Mr Chairman, I move the amendment printed in my name on the Order Paper, as follows:

Mr Chairman, moneywise there is inflation. It is quite absurd, however, for the hon the Minister to try to inflate time as well. I am convinced that has never been the object of the lesson. One cannot simply inflate the fine which is applicable in this case, and then also inflate the term of imprisonment. There has been an inflation of money, not of time span of a man’s life.

Mr Chairman, as the hon member for Bezuidenhout correctly pointed out, clause 17 prescribes the fines which are applicable in the relevant case. Up to now it has been R1 000 with the applicable term of imprisonment being one year. The whole intention of the measure under discussion is to make the penalties a little more stringent. The hon member for Bezuidenhout is now arguing that inflation has an effect on money but that it does not have an effect on time and that it should therefore not have an effect on the term of imprisonment.

But the provision in the clause under discussion is in fact being brought into line with another statutory provision, in which penalties in connection with the Marketing Act as a whole are prescribed. Now there is also another amendment to follow, of which the hon member for Mooi River has given notice, in connection with the increase of the penalties prescribed in clause 46. In terms of that clause the prescribed penalty is at present R2 000 fine or two years imprisonment. As far as I am concerned it is only logical that in the relevant amendment the fine should not only be increased to R5 000, but that the term of imprisonment should also be increased to two years as is already being provided in connection with the penalties prescribed in clause 46.

Under these specific circumstances, Mr Chairman, I cannot therefore support the amendment of the hon member for Bezuidenhout.

Mr Chairman, I listened very carefully to the hon member for Paarl. I do not think he realizes what a year’s imprisonment really means. Nevertheless, he wants the time of imprisonment doubled in respect of a commercial crime of this particular nature; a crime in terms of the Marketing Act. I believe it is absurd for him to reason that because the hon member for Mooi River intends to move an amendment in respect of a later clause, seeking to increase both the fine and the term of imprisonment prescribed, the same should apply here as well. There is no reason whatsoever, I submit, for the Minister to increase the term of imprisonment in this case. One year is a very long time for anybody to spend in prison, and I hope hon members of this House will realize that. [Interjections.]

Order! Hon members are conversing too loudly while the hon member is speaking. Nor should hon members stand at the entrance to this Chamber and have their conversations there.

Mr Chairman, clause 17 amends section 23 of the Marketing Act. Section 23 of the principal Act provides for penalties in the case of contraventions in connection with schemes that exist in terms of the Act. If one takes note of the schemes that are prescribed in terms of the Act and also of the respective schemes in operation at the moment I maintain that this is the most important facet of the Marketing Act. Of course I understand the problem the hon member for Bezuidenhout has in this regard. However, section 23 is specifically being amended to increase the penalties in order to create a greater deterrent. Against what do we want to create a deterrent in the process? In the first place, we want to create a deterrent against the evasion of price determinations, and other contraventions in connection with fixed prices, advance prices, grading and so on. These are the contraventions against which a deterrent must be created by increasing the penalties in the principal Act. This is the sole purpose of the clause under discussion.

This is not merely an adjustment to the penalties. The whole intention of this statutory amendment is to build a stronger deterrent in connection with scheme contraventions into the Marketing Act. At present it is so easy to commit scheme contraventions, for example, by evading price determinations and in that way ensuring large profits to certain people, that the size of the fine is not actually a deterrent. For that reason we also want to increase the term of imprisonment to two years. I cannot therefore accept the amendment moved by the hon member for Bezuidenhout.

Mr Chairman, I should just like to ask the hon the Minister one question. Can he please tell the House how many people have actually been imprisoned on account of contraventions of the Marketing Act? I do not believe anybody has actually been sent to prison yet for contravening the Marketing Act. Therefore I submit that imprisonment of one year is still sufficient in this case.

Amendment 1 negatived (Official Opposition dissenting).

Clause agreed to.

Clause 19:

Mr Chairman, I move the amendment to this clause printed in my name on the Order Paper, as follows:

Mr Chairman, I wish to refer specifically to the clause itself, not to the proposed amendment of the hon the Minister. I am unable to understand why for some 50 years now there has been this particular objection to age. The proviso to section 28(l)(b)(i) of the principal Act reads, inter alia, as follows:

I should like to know why this provision was ever inserted. Surely a person of any age should be entitled to be appointed but, if he is above a certain age, he should be subject to the consent of the Minister. I think it is absolutely absurd to lay down an age limit in respect of a person serving on a control board.

As far as the proposed amendment of the hon the Minister is concerned, we have no objection to it.

Amendment 1 agreed to.

Clause 46:

Mr Chairman, I move the amendment to this clause standing in my name on the Order Paper, as follows:

I wish to reiterate very briefly my reasons for proposing that the penalties should be increased in this respect.

My proposed amendment now brings the penalties provided for in this clause into line with those provided for in clause 17. Concern has been expressed in regard to the illegal importation of products. As the hon the Minister said a little earlier, those people who contravene these regulations stand to make enormous profits. I feel that this is merely a case of making the punishment fit the crime.

Mr Chairman, I have considered the amendment of the hon member for Mooi River and I am prepared to accept it.

Amendment 1 agreed to.

Clause, as amended, agreed to.

House Resumed:

Bill, as amended, reported.

Third Reading

Mr Speaker, I move, subject to Standing Order No 56:

Mr Speaker, I think it is necessary now that the Bill has reached the Third Reading stage to state what the policy of the PFP is in regard to the Marketing Act. Our policy, in view of the nature of agriculture production, is that many of the provisions of the Marketing Act are necessary, but our goal is to establish the groundrules for the operation of a free market economy. This means that all should be able to participate freely in the agricultural sector without being given an unfair advantage. Since certain control boards appear to act against the best interests of consumers and producers, a thorough overhaul of the Act is necessary. In addition to the review of the Marketing Act, the question of protectionism for local industry also needs urgent attention. In principle local industry supplying inputs to agriculture should have to compete on an equal footing with overseas suppliers.

During the Second Reading debate the hon the Minister said that it was time that there was some change in the National Marketing Council setup. I think this is one of the things which must urgently be done. On the whole question of the organization of the National Marketing Council in relation to the 21 marketing boards, I do not think that there is a necessity for having so many boards as we do have. On going through the list of these boards and on careful investigation, I find that really all one needs is five boards in total. There should be a grain board which should be in charge of the potato scheme, the dried bean scheme, the lucera seed scheme, the summer grain scheme, the tobacco scheme, the winter cereal scheme and the oil seeds scheme. There should be an animal husbandry board which should be in charge of the dairy scheme, the livestock and meat control scheme and the egg control scheme. There should be a fruit board which consists of the dried fruit scheme, the canning fruit scheme, the banana scheme, the citrus scheme and the deciduous fruit scheme. There should be a fibre board dealing with karakul, cotton, mohair and wool. The fifth board should be a beverage board concerning rooibos tea control and the chicory scheme.

I believe that control should not vest in the boards themselves but in the National Marketing Council itself. The whole way in which marketing was structured was all right in 1934-35 when the scheme was instituted. At that stage it was felt that it should be in the control of people who were in the Public Service. I believe, however, that the time has come for the council to be expanded to include more people from outside. There must be outside directors as well as inside directors. There should be five chairmen who would be in actual control of the five major schemes mentioned above. I think that something along these lines must be considered if one wants to have effective marketing between now and the end of the century.

The problem of the 1930s are no longer with us. We have entirely different problems. We are now more in the world market than we were ever before. I think that the time has now come that the whole structure of the Marketing Council must be expanded so that it will be far greater than it is at the moment. It must be there to assist the Minister so that he will no longer have to deal with the 21 boards with which he was to deal at the moment.

I noticed a rather interesting article published two years in The Farmer’s Weekly. In regard to the control boards it said:

That, unfortunately, is what has happened as far as the marketing of agricultural products is concerned. Certain organizations and certain people have more to say and are more equal than others. I think it is time—I mentioned this in the debate on the Agriculture Vote—that not only are co-operative companies to be considered in the scheme as agents of the boards, but private companies and public companies should also be considered. After all, the public and private companies supply the greatest bulk of the taxation in this country and they too should therefore be considered. The time has come when the whole question of the types of schemes must be reconsidered by the National Marketing Council. I am not against the Marketing Act. It is only a question of it operating in such a way as to be fair to everybody. I have been to see the hon the Minister on one or two occasions because I thought certain schemes had not been operating fairly to certain people in private industry because of the way in which the schemes had been operated by the control board concerned. The co-operatives are the agents of the board while private industry has nothing else to do but to buy and consume the product. I think the time has come that something should be done about that.

I should again like to deal with a question I raised also the other day, namely the production of grain sorghum. Also I think we are going to have a problem with our Black population because a large proportion of them prefer white to yellow mealies. With regard to grain sorghum I say there is going to be a loss to be effected by the Maize Control Board. I said that there would be 500 000 tons of grain sorghum this year of which 50 000 tons would be under-grade. That leaves 450 000 tons to go through the normal channels. The malt manufacturing industry will consume about 200 000 tons, but they are not in a position to buy and store the 200 000 tons at the beginning of the season. I would say that they would take 150 000 tons as a start for the manufacture of sorghum beer and take another 50 000 tons later on in the year. This 50 000 tons which the industry cannot take at the beginning of the season would have to be taken up by the board under its present floor-price scheme, which means that the board will have to take in altogether 250 000 tons at R187 a ton. On that there is a levy of approximately R10. At this price it would be possible for the private millers to buy grain sorghum for animal feed. A large proportion of the grain sorghum this year can go to the animal feed industry. The price the animal feed industry will pay for this grain sorghum will not be the same as the price of maize because the relative feed value of grain sorghum is about 85% of that of maize. According to figures I have received it appears that the board’s fees for storage and finance will be about R43 per ton so that in respect of this 250 000 tons the board is going to be faced with an expenditure of approximately R10 million. As against that the board is going to collect a special levy of roundabout R7,50 per ton on all the grain sorghum marketed which will bring in about R4 million. It therefore appears to me that the board is going to lose about R6 million to R7 million on going in for this scheme. If the board handles it differently and allows it to go through the normal private trade channels as in the past it would not lose this amount of money.

I have another problem. I have here an article on a speech made by the chairman of the OTK a while ago. It appears in the Journal Otikaner. It says the following, dealing with the production of maize, is the problem of the future:

That is an almost direct attack on the Maize Control Board. This is a very basic problem which control boards will have to face in future. One of the problems they will have to face whether they like it or not, is that they will have to consider world prices as a basis on which they produce. I believe the time has come that this has to be considered, because for years the EEC has also tried to avoid this particular problem by subsidizing the farmers heavily. At the moment we have the situation that they have a milk product mountain in the EEC. Farmers want a 3% increase in price and to produce 3% more per annum for the next three years, while consumption will only increase by 1%. The result is that the EEC is almost bankrupt because of the subsidies which are being paid to farmers. It is on the verge of a collapse because of the very fundamental problem of avoiding and evading world prices. I believe that one of the important things that has to be done, and which the mealie industry faces here, is how we can sell our surpluses at a profit on world markets, while at the same time ensuring that people in South Africa get a reasonable price for their product. Is it fair what has happened in the past? South Africans have had to pay more for products, while surpluses were sold at lower prices to people all over the world. We in South Africa have certain nutritional problems among certain sections of our population, but we do not sell these products to them. We are prepared to sell those products on overseas markets at a loss.

I would also like to draw the hon the Minister’s attention to something which is worrying me very much indeed. In the Freight and Container Weekly of 4 May 1984, an article appeared in which it is said that there is going to be a maize import bottleneck. They say that the whole South African harbour system is geared to the export of maize, while at the moment we have to import large quantities of maize. This journal says that despite what the SA Transport Services have said, namely that they will be able to handle the import of maize, it doubts whether they will be able to handle these imports. All our elevators are suitable for exporting maize, but the system whereby we unload the maize by means of grab cranes, appears to be a very poor method indeed. I would like to have an assurance from the hon the Minister that we are not going to have a bottleneck. There is the possibility that we might end up with no stocks inland if something goes wrong with this particular project.

I would like to conclude, in dealing with agricultural boards, to say that many of them have played a very great role indeed. The Citrus Exchange, for example, has done very good work by being able to compete on world markets. What I am unable to understand, however, is why certain control boards regard the whole question of export as being part of their own set-up and do not allow any South African to export agricultural goods. The two boards in particular that I want to mention are the Oilseeds Board and the Dried Fruit Board.

And the Wool Board.

And the Wool Board.

And sugar.

Well, I am mentioning only two in particular. As far as the sugar is concerned, it goes through an organization which is run by the sugar millers themselves. The situation is that many South Africans have tried to export these products. Why should there be only one agent in the whole of England for the Oilseeds Board, for instance? When ground-nuts are available for export, why can’t any South African not sell direct to overseas buyers. I think it is very unfair that some boards do not allow private enterprise to act as brokers but they themselves go over and sell their products without allowing anybody else to come into it. These are some of the problems with which the National Marketing Council will be faced. I believe that the future solution to our problems lies with what the National Marketing Council can do to meet those problems.

Mr Speaker, I take pleasure in following the hon member for Bezuidenhout. He made certain statements that I must agree with. I want to tell him that as far as the marketing of agricultural products is concerned, he definitely knows what he is talking about.

I should like to refer to certain statements he made about the grain sorghum situation in the country today. The basis for the determination of the grain sorghum price in this country—the hon member was almost right in this regard—is R177 per ton net producer price. Then there was a levy of R10 per ton. This brought the price to approximately R187 per ton. Where the problem comes in—and the hon member did not put this in perspective—is that the position as regards transportation and storage of grain sorghum is not the same as in the case of maize. The grain sorghum farmer must himself pay the R43 per ton/year that it costs to handle and store the grain sorghum, in contrast to the maize farmers, in whose case this charge is made good by the State. The consumer price of maize is R220. If one adds the R43 in respect of the handling and storage of grain sorghum to its gross producer price of R187, it is clear that as a feed crop, grain sorghum cannot compete with maize. It is here that the problem comes in and it is for that reason that the grain sorghum farmer will be saddled this year with the deficit of between R6 million and R7 million to which the hon member referred. These are two basic products competing for the same market, but under different circumstances.

The hon member said that the problem arose because the Marketing Board did not permit grain sorghum to be dealt with as it used to be in the past. However, that is not correct. This year grain sorghum is making a far greater contribution to the feed requirements of the country than in the past. In the past the ratio of the quantity of grain sorghum used for malt and the quantity used for cattle need was totally different to the position this year. For that reason the storage of grain used for feed requirements has never before had the drastic effect it had this year. This is the cause of the deficit, it is not to be found in the fact that grain sorghum is being dealt with differently by the Maize Board this year.

There is another real problem in this sphere and the hon member perceived it, although he perhaps failed to appreciate its full extent. That problem is that in this country today all the transportation and handling of maize for the domestic market is subsidized by the Government, whereas that part of the grain sorghum that is used for stock feeds—I am now referring to the stock feed section of the market—has to compete with maize. Maize has a headstart of R43 per ton in the domestic market because its transportation, handling and storage is subsidized.

This brings me to the question of too many or too few control boards. It is necessary to ask when a control board should be established, and when there should be a separate control board for a product. Should this not happen when two products compete with one another for the same market, or are there other principles that apply here? The hon member asked that an investigation be instituted into the number of control boards and the reasons for the establishment of those control boards. But should more control boards not perhaps be established in certain circumstances? If two products competing for the same market are dealt with by the same control board, is it necessary that people involved with the two different products should have a say when pricing and marketing arrangements are made.

When one looks at the issue of control boards, one must be careful not to say that because one control board works well, other control boards ought necessarily to be operated on those principles. It was interesting to hear what the hon member for Pietermaritzburg South had to say. One marketing system he is totally opposed to is the one-channel pool system. However, later in his Second Reading speech the hon member said that the one control board which had achieved notable success was the one-channel pool system of the Wool Board.

The one-channel fixed-price system.

The hon member would do well to examine his Hansard and ascertain what he said. I read it this morning and that is what is stated there.

The one-channel pool system may be introduced in the meat industry due to its success in the wool industry. However, there are certain basic differences between these two industries that must be taken cognizance of before such a system is established in the meat industry as well. There is nothing in the wool industry preventing producers from shearing at any time of the year. Sheep can be shorn, and the wool marketed, at any time of the year. In the meat industry, however, there are two types of production. In the first place there is production from the veld. In the late summer there is always an over-supply of stock that can be marketed cheaply from the veld. However, in the late winter and the early summer—in about November—decent meat can only be marketed by making use of the expensive method of feedlots. Therefore, pooling all the income means that people who produce meat using expensive systems will be forced to share with people who produce meat on a cheap basis.

As far as the Second Reading speech of the hon member for Bezuidenhout is concerned, there is one matter on which I agree with him wholeheartedly, and that is that in future, control boards must be more geared towards market research and market development, and not only traditional research. They must emulate the Milk Board which, in spite of receiving many complaints from the right, went ahead and placed advertisements aimed solely at the Black market. The complaint is now being advanced that the Whites’ money is being used for advertisements aimed at the market for Blacks. I mention that fact because this is the political battle being waged in public in this regard. If those people were only to reflect for a moment on what issues are involved, or were to examine the figures, they would realize that the market among Black people is the only market which lends itself to expansion as far as the marketing of milk is concerned.

We get the same kind of argument with regard to maize. One need only hold meetings to hear what supporters of the CP have to say about, for example, the fact that the Maize Boad sponsors sports meetings for Black people. [Interjections.]

The hon member for Pietermaritzburg South had a point when he said that one should consider having major outlets in Black areas within the urban complexes. I am convinced that we are far from having done all we can as regards market development in Black residential areas. One is amazed to see what a small number of outlets there are in Black areas.

This Bill contains one very important characteristic. On the one hand it is clearance legislation in terms of old terminology is being adapted to new circumstances, but on the other hand if is also legislation that lends itself to greater flexibility in the sense that there can be greater co-operation between the Ministry, organized agriculture and the Marketing Board. The Minister may now make regulations and they need no longer be proclaimed in the Gazette. This also has to do with the coming new dispensation in terms of which agriculture will be an own affair.

The Minister can also obtain information from the various control boards to ensure that the doings of one control body are not unreasonably detrimental to the interests of another control body, product or scheme. As far as the flexibility of the legislation is concerned, one can also refer to the fact that the Director General can now perform certain duties. If anyone were to say that this legislation encouraged irregularities, one would only have to refer to the far more severe penalties being introduced for contraventions of the regulations. This legislation also keeps pace with the modern international period in which we are living. Certain provisions in the legislation are now specifically providing for protection against “dumping” of agricultural products in this country. In 1968, when this Act was drafted, the situation in the EEC countries—the hon member for Bezuidenhout also referred to this—was not what it is today. The situation of a mountain of cheese drowning in a lake of wine did not exist at the time. It does exist, now, and for that reason provision is being made in this legislation for dealing with the changed circumstances in order to protect our agriculture in this regard.

Control must be selected in the same way as a man would choose his wife. She must not be too plain because then the men will laugh at one; however, she must not be too pretty either, because then one’s soul will not be one’s own, because the men will want her.

Mr Speaker, it is a pleasure to follow on the hon member for Heilbron, who has just delivered an excellent speech. I heartily endorse the comments he made in regard to the marketing strategies of the Marketing Board, as we call it now. He is absolutely correct in saying that the market in the Black townships is not properly supplied, probably as a result of defects in distribution. However, it is also important to note that one of the reasons why these markets in the Black townships cannot be adequately supplied is due to the health regulations that are involved. I know that particularly in regard to dairy products this is having a considerable effect indeed.

I should just like to add a word of caution in regard to the hon member for Heilbron’s comments regarding the pool system of meat marketing. I think this is something that still requires a great deal of research, and I would appeal to the hon the Minister to be very, very careful and to make sure before implementing any recommendations from the Meat Board that this will receive the full support of all producers.

Mr Speaker, we sincerely welcome this Bill, which is now in its final stages. Perhaps one of its most important aspects is that it will bring a greater flexibility into the operation of the marketing boards and also within the Marketing Act. The greater discretionary powers that will now vest in the Minister are in my opinion very important indeed.

I should like to deal briefly with a point that the hon member for Bezuidenhout made. I fully agree with him when he talks about world prices, but in no way can the marketing boards set their sights on the world market when they have to contend with the situation that is applicable to the EEC countries. I know the hon member for Bezuidenhout stressed that point and it is a very realistic one. While there is this fictitious means of setting prices on the world market for food, it can only cause a tremendous amount of harm to those countries who are not in a position to subsidize their local production as heavily.

We certainly welcome the regulations that will now apply in regard to the import and export of agricultural products. We are particularly pleased to see that the inspectors have now been given additional powers and that these powers have been clearly defined. I think the extension of the provisions of the various marketing schemes to the neighbouring states is something which will have a very, very beneficial effect, not only to this country, but also to those states.

The provision in the Bill relating to information having to be made available to the hon the Minister by control boards is very necessary. The control boards should have nothing to hide from the Minister, and I see this as a means whereby the Minister can curb any suggestion of autocratic action on the part of a control board.

I should like to refer very briefly to the fact that we are beginning to discern a certain autocratic attitude rearing its head within the meat industry. One notes with concern a reference in The Financial Mail of Friday, 25 May, to the Meat Board’s being desirous of extending control in the Western Cape. Unfortunately I cannot confirm the accuracy or otherwise of the figures quoted in the report but if they are correct they are quite interesting. The following figures are quoted in that report, and they all refer to the period just before Christmas last year. According to this report the price of rump steak in the uncontrolled areas was cheaper by R1,55 a kg than in the controlled areas. At the same time the price of lamb chops in the uncontrolled areas was R1,90 a kg cheaper than in the controlled areas. For a leg of lamb the price in the uncontroled areas was R1,25 a kg less than in the controlled areas. So I can go on quoting from this report. These figures reflect the general tendency with the exception of one case, which is …

So, you do have some pity for the consumer?

I have a lot of sympathy for the consumer indeed. I have also worked with them on control boards, and we have worked together extremely well.

Could you give us a list of the uncontrolled areas? [Interjections.]

Be that as it may, Mr Speaker, I hope I have made my point because this is a matter, I believe, which concerns all of us. I know of a number of meat producers in this country who are directly affected by a state of affairs of this nature.

Furthermore I should like briefly to refer to the functions of the Marketing Board, which are mainly aimed at stabilizing prices. In this respect I should like to pose a question. With all due respect to the hon member for Bezuidenhout, I am standing up here for the consumer. I want to pose the following question. What would the position be if there was no Maize Control Board at the present time? What would the position be relative to the present maize supply position? Mr Speaker, I can assure you that it does not need much imagination to realize that the prices that are paid now for maize products would be very, very much higher than they are at the present time.

You know, people would have been importing maize left, right and centre in order to compete with each other.

Mr Speaker, I should like to reply to that remark made by the hon member for Bezuidenhout. We do know, however, that the hon member for Bezuidenhout would not experience any problem should he wish to import. We also know of course that it is very, very difficult to import maize at the present time.

I should appeal to the hon the Minister to keep a very close contact with the Co-ordinating Committee of Control Boards. He has already indicated that he will do so, and I feel that this is a very important aspect of the whole Marketing Act. In respect of the criticism of marketing boards the question arises with what they could be replaced. Unless one can come up with a suitable alternative I do not think it is realistic for anyone merely to fall back on the old slogan and shout that it should be left entirely to free enterprise. I believe it must be pointed out that the Marketing Act and the marketing boards can only survive if they retain the confidence of producers. This is dependent on producers being assured that the margin of the price paid by the consumer is not out of proportion to that received by the producer.

With those few words, Mr Speaker, we sincerely welcome this measure as a long overdue piece of legislation. We certainly support it.

Mr Speaker, I wish to thank hon members for their support. I want to react very briefly to certain remarks made by hon members.

In the first instance I want to discuss the question of the expansion of the controlled area in the Western Cape. I do so with reference to an article that appeared in the Financial Mail. I want to say at once that replying to this places me in a very difficult position. We have now amended the Act to preclude anything of the kind from happening again. The Meat Board was considering the expansion of a controlled area and investigating all the possibilities in that regard. The recommendations in this regard would eventually have been submitted to the National Marketing Council, which in turn would have made a submission to the Minister to enable him to take a decision. I do not know what the reason was, but a member of the Meat Board publicized the whole discussion of this matter by the Meat Board. It was then seized upon the Press, which has built this up into a tremendous issue. The whole matter is sub judice. I am not defending the Meat Board now, but I do not want to say for a moment that the Meat Board did not have good reason to wish to expand the control area. I wish to inform hon members that of the 46 abattoirs involved here, only three buy their meat from outside the control area. The rest all buy it at the controlled abattoirs at Maitland. Whether the price of meat will be increased in the process is another matter. However, I am awaiting the submission of the Meat Board.

During the discussion of my Vote I gave the undertaking—I think the hon member for Wynberg touched on the matter—that in the light of all the speculation and allegations that have been made in regard to this so-called expansion, the Minister, in terms of his powers under the Act, instructed the National Marketing Council to investigate the matter and hear evidence in respect of bodies that would supposedly suffer in the process and encounter problems in this regard. This matter will be investigated and settled democratically and amicably. This will be done within the context of a good marketing system and a good Marketing Act, and I sincerely hope that the Press will stop writing about this, because they do not know exactly what is going on here. I reiterate that the amendment of the Act now provides that a member of a control board is not supposed to publicize discussions in the board, particularly with respect to sensitive matters and particularly with respect to a matter about which the Minister must ultimately decide, before the facts have been submitted to the Minister. This is an absolutely normal procedure with regard to meetings that must be followed. Therefore I think that in future this kind of problem-ought to be eliminated.

The hon member for Mooi River referred to the flexibility of the Marketing Act. I agree with the hon member that over the years the Marketing Act has become more flexible. In fact it is an enabling Act. It is not the law of the Medes and the Persians. Within the context of the provisions of this legislation a whole series of marketing schemes can be developed that can be amended. Moreover they are schemes that are under constant supervision and are constantly being investigated. During the discussion of my Vote I made it known that the Marketing Council had been instructed to investigate all the schemes. I said in the Second Reading debate that I was not sure whether the Marketing Council, as presently constituted, was equal to the task of investigating the totality of all the schemes, because there are more than 40 agricultural products involved under various schemes, and that must be considered. This is an enormous task for the National Marketing Council.

I want to say to the hon member for Bezuidenhout that as far as we can see there is nothing wrong with the Marketing Council, structurally speaking, at this stage; it is just that one must have it functioning correctly.

