I move—

The Budget which I am now to present to the House is an historic one, for two reasons: it is the first Budget expressed in our new monetary unit, the Rand, and it is also the first to provide for Government expenditure under the Republic of South Africa! This Budget, therefore, inaugurates a new era in both our currency system and our constitutional system. We can hardly expect that our new republic will always sail in calm financial waters, but we dare trust that, under the guidance of Providence, it will always ride the financial waves on an even keel and weather every financial storm.

In one respect, however, this Budget is exactly like all its predecessors. It affords the South African economy an opportunity, once a year, to submit to a check-up or a searching examination. He who follows this wise course in his private life, is the man who believes in prevention rather than cure. He wants to know whether his state of health has deteriorated or improved during the past year. He wishes to know whether he has become susceptible to a new ailment or whether an old one requires greater care. He wishes to know whether old ailments have improved or whether his system is showing signs of developing a new one.

Having discovered any latent or unexpected source of future indisposition by means of a proper diagnosis, and a prognosis of what the future holds in store, he expects the necessary prescription to keep him in sound health for the next year or, in any case, to prevent any deterioration in his condition.

As is customary, I wish to examine to-day the economy of South Africa. In the light of the discernible symptoms, I propose making a diagnosis of any possible ailments, followed by a prognosis of what may possibly happen without proper care, and thereafter issue a prescription which will bring relief, eliminate discomfort and restore to the system any bio-economic deficiencies.

I shall begin by saying that our economy shows sparkling health and exceptional vitality An economy which has had to endure such shocks and setbacks since my last Budget and yet remains so sound and resilient must, indeed, be blessed with an exceedingly robust constitution. An economy which could afford an increase in imports of R133,000,000 above the 1959 level, as well as an outflow of capital to the tune of R162,000,000, and still present such a radiant look can certainly not be a patient suffering from any serious or dangerous disease. The beat of its heart is regular and strong, even under pressure. The red blood cells of mineral wealth are more than adequate. The blood circulation is satisfactory. Agriculture and secondary industry reveal that the liver and kidneys are in fine shape. Organically, there is nothing wrong with our economy. But there are certain impurities present in the bloodstream which require watching. The inflationary animal fats in the blood need to be strictly controlled, otherwise we may be heading for a financial thrombosis. Certain organs function sluggishly and have to be stimulated. At times the bio-economic ingredients are deficient and require supplementing. There are economic habits which may need to be either strengthened or discouraged. The wise doctor, through his check-up or examination, seeks in the first place to prevent illness and thereby to avoid the need for later treatment. Let us look, firstly, at

The Balance of Payments:

This is an old weakness in our economic system!

The most important change in our economic situation during the past year has been the decline in our gold and foreign exchange reserves. During 1960 these reserves dropped by R132,000,000, as against a rise of R80,000,000 in 1959. This decline was caused mainly by an increase in imports of roughly R133,000,000 above the 1959 level, and a net capital outflow of R162,000,000 compared with an outflow of R78,000,000 in 1959. Against these unfavourable developments there were a modest increase of R6,000,000 in merchandise exports and a rise of R27,000,000 in net gold production, but these increases were largely offset by a rise of R28,000,000 in net invisible payments.

The increase in our imports was largely due to an appreciable expansion _ of general economic activity in South Africa during I960, and the normal associated tendency for a rise in the demand for imported goods and services. To a certain extent, however, it can also be ascribed to the replenishment of inventories, not only because inventories had been considerably reduced the year before, but also because some importers apparently feared an intensification of import control and thought it wise rather to import too much than too little. My colleague, the Minister of Economic Affairs, is keeping the matter under surveillance and, as announced in November, advance issues of allocations for consumer goods have, for the sake of prudence, been smaller than in 1960. As far as motor-cars are concerned, import permits are now issued with due regard to stocks on hand. The banks have also been asked to exercise caution in extending credit for the financing of imports. However, no drastic intensification of import control is contemplated.

The relatively small increase in our exports is due mainly to somewhat subdued conditions which prevail in the markets for certain primary products. The provisional figures indicate that wool exports in 1960 yielded R11,000,000 less than in 1959, wattle bark and extract R5,000,000 less, and diamonds R7,000,000 less. On the other hand, some other export products recorded small but encouraging gains. Economic conditions abroad—the principal factor determining the demand for our exports—reveal divergent trends: a moderate economic upswing in the U.S.A. is not expected before the third quarter, but on the other hand, it is expected that the conditions of economic prosperity prevailing in most European countries will continue though the rate of expansion may decline. Whilst, therefore, we cannot rely on any marked increase in exports—particularly having regard also to the uncertain conditions prevailing in neighbouring states—there is likewise no reason for fearing any large fall.

Despite the steep rise in our imports, the balance of payments on current account showed a net surplus of R30,000,000 last year which, together with the relatively high level of our reserves at the beginning of 1960, enabled us to weather the large outflow of capital amounting to R162,000,000. The fact that South Africa could withstand a capital outflow of this magnitude without serious repercussions is, indeed, a remarkable performance. Nevertheless, the outflow of capital constitutes the most important economic symptom requiring attention.

Official and banking institutions accounted in 1960 for a net capital inflow of R32,000,000, as a result of, inter alia, the revolving credit by a group of American banks which brought in R14,000,000, a Swiss loan of approximately R5,000,000, a drawing of R9,000,000 on the International Monetary Fund, and a short-term loan of approximately R14,000,000 granted to the Reserve Bank by a foreign banking institution. Against these credits there was a net private capital outflow of R194,000,000. Union residents invested R28,000,000 net abroad (principally in the Federation of Rhodesia and Nyasaland), and repatriated South African securities to an amount of R78,000,000 net from abroad. Repayments of uranium loans by the gold mines aggregated R14,000,000, and foreign funds to an amount of R56,000,000 net were repatriated from the Union.

Fears that occurrences in South Africa, as well as in other African territories, will jeopardize their investments, are mainly responsible for the outflow of private capital. Our own people, with intimate knowledge of our conditions and of the vast difference between South Africa and the other territories on the continent of Africa, seized the opportunity of acquiring these foreign investments—to the eventual advantage of our country, although, naturally, our reserves suffered a reverse in the process. Bearing in mind the widespread ignorance abroad of conditions in our country and the poisonous propaganda constantly conducted against us, we cannot assume that the capital outflow will shortly be completely arrested. Similarly, further incidents, also in South Africa, are not beyond the bounds of possibility, haying regard to the intensification of communistic activities in Africa and their well-known technique of creating unrest and disturbances. This can only be prevented and frustrated by the realization that South Africa is fully prepared for any eventuality of this nature. This Budget accordingly supplies the prescription against this danger which threatens our economic well being. The foreign investor —as well as the communist agitator! —may rest assured that, more than ever before, we are now prepared to deal with unrest and disturbances, and day by day we are becoming better prepared still.

There is, however, reason to believe that the greater proportion of the remaining foreign investments in the Union are held by individuals or institutions who have a better appreciation of our position and who are unlikely to be swayed into panic-stricken sale of their holdings.

I am glad to be able to inform the House that the net outflow of private capital declined considerably during the fourth quarter of 1960. It amounted to roughly R28,000,000 in that quarter, compared with an average rate of R55,000,000 during the first three quarters.

Since the beginning of 1961 our reserves have risen substantially, with the assistance of further drawings aggregating R18,000,000 on the International Monetary Fund, and last Friday they stood at R193.8 million, i.e. R22.7 million more than on 31 December. Normally, the coming months constitute our lean period and we expect, therefore, that the reserves will again show a decline. However, as I have explained on a previous occasion, we may, under certain circumstances, if the level or trend of our reserves so requires, make substantial further drawings on the International Monetary Fund. That, after all, is the purpose of the Fund.

Domestic Financial and Economic Conditions:

The considerable deficit in the balance of payments has naturally had a marked effect on internal financial conditions, but this effect has largely been neutralized by the expansion of bank credit. Advances and discounts by the commercial banks to the private sector (excluding the Land Bank, discount houses and merchant banks) increased, with the assistance of Reserve Bank credit, by no less than R112,000,000 in 1960, principally because of increased general economic activity, and the public’s total liquid assets with the banking system consequently declined by only R27,000,000. This expansion of credit caused a decline of bank liquidity. Thus, the commercial banks’ ratio of liquid assets to liabilities to the public fell from 49.4 per cent at the beginning of 1960 to 43.2 per cent at the end of the year, and this ratio has since fallen further to 39.8 per cent on 31 January. Partly to alleviate this position, I recently piloted a Bill through Parliament enabling a limited reduction from time to time, if circumstances so warrant, of the cash reserves which the commercial banks are required to hold with the Reserve Bank.

For the reasons outlined above, the money market has also experienced some stringency, despite the fact that at present the Government has invested with the commercial banks and money market institutions in the form of short-term interest-bearing deposits, surplus funds amounting to R51,000,000. Short-term interest rates have tended upwards as instanced, for example, by the tender rate for Treasury bills, which advanced from 3.325 per cent at the end of 1959 to 3.98 per cent last Friday. The discount rate of the Reserve Bank, at present 4½ per cent, in my view bears a proper relation to these rates, and there is now no interest incentive to transfer short-term balances abroad.

Long-term interest rates have likewise shown an upward trend. Since domestic savings show no signs of contracting, this trend is probably connected with the outflow of capital, but it may also indicate that the demand for long-term investment capital is greater than is sometimes suggested. In August 1960 the Reserve Bank advanced its interest rate pattern for Government securities by ¼ per cent, in respect of maturities of not more than ten years and ⅛ per cent for longer maturities, and recently it effected a further increase of ¼ per cent in the pattern as a whole, which brought the pattern to a level which, in my view, is a realistic one, especially if it is borne in mind that, as I shall explain later, the Government does not contemplate making any net calls on the domestic capital market this year. It is against the national interest that rates of interest should rise to unduly high levels and, with the co-operation of all the parties concerned, it should be possible to avoid such a situation.

Most of the statistical indices reflect that general economic conditions in South Africa have remained sound. Preliminary estimates show that the net national income for the year ended 30 June 1960, amounted to R4.034.8 million, i.e. 8.6 per cent above the preceding year’s figure. All the main sectors of the economy shared in this progress: the net income of agriculture and forestry, for example, increased by 9 per cent, that of mining by 11 per cent, that of private manufacturing by 4 per cent, and that of commerce by 8 per cent.

Although certain sections of agriculture were affected adversely during the past year by unfavourable market and weather conditions, it would seem that practically all sectors of the economy registered further progress during 1960 and the early months of this year.

The value of our gold production at R536,000,000 in 1960 was 7 per cent higher than in 1959, whilst sales of other minerals increased by 10 per cent. Employment in secondary industry in January 1961—the latest available figure—was 2.7 per cent higher than in January 1960, and in private construction the figure was 2.3 per cent higher. The number of registered unemployed Whites, Coloureds and Asiatics declined somewhat during 1960, and the percentage unemployed amongst these sections has remained constantly below 2 per cent. Share prices naturally declined in the course of the year, but the Reserve Bank’s index of gold mining shares for February 1961 was nevertheless 10 per cent above the 1958 average level. A recent survey of 321 industrial and trading companies, whose shares are quoted on the Stock Exchange, proves that the drop in share prices reflects no real deterioration; the survey established that profits for the year ended June 1960 were, on average, 8.6 per cent up on the previous year.

According to provisional estimates the gross national product increased by slightly more than 6½ per cent during the calendar year 1960. After allowing for price increases, this represents an advance of something more than 5 per cent in the real national product, compared with an increase of nearly 3½ per cent in 1959. The per capita increase in the real national product during 1960 was approximately 3½ per cent. This is a high rate of increase by international standards, and it is gratifying, indeed, that the country’s economy reveals such strength, despite the setbacks which we had to endure last year.

As was the case last year, the rather low rate of investment is an aspect of our economy requiring treatment. The latest available figures show that gross domestic capital formation amounted to R986,000,000 in 1959, i.e. R144,000,000 less than in 1958. R72,000,000 of this reduction is accounted for by lower fixed capital investment by the Railways because of the exceptional progress they have made with their programme of capital works. Since the contraction of inventories by private business firms caused capital formation to decline by R82,000,000, it appears that fixed investment in the private sector remained practically constant. However, this is not good enough; in order to make proper provision for our growing population an increase in fixed investment is most desirable. It is possible that the tax concessions I made last year have already generated an improvement in this respect in 1960, although I doubt that this is, in fact, the case. The value of building plans passed in the principal urban areas during the fourth quarter of 1960, for example, was 13 per cent below the corresponding figure for 1959, and in January 1961 there was a further decline. Likewise there are indications that the rate of increase in the national product declined in the course of 1960. It would seem that any appreciable acceleration in the rate of development was retarded by the uncertainties flowing from the state of emergency, other events elsewhere in Africa, and the outflow of capital.

