I move—

I shall try to explain the motion standing in my name as briefly as possible, in the hope that hon. members will then find no difficulty in passing it.

As hon. members know, in 1951 the Expropriation (Establishment of Undertakings) Act was passed by Parliament with the object of providing the necessary machinery to facilitate the establishment of undertakings regarded to be of national importance, after they had been declared as such by both Houses of Parliament. When both Houses of Parliament declare an undertaking to be one to which this Act is applicable, and therefore as an undertaking of national importance, the Minister of Economic Affairs can, subject to certain conditions he may determine, give that undertaking the right to expropriate certain land or the rights to land for certain purposes, and the purposes laid down in the Act are the following:

When such an undertaking which is regarded as being of national importance finds it necessary to build, exploit or maintain any structure used for or in connection with the transportation of any solids, fluids or gas, including a pipe-line, conveyor belt, cable-way, cocopan rail, rack rail, private railway branch line or railway siding. (Section 2 of Act No. 39 of 1951, as amended in 1955).

It is obvious that the Minister of Economic Affairs, when requested by such an undertaking to be given the right to expropriate land for the erection of structures of this nature, will feel compelled in terms of the Act thoroughly to investigate, firstly, whether the proposed structure is actually necessary for the undertaking and, secondly, whether the land required is necessary for that structure.

It is also expected of the Minister, if he considers it necessary, that he will get the advice of the Board of Trade and Industries. The Minister is also obliged to give the registered owner of that land timeous notice of the intention, and then to give the owner of the land at least ten days’ time in which to make representations to him. The Act of 1951, as amended in 1955, became necessary in regard to certain difficulties we experienced with the erection of the STANVAC refinery in Durban. It has been used only twice, once in connection with STANVAC and once in connection with Iscor.

Now we are faced with a similar position again, namely that it is intended again to establish a refinery in Durban, by the South African Petroleum Refineries (Pty.) Ltd. This company, briefly called SAPREF, wants to establish a large refinery in the vicinity of Durban. For that purpose it has become necessary for them to lay an oil pipe-line for a distance of approximately eight miles and to build a railway branch line of approximately three miles in length. We do not expect any trouble in regard to obtaining the land or the property rights for the erection of that railway branch line or the oil pipe-line, but we think it is important to take precautions now already so that if difficulty should arise the powers will be there and the undertaking will have been declared one to which this Act applies, and that the Minister should be able to take the necessary steps. In order to save time and to obviate a waste of money, it is better to take the necessary steps now.

Now I may perhaps be asked why we regard this undertaking as one which is of national importance, as happened in the case of the STANVAC refinery. I therefore want to give a few facts: This company has already purchased land to the value of R750,000, and this land will be used for the purposes of erecting a refinery. Apart from one contract awarded to a London firm, which in its turn again includes four South African contractors, since November 1960 six South African contracts involving R1,702,000 have been awarded. The whole undertaking will cost between R30,000,000 and R35,000,000, of which 60 per cent will be spent in South Africa. During the period of construction 1,500 workers will be employed, and when the refinery comes into operation in 1964 it will employ 200 Whites and approximately 50 non-Whites, and an additional number of contract workers. The running expenses will be approximately R4,000,000 per annum, and approximately 3,000,000 tons of crude oil per annum will be refined. There will be an increase in the tanker services, which will result in increased harbour revenue. Approximately 900,000 tons of black oil per annum will be exported by the refinery.

Therefore, viewed from all angles, hon. members will agree with me that we are here dealing with an undertaking we should welcome in South Africa because of the capital investment, the amount of capital being spent here, the provision of employment and the resulting savings in foreign exchange. The chemicals and raw materials which will he made available by this refinery will be of great importance. In every respect we ought to welcome this undertaking in South Africa and regard it as one of national importance. Therefore I can confidently ask hon. members to approve this motion, so that if trouble should arise in future in connection with obtaining the land we shall be able to take the necessary steps.

I second.

We have no objection to the motion of the hon. the Minister to give this company powers under an Act promulgated in this House, but it gives this company very wide powers and I hope, Mr. Speaker, that this company will also realize that it has great responsibilities. It is investing a lot of capital in this country, and as the hon. Minister well knows, the site of this company is in a position close to a very important residential area of Durban, and there have already been difficulties in the matter of air pollution in the past. I hope that when the company accepts these powers, it will also realize that it has a responsibility to the City of Durban, and while it is refining oil, it must also take into account the importance of Durban not only as an industrial area, but also as a tourist centre. The Minister knows that tourism is important because it brings valuable exchange to this country. I do hope that the hon. the Minister will remind the company when granting these powers that they also have a responsibility to the country as a whole.

Motion put and agreed to.

I move—

The main purpose of this Bill is to remove certain restrictions from the Unit Trust Control Act, 1947, in order to make the establishment of so-called open-end trusts possible. At the same time it is proposed to improve the Act in some other respects. An open-end trust is a special type of unit trust and may be described as a portfolio of underlying securities in which members of the public are invited to acquire an undivided share and to participate proportionately in the income or profits derived therefrom. The portfolio is continually increased with securities to cover the inflow of capital from the public and units held by the public are priced by the market valuation of the underlying securities.

The present time is especially propitious for the establishment of open-end trusts. An openend trust naturally favours buying underlying securities when prices are low and, on the other hand, it is inherent in the nature of a trust of this kind that it will sell securities of which the prices become unsoundly inflated. It will at once be obvious that open-end trusts offer the possibility of strong support to the share market. In the present circumstances support of this nature should be encouraged as much as possible and, for that reason, I regard this Bill as urgent.

We have consulted the various interests in the country which are interested in the establishment of open-end trusts and which were in a position to render assistance with the drafting of the Bill. I do not want to mention these interests by name, but I can inform the House that the initial memorandum containing the Department’s proposals for amendment of the Act was sent to 19 parties representing various types of financial institutions in the Unit trust and related fields and the various shades of business opinion. Some of these interests have contributed appreciably to the final draft, and I can give the House the assurance that this Bill has the approval of the great majority of business interests consulted. I do not think that the provisions of the Bill can be improved upon by any further consultation with outside interests.

Open-end trusts can render a particularly valuable service to the economy of the country at the present time by ensuring that more risk capital will become available and that the savings of the community will accordingly be employed in those sectors of our economy where the need in the general interest of the country is greatest—ensuring, therefore, a better state of balance in our economy.

In view of changed socio-economic conditions which have gradually developed in most countries of the world during the past couple of decades, the small saver has to-day become one of the most important generators of capital in most countries. These small savings can. however, only be utilized effectively if they are collected through the medium of some financial institution or other. The various deposit-receiving institutions and building societies in our country are very suitable channels serving the field of fixed interest-bearing investment. The risk capital field has, however, it would seem, been somewhat casually treated, if not neglected, in the past in this competition for the patronage of the small saver. The amending legislation which we now propose will provide in this important need. The open-end trust will present a very suitable means of investment in equities. It will provide important services to the investor: Firstly, it will ensure a large spread of risk and will, in this way, ensure safety of investment as far as possible; secondly, by investing in equities and real assets, it will provide a hedge against inflation; and, thirdly, it will provide the expert management and supervision of the portfolio which is indispensable for investment of this kind.

Open-end trusts will not only be available as a medium of investment to the small investor, but they will also strongly appeal to such investors as pension funds and other institutional investors who are desirous of entering the field of equity investment. One may also hope that open-end trusts will present a channel for the flow to industry of moneys of the kind which have been in the not too distant past, and may still be at this time, employed in unhealthy land buying or speculation.