The hon member for Bezuidenhout also discussed the problems with regard to the importation of maize. He is concerned about the fact that whereas we are normally a maize exporting country, this is the first time in 20 years that we have become a maize importing country. This has been the position since last year, but it is so this year to the extent that we have to import more than 60% of our requirements through our existing harbours. I want to set the hon member’s mind at rest. With the co-operation of the Maize Board and the SA Transport Services we have now organized our harbours in such a way that we are at present bringing in between 250 000 and 300 000 tons per month through the various harbours, inter alia the East London harbour. Up to two shifts are being offloaded simultaneously in the East London harbour. This is being done as a result of very good organization and without incurring heavy expenditure in the harbour. One manages a lot when one has to. On this occasion I want to say that in my opinion we can succeed, with the administration of the Maize Board and the SA Transport Services, in achieving an orderly inflow of maize through the existing channels to the various consumer areas.

The hon member also had a problem with regard to grain sorghum, but I think that the hon member for Heilbron, who is an expert on the industry, replied to him reasonably well. I could perhaps refer to the possible deficit of R5 million to R7 million on the importation of surplus grain sorghum. The hon member must bear in mind that the grain sorghum that will remain is the grain sorghum that the malt industry does not want. Particularly if there is a big harvest, the malt industry is extremely selective as regards the quality of the grain sorghum they purchase. Certain grain sorghums take longer than others to be malted, and therefore they seek out the good types. The grain sorghum that remains is therefore not the best, and it has to be diverted to the stock feed market. The stock feed people are not always very keen to take this grain sorghum because it upsets their mixtures.

However, we can succeed in reaching an agreement as regards the mixing system and the Maize Board. If the surplus grain sorghum were to replace maize then we should have to make good that difference in one way or another. If we can effect savings with regard to the import account on maize and in that way provide compensation for the grain sorghum farmers, we shall do so. It seems to me that this will happen. We did have a scheme of this nature last year. Therefore I believe that the grain sorghum farmers need not be concerned; we shall mix in those surpluses in the stock feed industry.

Mr Speaker, the hon the Minister is now dealing with the future of grain sorghum, but I should like him to deal with future competition between the grain sorghum farmers and the producers of wine in view of the fact that there is an endeavour to have grain sorghum beer replaced by wine. This is a problem which affects two control boards; how is he going to solve that sort of problem?

I do not know what the hon member’s question has to do with the Bill, but I shall try to reply to it.

What is happening in the consumer market is that particularly in the more sophisticated areas among the Black communities there is a tendency to move away from sorghum beer to other types of liquor. The KWV is investigating this market and is making a study of market trends. It is only right that when such a consumer trend occurs, the market should be adjusted accordingly. As far as grain sorghum beer is concerned, it will always, as far as I can see, remain the traditional drink of many of our Black people.

The hon member also spoke about the position of power occupied by co-operatives in the control board system, in that they act as agents for the boards. It is a principle of the Marketing Act that a marketing board may only take regulatory action. However, there are specific circumstances surrounding specific products. Take chicory, for example. The private sector is not interested in marketing chicory. The Marketing Board in question therefore has to do so itself. In the egg industry we had the situation where we had to break surplus eggs, because the private sector was not interested in those surplus eggs. The marketing board in question had to accept responsibility for that.

In that case it was done by a private entrepreneur.

Yes, as an agent of the board. I can tell the hon member that this is not a question of discrimination against the other private companies. Where they feel that they are being deprived of a right they enjoy under the Marketing Act, they have the right to appeal.

Mr Speaker, I think I have now replied to all questions. For the rest we debated the matter at length in the Second Reading and during the Committee Stage.

Question agreed to.

Bill read a Third Time.

When the Committee reported progress on 25 May, clause 14 had been put, upon which an amendment had been moved.

Amendment 1 negatived.

Clause agreed to.

Mr Speaker, I move:

The Bill has three main objectives, namely:

1. 1. To provide a broader scope of prescribed possibilities for the application of funds available in the State Oil Fund;
2. 2. To transfer funds, not immediately required for a specific objective, to the State Revenue Fund; and
3. 3. To increase the income of the Equalization Fund without an additional levy on the consumer of fuel.

With the completion of the financing of Sasol 2 and 3, the State Oil Fund has achieved its first main aim. Notwithstanding our policy of diversification of supply sources, the fact is that the supply lines of crude oil to the RSA can be severed overnight as has already happened in 1978. For this reason it is imperative that we should strive to achieve the maximum practical level of independence from imported crude oil.

With any further synthetic fuels project, the State Oil Fund has an important role to play to act as financier on behalf of the State. Consequently this also requires that other coal based energy projects be accommodated in the sphere of applicability of the State Oil Fund.

It is also necessary that funds be channelled back to the Treasury. Presently there is no major project for the production of synthetic fuels requiring financing for the creation of the necessary infrastructure. There is only the already announced incentive for the production of liquid fuels from indigenous feedstock. The amount is presently 3,5 cents per litre. The temporary employment of a part of the customs and excise levy on fuel, as well as the monies which accrue to the State as a result of the sale of Sasol 2, has already been announced by the hon the Minister of Finance.

*Since this Bill creates the framework for these arrangements, I consider it necessary to remove any uncertainty which may exist with regard to the funds. The sale of the State’s interest in Sasol 2 raised an amount of R2 620 million.

During December 1983, a cash amount of R887,6 million was received. A further R240,5 million was received in the form of shares in Sasol Limited, in order to maintain the State’s interest at 30%. The remaining R1 491,8 million will be paid back by Sasol Limited over a period of at least five years.

Of the cash amount of R887,6 million, the State is receiving R258,8 million in cash, representing a recovery of the initial Treasury investment and a proportional share of the profit from the sale of the shareholding.

In addition, an amount of R441,2 million is being made available to the Treasury free of interest up to the end of the 1984 financial year. These amounts add up to R700 million. The remaining R187,6 million of the R887,6 million presently available is also being utilized free of interest by the State, but has been allocated for possible use during the current financial year, with the approval of the Cabinet, for:

1. (1) Aid to Escom in the form of interest-free loans up to a maximum of R150 million for the relief of cash flow problems. These problems arise from the fairly low Escom tariff increase of only 6% on 1 January 1984.
2. (2) Aid to the agricultural sector by the suspension of extension fees payable by farmers to Escom. The amount required for suspending extension fees for nine months up to the end of 1984 is R18 million.
3. (3) R20 million is earmarked for the maintenance of fuel prices. The weakening of the exchange rate of the rand against the American dollar has led to considerable cost increases which have to be met.

The Government’s earnest endeavour to keeping fuel prices as low as possible need not be emphasized again. However, in order to finance this, the revenue of the Equalization Fund has to be supplemented with the funds obtained by the SFF Association from the sale of a small percentage of the country’s stockpiled supplies.

For the rest, Mr Speaker, the Bill really serves to bring the principal Act into line with changed concepts and is self-explanatory.

Mr Speaker, we are going to oppose this Bill and I will motivate our reasons. Perhaps the House will bear with me while I just set the stage as a prelude to motivating our opposition.

The State Oil Fund is a private company, as we know, which came into being in 1977. In motivating the original Bill, the principal Act, Minister Heunis at that time mentioned three specific purposes of the fund. He said it was to provide funds for Sasol 2 as soon as possible, to build up strategic supplies and stock piles, and to fund the further activities of Soekor. The hon the Minister appears to be shaking his head. I can give him the reference for those motivations supplied by Minister Heunis. It is Hansard of 7 March, 1977, col 2857. The principal Act was subsequently amended on 30 May 1979—col 7592 of Hansard refers. The hon the Minister at that time confirmed that the original Act—

It is, of course, clear that Sasol was financed by this Fund as well as by funds appropriated from the Treasury, export credits received on capital goods imported for the construction of Sasol, and Sasol’s own reserves. Although that was a specific purpose at the time, the principal purpose being Sasol, Sasol by now, according to all accounts, is self-financing.

That brings me to the question of what money is at stake here, what money is in this fund. As we know, the State Oil Fund receives large sums of public money, for instance, the revenues obtained from levies on petrol imposed by this Parliament. Just by way of example I can mention that the Gazette of 18 May shows that the money received by State Revenue and transferred to the State Oil Fund for April 1984 was R22 522 704.

It is about R300 million per year.

I would estimate—and the hon member has just confirmed this— that the annual receipts from this source alone into the Fund must be at least R300 million and possibly a lot more. A further inflow of money into this fund occurred because of the privatization of Sasol. The hon the Minister gave figures in this regard. There was a total capital inflow of R887 million. The redemption of the original capital amount was R259 million, and there was a profit on the sale of those shares of R628 million. This money, together with the income of Sasol’s repayments of its loans from the State Oil Fund, with the net inflow of petrol levy revenue and with the reported recent sale of part of the strategic stockpile— which the hon the Minister confirmed again this morning—means that the SOF must be sitting on an enormous slush fund of money. I would like the hon the Minister to tell us what the total amount in the fund is at present. It obviously far exceeds what the proceeds of the Sasol privatization were. Over the years the inflow through this fund must amount to billions of rand. At current rates, it must have been earning a great deal of interest, although the hon the Minister said that the intention now is to lend it to the Treasury interest free. However, interest must have been an important component of the inflow in recent years.

The point is that Parliament has no direct control over this money and it is not audited by the Auditor-General. This is a fundamental principle objection which we have to the State Oil Fund in its present form. This Bill provides for a reduction in the amount to be paid into the State Oil Fund, but without changing the charge made on a litre of petrol, distillate fuel or residual fuel oil. It is not changing the main source of revenue for the fund. More important, it provides for an expansion of the purposes of the State Oil Fund. Whereas in the past there was a very specific purpose spelt out regarding oil and coal, we now have a proposal that the money can also be used for, and I quote from clause 1(c):

This entails an enormous broadening of the function of this fund in comparison to what it was originally when instituted by Parliament.

Thirdly this allows the hon the Minister of Mineral and Energy Affairs to retain whatever amount in the State Oil Fund which in his opinion is not required for the purposes of the fund and for this retained money to be invested on a wider basis than previously, but with the concurrence of the hon the Minister of Finance.

The fourth purpose of the Bill is to allow the Equalization Fund to receive moneys obtained by the SFFA from the sale of products to be determined by the hon the Minister.

In short, the crux of this Bill is that it provides for State revenue, subject to the veto of the hon the Minister of Mineral and Energy Affairs to take back some, but only a small portion, of the money presently in the State Oil Fund. In return the State Oil Fund will now have wider powers of initiative to transform it into a general energy fund for development and trading in the energy field together with new powers of general investment. We have four broad objections to this proposal.

The first is a standing objection, namely that we strongly object to the principle of any tax money, raised from the public, not being controlled by Parliament and not being audited by the Auditor-General. Secondly we strongly object to the principle of vast amounts of public money being given to a private company to use at its discretion. It will now have enormously wide discretion for largely undisclosed purposes.

The State Oil Fund was established with very specific purposes in mind. Now that its original purposes have largely been fulfilled, Sasol 2 and 3 have been established and the strategic stockpile has obviously reached a point where it is adequate because part of it is being sold back to the public, it is our view that it is actually time to review the need for the State Oil Fund as presently constituted. We are obviously not opposed to energy research and development in general and trading in energy in the public interest. However, the question is: Why should it be done in this particular way, with this particular vehicle? Why the cloak of secrecy beyond the reach of Parliament or the Auditor-General? Why not fund these projects in the same way as the projects of all other departments, ie in general competition for State revenue subject to priorities set by the Cabinet and Parliament? Is there a hidden agenda for the State Oil Fund? Why can the operating of this vast slush fund not be exposed to the light of public debate and scrutiny by putting in into general revenue and making energy projects part of the departmental estimates in the normal way?

Thirdly, we object to the State allowing the vast slush fund in effect to be held by one Ministry when it is desperately needed elsewhere in the economy. What sensible person would allow his family to go short and run up debts on basic essentials such as food, housing or education while sitting with huge cash balances in the bank? How can the Government in all conscience now sting the consumer with unprecedented levels of taxation, including a further penal rise in the GST in order to raise an extra R880 million in that way, when much more than this must be idling in the State Oil Fund? I have mentioned only one element of the money that is in that fund, namely that R887 million. Why should one Ministry in a real sense be determining national expenditure priorities in this way?

A fourth area of concern is a very general concern that the management of the money in the last few years has not been what it should have been. We have a grave concern about the way these funds are being managed. Some disturbing indicators have come to light, particularly in recent times, and we cannot ignore these in assessing our attitude to the Bill. I will just mention five of these indicators.

Firstly, the file of alleged oil procurement overpayments to the amount of 386 million US dollars, which is presently under investigation by the Advocate-General, raises grave questions about the possible misapplication of State Oil Fund moneys. I will leave it there at this stage.

The second indicator is the whole question of the Salem incident, which has not been cleared up and which remains a burning question. The directors of the State Oil Fund and the directors of the SFFA are the same people, or have been, anyway. One of the directors, Dr Dirk Mostert, seems to have been South Africa’s chief oil procurement officer. He was apparently the person who investigated the Salem case in 1980 and who subsequently recommended to a Cabinet Committee that compensation of $25 million should be paid to Shell. We still want to know what that investigation revealed, as well as why and on what grounds Dr Mosert, the State Oil Fund or the SFFA convinced the Cabinet to pay out that amount of public money if there was no culpability or negligence on the part of this country or on the part of senior decision-makers involved. If we acted bona fide in purchasing the Salem crude why did we not defend such a large claim against public funds? Were we tacitly admitting guilt or were we covering up someone’s serious embarrassment when we settled that claim?

A third general area of concern is the payment of enormous premiums over official Opec selling prices. This also raises the question of how this money has been expended over the years. We naturally accept that South Africa would have had to pay a certain, what is being called, pariah premium is the difficult years since the beginning of the oil supply boycott. However, the actual levels seem to have been excessive. The hon the Minister in the debate on his Vote on 4 May set out what premiums had been authorized at ministerial level for the procurement of oil. He said that in 1980 the authorized premium was $8 a barrel; in 1981 $5; in 1982, $3,50 and at the present time $1,90 per barrel.

The maximum.

Correct, the maximum authorized premium. However, if the maximum had been applied to the purchases in these various years, it means that South Africa has had to pay a gross pariah premium since that time of up to R3 000 million plus an uncalculated further amount of money during the period between 1976 and 1980 when it was more difficult to procure oil.

As public representatives responsible to the taxpayers of South Africa, we have to ask whether this has all been spent in an acceptable and bona fide manner. There are some doubts about this. I made the point in the debate on the hon the Minister’s Vote that we had good reason to believe that we paid more for our oil than we should have paid, and I could mention two specific examples in this regard. I have here in my hand a copy of a written offer which was submitted in the SFFA, dated 27 July 1983. I am not going to mention the names, for obvious reasons, but merely the salient facts. This is an offer of 30 000 barrels per day, of the correct specification quality, to be supplied during the period 1 August 1983 to 30 June 1984, at a premium of only 50 US cents per barrel over the official Opec CIF price. In other words, this specific offer entailed a potential saving of 1,40 US dollar per barrel, compared with the authorized premium of 1,90 US dollars. If such a saving were annalized across the entire requirements of crude oil for South Africa in a year, and if oil could have been purchased at this kind of saving against the premium, it would have meant a saving of R200 million of the taxpayers’ money.

I have here another offer, dated 8 September 1982, and this is only what has been passed on to us. We have heard of many others. It reveals that the SFFA were offered 60 million barrels.

60 million?

60 million barrels. [Interjections.] That is a lot of oil, Sir, but it is certainly not our annual requirements. This oil was offered at an estimated saving of 5 US dollars per barrel. The point is that this offer was to supply the oil at 5 US dollars per barrel less than the official Opec price together with the $3,50 premium. That means that this particular offer was to supply the oil at below the official Opec selling price, even though the Government had authorized the $3,50 premium over the Opec price. This particular offer is for 100 000 barrels a day over a two year contract period. If the hon the Minister has not yet seen these two examples, I shall make sure that he does.

I have already seen them.

A fourth area of concern which gives rise to our feeling of unease about the possibility of the misapplication of oil funds, is because that although there are many established and reputable brokers and dealers in the world, it has nevertheless come to light that the Republic of South Africa has been dealing extensively with a cast of characters who are tainted with shady references.

A fifth area of concern arises from the fact that there is a major court case being heard at the moment. That is the so-called Sasol/ Sellier court case which is currently being held in camera. We understand that an amount of approximately R200 million is at stake in this particular case. We ask who is going to pay if this court case is lost. This is going to have to be paid for with public money, and in spite of repeated requests on our part for a clear statement of policy in this matter, we have only had silence and evasions from the Government. We cannot approve of a bill which may have the effect of squandering part of the State Oil Fund for purposes of this nature. It would be a wrong and devious method of settling a potential claim of this magnitude by using moneys in the State Oil Fund as a result of amending legislation passed by this Parliament.

If there have been problems or mistakes, and the public must pay to put them right, the public should know the story.

For all these reasons, Mr Speaker, I wish to move on behalf of the PFP, the following amendment:

1. (1) a Parliamentary Select Committee is appointed to investigate all the transactions of the State Oil Fund and the Strategic Fuel Fund Association since their inception relating to the funds referred to in clause 1 of the Bill;
2. (2) the Auditor-General is appointed to be responsible for the auditing of the accounts of SOF (Pty) Ltd and the Strategic Fuel Fund Association; and
3. (3) provision is made by Parliament for the economy as a whole to benefit from the accumulated funds presently held in the State Oil Fund.”.

Mr Speaker, the hon member for Constantia once again made a very obvious effort to create in this House the impression that there is large-scale dishonesty going on in the oil affairs of this country. [Interjections.] He has done so before, too. In the speech he has just completed he again used the term “cloak of secrecy” in this regard.

These are secrets that you yourself know nothing about either.

Mr Speaker, the hon member for Bezuidenhout may as well relax a little. [Interjections.]

On a previous occasion, too, the hon member for Constantia did everything in his power to create the impression here that major irregularities were occurring and dishonest transactions were being concluded in regard to oil purchases—in fact, with regard to all matters relating to the State Oil Fund. Indeed, he has also said before in a newspaper report that the PFP is profoundly disturbed about the things they are aware of relating to the oil affairs of this country.

However, they have been told repeatedly that if they have any information they can approach the Advocate-General, but I do not know whether they have done so. The hon member persists with these allegations of so-called dishonesty.

The hon member also made a statement about the companies over which there is supposedly no control. However, the companies in question to which the hon member referred have their own private auditors who examine their books. Therefore it is not quite correct to say, as he put it, that there is no control whatsoever over these matters or accounts.

With regard to the remarks of the hon member I just wish to say, in conclusion, that I am convinced that the hon the Minister will reply in detail with regard to the hon member’s figures and the wild allegations, in connection with figures and allegations which the hon member failed to substantiate. [Interjections.] The fact remains that in the times of crisis when our country was virtually unable to obtain crude oil, the action taken by the Government enabled that hon member and his colleagues, who are today so critical, to obtain fuel and carry on with their business enterprises, and even to keep their private motor-cars running. [Interjections.] When a crisis is past it is very easy to criticize all kinds of aspects of a matter, including the premium that had to be paid for the fuel. However, the fact remains that in those times of crisis our country had its friends, too, on which it could rely and which enabled it to obtain those vitally necessary oil supplies. The hon member is now finding it very convenient to forget about the circumstances that prevailed at that time of crisis because he is now pretending that there were never any problems as regards obtaining oil supplies.

Surely we know that these things can change overnight. We see what is happening in Iran now, where oil tankers are being scuttled, and we must realize that the situation could again change overnight. The hon member thinks that circumstances as regards oil supplies, etc, are so favourable at present that he can make a political football of it. It is irresponsible to create the impression in that way that there is an unholy process under way as far as the oil supplies to our country are concerned and that, as he puts it, many millions of rands are being thrown away or used unproductively, which is not a correct statement either. Money is certainly not lying fallow without earning interest.

Oil will always be an important source of energy, and accordingly it is of strategic importance for any country with a modern economy. Without oil we cannot progress. Our economy is not static. Prices and rates of exchange change from time to time, and therefore the necessary adjustments have to be made. It is therefore logical that levies be imposed on oil as circumstances may require.

The aim of this amending Bill is to afford more flexibility in the utilization of the funds and levies in question, to enable this to be done in a meaningful and judicious fashion. The hon member sought to suggest that proper control was lacking and that things were done on a very loose basis. That is not the true state of affairs. For example, use was made of these funds to make our country less dependent on the importation of crude oil, by manufacturing synthetic fuel and by other means. I take it that the hon member approves of this and that he does not object to our becoming more self-sufficient with regard to the provision of fuel. However, at no stage has the hon member said that the Government took sound action in this regard or that good work had been done to make the country more self-sufficient in this way.

We said we supported the Sasols.

In fact, the hon member only criticizes.

The State Oil Fund dealt with the financing requirements of Sasol 2 and 3. It must be possible to return funds that are not being utilized at present, to the Treasury. Part of the revenue of Sasol 2 and the revenue from customs and excise duties will go to the Treasury. This measure accordingly creates the framework for this, as the hon the Minister said in his introductory speech. The Public Debt Commissioners will no longer exist, and accordingly a portion of the funds cannot be invested there.

The hon member indicated that the Government was keeping fuel prices as low as possible. The Equalization Fund is being supplemented to make provision for the fluctuation in prices. I almost said “evangelization” because there are so many former clergymen here. [Interjections.] The Equalization Fund is being supplemented by the revenue obtained by the SSF from the sale of a small proportion of the stockpiled supplies. Therefore the Equalization Fund, too, is being strengthened. In the world we live in today and in which things can change overnight, as I have already said, it is necessary that we should have those funds to ensure that we shall not be trapped in a situation which could entail major embarrassment for consumers.

In conclusion, I wish to say the following: Whatever the hon member for Constantia said in this regard—and he did his best to create the impression among the public at large that the secrecy surrounding the oil supplied to this country created the opportunity for the Government and other agencies to abuse the situation—he will not succeed in making any progress in creating that impression, because he lacks evidence to support it. He spoke this morning about offers at lower prices and so on, but those are not things that make an impression; in the long run it is the facts that count. [Interjections.] All the hon member is doing is creating doubt, but fortunately he is not succeeding in doing so, because if there really are irregularities, he has at his disposal the necessary channels whereby to advance his case.

Mr Speaker, as we see it, the Bill before us this morning deals mainly with financial steps taken to obviate specific developments which have already taken place in what I want to call the entire oil industry. Unless these amendments are introduced it would seem that as far as certain matters in connection with the oil industry are concerned, a stalemate will have been reached. Only the amendments for which provision is made in the Bill will prevent the oil industry from reaching this stalemate.

These developments took place and I do not think it is very relevant this morning to give the misgivings and questions which exist in connection with the oil industry as the reason why the statutory amendment should be opposed. I am of the opinion that the questions and misgivings which have been repeatedly raised are of such a nature that it would perhaps be a good thing if the hon the Minister and his Department replied to them and threw some light on them so that these misgivings could be eliminated. These are not going to serve as a reason for us not to support the Bill this morning. We intend to support the Second Reading. I am merely mentioning this in view of the repeated questions being asked and misgivings being expressed.

We also support the fact, and this would seem to be necessary owing to the nature of the circumstances, that the Minister of Mineral and Energy Affairs will in terms of this measure, be entrusted with certain obligations in connection with the oil industry. In certain respects he will discharge them with the hon the Minister of Industries, Commerce and Tourism and in other respects in the place of the hon the Minister of Industries, Commerce and Tourism. This seems to me to be an essential amendment to the Act. Since the remainder of the legislation is, to our way of thinking, concerned merely with financial steps which have to be taken, there is nothing we want to pursue at this stage nor do we have any further objections to the measure, and we shall support the Second Reading.

Mr Speaker, I want to thank the hon member for Koedoespoort for his party’s support for the legislation. I share his view when he says that he cannot understand why the hon member for Constantia cannot support the Bill because he feels “uneasy” about certain people with whom negotiations are being conducted.

I want to ask the hon member for Constantia whether he is going to give evidence on the allegations which have been made recently on the question of misapplication. I want to ask him directly: Did you give evidence?

Yes, he did.

I am asking the hon member for Constantia and not the hon member for Bezuidenhout.

Make your speech.

Apparently the hon member is always prepared to sow suspicion and gossip about people, but he does not see his way clear to submitting facts. He merely feels constantly “uneasy” about everything taking place in connection with oil. It is a pity that when members of this House have doubts about something, they do not begin to make investigations and then go to the Advocate General with their problems. The hon member for Constantia has been given the assurance by the hon the Prime Minister and other Ministers that if there is any fault to be found, Parliament will be able to pass judgment on this matter. This should eliminate any fears the hon member may have about how this fund is used. The hon member must realize that he has access to the Advocate General and that he may lay any misapplication of funds before him. He must therefore stop sowing suspicion.

One merely hear that the hon member was rather concerned about the possible misapplication of the consumers money. I, however, agree with the hon the Minister that the proposed amendments to the Act will assist the consumer. The Equalization Fund can now be supplemented without more money needing to be collected from the consumer to do this funding. One cannot say much about the amendments the hon member moved, and for my part I merely want to agree with the hon the Minister that the matters he concentrated on in his speech, namely the more general prescriptive utilization possibilities of the fund, the use of the fund for a specific objective and the increase in the revenue of the Equalization Fund, are sufficient reason why these amendments are necessary, and we take pleasure in supporting them.

Mr Speaker, the hon member for Boksburg said that there is very little to be said about this Bill. I think the very contrary is true, I think that there are some fundamental principles at stake here. I must tell you, Sir, that I note with some regret the absence of the hon the Minister of Finance, who is overseas, because this is actually a matter which fundamentally concerns him. It relates to the whole issue of budgeting and the whole issue of parliamentary control in respect of finance.

Let me deal with a couple of issues and put them in perspective to show what is actually happening here. In this Budget Speech the hon the Minister of Finance said inter alia (Hansard, 28 March 1984, col 3890):

I stress “mainly”:

“Diminishing” and not “disappearing”:

Two points arise here. The first is that at the time when that statement was made there was no statutory authority, no legal right, to do that. Now that legal right is being sought. So, at the time of the Budget Speech it was in fact an illegal act to do what was suggested.

Secondly, the hon the Minister of Finance said that R163 million would be the amount that would be obtained. I looked at the latest document relating to the Budget that has come to hand but sought in vain for the amount of R163 million. I wish someone would show me that figure there, because for some reason I cannot find it there. What there is is an amount of R150 million. What has happened? I think someone needs to explain it to us, because budgeting in South Africa now appears to be a game in which figures do not play such a major part at all.

Then the hon the Minister of Mineral and Energy Affairs said today in his introductory speech:

He must be the new Minister of Finance, because he made that announcement. However, there is nothing in the Budget about the R441 million. No wonder that the retiring president of the Afrikaanse Handelsinstituut says there is something wrong with the financial management of the country. What is going on?