The contraction of the Government’s capital programme (mainly as a result of the tapering off of the development programme of the Railways) makes it all the more essential that development in other sectors, and particularly in secondary industry, be stimulated. The four Government corporations, Iscor, Escom, Sasol and Foskor, with their important expansion schemes which, in the aggregate, will run into upwards of R1,000,000,000, are bound to make a significant contribution, but in our economy, primarily based as it is on private enterprise, it is of the utmost importance that capital development in the private sector should follow an upward course.

As was the case last year, the prescription in this Budget should, therefore, be the encouragement of capital development, but this year it is even more essential to ensure that any incentives to be granted will not endanger the balance of payments by encouraging excessive imports. On the contrary, one of our objectives should be to conserve foreign exchange. At the same time we should endeavour, in all possible ways, to bring the attractiveness of South Africa as a field of investment for foreign capital to the attention of foreign investors. In addition, we should prescribe the means by which domestic saving and capital formation can be stepped up still further.

The Financial Year 1960-1:

It is anticipated that the year 1960-1 will close with a surplus of R38,000,000 on Revenue Account, after allowing for a transfer of R37,000,000 to Loan Account as foreshadowed in my Budget speech last year. The sale of the Centurion tanks brought unforeseen revenue, but in the main the surplus is due to higher receipts from income tax. This last-mentioned source is likely to yield R26,000,000 more than estimated. Quite evidently, last year’s prophets of doom led me to underrate the resilience of our economy!

I propose that, in accordance with established practice, the surplus on Revenue Account be transferred to Loan Account.

Expenditure on Loan Account for the year 1960-1 will be considerably less than originally estimated, largely because of a reduction in the Railways’ needs of loan capital. It is for this reason that the Government did not endeavour to make a call on the capital market for any net new long-term loans and further considerably reduced its calls on the money market (i.e. in the form of Treasury bills).

Expenditure on Revenue Account, 1961-2:

The Estimates which I have tabled show the total expenditure on Revenue Account to be estimated at R688.1 million—approximately 5 per cent more than the original estimate for the current year. This increase must be regarded as most reasonable, particularly if it is borne in mind that provision had to be included for the following important services:

These services, together with other increases, can be discussed under the different Votes in Committee of Supply. However, I now wish to present to the House the following proposals for additional expenditure which will be included in the Supplementary Estimates.

Defence:

A sound economy demands confidence, and confidence requires that the safety of the state should be maintained.

The time has arrived when we should give serious consideration to modernizing and expanding our armaments to ensure that the striking-power of our armed forces will keep abreast of developments in military technique.

Equipment such as aircraft, vehicles, arms, ammunition, radio sets, etc., is very expensive, and it is seldom possible to determine in advance with any degree of accuracy when delivery will be effected.

For this reason the Government deems it advisable to increase the contribution to the Defence Special Equipment Account by R10,000,000. This account was established by Act No. 9 of 1952 in order to make provision for the purchase of equipment for a special task force, and at a later stage was also used for financing the purchase of naval ships. It is now proposed that, henceforth, the account be also used for the purpose I have indicated. This will enable us to spread the cost of the main items of equipment to be purchased over a period, and to build up the fund in such a way that it will not be necessary to provide abnormally large amounts in those years when heavy deliveries are made.

Bantu Areas:

The next proposals I wish to make concern the development of the under-developed areas and races in our country. The first priority is the development of the Bantu Areas. Much has already been accomplished to improve agriculture in these areas. During recent years, however, the attention of the Department of Bantu Administration and Development has primarily been devoted to improving the chaotic conditions that prevailed in some urban areas, and during the years 1948-60 more than R225,000,000 was spent on housing and transport for the Bantu in the cities. The time has now arrived to devote even more attention to the development of the Bantu areas. An acceleration of the rate of development in these areas will not only enhance the purchasing power of the Bantu inhabitants, and thereby widen the market for secondary industry in all parts of the country, but it will also lessen the economic lure which the White urban areas hold for the Bantu and thereby alleviate the associated social problems.

In addition to the normal contribution to the Native Trust Fund—which, as I indicated earlier, has already been increased by R1,180,000—the Government has decided to make an additional amount of R10,000,000 available to the Fund. The total contribution for 1961-2 therefore amounts to R17,500,000, R2,000,000 of which will be devoted to the purchase of land, and the balance of R15,500,000 to the development of the areas. R8.3 million of this latter amount will be utilized for general development, e.g. forestry and the production of fibre and sugar; water supply and irrigation; soil reclamation; buildings, such as agricultural schools, youth camps, etc. R4.8 million will be used for the establishment of villages in these areas, R1,000,000 for machinery and equipment, R400,000 for electricity supply, whilst R1,000,000 will be made available to the Bantu Investment Corporation to enable the Corporation to expand its activities.

My colleague, the Minister of Bantu Administration and Development, will give further details of these development plans in due course. I wish to emphasize, however, that this should be regarded as a first step only, and that further large amounts will have to be provided in the years to come.

Border Areas:

Apart from the development of the Bantu areas as such, provision also requires to be made for the development of industries in the border areas, as visualized in the announcement made by the Prime Minister last year. Provision for these border areas has already been included in the Votes of Lands and Water Affairs, but a further amount of R2,000,000 will be requested in the Supplementary Estimates under Loan Vote J, as additional capital for the Industrial Development Corporation for the purpose of enabling the Corporation to assist with the financing of industries in the border areas.

Development Corporation for Coloureds:

The next component of the Government’s prescription for promoting development concerns the Coloured population. As is known, the Government has decided to establish a development and investment corporation for the benefit of this section of the population.

This step forms part of the Government’s programme of positive action aimed at the socio-economic development of this section of the population in accordance with the announcement made by the Hon. the Prime Minister towards the end of last year. The object of this corporation is to encourage the establishment of Coloured enterprises and to provide them with expert advice and financial assistance. As a first step in this direction, I propose that provision to an amount of R500,000 be included in the Supplementary Loan Estimates.

Social Pensions:

Whilst the promotion of development constitutes the central theme of this Budget, I also desire to do something towards improving the situation of the less privileged classes.

At present a social pension is granted from the date of application and terminates on the date on which the beneficiary ceases to be entitled thereto. It has now been decided to pay the pension from the first day of the month in which the application is made and to terminate it on the last day of the month in which the beneficiary ceases to be entitled thereto. This concession will also apply in respect of maintenance grants and family allowances payable under the Children’s Act.

The maximum attendant’s allowance payable to a White social pensioner whose physical or mental condition is such that he requires the regular attendance of another person, will be increased from R36 to R48 per annum. Proportionate increases will be made in the maximum attendant’s allowance payable to non-Whites.

It has further been decided to relax the prescribed residential requirements in certain respects. For example, an applicant for an Old Age Pension who has been a South African citizen for five years immediately prior to his application, will in future qualify for the pension if he has resided in the Union, as such a citizen, for five out of the ten years immediately preceding the date of the application. At present, such an applicant has to be resident in the Union for 15 out of the last 20 years.

The cost of the foregoing concessions, which will be applicable to persons of all races, is estimated at R315,000.

The ratio between the amount of basic social pensions for White persons, Coloured persons and Indians has remained constant in recent years, namely 12: 6: 5. However, when basic pensions have been supplemented from time to time by the grant of bonuses, etc., White persons have received proportionately greater increases, with the result that the ratio between the amounts payable to the three races has been disturbed.

As a result of representations made by the Department of Coloured Affairs, after that Department had investigated the question of social pensions for Coloured persons, it is now proposed to restore the ratio by increasing the bonuses, etc., payable to Coloured persons. The same step is being taken in regard to Indians. The basic pensions remain unchanged.

A similar concession is being made to Coloured persons and Indians who are in receipt of maintenance grants or family allowances.

The additional cost of these further concessions will amount to approximately R1,979,000.

In addition, the basis on which allowances are paid to foster parents under the Children’s Act will be altered. The resulting increase in respect of allowances payable to foster parents of Coloured children is estimated at R34,000. The additional cost in respect of Whites and Indians, namely R60,000, has already been included in the main estimates under Vote 31.

Care of the Aged and Infirm:

I may state that the per capita subsidy paid to non-state homes for aged White persons in respect of infirm inmates is being increased from R8 to R10 per inmate per month, at an estimated cost of R50,000. The maximum non-recurrent subsidy paid to such homes in the future for the purchase of furniture and equipment will be raised from R30 to R90 per inmate. The additional cost in this connection is estimated at R9,000. Here, too, the necessary provision has already been made in the main estimates under Vote 31.

Civil Pensions:

I now come to the investment of the moneys in the pension funds of the Central Government and the Provinces. Since 1936 these moneys have been invested in special 4 per cent inscribed stock, and representations were received last year for a revision of the rate of interest payable on this special stock, in view of the rise in interest rates since 1952.

It has been decided, after careful consideration, that the representations are well founded, but rather than raising the interest rate on the special stock, the issue thereof will be discontinued with effect from 1 April next, and the moneys in the pension funds, Government as well as provincial, invested as from that date in Government stock at current rates of interest. Moreover, it has been decided to convert the existing 4 per cent special stock, at a rate of R20,000,000 per annum, into local registered stock at current rates of interest. These two measures will yield additional revenue of approximately R625.000 to the several funds during the financial year 1961-2, and this amount has already been included under the Public Debt Vote.

The effect of this additional revenue on the funds can, of course, only be determined accurately when the next actuarial valuations are made. If, as is anticipated, those valuations reveal an actuarial surplus in a Government fund, it would be the intention to devote such surplus to the benefit of the members of the fund concerned, either by way of improved benefits, including those payable to existing pensioners, or by way of adjustment of the contributions payable by members.

Provincial Subsidies:

Last year it was decided to enhance the subsidies to the Provinces by per cent, in lieu of the 6 per cent statutory percentage increase. All the Provincial Administrations have made representations to me to have the 7½ per cent increase repeated. The Provinces are performing important functions, and the Government has decided to extend the 7½ per cent increase for another year at a cost of R5,300,000. I can give no undertaking, however, that this concession will again be repeated next year. I am sure we all share the hope that the commission which is now investigating the problem of the financial relations between the Provinces and the Central Government will find a satisfactory solution. Meanwhile I wish to address an earnest appeal to the Provincial Administrations to keep their expenditure within the bounds of their revenue and not to permit expenditure to increase more rapidly than revenue. The Central Government is obliged to follow this course, even if praiseworthy expansion or new services have to be held back. I can with justification expect the same sense of responsibility and self-control on the part of the Provinces.

With the exclusion of the essential additional provision for Defence and the development of the reserves, the total budget on Revenue Account shows an increase of 6 per cent on last year’s corresponding figures.

The total estimated expenditure on Revenue Account, inclusive of the additional provision for Defence, the Native Trust, Pensions, and the Provinces, amounts to R715,700,000. Before considering the estimates of Revenue, I shall deal with the Loan Account for 1961-2.

Loan Account, 1961-2:

The Estimates of Expenditure on Loan Account which I have tabled, reflect estimated expenditure of R225,100,000 for 1961-2, as compared with the amount of R262,800,000 provided in 1960-1.

Because the large capital programme of the Railways is now nearing completion, it has been possible to reduce the provision of loans to the Railways Administration by R47,000,000, and this also largely explains the considerable reduction in the total amount requested on Loan Account. There is also a reduction of R8,600,000 in the provision on Loan Vote H— State Advances—due to the completion of the scheme for rehabilitation assistance to farmers.

These decreases enable the Government to proceed with development work in other fields at an accelerated rate. Thus the provision for Water Affairs has been increased by R1,600,000, that for Forestry by R1,100,000, while an amount of R1,400,000 is requested on Loan Vote J—Commerce and Industries—as additional capital for Foskor. An additional R6,400,000 is included under National Housing to provide housing for the different sections of the population who require to be moved in accordance with the proclamation of residential areas. I also wish to make special mention of the additional amount of R2,780,000 provided on the State Advances Vote in accordance with the Government’s decision to supplement the existing Stock Feed Scheme with a view to rendering further assistance to farmers in the drought-stricken areas. My colleagues will be ready to supply particulars of these and other services when their Votes are considered in Committee of Supply.