I cannot fail to point out at this juncture that the open-end trust will present an ideal opportunity to the small saver and to the investor from all walks of life in this country to demonstrate their confidence and their faith—which I am convinced are not lacking—in our own commerce and industry. And I should go further and express the personal conviction that, if this movement should catch on properly, our economy will benefit in that it may become less inhibited in some respects than it has been in the past. One has often heard the criticism that, because existing enterprizes are not confident of obtaining from the public new capital that may be needed for their development, they are forced to rely solely on the retention of profits for capital needs of this kind. Now, while I must emphasize that I fully endorse the legitimate utilization of capital from this source, I must point out that indiscriminate retention of profits—which may very easily happen if enterprizes develop the attitude that they must themselves provide for their capital needs and not go to the public—may easily result in the uneconomic employment of capital. The service which open-end trusts can render in this respect is to ensure that capital for development purposes will be forthcoming from the public and to foster the attitude that such development capital should properly be drawn from the public. I think if we could attain this we will be assured of more natural tendencies in the financing of new development and in dividend policies that will be followed. This is bound to redound to the favour of our share market position.

Before I proceed to deal with the more important clauses of the Bill, I want to point out briefly why open-end trusts are in a strong competitive position vis-à-vis other investment media. In the first place there is the facility with which investments can be made and the ease with which trusts can expand without having to comply with any formalities. Further, there is the facility with which investments can normally be realized should the investor so desire, i.e. by merely selling his units back to the management company at a price calculated from the market value of the underlying securities. Open-end trusts are in a particularly strong position since, from their nature, they are in a position to make effective use of publicity and advertising in enlightening the public and gaining support.

I come now to the more important clauses of the Bill. I have circulated a very complete memorandum on the clauses of the Bill and I do not therefore need to deal with the clauses in detail. I propose merely to refer to the main provisions.

The first clause that I want to deal with is Clause 3. This clause amends Section 3 of the principal Act. The amendment we propose is to the effect that the capital resources of the management company of a scheme in securities other than property shares should be increased from R50,000 to R600,000. We further propose that, whereas the principal Act now provides that a management company should be formed solely or principally for the purpose of managing a unit trust scheme, any existing company which is experienced and equipped for the purpose will now be permitted to manage a unit trust scheme. This latter proposal is motivated by the desire that well-known companies of high standing should undertake the management of open-end trusts. We feel that this will go a long way towards ensuring that the public will have the confidence in a scheme which is necessary for its success.

The proposed capital of R600,000 may seem high at first blush, but there are very strong reasons why this is necessary. First of all, we now propose in Clause 8, which substitutes a new Section 9 in the principal Act, that every management company shall from its own resources maintain an investment in every unit portfolio of at least 10 per cent of the total assets, which investment may, in the discretion of the Registrar of Unit Trust Companies, be limited to R200,000. We consider this requirement of a limited investment by the management company in a scheme to be a very important new principle. Its object is that the management company must demonstrate its own confidence in the scheme in which it invites the public to participate—the proof of the pudding is the eating thereof. In the second place, a management company will require a considerable working capital to create a market in the units of the scheme it manages. It will be incumbent upon a management company to repurchase units offered to it by the holders thereof. On the other hand if there is a brisk demand for the units of a scheme the management company should always dispose over a considerable supply of units. For these purposes as well as to provide for the other capital needs the scheme may have, it is considered that the management company should have available an amount of capital of at least R400,000.

The considerable capital resources of R600,000 will automatically achieve one other object which we feel is of great importance. It will limit the number of schemes. The management of a unit trust scheme is a matter which requires expert knowledge. Coupled with this there is the narrowness of our share market. These considerations make it imperative that there should not be an uncontrolled rush by all and sundry into the unit trust business. On the other hand, it is very essential that there should be sound competition between a limited number of well-managed schemes. I may add that the whole interplay of economic forces which we visualize presupposes sound competition between a number of open-end trusts on the one hand and other financial institutions like banks and building societies on the other hand.

I have here outlined the objects we are endeavouring to achieve by the proposed amendment to Section 3 of the principal Act, and I now come to the next important clause of the Bill which is Clause 7.

Before I deal with Clause 7 I would like to say a few words about Clause 4.

Clause 4 of the Bill adds a new sub-section (4) to Section 4 of the principal Act. The object of this new sub-section is to vest power in the registrar to refuse the registration of a management company if it is not considered in the public interest. This power will be exercised subject to an appeal to the Minister. The provision is similar to provisions of this nature in both the Banking Act and the Insurance Act. It is admitted that this is a very wide power, but it is taken for the sake of protection of the movement. It is essential to guard against a position of over-trading, so to speak, in this field. On the other hand the confidence of the public in this type of investment must still be won and this will best be achieved by the sound record of stable and well-run institutions.

I now come to Clause 7. This clause substitutes a new Section 8 in the principal Act. The existing Section 8 merely provides that all the underlying securities in a unit portfolio shall be stock exchange securities or securities issuing from stock exchange securities and, secondly, it provides that securities in which the management company has an interest and which are included in a unit portfolio must have yielded a dividend of at least 3 per cent for a period of three consecutive years immediately prior to their inclusion in the portfolio. That is the percentage in the existing Act.

We now propose, first of all, that there should be two limits governing every investment, except an investment in approved securities, which is an investment in such securities as government and municipal stock etc. These limits are: firstly, not more than 5 per cent of the total assets in a unit portfolio shall be invested in the securities of any one concern and, secondly, no investment shall exceed 5 per cent of the total securities issued of the class in which the investment is made. I may inform the House that by introducing this principle we are writing into our law a generally recognized sound principle which is very extensively applied by well-managed overseas trusts. The object of this provision is to ensure the wide spread of investments which is basic to a unit trust scheme. A further object is to ensure as far as is practicable that a unit trust will not acquire the control of any undertaking in which it holds an investment. It is a sound principle that investments of this kind should be investment without control. By this means we endeavour to safeguard the interests of the investor as much as possible.

We recognize, however, that there are investment companies which already provide a spread of investments and we propose to permit a somewhat bigger investment in the shares of such companies. It is accordingly proposed that the second limit which I have just mentioned, that is the permissible percentage of the total securities issued of the class in which the investment is made, will in the case of investment companies be 10 per cent. For the purposes of the Act we define an investment company as a company which is engaged primarily in the business of investment in the shares and stocks of other companies for the purpose of revenue and profit and not for the purpose of exercising control and which has been approved by the registrar.

Apart from these limits which we prescribe for every investment we also prescribe that at least 95 per cent of all the securities included in a unit portfolio shall be stock exchange securities or securities acquired by the management company pursuant to the exercise of rights attaching to stock exchange securities included in the unit portfolio. This implies that not more than 5 per cent of the underlying securities may be non-stock exchange securities. We feel that this slight concession is desirable, but we require that such securities shall become stock exchange securities within a period of one year as from the date of their inclusion or within such extension of time as the registrar may permit if he is satisfied that the securities will become stock exchange securities within a reasonable time. Should this not happen such securities must be replaced by stock exchange securities at either the value at which they were originally included or the price that can be obtained for them, whichever is the higher. I shall deal later with the manner in which the market prices of such securities must be determined.

In connection with Clause 7 with which I am now dealing. I may also mention that we propose under this clause to insert a new Section 8ter into the principal Act. This new section provides that every open-end trust shall as at the date of its formation comprise underlying securities to the market value of at least R500,000. The reason for this proposal is that we recognize that every open-end trust will have to be of a fair size to be operated as an economic unit. By introducing this provision we are therefore endeavouring to ensure that only open-end trusts that will be assured of success as far as possible will be established. The provision is moreover in line with our attitude, as I have explained before, that the number of open-end trusts should be limited.