Do you know what is remarkable, sir? During the Budget debate I raised the issue that this money was available. I refer hon members to Hansard of 2 April 1984, col 4190. I pointed out that we were only dealing with R259 million and I went on to say:

Do you know what happened, Sir? The Minister of Finance then interjected and said I did not know what I was talking about. He said he would deal with me. He still has not dealt with me. He has not replied to that to this day. He leaves it to this hon Minister to come along with his story today. In discussing the Finance Vote—not in the Second Reading debate—we pointed out that sales duty had been increased and that from that the Minister of Finance hoped to get extra revenue amounting to R800 million for the forthcoming year while there was over R600 million sitting in the Sasol Fund and, as far as we were concerned, with the Public Debt Commissioners and in the Reserve Bank. Do you know what happened then, Sir? The Minister of Finance said: “Nou het jy jou vasgevang”. Now I have caught you. Now I have got you, because you do not know what is happening here.” He said he was going to deal with it. Sir, I am still waiting for him to deal with it. He had hours in which to reply to that, but he never said a word about it. So I ask: What is happening to the financial management of this country? How is it being dealt with? I want to deal with this as he set it all out nicely in his Budget Speech, and I quote:

This figure is not accurate either. The R887,6 million is actually …

R887,9 million.

I thought it was R887,6 million. Sir, one cannot keep track of these guys. What is a mere, 3 million? [Interjections.] This is only the cash part of it, as it appeared clearly here today. One can understand why the hon the Minister referred to this figure at the time. The hon the Minister of Mineral and Energy Affairs must be a frontrunner for the job of Minister of Finance because he at least gets his figures fairly accurate.

It is R887,6 million. [Interjections.]

I thought he was a frontrunner for the Finance job, Sir, but I will now have to demote him to below the hon the Minister of Transport Affairs.

The total amount involved is actually more than R2,76 billion. That is not a figure which the hon the Minister of Finance gave us. These are reasonably substantial figures, even in our economy. To me this is certainly a fair amount of money. I quote further from the hon the Minister of Finance’s Budget Speech:

He said further:

When we asked him why he does not take the rest of the money, hon members on that side of the House said it could not be done because it would be inflationary. However, I am told today that R441 million will be used for the Exchequer on an interest-free loan. Therefore, when we on this side of the House say that these funds should be used, it is inflationary, but when hon members on that side of the House say it should be used, it is good management. I ask you to judge for yourself, Sir. The hon the Minister says that profit cannot be used, but only the capital which one invests. One can use a proportional share of the profit. There is nothing wrong with that. But one cannot use the rest of the profit, because that is not OK. One can lend the money interest free, but one cannot appropriate it because it is inflationary. With great respect to the financial management of this country, I believe there is something fundamentally wrong and this needs to be put right at the earliest opportunity.

I want to ask the hon the Deputy Minister a further question.

What Deputy Minister?

I apologize. But the hon the Minister was a Deputy once and it is not too terrible to be one. In any event, my respectful apologies, but since he has become a Minister, he cannot add anymore. He used to be able to add when he was a Deputy Minister. [Interjections.] So he can have it anyway he likes.

This is very interesting. When one looks at the total amount from Sasol, not all of it went into the SOF. Some of it went into another subsidiary of the IDC. The hon the Minister should not shake his head. If he checks up he will see the amount is just under R250 million.

Repeat that.

The money did not all go into the SOF. Some went into another subsidiary of the IDC.

Where did it go?

It went into Con Oil. Does the hon the Minister know that? This can be seen in the Sasol prospectus. Today we are changing the law so that money can be taken from the SOF for the Exchequer or for any other purpose which you desire. In other words, you do not have financial control over it and this is one of the major issues which I want to discuss. What about the money in the other IDC subsidiaries? By law one cannot use that either, and at this moment in time one cannot use SOF’s money, as the hon the Minister of Finance wanted to do. I ask the hon the Minister to tell us why it only applies to SOF and not also to other subsidiaries of the IDC, who also benefit from the Sasol transaction. Why can they not deal with it in the same way as this one? What is the distinction? I do not think that is an unfair question to ask the hon the Minister. I think there must be a distinction. It is true that the IDC may well want to use the money for other projects, but if it does then I should like to know what they are.

[Inaudible.]

The hon the Minister says it will not be used for other projects. I should nevertheless just like to know. That is all I am after here.

The thing that worries me and, I think, also anyone who is concerned with the role of Parliament as far as the appropriation of funds is concerned, are the provisions of this Bill in terms of which the funds which are collected for a particular purpose, which are levied in a particular way, can actually be used for other purposes without the approval of Parliament. It is demonstrated in the following way. One does not know need an appropriation of Parliament in order to deal with the interest-free loan of R441,2 million because that is money that is just going to be used for the current year. I do not know what is going to happen to it at the end of the year. I hope the Government will be able to pay it back. The point is, no parliamentary authority is needed for that. One does not have to have Parliamentary authority in the future in order to deal with the funds which are in SOF, which are then used for a purpose other than what it was originally collectly for and what it is being collected for. The motorist and other people who pay this believe that it is being used for a particular purpose, and yet one does not have to come to Parliament to get authority. One does not have to get an appropriation of Parliament to do it. The Bill states that if the money is not immediately required it may be invested in such manner as the Minister, with the concurrence of the Minister of Finance, may determine. The Bill also deals with a futher discretionary power in order to deal with these funds.

Parliament has a major function. One of the reasons for the existence of Parliament is to keep control over the funds of the Exchequer. It is an ancient tradition of Parliament. What is happening here is that we appropriate money for a particular purpose but now we are passing a law so that that money could be used for anything at all. It is demonstrated by the other uses for which some of this money, which is really profit from the Sasol transaction, is being used. I pose the question, for example, in regard to Escom. Was it within the contemplation of the people who enacted this legislation that eventually the money would be used for Escom in a manner in which it is now suggested? It does not matter for the moment whether that is a good or a bad purpose; the argument is that when one appropriates money for a specific purpose in Parliament it should be used for that purpose. If there has to be a change then one comes back to Parliament to get approval for that change. There were people in Britain centuries ago who went to jail rather than agree to the Exchequer doing the things that this Government is doing. They were people who stood up against the Exchequer and said that it could not be done, that it was wrong, because it was the power of Parliament to withhold funds and to decide when and on what they should be spent. They struggled for hundreds of years. One gentleman actually lost his head as a result of it when as head of the Executive he tried to do the very thing that the Government is doing at the moment. [Interjections.] Is it right that Parliament must be surrendering another one of its ancient powers, another one of the things why Parliament really exists in these particularly circumstances?

There are also other matters that arise here. If one for example looks at the accounts that the hon the Minister outlined in his speech, one gets a very interesting situation. It seems that there is quite a substantial sum of money, well over R1 billion, which is going to be repaid over a five year period—I think the figure is R1,491 billion. If one looks at the liquidity position of Sasol, I think it would be able to repay a portion of that loan a little earlier. There is therefore extra money which could be made available because Sasol could readily come to terms with the Government and repay a portion of that loan a little earlier. I should like to ask the hon the Minister whether there is any reason why Sasol cannot repay a portion of that R500 million loan just a little earlier.

Which loan is that?

That is the five-year loan. There is a loan of R1,491 billion which is still owing, and I think a part of that could be repaid earlier. The hon the Minister mentioned it in his speech, the figure of R1 491,8 million. He said:

The hon the Minister, said “minstens vyf jaar”. I therefore ask the hon the Minister, if we need extra funds, whether it is not possible to have a part of that loan repaid.

The last matter that I should like to touch on is in regard to Sasol. We are talking about Sasol 2 and about Sasol 3, but what about Sasol 4? The question that I want to pose today to the hon the Minister—and I hope he will reply to it—is whether there is not going to be a Sasol 4, because I believe there should be a Sasol 4.

Where?

Where it should be. That we can discuss in due course. The principle whether there should be a Sasol 4 is what I am raising now. I venture to suggest two things in this regard. Firstly, while at the present moment, despite the Iran-Iraq war and the problems in the Gulf, there may not be a shortage of fuel in the international market, I believe that if we wait to the year 2000 that situation will change. It may change even earlier than that; we do not know. I am not that knowledgeable in this field that I would venture into forecasting it exactly. However, I believe that the situation in world terms will change. There are experts in the field who believe that the world situation will change, and I believe therefore that we have to look at that.

Modesty does not become you.

Well, I know my strengths and my weaknesses, unlike some other people. The Government for instance thinks it can administer the finances of the country. The point is that I do not believe that we can take a chance in respect of oil sanctions against South Africa. It is true; we have done relatively well despite all the problems that the hon member for Constantia has referred to. It was not necessary as yet for the public of South Africa to go to a pump just to find that there was no petrol. I think this is quite an achievement in the kind of world in which we live. However, we cannot assume that the enemies of the country are not going to try to use more potent methods in respect of sanctions against us, and in those circumstances a statement in respect of the future plans for synthetic fuel would not be out of place in this debate.

Let me then conclude by saying, firstly, that if nothing else has been proved in this debate, it has been proved that if the Government says that it had to increase GST in order to deal with an economic purpose, such as the balance of payments for an example, then there could be an argument in favour of it. However, if the reason is to raise more revenue, I submit that we have actually proved this morning beyond reasonable doubt that GST is unnecessary if the Budget is accurate.

The third thing, which, I believe, we have shown is that we cannot actually rely on the figures that are presented to us in relation to the financial management of the country. One cannot actually rely on this Government for the accurate financial management of South Africa. That is our indictment in respect of this issue.

Finally, Mr Speaker, I cannot overstress the point which we are trying to make in our amendment. That is that the accounts of these companies should be subject to the supervision of the Auditor-General. There should be accountability to Parliament. That does not mean that private auditors cannot be employed to do the job. If such a private auditor is appointed, however, he should be subject to the supervision of the Auditor-General. We have had this problem before in respect of secret defence funds, and we have overcome it. The hon the Minister of Defence and the hon the Prime Minister took the view that they wanted to bring the Auditor-General into the picture. They did it without any risk to South Africa. Is there then a greater risk to South Africa in respect of the arms industry or is there a greater risk to South Africa in respect of the fuel industry? I am convinced it cannot be argued that the Auditor-General can audit the Special Defence Fund and the secret defence funds but that he cannot be responsible for the audit of companies which relate to fuel. If the Auditor-General is responsible he can then account to Parliament, and then there will be a degree of control. A lot of the trouble to which I have referred will then, I believe, disappear.

I should like to appeal to the hon the Minister to apply his mind to these problems in a reasonable fashion. I submit that the hon the Minister should personally consider whether it is not desirable to bring the Auditor-General into this on the basis that if it is good for defence it surely should be good for fuel as well.

Mr Speaker, could the hon member for Yeoville just indicate whether I understood him correctly that, when he referred to Sasol 4, he said that he considered it to be a matter of very high priority that we should begin as soon as possible with a Sasol 4?

Mr Speaker, I believe that Sasol 4 is a necessity for South Africa. I believe it has to be planned. Its location should be determined in co-operation with the hon the Minister of Environment Affairs and Fisheries. The sources of fuel for Sasol 4 should be determined. It is a big task, and if we want Sasol 4 ready by the year 2000 we cannot start early enough with the planning of that project. The year 2000 is only 16 years away. A period of 16 years, I submit, is a very brief period when it comes to a project of the magnitude of a Sasol 4.

Mr Speaker, the hon member for Yeoville devoted about 90% or more of his speech to a discussion of the principles of a budget. He dwelt on the way a budget has to be compiled, who should be responsible for it, what should be done with regard to GST and so on. The hon member for Yeoville went on to say that he was aware of his strong points and his weaknesses. I, too, am aware of my strong points and my weaknesses. Therefore I do not wish to elaborate further on what the hon member for Yeoville had to say, for two reasons.

The first is, of course that the question of budgets, how they are drawn up and how they work is really not one of my strong points. I believe it is one of my weak points. That I want to admit openly and honestly. The second reason why I do not wish to react further to the hon member for Yeoville is that I believe that this is not the time or the place to do so. I really believe that there is more than enough time in the course of proceedings during the session for the discussion of budgets and everything that involves.

The hon member for Yeoville said, inter alia, that the hon the Minister of Finance had announced certain things which, according to him, were in fact unlawful. In a certain sense the hon member is correct. Indeed, that is one of the reasons why this legislation is essential. This Bill is necessary specifically in order to implement in practice certain things that we have already decided on, things that we have already discussed at length in the budget debates.

The hon member for Constantia, in turn, tried to discuss the whole oil debate again. Hon members will recall that during the no-confidence debate we discussed at length the whole issue of oil supplies and the problems they entail. During the discussion of the Budget Vote of the hon the Prime Minister we dealt with this aspect at length yet again in so far as we were able to do so in the fight of circumstances. Under the Vote of the hon the Minister of Mineral and Energy Affairs the oil problem was once again discussed in detail.

The hon member raised the matter of the SFF again, and that, too, he wanted to discuss in detail. He also wanted to discuss in detail the premiums that were at issue in 1979-80. On top of that, he wanted to discuss Dr Mostert and all his doings at length. He moved an amendment providing for the appointment of a select committee to investigate these matters. We have already discussed all these aspects at length, and in any event I do not think that these are matters which we should discuss now with reference to the Bill before us. This Bill has virtually nothing to do with the SFF. Truth to tell, the State Oil Fund has nothing to do with the SFF. Moreover, the Advocate-General is carrying out an in-depth investigation of this entire matter and the hon member could have submitted everything he said here to the Advocate-General, because that matter is being investigated at present.

There is another Bill on the Order Paper, viz the Petroleum Products Amendment Bill, and during the discussion of that Bill we shall certainly be able to discuss all the matters of principle raised by the hon member. Accordingly I do not think it is worthwhile to devote any more of my time to these two hon members because as I say, this Bill concerns something entirely different.

The hon member for Koedoespoort adopted a very positive and intelligent attitude, viz that this Bill concerns the practical implementation of certain things. I also wish to thank the hon member for supporting the Bill and this is something that I, too, wish to do in the few minutes still at my disposal.

I want to discuss certain principles of this Bill. The Bill provides for certain matters which, as I said, we have already discussed. As the hon member for Yeoville also said, we are now implementing this in practice and making it possible to do so in law. The Bill also provides for a specific flexibility in the handling of certain funds. Reference has already been made to the sale of Sasol shares. When the original legislation on Sasol was passed, no one in this House spoke about the sale of Sasol shares. This is a matter which only came up for discussion years later. Those shares were sold and a certain amount of money is now available. What are we doing with that money? Flexibility is necessary in that regard and that is why a very important principle of this legislation is to determine how those funds are to be dealt with in practice.

Clause 1(c) provides for—

Therefore it is not merely a matter of the manufacture of petrol from coal. Certain hon members referred to Escom, which is a tremendously important source of energy. It would be an extremely hidebound situation if the legislation were only to make provision for the manufacture of petrol from coal. The provision I have just quoted therefore affords greater flexibility to this legislation. Clause 1(d) refers to—

etcetera. Therefore reference is made to parliamentary control. Indeed, the hon the Minister of Mineral and Energy Affairs is accountable to Parliament for his actions. When we leave this to the Minister, it does not mean that the Minister can do what he likes. After all, the Minister is accountable to Parliament. Therefore there is no question of parliamentary control being summarily abolished.

If some of that money were to be used to remove lead from petrol—this is something he would like to have done—would the hon member for Constantia be satisfied with that? Surely that is a possibility, because it is concerned with energy. If funds are available and are used for that purpose I have no objection to that. The hon the Minister will be accountable to Parliament for that as well.

One can budget for that departmentally; one does not need a secret fund for that purpose.

Unfortunately I failed to hear the hon member’s reply clearly enough to react to it.

Finally, something which is embodied in the legislation and which I regard as praiseworthy is aimed at the protection of the consumer. The consumer is protected in two ways. The money obtained from the sale of smaller quantities from the stockpiled supplies will be used to keep the price of petrol low. These smaller quantities of the stockpiled supplies that are sold do not affect the real strategic supply. Therefore from the point of view of security, too, we can also afford the sale of such smaller quantities. What is being done with that money? That money is being used to keep the price of petrol low. Surely it is specifically to protect the consumer that this is being done. Therefore the principle is sound.

In what other way is the consumer being protected? The issue here is the strengthening of the Equalization Fund. It has happened before, and it could happen again, that in given circumstances, and given the price of petrol and so on, if the rand were to drop from, say, 89 cents to 78 cents against the dollar, this could result in a difference of 10 cents per litre in the price of petrol. That is why the Equalization Fund is of enormous importance. The funds must be duly provided for the benefit of the consumer. An important principle of the Bill is exactly what all of us in this House want to see. That is to say, we want the consumer to be protected, and that also goes for something as strategic as energy.

In conclusion, just a remark about the issue of secrecy. There is nothing secret about this Bill. Nothing for which provision is made in the Bill can be done in secret. Nothing can be done in terms of the legislation which can be concealed. The hon. member says that the State’s auditors cannot audit everything. The point has already been made that we have a very high regard for the private sector, and surely it is just as good if part of the funds is audited by the private sector. Surely we are just as satisfied with that. It is not concealed so that no one can carry out an audit.

Mr Speaker, will the hon member be prepared to reply to a question?

I shall try to reply as best I can.

Mr Speaker, the hon member speaks about the private auditor, and I now want to ask him what is the difference if a private auditor audits the accounts of a control board and is then responsible to the Auditor-General. Why should this not happen in this instance?

Sir, I do not wish to go into the financial detail now. I have no objection whatsoever if the Strategic Oil Fund which, as the hon member says, is a private fund, is audited properly. Of course, it should be audited properly. Indeed, that is how it is done, and a report is submitted to the necessary bodies. I have no objection if the hon member is unhappy about a further point of detail. He can certainly discuss it with the hon the Minister. As far as the principle is concerned, I have no objection to that; however, I do not know how it would work in practice.

To conclude, the point I want to make is that when we discuss oil, and are constantly speaking about secrecy and “cover-ups” and matters of that nature, there is nothing secret about this legislation. It is a positive and practical piece of legislation which can give effect in practice to what we envisage and want to do openly. Moreover, it protects the consumer. Accordingly I give the Bill my wholehearted support.

Mr Speaker, I agree with certain of the remarks made by both the hon member for Constantia and the hon member for Yeoville in opposition to the Bill, but notwithstanding that, we in these benches will support the Bill.

In our opinion the hon the Minister has motivated the reasons for these amendments fairly fully, and has also stated where the allocation of funds are going to. We see this legislation as consequential to certain changes made in customs and excise by the hon the Minister of Finance, and the rationalization of various departments, for example the changing of the old Department of Economic Affairs into the Department of trade and Industries. The only additions is in fact clause 1(c), which expands the scope of the State Oil Fund in the promotion of energy. Previously this was very restricted to coal and coal-related products, and this is a particular addition which we welcome, because energy, wherever it comes from, is still energy.

Clause 1(d) relates to the change from the Public Debt Commissioners to the Public Investment Commissioners and the Corporation for Public Deposits. Clause 1(d)(ii), however, leaves room for concern. If such revenue is in fact paid into the State Revenue Fund, will there ever be the possibility of that revenue being able to be recouped back to the department, or will it just be lost in the whirlpool of funds? I am therefore a little unhappy about that money being paid into the State Revenue Fund.

Clause 3 has the effect of legalizing the position that presently exists, because it is after all the Department of Industries and Commerce that controls pricing and does the necessary investigation of reported irregularities. We would prefer to see a much more open approach to the question of oil procurement and energy resources. Here I want to suggest to the hon the Minister that the time has surely come for a complete revision of the Acts dealing with our energy resources. Wherever you have secrecy, you create an umbrella for possible irregularities, but more so, you have suspicion. Where you have suspicion, you are always going to get rumour-mongers and pot-stirrers. The Government must realize that it is giving its opponents a political sjambok, which they will have no hesitation in using on the Government or the department concerned. The solution to obviate the criticism because of secrecy, is to respect the age-old adage of accountability and responsibility to Parliament. Here I must agree with the hon member for Yeoville. This is not difficult to do without disclosing your sources of supply. The audit procedure should be changed so that the Auditor-General will have access to both the accounts of the State Oil Fund and the Strategic Fuel Fund. This would place him in a position to report any irregularities that may occur to the Select Committee on Public Accounts I make the point that oil procurement is just as strategic as defence and defence spending. In this regard defence spending is audited by the Auditor General. In this respect I agreed with the hon member for Yeoville.

As long ago as 1979 we warned that this area would develop into an area of concern. We on this side of the House specifically asked for accountability to the House, but unfortunately this was to no avail. We stated our reservations, and subsequent events have proved that our reservations were well-founded. We therefore appeal to the hon the Minister to reconsider the invidious position he finds the government and himself in and to instigate the complete revision and restructuring of the Acts which control oil procurement, the State Oil Fund and the Strategic Oil Fund.

In conclusion I want to say that we would like to wait and assess our position until the report of the Advocate General has been tabled. We do not believe that we can pre-empt or make insinuations in a situation where we do not know whether they have been validated or not. We would like to retain our position and assess it only as and when the report of the Advocate General is tabled in Parliament. We will therefore be supporting the measure before us.

Mr Speaker, allow me first of all to thank hon members who supported the Bill, namely the hon members for Welkom, Boksburg, Koedoespoort, South Coast and the hon member Dr Vilonel. I think it was quite an interesting debate and I think for the most part the discussions was quite relevant, except of course in the case of the hon member for Yeoville.

The hon member for Yeoville started the Budget debate all over again. Why he did not raise these matters during that debate, I do not know. I am afraid that I cannot reply to those accusations which were directed at the hon the Minister of Finance. I think he should raise these points during the Third Reading debate on the Budget or at some other opportunity. It is quite obvious that the hon member wants to support the Bill. We heard the hon member for Constantia raising some completely irrelevant aspects, aspects relating for instance to the Salem, the Advocate-General, etc. The hon member did so just because it provided him with a platform to rehash the little gossip stories in which they are participating.

*As far as the hon member for Yeoville is concerned, I want to make just one point. I asked him whether he agreed that we should start planning for a Sasol 4 as soon as possible. The hon member’s reaction to this was very positive and I should like to thank him for that. We on our side of the House are also concerned about the future and our dependence on imported oil. Whether we should embark upon another Sasol project or upon projects for other kinds of synthetic fuels is a different matter. However, the hon member want us to start planning that project at once. On the other hand, he says that we should now get rid of the money which we have saved up over the years for synthetic fuel projects, that we should neutralize or sterilize it. He says we should not save it in a Fund, so that when we embark upon those projects, we need not go to the fuel consumer and say to him: “Now we want a lot of money from you again so that we may finance these projects.” Then we could justifiably be asked: “What did you do with the money which you received from Sasol 2? Why do you not use it to finance the new Sasol projects or to finance alternative projects?”

The rationale of this Bill is that we want to invest the money we have taken from the public in an asset. I believe that no one in this House or in South Africa would say that that money is not well invested in Sasol 2 or Sasol 3. The money is very well invested. We have made an enormous profit on that money for the fuel consumer. The hon member for Yeoville will agree with me that one cannot use an asset which one is rationalizing for current expenditure. Surely this is a totally unacceptable concept, economically speaking.

But the Minister of Finance does that.

I am not talking about the Minister of Finance; I am talking about my legislation, and the powers it confers for certain funds to be handled in terms of my department’s legislation. That is what I am talking about. I am not speaking in the Budget debate; I am telling the public outside that we now want to invest that money which was realized and that we want to save it for the benefit of any future synthetic fuel project in South Africa. That is what we are saying. It is as simple as that.

Now the hon member has many misgivings about this. What I still cannot understand is that while the hon member concluded with the idea of a Sasol 4 and confirmed this in a question, he said in the very next breath that we should not now invest that money which we can utilize to finance Sasol 4, but that we should spend it, that we should get rid of it by using it for anything else. Then, when we have to finance Sasol 4 eventually, we shall not have the money to do so, and we shall have to go back to the public and to tell them to come up with the money required. Really, Sir, the attitude of the hon member for Yeoville astonishes me. Allow me to tell you, however, why he is adopting that attitude. He committed himself long ago by being clever and saying that this money in the budget should be used for the current expenditure of the State. Now he cannot go back on what he said in this connection.

But the Minister of Finance …

The hon member knows he is wrong, and now he is hiding behind the hon the Minister of Finance. He knows that it is economically unacceptable to use assets which have been built up over the years, and which have now been realized in cash, for current expenditure. He knows this is wrong. If he would reflect on the principle of the matter, he would concede that I am right.

Mr Speaker, may I ask the hon the Minister a question?

I have asked the hon member a question and now he wants to reply to it with a question of his own. If I were to ask him now whether it is a sound economic principle to realize a fixed asset and then to use it for current expenditure, the hon member’s reply to that would have to be “yes”.

The hon the Minister of Finance said that the capital amount was used for revenue.

The hon member has only to say “yes” or “no”. However, he does not want to, because he is ashamed. He made this statement in the past, and now he is hiding behind the hon the Minister of Finance in order to get away from it.

The Minister of Finance supports this legislation.

Yes, the best part of it is that the hon the Minister of Finance supports this legislation.

The hon member now asks me where that money is. But we know where that money is. I told him exactly where every cent was in my Second Reading speech, and now the hon member is questioning it. One should have a look at the hon member’s questions on the Select Committee on Public Accounts. The hon member got all the answers there. What reason does the hon member have for repeating the same questions here that he asked on that select committee?

Mr Speaker, on a point of order: The hon the Minister knows that the report of the Select Committee on Public Accounts has not yet been tabled. It is therefore improper for him to refer to questions which he alleges I have asked on the committee. If you rule, for that it is proper for him to do so, I will refer to the evidence and the questions which I asked during the Third Reading. If you rule that he cannot ask it, I cannot do so either during the Third Reading. As I understand the rules of the House, until a report of a Select Committee is tabled, one is not allowed to refer to it. If that is not the case, I want to have a free hand during the Third Reading in reacting to everything which was said about this on the Select Committee. Then the hon the Minister will eat his words.

Well, who is in trouble now?

Order! The hon member for Wynberg should first give me a chance.

Mr Speaker, I apologize.

Order! I would be glad if the hon the Minister would not refer to the report of the Select Committee on Public Accounts before the report has been tabled—that is the practice.

I accept your ruling, Sir.

It is very clear that the hon member for Constantia completely failed to recognize the objectives of this legislation. It has four objectives, and the hon member for Constantia did not mention one of them.

However, the hon member for Yeoville also spoke about a part of the money which had been invested in a subsidiary of the IDC. We know exactly how much it is. However, the hon member is very clever. He pretends not to know what it is for. But he knows very well what it was used for. This money was used by Con Oil to buy shares in Sasol. It was used to obtain the 30% shareholding which the IDC obtained in Sasol Limited and Sasol 2 through Con Oil. It was not reserved for any other purpose. I am mentioning this to the hon member so that he need not ask any further questions about this in future.

The hon member for Constantia completely failed to see the objectives of the legislation. He was simply anxious to get on the oil scandal bandwagon. The purpose of the legislation is, in the first place, and some of my figures are merely approximate …

Business suspended at 12h45 and resumed at 14h15.