I have already indicated that I shall ask the House to make a further amount of R2,000,000 available to the Industrial Development Corporation for border area development, as well as an amount of R500,000 for the new Development Corporation for Coloureds. In addition, an amount of R1,600,000 has to be provided as a further contribution to the International Bank for Reconstruction and Development, and an amount of R1,000,000 in respect of the cost of raising loans.

During the next financial year external loans to an amount of R49,000,000, and internal loans totalling R128,500,000, fall due for redemption.

The total amount required on Loan Account for the year 1961-2 thus comes to R407,700,000.

It is anticipated that the following funds will be available for financing the Loan Account:

It is assumed that out of the internal loans falling due for redemption this year, an amount of R127,000,000 will be converted into new long-term loans. We have also reason to hope that it will be possible to obtain new foreign loans (or the renewal of existing loans) to an amount of R54,000,000.

This leaves a balance of R39,000,000 still to be found.

Having regard to conditions currently obtaining in the capital market, I consider it undesirable to float new internal long-term loans other than what is required to redeem maturing loans. Indeed, the conversion operation itself may present problems in view of the large amount involved and I trust that the Government can again rely on the support of the financial institutions.

However, I deem it desirable again to attract capital funds from the private investor by means of special bonds, the interest on which will be tax free. The private investor is not much interested in ordinary Government securities, but this type of bond, which was introduced in 1958 and withdrawn last year, did attract great interest. It affords an opportunity for saving without tax liability and at the same time it taps a source from which Government stock could draw only small amounts. I intend to make these special bonds available to individuals again, up to a maximum of R20,000 per person, and at 5 per cent interest which will be exempt from income tax. Since this would fit into our pattern of redemptions, the bonds will run seven years to maturity, but if the bondholder so desires they can be repaid after five years at a discount of 2 per cent. These bonds should yield R14,000,000.

This leaves us R25,000,000 short. Since our short-term debt is expected to decrease by some R60,000,000 in the course of the current financial year, it should be possible to make good this shortfall from the money market by means of Treasury bills.

Honourable members will note that no provision is made for any special transfer from Revenue to Loan Account. This does not constitute an abandonment of the policy which the Government has pursued since 1953, because we have consistently emphasized that this policy has to be adapted to prevailing circumstances. The inflationary conditions obtaining at the time, and the large amounts required for capital development, particularly by the Railways, were circumstances which made it necessary to transfer considerable amounts from current Revenue to Loan Account, and similar or other circumstances may again make it necessary in the future. Since the inflationary pressure in the economy has now eased, however, and since the Government’s capital expenditure has declined, I feel that such a transfer will not be necessary next year.

Estimates of Revenue. 1961-2:

The revenue for 1961-2, on the existing basis of taxation, is estimated at R725.3 million, or R5.4 million less than the revised estimates for 1960-1. The possibility of reduced imports, the tax concessions granted last year (the full effect of which will only be reflected in the next financial year), and certain non-recurring special receipts which accrued in 1960-1, are some of the reasons for the decline. As I have indicated, the estimated expenditure on Revenue Account amounts to R715.7 million. Accordingly an amount of R9.6 million is available for tax changes.

In considering the taxation and relief mixtures which I shall prescribe for the economy, I wish once again to draw the attention of the House to the principal aim of this Budget, viz. to encourage development and saving and to protect our balance of payments. In addition, it is my aim to continue the process of rationalization of our taxation system which I initiated two years ago.

CUSTOMS AND EXCISE DUTIES

National Road Fund:

My first proposal concerns the allocation of tax revenue, rather than the tax itself. It is essential for the further development of the country that the road network be expanded and improved, and the National Transport Commission contemplates an extensive road building programme entailing the provision of considerable additional funds. The Government considers it desirable that additional funds be allocated for this purpose, and that all types of motor fuel, including diesel oil and locally refined petrol, should contribute to the cost of the programme. The tax on motor fuel will consequently not be changed, but I propose that, in lieu of the existing allocation of 8½d. per gallon on imported petrol, an amount of 5.35c per gallon on all motor fuel, subject to the normal customs or excise duty, be apportioned to the Road Fund. The revenue of the Fund will thus be increased by approximately R2.6 million in 1961-2, and Government revenue will decrease accordingly.

Import Duties:

On the whole our customs tariff is low and hon. members will agree that many unnecessary goods are still being imported at the expense of our balance of payments and local industry alike. There are various items able to bear a moderate increase in import duty, to the benefit of our own industries and without exercising any noticeable effect on the cost of living. The increases I am now proposing are too numerous to bear enumeration, and they are set forth in the Notice of Motion which I shall table. I wish, however, to assure the House that they affect mainly non-essential items and that the new rates of duty are still moderate. Goods used by local manufacturers have, as far as possible, been excluded from the increases. There will, of course, be opportunity to discuss the details in Committee of Ways and Means. The increases become effective forthwith. The estimated additional revenue amounts to R2,000,000.

Motor Cars:

The import of motor cars costs the country some R86,000,000 per annum in foreign exchange, and I consider that a small increase in the customs and excise duties on motor cars is justified. I propose, therefore, that the customs and excise duties on motor cars weighing not more than 3,700 lb. be increased by one cent per lb., and those weighing more than 3,700 lb, by two cents per lb. I hope that this measure will encourage the importation of the lower-priced light cars as against the more expensive heavier cars, to the benefit of our balance of payments. The additional tax on a light car weighing 2,000 lb. will be R20. The enhanced duties take immediate effect and will, it is expected, yield additional revenue of R2,000,000. As was the case in 1958, the increased customs and excise duties also apply to motor cars which have not been delivered from the stocks of importers, manufacturers, assemblers, distributors, and dealers in wholesale or retail quantities. These firms will, therefore, have to prepare an immediate record of all motor cars which have not, at this point of time, been removed from their premises under a valid contract of sale.

Stamp Duties:

The only change I am proposing here is a reduction in the stamp duty on marine insurance policies to bring it more into line with the duty payable in other countries, and thus to make our insurance companies more competitive with foreign insurers. Full details will be tabled, but I may mention that henceforth the duty on ordinary marine insurance policies will be 5c. The change will become effective on 1 July 1961 and will cost R20,000, but it may mean a saving of R2,000,000 per annum in foreign exchange if all marine insurance premiums can be kept within the country.

Diamond Export Duty.

Cases have been brought to my notice where a diamond mine will be forced to close down unless it can obtain exemption from this tax. It is obviously in the national interest that in bona fide cases of this nature the required exemption should be granted. The revenue from this duty is credited to Loan Account, but as the mines concerned would otherwise close down, this concession will cause no actual loss of revenue.

Film Tax:

When the tax on cinematograph films was introduced last year, provision was made for exemptions where the proceeds of the performance were used for cultural, charitable or religious purposes, provided that not more than 25 per cent of the gross proceeds of the performance were devoted to the payment of necessary expenses. The proviso appears to be unnecessarily severe and I propose that it be repealed. The loss of revenue in 1961-2 will be only about R4,000.

Estate Duty:

Following upon representations made to me, I propose that a limited exemption from Estate Duty be given in respect of investments made by the deceased during his lifetime in Land Bank debentures. In accordance with the present provisions of the Estate Duty Act, exemption is granted up to a maximum of R10,000 in respect of the recoverable value of insurance policies on the life of a deceased person or in respect of capital which he invested in local registered Government stock. The proposal is that these provisions should also be applied in respect of amounts which deceased persons invested in Land Bank debentures. I must emphasize that only one amount not exceeding R10,000 in respect of the total value of the abovementioned assets may be deducted from the dutiable value of an estate, and that the amount exempted may therefore not exceed R10,000. I hope that this concession will be an incentive, especially to our farming community, to invest in Land Bank debentures.

INCOME TAX

Investment and Initial Allowances:

Last year I introduced the system of investment allowances for manufacturing industry and the hotel industry, and a month ago I announced that the system of investment and initial allowances will be extended until 30 June 1962, on a basis no less favourable than the existing one.

As I explained last year, the investment allowance is a more potent incentive to new investment than the initial allowance, because the former represents an actual remission of taxation and is not taken into account in the determination of the depreciation on buildings and machinery in subsequent years.

In order to provide an even bigger incentive towards new investment, I propose, therefore, that the investment allowance be increased from 15 per cent to 20 per cent of the cost of new industrial equipment and machinery taken into use after 15 March 1961. The initial allowance in respect of new equipment and machinery will, however, be reduced from 20 per cent to 15 per cent.

As I indicated last year, investment allowances should not be regarded as a permanent measure. I deem it essential, however, that industrialists and hotel-keepers be allowed adequate time to avail themselves of the new concessions. The new investment allowances in respect of equipment and machinery will accordingly remain effective until 30 June 1963. The investment allowance in respect of buildings will continue in force until 30 June 1964, provided the construction of the building was commenced not later than 30 June 1962.

As the Act reads at present, the so-called “ service industries ”, e.g. the dry-cleaning industry, are excluded from the scope of the investment and initial allowances. This does not seem quite fair, and these “ service industries ” will, as from to-day, also qualify for the investment and initial allowances.

The owners of buildings used by lessees for industrial or hotel-keeping purposes, at present likewise do not qualify for either the investment or the depreciation allowance on new buildings or improvements. In the hotel industry and secondary industry alike numerous cases occur where the building is owned by someone other than the manufacturer or hotel-keeper, and since a new building erected for such a lessee serves the same purpose as that for which the investment allowance was established, I propose that, as from to-day, the allowance be also made available to such owners.

Finally, I wish to propose a special incentive for new industries established in the border areas or in the Bantu areas, and in need of such an incentive. I propose, therefore, that enhanced investment allowances up to a maximum of 30 per cent for equipment and machinery, and 20 per cent for buildings, be allowed in respect of such industries, on the recommendation of the Department of Commerce and Industries or of Bantu Administration and Development.

The cost of these concessions will amount to R1.5 million in a full year, but for the year 1961-2 will probably not be more than R50,000.

Base Mineral Mines:

I wish to do something to stimulate the further development of mining, particularly where the mined product is beneficiated in South Africa. Diamond mines and new gold mines are permitted an immediate write-off against profits of new capital expenditure, but in respect of other mines the write-off is spread over the estimated life of the mine. In my view it is only fair that these other mines be allowed at least an initial allowance in respect of new capital expenditure, and I am prepared to go even further in order to encourage the beneficiation of minerals in South Africa.

I propose, therefore, that all mines (other than gold and diamond mines) be allowed an immediate write-off of 25 per cent of all new capital expenditure incurred after 15 March 1961, which under existing legislation requires to be spread over the life of the mine, the balance of 75 per cent to be written off in the normal way over the life of the mine.

Where, however, the Departments of Mines and of Commerce and Industries are satisfied that the mine beneficiates, or causes to be beneficiated, to a substantial extent, a substantial proportion of its output, I propose that it be allowed to charge immediately to profits up to 100 per cent of any new capital expenditure, as defined above.

I trust that not only will this measure stimulate development, but that it will also act as a powerful incentive for the local beneficiation of our minerals. The loss of revenue will amount to R350,000 in 1961-2, and R2.1 million for a complete year.

Non-Resident Shareholders’ Tax—Abolition of Apportionment System:

Up to 1952 all private companies were taxed in accordance with an apportionment system, i.e. their income was apportioned to shareholders as if they were partners. In that year the system was abolished in all cases but one, viz. for the purpose of levying non-resident shareholders’ tax on private companies, not subject to undistributed profits tax, and whose shares were held wholly or in part by foreign companies.

The apportionment system has the advantage of increasing receipts from non-resident shareholders’ tax, but against this benefit have to be weighed three disadvantages. In the first place it deprives local companies (who have to meet the taxation) of funds which otherwise could have been utilized for operating capital for expansion. It could, therefore, exercise a throttling effect on development, particularly under prevailing circumstances where the parent companies abroad may be rather disinclined to make adequate further funds available to the local subsidiaries. Secondly, the system discourages new foreign investment in the Union. Thirdly, the incidence of the system may bear inequitably on South African shareholders who, on top of their liability for normal tax on any dividends accruing to them, also have to shoulder, through the company, the burden of the non-resident shareholders’ tax on the profits apportioned to the foreign shareholders.

I propose, therefore, that the apportionment system be abolished in this case also and that non-resident shareholders’ tax be levied in all instances only on dividends actually declared.

The maximum loss of revenue to the Treasury amounts to R1.6 million per annum, but the actual loss is estimated at approximately R1,000,000 per annum.