The next important clause on which I want to enlarge is Clause 9, which amends Section 10 of the principal Act. The existing Section 10 prescribes certain information concerning the operation of a unit trust scheme which every management company shall disclose. This prescribed information we regard as altogether inadequate. We consider that it is very important that there should be the fullest possible disclosure of the position and the details of management of an open-end trust. This is one of our main objectives with the control of the movement and one of the strongest guarantees that the interests of the public will be properly handled. The new sub-sections which we now propose to substitute in Section 10 are designed to achieve this object. In addition to the requirement that the prescribed information must be furnished to the registrar and to every holder of a unit certificate, we propose to vest in the registrar the authority to call for such further information or explanation as he may deem necessary. This is an additional safeguard of the interests of investors. The registrar is charged with a general supervisory function under the Act and this power, which is in line with similar provisions in other Acts, will enable him to perform his duties properly.

I now come to Clause 18 of the Bill, which amends Section 20 of the Act. I want to explain only one of the several amendments to Section 20 and that is the proposed increase of the prescribed capital and unimpaired reserves for a trustee of a unit trust scheme from R100,000 to R1,000,000. This is the 3rd pillar of the scheme. It is important that the trustee shall be a financial institution—in practice it is usually a banking institution or insurance company—of status and considerable size. This is necessary because the trustee serves to a great extent to give the desired standing to a scheme, while he must also assume important duties in safeguarding the interests of investors. If anything should go wrong with the management company the trustee may have to assume immediate interim responsibility for the scheme and in these circumstances we consider it essential that the trustee should be a fairly large institution, hence the prescribed capital of R1,000,000.

The next important clause that I want to deal with is Clause 20, which substitutes a new Section 22 in the principal Act. The existing Section 22 provides for a number of matters which must be included in the trust deed of a unit trust scheme. Apart from the fact that the existing provisions are generally designed to comply with the circumstances of fixed trusts and are therefore unsuitable for open-end trusts, this section now also leaves the door open for a unit trust scheme to have other rules in addition to its trust deed. This is undesirable since the trust deed should incorporate the complete rules for the management of the scheme. In the new section which we now propose we meet this objection by prescribing that the trust deed shall contain the rules for the administration of the scheme and shall inter alia contain provisions covering 16 matters which are specifically enumerated. Each and everyone of these matters is designed to protect the interests of investors. I shall enlarge very briefly on some of these matters: It is inter alia prescribed that the proceeds of capital gains, rights and bonus issues shall not be distributed but shall be invested in the scheme concerned for the benefit of the holders of unit certificates. This is a generally recognized sound principle the purpose of which is to prevent the gradual distribution of capital. In this connection I may also mention that it is very desirable that a scheme should amortize securities in respect of wasting assets. If this is done the basis of such amortization shall be clearly stated in the trust deed. This is likewise an endeavour on our part to preserve the capital value of certificates. For practical reasons the amortization of wasting assets cannot be made compulsory, but whatever is done by a management company must be specifically disclosed, since we now prescribe that all advertisements must clearly state whether or not amortization of wasting assets takes place.

If the holders of certificates desire to realize any capital appreciation which may have occurred in the value of their certificates, the only way in which they can do it is to sell their certificates. It is prescribed that it shall be incumbent upon a management company, except in very exceptional circumstances, to repurchase units offered to it by the holders thereof.

The only other point that I want to mention specifically is that if a scheme should provide for the inclusion in a unit portfolio of securities which are not quoted on a stock exchange then the market prices of such securities must, for the purposes of the scheme, be determined in a manner prescribed in the trust deed. In this way the registrar will be able to satisfy himself beforehand that an equitable method will be followed.

I come now to Clause 26, which amends Section 28 of the principal Act. We propose that the prescribed capital of a management company managing a scheme in property shares shall be increased from a minimum of R50,000 to a minimum of R100,000. I may mention that the underlying securities in a unit trust scheme in property shares are not stock exchange securities as is almost exclusively the case with the ordinary type of scheme, but are usually the shares of private property companies. The result is that a management company in property shares cannot usually undertake to repurchase units offered to it in view of the illiquid nature of such securities. In order, however, to afford the holders of certificates in this type of scheme a sure way of realizing their units we now propose to make it compulsory that the management company should either undertake to repurchase or obtain a stock exchange quotation for such units. For this we provide in a proposed new Section 34bis which is inserted by Clause 33.

Owing to the different nature of a scheme in property shares, we do not propose to prescribe in respect of this type of scheme, as we do for the other type of scheme, that it shall start with minimum underlying securities of R500,000, but we do prescribe, however, that the management company shall also hold an investment in the scheme it manages of at least 10 per cent, subject to the same conditions as for the other type of scheme. It is obvious from the explanation I have given that a management company in property shares may not initially require the same amount of working capital as the management company managing the ordinary type of scheme. Our attitude is that in this case the required amount of capital will be governed by the size of the scheme and the fact whether or not the management company undertakes to repurchase units. In the circumstances we propose to prescribe a minimum capital of R100,000.

The next important clause that I want to deal with is Clause 35, which substitutes a new Section 36 in the principal Act. The existing section in the principal Act contains a prohibition of analogous schemes, but it leaves loopholes which make the prohibition entirely ineffectual in practice. As an instance I may mention that the section prohibits schemes with “specified assets other than securities”. This wording does not unambiguously bring into the ambit of the prohibition the type of case which we find in practice where there is no trustee and a mixed bag of all types of assets, i.e. securities and other assets. Our proposed new section is an endeavour to formulate the prohibition in clear and unambiguous terms. The existing section in the principal Act permits schemes which fall within the prohibition but which were operating at least three years before the commencement of the principal Act to continue. This right we do not now take away, but we do provide that such schemes must apply to the registrar for exemption from the provisions of the Act on such conditions as the registrar may impose and, further, we prohibit such schemes to invite or accept further investments from the public.

We also bring into the ambit of the proposed new section one other type of scheme, namely, so-called participation mortgage schemes. It appears that such schemes are open to abuse, for instance, that more participations may be be issued than the value of the security or that the interests of participants are not properly safeguarded seeing that they may not acquire a real right in the mortgaged property, and in these circumstances it is proposed that such schemes should apply for exemption from the provisions of the Act on such conditions as the registrar may impose.

At this stage I would like to say something about another type of scheme of which one hears occasionally these days and that is the so-called investment syndicate or club. My Department has information to the effect that such clubs are being organized by some people on a considerable scale and that still other would-be organizers want to enter this field. Although the membership of individual clubs is limited by the Companies Act to 20 persons, the link-up of a great number of clubs with the central organizer means in effect that large investments come under a central control. This is a matter which we view with some concern, because in the event where such investments reach appreciable proportions there is no reason why our legislation should distinguish between such clubs and unit trust schemes which are subject to the control of the Act, while the other club schemes are not. I, therefore, want to issue a very clear warning: Firstly, to the public, to the effect that they must bear in mind that such investments do not enjoy the protection of control under the Act, and, secondly, to the organizers of these clubs, to the effect that we are carefully watching the position and that if it should become desirable to do so we will not hesitate to extend control over such clubs.

I come now to the last clause that I want to deal with briefly and that is Clause 42. This clause contains a general dispensation to existing schemes in securities other than property shares to continue, should they so prefer, on the basis that applied to them in the past, provided that no further units may be created for sale under such schemes. There are only two existing schemes of this kind which are in the nature of fixed trusts, and they have been contracting all the time during the past ten years or so during which period no new units have been created. It will mean a major reorganization of these schemes if they were to comply with all the requirements of this amending legislation. In the circumstances we propose to meet representations we have received in this regard by granting the conditional dispensation I have mentioned. These schemes are agreeable to the condition that no further units should be created unless they comply with the provisions of the Act as amended.