Afternoon Sitting

Mr Speaker, when we adjourned I was dealing with the hon member for Constantia. He raised certain aspects relating to oil procurement and the funds of the SOF, issues with which I really do not have any quarrel. The hon member for Yeoville also referred to that. I will deal with that in more detail at a later stage.

It is very clear that the hon member for Constantia confuses the funds available to SFF with the funds available to SOF, irrespective of the fact that SOF is a full subsidiary of SFF. I think one should be very clear about the fact that SFF has no free access to the funds of SOF. I will also deal with this matter in greater detail just now. I just wanted to emphasize the distinction between the two funds, how they are controlled and for what purpose. SFF funds are basically used for purchasing oil and SOF funds are by law—that law which we are amending now with this amending Bill—used only for investment in synthetic oil projects. Funds can therefore not be transferred from the one company to the other without any approval. There is no authority for such uncontrolled transfer.

This Bill provides for that.

No, it does not provide for that. I shall come back to that in greater detail at a later stage. I now want to come to an agreement with the hon member for Constantia. If I reply to those of his questions which are relevant to the legislation—I am not talking about the questions about the Salem, because that has nothing to do with this legislation, nor does this legislation have anything to do with the Salem—the hon member must withdraw the amendment which he moved. I shall try to reply to the hon member’s remarks as fully as possible.

In reply to a question put to me in this House, I said that we had more than 200 oil offers over the past two years. The hon member referred to an offer here—I should like to know where he got the information from—and quoted a certain price. He linked a certain premium to that price, $0,5, if I remember correctly. I believe it was 50 American cents.

Yes, in the one case.

The hon member then links it to the statement which I made during the debate, to the effect that we had fixed the maximum premium at 1,9 cents a barrel for 1983-84. I may point out to the hon member that we purchase oil at a lower premium than the one he mentioned. [Interjections.] It is not such a simple matter to select one offer from a great many and then to compare it with the approved maximum premium which we have laid down. The quotation which the hon member made in connection with those offers has a bearing on a question asked by an hon colleague of his in the past. We know exactly what it is all about. I should like to know where he got a copy of the offer. However, we are buying crude oil at the moment at a lower premium than the one the hon member quoted. Therefore I do not know why he asked this question. Would he like us to buy the crude oil at a higher rather than a lower premium? [Interjections.]

It is quite clear to me that the hon member has completely failed to understand the true contents of this amending legislation. He made no reference to it. I believe that the hon member for Koedoespoort, the hon member for Boksburg and the hon member Dr Vilonel really concentrated on the purpose of the legislation. I want to deal with it briefly, without repeating my Second Reading speech. Its first objective is to enable us to pay back to the Treasury the original R200 million given to the IDC from the treasury fo finance Sasol, plus the money earned by that amount in the form of dividends and interest—which brings it to a total of R258,8 million—because we were unable to do this under the previous legislation. So it is in line with one of the objectives laid down by the hon member for Yeoville, namely that a part of the proceeds would be used to finance the Treasury. [Interjections.] I want to know from the hon members whether they want us to pay that money back to the Treasury or not. The hon member for Yeoville said that we should pay everything back, and hon members must now indicate whether or not they want us to pay it back. We should like to pay it back to the Treasury in order to afford some relief in the difficult economic conditions prevailing at the moment. This is one objective of the legislation, and if the hon member would read the Bill again carefully, he would see that this is in fact the case.

There have been scornful references to the 4c a litre which is being paid into the SOF. In introducing this 4c a litre, we had three objectives in mind. The primary objective was to finance Sasol 2. I concede to hon members that the financing of Sasol 2 belongs to the past, and at this stage, therefore, we no longer needed that money to finance Sasol 2. Of that 4c a litre, we have 2c left, therefore, and the hon the Minister of Finance announced this during the Budget debate. Consequently we are simply adapting this legislation to enable the Minister of Finance to obtain that 2c for the financing of his Budget. The remaining 2c is being allocated as follows: 0,22c is being used for the infrastructure and the maintenance of the tank depots. The hon member must now tell me whether or not we should continue operating the tank depots in which we stockpile our strategic supplies; should we tighten the security measures there, or should we relax those measures? Secondly, 0,55c a litre is being allocated to the Department of transport Affairs for the combating of oil pollution along our coasts. A trawler has just run aground near Agulhas again, and any oil pollution will have to be combated. That is what the 0,055c is being used for. This leaves us with 1,75c of the original 4c, and we are not making any secret of that 1,75c. As soon as the investigation into oil supplies and so on has been completed, we shall indicate in detail how the oil price is made up. That 1,725c is being paid into the SOF to swell the funds for future synthetic fuel projects. We do not want to return the money now and then ask to have it back later; we want to augment the funds for future synthetic fuel projects now.

I now want to ask the hon member a question. Soekor is evaluating its gas finds at the moment, and if Soekor were to recommend tomorrow that we should develop a specific source of gas, in other words, that we should fluidify the gas, there will have to be funds available to enable Soekor to embark upon the project. If we have to finance Soekor, where else is the money to come from? We should like to finance Soekor, where else is the money to come from? We should like to use the money from these funds so that we do not have to go back to the consumer again and to say: We should like to finance the Soekor project, so you have to pay Xc a litre more. Then the consumer would be justified in asking us what we have done with the profits that we realized from their assets.

When we talk about Soekor and Sasol, however, we are talking about the principle that the State does not want to undertake the total financing again. The idea is that the financing, the control and the running of those projects should be undertaken primarily by the private sector. However, there is a certain amount of risk capital which the State will have to guarantee in any event. We would like to guarantee it with these funds. That is precisely why we want to amend the principal Act, in order to widen the scope of the provision.

The final argument I want to put to the hon member is the following: We have a serious problem with the exchange rate between the dollar and the rand. This is a problem which is getting worse and worse. What I am saying now has already been announced. It is no secret, therefore. The Government has decided to use a certain amount of our stockpiled supplies. For what purpose? To sell those cheap supplies, which were bought at a low price in the past, to the oil refineries at the prevailing price. The money we are going to earn in this way we want to use to soften the impact of the exchange rate on the fuel price on the consumer. The object of this legislation is in fact to give us the right to use the money generated in this way to soften the impact of the exchange rate on the fuel price. This is a further objective of this measure.

There is another important objective as well. The hon member for Yeoville now wants to know why this R887 million is with the Public Debt Commissioner at the moment, the hon member should simply go and read the Act again, the Act provides that it has to be invested there. The Act provides that if that money is not being used for a synthetic fuel project, it must be invested with the Public Debt Commissioner. Now we also know that the Public Debt Commissioner and the National Finance Corporation have ceased to exist and that in their place we now have the Public Investment Commissioners, as well as the Corporation for Public Deposits.

Do not confuse him with facts.

Yes, it seems to me that we should not try to confuse the hon member too much. We now have to change the principal Act, therefore, in order to obtain the right to invest the money with the institutions concerned in terms of legislation, in co-operation with and with the concurrence of the hon the Minister of Finance. So that money is not lost. It is money from the State Oil Fund, which is destined for future synthetic fuel projects and which is being invested with these two institutions. In the one case, it is being invested in the long term, and in the other case in the short term.

Now the hon member for Constantia has done something else which I find extremely interesting. I consider it a very clear indication that the hon the member does not have the faintest idea of what this legislation is about. He obviously has no idea of where this money comes from and what it is being used for either. If I remember correctly, the hon member for Constantia said in his speech—and he can indicate whether I am right—that there are thousands of millions of rands in the State Oil Fund at the moment. The hon member nods his head. He confirms that I am right, therefore. According to him, there are thousands of millions of rands in the State Oil Fund, which have been accumulated over the years. He also says that he would like to know what has become of that money. Of course, this is another one of those rumours, Mr Speaker, which have proliferated. It is an attempt to make political capital, of course. There are not so many thousands of millions of rands in the State Oil Fund, of course.

Let us see how much money there is in the State Oil Fund. On 30 April this year—only a few weeks ago—there was R887,6 million in the State Oil Fund. Now the hon member for Constantia must not say that he does not know where that money comes from. Surely he knows where it comes from. It comes from the realization of the Sasol investment. There is a cash amount of R59,3 million. In all, there is an amount of R946,9 million, therefore, every cent of which is invested with the Public Debt Commissioner. A part of it has been invested free of interest—as I indicated in my Second Reading speech—while the rest of it is interest-bearing. There is R140,7 million in the Equalization Fund. This is the only money invested in the Equalization Fund and in the State Oil Fund, respectively, at the moment. We know that the amount of R140,7 million comes from the customs levy on the price of petrol. That is the full amount. So there are not thousands of millions of rands in that fund. We know exactly how much money there is, and we are now changing the principal Act precisely in order to use that money in the way which I indicated in my Second Reading speech. That money will not be spent, therefore, if the Cabinet has not approved the projects concerned. I can reassure the hon member for Constantia, therefore, by telling him that there is in fact a committee for national priorities. Consequently, those projects will not be embarked upon, even if they are synthetic fuel projects, without first having been approved by that committee for national priorities. If we look at the committee for national priorities in general terms, having regard to all priorities on the national level, we find that there is another committee, an energy priority committee, which falls under that committee. This is the committee of which Prof Garbers of the CSIR is the chairman and which decides which energy projects should receive priority. Those recommendations are submitted to the Minister.

We also went further, and I think this will serve as a reply to the hon member for Yeoville as well as the other hon members who referred to this. Within the department there is an energy policy committee, and that committee is at present engaged—the framework has been virtually completed—in determining the overall energy priorities, the various possibilities, the various sources of energy of South Africa, so that we may prepare a White Paper in connection with an energy policy. All energy projects will be undertaken in the light of the energy committee’s recommendations and will be submitted to the Cabinet for its approval.

I should like to conclude by describing in very broad outline how the oil purchasing situation in South Africa has developed and how we involved the SFF in this situation. I also want to indicate what the changes are which have taken place over the years, what the changes are that have taken place in recent months in particular, and how we see the future.

Since the interruption of the supply of crude oil to the RSA by Iran—this happened in 1978-79—we have constantly been examining effective financial control measures with regard to the funds for the purchase of crude oil. I do not wish to discuss every step in detail, but I just want to refer to them in broad outline. Financial control measures were constantly scrutinized. At first, the most suitable mechanism was to make use of existing private companies in order to buy crude oil. What was the SFF association in charge of during that time? Since 1964, the SFF association has been in charge of the country’s crude oil purchases for strategic supply and stockpiling purposes. For this purpose, the SFF obtained its funds from the National Supplies Procurement Fund of the Department of Industries, Commerce and Tourism. When the legislation came into operation in 1977, the funds of the SOF were meant for the financing of the various Sasol projects, which we are very proud of and from which we are deriving very great benefit at the moment. All purchases made purely for stockpiling purposes in the past, with regard to prices, quantities, sources, quality, security of delivery and shipping, were ultimately cleared with the responsible Minister of Economic Affairs at the time and were made with his knowledge.

After 1978-79, when crude oil had to be obtained on the open market, the modus operandi was that the board of directors of the SFF had to enter into the usual trade contracts, in close co-operation with the then Department of Commerce and Consumer Affairs and of Industries and with the Minister. However, the crude oil market has stabilized somewhat since mid-1980, and it has been possible to organize purchases on the basis of a longer term of supply, making it possible to give account of these purchases in a better regulated way. This is the point which hon members so strongly emphasized, and I have no quarrel with them in that regard. In consultation with the Minister involved, long-term contracts were entered into and a crude oil purchasing committee was established on a more representative and firm foundation, to consider offers and make recommendations to the Minister.

The offer to which the hon member referred was considered by this committee, together with all the others which we had received. Firm guidelines were laid down with a view to the diversification of sources and dealers and Government contracts. Among the most important were—I am just going to mention them briefly—the price, security of delivery, the size of potential suppliers, their experience and financial strength, the quality of service to the SFF in the past, the access of suppliers to the shipping market and the oil-producing countries and the distance between the sources of supply and South Africa.

The next step was to revise all existing contracts—we had a few existing contracts in the 1980-81 period—which resulted in restructuring of purchases and eventually led to lower fuel prices. So much for the past.

I come now to the last few months. During the last few months, a number of new circumstances have developed which make it necessary to re-examine and reflect on the whole SOF/SFF/IDC situation and the departmental setup with regard to the purchase of crude oil. What are these factors? Firstly, the privatization of Sasol, and the organization’s request to be relieved of the purchase action, led in the first place to the transfer of control over the SFF and the SOF to the IDC. This was the first new development. At the same time, considerable amounts began to accrue to the SOF from the sale of the State’s interest in Sasol 2. Furthermore, funds are being generated in the SFF through the sale of a small percentage of the stockpiled strategic crude oil supplies financed by the State, and these funds are earmarked for price equalization purposes. In the light of this, it is necessary to re-examine the structure of control over as well as the location of the instruments dealing with transactions for the purchase of crude oil.

So far, levies have been imposed on the sale of petroleum products for the financing of Sasol 2 and Sasol 3, among other things, and for the equalization of fuel prices, and these have been paid into the SOF and SFF organizations respectively. These funds may all be regarded as public funds, because the revenue was obtained from the motorist in the form of levy in terms of legislation.

Further funds in the SFF have been and are being obtained from the sale of crude oil to the oil companies which recoup it in their selling prices, and it is used again for further purchases of crude oil for commercial purposes. These funds are ordinary operating capital to which the State cannot lay any claim.

What I am going to say now is something which I would like the hon member to pay attention to, because if what I am going to say now is acceptable to the hon member—I believe that it will be acceptable to him, because it is certainly acceptable to all the other hon members of all the other parties— I want him to reconsider his amendment and to withdraw it and to help us to get the Bill through Parliament so that we may exercise proper control over the financial aspects.

So far, no distinction has been drawn between public and private funds for audit purposes, because all funds handled by the private companies have been audited by private auditors in terms of the Companies Act. The Auditor-General—and we discussed the matter with him—could not be involved in the financial control, therefore. The rationalization of the Republic’s purchasing organization with a view to exercising the best possible financial control over the various kinds of funds is receiving the attention of the Department of Mineral and Energy Affairs at the moment, therefore. For good reasons connected with the clandestine nature of purchases as well as the relatively small involvement of State funds in the purchases—the only State funds involved are the premiums which are channelled to the SFF from the Equalization fund and which are contractually laid down, so that there is full control over them—it was not advisable in the past to exercise any further parliamentary control over the SFF and the SOF, and Parliament ratified the existing loan by way of this Act. Because of the greater involvement of State funds, as I have indicated, and especially with regard to the SOF, in providing for the RSA’s energy requirements, and the consequent need—the hon member for Constantia must listen carefully now—to give the Auditor-General a say in the control over the funds, it has become necessary to consider the desirability or otherwise of the continued existence of the existing instruments in company form or, alternatively, the establishment of State corporations or some other structure to perform this function. By this I mean the total restructuring of the SFF, the SOF, the IDC, Con Oil and all the other organizations so as to be able to comply with this function of the auditing of State funds. These aspects are being investigated by the Department of Mineral and Energy Affairs, and if necessary, legislation in this connection will most certainly be introduced next year.

The provisions in the proposed legislation will go even further. They will even incorporate guarantees with regard to the purchase of fuel in the same Act, so that we may have proper audit control by Parliament, in the first place, and so that the necessary reports on funds which have not been involved in any clandestine operations may be tabled in Parliament or audited. I believe that if we introduce such legislation next year, hon members opposite will support us. In terms of the investigation which the department is conducting at the moment, it is our intention to resolve every problem foreseen by the hon members this afternoon. We regard this Bill simply as an interim measure to enable us to make proper financial arrangements according to law until we are able to come to Parliament with a consolidated measure next year.

Once again, I wish to thank hon members such as the hon member for Boksburg, the hon member Dr Vilonel, the hon member for South Coast and the hon member for Welkom for their support. I also ask hon members of the PFP whether they would not like to support us with regard to this interim legislation. Next year we shall solve all their problems, and our own.

Question put: That all the words after “That” stand part of the Question,

Mr Speaker, at an earlier stage of this debate I mentioned that the White House had appointed a commission to investigate the problems of the small businessman. I also mentioned that they identified specific objectives and problems, particularly the problem of raising capital. A second problem was the existing red tape in connection with small businesses. In the third place, the private sector had to provide more assistance in the management of small businesses. A fourth interesting aim that was stated was that small businesses should be assisted in establishing certain industries in certain areas. They therefore saw the development of small business undertakings in conjunction with a type of decentralization policy. A fifth point which was mentioned was that small undertakings should be assisted with purchases and credit measures. A sixth interesting point was that small business undertakings should also have a say in authorities, such as the Board of Trade and Industries and in State Departments where committees made recommendations on matters affecting them.

As I mentioned earlier, we in South Africa can really say that we have made a great deal of progress in assisting the small businessman. If what the White House recommended to the President is compared with what we have done, we can be proud of our record. The first aspect of our strategy that I want to refer to, is the Development Bank which was established recently, and which operates through the Development Corporations. The Development Corporations have already played an important role in the development of many homelands, national states and border areas. They have assisted with the provision of capital, marketing, training, advice, administration, the provision of space and other physical facilities, and we can look back on their successes with pride. Since the corporations are now going to co-operate with the Development Bank, we are looking forward to the important role it will play in regional development and the development of national states in future.

Another body which is playing a very important role in our strategy by assisting small business undertakings is the Council for the Promotion of Small Business. This body has a very important function, namely to continuously identify problem areas that obstruct the promotion of small business undertakings. This means that they are a kind of watchdog. The report of the National Manpower Commission points out the large amount of red tape which small business undertakings have to deal with. They say that this council should implement the recommendations in their report. The council should also give attention to recommendations in connection with the comprehensive policy for the promotion and expansion of the small business sector in South Africa. They also deal with the allocation of available funds to institutions actively involved in rendering services such as advice, guidance, training services, and applicable research. Here we can also take note of the important role played by the Small Business Advisory Bureau at Potchefstroom University. At present this body also liaises with the council Another function of the council is the co-ordination of the activities of various institutions. Here I want to mention the Small Business Information Centres, which now fall under the Small Business development Corporation. In the case of the Small Business Development Corporation, a third aspect of our strategy, it may be noted that the State co-operates with 91 key companies in South Africa. The functions of the corporation deal with financing by way of loans, share capital, divisional sales, leasing, the availability of business premises, etc. The latest report of the Small Business Development Corporation indicates what tremendous progress has been made during the past two years. One can already say that this corporation is a success.

The fourth aspect of the strategy, which is also important, is the role of the private sector. We have to give recognition to the private sector because the small businessman cannot be assisted if the private sector does not co-operate. One can think of Norton Barlow Rand which is giving a great deal of assistance to Black businessmen. One can also think of the various newspapers that are offering courses for small businessmen. We can also think of the Urban Foundation. These organizations are really going out of their way to help the small businessman. There was also the recent announcement that the Stock Exchange was investigating the possibility of starting a development capital market on which those persons who do not meet the requirements of the Stock Exchange could enter the capital market.

As I have already said, the White House report also pointed out that there was too much red tape and administration involved in small business undertakings. The National Manpower Commission also pointed out how we should differentiate clearly in our legislation between large companies and small business undertakings.

If one were to summarize the legislation now before us, it is a simplification of administration in connection with forming organisations. In the first place one may note the simple manner of registration and the administration procedures. One also notices the advantages of juristic personality, which are being retained. One finds the maintenance of limited liability. There is no restriction on turnover and the number of employees, but there is a restriction on the number of members; control and administration occur by way of association agreements. We are therefore taking the benefits of a partnership and applying them to a close corporation. We also note that there is no board of directors. One could also add that there are no board meetings. In many companies, as we all know, board meetings frequently take place only on paper. Nor is there any share capital or shares involved, but there are interests in percentage ratios. There is a reduction in the information close corporations have to make available. This is a very important point. We find, for example, that the auditing requirement falls away. It is frequently said that it is more important for the accountant to draw up financial statements than to do an audit for a small corporation, because one has the problem of vertification of facts in the case of the small business undertaking. Another advantage is simple deregistration and liquidation procedures.

Another very important point is that the system is self-regulating. Non-compliance with a limited number of requirements leads to members losing their limited liability, and they are also fined. A very interesting point is the matter of the accountant. It is no longer necessary to appoint a qualified accountant or an auditor as an accountant. The Minister may now decide that certain persons, for example persons with a B.Comm degree in accountancy, may also qualify as accountants.

When we talk about red tape, there is one problem as far as I am concerned. In terms of clause 56(5) small business undertakings have to deposit their funds in prescribed bodies such as the Post Office and banks, and in my opinion this is not in line with this effort to simplify the entire system. The argument could be advanced that this provision is aimed at preventing negotiations on the grey market. My argument is, however, that with the present monetary and more market-orientated policy, a grey market no longer exists today, and I feel that this clause should be reconsidered.

In addition to the administrative improvements which have been made, there is another very important objective I want to refer to, and this was also an objective which was emphasized in the White House report. I am referring to the problem of capital for the small businessman; the problem of credit and the problem of retaining some of one’s own earnings.

Mr Speaker, as far as the obtaining of capital is concerned, we first have to consider capital formation. Personal savings in South Africa have reached low-water mark. In 1983 they had dropped to 3%. This is, however, a world-wide trend. The American figure for 1983 was also a mere 3,3%. People are investing more and more of their savings with insurance companies and pension funds, and the small businessman is finding it difficult to obtain private savings for his activities. The small businessman is also experiencing problems because he is finding it difficult to obtain cash owing to inflation and high interest rates.

Because of all these problems, a great many of our small businessmen are being eliminated, and I feel it is very important for us to create opportunities in these close corporations so that they can utilize available capital resources to the maximum. I have said that the Small Business Development Corporation, other development corporations and many of our banks are already giving special attention to small businesses, but they are not able to invest in close corporations. Many of the banks assisting small businessmen today are not really earning any dividends on the capital they are investing in those organizations. If the small business undertaking concerned is successful, they receive their dividends later in the form of capital gain.

According to this Bill, a juristic person may not become a member of a close corporation. I realize that we are dealing here with a new type of body and one should therefore not be over-hasty, but I would be glad if in the near future we could give attention to opening the channels to enable the Small Business Development Corporation to invest in a close corporation via banks.

The second aspect I want to refer to is the problem the small businessman has in obtaining credit; in borrowing money. Of course we have to remember that a close corporation does not have shares or a share reserve. The Bill under discussion emphasizes the concept of solvency and liquidity very strongly, however. A whole series of clauses, inter alia clause 3, 26, 27, 34, 39, 51, 52, and 81, clearly indicate that the point of departure in this case is protection of the creditor. Clause 3, for example, provides that because members of a juristic person are normally indemnified against the claims of creditors, this will quite clearly be the case here, but that certain provisos exist; provisos determining cases in which indemnification will not apply. In clause 63 specific reference is made to eight cases in which a member, a former member or a person purporting to be a member, will be liable, together with the corporation, for certain debts of that corporation. It is very important for us to point out this aspect, precisely criticism is being expressed in certain circles that the creditor will not receive adequate protection. Personally, I think that there is adequate protection for the creditor, and that he enjoys that protection in terms of a whole series of provisions in the Bill under discussion.

The third aspect I want to refer to concerns the entire matter of taxation. I know we are not yet certain how the close corporation is going to be taxed. As I have already said, the first problem lies in the fact that part of that corporation’s capital will have to be derived from savings. In the second place, I pointed out that the close corporation would have to raise loans, and that its creditors should not feel concerned about loans they want to grant to small businessmen. The third question is how the small businessman can retain a larger part of his earnings. At the moment he is taxed by 50% on earnings. We also know that the small businessman cannot claim the same number of tax deductions as large companies, for example. The small businessman cannot make use of export assistance and training assistance. It is also a fact that nowadays the small businessman pays far closer to 50% than do large companies, for example.

It is also interesting to take cognizance once again of the report to the American President, in which this problem was specifically indicated. According to the report, pressure on the small businessman was definitely far greater than on the large corporations. In the report it is also suggested that a progressive scale of company tax be introduced. In America a lower tax rate applies in the case of a turnover of less than $100 000 a year. This applies in the case of companies. I may also point out that in Britain the small companies pay only 30% tax as against the 50% paid by the larger companies. A second suggestion in the aforementioned report is that part of an undertaking’s income should be considered to be personal income. In the third place, a simpler system of writing-off is recommended. A fourth aspect, one which is also very important, is the recommendation that a person who wants a share in a small undertaking—of course this is not possible in a close corporation—can obtain tax credit with regard to those shares he has invested in a small undertaking. At present we find the same system operating in Britain. A person purchasing shares in a small undertaking can obtain tax credit on them. In South Africa this does not yet exist. I feel we should give serious consideration to something along those lines.

At the moment we have three forms of taxation. A one-man business is taxed on the basis of personal tax. This means that a one-man business pays tax like the ordinary taxpayer, namely a maximum marginal rate of 50%, which begins at a income level of R40 000 a year.

In the case of partnerships, there is no separate tax identity either. The profits accruing to a partnership can, however, be set aside in some way so that after the partnership’s financial year has ended they can be assessed. As far as the company is concerned—this is our problem and I feel we must give serious attention to this—one finds that the company pays tax on its profits but that when these are paid out in the form of dividends to South African citizens, tax has to be paid on two-thirds of those dividends. We therefore have economic double taxation in this connection. When we therefore consider the taxation of close corporations, we have to make provision for getting away from this concept of economic double taxation. Many companies endeavour to reduce their profits in the form of director’s fees and salaries. They do so in such a way in order to ensure that the shareholder pays less tax. When we therefore consider these three examples, we find that the present tax form or method used for companies is really not ideal for the close corporation.

The Organisation for Economic Co-operation and Development also mentions three tax systems. The one is a totally separate tax system for the company and the individual in terms of which there is no alleviation of economic double taxation. In the second place, there is the partial integration of company and individual tax. This is the system we have at the moment where tax is only paid on two-thirds of the dividends. In the third place, there is the total assimilation of company tax and individual tax, which means the total relief of economic double taxation. This is the method we should consider in this case. The allocation system must be such that the dividends paid out to shareholders will be deducted from taxable income of the close corporation and is fully taxable in regard to the shareholder.

I also have another suggestion as far as tax is concerned. Since we know that the close corporation is experiencing a serious problem, the question arises why the close corporation cannot deposit a larger part of its profits with the Small Business Development Corporation. It may deduct this amount from its profits and only the remaining portion of those profits will then be taxed. The money it invests with the Small Business Development Corporation then provides that corporation with funds which it can use to assist all small business undertakings. When a close corporation has built up sufficient funds with the Small Business Development Corporation, it may withdraw them on submission of a certificate from its accountant stating that those funds are to be used for capital projects.

Another difficulty I want to mention is that the small business undertaking is tremendously handicapped by inflation and high interest rates. Almost all of them are experiencing cash flow problems. If we can develop this system where the Small Business Development Corporation may pay out the funds invested in it by a close corporation on demand when that corporation experiences cash flow problems, this will assist those undertakings a great deal.