If this proposal is accepted, the distinction between public and private companies for taxation purposes will retain its significance only with respect to the undistributed profits tax. Last year public companies were exempted from this tax. Under the existing provisions of the Act it is a relatively easy matter for a company to qualify as a public company, and this position lends itself to abuse and tax evasion. In my view a more restrictive definition of public company is fully justified. The Department of Inland Revenue is examining the matter, and I hope to be able to submit proposals to the House when the taxation legislation is introduced. No significant additional revenue is anticipated.

Tax on Royalties:

Under the Union s taxation system, payments to foreigners in respect of know-how do not attract tax liability. Payments in respect of royalties, on the other hand, are subject to tax, to the full extent of such payments.

This differential treatment in respect of two matters of the same nature gives rise to abuse. Moreover, complaints are received in growing number to the effect that the tax on royalties militates against the acquisition of foreign patents by local interests, or enhances the cost of such patents (in order to compensate for the tax payable), which, in turn, impairs the competitive position of the local licensee.

As it is obviously desirable that the latest processes and techniques should be at the disposal of local manufacturers, I propose that payments in respect of royalties and know-how be treated on the same basis. This can be achieved by accepting 70 per cent of the payments, under either head, as representing the cost of exploitation, the balance of 30 per cent only to attract liability to income tax.

The estimated loss of revenue per annum (including 1961-2) amounts to R600,000.

Concession to Exporters in connection with Appointment of Agents:

Expenditure incurred by exporters in connection with the appointment of foreign agents for the sale of South African goods is regarded as capital expenditure and, therefore, not deductible from income. This impedes our export trade and I propose that specific provision be made to permit such expenditure as an allowable deduction. The loss of revenue will be small.

Donations to Universities:

Last year I exempted from the taxable income of companies, up to a maximum of 1 per cent of income, donations made by them to universities for laboratory equipment, technical literature and basic research in the departments of pure science and technology. Of any amount so donated, three-quarters were permitted to accrue to a university institution nominated by the donor company and for such specific purpose as determined by it, while the balance of 25 per cent was to be retained in a trust account for the purpose of assisting universities in general in the directions I have indicated. I mentioned explicitly in my previous Budget speech that this concession was in the nature of an experiment, and that the position would be reviewed in this Budget.

The results of the experiment have been disappointing so far and the concession had been availed of to such a small extent that I have seriously considered its abolition. The need for expanding university facilities for pure science and technology remains so pressing, however, that I have decided to extend the experiment for another year, i.e. until 30 June 1962. Since the mandatory 25 per cent contribution to the trust account may have been partly responsible for the poor response up to now, this requirement will be discontinued in respect of donations made as from 15 March 1961. The loss of revenue is estimated at R600,000.

Long-term Insurance:

In terms of the system introduced in 1959, the taxable income of long-term (i.e. mainly life) insurance companies is calculated at 30 per cent of their investment income (excluding dividends and income from pension fund business). I may mention that the revenue accruing to the Government under this system falls substantially short of the amount that was contemplated, and I hope that insurance companies will show their gratitude to the Treasury in a suitable and—for the most part— customary manner!

The exclusion of dividends gives a special incentive to insurance companies to invest in shares, and substantial such investments have been made by some companies. Within limits, this tendency can redound to the benefit of our economic development, and I welcome it. I feel, however, that the incentive is too strong, and that a balance requires to be restored. It should also be borne in mind that where an ordinary company receives dividend income, its shareholders are liable for tax on any dividends distributed by the company out of its dividend income. The policy holders of a life insurance company, on the other hand, pay no tax on any benefit accruing to them as a result of the company’s dividend income.

As in the case of an individual who has to pay tax on two-thirds of his dividends if his income exceeds R4,600, I consider it justified that two-thirds of the dividends received by long-term insurance companies should be included in their investment income in determining their taxable income. This proposal will yield R300,000.

Representations have been received to the effect that, for tax purposes, the investment income received by insurance companies in respect of annuities paid by them, should be disregarded, because the annuity is taxable in the hands of the annuitant. This request seems reasonable, and I propose that the exemption be granted. The loss of revenue is estimated at R26,000.

Short-term Insurance:

Two years ago, short-term insurers (e.g. fire, theft and motor vehicle insurance companies) were allowed to build up, over four years, a reserve against unexpired risks. In addition to the unexpired risks at the end of each tax year, there are also claims which have been submitted but not disposed of. Strictly speaking, provision for such claims may not be deducted from the companies’ income. It is reasonable to allow the companies to build up reserves for this purpose too—again over a period of four years. The annual loss will eventually reach R1,080,000, but since certain companies are, contrary to the existing provisions of the Act, already making full provision for such a reserve, which will not be permitted in future, the State will receive an additional amount of R780,000 in 1961-2.

Self-employed Persons:

Last year self-employed persons were permitted to deduct from their income their annual contributions to any approved pension fund, up to a maximum of R600. In respect of an elderly person this maximum is somewhat low. Furthermore, an employee is allowed a rebate of R400 in respect of such contributions, and more often than not the employer will at least match the employee’s contribution—a total, therefore, of R800. In the circumstances I propose that the maximum contribution by a self-employed person be raised to R800. The loss of revenue is estimated at R100,000.

Pension, Provident and Retirement Annuity Funds:

Malpractices and tax evasion still occur in cases where well-to-do persons, or their employers, contribute to these funds, and large lump sum payments are made to them. The Commissioner for Inland Revenue has discussed the problem with interested parties and proposals will be submitted to the House concerning the determination of the tax free percentage of any lump sum payment. Generally speaking, the maximum tax free payment will henceforth be R20,000. Vested rights will, however, be entrenched, so that a person who was entitled, for example, to draw R30,000 tax free in 1960, will not forfeit that right. Eventually, although not next year, this proposal will give rise to additional revenue.

Tax on Income of Estates:

At present, the income of an estate prior to liquidation is taxed in the hands of the estate and not in those of the heirs. The effect of this may be unjust, and I propose that hencefor the income be taxed in the hands of the heirs. The estimated revenue loss will amount to R200,000 for a complete year and R50,000 in 1961-2.

Income Tax on Persons and Companies:

Apart from the main tonics I have recommended for stimulating the sluggish rate of development, I have prescribed a number of auxiliary remedies. The immediate sacrifice in revenue which the latter entail is not very big, but, unlike most modern remedies, the efficacy of a fiscal prescription cannot be judged by its cost alone!

But if the application of all these mixtures should have the desired effect, and increased saving and investment lead to expanded production, a new disparity may develop between production and consumption. We have to guard against this danger. This requires that a new remedy be prescribed which will ensure that the increased output is properly absorbed by the economic system. In other words, this remedy should have the effect of putting money into the pockets of the people in order both to stimulate and absorb the increased production. The obvious fiscal remedy for this purpose is a reduction in income tax rates.

A real danger exists, however, that a reduction in personal income tax will stimulate the demand for imported goods, thereby subjecting our balance of payments to renewed pressure. On the other hand, I have taken steps in this Budget to check the demand for non-essential imported goods. In all the circumstances I am prepared to run this risk. I propose, therefore, that the discount of 5 per cent granted last year to individual income tax payers be retained this year, but with this change that it will be increased to 10 per cent. This concession will cost the Government R4.8 million. Provincial income tax will continue to be calculated on the present year’s basis and my proposal does not, therefore, involve any automatic loss in provincial revenue.

Further, although our company tax to-day is amongst the lowest of comparable countries throughout the world, I nevertheless propose making a concession here as well. In our society the functions of the entrepreneur are fulfilled, to an important extent, by the company, and a tax concession to companies should, therefore, stimulate enterprise and promote increased capital formation. Accordingly I propose that a discount of 3 per cent be allowed on the income tax payable by all companies other than gold and diamond mining companies. The loss of revenue will amount to R4.2 million. This loss will be borne entirely by the Central Government, and my proposal will not entail any reduction in the revenue derived by the Provinces from company tax.

It is perhaps not inappropriate to reflect that the benefits of the general economic revival which this Budget contemplates will inevitably penetrate to every income group and to all sections of the population.

Summary:

The following is a summary of the Revenue Account for 1961-2:—

This leaves a small surplus of about R255,000.

Conclusion:

Mr. Speaker, I indicated in earlier Budgets that I would pursue a flexible financial policy. It is the mark of a sound Budget that it allows concessions if circumstances permit, because, in that case, sacrifices can more justifiably be asked if conditions so demand. It is necessary, moreover, to revise and re-form the taxation system from time to time in the light of changing circumstances, in order, for example, to achieve a more even distribution of burdens, to simplify tax collection for both taxpayer and the Treasury, and to enhance the efficacy of the taxation system as an economic stabilizer. But the policy, whilst flexible, should always have a firm foundation. The objective should always be to safeguard and strengthen the national economy, but to seize new opportunities with vigour and confidence.

These general guiding principles have been strictly observed in this Budget. The taxation and concession mixtures which I have prescribed for South Africa are directed towards the immediate aim of this Budget, namely, as I have indicated, to stimulate development and saving, safeguard the security of the State, and protect the balance of payments.

I need only quote a few examples. The additional provision for defence is, naturally, designed to serve the prime duty of the Government, viz., to safeguard our national security. The large amounts made available for the border areas, the Bantu areas, and the Development Corporation for Coloureds, as well as the tax concessions in respect of investment allowances and base mineral mines, are designed to stimulate development. The enhanced import duties will assist in protecting our balance of payments. The discount on personal and company income tax will promote private saving, while a number of other tax changes will assist towards the further rationalization of our taxation system. In this connection I would also mention that, while certain difficulties remain to be solved, I am still hopeful that it will be possible to introduce a pay-as-you-earn system of income tax in the near future.

In formulating his prescriptions, the medical doctor has the whole of the pharmacopoeia at his disposal. My field is much more limited. The remedies I am able to prescribe are only fiscal and monetary measures. In an economy based on private enterprise these remedies can never have a decisive effect. But, if the circumstances are favourable, they can point the way and serve as incentives. They cannot exercise a determinative effect on the national economy, but, nevertheless, with the co-operation of the private sector, much can be accomplished by fiscal and monetary measures.

I am firmly convinced that, provided the prescription in this Budget is followed faithfully and utilized to the full, and provided we are not unduly affected by economic gales from abroad, our first republican year will be a year in which our economy will reach new heights.

I second the motion.

I lay upon the Table—

1. (1) Estimates of the Revenue to be received during the year ending 31 March 1962;
2. (2) White Paper in connection with the Budget statement, 1961-2;
3. (3) Taxation proposals; and
4. (4) Comparative figures of Revenue for 1960-1 and 1961-2.

REVENUE. 1960/61

REVENUE. 1961/62

Mr. Speaker, the hon. the Minister of Finance stated at the outset of his speech that he believed that this Budget was a historic Budget for two reasons. Firstly, that it was the first Budget to be introduced under the decimal system and secondly that it was a pre-republican Budget.

I am sorry to say, Sir, that it was notable for a third reason. It is the first time in all my years in Parliament that I have ever heard a Minister of Finance take advantage of his Budget speech to make a cheap party political attack. [Interjections.] This hon. Minister is the most vulnerable Minister in the Cabinet, and he should be the last person to take an advantage—when he is broadcasting to the country, let that be remembered, Sir—of his Budget speech and to say what he said this afternoon. He has set a precedent, Mr. Speaker, which I hope neither he nor any subsequent Minister of Finance from whichever part of this House he may come, will follow, because we have a record in this House of Budget speeches which have been an objective, serious survey of the country’s position. The Budget to which we have listened this afternoon, Sir, is quite clearly from the beginning to the end, from the commencing admonitions of the hon. the Minister when he donned the garb of a medical practitioner right up to the last concluding sentences, a mark-time Budget indicating that the Minister has the gravest doubts as to what is likely to happen within the next 12 months.

Sir, the Budget speech is commonly intended and regarded as the most important speech of the Session. It is awaited by hon. members and by the country either with hope or foreboding or anxiety as the case may be, depending on who it is who is listening. But I feel that neither this House nor the country is in any mood to go deeply into the details of this Budget. I believe the eyes and the thoughts of everybody in this House and outside it are at present on London and not here. That being so, Mr. Speaker, I believe I will be interpreting the feelings of hon. members if with the permission of the hon. the Minister I move—

That the debate be now adjourned.

I second.