I have now disposed of the more important clauses of the Bill but I think it is desirable that I should say a few words about the taxation position of open-end trusts before I conclude. Unless the position of these trusts is specifically determined in the Income Tax Act, the trusts will have to be classified as individuals for taxation purposes which will mean that they will be taxed at the rates applicable to individuals which may be very high if it is a sizeable unit. In the circumstances my Department has received representations that relief be granted to the proposed trusts and in this connection I may say that we propose to introduce an amendment to the Income Tax Act which will make it possible to classify open-end trusts as companies for the purposes of taxation. This will have the effect that, as regards their two main sources of income, viz., dividends and interest, trusts will not be taxed on dividend income but only on interest income. This is the position that applies to investment companies and indeed to any company. My Department is also prepared to accept that open-end trusts will not ordinarily deal in shares. A decision of this nature will mean that gains from the varying of share investments will be regarded as capital gains which are not taxable. The dividends which are distributed by trusts will be taxed in the hands of the certificate holder in the same way as ordinary company dividends.

In conclusion I want to say that this Bill represents the result of a great deal of intensive study by my Department and very thorough consultation has taken place with wide interests who all agree or support this amending legislation. In commending this Bill to the House I want to say that I regard this legislation as a further step towards making our financial institutions able to serve the needs of the general economy more efficiently. The establishment of the National Finance Corporation, the development of a money market and now the institution of open-end trusts, are all steps to forge financial instruments to meet the growing demands of a modern economy and to provide the mechanics for a better and more efficient utilization of our available capital resources.

We support this Bill. We think it is a Bill which is necessary for the financial development of the country. But we do not exactly agree with all the suggestions of the Minister. The hon. the Minister suggested during the course of his address to this House that this would provide new capital for industry. I do not think we can agree with that. It will not provide new capital; it will provide further channels for capital investment. It certainly will not provide capital for new industries, new schemes. Before going on to a detailed examination of the Bill, I think it is appropriate at this stage that I express my appreciation to the Minister for the explanatory memorandum and for the assistance given to us by a member of his staff. That member of his staff gave some of his time to us to go through the technical parts of this Bill. As the Minister rightly says this is a technical measure and one which has warranted a considerable amount of study by his Department and a considerable amount of study by those of us who are unfortunate enough to have to deal with this legislation so early in the Session. It follows the lines of the Bill which we had last session as some of us have had an opportunity of doing some homework on the matter.

Mr. Speaker, there are three sides to this investment. namely the investing public—the Minister said the “unit”, but it is really the investing public—the management company and the trustee. This will encourage the small man, and it is essential, if the small man is to be protected, that there should be adequate control over the management company. One thing is not quite clear, Sir, and it is this: There seems to be an opportunity for companies to be registered which can be very similar to these trust companies and yet can fall under the control of the Registrar of Companies. To what extent is the Minister’s Department going to have an inspectorate to ensure that the companies which follow almost similar lines but not quite—which do not come under the control of the Minister—are inspected and brought into line? As the Minister quite rightly says there have been investment clubs and similar institutions who have not all been successful. The ordinary investing member of the public does not have the necessary knowledge and quite frequently only complains when he has lost his money. He is attracted by a very high rate of interest. He thinks that the scheme is an attractive one. I think it is necessary for the Minister to tell us, when he replies, whether his Department will be controlling this organization—as I think it should do—and whether there will be some liaison with the Registrar of Companies. I think there should be some liaison with the Registrar of Companies, particularly with those companies which try to overcome some of the prohibitions provided in the Act. The Minister suggested that there might be an opportunity for companies of this kind forming management schemes under this Act influencing the distribution of dividends. He suggested that there were certain companies that did not distribute dividends, or the dividends that they might have distributed; that they were inclined to plough back a great percentage of their profits and retained them in their company. He expressed the hope that as the result of open-end trusts those companies would be persuaded to follow another policy. I fail to follow the Minister’s argument in this connection. because later on in his speech the hon. the Minister went on to say that no unit would be able to invest more than 5 per cent in any one class of security. I fail to see when a unit is made up of only 5 per cent how it can have very much influence. I would like some further information in that connection when the Minister replies.

The Minister referred to Clause 4 of the Bill and he indicated that he could prohibit the registration of any company as a management company under this Clause unless he was

The Registrar has no powers and the only appeal is to the Minister. I would suggest that the Minister should seriously consider later on when we come to the Committee Stage, if he does not introduce it himself, the advisability of having an appeal to the courts. As the Minister knows there is provision in the principal Act for an appeal to the courts where it is proposed to close down a company of this kind. Where the Registrar refuses to register the company can appeal from the Registrar to the Minister and if the Minister supports the Registrar, the parties concerned should have the right of appeal to the courts. There may be cases, possibly very rare cases, where companies who wish to register pressure may be brought to bear upon the Registrar and the Minister not to have those organizations establish themselves in this country. All the existing companies can “gang-up”—for want of a better word—and provide the Minister and the Registrar with information which may lead them to believe that it will not be in the public interest. The Minister and the Registrar, on the one hand, have the advice of these various companies who say that it is not in the public interest. On the other hand the new company which starts this venture is on its own; it puts up its argument and its arguments are defeated by the group of people who bring pressure to bear on the Minister. They may point out that there is overtrading already. What they really mean is that they themselves have created a monopoly and that they do not want this new organization to come in. For those reasons, Mr. Speaker, I think it is highly desirable that there should be an appeal to the courts. It makes for a healthier state of affairs and it certainly frees the Minister from a charge of bureaucracy if he does support the Registrar. I do not suggest that where the Minister supports the Registrar it will always be a case of bureaucracy. But I do think it is advisable to have an appeal to the courts and I hope that the Minister will seriously consider an amendment at a later stage.

Clause 9 of the Bill to which the Minister referred in the latter portion of his address, deals with the question of taxation and the exemptions which will be given to companies in so far as dividends and interest are concerned. That is not before us now, Sir, but it appears to us from an examination of Clause 9 (e) which reads—

that those capital gains and bonus shares and so on, if they accrue to an ordinary individual in certain circumstances, will be taxable because he will be regarded as a person dealing in shares, where his transactions are of a sufficiently frequent nature to justify the Commissioner for Inland Revenue in deciding that person is liable for taxation, because it was not an isolated transaction. It appears, Mr. Speaker, that it is more than likely in a fluctuating market and if this management company is doing its job, that it will be investing and disinvesting from time to time. And in investing and disinvesting from time to time there may be capital gains and capital losses. The Minister suggests to us that in cases of that kind, whereas the individual will be taxed, there will be exemption. I hope the Minister will give us some indication as to the amendments he intends to make to the Income Tax Act because this does suggest that there might be an opportunity for dealers in shares who formerly have found themselves falling foul of the Commissioner for Inland Revenue, to seek an opportunity to get into unit trusts, openend trusts, as a means of enjoying the benefits of profits of this kind, whereas in normal circumstances they would be subject to taxation. No doubt the Minister has consulted the Commissioner for Inland Revenue about this and give us a reply at a later stage.