We have to consider all these proposals. We have a very good system through which we can assist small business undertakings in South Africa, and I feel that it can serve as a model for the Western world as far as these matters are concerned.

Mr Speaker, we in the CP support this Bill, about which I just want to make a few remarks.

In the first instance I want to extend my cordial thanks to the department for the comprehensive and detailed memorandum that has been made available. It contains 75 foolscap pages and has been very well drawn up. When one is dealing with a new Bill such as this, then such a document is very illuminating.

Apart from the exposition by the hon the Deputy Minister in his introductory speech, there is a further memorandum by Prof S J Naudé. I think it is appropriate that we should convey our sincere thanks to Prof Naudé today, a person who has worked so enthusiastically to establish close corporations.

Let me say here and now that I do not like the Afrikaans word “beslote”. “Close corporation” sounds good to me in English, but the same does not go for “beslote” in Afrikaans. I wonder why we could not rather refer to “geslote korporasies”. Perhaps we could find another name. The hon the Deputy Minister pointed out that the idea was that it could be called the “kleinsakekorporasie”, but he added that that would not be a good name because such a “kleinsakeonderneming” could develop into a very large, capital-wealthy enterprise.

I now turn to the legislation as such. It is the task and duty of the legislator to ensure that the necessary legislation exists, but he also has to find ways and means, and establish institutions, to enable business to be done on a sound basis in the country. There must not be unnecessary restrictions, but unfortunately that is just what we have at the moment with regard to existing undertakings. The Companies Act, for example, does not make it very easy for a small businessman to conduct his affairs. Much of this unnecessary red tape is being eliminated.

Nowadays the South African businessman has to prepare an interminable series of returns. One can virtually have a full-time employee dealing only with those returns. That does not apply to one department only, but to a whole series of departments to which returns have to be sent. I could refer to dozens of them. For example, there is the Receiver of Revenue. Apart from the annual tax returns, there are GST returns that have to be sent in. Some business enterprises have to submit such GST returns monthly. Then, too, there are the monthly returns one has to send to the Receiver of Revenue with regard to one’s employees. There are the monthly tax payments that have to be made. Then, there are unemployment insurance returns, and returns in regard to accidents. One has to furnish the IT3 returns annually. And that is by no means all. If the Receiver of Revenue wants to tackle one and sends one inquiries, that is another story. For example, if one has had a credit and one asks for it back, one could have a visit from an inspector. He could easily address an inquiry to one which could run to five or six pages, and it could take one six weeks merely to reply to it, for the sake of a few trifles. Then, too, there are census and statistics returns. One also has to send employee returns to the local authorities. Then there is the question of annual licences. I could continue in this vein, but I honestly hope that this aspect will be investigated. Could one not eliminate some of these things? The motive behind the Bill is specifically to ensure that far fewer problems are created.

The hon member for Waterkloof explained several things. But there is one point on which I differ with him. He said that close corporations would have to invest any superfluous monies at their disposal in the Small Business Development Corporation. It is small businessmen themselves who will have these close corporations. This is something completely contradictory if a person who has a close corporation may only invest his money in the Small Business Development Corporation. At what interest rate? And only in order that a person who has nothing, can be assisted to begin. Why should the large companies not invest their money in it? I think that this is a total contradiction, and I cannot go along with it.

In the establishment of close corporations three objectives are envisaged. In the first place, an effort is being made to make a simple form of enterprise possible. It must also be cheap to run such an undertaking. I have practical experience of the problems one is faced with as far as smaller business enterprises are concerned. I came by that experience in the days when I was still practising. For a small enterprise it is extremely difficult to provide all the annual returns required in terms of the Companies Act.

This legislation does not affect the other forms of enterprise either. The legislation is very positive and is certainly the desired step in the right direction. Therefor we must support the legislation.

I now wish to refer to a few of the clauses, inter alia, clause 4. I think that this was a very wise move, and it is a great improvement that a Deputy Registrar is being appointed as well as an Assistant Registrar. Moreover, their powers can be delegated. When there are no powers of delegation, and due to illness or for some other reason the Registrar is not available, the work falls behind unnecessarily. In terms of clause 11 the standing advisory committee on company law will be the guardian of this form of enterprise. This is an outstanding step in the right direction and I want to emphasize this strongly.

Clause 12 relates to the founding statement when such a corporation is established. There is a great deal of red tape involved when one wants to register a company. One draws up all the necessary memoranda, the articles of association, etcetera, but when one wants to submit them to the Registrar, additional copies first have to be made. All this then has to be taken to a notary public so that he can certify that they are true copies. A commissioner of oaths may not certify such documents. In my opinion this procedure gives rise to unnecessary expense. When I was still in practice, it only cost about R30 to R40 to register a small company. Ther are certain forms that have to be completed, and if someone notarises it, it still costs the same amount extra to have everything finalized. I do not think that is the correct procedure to follow. Nor is it good for the attorneys’ profession.

Another aspect to which I want to refer is the conversion of such a corporation into a company. In my opinion all the members of the close corporation must then also become members of the company. This will prevent scoundrels—we all know that there are such people—converting a close corporation into a company when they want to rid themselves of the liabilities and responsibilities, and thereafter disappear and leave all the other people in the lurch. If one wishes to convert a private company into a close corporation the shareholders, too, must all become members of the close corporation. That is a step in the right direction.

Clause 29 provides that only natural persons may become members of the corporation. As far as I am concerned this is a praiseworthy principle, because this kind of corporation is in my opinion aimed at the one-man business or the business run by a family or by brothers. I hope that this principle will remain unaltered in the future.

The question of insolvency and what happens if someone dies, is very well set out in the Bill and no fault can be found with it.

Then, too, there is the question of meetings of members of such a corporation. As the hon member for Waterkloof said, the meetings of the majority of private companies only take place on paper. If a small company has only two or three directors, one will surely not call a formal meeting, give a certain number of days’ notice and so on.

I am unhappy about the fact that in his Budget speech the hon the Minister of Finance gave no indication of what would happen with regard to the taxation of this kind of enterprise. It is not really appropriate for us to discuss this matter this afternoon, because this is not the responsibility of the Deputy Minister. We cannot reach a decision here and now as to what the tax ought to be in this connection. However, I am of the opinion that the Government should already have stated what would happen with regard to such enterprises. Six weeks after the Budget speech we had the increase in GST, whereas a whole series of other increases still lie ahead. I ask that our financial policy and Budget should not lapse into a state of chaos. The president of the Afrikaanse Handelsinstituut has already said that the situation is confused.

I shall let that suffice. I want to say to the hon the Deputy Minister that this Bill should have been submitted to this House at an earlier stage. That was not his fault, but this matter has been investigated for several years. Perhaps we should be grateful that a proper study has been made and that it is perhaps worthwile to wait for a year for a thorough piece of legislation, rather than to have a half-baked piece of legislation submitted which subsequently has to be amended. I support the Bill.

Mr Speaker, I am very pleased to hear from the hon member for Sunnyside that he, too, supports the Bill. When I read last week what Dr Servaas Latsky had said I doubted whether the CP would support this Bill, because according to Dr Latsky the zeal shown by the NP in establishing the small business enterprises and supporting and protecting them was merely a way of deceiving the public so that we could develop only Black and Coloured business enterprises. Accordingly I am grateful that the hon member for Sunny-side apparently adopts a totally different standpoint in this matter.

But small business enterprises and these close corporations are something completely different. They are poles apart.

If the hon member had listened he would have heard that I was not referring to the Small Business Development Corporation but to the protection and development of small business enterprises per se.

Sir, there is never a need for an Act before the situation has developed such that an Act is necessary to deal with it. As the hon member for Waterkloof put it, this piece of legislation comprises one of a series of Acts whereby to prepare for the development of small business enterprises in this country. What makes it necessary for us to develop and protect these small business enterprises? The position is that in recent years the concentration of money in certain hands has increased enormously. For example, with in the space of one year the concentration of money in the hands of three companies on the Johannesburg Stock Exchange increased by 4% from 69,9% of the total exchange to 73,9%. To proceed, the present situation is that 16,1% of the country’s total assets is in the hands of 11 conglomerates. One of those conglomerates possesses almost 8%, or R49 000 million, of the country’s assets, calculated at R641 billion.

Therefore we have before us a situation which recalls the words of Karl Marx, viz that in the capitalist system the system will degenerate into a situation in which the country will be governed by the financially powerful, and will eventually be destroyed by the labourer. Now the hon members of the CP are accusing us of making common cause with the financially powerful and doing only those things that play into the hands of the financially powerful. Then, for good measure, they drag in the Illuminati and say that we are part of the Illuminati.

Where did all this happen?

Of course it all happened. The hon member enters my constituency as often as I do, if not more often. Surely he knows what they are saying in my constituency.

You are talking nonsense, man.

When I look at that hon member’s face I see nonsense.

If there is one proof that it is “nonsense”—to quote the hon member—that (as they accuse us in public) we make common cause with the financially powerful and the Illuminati, that we and Chester Crocker are a part of this and that the American constructive participation is also part of the “great plan” of the financially powerful, then it is this kind of Bill that clearly shows that that is not the case.

[Inaudible.]

If that hon member will only withdraw from the discussion for a moment to think, he would agree that this kind of Bill proves that they do not know what they are talking about and have no grounds for what they are so fond of saying in public.

You know a lot about the financially powerful, do you not.

The hon member for Sunnyside is always mentioning here how dissatisfied I supposedly was because Coloured workers were working on my porch.

Sitting.

That is right; he said that they were sitting there and that they also threw newspapers around there. Looking at the hon sour member it reminds me of the story of the man who had to meet a CP MP at a point near the station.

Mr Speaker, on a point of order: May the hon member refer to another hon member of this House as a “suur” (sour) member? [Interjections.]

Order! The hon member must address other members in this House as “hon members”.

I was relating the story of a member of the Conservative Party who had to meet an hon CP member of the House of Assembly at the station. When he arrived there there were several people on the station and he was unable to find the CP MP. He then saw a person standing to one side, looking somewhat grumpy. He asked him whether he was the hon the member. The man replied that he was not but that he did not blame him for making an error, because he was suffering severely from heartburn. I should not have told that if the hon members had not kept harping on matters which are not relevant at the moment.

The aim of this legislation—as I have already said—is to protect the small business enterprise and to protect the small business embryo against the financially powerful, so as to make it possible for the small businessman, too, to enter the business world. The basis on which this is done is to make matters simple and easy for the small businessman in that the ultra vires rule will fall away. In other words, it is no longer assumed, when one does business with a person, that one knows what appears in the articles of the association of that company. The onus is being transferred from the corporation with which business is done to the person, so that one has a right of recovery from the person with whom business is done, in contrast to the situation with ordinary companies, in which the ultra vires rule still applies to an extent.

To begin with I want to refer to the way in which the small businessman is protected and to the rules that are laid down. How are they to be applied so that protection can be afforded people who trade with this corporation?

Mr Speaker, the hon member contends that this legislation protects the small businessmen against the big businessmen. If the hon member founds a corporation and Mr Harry Oppenheimer also founds one, will he be protected against the power of Mr Harry Oppenheimer in terms of the close corporations? [Interjections.]

I should like to reply to the question. Before doing so the hon member will permit me to point out that earlier in the debate he misunderstood the hon member for Waterkloof. He raised an objection and asked why the small businesses or close corporations would have to invest in the small business development corporation, and why the big businessmen did not have to do so as well. What the hon member for Waterkloof meant was that it was a privilege to invest money there and not be taxed on it, but only to be taxed on it when that money was withdrawn from the small business development corporation. That is the same privilege that applies when money is invested in the Land Bank in terms of some of the drought aid schemes.

I now turn to the question of the hon member for Sunnyside. There would be no sense in Mr Harry Oppenheimer forming a close corporation. With whom would he form it? All his activities are in companies, holding companies and subsidiaries. The hon member cannot mention one reason why Mr Harry Oppenheimer would be interested in founding a small close corporation. I shall leave the matter at that.

I now turn to the question of the value to the small businessman of this close corporation. Firstly, as far as court cases are concerned, cases are being made much simpler, easier and cheaper. [Interjections.] Now, for the first time, the ordinary magistrate’s court can adjudicate the affairs of an undertaking operated in the form of a company. It can now for the first time adjudicate in respect of legislation on close corporations and in respect of liquidations thereof. However, there is one problem in this regard. I realize that we cannot address the problem here, because it is a problem that belongs with Justice legislation. It is my conviction that the limit of jurisdiction of R5 000 which applies to magistrates’ courts is far too low. I know that the matter is not relevant here, but it nevertheless does form part of the problem situation. Nowadays R5 000 is less than the cost of even a small tractor. I believe that the hon the Minister will have to take up the matter with the hon the Minister of Justice. Particularly since consideration is now being given to freeing magistrates from the daily red tape to enable them to be better prepared, I believe that now is the time for the limit of R5 000 to be increased drastically.

There is another point too, that is a matter of heartfelt concern to me. The hon member for Waterkloof also referred to this. It is the fact that the close corporations should have the right to invest its money anywhere. I know that the clause was included to protect the creditor, but it often happens that a small business enterprise advances money to a person and in that way obtains a hold on him until that enterprise can eventually be taken over. What gave rise to this clause is the Share Blocks Control Act of 1980 in which it is provided that the block management may only invest the money in approved financial institutions. However, the two matters are not really related. I do not believe that the basis of the above Act is relevant to this situation.

I want to raise another matter in connection with the auditing of the books of a close corporation. It is not only in the case of the capital system that there is a blockage in the RSA. Not only is it difficult to obtain a share in capital formation in the country; as far as the various associations, too, are concerned—for example, the medical associations, engineering associations and law societies—there is a kind of “closed shop” situation, as an hon member of the PFP called it. Therefore my request to the hon the Minister is that when the accounting procedures and the qualifications of accountants of close corporations are specified, he will be reasonable. He must try to lay down the minimum qualifications for accountants, because the bookkeeping involved is very simple in comparison with the bookkeeping of a company. As I have already indicated, the creditor is protected to a large extent because the onus is now being placed on the man who does business on behalf of the close corporation.

This is one of the most positive measures we have ever passed in this country and I am looking forward expectantly to seeing how it can be linked up with what we, as the NP, are trying to achieve in the country, viz that everyone should be able to share in the wealth of the country and that everyone should be afforded the chance to prove that he can stand his ground in the business world.

Mr Speaker, one of the most encouraging things that we in these benches have heard of late is the growing enthusiasm with which Government members speak of the free enterprise system, of the need for competition, the need for the growth of our capitalistic structure and also the need to promote the small businessman. I believe that this is very, very encouraging indeed, especially in the present time when South Africa is facing a high degree of economic stringency where we are having to tighten our belts and where there is a need to generate far more development and higher productivity. Therefore, if one hears these views voiced by the Government party, it is very encouraging indeed.

We need small businesses, and we know this because this is possibly the quickest and the best way to promote the idea of free enterprise amongst the common man. It is furthermore one of the quickest ways to increase the number of employment opportunities in South Africa with much less capital than what is normally required by larger companies involved in larger developments. We have this afternoon heard the hon member for Waterkloof expound on this matter at quite some length and now also the hon member for Heilbron. I should like to say to the hon members and to the hon the Deputy Minister that as long as this Government comes to Parliament with legislation such as we have before us today, they can rest assured that the NRP will support it, because we believe it is in the best interests of the country.

Before I go on to the Bill itself, I want to thank the hon the Deputy Minister for the explanatory memorandum and also for a copy of the paper which was submitted by Prof Naudé. I should also like to thank Prof Naudé and the other members of the hon the Deputy Minister’s staff for explaining this measure to members of this party. Unfortunately I was away at the time but the hon member for Durban North received them. I believe that regarding this particular piece of legislation there has been probably one of the most thorough investigations into this matter prior to the presentation of the Bill before Parliament.

The background to this Bill goes back some years, with the Standing Advisory Committee on Company Laws starting investigating it a few years ago. They presented a memorandum entitled “The need for a legal form for small businesses”. This was circulated widely, as the hon the Deputy Minister said in his Second Reading speech a few days ago, and as a result of the representations and the ideas which flowed from those discussions, the author of the original memorandum was asked to produce a draft Bill. This was also distributed widely amongst the business and industrial communities and elsewhere and as a result of that the Bill we now have before us, was drafted late last year.

The need for a review of the existing legislation has been very clearly defined and motivated. There is no doubt that businessmen need the benefits of legislation such as are presently contained in company law. They need this because also contained in current company law is the entrenchment of the concept of a judicial or legal personality. Secondly there is provision for perpetual succession, as is also true in the case of companies. If one of the shareholders dies it does not mean that the company is also dead. There is now this perpetual succession. Probably more important even is the concept of limited liability of the company. That is to say that the individuals who are operating or managing the company are not liable personally but that it is the legal personality of the company which gives the individual a degree of protection.

The basic objectives of existing company law are possibly twofold. The first objective is to protect the shareholders and the interests of shareholders, and the second is to protect creditors who have been lending money to the company. The legislation and the regulations which have resulted from these two needs of protection are today, as has been said by hon members, extremely complex and very extensive indeed. This has had to happen. We must not deny the fact that this complexity and the extensiveness of executing the existing legislation have to be there because most large companies today are under the control of professional managers and not under the control of the shareholders themselves. Therefore, as I have said, the shareholders also have to be protected. That is one of the reasons why we have this type of complex laws and regulations at the present time.

The deficiencies of the present legislation, as far as the small businessman is concerned—and in this regard we are talking about businesses such as family enterprises with very few shareholders—are to be found in the mass of red tape of which we have already heard, also including administrative duties which often overwhelm the owner operator of such a business or company. I am referring now to businesses which are basically managed by the entrepreneurs and by the shareholder or shareholders personally. Those of us who run our own company—our own private companies—I am sure, are very much aware of the tremendous amount of red tape with which one has to contend in businesses of this nature. In this regard I can only refer to factors such as the necessity of having a board of directors, and the need of having to write minutes containing every decision taken concerning the funds, assets etc of the company or business undertaking concerned. Then there are also aspects such as the transfer of shares and restrictions in respect of shares, as well as financial disclosures that have to be made, the necessity to have one’s books audited and the completion of all the prescribed forms which have to be filled out, etc. All these things cost the company time and money. Individuals and small businessmen cannot always cope with all these obligations. The result is that costs mount up. It appears therefore that all these things are both time-consuming and expensive.

Furthermore, it has already been said that in reality and in practice the complying with all these regulations is nothing but a farce. This is also being admitted to in this memorandum presented by Prof Naudé. That is why we submit that there is a need for revision. As I said right at the beginning, the amount of research that has gone into the drafting of this Bill before us now, is tremendous. Those involved researched legislation overseas, in the USA, in Europe and in the UK, and I believe that Prof Naudé and his colleagues who worked on this are to be complimented on the amount of research they carried out and also on the final result which is the Bill now before the House.

Furthermore I believe that this Bill is unique, and that it is probably a world-leader in this type of legislation. I am sure that in time to come people from other countries will be coming to South Africa to view and research our legislation in this regard. This will not be the first occasion on which South Africa has led the world in relation in legislation such as this. We know that as far as our industrial legislation for example is concerned we have laid down very sound guidelines for others to follow.

The Bill provides basically for the incorporation of the small business undertaking, the so-called close corporation. This refers to those business that have 10 or fewer shareholders and which in most cases are owner-operated types of businesses where the owners manage the business themselves. As has been mentioned, the Bill excludes corporate membership and this ensures that control of a close corporation will always remain in the hands of the actual owners of the company. Therefore, the need to protect non-active shareholders which, as I have said, is necessary in regard to large public corporations, actually falls away. So too the need for the burdensome but protective administrative duties contained in the present Companies Act can be dispensed with.

The Bill is fairly long and one could go through it clause by clause, which I do not intend doing. However, I should just like to refer to the memorandum by Prof Naude on this legislation in regard to the decriminalization and self-enforcement that is part of the philosophy of this legislation. In this regard Prof Naude has the following to say:

I should like to say here, Sir, that I should like to know how many offences are included in the present Companies Act as compared to the 10 which, as Prof Naude says, are contained in the legislation under discussion. Prof Naude goes on to say:

I believe, Sir, that this paragraph from the memorandum summarizes exactly what this legislation is all about.

Having said that and before I resume my seat, there is one clause that I should like to probe with the hon the Deputy Minister and in regard to which I should like some clarification. We have had representations in this regard and I should like the hon the Deputy Minister to consider the representations that have been made to us so that he may be in a position, if not in his reply to this debate then during the Committee Stage, to reply to the questions that I wish to put to him.

In clauses 58, 59 and 62 there is reference to accountants. It is very clear from clause 59 that accountants will have to be appointed to keep the books of the company. Clause 60 clearly lays down what the qualifications of those accountants will have to be. They will have to be qualified accountants.

I have had representations from the secretary of the Natal Society of Chartered Accountants who is concerned that by using the term “accountants”, in time the public will be confused. There will be confusion between that term and the term “chartered accountant”. The secretary writes as follows, speaking on behalf of the profession:

I think reference is made to this in clause 59(6). He then writes further:

That Bill is on the Order Paper—

I put this to the hon the Deputy Minister and I ask him whether he will give it his due consideration. Perhaps he can either agree to such an amendment or at least put forward his reasons why these people should not be as concerned as they apparently are.

In conclusion I should like to add to what has been said by the hon members for Waterkloof and Heilbron in regard to the removal of restrictions which face small businesses. I should like to say that I personally welcome this particular legislation because it is one step in removing the host of regulations and administrative duties with which small businesses have to contend. It cuts a certain degree of red tape, as has already been said, and as such it cuts expenses. It also improves the productivity of those people who are concerned with managing small businesses.

I want to say to the hon the Deputy Minister that we sincerely hope that he, his Minister and the department will go through all existing legislation concerning commerce and industry in South Africa with a view to reducing the red tape which is presently hindering the promotion of business in South Africa. We believe that we should deregulate as much as possible because this is in the best interests of our country. It is in the best interests of the creation of more employment opportunities. In the long term it will go a long way in building a stronger economy and also a population in South Africa which believes in the free enterprise system and a population which can benefit from the fruit of a truly productive capitalist system in South Africa.

Mr Speaker, the hon member for Amanzimtoti made a fine, well-balanced speech, as one has come to expect of him. At the end of his speech he came to light with a single query about the question of accountants for close corporations. I am aware that over the past few days the hon the Deputy Minister has given attention to this matter, and I shall not be venturing onto that terrain myself. At the very beginning of his speech the hon member virtually waxed lyrical about his observations on how free-market-orientated we on this side of the House, have all of a sudden, allegedly become. It amazes me that the hon member is only now observing our long-standing efforts aimed at achieving a market-orientated private sector economy. Fortunately the hon member can feel satisfied that we on this side of the House will, as in all matters, handle this matter with great levelheadedness. That is the right way to do it. Where in the world does one, in any event, get a fully-fledged free-market economy? We are market-orientated people, but we shall not be taking any precipitate action. We want to administer the country properly, correctly and to everyone’s benefit. In any event, I thank the hon member for his speech.

I briefly want to refer to the hon member for Sunnyside’s speech. He also made a fine, meaningful and responsible speech, except at the very end when he referred to taxation. Even at this stage he wants the tax aspect dealt with in this measure. Surely the hon the Deputy Minister cannot, at this stage, embody tax measures in this Bill.

I said that he could not do so and that the Minister of Finance should already have done so.

If that is the case, it is exactly what I wanted to say. The hon member must just exercise a little patience and the right Minister will submit the correct measures to the House at the correct time. Meanwhile I think that the hon member would have been acting in a meaningful and responsible fashion if he had, on the basis of his wide knowledge of this subject—I know the hon member for Sunnyside knows a great deal about taxation—made a few inputs in this connection. He should rather have made a few proposals, something the hon member for Waterkloof did, in fact, do. He would then have been acting responsibly and we would all have been able to learn something. The relevant Minister who will eventually have to bear the responsibility for this would then perhaps have learned something. His preference, however, was for trying to play a little politics. So he simply dragged the recent statement by Mr Hennie Klerck into the debate. I am sorry to have to say this, because I have the utmost appreciation and respect for Mr Klerck, but I also think that he would have been able to make a meaningful contribution to the debate outside the House, the debate on the economy of the country, if he had rather told the public what his organization and those it represents have done to help the Government in its struggle against inflation and in its efforts to straighten out the economy. I think his actions would then have been more meaningful. I think it would also befit Mr Hennie Klerck to take note of all those who climbed onto the bandwagon that he set in motion. I do not think he would feel all that comfortable about some of the people who are riding along with him on that wagon.

Against the background of this legislation, I should like to remark that the Japanese economic success story, and that country’s industrial strength, is a challenge to the whole Western world. South African entrepreneurs are also continually looking to the Japanese for inspiration and for examples to emulate. In that connection there is a specific aspect of the Japanese economy that is deserving of our attention. According to recent statistics that I have available, there are 5,8 million small and medium-sized companies in Japan comprising no less than 99% of all private sector businesses. Much more important than that, however, is the fact that those small and medium-sized companies employ approximately 81% of the total Japanese labour force. This is an important aspect of the Japanese economy, as far as we in South Africa are concerned, confronted as we are with the reality of having to achieve the virtually impossible in the sphere of providing jobs. It has been said—and is well-known—that we have to create an average of 1 233 job opportunities per day up to the year 1990 and 1 630 per day between 1990 and the year 2000. Those figures alone presage a catastrophe for this country on the road ahead unless we do everything possible, even at this stage, to turn this to our advantage. One of the means of our disposal lies in the field of small business development. In this specific context the Japanese example should also serve as an inspiration to us, as should the fact that 66% of all job opportunities created in the USA in the 16 years between 1960 and 1976 were generated by the small business sector. So there is hope. There is specifically also hope because we in this country have a Government that identified in the problem as far back as 1979 and designed instruments for its solution. The success story of the SBDC, a project which the Government tackled in conjunction with the private sector, is surely familiar to us all.

This, however, is not nearly enough. Everything possible must be done to enable small business to find a place in the economy of the country and to develop this. This Bill is specifically a means to that end. The simple fact of the matter is that in our country, and under our conditions, the present Companies Act is not the proper instrument for the launching of a small business undertaking. In fact, it is totally unsuited to that purpose. To float a company is too expensive, and once that has been done, its administration is not only an expensive process, but also a very complex one. It requires expert professional help and assistance. Let me emphasize that the help must be of a professional nature, because even many of our general legal practitioners seek outside help when confronted by specific company-related problems. The Companies Act is massive in scope and is complicated. There are very few people who can say they have mastered it. Even if someone knows the Companies Act, that still does not mean that he also understand company law, because essential and even fundamental tenets are not even mentioned in the Act, the reason being that for historical reasons our Companies Act is not a codification of our company law.

