we should try to do, therefore, is to appoint a person with a particular skill and experience, by virtue of which he can make a particular contribution, as we have in fact done with regard to the other posts in this advisory board. We have specifically appointed a judge because he is a person who occupies a specific position and who has a specific expertise which is clearly definable. In the Committee Stage we shall have to scrutinize the hon. member’s arguments, as well as his motivation, to see whether we cannot reconcile his idea with that of the hon. member for Durban Point. I say this because he has indicated that in such a case he would be prepared to support the hon. member for Durban Point.

This brings me to the amendment moved by the hon. member for Durban Point. He motivated his amendment very well. He wants to involve a person who is also concerned with the after-care of the prisoner, a person who knows what opportunities there are in society, how society will accept a prisoner and to what extent society can assist in rehabilitating the prisoner. The hon. member for Kroonstad made it clear that the final chapter of rehabilitation was not written in prison, but in society, when a prisoner was conditionally released and served the rest of this sentence under supervision in society, into which he had to be absorbed and in which he had to do certain work. I think I should therefore ask the hon. member for Durban Point and the hon. member for Green Point to give me an opportunity to see, before we come to the Committee Stage, whether we cannot bring about a meaningful adjustment—not necessarily a compromise—for the object of those hon. members is the same as ours, namely to ensure that this board achieves the general purpose for which it is being introduced. So I am not rejecting the amendment of the hon. member for Durban Point out of hand. What I am saying is that in the light of the recommendations of the Viljoen Commission, and of the arguments that have been advanced, we have good reason to go into the matter once again. Therefore I shall negotiate with those hon. members before the Committee Stage. However, I want to add at once that we have circulated the proposal concerning the composition of the board. One of the people we sent it to was Mr. Justice Viljoen, judge of appeal, whom we asked to comment. I do not wish to quote from his letter now, but his comment was that he welcomed the establishment of the board. In fact, he thinks—he says so in his letter—that our proposal is better than his recommendation, and I greatly appreciate the fact that he said this. Therefore I want to take this opportunity of telling Mr. Justice Viljoen that we value his dedication very highly.

This brings me to the amendment of the hon. member for Pretoria West. It is true that the attomeys-general of the various divisions are very busy people. Each of them has a number of deputy attorneys-general available to him, and some of these deputy attorneys-general also have certain State advocates who are in the offices of the attorneys-general and who have already made tremendous contributions on this subject. A young lawyer, Advocate Du Toit for example, has published a document entitled Straf, and I should like to recommend it to all hon. members who are interested in this subject. It is an extremely illuminating document. In order to involve such expertise, and in view of the fact that the attomeys-general are being given the opportunity to make inputs through their deputies—if we decide to appoint such a deputy—the amendment of the hon. member for Pretoria West is a very good one, in my opinion. Therefore I shall accept that amendment in the Committee Stage.

There is some truth in the interpretation given by the hon. member for Green Point of the reason why we are creating this advisory board. We have become sensitive about a number of situations which have arisen. For example, a person is tried and convicted. It then appears, when his record is examined, that either he has already been in prison, has served his sentence and has committed a large number of offences, or he has been released on parole. Then one’s immediate reaction is to ask why this has happened. The hon. member for Kroonstad, the hon. member for Green Point and other hon. members have already indicated that it is not fair to blame the Prisons Service when, as a matter of policy and on compassionate grounds, certain people who have never shown any violent tendencies are released. I want to quote an example. A particular case has been brought to my attention concerning a person who had committed a whole series of offences. These included theft, burglary, etc. However, there was not a single crime of violence among them. But his next crime was one of extreme violence, namely murder. Therefore there is a need on the part of the Prisons Service to anticipate this in its classification. But this is an almost superhuman task. The Prisons Service has already introduced a psychopathy division which is identified as a division to which special attention should be given so that society may be protected, and the division is in fact doing important work.

As the hon. member quite rightly said, we are beginning to be sensitive to the problem of violent crime. However, I want to say at once that the responsibility in this connection does not lie with the Prisons Service, because prisoners can also become involved in a particular crime or in a series of crimes after the expiry of their full sentence. If we wanted to prevent even this, it would mean that everyone with a prison record would have to be detained by the Prisons Service for ever. Therefore the rehabilitation work done by the Prisons Service is very important. In fact, the whole programme for dealing with so-called long-term prisoners, i.e. those serving a sentence of two years or longer, is equally important. This programme involves a process of observation, a profile, a classification, etc.

In order to enable the Prisons Service to deal with this matter even more effectively, an organization is now investigating, at our behest, the occurrence and incidence of violent crime in South Africa. The results of this investigation should be of great value to the advisory board which is to be established. After all, the advisory board will not be able to do its own research. It will have to have agencies, instruments, to do the research on its behalf. We do not wish to dictate to the advisory board. It will be largely autonomous in respect of the advice it offers, whom it consults, etc. Other disciplines will be available to the board. We considered it necessary to initiate such an investigation, and it has now been done. We may make more information available in this connection at a later stage.