I go now, Mr. Speaker, to Clause 20 (f) of the Bill. The Minister has already made reference to this matter. It says—

The Minister went on to say this—I took a note of his remarks—“except in special circumstances”. I hope the Minister in his reply will indicate what he meant by that phrase. The sub-section is quite clear, Mr. Speaker. It says “it shall be incumbent upon the management company managing such scheme to repurchase units offered to it by the holders thereof”. That is Clause 20 (1) (d). But I want to deal with another aspect of the Bill, namely that in terms of this clause it is incumbent upon the managing company to re-purchase the investment where any investor decides to disinvest and calls upon the company to repurchase his units. We know from past experience that unit trusts have not always been popular with the public. The public has an unhappy memory with regard to unit security, and I am glad the Minister tells us that there will be no further units issued unless they come under the control contemplated by this Bill. But one can well imagine that if the public got nervous again in future about the units they hold—I wonder whether the reserves would be sufficient for the management company to comply with this sub-section, namely that it will be incumbent upon the managing company to re-purchase the units offered to it by the holders thereof. It is quite clear to me that the Minister contemplates that there might be difficulties, and that is why he says “except in special circumstances”. I would like to know from the Minister, when he uses that phrase, whether he is contemplating a state of affairs when there will be a run on the company because a large number of investors attempt to disinvest at a particular time? If those are the special circumstances contemplated by the Minister, I hope he will tell us that in his reply. It seems to us that a further explanation is required. We will examine the clause more closely in the Committee Stage, but it is essential that there should be some protection to the public, and also some protection to the company. It is quite obvious that with a run on a company of this kind, it will be far more serious than a run on a bank or on a building society.

The Minister dealt later on with Clause 36, which provides for the prohibition on misleading names. I once again would like to know from the Minister to what extent there will be liaison between the Registrar of Unit Trusts and the Registrar of Companies, because I can foresee that there will be many cases where persons will attempt to register just outside the requirements of this Act with the Registrar of Companies. I would like to know whether there will be any liaison between the Registrar of Unit Trusts and the Registrar of Companies to examine memoranda and articles of association to ensure that there is no evasion of these provisions. I think it will be highly desirable that the Registrar of Companies and the Registrar of Unit Securities should collaborate in this matter to ensure that the public are adequately protected.

Finally, the Minister has given a general warning about investment and investment companies and the need for the public to be protected. Might I suggest that a general warning is not always heeded. The people who catch the public and cause the public to lose their funds are not much concerned about ministerial warnings. The only way they are brought to book is by the provisions of a statute of this House. If the Minister feels that it is desirable that the general investing public should be adequately protected, I submit that a general warning, while it does some good, is not sufficient. I think the Minister would be well advised, instead of a general warning, to entrench that warning in the statute.

As I said in my opening remarks, this Bill does not provide new capital for new businesses, because as the Minister says, the management company cannot invest in units of companies unless they have a three-year dividend record of at least 3 per cent, so the companies will have to prove themselves first before the managing company can invest in their units. It cannot influence dividends materially. While I grant that the fact that a managing company is interested in such a company would be a stimulating factor, it certainly cannot have any influence on major policy, but it does provide for diversification of investment, and for that reason it is welcomed, because it encourages the small investor. It does provide better control and we welcome it for that reason also. And, finally, it does bring our legislation up to date and in line with modern practice, and while we have as far as possible criticized this Bill objectively we will have the opportunity in the Committee Stage to go into greater detail.

I just briefly want to welcome this measure. I think the fact that the Opposition also supports the measure—and we know how much they like to oppose anything if they possibly can—is a sign that we are dealing here with a matter which enjoys the blessing not only of everybody in this House but also of the public outside.

I do not really want to deal with the various clauses and the arguments advanced by the hon. member for Pinetown (Mr. Hopewell). I do not think this is the suitable occasion for it. We can do so more advantageously in the Committee Stage, as e.g. the question as to whether new capital will now go to industries, or whether capital will go to the newer industries. He draws a distinction there, but I think that he is splitting hairs.

It is a fact.

He split hairs as to what came first, the hen or the egg. [Interjections.]

Order! I cannot allow a discussion about the hen or the egg now.

The matter which is affected by this measure is the question of capital and where it is invested. At the moment we have the building societies and the deposit-receiving institutions for the smaller investor, and here an additional channel is being provided for them. It will probably to some extent draw capital from those bodies, but it will also draw money from the commercial banks and capital which is practically lying idle. There are many people in South Africa who perhaps invest their capital wrongly. In South Africa, to a large extent, people must still learn how to invest their money, and here I have in mind particularly the Afrikaans-speaking people. They are prejudiced against the Stock Exchange, and I have already from time to time said in this House that we should appeal to the Afrikaans-speaking people to show more interest in the Stock Exchange. I do not think we have had much success in that respect, but what I find gratifying is that in the latest speech of the President of the Stock Exchange in Johannesburg he mentions that there is a considerable increase in the percentage of capital emanating from Afrikaans-speaking people and being invested in shares on the Stock Exchange. He expressed the hope that this tendency would develop further and I think we all share that hope.

Here a measure is now being introduced enabling people who have capital and who do not want to invest it on the Stock Exchange as such can go to a company in which they have confidence, like an insurance company which has such an open trust. They can go to the old existing trusts which everybody has confidence in and which will establish such open trusts, and by that means they can obtain an interest in the Stock Exchange. It will also result in stronger competition on the Stock Exchange for the shares offered, and it may lead to an increase in the average prices. Competition is the best thing one can have in investment. It makes people more conscious of the value of money and the interest yield. I hope that as far as that is concerned, this measure will lead to an appreciable revival in share transactions in South Africa.

I again want to raise this one matter which I have already mentioned here before, namely that people think in only one direction. One has certain people in the cities who only want to invest in immovable property. They are afraid of any other kind of investment. One has other people on the platteland who only believe in buying farms. In both cases it results in over-capitalization, because these people pay too much for those things in relation to investments they can make in other fields. We must appeal to these people to compare various fields of investment in order to see where they can make the most advantageous investment. Here a new channel is being created for people to invest their money in a way which perhaps will be most advantageous to them. I do not want to say that capital will be attracted to new industries. The hon. member for Pinetown says that is not so. I will not say it is so, but at least the tendency will be there. But I want to state very clearly that new capital is attracted to industry and mining and the other commercial enterprises, and that new capital can only result in greater fluidity of the market and more prosperity in the country.

Once again I want to thank the Government for having introduced this measure and I hope it will be in operation soon.

I have no intention of crossing swords with the last speaker, nor do I intend traversing the ground covered by the hon. member for Pinetown (Mr. Hopewell). There is a very distinct advantage in this Bill having been left over from last session to come before us now. Not only has it given us an opportunity to study and understand the contents of the Bill, but we have also had the added advantage of having some guidance and advice as to what it means.

There is just one matter I want to raise, in support of the hon. member for Pinetown. That is on the question of making an appeal to the hon. the Minister to extend the principle which is already contained in the original Act to this additional portion, namely the principle, set out in Clause 7 of the Bill, of permitting an appeal to the courts. This method of investment, unit securities, is applicable in other countries and experience has been gained there, but as far as we are concerned it is quite a new venture. There is very great need, therefore, that we should start without making errors and without letting bureaucracy be the master of the situation when the greater sphere of governmental interest can deal with the matter. The provision which exists is a very salutary one. Of course, I do not know to what extent these provisions have been used, but where there is a right to go to the court where there has been cancellation or suspension of a registration, it seems to me that in principle there should be that equal right when there is the refusal of a new application. It is a case where the Government and the country can well have the experience and the wisdom of the court to guide it in regard to the suitability of the concern entering into this sphere of business. I know that there are certain matters of detail which differ Clause 7 from the present sub-clause (4), but that is a matter of detail which we can discuss in the Committee Stage. But I do make this appeal to the Minister, to give consideration to the suggestion that has been put forward and to continue what is really a very salutary practice.

In common with everybody else on this side, we accept that this Bill is intended to encourage activity in our economic life and also to protect the public, because it will deal with a large amount of public money. I think I should just say, in regard to the last speaker, that I support him entirely in regard to the question of an appeal to the court, but there are one or two other matters I would like to mention.