Mr. Speaker, I want to begin by asking: What mandate or instruction did Section 127 of the South Africa Act give the Railways? And if we analyze that mandate we find that two important injunctions were given to the Railways. The first is that the Railways, in its administration, must apply sound business principles; and, secondly, that it should assist in establishing the population in the interior. This mandate imposed certain duties on the Railways, the first of which is that the Railways is compelled to bear in mind the broad national interest, to take the population into consideration, to take the agricultural and industrial development into consideration and to make no more profit than is required to cover its interest, depreciation, maintenance, improvements and expenditure, as was also clearly stated in the report of the Newton Commission in 1954. In regard to this mandate and these two principles contained therein, the Railways always had to be guided by these main principles, viz. to act on business lines and to render service to the whole of the population irrespective of where they are and of geographical factors and the vicissitudes of nature. So much for the mandate given to the Railway Administration by the South Africa Act.

Now the Opposition, during this debate, made various points in regard to various matters. They spoke about our tariff policy. They pleaded for the establishment of a capital fund. They pleaded for relief in the competition between road transportation and rail transportation, and they alleged that the Railway Administration had developed a monopoly as against other systems of transport, with special reference to road transportation.

Now I want to say something in connection with our tariff policy. Since 1954 all tariffs have been based on the principle of covering the direct costs plus what the traffic can bear. In regard to this matter, I want to say that this principle underlying our tariff policy is followed by almost every railway system in the world. In the second place, I want to say that the services on which the South African Railways suffer losses because of its tariff policy are guaranteed by the State in two instances, viz. the transportation of non-White suburban passengers to the resettlement areas, and where the State gives a guarantee in connection with the transportation of animals from drought-stricken areas. Our tariff policy is a flexible one. Our tariff policy adapts itself to changing circumstances. The tariff policy of the Railways is linked up with the interests of the country, with its whole economic structure, and it is in line with the mandate contained in Section 127 of the South Africa Act. The proof of this adaptability and flexibility is to be found in the various tariff arrangements applied from time to time and recommended by various commissions. Our tariff policy has not become stagnant through the years. It did not remain static; it is no longer what it was in 1910. Only seven years ago, in 1954, as the result of the report of the Newton Commission, we tried to adapt our tariff policy to the changed economic circumstances. But whilst the tariff policy of the Railways is elastic and flexible and adaptable, and whilst in the past it proved that adaptability by making various tariff changes to fit in with changed economic circumstances, our tariff policy has one great characteristic, namely that it is stable. It does not vary, as is the case in many other countries. A stable tariff policy is essential in order to have continued peaceful economic development. In connection with its mandate, the fact remains, and I repeat it—this fact is closely linked with the application of our tariff policy, namely that, throughout the years, and even to-day, the Railways have had to render uneconomic services. This is the whole basis for the principle of high-rated traffic and low-rated traffic. This is also the reason why the Railways has to run a road motor service in South Africa on an uneconomic basis. It is due to this policy that tariffs cannot be raised on low-rated traffic, and cannot be lowered on high-rated traffic, with the object of increasing revenue and to increase certain volumes of traffic. I want to pose this question. Unless we apply this principle in our tariff policy of high-rated and low-rated traffic, and unless the Railways is prepared to comply with the mandate to serve the interior and the whole of the population and, consequently, to maintain uneconomic services, who will then carry the goods to the far distant areas? What private undertaking is there in South Africa which will do so? Or else it must depart from the principle of direct costs plus what the traffic can bear and introduce a system or a policy of actual costs, and then the Railways will be able to do it. I want to put a further question: Who will transport the volume of coal which is so important in our economic development unless the Railways does so; which will be prepared to bear the consequences of an increase in the tariff on coal—just to mention one example—in so far as the economic implications are concerned which will affect the whole of the country? Then I want to ask: Unless we maintain this tariff policy, as the Railways is now doing, will the State have to help the Railways by means of subsidies? And I want to ask whether there is one person in this House who is in favour of the State paying a subsidy to the Railways? I say, Sir, that other countries like Germany and Britain would like to apply our system of tariffs. We know that the Railways there are being subsidized. But surely we are not a country like Britain or the other European countries where the ratio between industrial production and primary production differs as widely as it does in South Africa? We have long distances. We have large areas where the traffic offered consists exclusively of low-rated traffic, viz. primary products, and the South African Railways is bound by its mandate to take agricultural development into consideration, as the Newton Commission says, and I quote—

Another factor which has a great influence on the revenue of the Railways and which, in many instances, affects the tariff policy, is the fact that economic recessions always first affect the high-rated traffic and result in decreased Railway revenue. Therefore, if you take all factors into consideration in connection with our tariff policy and the principle underlying it, as it is being applied by the Railways to-day, we can say that the policy we are following to-day is in the national interest, that it is aimed at eliminating continual vulnerability, that our tariff policy is well balanced, and that, in general, it is closely adapted to the particular transportation problems which are peculiar to South Africa with its long distances and its sparse population. I want to say further that our tariff policy, therefore, has stability and that it does not vary as much as it does in other countries like Britain, where, in recent years, there were repeated increases by as much as 50 per cent. In his book, “ Road Transport in South Africa ”, Dr. C. Verburg said that our tariff policy, as it is being applied by the South African Railways, acts as a stimulus for our whole economic and industrial development and that our tariffs, as they are to-day, viewed from the angle of general development, have no unfavourable effect on the establishment of industries.

Now I want to say something in connection with the capital fund which was advocated by the Opposition. The Opposition pleaded for a fund which is to serve as a reserve fund to make the Railways less dependent on the capital financing of the State, and to reduce the burden of interest. I say that this matter has not been well considered, that it is not necessary to have such a fund, and that it is not in line with the South Africa Act and the mandate contained in that Act. It is not necessary because the Administration has funds at its disposal which can be regarded as reserve funds. I want to mention a few of them. The Railways has its Betterment Fund which provides for improvement and additions, and for the redemption of certain capital expenditure, and into which fresh sums are paid from year to year. At the moment this fund stands at £5,772,654—or rather, it stood at that amount on 30 November 1960. Then there is the Insurance Fund, which is intended to cover certain responsibilities and risks run by the Railways, and at the moment this fund stands at £16,250,442. In addition we have the Renewals Fund to write off assets with a view to depreciation, for rolling stock, equipment in workshops, ships, aircraft, etc. Since 1957, as part of this fund, we have had a special Higher Replacement Costs Account. The whole fund at the moment stands at £63,650,727. In addition to this we still have the Staff Guarantee Fund, which stands at £94,862. Then there is the Institute Fund, £355,864. Then we have the Welfare Fund, £156,094. These funds are all reserve funds. They are all interest-bearing funds. As I say, these funds are reserve funds, and I say that it is contrary to the South Africa Act and the mandate contained in it for the Railways now to establish a new capital fund which would oblige the Railways year after year to budget for surpluses, because that is contrary to the spirit of the mandate. The Railways will be compelled for a long time to budget for surpluses, and that policy is diametrically opposed to the mandate contained in the Act.

I want to mention further objections to this fund which is advocated, and I want to use the argument of the Opposition itself. When the Minister of Finance during the past few years in this House took surpluses from the Consolidated Revenue Fund and diverted them to the Loan Account, they advanced the argument that we could not burden the present generation in order to pay for future generations. Now I want to ask: Why should this generation then incur responsibilities for the sake of future generations, and in that way subsidize the Railways? The Opposition itself says that the existing reserve funds are too weak and that they should be strengthened. Where will the Opposition find the money to pay into this capital fund they plead for? If this fund is established, I say that the Railway Administration will immediately have to budget for surpluses in order to provide for that fund. If the money for this fund is to come out of the Consolidated Revenue Fund, or in other words from the public, then why take a tickey from one trouser-pocket and put it in the other pocket? Why then not suggest that the state should say every year that it will write off a certain amount of the capital debt of the Railways? Why establish a special fund and borrow money from the State which will have to be paid back to the State again? Such a fund subsidized by the State, or such a loan, will surely have to be earmarked as a direct State subsidy paid to the Railways. Such a fund, if it is to be subsidized by the State, will make the Railways a political football. Other countries like Britain and Australia, where the State subsidizes the Railways in this way, are jealous of our system in terms of which we have various funds in which the Railways in the course of time build up reserves, to such an extent that on 30 November 1960 we had a total amount of R360,413,408 in those funds. This proposed fund would be an extra fund, and this is my objection to this proposed capital fund which will swallow all the surpluses of the Railways, and where will the other funds then get money from if not from the State? Does the Opposition want to abolish the other funds? No, Mr. Speaker, the Railways has in these funds and through this R26,000,000 which the Railways annually pays in interest on its capital investment of £630,000,000, become a source of capital formation in the State. This interest is an income to the State. To the State it is a capital investment. The Railways has become a field of investment to the State, and now the Opposition complains that the burden of interest on the capital investment is becoming too heavy, but they forget that the Railways is not a private institution or a semi-State institution. The Railways is a State institution and it is an investment field for the State through which the State can amass capital. The Railways is just the means by which the State yearly obtains a source of capital in the form of the interest paid on the great capital investment on the Railways. If the State’s capital is now to be repaid by means of this capital redemption fund, as is suggested by the Opposition, where will the Treasury then find the interest which it now receives from the Railways? It will have to go and invest that capital elsewhere. Here the Railways is earning interest; it is earning funds which it uses in the interest of the State as a whole by utilizing that capital. But it is now being suggested that another capital fund should be established and that the State’s capital should be repaid and then the State loses an internal source of revenue which it will then have to seek elsewhere. It will have to seek investment fields elsewhere. But by this capital investment the State has made it possible for one of its public arms, one of its sectors, to play an indispensible function in the whole State process of production. Transport of all types constitutes an integral part of the whole process of production. These are my objections to this capital fund, and I therefore say that I cannot accept it under any circumstances.

I now want to answer the accusation of the Opposition that the Railways have become a monopolistic institution. My first submission is that the Railways do not have a monopoly of any kind. More goods and passengers are conveyed by the Airways and by road than are conveyed by the Railways. The private haulier in South Africa has his full share of the available traffic. Under present circumstances road transport can never be a supplementary service seeing that the Railways have reached their maximum carrying capacity. Under present day conditions road transport will always be competitive from the very outset. The development of road transport has made such progress that the Railways on the basis of figures are not to be entitled to break their mandate. Let us examine the figures. In 1957—these are the latest figures I have available—the private haulier carried 67,000,000 tons of goods. The Railways carried 75,000,000 tons. Of these the Railways carried 10,000,000 tons free of charge. In other words, they carried their own goods which therefore cannot be taken into account. In other words the private haulier carried 67,000,000 tons and the Railways 65,000,000 tons, and how on earth can the Opposition now say that the South African Railways are a monopolistic institution? Bear in mind that of the 65,000,000 tons of goods carried by the Railways, 18.8 million tons were coal. Coal traffic is low-rated traffic. If the Railways do not provide this service we would be left in darkness. I want to read what Dr. Verburg has said in this regard. Dealing with the privileges and benefits enjoyed by private hauliers he says the following—