Our Companies Act—and it is regularly adapted—is basically there to cater for the needs of the large public corporations with their listed shares and with their widely scattered and virtually faceless shareholders who are far removed from the management of the company and its business. Here we are dealing with companies that are managed in a highly professional manner where ownership of an interest and control of the undertaking are divorced and where one constantly has to guard against the problems of group formation. These companies are very conspicuous. We know of them, we all know the large listed company on the Johannesburg Stock Exchange, but numerically they are by far in the minority in the economic sphere in our country. The majority of South African companies are small, with only one member or a few members operating as de facto partners, but who are organized into a company, amongst other things because they want the benefits of juristic status and the limited liability of members. These people now have to plod through a maze of measures that have been created and are suitable for quite a different category of business. So it is no wonder that there are so frequently technical infringements of the Companies Act by small companies that it is quite impossible to take action against everyone. That is an altogether unsatisfactory state of affairs. Such a situation encourages disrespect for the law and actually exacerbates the problem.

To understand the need, we must bear two aspects in mind, ie who the entrepreneurs are for whom provision must be made and what their requirements are. Firstly there are the entrepreneurs. In South Africa, in the foreseeable future, there will be large numbers of people entering the business world, unsophisticated people from a business point of view. For them the deluge of rules and provisions of the Companies Act will be nothing less than a nightmare, and it would be completely unrealistic to try to subject them to that. Secondly, with regard to the requirements laid down by the undertaking, here we are dealing, for the most part, with those who own a small business undertaking and manage it independently. Ownership will be in the hands of only one person, or in the hands of a small group of people. These people will have close ties. All of the participants, or the majority of them, will be more or less actively involved in the business. In reality there will consequently not be, as in the case of the large public corporations, a gap between ownership of an interest and control of the undertaking. Consequently it would not be necessary to have a board of directors. The participants would be in a fiduciary relationship to one another and to the undertaking. As a result of their special relationship to one another they would want to see new participants prevented from becoming part of the undertaking without the other members agreeing to it. They would want to limit meetings to a minimum and would regard the holding of an annual general meeting as quite unnecessary. They would also like to have the undertaking survive after their retirement or death. They should also like to have their accountability limited when it comes to the business liabilities and other obligations of their undertakings and would also like to be a juristic person.

None of the structures available at present meets these requirements. Neither the one-man business nor a partnership has any juristic status, nor does a partnership have limited liability. The company does, in fact, have the benefit of juristic status, continuity of succession and limited liability, but has the disadvantage of expensive and complex administration, an extensive system of bookkeeping and auditing, the completion and submission of a plethora of forms, the holding of numerous meetings and the necessity for expert professional help and assistance. That is why it is necessary for a completely new legal form to be created to meet the demands of the times.

And that is what is being done with this Bill. The Bill creates a new alternative for the South African businessman, an alternative that is so flexible that it is extraordinarily practicable. For example, no restriction is placed on the size or scope of the business that may be conducted in terms of this. Owing to the nature of the concept “close”, membership is merely being restricted to 10, all of whom must, of course, in principle be natural persons. The close corporation can be small in scope but can also grow into an undertaking very well-endowed with capital, without the nature of the means of management needing to change. In other words the successful business of a close corporation cannot outgrow its legal form.

If it is thought necessary, a close corporation can easily and cheaply be converted into a company by making use of a process offering creditors proper and adequate protection. The close corporation is suitable for both the unsophisticated and the highly sophisticated businessman. The small beginner, for example the person in the informal sector of the economy, can use the law just the way it stands at present. The businessman, the individual with refined needs, can regulate the internal organization by way of co-operation agreements. The basic rule is that every member is entitled to participate in conducting the business but this can easily be changed by transferring the responsibility to only one person.

I have just mentioned these few examples to illustrate the flexibility of the new legal form. One would be able to elaborate on this quite extensively, but I want to conclude by saying that this is probably the most exciting development in corporative law in South Africa. Those responsible for the drafting and planning deserve our thanks and appreciation. I want to associate myself with the hon member for Amanzimtoti who said that in this field our country is being placed in a position of being a world leader. One really cannot but support this Bill with enthusiasm.

Mr Speaker, the hon member for Stellenbosch supported this legislation in the major part of his speech. He dealt with certain aspects of it with which one has relatively little quarrel as it was a repetition of the general trend.

However, he started by dealing with two matters in connection with which he attacked the hon member for Sunnyside. I am not a defender of the hon member for Sunnyside. It is not my function in this House to try to do so. Nevertheless I found the words of the hon member for Stellenbosch quite remarkable. Firstly, he criticized the fact that the gentleman who is retiring chief office bearer of the Afrikaanse Handelsinstituut had the audacity—in the view of the hon member for Stellenbosch—to utter criticism of the Government and suggested that this organization should rather make some constructive suggestions regarding inflation and other matters. With great respect, two things arise here. Firstly, when people in South Africa praise the Government then it is legitimate, but when they happen to be critical of the Government because it is making a mess then it is no longer legitimate. Whereas the retiring president of the Afrikaanse Handelsinstituut was a very nice chap in the eyes of the hon member for Stellenbosch and his colleagues while he was not criticizing the Government, the moment he offered one word of criticism he was a bad fellow. [Interjections.] The personality of a person cannot change overnight. Either he was good throughout or he was bad throughout. With great respect, I do not think that was a legitimate attack upon the hon member for Sunnyside. [Interjections.] One cannot do that.

It is a political organization!

Yes. I do not want to be drawn into that argument.

The other point I wish to make is that I venture to suggest that it is most remarkable that I should have to get up here and say that I believe the Afrikaanse Handelsinstituut has actually made a very real, concrete and substantive contribution towards endeavouring to solve some of South Africa’s economic problems. I think for the hon member to say it has not, is a nerve. I do not think the hon the Minister of Industries, Commerce and Tourism agrees with that.

They support the legislation.

Of course they do. The hon the Minister should please talk to his colleagues. They are very confused. [Interjections.] The reality is that South Africa’s economy is being mismanaged, and it takes some guts for people in the business world to get up and say so. I take my hat off to the people who have the guts to do that. [Interjections.] Let us be realistic.

There is also the question of tax. It is perfectly correct that this is not a measure in which one can introduce tax provisions. However, I think simultaneously during this session of Parliament there should be legislation which deals with the taxation of small companies, not only close corporations. The issue is: What is a small company? Is it a small company because it happens to be a close corporation? I would be very unhappy if there were special tax concessions for close corporations and not for other companies because one can use a close corporation and make millions of rand of profit while one is not a small company. Some other test has to be applied. The hon member for Stellenbosch says we must make some concrete suggestions. We have made that. In the United Kingdom there is a different set of taxation for companies which earn less than £100 000. They only pay 38% in company tax as opposed to a higher percentage that applies to other companies. I think that is the real test. I should like to hear from the hon the Deputy Minister in his reply to this debate whether his collegues the hon the Deputy Minister of Finance or the hon the Minister of Finance have applied their minds to this situation so that during this session we will get some legislation which deals differently with the small man who is trying to build up capital and the big company which already has its working capital. We have taken that attitude throughout. We believe this is the right time to deal with it.

In the same way I think one should deal with closed corporations as far as tax is concerned from an apportionment point of view. A strong case can be made out for apportionment in respect of private companies. This was the system we had some years ago. The hon the Minister of Industries, Commerce and Tourism will remember that we had such a system. In the case of a close corporation, which is really intended to be a form of partnership of a small number of people, the case for apportionment as far as tax is concerned becomes even stronger. Let us look at the situation where a close corporation decides to adopt this form of business structure, pays company tax at the 50% rate, and also dividends. It is interesting that the word “dividend” is not used in this legislation at all. It is a payment out of what appears to be a surplus, which can be a dividend or anything. It is not really in that category. When they pay it out they have to pay tax again up to a maximum of one third of the taxation. That does not seem to me to be encouraging small business. Therefore I think it is necessary that some indication should be given in regard to what is going to happen about the taxing of close corporations and small companies generally.

In so far as the broader aspect of this matter is concerned, I think the attitude of hon members generally speaking is that this is a worthwhile experiment. From a critical point of view, I think we have to give it a chance and experience will show whether there will have to be certain changes. I therefore feel that we should give it that opportunity to see how it works in practice, and it is in that spirit that I approach this debate. I am not trying to find fault with the legislation, Sir, nor am I saying it is perfect, but I look upon it as a new and worthwhile approach which is of considerable benefit, and therefore we should give it a chance and see from experience how it is going to develop.

However, I should like to issue a word of warning. I personally believe that for many people it would be a mistake to go into close corporations. I think it would be much better for them to go into ordinary partnerships, with the concept of having a limited partnership where they need somebody to provide finance who can take an interest in the business but who does not have any financial responsibility in the partnership for the debts of the partnership, and where they can actually find that from bodies corporate. Let me take a simple example. One of the problems of this legislation in its present form is that only natural persons can be members. There are, nowever many cases where companies are prepared to advance money, to make available expertise and to do various things for the company, including the lending of money, provided that they get an equity interest in the concern. If this legislation provided that non-natural persons, that is companies and other jurisdic persons, could in toto acquire a minority interest, then in fact one would be able to utilize that situation for the benefit of the close corporation. It is true that one has the danger that if one allows corporate bodies into small businesses they may end up trying to take the whole thing over and that the people who are really running it do not get the benefit of it. However, that is one side of the picture. If one limits the total ownership and the total share that can be held by jurisdic persons in a close corporation to, say, no more than 25%, then that danger in fact disappears. However, the same position arises in regard to a partnership. In a partnership one can have a limited partner who, in fact, has an interest in the profits, who can make money available and who has no responsibility for the debts and cannot take the business over. In many cases it is therefore going to be more advantageous for people to stick to pure partnerships rather than to get involved in close corporations. From that point of view I think one must say that each one of these forms of business association has its place. No doubt the close corporation will have its place together with private limited liability companies and partnerships.

In many cases it is going to be better to be involved in a private limited liability company as opposed to be involved in a close corporation. I therefore do not think that the public should regard the close corporation as a panacea for all sorts of problems and that suddenly there should be a rush to convert private companies into close corporations or to form close corporations where private companies are the better vehicles.

That brings me to the question of auditors. I recognize the fact that the concept here is to reduce the costs and that having an auditor increases the costs. I must, however, tell you, Sir, that I actually believe that even in the case of a close corporation, unless it is of so small a nature that it really does not pay one, there are very real advantages in having an audit done. The advantages are that when one has a number of people participating in a company, with some participating more actively than others, I believe, the partner who is not so active makes it even advantageous to have an audit done. It also pays one if one has employees who sometimes are not all that honest, to have an audit done.

But you have the choice.

Correct. All I am saying is that because there is no necessity to have an audit done in respect of a close corporation this very fact should not be regarded as sufficient reason not to have any audit done. I believe auditors serve an important purpose. They serve an important purpose internally, and they also serve an important purpose when one produces one’s account in order to get credit. If one produces an audited account is obvious that far greater importance will be attached to it than when one produces an unaudited account. Therefore the question of whether or not accounts should be audited, I believe, is a question that people who get involved in this type of enterprise should look at very closely.

The point made by the hon member for Amanzimtoti in connection with what the description should be, is also important. I believe most of us have had those representations. The issue is merely that one does not have the confusion which is created when people think that accounts have been audited and are signed by an auditor when in fact they have not been. One of the characteristics of our community is that when one refers to a man as an accountant people think he is actually a chartered accountant. That is where the problem lies. The reality of the South African situation, however, is that not every accountant is a chartered accountant, and people are entitled to describe themselves as accountants irrespective of whether they are chartered accountants. One can, for example, be a company accountant without having to be a chartered accountant. People can therefore describe themselves as accountants, and I for one would be unhappy if those people who can legitimately describe themselves as accountants today would be prohibited from doing so. One can, in other words, be a close corporation accountant without being a chartered accountant, and without the set of accounts in question being an audited set of accounts. The real situation that arises in this regard, I believe, is that the signing of accounts could really make it clear beyond all doubt whether the accounts in question have been audited or not in order that there can be no question of deception in that sphere.

Another question which concerns me somewhat is the fact that it is always alleged that the Companies Act is too complicated. Strangely enough I do not think the Companies Act is complicated at all. I think people who use it make it complicated, and if it were complicated it should indeed be our job to make it simpler. The problem in connection with any law is that people look at it and try to make it complicated in order to confuse issues, and also of course in order to deceive other people. One will find that the majority of complications set in in regard to company law when somebody is doing something wrong. The whole approach of stating that the Companies Act is too complicated is something with which I for one do not go along. I believe it is true that in respect of small corporations one can have a simple procedure. I also believe, however, that one has to have legislation in order to stop the abuse of company law; legislation to stop people who try to drive a horse and cart through it, as it were. That is why we need laws that appear to be complicated but that are only complicated for the dishonest, and that are only complicated when they are used for a dishonest purpose.

That brings me to the whole question of whether the term “corporation” is the correct term to be used in relation to close corporations. I think it has been said already that when one uses the term “corporation” one actually creates an image of something large. I think it has also been pointed out that the word “company” actually comes from the Latin term referring to people eating bread together. The term is cum pane. The history of companies, as has already been pointed out, teaches that companies had their origin in people working together, eating together and living together. I think it is people of that nature who are actually going to become involved in close corporations. Nevertheless, we are naming this type of association “corporation”, which makes them appear to be really powerful financial institutions. I should like to suggest—I know it is perhaps a very late stage to do so—that what we are actually dealing with here is a new form of partnership. We are not really dealing with a corporation; we are dealing with a form of partnership that has the benefit of limited liability as well as other benefits attached to it but which is really a form of partnership.

Every time you lose a director you have to dissolve the partnership.

No, you do not. If the hon member knows how to draw up a partnership agreement—if he does not, then I am sure one of his legal colleagues will assist him—he will know that whereas the law provides that when a partner retires the partnership has to be dissolved, it can be provided by agreement that the partnership shall continue among the surviving partners including any new entrant.

What about a one-man business?

The whole point is that this is intended to be an informal association. It is intended to be an association among a limited number of people which has the benefit of limited liability and corporate personality. This still applies even if one calls it a kind of partnership entity. All I am asking is whether the term “corporation” is the correct one to use in respect of this particular type of entity. To answer the question myself, I do not think that it is, even though it may be too late to change the name at this stage.

I also want to ask the hon the Deputy Minister to deal with the position of the non-resident shareholder. Will non-residents be allowed to become shareholders of close corporations? Should this not be the case— there are a number of problems that arise in this regard—is it then intended that an exception be made in regard to the TBVC countries because obviously there may be many people resident in those countries who have shareholdings in this type of corporation? I think that that matter needs to be dealt with.

I should also like to discuss with the hon the Deputy Minister the question of the raising of the level of jurisdiction of the magistrate’s court in regard to close corporations. Although the jurisdiction generally can be exercised by a magistrate’s court I wonder whether the hon the Deputy Minister should not consider that when it is a question of a liquidation which is a serious matter the jurisdiction in that regard should remain with the Supreme Court. Having regard to the magistrate’s court and its activities, I am a little concerned as to whether it is the correct court to deal with a liquidation.

While in a partnership all the partners may be managing partners and, where this is not specifically provided, some form of unanimity is required in regard to decision-making processes, I should like to ask the hon the Deputy Minister in view of the provisions of clause 46 whether there should be unanimity in respect of such proceedings. Let me give an example in this regard. If one wants to dispose of the major assets of a private company today and a shareholders’ resolution is required where a majority of one over fifty is sufficient, why is unanimity necessary? One may find that in a particular business the owners of the business feel that their employees should share in the business. Therefore, they give a 1% or 2% share in the business to their employees. However, when they want to do anything in the company, a person who owns 1% or 2% of the shares in that company can actually hold up everything. Therefore, if an employee is given an interest in a company—and we know just how often employers and employees fall out—then that employee with his very small percentage can actually hold up the whole operation. I do not feel that this should be done because I believe that if one wishes to foster private enterprise one should make employees shareholders in all one’s companies, if possible. We should have share-incentive schemes in South Africa so that the working population can take shares in public companies because then they will have an interest in the business. If one does that, one will have less risk of inspired industrial unrest. One will then have people knowing that if they start doing something harmful to the company, they are harming their own shareholding. I for one am all in favour of worker participation. I am all in favour of share option schemes. What we are doing here—that is why I raise it and I should like the hon the Deputy Minister to think about it—is that once one has given a man a shareholding, even the tiniest shareholding, such a man can hold up the works if one wants to do anything at all. I should like the hon the Deputy Minister to give that some consideration in order to overcome that problem. I propose moving an amendment in the Committee Stage—the hon the Deputy Minister may of course move one if he so wishes—to have a figure which may not be the same as that which we find in a private company. The amendment will have the effect that if one wants to dispose of the business or the company, one must have more than 50% of its shares. Perhaps the figure should be about 75%. I think the line should be drawn roundabout that percentage to allow employee and worker participation in this type of business.

I should like to turn to some other matters. There is a provision about “adequate precautions against falsification”. I find that fascinating and I have seen it in other legislation. What is an adequate precaution against falsification? An adequate precaution is one which actually stops falsification. I should like somebody to tell me how one actually stops falsification. One can say “reasonable precautions against falsification” but one cannot create a situation where one has to keep one’s books in a way which actually ensures that there is no falsification. There is no such thing.

One can try.

Yes, one can try, but then it means “reasonable”. “Adequate” means that it actually has to be fool-proof.

To which clause are you referring?

I am referring to clause 56, and if the hon the Deputy Minister should look at line 4 on page 49 he would find there the term “adequate precautions”.

I should like to suggest the term “reasonably adequate”.

Yes, that will be better, but if it says “adequate” it means that one has to do something which is not possible to be done.

Clause 56(5) provides that a corporation shall only deposit its funds in an institution which is either the Post Office, a building society or an institution registered in terms of the Banks Act. Why restrict them? Surely one can put one’s money where one likes in a free enterprise system? A company has no such restriction, and I do not think there should be such a restriction in this Bill.

There are a number of provisions which I should like the hon the Deputy Minister to look at. The first of these is clause 64, which provides:

What is interesting is that if one compares this with section 424 of the Companies Act, one finds that the words “gross negligence” are not included in the Companies Act. It could be argued that “reckless” and “gross negligence” mean the same thing. If that is so, then there is no reason for the words “gross negligence”. I wonder why we make it more difficult for small businesses than for large ones when in fact the possibility of people who are less sophisticated being negligent is obviously greater than the possibility of those who are more sophisticated. I would regard it as negligence on the part of a sophisticated businessman if he does certain things but I would not regard it as negligence on the part of an unsophisticated businessman if he does the same things. I wonder whether we should not look at that again.

The same applies to clause 73. Here again it is interesting to read the following:

If you are negligent to the extent that there is a civil remedy, that is fine, but let us compare that with section 423 of the Companies Act. In respect of a large company that word “negligence” is not included. It is, however, included in respect of a close corporation. Why do we put it in for the close corporation when it is not included in respect of a large company? I wonder whether that should not be deleted as well, because to my mind the issue of negligence in respect of the small business is quite different to what it is in respect of a large business. Let me take an example. If you are running a major corporation, which is on the Stock Exchange, which is highly computerized and which employs highly skilled staff, negligence will be seen in a different context than in respect of a man who is running a shop on a corner somewhere in a small place and who has none of the sophisticated equipment or highly skilled people available to him. Again I ask that the hon the Deputy Minister should consider deleting the word “negligence” from the clause.

I have another problem, and it relates to the question of the abuse of juristic personality. I am now referring to clause 65. It is perfectly true that this also applies to ordinary companies, but I wonder whether the hon the Deputy Minister will tell us what he regards as a gross abuse of the juristic personality of a corporation. I think we are opening a field here for legal interpretation, for court cases and things of that sort, which may be appropriate to the larger entity, but I have some doubts whether it is appropriate to this type of entity, and I ask the hon the Deputy Minister to consider this aspect.

There is just one last issue I wish to raise, namely the role of the Master in this type of company. Clause 71 introduces a principle which I do not think should be here. I want to quote clause 71(1), which provides:

1. (b) such payment was, in the opinion of the Master, not bona fide or reasonable in the circumstances

I would like to suggest to the hon the Deputy Minister that the function of ordering the repayment of money is a court function. The Master’s function is different and lies more in the administrative sphere. The actual finding as to whether or not there was a payment which was not reasonable or bona fide, and directing repayment to be made, is as if it were a judgment of a court, and a Master of the Supreme Court is neither a magistrate nor a judge. With great respect, I do not believe that we should impose upon a Master a judicial function to order a repayment. I would ask the hon the Deputy Minister to consider amending this provision because I think it would be for the court to make an order in this respect.

Also in regard to the Master’s function there is in clause 76 a perpetuation of something which comes from the Companies Act and which I find very difficult to understand, even though I can clearly see the motive behind it. If the Master refuses to appoint a person as liquidator, he is required to give his reasons. The reason why he should do that, is that you then know why the man cannot get the job. But then there is a proviso added that if he is of the opinion that the person nominated should not be appointed, that is sufficient reason. However, that is the very issue. You can only be of the opinion that he should not be appointed if there is a reason for it. To say therefore that you are of the opinion that he should not be appointed is not the reason why you are of that opinion. I concede that this provision is also in the Companies Act, but I do not think it should be there either. I think if the Master does not want to appoint a person as a liquidator, he should actually give a proper reason which can be tested and if necessary can be shown to be an invalid reason. Somebody can furnish information to the Master which the Master may believe but to which the person affected has no opportunity of replying. All the Master then needs to say is that he is of the opinion that that person should not be nominated. That is then a reason for not nominating him, even though the clause says the Master must give reasons. I therefore ask for that provision to be reconsidered.

I have a lot of detailed points which we can leave for the Committee Stage. I want to assure the hon the Deputy Minister that what I have suggested here has not been suggested in a destructive manner. I am suggesting it in the spirit in which I started, namely that I believe that this legislation is desirable and that we should give it a chance. If we have to amend it in due course, nobody is going to say: “Well, you should have thought of that in the first place”. I think that, where we are breaking relatively new ground, it is a question of learning as we go along. I should like to join with the others in congratulating those who were responsible for the concept, for the drafting and for the fact that we will have such a piece of legislation on our Statute Book.

Mr Speaker, at the outset I should like to assure the hon member for Yeoville that it is the aim to create the best possible legislation and therefore I see the suggestions made by him and by the other hon members who participated in the debate in a positive light.

I should like to begin by thanking all the hon members who participated. I should like to reply to them as shortly as possible although we have had quite a lengthy debate. Obviously, as the hon member for Yeoville has indicated, many of his remarks as well as those of other hon members can well be debated in the Committee Stage. It is thus my intention to reply to a few aspects and then we can, in the Committee Stage, debate certain aspects which have been raised, more thoroughly.

I should like to say that the hon member for Walmer, who is the main spokesman for the official Opposition on matters relating to this department and its legislation, was very, very positive and I should like to thank him for his approach and that of his party to this legislation. That approach was also endorsed this afternoon by the hon member for Yeoville. In a lighter vein, I think the hon member for Walmer made his best speech since becoming a member of Parliament when he spoke on this legislation.

The hon member expressed his concern at the ability of a close corporation to own and control companies. More specifically, the hon member asked whether this ability will not have the effect of moving towards a company structure the pattern of which will be for a close corporation to control groups of companies and other holding companies because of the advantages a close corporation will enjoy. A close corporation can indeed control one or more companies. In view of its requirements for membership, however, it is unlikely that the general pattern will develop that a close corporation is used to control company groups of any significance. Where a close corporation indeed controls companies, the close corporation itself will of course enjoy the benefits concerned. However, each of the companies in the group concerned will be subject to all the statutory and common-law rules of company law aimed at the protection of each company, its members and its creditors. In addition, clause 55 applies the provisions of sections 37 and 226 of the Companies Act with a view to the protection of creditors and minority members of the companies directly or indirectly controlled by the close corporation at the top. Without a doubt, however, this is an area which will be closely watched by the Standing Advisory Committee on Company Law so that appropriate action can be taken if unforeseen problems arise. I sincerely hope that thereby I have answered the hon member for Walmer on this specific point, about which he was worried.

*I want to thank the hon member for Waterkloof sincerely for the contribution which he made at the beginning of the debate and also this afternoon. The hon member, as other hon members also did, referred inter alia, to the question of a tax system. I shall still come to that. The hon member also referred to clause 56 in connection with the depositing of funds, to which I shall also give attention briefly. Like other hon members he also referred to the question of accountants, and I shall return to that point later.

The hon member for Waterkloof also gave an exceptionally good account of what the Small Business Development Corporation was doing for the development of the small businessman. He also referred to the elimination of complicated procedures by means of this measure, in contrast to the Companies Act, and I want to thank him for doing that.

Something I want to point out to the hon member is that clause 60(1) provides that the person who shall qualify to be appointed as an accountant in terms of the Bill must in fact be a member of a recognized profession. As it is formulated here, it may not therefore be any individual. Such a person must be a member of a profession recognized as such by the Minister and in terms of this legislation.

As far as clause 56(5) is concerned—I know the hon member also read the explanatory memorandum—the situation is that such a close corporation may be converted into a private company if it should appear to be necessary that this is really the only basis on which it can be financed, in other words, by means of a shareholding. The hon member for Yeoville also referred to this. It could be a solution. However, I shall also take a positive look at this aspect, and it is not impossible that there may be developments in this area in future.

Hon members will understand, and I want to put it to the hon member for Yeoville in particular, that such a step could in fact have complications.

It has also been suggested that the Small Business Development Corporation could be a body in which a close corporation could invest money and subsequently reap the benefits of such a step. The greatest degree of assistance which the SBDC is providing at present is by means of the bank financing scheme, where loans are granted by banks and the SBDC merely serves as guarantor. It would be difficult to extend this scheme to banks, and we shall also have to consult the SBDC if the suggestion of the hon member were to be implemented. I want to put it to the hon member that we not only find the suggestion interesting, but will also examine it thoroughly.

The system of taxation which should be applicable to a close corporation has been extensively debated here, and I agree with hon members that it is a very important aspect. I have been informed that the Standing Commission on Taxation Policy is at present giving attention to this matter, and I trust that ways will be found to avoid making the so-called double taxation system applicable to these corporations. I do not have the authority to say that this will not happen. It is important, however, that a person who wishes to establish a close corporation should also be acquainted with the system of taxation to which such a corporation will be subjected. The basis on which a close corporation will be taxed is of material importance. It is also desirable that finality should be reached in regard to this matter during the present session. I also understand that the Standing Commission on Taxation Policy is giving urgent attention to this matter and that it will ultimately have to be dealt with by the Minister of Finance. I want to give hon members the assurance that this is an aspect which is at present receiving very urgent attention. The hon member for Sunnyside also referred to this aspect. He spoilt an otherwise good speech with the nonsense he spoke towards the end of that speech, as more than one hon member has already told him.

As far as the system of taxation is concerned, I have now given a detailed reply. I take it that the hon member has taken cognizance of the points I made that urgent attention is being given to his matter. This of course led to the hon member for Sunnyside finding an ally in the hon member for Yeoville this afternoon. I do not know whether the hon member for Yeoville is acting pro amico for the hon member for Sunnyside, but as soon as there is a little political gain to be made from a matter, that is what happens. [Interjections.]