Clause 35 brings in the question of boards of executors and trust companies, a large number of which run participation in specified mortgage bond schemes. I understand that originally it was not intended that such companies should be brought into this Bill, but that difficulties have arisen because in some respects their activities in regard to participation bonds fall under certain provisions of the Act. I understand, further, and I know, that there have been negotiation between the Department and the Association of Trust Companies and that they have more or less come to an agreement in regard to the regulations which will govern the activities of these trust companies and boards of executors. I personally feel that this is giving bureaucracy a bit too much scope, but again I must admit that the regulation suggested by the Department will not be very onerous. But I am asking the Minister please to see that those regulations which are drafted to govern these boards of executors and trust companies in mortgage participation schemes are left as light as possible. It is very difficult to realize why they came into the purview of the Act, but as they have done so they must not be landed with any real bureaucratic control.

There is another matter I should like to mention. My own thoughts are that possibly certain provisions of this Bill will make the work of the managing companies too onerous. They might defeat their own object. In the one clause they are required to take at least 10 per cent participation in the units. Then we go on to provide that they must re-purchase any units offered. As the hon. member for Pinetown (Mr. Hopewell) has said, this throws a tremendous responsibility upon the managing companies should things happen to go wrong. We have in this Bill, as far as one can humanly see, spread the responsibility towards the public, to see that they are protected, but I fear that here we have gone too far, and it may defeat the whole object of the scheme. I wonder whether the Minister should not discuss it with his Department. I have not clarified my own thoughts on this question yet, but I wonder whether there should not be some limitation on their liability. After all, they have put in 10 per cent of the total unit and they have a definite stake in it. Now you are in effect making them responsible for re-purchasing every unit if called upon to do so, and that is an extremely onerous responsibility.

A third point I should like to mention is that the Minister mentioned the question of taxation and explained that these unit schemes would be taxed as companies. I have not been able to find anywhere in the Act, in the old or the new Act, any requirement that all the dividends received have to be redistributed. Under the Companies’ Act, of course, if there are capital losses the directors will have to consider whether they should distribute a dividend in the event of capital losses having been made. But here we have the position that dividends are going to an organization which will be taxed as a company, and as far as I can see they may be retained there by the management, at least to some degree, and if they did not reach the unit holder it would affect the income of the country. I may have got this wrong, but I do not think so. I cannot find anything in the Act which covers the distribution of dividends.

The unit trust movement first became popular in the world after the 1929 crash in the United States. People in the U.S.A, had invested money in certain securities in their own market, and the awakening after the crash ruined millions. Everybody was an investor. Therefore the new idea of the unit trust spread throughout the U.S.A. It spread to the United Kingdom, and after that to South Africa. Now, the unit trust has one great advantage which the Minister has mentioned. It has the great advantage in investment of a spread-over. It means that the small man can share that advantage with the rich man. By buying a unit in a great trust, he has a fraction of the holding. But it also has one great disadvantage. The disadvantage lies in the negotiability. How is the holder to dispose of his assets, and how is he to find out what the value of his assets is? If he buys 100 shares in a mining company, or one share, he can find the value of his shares by reading the Stock Exchange quatations any day, but if he buys shares in a trust he does not know. What has our experience been in South Africa? We have had unit trusts advertised in South Africa to pay 7 per cent and 8 per cent and even more. It is very easy to give you a unit fixed trust that would pay 8 per cent or 9 per cent or more, because many of the holdings are wasting assets. They are mines with a life of from five to ten years. They are not developing mines with a great future, and therefore they have fat dividends and a short life. The holder of the unit trust receiving his annual dividend is really receiving part of his capital back The awakening came in South Africa when investors came to sell their units. But generally very few of them were sellers. Chiefly in deceased estates, it was found that the value of the units was very much lower than had been paid for them. There was no appreciation, and that was the awakening.

The hon. the Minister this afternoon said that it would be incumbent upon the new trust to re-purchase the units. How are we going to arrange that? How will the market be arranged? It is quite easy to say that if you have a rand trust, and pay a rand for a unit, you will buy or sell, but what about the margin between buyer and seller? Supposing they say “we will buy from you at 80 cents although we are selling at 120?” it is still incumbent upon them, but there is no close margin as there is on the Stock Exchange. There is no stock exchange in the world that I know of which has a finer margin than the one we have in South Africa. We have shares listed in South Africa to-day at 1,000 cents, where you have a margin of five or ten cents. This is a remarkable market, but these trusts cannot operate in that way.

The hon. member for Pretoria (Central) (Mr. van den Heever) tells us of the advantages in this new form of investment, but I want to say that investing your money in a trust does not bring more money into equities for the development of industry. In the last year, through all these big insurance companies and financial companies buying up shares, they have taken the equities off the market but they have created no new industries. That is the position. What South Africa needs to-day is money in new industries, and that we shall have to find. This Bill does not do it, although it is a very good Bill, and I hope we shall have an opportunity to discuss it further in the Committee Stage. I should have liked it to go to a Select Committee, but after the Minister’s assurance that interested parties have been consulted over a long period, I am quite prepared to accept it. I agree that it is a good amending Bill.

Now there is this to be said at the end. We are going to have this new system of investment, but it is not easy to operate in South Africa, a very small country compared with the big industrial countries of the world. We are now having industrial countries, not only like the United States or the United Kingdom or Germany; we are now having a European Common Market where there is a spread-over of all the industries there. I would like hon. members of this House to tell me how they would choose a very good unit trust for 20 sound South African industrials. The Minister of Economic Affairs should be an authority on that, and I think he will agree with me that it is not easy. I am not speaking of mushroom industries, but of old-established, sound industries. I agree that some of the improvements in this Bill are very good indeed, and I hope that in the Committee Stage we shall have an opportunity to make further suggestions to the Minister. I agree with the hon. member for Pretoria (Central) that in a Bill of this kind we can work together to protect the public.

I want to thank the House for its general reception of this measure, and I particularly want to thank hon. members who have made constructive suggestions, which I shall reply to as far as I can at the moment but which I shall consider before the Committee Stage. I can quite understand that the expectations of the effect of this measure, will not be put equally high by members on that side of the House even amongst themselves, and by members on this side even amongst themselves. We are to a certain extent on an uncharted sea and all that we know is what we can learn from the experience of similar movements in other countries. I do not think it is right to say that this particular investment by small savers in a unit portfolio will directly benefit any particular industry. It is true, as the hon. member for Pinetown (Mr. Hopewell) has pointed out, that it is only 5 per cent, but on the other hand it may be that there are six such schemes and if each of them were to put 5 per cent into any particular investment, it becomes quite appreciable. The hon. member for Kensington (Mr. Moore) said that it does not mean that you make this capital available for industrial development. Not directly, perhaps. But what you do here is that you channel investments away from the customary line, that is to say, from interestbearing investments. You now channel them into risk investments. It is true that only shares which are already on the market will be purchased; but if that capital is made available to people who have some experience, it may help indirectly in the establishment of new industries. I think then the total amount of investment or risk capital will be increased by this. To a certain extent it will be diverted away from the institutions which provide for a fixed interest and it will go into the broad sector of dividend investments. As I say, it is difficult to be too optimistic or to be too pessimistic about how this is going to work; we will have to see. All that we are concerned with at the moment is to see that in the Act which we provide, we create the best possible climate for making a success of this scheme, and for that purpose I would welcome all constructive suggestions. Sir, here I want to pay a tribute to my Department. They have gone to tremendous pains in order to evolve a scheme. I do not think there is going to be a tremendous number of these schemes. I do not know—this is just my personal opinion offhand—whether economically there is room, taking into account the size of these portfolios and the capital requirements we put, for more than half a dozen. But we want them to be tiptop institutions, and we want to be careful because I don’t know whether at the time the old Act was drawn up we had sufficient experience of the fixed trust. It is not only that we are introducing the new principle of the open-end trust now, but I think we are also profitting by the experience we have had in the past ten years of the fixed trust. I am therefore modestly hopeful. As the hon. member for Pretoria (Central) (Mr. van den Heever) has said, there is a certain amount of aversion—it is a psychological fact—to investment in shares, and I think this may be an aid to breaking down that resistance. I only hope that there will not be any disappointments because then whatever good is done in that direction will be lost.