He is referring to a survey of the whole road transport position in the Union—

While the private haulier can choose his area, his goods and his tariffs as he wishes, the Railways are bound to their routes, their timetables and their rating policy, which they cannot change and amend overnight because they are responsible to Parliament. I say that in addition the privileges which the private haulier enjoys, he also enjoys a whole series of concessions which have been granted to him in exempted areas so that he can sometimes carry goods up to 300 miles. In any uncontrolled competition between road and rail the Railways would have to increase their tariffs and the principle of actual costs plus what the traffic can carry, will have to be surrendered if the Railways are to compete with road transport and the private haulier. I say that the Railways in South Africa are entitled to protection. They are entitled to that protection because it flows from their mandate. It flows from their obligation to take and to carry the traffic offered. It flows from the broader function of the Railways. It flows from the socio-economic function that the Railways fulfill. The purchasing power of 111,000 Whites in South Africa, of 10,800 non-Whites, of 232,000 White women and children and of 31,000 pensioners is based on the fact that the Railways constitute an important source of capital formation. Protection is required because the Railways form part of the State’s whole process of production. This need for protection flows from the fact that the Railways contribute 7 per cent of our national income as compared with 10 per cent by the gold industry and 12 per cent by commerce and industry. It flows from the Railways’ obligation to do the dirty work. 17.35 per cent of the traffic carried is high-rated traffic and 82.65 per cent is low-rated traffic. Mr. Speaker, the Railways are entitled to protection because they provide the only means which can solve the unique transport problems of South Africa. The Railways are entitled to protection because they constitute a training institution for unskilled labour I just want to give these figures. In 1945 ordinary rail workers filled 3,377 graded posts, and in 1959 the figure was 1,202. But because the Railways as a result of increased employment opportunities, can no longer attract skilled labour, the Railways have to act as the refuge for a vast number of unskilled White workers, and they have to make use of this unskilled labour while the private sector and the private haulier can make use of the non-White who can work for a lower wage. I say that for this reason the Railways are entitled to protection. This protection is provided to the Railways because of the service they render by providing a vast number of unskilled White workers with a livelihood. The Railways are entitled to protection because they are bound by fixed tariffs, while the private sector is not. The Railways are bound to fixed routes. They must look after the interests of all. The private haulier does not. He is only concerned with individual contacts. I want to ask this question: Who else could provide a national transport network and fulfil the obligations entailed therein and provide the services entailed therein, as the South African Railways are doing? In many instances the Railways assist in the export of goods which we want to sell abroad. The Railway rebate on raw materials which are being conveyed to factories for processing represents another task which the Railways are carrying out. The Railways are entitled to protection because their carrying capacity cannot easily be adjusted to meet fluctuations. There is an inter-action between supply and demand and the establishment of an equilibrium between supply and demand is a long process. There is for example our variable climate, and the Railways cannot curtail their services. They cannot suddenly reduce tariffs in order to attract a larger volume of traffic. The Railways do not have the same elasticity as the private sector. They cannot arrange their labour position as the private sector can; they do not have that elasticity either. The Railways cannot reduce their fixed costs so easily. No, the Railways must bear in mind their wider obligation to serve all sectors and cannot merely take the profit motive into account. The Railways have a socio-economic task to fulfil and not merely an economic task. The Railways are under the control of Parliament and of legislation. The Railways’ ability to attract traffic on a large scale is limited and restricted, unlike the position of the private haulier. On these arguments I base my submission to-night that the Opposition should please cease advocating that the Railways Administration has developed into a monopoly and has acquired a monopoly over the years. Mr. Speaker, who would survive if the Railways were to disappear to-day? Let us assume that we were to withdraw this protection. What would be the result? Our roads would be overloaded and there would be difficulties. There would be representations, political pressure, bankruptcies, just as happened when the Railways reduced its subsidy on the carrying of coal from the coal fields, when they were able to cope with that traffic themselves.

Mr. Speaker, I want to conclude and I ask what our Railways have done to eliminate all uneconomic services? I say that the State already guarantees the carrying of non-White urban passengers to and from the resettlement areas. Certain harbours such as Knysna, Kalk Bay and Saldhana have been transferred to the Department of Commerce and Industries or the Department of Defence. By so doing the Railways have freed themselves of unnecessary obligations. The State at the moment is running the airports. The construction of railway lines to mining undertakings is guaranteed. The Railways have undertaken electrification, dieselization and mechanization in the offices and harbours and by introducing mechanization into the shunting yards the Railways have also achieved the greatest possible measure of economic administration. Efficiency has been increased. Better candidates have been attracted; publicity has been undertaken; vocational guidance is being provided; training is being provided; special courses have been provided in order to develop to the full the potential of officials. Study bursaries and recognition of academic training have been granted. Since 1945 32,410 servants have undergone Departmental courses. Improved organization and working methods have been introduced. Mechanization has been applied in all spheres, and there is improved guidance and standardization which have resulted in a decrease in claims. Mr. Speaker, we have the best costing system in the world. Rhodesia’s representatives were here recently and they adopted our system as it stood. Our costing system is based on and has been adapted to meet the code which the International Union of Railways have laid down and which is being used by the British Transport Commission. By these means our Railways have achieved greater punctuality, greater safety and greater speed—and speed is money and money is time. And then we find that our expenditure per train mile has fallen behind our revenue per train mile. I attribute this to the overall efficiency campaign of the Railways which has met with such success.

I just want to refer to the representations of the hon. member for Zululand (Mr. R. A. F. Swart) for the establishment of a board of experts. In this regard I just want to ask him: Who does he want to see appointed to that board? It would be a most cumbersome body because there are so many interests in South Africa—I am thinking of commerce, agriculture, the gold mining industry, the metal workers, the engineering workers, the sugar industry and numerous others—each of which would make a claim for representation on that board. But after all we have our Railway Board and under the 1916 Act the Railway Board has the exclusive function of advising the Minister from time to time. Mr. Speaker, their argument in favour of a capital fund therefore falls away; their allegations that the Railways have become a monopoly similarly fall away; and their attempts to interfere with the rating policy have failed. I say we must keep what we have and I congratulate the hon. the Minister on the excellent way in which he has shown he can handle the affairs of the Railways.

Mr. Speaker, as someone who represents a constituency in a province where we do not often have the opportunity of listening to an Opposition speaker, I have been listening during the past few days in an endeavour to find out what the Opposition has to contribute to this debate; I have tried to ascertain what their grievances were, but it has been very difficult to gather from their speeches what their grievances really were. We have had some criticism but because of what happened in the past, we know the United Party as prophets of evil. We remember that in 1948 when the National Party came into power they announced that the banks would close, that people would be thrown out of their jobs on to the streets and that our economy would collapse. That was what they said on every street corner because that was their only hope of bringing the National Party Government to a fall. After that they tried to frighten investors and to create panic. This agitation nearly succeeded in its objective, Mr. Speaker, particularly during the years when the Railways found it difficult to keep pace with the tempo of the country’s development.

May I ask the hon. member a question?

Mr. Speaker, I only have 12 minutes at my disposal and I am sorry. I want to say that when the Railways found it difficult in those years to convey all the traffic and to keep pace with the terrific development of the country’s economy and a small quantity of goods was left lying at the stations, goods that could not be conveyed, the demerits and inefficiency of the Railways were broadcast from every station. The Opposition really thought at that time that they had hold of something but that inefficiency was very soon put right by the present Minister when he introduced his six-year rehabilitation programme and before long the Railways were once again able to convey everything and to meet the high demands which the rapid rate of development of the country’s economy made upon it and it only succeeded in doing that by exerting itself to the utmost by the most efficient planning, hard work, and with the wholehearted co-operation of the railway staff. That was why the hon. the Minister could successfully meet the challenge which he had accepted.

We want to congratulate the Minister and his staff—from the lowest rung to the highest rung—on their achievement. That achievement is and was of the utmost benefit to our country; we can say that it was an indispensible part of the fantastic development and growth which our country had experienced. We delight in this achievement. That put an end to the battle cry of the Opposition about inefficiency. I have tried to ascertain—I have honestly tried—what the problems are that the Opposition envisages. We were very pleased to learn that the dreaded deficit which was expected in the finances of the Railways had been converted into a surplus of R19,700,000. We are pleased and delighted about that and if members of the Opposition feel bad about it, then I sympathize with them. They naturally feel bad because their house of cards has tumbled down. It is difficult to believe that the chaos within their ranks is such that some of them get up in this House and held it against the Government that the anticipated deficit had been converted into a surplus. Seeing that we are all living in this country and seeing that we are all striving towards progress, I find it hard to believe that when we receive such glad tidings, they can still come and hold that against the Government.

Another problem of theirs is what they call the crumbs off the rich man’s table and consequently we have had these accusations directed at the Minister. It has now become very clear to me why the United Party cannot attract the vote of the electorate particularly not that of the railwaymen. It appears that they are completely out of touch with the railwayman. The railwayman is not ungrateful and if we regard this concession that has been granted as crumbs off the rich man’s table, then I do not know what the railwayman wants. The proposed consolidation of cost-of-living allowances with basic wages means a tremendous amount to the railwayman they were even prepared to accept partial consolidation in order to draw a higher pension. They would even have been grateful for that. I can assure you, Sir, that the railwayman is afraid of only one thing in South Africa and that is that the United Party may perhaps come into power and that they will then do what they did in 1922 when they did away with cost-of-living allowances within a period of one year. Those are the people who to-day blame the Minister and who say that what he is giving the railway-worker are the crumbs off the rich man’s table. This act is a blot on the memory of the predecessors of that party.

But this Government has done even more. The railwayman was never so bold as to expect the Government to carry the additional expenditure, they thought that they themselves would have to carry it. The Minister has now come forward and exceeded everybody’s expectations by giving the railwayman R3,000,000 in the form of salary increases. That, I think, is an exceptionally valuable concession the additional contribution which is required in order to increase the railwayman’s pension by 40 per cent to 60 per cent. We want to tell the hon. the Minister that the people of South Africa are grateful and the railwaymen, particularly those in the lower income group—are grateful for the fact that it has been made possible for him and his family, when he retires one day, to be well looked after.

Mr. Speaker, as you know, the time for this debate is allotted by you to the various parties. A good deal more time has been allotted to the Government side than to the Opposition side. The Opposition has exhausted its allotted time and it appears that members from the Government side have nothing more to say that they are using a certain amount of time which might be available to us. I want to make this clear, Mr. Speaker, because uninformed members of the Press have suggested that this side has nothing further to say.

While many members on the Government side has spent their time by thanking the Minister and by praising the work of the Railway servants, nothing has been said by any of them in connection with the facilities available to the travelling public. Nothing, virtually, has been said on their behalf, particularly on behalf of the suburban passenger. The Minister knows that it has been the policy of his Department in the past, to provide traffic facilities where there was a demand. I suggest in this connection that the time has arrived that the Minister should reconsider this policy, and follow the procedure of business to take new measures with a view to creating and stimulating demand where this has shown signs of declining. The Minister should now consider stimulating demand for suburban rail traffic. The Minister knows that particularly in latter years, roads in our suburbs were congested with motor traffic and it frequently takes longer to travel by car, than by bicycle. I suggest, therefore, that the time has arrived where the Minister should reconsider the planning of suburban stations. The Minister knows that when he comes to stations in the country districts, he will find the old hitching posts where people could tie their horses before setting out on their business. There were also outspans outside where wagons could be stationed while people attended to their business affairs. I suggest that the Minister should seriously consider the provision of parking spaces round our suburban stations so as to encourage passenger traffic on our suburban lines. It is no use the Minister telling us that suburban traffic does not pay because in his Budget he has referred to increasing traffic of the non-European services and expressed the hope that that would still further increase. I suggest that the Minister should provide the necessary facilities on the European sections to encourage the use of suburban railway transport.

I want to refer again to transport for non-Europeans, and want to quote the following statement by the Minister in his Budget speech—

I would like to ask the Minister what his plans are for the encouragement of the non-European service? Is he waiting until the areas have been developed or is he putting his services in first. You see, Sir, that one way in which the Minister can encourage his non-European service is to provide trading sites at stations. The hon. Minister, I know, will not disagree with me when I tell him, that he is already having trouble at some of his suburban stations, in non-European areas. The Handels-instituut has made representations to him for the provision of trading facilities at these non-European stations. The Minister is having difficulty because the Minister of Bantu Administration and Development also wants trading sites for the non-Europeans of those areas. I would like the hon. Minister to tell me, in the course of his reply, to whom he is going to give these concessions. Is he going to give them to members of the Handels-instituut to enable them to trade at these non-European stations or is he going to accede to the request of the Minister of Bantu Administration and Development?

I have not yet decided to give anything!

The Minister says that he has not given anything yet. Previously I said that one of the ways in which the greater use of suburban transport by non-Europeans and Europeans may be encouraged, was to encourage these people to come to the transport centre and one of the ways in which they can be drawn to the transport centre is to provide trading facilities contiguous to these centres. The Minister will have to encourage trade because his Budget was prepared under vastly different conditions than the conditions which may obtain in the future. The news we have received to-night, indicates that there are difficult tasks ahead. The Minister framed his Budget on the assumption that everything was going to be as usual. The Minister knows that according to the latest news flash, the Prime Minister has withdrawn his application for South Africa to be allowed to stay within the Commonwealth. This will have serious effects on the economy of the country.

No.

The Minister says “ No ”. Mr. Speaker, we will have an opportunity of debating that next week, but I hope the Minister is right and that the economy of the country will not be affected. But this Minister has been proved wrong in his prognostications before this and he can be wrong again.

I have always been on the right side!

Mr. Speaker, the Minister, if he is going to get any improvement in his railway services, particularly with regard to suburban traffic, should not wait for the traffic to justify the provision of railway services, but should adopt the new and modern approach and stimulate the demand for the services by providing these services first.

Are you referring to the Bantu areas? I want clarity.