Jac Rabie is your partner.

This House is the only place that hon member has ever heard of a close corporation. He really does not know what is going on here. [Interjections.]

Order!

I find it remarkable what reaction one can meet with in regard to a measure which the hon member for Sunnyside praised to such an extent this afternoon. Now the hon member for Brakpan and the hon member for Rissik are belittling the measure. The petty politicking which one sometimes finds is really astonishing. [Interjections.]

You can do this now, but I shall get back to you.

Here are my notes. I shall show them to the hon member for Sunnyside now. This afternoon he spoke as an experienced accountant and analysed the measure. I am grateful for that and I appreciate his support. It is a pity, however, that he coupled certain remarks made by people in the private sector about an entirely different matter to the taxation system. I saw in this a little spitefulness, which was unnecessary in the discussion of this measure. That is the point I want to leave with the hon member this afternoon.

The hon member also made the important point that as far as the staff structure was concerned—the establishment of the posts of Deputy Registrar and Assistant Registrar— this was a very good development, also as far as the Company Act was concerned.

Other hon members also replied to the hon member for Sunnyside, inter alia, the hon member for Stellenbosch and the hon member for Heilbron. As regards the appointment of accountants in terms of the legislation, I want to tell the hon member for Sunnyside that I should like to deal with this aspect in general later and that I should like to hear the hon member’s standpoint, as well as those of other hon members in this regard.

I thank the hon member for Heilbron for the speech he made this afternoon. He was very positively disposed towards this Bill. In particular he referred to the jurisdiction of the magistrate’s court in terms of clause 7 of the Bill. This is a very important provision. The hon member for Yeoville also referred to jurisdiction in his speech, more specifically in respect of the liquidation of a close corporation. The present limit of R5 000 in the case of civil actions was of course fixed earlier this session. Consequently it will be difficult to single out the close corporation for enhanced jurisdiction. The hon member referred to the case of a small tractor which costs more than R5 000. It is of course true that contracting bodies can agree that, despite the size of the amount of the contract, hire-purchase, or whatever, a magistrate’s court will still be able to have jurisdiction over that case. The jurisdiction can therefore be confirmed by way of agreement.

As far as clause 56(5) is concerned, to which the hon member as well as the hon member for Waterkloof referred, I want to ask these hon members to debate their suggestions further during the Committee Stage.

As far as the depositing of funds is concerned, the basic aim with this provision is to neutralize the grey market in regard to financial investments as far as close corporations are concerned. Another inherent benefit is that of financial discipline, something which is extremely beneficial, particularly for the informal sector. I think that as far as this provision is concerned, hon members should also bear the informal sector very clearly in mind. Another advantage is that it offers the creditors of close corporations a certain measure of protection. It is as the hon member said, there is a similar provision in the Share Block Control Act. I want to tell the hon member, however, that I am positively disposed towards this—the hon member for Yeoville also referred to it—and that we can look at this clause again. Perhaps we could consider an amendment in this connection during the Committee Stage.

†Mr Speaker, I should like to thank the hon member for Amanzimtoti for his support and also for his kind remarks about Prof Naudé and the advisers on this legislation. It is indeed true that a very thorough investigation had been made and a great deal of research done before this measure was introduced in Parliament. The hon member also gave a very good exposition of some of the main principles contained in the Bill, for which I thank him.

Mr Speaker, I think this is an opportune time for me to deal with the question of the accountant. The hon member referred to clauses 58, 59 and 62, and also included some other clauses. I should like to tell the hon member and also other hon members that at very short notice I very recently interviewed a rather large deputation from the accounting profession.

*This profession undoubtedly made a major contribution to the formulation of and the final expression given to the Bill, and I conveyed my appreciation for this during my Second Reading speech. The basic point that was made, was that of confusion. Not only did I see a deputation from the accounting profession, I also discussed this matter in depth. I have formulated an amendment which I shall move during the Committee Stage, namely to substitute other words for the word “accountant”—“rekenmeester”— in the Bill.

†I know that in the representations made to the hon member for Amanzimtoti it was suggested that the expression “reporting officer” should be substituted for the word “accountant”. This is the general feeling in the profession, but in my opinion that wording in this Bill may give another description to this particular officer which is also not quite correct. This is not merely a question of reporting; certain functions are being laid down in this Bill and the use of “reporting officer” may therefore be misleading.

Why not call him the “accounting officer”?

I have a suggestion which I have incorporated in the amendment that I intend moving, namely that we should substitute the expression “accounting officer”—“rekeningkundige beampte” for the word “accountant”. This amendment was only recently drawn up but I shall let the hon member have a copy. I think that will also solve the hon member for Yeoville’s problem.

*Mr Speaker, I think this will eliminate confusion in regard to the official designation of accountant as far as the accounting profession is concerned, and I should like to thank the hon member for Amanzimtoti for his contribution in this respect.

I thank the hon member for Stellenbosch for his speech. In particular the hon member also emphasized the importance of the small business sector, particularly as far as this affected the matter of the creation of employment in South Africa. He also pointed out the complexity of the Companies Act and the problems this entailed for entrepreneurs. In contrast to this the hon member also emphasized the particular appropriateness and suitability of a close corporation for an entrepreneur with the specific requirements he has today, particularly owing to the flexibility of the legal forms now under discussion. It is true that the hon member for Yeoville said that the Companies Act was not a complicated Act. I must say, Mr Speaker, that there are only a few people to whom the legislation is not complicated. However, I shall debate this aspect with the hon member for Yeoville a little later on.

I want to agree with the hon member for Stellenbosch when he says that this is a particularly appropriate legal form, particularly for the smaller entrepreneur, as well as for the entrepreneur in the informal sector.

This brings me once again to the hon member for Yeoville. I must point out, Mr Speaker, that the introductory part of his speech was by no means the best part of it. Of course he tried to get at the hon member for Stellenbosch via that hon member’s reply to the hon member for Sunnyside. Sometimes the hon member for Yeoville has the knack of dragging politics into debates in quite another way. The hon member for Yeoville wants us on this side of the House to suggest, through the hon member for Stellenbosch, that we have no appreciation for the contributions made by the Afrikaanse Handelsinstituut to the economy of South Africa. [Interjections.] With all due respect, Mr Speaker, that is not what the hon member for Stellenbosch said here this afternoon. He did not say anything of the kind. The hon member for Yeoville should go back and read the speech made by the hon member for Stellenbosch. There is still a Committee Stage and a Third Reading stage to come, during which the hon member for Yeoville can react to this matter again. I am asking the hon member for Yeoville not to adopt that method however. Normally he is a person who is able to make a good contribution to debates in regard to legislation. As far as politics are concerned, his contribution is very slight. [Interjections.]

I have already replied to the hon member’s question in regard to the tax situation. I do not think I need reply any further on this point to the hon member. I was very pleased to hear from the hon member that this Bill will be worthwhile experiment, as he put it. I want to put it to him that it will be even more than a worthwhile experiment. It is our earnest intention to make this Bill succeed in practice as well, and I know that we shall be able to rely on the contribution of the hon member.

The hon member then touched upon various aspects of the legislation in detail, as they are embodied in a variety of clauses. I just wish to refer to a few matters. The rest I shall discuss with him further during the Committee Stage.

The hon member referred for example to clause 29, in which it is provided that only natural persons may become members of close corporations, but that in certain exceptional cases juristic persons may also become members. In specific cases, therefore, there are also juristic persons who will be members of closed corporations. One of the exceptions is found in clause 29(2)(d) in which it is provided that a trustee of a trust, if he is a juristic person, may under certain circumstances become a member of a closed corporation. As the provision is formulated at present, it will also include an inter vivos trust and in addition to that a business trust. That was not the intention and could give rise to certain malpractices, for example in regard to taxation. The intention is that it should in fact be possible to use a closed corporation in the planning of an estate, and during the Committee Stage an amendment will be moved with a view to limiting membership to trustees of testamentary trusts. The amendment has already been prepared, and I should like to make it available to hon members as well.

The hon member then referred to the designation of a “close corporation”. The hon member expressed his concern about the use of the word “corporation” in this case. However, he did not suggest an alternative term. Conversely, the hon member for Sunnyside expressed his concern about the use of the word “beslote”. The hon member indicated that he would prefer the use of the word “geslote”. [Interjections.]

What is interesting, Mr Speaker, are the definitions of these two concepts in the Handwoordeboek van die Afrikaanse Taal, to which I should like to draw the hon member’s attention. In regard to the word “geslote” we find the following definitions in this dictionary:

These are only a few examples of the meaning of the word “geslote”. The word “beslote” is defined as “alleen toeganklik vir lede”, for example a closed meeting. To put it simply, I want to say that it seems to me the word “geslote” means “heeltemal toe” and the word “beslote” means open, yet also closed. [Interjections.] Perhaps I should let that suffice, because I am not a language expert and I am afraid I cannot help the hon member any further in this respect. The hon member for Yeoville also put certain questions to me in connection with specific aspects to which I shall reply in the course of the debate. As regards the question of jurisdiction of the magistrate’s court in connection with liquidations, I personally think that this is a matter which one can welcome. The hon member made the point that the Companies Act is not a complicated Act. However, I really want to tell the hon member that the liquidation of a close corporation or a company is, in 99 cases out of a hundred, not a complicated matter. There is a specified and almost rigoristic procedure that has to be adopted, and we are of the opinion that it is really useful, in these circumstances, to vest the jurisdiction in this connection with the magistrate’s court. When we discuss clause 7 during the Committee Stage, however, the hon member is very welcome to debate this matter with me again.

†The hon member for Yeoville also referred to the question of unanimity as contained in clause 46 and the problems that may arise in this regard. In this connection I refer the hon member to the following provision of clause 46:

I wish to emphasize the words “… or an association agreement in respect of the corporation does not provide otherwise.”

The hon the Deputy Minister must read the proviso to clause 46(b).

The fact remains that an association agreement can make provision to overcome that situation. I should also like to draw the hon member’s attention to this provision of clause 46(c) which states:

May I ask a question?

Yes, certainly.

Does the hon the Deputy Minister construe the provisions of the proviso to which I have just referred as meaning that if the association agreement provides differently, one does not in effect require unanimous consent in respect of the four matters referred to in the proviso? My interpretation of this provision is that unanimous consent is required in respect of these four matters but that other matters can be provided for in an association agreement.

Mr Speaker, I speak subject to correction in this regard but my interpretation of the introductory sentence to this clause, which I have already quoted, is that it provides thus. Thereafter, we have the four categories contained in paragraphs (a) to (d). As I see it, the association agreement is actually the key because if a particular arrangement has been made in such an agreement among the various members of the close corporation, I think it would supersede the provisions of paragraphs (a) to (d). I would suggest that we debate this matter further when we come to clause 46 during the Committee Stage. However, I do want to say that I think the hon member has raised a very important aspect which we shall have to clarify.

*The hon member also referred to clauses 64, 65, 71 and 73, and I shall discuss all these clauses during the Committee Stage. In particular I want to refer to the task of the Master of the Supreme Court, where the hon member referred to the question of the refusal to appoint liquidators in specific cases, as well as the right of the Master to take a decision in connection with a fine.

In conclusion I should like to thank all hon members for their positive approach to this matter.

I have no doubt that this measure will establish a specific legal form for an undertaking in our economy.

Question agreed to.

Bill read a Second Time.

Mr Speaker, I move:

The Companies Act, 1973, makes provision for a standing advisory committee on company law, and it is inter alia the function of this advisory committee to make recommendations to the responsible Minister from time to time concerning amendments to the Act that it deems advisable. Thus, the amendments to the Companies Act proposed in this Bill were recommended by the Advisory Committee on the basis of representations submitted to it for consideration, chiefly during 1982 and 1983.

The Bill contains proposals for amendments covering a wide series of subjects dealt within the Companies Act, inter alia in order to facilitate administration in the office of the Registrar of Companies, to eliminate unnecessary administrative red tape and to facilitate the task of the private sector as far as company matters are concerned. Accordingly I shall single out and explain the most important aspects of the amendments.

Section 7 of the Companies Act, 1973, only provides for the appointment of a Registrar of Companies or for the appointment of a person to act in his stead. The establishment of the office of Registrar of Companies was expanded recently to make provision inter alia for additional senior posts in the registry office. Due to the simplification of the procedure with regard to the appointment of an acting registrar that would result, and the elimination of unnecessary administrative processes, it is recommended in clause 1 that the Act be amended to provide for the appointment of a Deputy Registrar and an Assistant Registrar, and to provide that the Deputy Registrar could also act as Registrar without further appointment if the latter was not in a position to carry out his duties.

The same section provides at present that the Registrar may delegate to an officer in the Public Service any of the powers or duties assigned to him by the Act. However, it now appears that the word “officer” only includes staff occupying posts on the permanent establishment of the Department, and the Registrar is accordingly not empowered to delegate any of his powers and duties to temporary staff. Due to the shortage of officers in the service of the registration office there is a need for the Act to be amended to authorize the Registrar to delegate his powers and duties to competent temporary staff employed at this office as well. That is why the words “or employee” have been inserted in section 7(3) of the Companies Act.

Clause 2 deals with the inspection by the public and interested parties of documents in the registry office. At present the Companies Act provides that only those documents which have been submitted in respect of a company in terms of the Act, can be inspected. However, documents submitted in terms of the Act relating to defensive names have not been included. After the consideration of representations received in this regard, the Advisory Committee recommended that the Act be amended to provide that documents submitted with regard to defensive names may also be inspected. This amendment will mean that all documents submitted to the registration office under the Companies Act will be available for inspection, whether or not they have been submitted in respect of a company.

An important aspect is regulated in clause 3, viz the conversion of close corporations into companies. The advisory committee instituted an intensive investigation into the question of the promotion of small business enterprises, and came to the conclusion that the Companies Act was entirely too complicated, and in many instances had become inappropriate to a business run by one, or at most a few, people. They further concluded that the solution did not lie in an adaptation of the Companies Act to accommodate enterprises of this nature, but in a separate measure in terms which a new form of undertaking for small business enterprises, alongside companies and partnerships, be created. That is why the Close Corporations Bill is under consideration by this House at present. It provides that the new form of undertaking would be known as “close corporations”. In order to develop this idea meaningfully, the Advisory Committee recommended that it be provided that companies could be converted into close corporations and close corporations, in turn, into companies, without the need for a break in the continuity of the legal persona of the form of undertaking in question. The conversion of a company into a close corporation is regulated in the Close Corporations Bill. The conversion of a close corporation into a company, however, belongs in the Companies Act, and therefore it is now envisaged that this be fully provided for in this bill. Hon. members will note from the relevant insertions that special attention has been given to the danger that a close corporation could convert into a company merely to escape the teeth of the Close Corporations Bill. Therefore a close corporation must get its house in order before being able to convert itself into a company.

The Companies Act compels the judicial manager or liquidator of a company, when the company is being wound up or is placed under judicial management, or when it is emerging from that situation, to apply to the Registrar of Companies on the prescribed form to enter or omit the words “in liquidation”, “in voluntary liquidation” or “under judicial management” with reference to the name of the company in question. However, there are cases where the liquidator or judicial manager neglects to submit the application. This fact means that as far as the public is concerned, the status and condition of the company in question may be misleading. Therefore there is a need to ensure that the objects of the Bill are complied with, and accordingly it is proposed in clause 4 that the Act be amended to provide that when these events occur, and on receipt and registration of certain documents in this regard, the Registrar will take the necessary steps to insert or omit the relevant declaration in respect of the name of the company in question.

The amendment contained in clause 5 relates to the issue of the reduction of share capital by companies. Section 85(2) of the Companies Act provides that on reduction of the capital of a company by the court, a list of creditors entitled to object to the reduction of the capital must be drawn up. Therefore an obligation is imposed on the court. However, practice has now shown that cases occur when this requirement is superfluous and even impossible to comply with in full. It is necessary to provide that the court be given a discretion to decide, taking the special circumstances of each case into account, whether the compiling of such a list is necessary. After all, in every case of this nature, when a reduction in capital is requested, the court has all the relevant facts before it and is in the best position to decide on the expediency or otherwise of the compiling of such a list of creditors.

Section 94 of the Companies Act provides that a certificate signed by two directors of the company, or by one director and one officer, shall be prima facie evidence of the title of the member to such shares or stock of that company. However, provision is not made for those cases where a company has only one director and no officer. This loophole creates practical problems, and the necessary provision is being incorporated by way of that amendment of section 94(1) in clause 6.

A further amendment relates to notice of change of address by a company. The Companies Act requires that every company must have a registered office and a postal address in the Republic and that notice of the situation of the registered office and the postal address and of any change therein be submitted to the Registrar. In the case of a change of address the company must give the Registrar notice at least 21 days before the change. This period is important to prevent companies changing their address without giving timely notice of doing so, to the detriment of the creditors. What happens now, however, is that in a large percentage of cases notice of less than 21 days is given, with the result that for the purposes of the Act the change of address does not come into effect, and the change cannot be recorded in the registry office. To rectify the situation it is necessary to adjust the Act, and accordingly the Advisory Committee has recommended that the Act be amended to provide that in such instances the Registrar may determine the date on which any change envisaged in the situation of the registered office or postal address of the relevant company will come into effect. Clause 7 gives effect to this. This amendment will prevent the need for about 50% of the notices to be rejected by the companies registry office.

†As hon members will have noticed, many of the amendments in the Bill concern the disclosure of information which, in terms of the Companies Act, has to be disclosed. I must point out that the disclosure of information is extremely important to protect the interests of actual and potential shareholders, and the creditors, of a company. However, despite repeated reminders by the office of the Registrar of Companies, certain companies are very reluctant in their lodging of the prescribed returns and documents with the Registrar. The procedure which should be followed to enforce the lodgement of returns and documents prescribed by the Act was considered by the standing advisory committee during 1978 and the chairman of the committee also discussed the matter with the Attorney-General for Transvaal. The advisory committee has recommended that the Registrar of Companies be empowered in section 176 of the Act to impose a penalty not exceeding R200 if any company or an officer thereof should remain in default to lodge a return or document after the Registrar has by letter and notice called three times upon the company or the officer thereof to make good the default. The penalty would be recovered as if that penalty had been imposed in a civil judgment by the magistrates’ court in the area of jurisdiction in which the registered office of the company is situated.

This power to impose a penalty will have to be exercised with due observance of the principles of justice. The Registrar will have to apply his mind to each and every case of this nature to enable him to determine whether a fine has to be imposed or not and, if a fine has to be imposed, what the amount thereof should be. It should also be noted that every decision of the Registrar is subject to review by the court in terms of section 12 of the Companies Act.

In this connection I also intend to move an amendment during the Committee Stage of this Bill to ensure that the company or officer on whom the penalty is to be imposed is afforded an opportunity to make representations to the Registrar and state reasons why a penalty should not be imposed.

The amendment of the Companies Act contained in clause 9 relates to the holding of the annual general meeting of a company. The Act was recently amended to extend from six to nine months the period after the end of the financial year of a company within which period the company must hold its annual general meeting. In terms of section 179(3) of the Companies Act, the Registrar may extend by a further six months the period within which such annual general meeting must be held. In view of the recent extension of the first-mentioned period from six to nine months and after representations were made to the advisory committee, it was felt not to be in the interests of shareholders to allow the annual general meeting to be held so far removed in time from the end of the financial year relating to the meeting concerned as the Act now allows. It is consequently recommended by this amendment to shorten the period of extension which the Registrar may allow from six to three months.

Several of the larger groups of companies have each formed a separate company to perform the secretarial duties of all the companies in the group. This led to a significant saving in costs and manpower for the group of companies. A problem, however, now arises in respect of section 216(3) of the Companies Act, as it does not allow a secretary who is a legal person to sign a statement required in terms of the said section. For purposes of clarity, it is important to note that the secretary who is a natural person falls within the definition of “officer” and no problem arises in respect of him. Consequently, the section is being amended by clause 10 also to include a secretary who is a body corporate, as there is no valid reason for refusing such a secretary to sign the statements concerned.

The amendment contained in clause 11 concerns the persons who may apply to the court for the winding-up of a company. The Act provides that a judicial manager may apply to the court for the winding-up of a company if application is made for the cancellation of the judicial management order in respect of that company. A similar provision, however, does not exist in respect of a provisional judicial manager when he applies for the cancellation of a provisional judicial management order. A need to allow such a provisional judicial manager to make such application is being experienced. At this stage the Act also does not provide for an executor, administrator, trustee, curator or guardian whose name has not yet been entered in the company’s register of members to apply to the court for the liquidation of the company concerned, with the result that their locus standi is being questioned. This should not happen as they all are members nomine officii of the company. This situation creates problems where the register of members of a company cannot be found and especially in those cases where the estate of a deceased member must be administered. A suitable amendment of section 346 of the Companies Act will solve these problems.

Clause 12 deals with the amendment of section 356 of the Companies Act which provides that a company which has paşsed a special resolution under section 349 for its voluntary winding-up must lodge certain documents with the Master of the Supreme Court within 14 days after the registration of the said special resolution. It appears, however, that companies sometimes find it extremely difficult to lodge and in some cases are not able to lodge the required documents within the 14 day period. In the circumstances it is only fair, Mr Speaker, to extend the period concerned to 28 days.

The amendment dealt with in clause 13 relates to the absence from the Republic of liquidators of companies. The Companies Act determines that a liquidator may not leave the Republic without the permission of the Master of the Supreme Court. Similar provisions in the Administration of Estates Act, 1965, and the Insolvency Act, 1936, were amended last year to allow a liquidator a period of 60 days in which to be absent from the Republic without the permission of the Master. These amendments as well as the proposed amendment of the Companies Act in this regard, were necessitated by problems experienced by curators, administrators and liquidators while travelling through the independent states of Transkei, Ciskei, Bophuthatswana and Venda. The amendment of section 378 of the Companies Act will solve this problem.

Mr Speaker, we will be supporting the Second Reading of this measure.

One does not lightly seek to amend legislation of this nature as it has already received the attention of the Standing Advisory Committee on Company Law and there is no doubt that these people have spent considerable time and energy in investigating the proposed amendments. They therefore perhaps have greater experience than one would have in debating this across the floor of the House. One respects that and therefore one does not lightly move an amendment. However, at the same time, it is Parliament’s prerogative in the final analysis to pass the laws in this regard.

It is not out of place, as I have done in the past, to pay tribute to the Standing Advisory Committee on Company Laws, and particularly to its chairman. He and his members are outstanding lawyers and make a very real contribution towards the functioning of company legislation in South Africa. In the same breath it would be appropriate to say that the Registrar of Companies and his officials do their job well. They are very co-operative and they have a good relationship with the practitioners who have to deal with them. That is very important because it makes for the smooth working of that office, and I would like to pay tribute to the registrar and his staff in this regard.

The question of the Registrar of Close Corporations is an issue because in the explanatory memorandum on the Close Corporations Bill it is clearly stipulated that there should not be a separate office and that everything should be run together even though in law there will be a separate legal personality. One wonders what will happen in reality. Will there be a deputy registrar responsible for that part of the work who will act under the registrar? That seems to me to be an appropriate way of dealing with the situation.

One matter which is dealt with here and which arises by reason by the close corporation legislation is the conversion of a close corporation to a company and a company to a close corporation.

There are a couple of matters which worry one in that regard. Firstly, if the penal provisions are not identical, the question of possible abuse in this regard arises. When I spoke during the Second Reading on the Close Corporations Bill I pointed to some differences in wording, and particularly the inclusion of certain terms relating to reckless negligence. If one bears in mind that one can convert from a close corporation to a company, in those sort of circumstances it would be desirable if the relevant provisions read the same. That also applies to other penal provisions because one does not want eventually the conversion process to be used as another mechanism for people to escape responsibility, whether in a criminal or civil sense. I would ask that attention be given to that aspect to make sure that this cannot happen.

The other matter that causes one some concern relates to the proposed section 29C(4)(a)(i), which reads as follows:

1. (i) a statement of the paid-up share capital (if any) for an amount not greater than the excess of the fair value of the assets to be acquired by the company, over the liabilities to be assumed by the company by reason of the conversion: Provided that the company may treat any portion of such excess not reflected as paid-up share capital, as distributable reserves;

In other words, one now has a discretion as to how much of the difference between assets and liabilities one is going to treat as share capital and how much one is going to treat as reserve. There is also nothing to indicate who really should determine that. I believe that if one is going to change a close corporation into a company it should be certified by an auditor. One should lodge an auditor’s certificate setting out what actually is the excess of assets over liabilities and how one is dealing with that excess. I think there must be some way of dealing with that.

In exactly the same way there is also a provision that one has to furnish a certificate by the accountant of the company. If one is going to amend the terminology it should also be amended in this case. Quite obviously the accountant of the company is going to sign this—he will now have a new name— and we will therefore have to amend the clause in the Committee Stage in the same way as we have to amend the other one. Quite obviously the accountant is the right person to give that certificate because an auditor who has just been brought into the matter cannot actually issue a certificate in that regard. I do, however, feel that an auditor should deal with the first part of it.

The proposed section 29C(4)(b) reads as follows:

That is very nice, but what is it going to be? To my mind we have here the potential of conflict arising and the potential of one person being placed at a disadvantage over another. The question arises: What does one actually need to do in order to convert a close corporation into a company? Is it going to need unanimous approval, or what kind of approval is it going to need? To what extent is one going to need unanimous approval in order to deal with the proportion in which the shareholding is going to be held? This is a matter—I give notice of it now— which we could discuss in the Committee Stage after the hon the Deputy Minister has had an opportunity of dealing with it. This is after all, really a Committee Stage Bill. I think it helps to give notice of certain points so that the hon the Deputy Minister can consider them.

As far as clause 9 is concerned, I am not sure that the reduction from six months to three months is actually desirable in the circumstances. I think one is going to find more and more extensions of time asked for. I think perhaps one should reconsider that particular provision.

Clause 7 amends section 170 and deals with the registered office. I have often asked myself why we do not make the effectiveness of the change of registered office the date upon which the notice is received by the registrar, because from that day onwards people who want to sue the company can find out where the registered office is. That really is the date which, to my mind, is material, and I am not sure that with this amendment we are actually solving the problem. To my mind the majority of enquiries about where the registered office is are made when one wants to serve a notice to make payment with a view to a liquidation application or when one wants to serve a summons. In my opinion the date as and from which that the registrar enters it should really be the date on which the new registered office takes effect.