There are a few points which have been raised here and with which I can deal at this stage, but I want to start by saying that it is, of course, very difficult to provide for every contingency in the Act itself. One of the main documents here will be the trust deed. The trust deed is of the greatest importance, and in the trust deed many things can be said which cannot be said here. That trust deed must be scrutinized by the Registrar, and that will provide for many of these problems to which hon. members have referred here. I regard the trust deed as one of the most important factors in making this a successful innovation, but it is difficult to prescribe at this point of time what should be in the trust deed. The main value of the trust deed is that whatever provision there is will be there for the public to see. Take the one case that has been mentioned here by the hon. member for Pinetown (Mr. Hopewell), namely Section 20 (1) (f). Subsection (1) (f) makes the position quite clear. It says—

This should be read with Section 22 (2), because Section 22 says in sub-section (2)—

It is not an absolute compulsion therefore to purchase outright, because you now have to set out the conditions under which you will repurchase. That is why I said in my second reading speech that it will have to re-purchase it except in exceptional circumstances, but whatever those exceptional circumstances are in which they will not re-purchase, they must be in the trust deed. That is the protection for the public. It is difficult to provide for every contingency when a trust deed is framed. I suppose people will think of a contingency like a war, for instance. There may be a war or there may be a Black Friday, but whatever they say—if they say, “we will repay it but under these terms and conditions”—the investor will know what those terms and conditions are.

Who would lay down the amount or price, because you may have a tremendous fall in shares.

Clause 22 (c) provides—

I have given hon. members this example to show that many of the details which are worrying them, actually constitute matters for determination in the trust deed, which I consider very important. Sir, it is difficult to answer all these questions, but I would just like to say that I think that is the answer to many of the questions. It would depend on how the management company frames its trust deed, but the main point with which we are concerned is that the conditions must be clear so that everybody will know what they are. The investor must go into it with his eyes open.

There are a few other points that I want to touch upon. In regard to the question of overlapping with companies under the Companies Act, I don’t foresee any great difficulties there. There is, for instance, our prohibition clause which makes the registration of any similar companies impossible. I think that will have the affect of providing that such companies which are common to both will not be registered. But I think it will not be difficult to find some modus operandi, some liaison, between the two in those cases where it is necessary. After all. we have had experience now for more than ten years, since 1947, and I do not know whether it has led in the past 14 years to any practical difficulty such as that mentioned by the hon. member. I am sure that if there is any difficulty, it is not beyond the ingenuity of the Registrar of Companies and one Registrar to find some workable arrangement, some modus operandi, to deal with such particular cases, but I personally think that this difficulty that the hon. member visualizes will not eventuate under our new prohibition clause.

The hon. member has referred to the question of capital gains. I said in the course of my speech that we do not intend to regard a company of this nature, a unit trust of this nature, as a dealer in shares, but it is not impossible that there may be abuse, and that instead of replenishing their stores from time to time, throwing out the old and bringing in the new, they become speculators in stock, and in that case we will be able to clamp down. We will watch the position and, while we will not do it without warning, if we see that what is supposed to be a unit trust company becomes nothing but a speculator in shares, if we see that it goes beyond its normal functions, there is sufficient liaison between the Registrar of Companies, the registrar of financial institutions and the Commissioner for Inland Revenue to see that there is no abuse of the concession provided for in legislation that we will introduce, the concession of not regarding them as dealers in shares. It is their normal business from time to time to sell old shares and to buy other shares, and as far as they legitimately confine themselves to that business, any profits that they make in the course of that will not be regarded as taxable.

The hon. member has asked whether I cannot extend the principle which is in Section 7 in regard to appeals from the Registrar to the Minister; he feels that should go further, as in Section 7.

We feel very strongly about that. It is very important.

I am dealing with this seriously, because I do not unnecessarily want to usurp the functions of a court of law, but you will have to consider the nature of the circumstances under which under Clause 7 this right of appeal is given not only to the Minister but from the Minister to a Court of Law. If hon. members will look at Section 7 they will see that the Registrar has the power to cancel the registration of a management company under this Act, and he can do so if he is satisfied that the company has contravened, or failed or neglected to comply with any provision of this Act with which it is its duty to comply. That is followed by some further words which I need not quote, and then it goes on to say—

that is apart from the winding up,

The point that I want to make is that this is taking away a vested right from a company which has exercised that right as a company for some time, and is now faced with the possibility that what has been its business all these years can now be taken away by the arbitrary decision perhaps of an official. Those are the circumstances under which the right of appeal is given. But it is entirely different if it was not a question of whether you have transgressed the law—because you are only applying for registration now; it is not a question as to whether there has been a legal dereliction of duty but it is now an administrative decision which has to be taken and in those cases, as in the Banking Act and as in the Insurance Act, we say that no court of law is really in a position to deal with an administrative matter like this. It is not a question of rights which have been given and which are now being taken away. It is a question of refusal to register a company. It is not an existing company which has already acquired certain vested interests and which is now being deprived of those interests on the ground that it has not carried out the provisions of the Act, on the ground that it has some legal transgression against it. In those cases it is quite appropriate. But what is the position with regard to banking institutions, for example? We were faced with this position a number of years ago. We have a number of banking institutions here, and within the space of a few months there were two new banks entering the field, and then we gave to the Registrar, subject to appeal to the Minister, the right to refuse registration under certain circumstances. There was a possibility at that time of a number of other banks opening business, because it was one of the easiest things to start a bank, and we said that we ought to have that right. But with all due respect, how will a court of law be in a position to say whether or not a new banking institution should be allowed? It would be different if we were to take away from an existing bank any of its rights to trade here. Let us assume that a Soviet bank, for instance, were to make application for permission to operate here. There it would be an administrative decision that we would have to take, and the position will be the same here as in the case of a bank. If we have reason to think that there is over-trading, if we have reason to think that it is not in the public interest, then the Registrar is to refuse registration to a new management company, and there is an appeal from the decision of the Registrar to me, and I think that is right. I do not think that this is a matter for the courts of law. If it was a question of taking away rights, I would be in full agreement with the hon. member.

But you are taking away the right of an individual to start a thing and it may be a perfectly legitimate right.

This is not an existing right, it is a potential right. I suppose I too have the right to apply for anything I like, theoretically, but I am not depriving any person of any right which he has exercised already. That is the difference. In the one case it is a purely administrative discretion which has to be exercised, and in the other case you have to exercise discretion legally as to whether there has been a transgression or not which requires this punishment of losing what you have

Does that provision not place much greater responsibility upon the Registrar than any responsibilities he has today? Does it not make the Registrar a much more responsible and important official than he is to-day?

No, he already has the same responsibility in regard to banking. He is entitled now to refuse registration. We are only extending it here; we found that we had to extend it, instead of waiting until that position arises in the future. we are now making provision for it here. If it had been a question of tampering with vested rights, then I would have been in full agreement with hon. members.

The hon. member for Pinetown has said that one must not give this general warning, that it is ineffective. I am inclined to agree with him, but I give it for what it is worth, to enable me to be able to say, “you have now burned your fingers; I told you so”, In regard to these investment clubs, it is all very well if you have a small investment club in which a number of your friends join you. They are not the ones which are a danger to the public; they are not controlled and we do not want to control them; but what you have now is this phenomenon that one man controls a number of individual clubs. Many of those members may not even be aware of the fact that there is this central control of 20 different clubs, and we say that in that case we must protect that man; he should not be under the control of somebody who is not under the control of this Act. What we are doing is to warn people that if they want to go in for clubs, they must satisfy themselves that the club is not one of the parts of the bigger whole. In the case of people who organize these big central clubs controlling a number of smaller clubs, we say to them, “you must take care; if you go too far, we are going to extend the provisions of this Act to your activities”,

Motion put and agreed to.