Let us take the Bantu areas. With these areas, Mr. Speaker, the Railways should come first. When the Government decides on a housing scheme, transport should be the first amenity to be provided. Let us take the new Bantu area at Kwa Mashu. I know that the Minister has provided services there as part of a programme, but these are not yet completed. Houses have been provided there and so have the bus services but not railway services. The result is a tremendous congestion and a great deal of time is necessary for non-Europeans to travel to and from their work. To this must be added the cost of the bus service. Surely the Minister knew that it was the policy of the Cabinet to establish these townships and he should, therefore, have provided railway services first. Another example is the Umlazi area outside Durban. The Minister knew that it was the intention to build those houses there. He knows that it is Government policy to establish townships and housing schemes where non-Europeans will be allowed freehold title and that, therefore, there will be a permanent non-European population there.

But all these services to non-European townships are being run at a loss!

Mr. Speaker, I refuse to accept the Minister’s statement that these services are being run at a loss, I will not believe a single word of it, until he produces figures in regard to costs to substantiate it. The Minister has told us year after year that these services were being run at a loss but when I placed questions on the Order Paper for figures in regard to costs to be given, he said that such figures were not available, the Minister cannot have it both ways. He cannot come to this House and tell us that the services are being run at a loss without producing figures to substantiate his claim. And these figures he has not got. Only last year, Mr. Speaker, I asked the hon. Minister what the costs were in respect of the Cape Town-Simonstown line because the Minister told us that the Railways were making a loss. But the Minister could not give us those figures. How is it possible for a Minister to come to this House and tell us he is making a loss on a service without being able to produce figures as to the costs? Mr. Speaker, we cannot accept that position as being satisfactory. If in any business the manager or director claims that the services are being run at a loss, he must be able to establish that by producing figures of revenue and expenditure and unless the Minister can also do so here, we cannot accept that the services are being run at a loss. The Minister knows that the fastest way to deal with traffic in peak periods is by fast, modern electric rail transport. Much of the tension which grows up in our non-European townships, is the result of frustration evoked by people who have spent many long hours to get to work and back to their homes. This can be avoided if these services are provided first. But the Minister and his Department are bogged down as the result of the age-old policy of not providing the services until there is a demand first. If that was the approach of modern business, many of the markets of the world would never have developed. It is high time the Minister adopts a new approach. Knowing that it is the Government’s policy to diversify the population, and knowing that it is the policy to establish these areas, he should establish railway services first, so that the people can be moved quicker, more economically and with less friction. If he claims that these services are being run at a loss, he can come to Parliament and either ask his own Department to subsidize them or that it be done through the consolidated revenue fund. But even then we will not agree to subsidization unless the Minister can establish costs. We are entitled to demand that he produces figures as to costs. I know the Minister will say that the whole question of costing suburban services, is a very involved and difficult one. I know that it is difficult where goods and passenger transport runs over the same lines. It is exceedingly difficult to allocate costs between the different departments. I know that it is a difficult and intricate matter but having accepted that, the Minister is not entitled to come to this House and say that these services are unprofitable and unjustified. It is the policy of the Government to establish industries on the borders of the reserves and to establish housing schemes on the borders of our towns and it is my contention that one of the most efficient ways of avoiding friction is to supply a fast and efficient suburban transport system in advance. The Minister cannot have it both ways. If he accepts that non-Europeans should be housed in areas away from our cities, then it is utterly wrong to provide housing before transport. It is essential that the two should go together; preferably transport should go in advance of housing, because it takes much longer to build a railway line than to provide houses. As it is now, cumbersome road motor services are being established which are in the hands usually of people other than the railways and as soon as these people have invested many thousands of pounds of capital in those services and have established a regular service, then the first thing that is done by the Railways is to object to the renewal of their licences. In that they invariably succeed. For that I do not blame the Minister, but in the meantime local authorities have had all the difficulty in establishing or encouraging the establishment of road motor services. All these services are then disorganized on account of the Minister maintaining an age-old policy of providing transport services only when there is a demand for them. I say again that the Minister, being aware of the Government policy to establish these separate areas, should provide railway transport facilities first. That is the only way in which to develop this country. Let us take air transport for an example. The Minister knows how air transport was developed in South West Africa and that the opening up of South West Africa over the past 20 years has been due, in large measure, to the allocation of licences to private aircraft operators acting as feeders to the South African Airways at Windhoek. I think the Minister can very well take a leaf from the book of South West Africa and establish feeder services in smaller towns where at present the establishment of air links is not justified. The time has arrived for the Minister, instead of sticking to the policy which has been followed since 1910, to adopt a modern outlook and to do his best to create a demand. In that way he not only will get more revenue but will also have more money available to establish and inform us of the costs involved instead of just coming to this House to say that the services are being run at a loss.

I move—

That the Bill be now read a third time.

We have arrived at the third reading of the Industrial Conciliation Amendment Bill which amends the principal Act of 1956. Clause 1 of this Bill amends Section 4 of the principal Act. This is one of those important clauses which I shall now endeavour to deal with in terms of the Rules governing this debate. Section 4 of the principal Act is the section which deals with the registration of trade unions and employers’ organizations. In terms of the principal Act no trade union or employers’ organization can be registered if its membership is mixed, except in certain special cases. I am not going to go into those special cases but I think the House appreciates what those special cases are. This provision was inserted in the Act in 1956. Mixed unions that were registered prior to 1956 are the unions that are in danger under this present amending Bill. At present there are 56 such unions.

Now, Mr. Speaker, I have indicated that we are opposed to the breaking up of these mixed trade unions. We are in favour of the mixed trade union retaining the right to conduct their unions in terms of the constitutions as registered with the Registrar of Trade Unions. This Bill introduces a further attempt by the Minister to bring about what he calls voluntary separation of trade unions on racial lines. This Bill has that purpose, although the Minister has denied that that was the real purpose of the Bill. The trade unions describe this as compulsory voluntariness and the Minister, in defending this measure, has said that in the Cape Province Coloured members of mixed unions have expressed their desire to break away from the mixed unions and obtain registration on a purely racial basis. The hon. member for Boland (Mr. Barnett), who is not here this evening, has been persuaded to support this Bill because of this contention. The argument put forward by the Minister was that the Coloured trade unionists wished to control their own trade unions mainly because they are in most cases in the majority in these unions.

The Minister has been careful not to give what I consider to be the real reason why the Coloured members in the Cape and possibly the Indians in Natal have expressed their desire to have separate trade unions.

Order! The hon. member must not make a second reading speech.

No, Mr. Speaker, I am dealing with the contents of this Bill and this Bill makes it possible for the members of these mixed unions to break away without obtaining the approval of the majority of the members of such a mixed union. I am saying, Sir, that the true reason why the Coloureds wish to break away to-day in the Cape Province and the true reason why the Minister is making it possible for them to break away, is because of the prohibition which the Minister has inserted in the principal Act against the mixed unions having mixed meetings. Mixed unions are not entitled to have mixed membership on executive level. So we are up against this position, Sir, that in terms of this Bill the remaining 56 mixed trade unions are going to be broken up. The Typographical Union is against the principle which the hon. the Minister has got through the second reading, through the Committee Stage, the Report Stage and with which we are now dealing in the third reading. The principle which is going to facilitate the breaking up of the last 56 mixed trade unions is that if a minority of members of such a union wishes to break away, this Bill will enable that minority to do so provided the union was mixed.

We have argued with the Minister on this issue and the Minister’s contention is why should the worker be compelled to remain a member of a mixed trade union; why should things be made difficult for him to resign if he is no longer satisfied and happy or feels that his interests will be better catered for elsewhere? It is this question of “ elsewhere ” that I am interested in, Sir, because in terms of this Bill it is going to be possible for this “ elsewhere ” to be created. I ask the Minister why does he believe that the interests of these workers will be better catered for in a union which has not as yet been established but which can only be established in terms of this Bill when it becomes law. How are the Coloured people or the Indians or the Europeans for that matter going to be convinced that their interests will be better served if they are in a separate union? Is it not true that in the years prior to 1956 the interests of all the workers have been very satisfactorily catered for in the mixed unions? Because there were no prohibitions on mixed meetings or on the executive positions being held by members of the mixed unions, there has been very little trouble over the years in respect of the mixed unions. Now, because the Minister has prohibited the mixed unions from having mixed meetings and has prohibited them from having mixed executives, it has become imperative that this Bill should be introduced so that those members can then exercise what they feel is their right to protect their own people in their own unions. It is not because they want to be in separate unions but it is because they are unable, because of the Minister’s prohibition, to give effect to their desire to protect themselves in mixed unions. That is why this position has developed. The Minister has said that that is not the case; these people want to move out of the mixed unions because they consider it in their interests and that the old mixed union principle did not safeguard their interests. I think the reasons put forward by the Minister are not convincing. The reasons that persuaded the hon. member for Boland to support the Minister at the second reading are not true reasons when you examine them. I am satisfied, Mr. Speaker, that the truth of the whole matter is to be found in the points that I have mentioned. If the Minister is prepared to continue and if he considers that it is in the best interests of all racial sections that they be in control of their own affairs on a strictly racial basis, and if the Minister is not prepared to accept the argument of this side and if he is only prepared to give effect to the policy of his own party, then there is nothing more that we can do at this stage to persuade him of the very, very, dangerous consequences that will ultimately flow from the policy which he is pursuing. I do not wish to prolong the debate on this particular Bill. We have had a great deal of discussion over the years and I do not think that we will convince the Minister at this late hour that he is making a mistake. He is often open to persuasion, I know, but on this occasion I do not believe he is prepared to give way one iota and we, the official Opposition will vote against this third reading.

It is not my intention either, Sir, to keep the House long. We made it quite clear during the second reading that we were opposed to a principle that will intensify the policy of the Government, a policy which encourages and favours a short-term view on the part of certain trade unionists but which does not look to the view of those other trade unions which have a clearer conception of the basis of the true strength and the true effectiveness of the trade union organization at large. I do not want to retrace the arguments of the hon. member for Umhlatuzana (Mr. Eaton) with which we in this part of the House agree, namely that a Bill which puts a premium on separate unions, although there is no compulsion in that direction, is not acceptable to us. It is not surprising therefore that certain sections may respond to those who have only a short-term view of the advantages of trade union organization and not to the ultimate strength as it lies in the common interests of all who are united as workers, irrespective of race. The Minister knows these things. They have been gone over time and again. There is a fundamental difference in principle between that side of the House and this side of the House. As far as the rest of the Bill goes where there are administrative improvements they will be supported by both sides of the House. We too will vote against this Bill because we are against the principle contained in Clause 1; Clause 1 is an extension of the principle which we voted against when the original Act was discussed in this House.

I wish to raise one point flowing from this Bill, one of the immediate consequences. Apart from the fact that it is part of the pattern of the Government’s general policy of smashing everything that it can lay its hands on …

Order! That is not under discussion at the moment.

Mr. Speaker, the effect of this Bill is that it will enable the Government, or rather it will make it easier for trade unions to be smashed up by political agitators who can now go into an area where they can get the majority of members of a trade union in a specific area as opposed to the members throughout the Union as a whole. In terms of the Government’s general policy this Bill is enabling disintegration to take place. It is enabling political agitators to go into a particular municipal or city area and to agitate within that area to smash a trade union which is functioning perfectly well perhaps in a hundred other municipalities. But because a small group in one particular area wish to use their political influence, this Minister is changing the Act in order to open the door to that political agitator. I know that in one particular trade union here in Cape Town at this moment there are political agitators going round trying to smash that trade union.

How do you know it?

I know it because the members of the union have told me. They have told me that they are being told by a political agitator, a paid political organizer, that they now have the opportunity of smashing a trade union which is functioning perfectly well for the whole of South Africa. But because this Bill now enables them to isolate one particular area where they may be able to get a majority of one section of the White group of that trade union, they will be able to disintegrate that union through nibbling at the core in one particular city, and once they have started the process of disintegration it will disintegrate the whole union. Members have come to me only to-day and have pointed out that if that takes place they will then be asked to compete on a wage basis. There will be competition between the White unions and the Coloured unions with the latter union bidding lower prices. It will eliminate the White man from an occupation. That is their fear. It is a fear which was put to me only to-day by an official of that union who said the result of this provision would be competition between the racial groups. If the Coloured man is prepared to accept a lower salary, he will force the White man out of an occupation in which there are 700 White people to-day against some 4,200 non-Whites. This Bill makes it possible for a small handful in one area to establish a separate trade union, which is part of the disintegration policy of the Government to which I have referred; part of the policy of this Government of not caring …

Order! The hon. member must come back to the Bill.