The hon the Deputy Minister dealt with the question of the registrar being entitled to impose a fine where certain returns are not made timeously, and he said that, of course, the registrar’s decision is subject to review in terms of section 12 of the Companies Act. However, what is happening here is that the registrar is to some extent exercising a judicial function, and where there is a judicial function there should actually be an appeal and not a review. I do not have to tell the hon the Deputy Minister what the difference is between an appeal and a review because he knows what it is while other hon members may not. The reality is, however, that that fundamental difference has an effect where there is the exercise of a judicial function. He imposes a penalty in that form and again—perhaps we cannot do it in this Bill— at some stage we will have to distinguish between what may be done where there is an imposition of this penalty and where somebody wants to go to court thereafter. In most cases one accepts this as a reality. One pays the fine and one smiles, and I think that is what is really expected in these circumstances. Very few people go to the Supreme Court in these circumstances where a fine has been imposed. However, we cannot make laws on that basis; we have to make them on the assumption that one day there may be an injustice which somebody wants to take on appeal.

Finally, I am pleased that section 378 is being amended by clause 13. We have debated this in other legislation and I think the hon the Deputy Minister is absolutely correct. In fact, where one has to have permission to enter the homelands one may be in and out six times on the same day. That is the way the homelands operate, and that is the way the boundaries are. In view of this we obviously welcome the amendment.

We support the Bill and will debate some of the matters I have raised in the Committee Stage. Should the hon the Deputy Minister not react to these matters in his reply on the Second Reading debate, we will understand it. The purpose of my raising them was to give him notice to enable him to deal with them when we reach the Committee Stage.

Mr Speaker, I wish to thank the hon member of Yeoville for his and his party’s support of this measure and also to join him in his appreciation for the excellent work done by the Advisory Committee that have, in fact, ensured that our company law and matters pertaining thereto function so well in practice. Furthermore, it is constantly being brought up to date and kept in line with developments and needs that crystallize out in practice.

The hon member dealt with a number of matters, most of which I will refer to in my speech. His remarks dealt mainly with the conversion of a close corporation to a company, and he indicated that he was in favour of the same language being used in the various provisions that are similar in the two pieces of legislation. Generally speaking I agree with him especially as in legal terminology a certain word acquires a specific meaning, and if that is the particular meaning which one wants to ascribe to something in aparticular Act, that wording should be the same in all legislation.

He has also indicated concern at the discretion granted—limited as it may be—in such a conversion in respect of the share capital. Furthermore he has suggested that an auditor’s certificate may be necessary, or at least advisable, in order to protect the party dealing with this particular converted close corporation. I shall touch on this matter again later one. In the main, however, I must point out that I believe adequate protection is provided by way of the stipulation that a company, when so converted, indeed takes over all the liabilities of the close corporation, and for all intents and purposes steps into the shoes of that corporation. The hon member has also indicated some measure of concern at the right of the Registrar to impose a penalty, which will not be reviewed but against which an appeal can be lodged. As the hon member will know, provision is made in the Act that such a penalty can in fact be set aside by a magistrate or, in certain circumstances—should the amendment of which the hon the Deputy Minister has given notice be accepted—by the Clerk of the Court.

Since we are dealing here with specific circumstances and with only specific facts upon which a Registrar can base his decision, and then also specific grounds on which this decision can be set aside or altered, I believe that point is adequately dealt with in the Bill as it stands.

*We on this side of the House are pleased to support this measure. The company, as a juristic person, occupies an exceptionally important position in our economic stystem. Moreover, as far as small undertakings are concerned, private companies are probably the most general form of undertaking and are also among the most important providers of employment. The economic system is a dynamic system which is always changing, and therefore it is essential that the statutory rules controlling the company’s position in practice ought to keep pace with developments in practice. As has already been indicated, this statutory amendment is pursuant to recommendations by the Standing Advisory Committee on Company Law. Accordingly it is largely concerned with improving and supplementing situations which have created problems in practice. The envisaged amendment will accommodate some of these problems, particularly those relating to the operation of the office of the Registrary of Companies, and will also eliminate certain deficiencies.

The hon the Deputy Minister referred at length to the most important clauses in the Bill. Accordingly I wish to confine myself to a few additional aspects.

For the sake of sound economic development, it is essential that those statutory rules relating to the creation of separate jusristic entities which can be made use of by commerce should, on the one hand, be kept flexible, and on the other, ensure security of justice at all times with regard to their position, particularly for the purposes of those doing business with the juristic entities in question. The desirability of a simpler form of juristic person is a an aspect for which provision is also being made in the legislation relating to close corporations. This satisfies a need which has been felt for a long time and is to be welcomed. However, it is essential that the statutory rules controlling such a close corporation must be capable of harmonizing with those relating to the existing system of company law, and that it must be necessary to change from one entity to the other it must be necessary to change from one entity to the other as circumstances require it.

The amending Bill under discussion makes it possible to achieve this and also regulates the situation in respect of such a changeover. It leaves ample room for the enterpreneur to find the most appropriate form for his undertaking, while on the other hand ensuring that outsiders doing business with the converted close corporations will not be prejudiced by such conversion. Thus, the legislation provides, inter alia, that a new company takes over the assets and liabilities of the converted corporation and therefore does in fact take the place of the close corporation for all legal purposes.

Another important aspect affected by the legislation concerns the filing of documents with the office of the Registrar of Companies. Often these filed documents are the only reliable source of information for outsiders in respect of the company, its powers, its officers, their powers etc. Therefore it is essential that they be submitted correctly and in good time as far as possible, and that they should be accessible to the public at all times.

The measures envisaged in terms of this amending Bill, particularly the provision vesting in the Registrar the right to impose a fine of not more than R200 and enforce it in civil law when a company neglects to submit documents which it is obliged in law to file, ought to be a successful incentive for companies that are tardy in this regard. The power of the court to set aside such a fine in whole or in part and even to award costs against the Registrar if he acted neglectfully or in bad faith, affords the company, on the other hand, sufficient protection if such a fine has indeed been wrongfully imposed. I also recognize that the setting aside of a penalty imposed by the Registrar will have to be done in the ordinary way that applies in regard to civil penalties if it is done by the magistrate after registration and not by the clerk of the court before such registration. In such a case, and indeed in both cases, it is essential to ensure that the existing magistrate’s court rules make provision for this. Therefore it may be advisable to prescribe a specific procedure, in co-operation with the Department of Justice, and embody that procedure in the magistrate’s court rules to ensure security of justice for all. This amending Bill contains various other measures that will expedite considerably the practical operation of the principal Act and eliminate hitches that exist at the moment. We therefore take pleasure in supporting it.

Mr Speaker, we on this side of the House also support this Bill which is, for the most part, consequential upon the previous Bill discussed, ie the Close Corporations Bill. The Bill does, however, also contain other amendments.

I also want to thank the hon the Deputy Minister for the explanatory memorandum he made available to us. It puts certain technical matters in a very clear perspective, and it is therefore unnecessary to ask any questions about those technical aspects. We say thank you very much for that.

It is a fact that the Companies Act is one of the most important instruments in our economic and commercial life. It is, of course, continually necessary for us to take stock of this and introduce the necessary amendments. We are also very glad to have a standing committee on this legislation, because it is complex legislation, and also one of the instruments in our commercial life that we continually have to take stock of. Circumstances change, and there are always clever individuals who want to try to circumvent such legislation, even to the point of committing fraud and theft. It is not always an easy matter, in terms of this legislation, to cover all those aspects, and that is why it is also so essential for the legislation to be amended continually to ensure that companies always act within the law as far as their dealings with the public are concerned.

Although I shall be discussing certain specific clauses in the Committee Stage, at this stage I want to support the Second Reading of this Bill.

Mr Speaker, I should very much like to thank the hon member for Sunnyside for his positive contribution. The hon member was right when he said that the hon the Deputy Minister had made a very comprehensive memorandum available to us. The hon member for Sunny-side is also quite right in having extended his support and thanks to the advisory committee for the outstanding work it is doing in this connection.

There is one aspect which strikes me when it comes to legislation dealing with companies and undertakings such as these, and that is specifically the fact that no legislation comes before this Parliament unless it has first been dealt with by the advisory committee, after which it is presented to this House in a form to which there can be very little objection.

I should like to get round to one or two of the points to which the hon member for Yeoville referred, but before doing so I want to refer to the standing advisory committee because it is, in my view, a body whose functions should for once, be brought to the attention of the House. This standing advisory committee is appointed in terms of section 18 of the Companies Act and is under the chairmanship of a judge or senior advocate. The Minister can also appoint quite a few other permanent members of the committee.

The names of the people serving on this committee make up an impressive list. Under the chairmanship of Mr Justice Margo there is a whole list of legal personages, a whole list of prominent accountants, of representatives of organized commerce and industry, inter alia the Afrikaanse Handelsinstituut, Assocom, the banks, FCI, the Johannesburg Stock Exchange, etc. I think one can very respectfully regard anything these people submit to the House.

The standing advisory committee goes even further by appointing a whole lot of sub-committees to assist it in its functions. There is, for example, a sub-committee in connection with stock exchanges, one in connection with legal practices, one in connection with liquidations, one in connection with accountancy practices, and now two are going to be added which are, in my view, of the utmost importance, and they relate to share blocks and close corporations. Anyone who has any problems with legislation of this nature is free to go to the standing committee with certain proposals.

The Registrar of Companies, in turn, serves as a very important link between the standing advisory committee and the hon the Minister and his department. Since we are now dealing with this Bill, I should very much like to broach the idea that prospective company investors and creditors should make a great deal more use of the facilities offered by the office of the Registrar of Companies before investing in a company or entering into any transaction with a company. The available information obtained from the Registrar’s office could give a decisive indication of how that company is being administered. Does the company submit its statutory documents correctly and neatly? Is the management of that company trim and disciplined? Those are some of the questions on which answers can be obtained.

I also think it is a good thing, in the discussion of the Bill, just to focus on the tremendous scope of the functions of the Registrar of Companies. Do hon members realize that at present there are 170 000 companies registered in the registration office? Do hon members realize, for example, that last year 14 000 new companies were registered, with registered capital of more than R140 million? If one takes note of this, one realizes what an important role the Registrar plays.

The legislation before us today—other hon members have conceded as much—is of a very technical nature, and it is therefore necessary for the Government to obtain the best possible advice and guidance to be able to bring the legislation up to a high standard and to maintain that standard. What I find very interesting is that the private sector, by the very nature of things, also has a very strong voice in the standing advisory committee.

I should like to refer to a few clauses. The hon member for Yeoville referred to the enlargement of the staff complement in the office of the Registrar. He made the interesting suggestion that one of the Deputy Registrars specifically be saddled with the responsibility for close corporations. What I find interesting is that of the Registrar’s total staff complement of 235 individuals, only 15 are men. Of the 220 women, only 25% are permanent employees. So 75% are temporary employees.

Do you not think that it is because there are so many women that things run so smoothly?

Arising out of the hon member’s question, I wonder whether the 15 men in the office of the Registrar do not have exceptionally pleasant working conditions, something which is definitely a very good fringe benefit. As a result of the tremendous number of temporary staff members it is therefore essential for the Act to be amended to extend the delegation to include temporary staff as well.

The second point I should like to raise is related to clause 3, in terms of which close corporations can be converted into companies and vice versa. In this connection I should very much like to make a serious appeal to thousands of farmers and small businessmen who could actually function much more effectively as close corporations rather than as companies. According to my information at least 20 000 of the 170 000 companies falling under the Registrar’s office could today very easily be converted into close corporations. I think one should go out of one’s way to encourage such people to do the conversion.

They must just first get a bit of advice before doing so.

The hon member is quite right. It is essential for them to be given sound advice about why they should do so and that they be given such advice before doing so.

The hon member raised an interesting point in connection with the question of notice of change of address of the registered office of a company. The problem is—and the hon the Deputy Minister pointed this out—that at present at least 50% of the notices of change of address are thrown out as a result of the fact that they do not meet the requirements. There is now a provision in the Bill to the effect that the change of address will come into effect 21 days after the notice reaches the Registrar’s office. The hon member for Yeoville suggests that that would be the actual address from the day on which the notice reaches the Registrar’s office, and it would be interesting to hear the hon the Deputy Minister’s suggestion in this connection.

Clause 8 has to do with the question of the lodging of returns. It is shocking that such a tremendous number of the returns that have to be lodged at present are simply not lodged in time and that it is therefore necessary to introduce more stringent penal provisions in this connection. My contention, however, is that as soon as those 20 000 small companies are converted into close corporations things will be very much better in this connection.

The penultimate point I want to deal with relates to the period within which a company must hold its annual general meeting. I have a feeling that on this point the hon member for Yeoville is wide of the mark. Last year the period within which a company should hold its annual general meeting was increased from six months to nine months, but when the amendment was introduced last year it was not added that the additional period of six months, which could be granted by the Registrar on payment of a sum of R30, be reduced to three months. The reason for this is very simple. Under no circumstances can a company hold its annual general meeting later than one whole year after the close of its financial year. So this amendment relates solely to the additional period that the Registrar may grant in this connection.

The last point has to do with the obligation placed on the secretary of a company. In the event of this not being a natural person, and a company is doing the work, the necessary arrangements are now being made for such a company to submit the necessary statements. In this connection I should like to ask the hon the Deputy Minister whether it would not perhaps be a good thing, as in the case of the previous amendment to this measure, to have this amendment made retrospective to the date of the original legislation.

I gladly support the Bill.

Mr Speaker, at the beginning of his speech, the hon member for Yeoville said that the Standing Advisory Committee on Company Law had no doubt gone through the provisions of the measure before us with a fine tooth-comb and I think that we are indebted to the hon member for Paarl for informing the House of the people who are members of that advisory committee and explaining some of its functions and the length to which it goes to ensure that the legislation on company law is amended from time to time in the best interests of the public in general.

The Bill before us consists mainly of clauses of a technical nature, clauses proposing technical amendments to the Act in order to enable it to achieve its objectives, one of them being, of course, the protection of shareholders and the public in general. We in these benches have no disagreement with this and will be going along with it.

There is one clause which, as has been said, is consequential upon the passing of the Close Corporations Bill which we discussed earlier this afternoon. It is essential that the Companies Act be amended in order that that Bill can be implemented when it eventually becomes law. I do agree with the hon member for Yeoville that if we are eventually going to have provisions in two acts dealing with the conversion of companies to close corporations and vice versa, perhaps the actual wording used should be the same to ensure that their will be no difficulty in the future.

No doubt there will be more to be said during the Committee Stage and I want to say that we will support the Second Reading of the Bill.

Mr Speaker, I should like to thank the hon member for Amanzimtoti for supporting the measure and for his positive contribution. He quite rightly said, as did the hon member for Yeoville, that this is more a Committee Stage type of Bill. I should like to thank the hon member for Yeoville for his support and for paying tribute, as did all the hon members who participated in the debate, to the Standing Advisory Committee on Company Law and its members under the chairmanship of the hon Judge Margo. I should also like to thank the hon member for his kind remarks to the Registrar and the officials for the co-operation the practitioners, especially those in the private sector, get from them.

*I should also like to associate myself with the remarks made by hon members in connection with the Standing Advisory Committee on Company Law. All the hon members who participated referred to it. The hon member for Paarl, in particular, gave a very good resumé of the activities, composition etc of the advisory committee. In addition, he provided interesting information about the set-up in the Registrar’s Office. I, too, wish to emphasize this afternoon that a very high premium is placed on the work done by this advisory committee and, indeed, that work of very high calibre is done by them. This places a special responsibility on those members of the advisory committee representing the various disciplines to make the necessary inputs in the committee, while at the same time keeping in close contact with their respective disciplines so that the necessary results can be achieved, taking into acount their wide-ranging recommendations.

†The hon member for Yeoville referred to certain clauses which I should like to debate further in the Committee Stage. He referred to the proposed new section 29C(4)(i) and we can also debate that further during the Committee Stage, but I would like to refer the hon member to the proposed new section 29C(1) which reads:

I believe this clarifies the matter for the hon member as far as the proposed new section 29C(4)(b) is concerned, which reads:

It appears to me that the proposed new clause 29C(1) gives some clarification to the question which the hon member has raised. However, I will debate it further during the Committee Stage.

*As regards the power of the Registrar to impose a fine, I have certain information before me, but in view of the time I shall debate the matter further in the Committee Stage. What is important is that the standpoints adopted here by hon members will be submitted to the Standing Advisory Committee I shall submit those proposals which do not give rise to amendments at this juncture, to that committee for their further consideration, and I undertake to do so in respect of every hon member’s contribution.

I should like to thank the hon member for East London City for the positive contribution he made here. He referred to important aspects concerning the conversion of close corporations into companies and vice versa. The hon member speaks with authority of the practical situation, and I was grateful to hear that the hon member welcomed this measure. I also appreciate the standpoints adopted by the hon member with regard to the Standing Advisory Committee.

I want to thank the hon member for Sunnyside, too. He referred appreciatively to the memorandum that was made available. The hon member also emphasized the importance of the work of the Standing Advisory Committee. One of the disciplines represented on the Standing Advisory Committee is—as the hon member remarked—the profession of accountant. This profession has made an exceptional contribution to the formulation of the Bill on Closed corporations and to the provisions embodied in this Bill relating to the conversion of the company into a close corporation and vice versa. I thank the hon member for his contribution.

I have already referred to the remarks of the hon member for Paarl. He, too, contributed interesting remarks concerning the point that prospective investors and creditors should make more use of the facilities offered by the Registrar’s office. I am in full agreement with the hon member that too little use is made of these facilities, and that people could use them to good advantage. As hon members have indicated, the Registrar and his office are prepared to co-operate with the private sector. I also wish to give the hon member the assurance that I shall give positive consideration to his proposal in regard to clause 10 and the possibility of making it retrospective. I shall reply to the hon member in that regard, too, in due course. In the nature of the matter, one does not like to give clauses retrospective effect, but in the light of the hon member’s plea and in these specific circumstances I shall give the matter positive consideration.

†With this I think I have replied to all hon members and I would like to thank them for their contributions.

Question agreed to.

Bill read a Second Time.

Mr Speaker, I move:

The Protection of Businesses Act, 1978, (Act 99 of 1978), is mainly intended to prohibit the enforcement of any judgment, order, direction, arbitration award or letter of request issued outside the Republic. Furthermore, the Act also prohibits the furnishing of information in compliance with any order, direction or letter of request issued outside the Republic, unless the prior consent of the Minister of Industries, Commerce and Tourism has been obtained in respect of such cases, and this Minister had an absolute discretionary power in this connection.

Concerning the matter of the enforcement of judgments given abroad, however, a number of developments have taken place in the administration of justice of the United States of America in recent years which have placed South African companies, and mainly South African mining interests, in a vulnerable position. The immediate reason for concern is the vulnerability of those companies which are at present producing asbestos and exporting it to the United States of America or which have done so in the past. The position is that a number of actions for damages have been brought against asbestos suppliers in the courts of the United States of America recently by sufferers from asbestos-related diseases or their dependants. The causes of action in these cases are based on what is known as “product liability” in the USA. Because this liability is not based on the concept of guilt as we know it in South Africa law, these actions are also brought against those mining companies that originally mined the asbestos concerned, even if it happened more than 20 years ago.

In actions based on product liability, the threat to South African companies is increased by the American practice of awarding punitive damages, as against ordinary damages, which are based on the damage actually done. As the name indicates, punitive damages are used in such actions as a punitive measure against a particular respondent.

For the purposes of determining punitive damages, American courts take into consideration, among other things, the nature of the respondent’s conduct and the nature as well as the extent of the damage that has been caused to the plaintiff. What is of material importance, however, is the fact that in addition to these, the court takes into consideration, in particular, the assets of the respondent, which, as hon members can understand, could be considerable in the case of a mining company.

Apart from these punitive damages, the American courts also award damages known as multiple damages in cases of this kind. In practice, this means that the court calculates the actual damage suffered by the plaintiff and then multiplies it by two, by three, or as circumstances may require.

For purposes of the execution of judgments given against foreign companies in the USA, the so-called alter ego doctrine is used. In terms of this, an order given by an American court against a foreign company for the payment of punitive damages or multiple damages can be enforced against any other company affiliated with the respondent company in any way whatsoever. In practice this means, for example, that the assets of any subsidiary of the respondent company can be attached if such assets are situated within the area of jurisdiction of any USA court.

†This state of affairs creates tremendous problems for South African mining companies which have extended overseas interests. The situation is further being complicated by the fact that the United States’ State Department has taken cession of the claims of numerous plaintiffs and has already retained law firms in South Africa to assist in the collection of the judgments concerned. In order to counter this relative new development and to protect South African companies against judgments based on punitive or multiple damages, it has been decided to extend the provisions of the Protection of Businesses Act, 1978, by the insertion of the new sections 1A, B and C.

I should like now to give a brief resumé of those amendments and of what is intended thereby. The first amendment is the proposed section 1A contained in clause 1 of the Bill which prohibits the recognizing and enforcing of any judgment delivered outside the Republic in respect of punitive or multiple damages. In order to create certainty in law in a case where the Minister grants his consent in terms of the existing section 1(a) of the Act, I intend proposing an amendment to the said section 1(a) during the Committee Stage. This amendment will have the effect that the prohibition in regard to punitive and multiple damages will still be valid notwithstanding the Minister’s consent having been obtained in writing beforehand.

The proposed section 1B is intended to be a countermeasure against the effect of the already mentioned American alter ego doctrine. The proposed section grants a defendant the right to recover from any party in whose favour the judgment concerned was delivered, or from any party to whom payment was made in terms of such judgment, the amount so paid in terms of the said judgment for multiple or punitive damages, over and above the amount of compensation awarded from the damages actually suffered by a plaintiff. It will be interesting to hon members to note that in respect of the application of this measure any amount obtained by a plaintiff by way of execution against the property of a defendant, or against the property of any subsidiary of the defendant, should the defendant be a company, shall be deemed to be an amount actually paid by the defendant in compliance with a judgment granted against him. After publication of the Bill it became clear that the meaning of the word “subsidiary” as defined in the Bill lends itself to a narrow interpretation, and I shall therefore also propose further amendments in this respect during the Committee Stage.

The effect of these amendments will firstly be that an amount obtained by execution against a company, the interests of which are according to the judgment concerned integrated with the interests of a qualifying defendant to an extent which requires that an act or omission of that company be regarded in law as an act or omission of the qualifying defendant also, shall be deemed to be an amount paid by the qualifying defendant.

Secondly, as a result of this amendment the definition of subsidiary in the Bill will fall away. In other words, for the purposes of this Act, no distinction is being drawn between a situation where a defendant pays in compliance with a judgment and a situation where he refuses to pay and the judgment is enforced by way of execution against the property of the defendant or, where applicable, against the property of a company associated with a qualifying defendant in the manner I have just described.

In order to obviate any uncertainty regarding the effect of the proposed amendments upon the existing provisions of the Act, it was considered essential to insert the proposed section 1C. This proposed section makes it clear that the Minister’s discretion in terms of the existing section 1 regarding the enforcement of a foreign judgment, order, direction, arbitration award or letter of request, as well as his discretion in respect of the furnishing of information in compliance with any other, direction or letter of request, is not being impaired at all. Furthermore, it is also made clear that notwithstanding the proposed provisions, a defendant may avail himself of any defence he may have in common law in any action for the recognition or enforcement of a judgment of a court outside the Republic.

Mr Speaker, this is a Bill which—I would not like to say it is not complicated, contrary to what I said in an earlier debate—has a number of very serious implications. Firstly, it deals with litigation which we know—the hon the Deputy Minister has also referred to it—arises mainly out of exports of asbestos from South Africa. The export of asbestos from South Africa is a problematic matter because, in the first place, there is an industry in South Africa. Secondly, there is the legitimate complaint where courts have found certain consequences arising from asbestos. Thirdly, there is the manner of litigation in certain North American countries and not just the USA.

In addition to it, however, there is a political connotation because there is little doubt that the problems arising from the export of asbestos have been used by certain parties to conduct some sort of an anti-South African campaign. Therefore the matter is to some extent a delicate one. In one’s attitude towards this measure one does not want to deprive of their remedy people who have genuinely suffered damage. On the other hand, however, one also does not want to assist people who seek to use this measure in order to exploit it for a political purpose. It is therefore to a considerable extent, I believe, a somewhat delicate matter, and I will also try to bear this fact in mind while discussing this measure.

The handling of asbestos mining in South Africa does not of course form part of the portfolio for which this hon Deputy Minister bears responsibility. I should nevertheless suggest to him that he should discuss the matter of asbestos mining with the hon the Minister of Mineral and Energy Affairs. He should pay particular attention to the possible consequences of this measure, and also to the way in which this measure can be used against South Africa overseas. He should also remember that it has already been used against South Africa overseas. However, Sir, I want to leave the asbestos mining issue at that.

The second matter to which I want to draw the attention of the hon the Deputy Minister is the question of international trade. It is interesting to note that there is a proviso in this measure, contained in the proposed new section 1B(2) which reads as follows:

1. (a) if the qualifying defendant at the material time carried on business outside the Republic and the proceedings in respect of which the judgment was given related to activities exclusively carried on outside the Republic in connection with that business …

The hon the Deputy Minister will know that when one talks about “carrying on business in a particular place” and “carrying on business outside the Republic” one has to look at the legal definition of “carrying on business”. In terms of the legal definition “carrying on business” can also mean merely to have an office. In terms of the definition it can have a very limited meaning. If one merely exports from South Africa and one has no office and no place in which one conducts any activity, one can then not be said to be carrying on a business. However, the moment one has an office it can be said that one is carrying on a business, and our courts might well hold that the legal definition means that the defendant is indeed carrying on a business outside the Republic and is therefore not entitled to protection in terms of this measure. I should therefore like to know from the hon the Deputy Minister whether it is the intention to cover a situation in which the party concerned may technically be carrying on a business with the “carrying on a business” merely being applied to encourage and to facilitate exports from South Africa. I mention this because I believe it is possible that although it may have a bearing on asbestos today it may, for example, happen to have a bearing on canned fruit tomorrow. It could happen that we export canned fruit from South Africa and that somebody may have a representative office or a subsidiary company in the USA purely to facilitate such exports. As a result of that this provision would then exclude that person from the protection granted in terms of this measure. That is of course if I interpret it correctly. However, that is what it says in so many words. I merely wonder whether that is really what the hon the Deputy Minister wants to achieve. I also wonder whether we should not look at the possibility of a change in relation to this particular issue.

Thirdly, Mr Speaker, I should like to refer to this Bill in relation to the legislation preceding it, which is of course the Protection of Businesses Act, 1978. What is interesting is that this Bill is exactly twice the length of that Act. If one looks at the particular Act it appears that it gives one all the powers to do all the things that are contained in the Bill now before the House. Therefore I should venture to suggest that we actually do not need this Bill. What is really happening is that the hon the Deputy Minister is granting himself the power here which he already has in terms of the Act of 1978. That Act stipulates that one can authorize the institution of actions subject to such conditions as the Minister may impose. Therefore, if the Minister can impose all the conditions that are contained in this measure it means that we are actually limiting to some extent the powers of the Minister in terms of the Act of 1978. I should therefore like to know why this Bill is actually being introduced while the powers already exist in a broader form in terms of the Act of 1978.