The hon. member for Houghton and other hon. members asked me, by implication, not to define the categories too narrowly. They asked me what I had in mind in this connection. I do not want to commit myself at this stage in respect of the categories of people whose cases I shall refer to this board for its advice. Nor can I commit myself in respect of individual cases. I have referred to crimes of violence. These cover a very wide spectrum. A violent crime can be committed with a knife or a pistol, but also with a bomb. Therefore any criminal sentenced under any law of the country can receive the attention of the advisory board in terms of this legislation. In saying this, I want to ask the hon. member for Houghton, when she refers to the people of Robben Island, to stop regarding them as a separate category of prisoners. They are people who have been sentenced under specific laws of this country. Some of them have even committed serious crimes of violence. They have raised their hands against society. When a Bench sees that justice is done and sentences a person, it must always bear in mind the important trilogy, the so-called Trust of Zinn. This trilogy is a summary of the three important principles, i.e. the protection of society, the imposition of a penalty and the execution of that penalty. The balance between these three important principles must always be preserved.

I must concede at once that the hon. member for Houghton did not make matters difficult for me. She made her statement very circumspectly, and therefore I am now doing exactly the same. However, I want to make it clear that I am not going to commit myself with regard to the specific categories that I am going to refer. I have referred to crimes of violence. However, there is another category as well. Here one must pay specific attention to the needs to society. In certain communities, for example, the crime of stock theft occurs. In fact, we have already adopted the policy of not extending the privilege of release to short-term prisoners in certain prescribed areas.

It has been brought to my attention that stock theft is occurring on a large scale in the Vryheid district in particular. Certain strong representations have been addressed to me from that district. Therefore I have now decreed that in the Vryheid and Utrecht districts, people who have committed this kind of crime will not qualify for early parole or unconditional release if they have been sentenced to less than two years imprisonment. I am only trying to give hon. members an indication of the approach which I may follow, an approach in which I must once again take into consideration the interests of society, the interests of the State and also the interests of the criminal. The interests of the criminal are in fact an important aspect of the activities of the Prisons Service. These include his rehabilitation, of course, as the hon. member for Kroonstad rightly indicated.

Naturally, the interests of society and its protection against the actions of criminals are further important aspects which must receive attention. When we have considered all the factors, we shall decide which categories should be referred. Then we shall also decide which individual cases should be referred. Finally, we shall request the board to keep us informed of overall policy, some aspects of which have been laid down either by way of regulation or by way of provisions contained in our Constitution.

However, I repeat that I do not wish to commit myself in advance in any way. I have indicated to the hon. member for Green Point why one is sensitive about matters of this nature. It therefore appears that this is also correct.

Talking in general about the whole question of prisons, the over-population of prisons and related considerations, I take it amiss of the hon. member for Houghton when she refers to overcrowded prisons. She quoted statistics and mentioned something like 100 000. She also referred to an annual report of a year or two ago. In any event, this is an annual report which is probably between 12 and 18 months old already. Therefore the statistics it contains are also out of date. The true situation is that we have a prison population of approximately 89 000 at the moment, which is considerably lower than the 304 000 when it was at its highest. That was a figure that we were all very concerned about. The important point is, however, that with regard to offences in terms of control measures—the category about which the hon. member expressed concern—a category in respect of which, according to the hon. member for Houghton, the recommendations of the Viljoen report to the effect that those offences should be decriminalized have not been implemented, I want to point out once again that we have already examined the statistics concerned. However, the hon. member for Houghton does not take cognizance of statistics when it does not suit her. That is what we find upsetting.

Mrs. H. SUZMAN:

[Inaudible.]

*The MINISTER:

Mr. Speaker, the hon. member for Houghton has already had the opportunity of addressing this House. She does not take cognizance of statistics when it does not suit her and she deliberately blazons ideas abroad with the sole purpose—this we can infer—of creating a distorted picture.

Mrs. H. SUZMAN:

Rubbish!

*The MINISTER:

On the night of 30 June 1980, only 1,7% of the total prison population was there as a result of offences in terms of influx control measures, compared with a much, much higher percentage at any other stage. However, I am not going to elaborate on this, because it is not relevant now. The fact is that the hon. member had a wonderful opportunity to bring her information up to date. Why did she not ask us what the latest statistics were? Had she done that, we could perhaps have had a more meaningful debate on this. The point I want to make to her is that our office is open to her. She must bring her information up to date and obtain the correct statistics, for then we shall understand each other much better.

I have already reacted to the speech of the hon. member for Durban Point. The hon. member for Roodeplaat gave a very good motivation for the composition of the board. I notice that he is not in the House at the moment. Nevertheless, I want to say that he was right about the considerations to which he referred. The hon. member Mr. Theunissen also dealt with the recommendations contained in the Viljoen report, and sketched the background as far as our considerations are concerned. I have already told the hon. member for Pretoria West that I shall accept the amendment which he intends to move.

Finally, I come back to the hon. member for Houghton. After having very nearly misunderstood each other, I do want to point out to her that I believe we are dealing here with a matter which gives her an opportunity to develop an interest in all prisoners and not only in a small group.

Question agreed to.

Bill read a Second Time.

ADJOURNMENT OF HOUSE (Motion) *The LEADER OF THE HOUSE:

Mr. Speaker, I move—

That the House do now adjourn.

Agreed to.

The House adjourned at 17h57.