This Bill will enable a small group of people to carry out an ideological direction which will affect the trade union movement adversely. I want to support the hon. member for Umhlatuzana in his objection to this measure, in his objection to the steam rolling through this House of legislation to carry out an ideological pattern without considering the consequences to the workers themselves.

I want to thank the hon. member for Musgrave (Mr. Williams) for his reasonable summing up of the difference between us, namely that it is a difference of principle. It is of no avail our fighting when matters of principle are involved. We have been fighting since 1956 and the principles which the National Party advocated were incorporated in the legislation which they placed on the Statute Book in 1956. Neither did it result in any prophecies which we had heard from that side of the House materializing. Five years have passed since then and we have not altered our principles.

We are merely attempting in this Bill to facilitate the working of those principles which were already laid down in the 1956 Act. Just as little as the National Party have been breaking up trade unions with its 1956 legislation, just as little will this legislation which is before us to-day, cause the splintering of trade unions. The hon. member for Durban (Point) (Mr. Raw) who specializes in seeing ghosts, can continue chasing them. The National Party which is the party of the working man knows the value of trade unions but it also knows that that member of a trade union has a soul, whether he be White or non-White. All we are doing in Clause 1—which I am surprised to say is criticized so strongly—is to enable a member of a mixed trade union to join a separate racial trade union and that nothing will be placed in his way to prevent him from doing so.

I just want to say this as far as this legislation is concerned. The hon. member for Durban (Point) said that because there will be two trade unions in future wages would drop, but that has not been proved to be the case in practice. The opposite has been proved in practice. It has been proved in practice that the necessary liaison exists between the separate racial trade unions and that when new conditions of service have to be decided upon, there is co-operation between these groups. These workers are not in the trade unions in order to fight one another. They belong to separate trade unions because they can better serve the interests of their members and if those workers prefer that position, the hon. member for Durban (Point) can forget about it if he thinks that he will ever understand the soul of the worker, whether he be White or non-White. The people who come here and pretend to plead the cause of the non-Whites or the cause of the Whites, should rather listen to what the hon. member for Boland (Mr. Barnett) who knows the non-White worker had to say. Those hon. members should also listen to what this side of the House has to say in so far as the interests of the non-Whites are concerned, because we know them thoroughly. That is why I say, Mr. Speaker, that this legislation is not aimed at breaking up trade unions. The hon. member for Umhlatuzana (Mr. Eaton) said that the real object underlying this legislation was to cause the integration of the trade unions. That is not its object and after a couple of years when we come together again we will see that the trade union movement has been improving by the day. The interests of the workers will be served by this Government as this Government wants to serve them and not the way the Opposition wants to do it.

Motion put and the House divided:

Ayes—64: Badenhorst, F. H.; Bekker, G. F. H.; Bekker, H. T. van G.; Bekker, M. J. H.; Bootha, L. J. C.; Botha, M. C.; Botha, P. W.; Coertze, L. I.; Coetzee, P. J.; de Villiers. C. V.; de Wet, C.; Diederichs, N.; du Pisanie, J.; du Plessis, H. R. H.; Fouché, J. J. (Sr.); Froneman, G. F. van L.; Greyling, J. C.; Grobler, M. S. F.; Haak, J. F. W.; Hertzog, A.; Jurgens, J. C.; Knobel, G. J.; Kotzé, S. F.; Luttig, H. G.; Malan, A. I.; Marais, J. A.: Maree, W. A.; Martins, H. E.; Meyer, T.; Mostert, D. J. J.; Mulder, C. P.; Muller, S. L.; Pelser, P. C.; Potgieter, J. E.; Rall, J. J.; Rust, H. A.; Sadie, N. C. van R.; Sauer, P. O.; Schlebusch, J. A.; Schoeman, B. J.; Schoonbee, J. F.; Stander, A. H.; Steyn, F. S.; Steyn, J. H.; Uys, D. C. H.; van den Berg, G. P.; van den Berg, M. J.; van den Heever, D. J. G.; van der Ahee, H. H.; van der Merwe, J. A.; van der Merwe, P. S.; van Niekerk, G. L. H.; van Niekerk, M. C.; van Rensburg, M. C. G. J.; van Staden, J. W.; van Wyk, G. H.; van Wyk, H. J.; Venter, W. L. D. M.; Viljoen, M.; Von Moltke, J. von S.; Vosloo, A. H.; Webster, A.

Tellers: W. H. Faurie and J. J. Fouché.

Noes—31: Basson, J. A. L.; Bowker, T. B.; Bronkhorst, H. J.; Butcher, R. R.; Cope, J. P.; de Beer, Z. J.; de Kock, H. C.; Dodds, P. R.; Gay, L. C.; Henwood, B. H.; Holland, M. W.; Horak, J. L.; Lewis, H.; Lewis, L; Miller, H.; Mitchell, D. E.; Moore, P. A.; Oldfield, G. N.; Plewman, R. P.; Raw, W. V.; Ross, D. G.; Russell, J. H.; Smit, D. L.; Steytler, J. van A.; Suzman, H.; van Niekerk, S. M.; Warren, C. M.; Waterson, S. F.; Williams, T. O.

I move—

That the Bill be now read a third time.

I wish to move the following amendment—

The hon. the Minister has put us in the position of having to oppose the third reading of this Bill. We are opposing the third reading because the hon. the Minister has refused to accept the amendment moved by us at an earlier stage deleting the proviso (iii) to subsection (2) (b) of Clause 4 which we regard as fundamental. We approve of those provisions of the Bill that give the Coloured communities in areas to be proclaimed under Clause 3 a suitable form of self-government. That will also enable the Coloured Affairs Department to provide money for their development and progress. But the proviso to which I have referred is another piece of ideological legislation that inflicts, I submit, a grave injustice upon a section of the residents to which we cannot in principle agree. What it does, Sir, is to deprive a disqualified person, be it a European, Bantu or an Asiatic, of his ownership in land or any real right that he may have derived in a Coloured area and which he may have acquired in good faith, a right which he has enjoyed for a number of years. In the case of a trader it means depriving him and his family of their right to live and what is to happen to them is just nobody’s business, and the Minister will be able to wash his hands of his own actions. This policy, Sir, of forcing persons to sell out their homes or businesses in this way, is, I submit, a grievous wrong which cannot be justified by any modern civilized standards. These disqualified persons are to be deprived of their rights because of their racial origin, and no amount of assurances by the Minister that this provision will be carried out with discrimination, can make it right or just. It is a fundamental injustice that is inherent in this sub-paragraph that spoils the whole of this Bill. The hon. Minister has not been able to throw any light on the question as to how many of these disqualified persons are likely to be affected. But that is beside the point. It is the principle that is wrong, a procedure that must inevitably result in some injustice being done to a number of these people. I submit that it is an unnecessary application of the Government’s crazy system of apartheid which should not be tolerated by the Christian conscience of this land.

I second the amendment.

We in this corner of the House made our attitude clear on this Bill at the second reading and Committee Stages. We have no objection whatsoever if the poverty in a particular area which is confined to a particular group is being relieved, but in principle we object to the compulsory removal of anybody purely on the ground of race from any area and it is on that ground that we will support the amendment of the hon. member for East London (City).

Hon. members now come forward with an amendment which will have the effect of wrecking this Bill which is a positive measure and which will greatly benefit the Coloured people, it will prevent this Bill from reaching the Statute Book.

It is being forced on to them.

We cannot have a repetition of the entire debate. We are at the third reading where we have to deal with the effects of this Bill and I say that this is a positive measure, because the effect of this Bill will be that in those areas where there is dire need for development and upliftment work, that development will take place, that the same will be done in those areas which are lying fallow at the present moment that was done in the areas which have in the past fallen within the ambit of the Coloured Affairs Department. The hon. member now moves an amendment which is aimed at preventing the hon. the Deputy Minister and his Department from taking the steps which are envisaged. We are sorry that we have an Opposition at this stage where there is so much talk about what should be done for those people, who is trying to put a spoke into the wheels of this legislation and trying to thwart it. We are convinced that if this legislation, as it is before us at the moment, is given a chance many of the objections which hon. members have raised this evening will disappear. Because the effect of this Bill will not be as expected by the hon. member. Hon. members have been guilty of a great measure of exaggeration. We say the hon. member is wrong and he says this is an oppressive measure. On the contrary the effect will be the very opposite. The object of this measure is to give these people something which they need, to establish the developmental works which are so necessary at this stage. It cannot be denied that the need exists. The need is there and for that reason we on this side of the House feel that it is unreasonable at this stage to act in this way and to try to prevent the measures envisaged in this Bill from being put into practice.

The hon. member for East London (City) (Dr. D. L. Smit) is acting in a most peculiar way this evening. I am surprised. The hon. member has stated that he approved of this Bill in principle.

Why are you surprised? I opposed it during both stages.

The hon. member now moves an amendment which means that he rejects the entire Bill because he is not satisfied with one sub-section. The hon. member is not satisfied with sub-section (iii) of the clause concerned and because of that he wants to deprive all the areas of the benefits contained in the 1909 Act, an Act which he has described as a good piece of legislation.

A spoonful of arsenic in a plateful of good food.

The hon. member who has just interjected has not got the slightest notion what this is all about. He has not even seen one of these areas and will in all probability never see one of them. What difference does it make whether or not he talks about this. But the fact remains that we want some clarity in regard to the implications of the amendment of the hon. member for East London (City). If this House were to accept that amendment it would mean that all these areas in the Western Province all the areas in the Eastern Cape, in the Free State and in the other provinces, would be deprived of the rights which this Parliament created for them in the legislation which it passed as recently as 1959. That is what the amendment of the hon. member for East London (City) amounts to, and I hope he will explain the consequences of his attitude to the people who are concerned in this, namely that because he differs from the Government on a minor point, he is prepared to deprive those people who live in poor circumstances, who live in economic chaos, who find themselves in the worst circumstances as far as health services are concerned, of the means to save themselves and of the means to uplift themselves and of the means of using funds which the Government machinery has created from the funds available. The hon. member wants to deprive them of that because he is afraid there may be one or two Asiatics in those areas.

I do not want you to stop giving those benefits but I want you to withdraw this clause.

The hon. member had the opportunity of voting against this sub-section and he did vote against it. He did not get his way and now he wishes to wreck the entire Bill with all its benefits. That is the strangest attitude I have ever come across. When the hon. member raised this point I pointed out that if the proviso in sub-section (iii) were deleted, the position would remain as it was namely that in terms of Clause 3 the Governor-General could lay down provisions in regard to rights of ownership and occupation. The Governor-General would still have the right under other clauses to lay down conditions relating to occupation and ownership and the position would then be that an owner who was a disqualified person would have no option but to sell his properly to a Coloured. In other words, by seeking the deletion of this proviso the hon. member is limiting the market to these people, and he wants to make us believe that he is pleading the cause of the disqualified persons! No, Sir, the point is this that the hon. member is now looking for a stick to beat a dog. It seems to me that I will have to withdraw what I said originally, namely that I was sorry that the hon. member did not take the lead in this debate, because I am sure the hon. member knows better. He knows what the position is in these areas. When he was Secretary for Native Affairs he administered some of these areas.

We never had a clause such as this one.

No, but he knows in what condition he left them. Why does he refuse to play a part in their rehabilitation? Why does he refuse to co-operate in declaring these areas betterment areas? And why does he want to limit the market to these people, if he is pleading for their rights as he says? The hon. member has not read that sub-section, or if he has, he does not understand it or he does not want to understand it. The fact of the matter is that here we are laying down certain principles and we give these people an opportunity of sharing in the benefits created in the 1909 Act. Furthermore we accept the principle as laid down in legislation introduced by that side of the House, namely the Act of 1946, to the effect that settlements such as these should be limited to Coloureds; that they should get the benefits.

It was not contained in the 1909 Act.

Of course it is contained in the 1909 legislation and it is also contained in the 1946 legislation for which the United Party is responsible. The hon. member must not run away from his own past. He has already run away from a number of things. I am surprised at him and I hope the Coloured people will take due note of this because I can say this to the hon. member that ever since I introduced this measure all the signs have been there that the Coloured people will grasp these benefits. I personally am receiving numbers of letters in which they express their appreciation of this measure and in which they say that in spite of the hullabaloo which the side opposite is raising, we should continue with this. The hon. member is doing a disservice to these people, whom he pretends to be serving. We have discussed this principle thoroughly and the amendment moved by the hon. member this evening is aimed at making a molehill out of an ant heap, and I am not prepared to assist him in that.