Bill read a second time.

I move—

The main object of this Bill is to transfer to the Secretary and officials of the Department of Housing, the powers and functions and duties conferred upon the Secretary and officials of the National Housing Office, in terms of the principal Act. It gives me pleasure on this occasion to announce the establishment of a full-fledge Department of Housing. This Department was formerly there as a sub-department under another Minister, but it has now become a department of its own and has received the recognition which is given to every major sub-division of the machinery of State that performs an important function. This Department, the National Housing Commission and the Bantu Housing Board, has already done a great deal to carry out the policy of the Government that the families of all races should be properly housed. In proof of this we have the thousands of homes and numbers of happy families throughout the Republic. As in the past this important task will have to be carried out on an even greater scale under the wing of this Department. The provision of homes or housing is, however, not the only task of this Department. It is also responsible for all housing matters flowing from other legislation, such as rent control, the management of Government townships etc. and such other tasks as the Government may from time to time impose upon it in connection with housing. While this amendment is necessary, we are availing ourselves of this opportunity to put a few other matters right in the principal Act in respect of which there has been some doubt from the legal point of view, or which have become desirable due to changed circumstances in the performance of the Government’s task to provide housing. The portion of the Bill which deals with the transfer of the powers and functions and duties of the Secretary and officials of the National Housing Office to the Secretary and officials of the Department of Housing is contained in Clauses 1, 6, 8(a), 11, 14, 16 and 17. All these Clauses deal with the new situation which has arisen because of the establishment of a full-fledged department. Clause 6 deals with the transfer of the powers, functions and duties from the Secretary and officials of the National Housing Office to the Secretary and officials of the Department of Housing and no greater powers, functions or duties are being placed on the Secretary of Housing or on the officials of the Department of Housing. The remaining clauses in this portion, except Clause 17, are consequential upon the acceptance of Clause 6, and deal in general merely with the substitution of the Department of Housing for the National Housing Office. The position is slightly different as far as Clause 17 is concerned, because provision is made in Clause 17 for the fields of activity of the National Housing Commission and the Department of Housing to be separated as far as compilation of annual reports is concerned. That is simply to bring the position into line with the new situation.

For the rest there are a number of new measures, like those contained in Clauses 13 and 15 of the Bill, which are actually innovations. The principle contained therein, however, is not in conflict with the spirit of the principle Act and the object in general is simply to ensure that the necessary legal powers will exist in order to carry out the duties that have to be performed without going through lengthy and complicated processes. According to the principal Act the Commission cannot at present acquire property other than property required for a scheme as envisaged in the principal Act. Clause 13 does away with this limitation by empowering the Commission to acquire any immovable property where deemed necessary with money from the National Housing Fund and to deal with it as though it was originally acquired in terms of the provisions of the principal Act. This provision is necessary to enable the Commission to assist with the development of towns where there are houses already but where the towns have to be replanned, or where the acquisition of such property is desirable with a view to the proper establishment of communities in such towns or areas.

In the final instance new principles are contained in Clause 15 in that two sections, namely 43bis and 43ter are inserted in the principal Act. By the insertion of Section 43bis the object is to place the Commission in a position, in cases where it re-plans old existing towns or portions of a town, and where it is found in the process of doing so that the nature and character of the existing town change to such an extent that its existing name is no longer acceptable or appropriate, to adopt a more direct procedure, a procedure which is not so involved and drawn-out and to avoid duplication which may adversely affect the development of a scheme in such an area. I may add that I believe that this measure is not necessary in respect of all four provinces, but there are provinces where we come up against unsurmountable difficulties. Apparently that is not the position in the Cape Province. The clause also empowers the Commission to assist a local authority who experiences difficulties as regards the name of an existing town which has or is being established with housing funds, to change the name of the town to a more appropriate name. I want to give an example of such a case, Sir. On the Reef, for instance, there is a place called Western Native Township which is being developed by the City Council of Johannesburg as a Coloured area. The Bantu are being removed from there. It will be absolutely wrong to retain the status quo and to call it Western Native Township once Coloureds have been established there, which is happening rapidly. There are also other cases where White people will be established in areas with names unsuitable to the new position.

The object for inserting Section 43ter in Clause 15, is similar to the object in the case of 43bis, but in this case power is conferred on the Commission, in consultation with the Administrator of the province concerned and the local authority of the area in which the Commission wishes to develop a scheme in an old existing township and where it is found that the existing planning does not conform with present-day standards and requirements in many respects, where necessary, either to close or to change certain streets, parks or public places, with a view to improved planning, traffic control and other amenities for the inhabitants. It is also laid down that ownership of such public places that are closed will not revert to those who originally built the town, because of the fact that they have already been compensated, but that ownership must vest in the Commission who will put it to use in the interests of the community. Because of the tremendous progress that has and it still being made with the proper housing of the various national groups, and because of the construction of new high roads and streets and the re-planning of large sections of our towns and cities, it happens that some parts of our cities and towns that have become slum areas now undergo a face-lift and in many cases they are replanned and reconstructed and converted into practically new urban areas. In order, therefore, to meet the needs and requirements adequately of the new development that is taking place in old areas, provision is made in the Bill in this way.

Then I want to say something about the provisions dealing with the promulgation of regulations. This portion of the Bill deals with those provisions which make it possible to promulgate regulations under the principal Act. I must point out that, as it is, the principal Act is a measure in which previous housing legislation, including the emergency regulations issued under the old Housing (Emergency Powers) Act of 1945, have been consolidated. In many respects, therefore, the principal Act already corresponds with the regulations in which the powers of those concerned are clearly outlined or circumscribed. That being the case and because there must be the greatest elasticity if the legislation is to be applied in an orderly and reasonable manner, particularly where there are cases, including the various income groups for which provision has to be made, which differ greatly and where each case has to be treated on an ad hoc basis, the promulgation of regulations can hamper the Commission in the exercise of its discretion and can, in more than one instance, create contradictions. The power to issue regulations in respect of other matters which are or can be dealt with in other ways, is omitted in Clauses 3, 8 (b), 9, 12, 18, 19 and 22. Hitherto the procedure adopted in practice was not to make much use of these regulations, but after obtaining legal advice I am convinced that it will be better if we followed that legal advice and rather deleted that power to issue regulations, otherwise we may find ourselves in difficulties and limit the elasticity of the Commission’s activities.

The object of Clause 3 is to do away with regulations in respect of the control of the funds and related matters. In actual fact the fund is managed on a current account basis and is consequently subject, inter alia, to interest rate fluctuations which call for immediate action. Other aspects also crop up which have to be dealt with from time to time and in the circumstances, therefore, it is not desirable to lay down by regulations the powers of those concerns that have to make arrangements in respect of the fund or the interest rate that will apply.

The provision contained in Section 16 of the principal Act, assumes that regulations have been issued in respect of the limit placed on the income of persons that may be housed under schemes established or being established with money from the fund. Regulations laying down those limits, however, deprive the Commission of its right to exercise its powers, as granted to it under other sections, on the conditions on which it may decide, with the discretion necessary to consider deserving cases not only on merit but on an ad hoc basis, a position which is in conflict with the spirit of the principal Act where the powers of the Commission are made as elastic as possible. The same applies to Clauses 9 and 18. Their only object is to eliminate unnecessary duplication seeing that the Commission already has powers under other sections to approve of loans on such conditions as it may determine.

Clause 12 amends Section 22 of the principal Act in which power is given in paragraph (h) to lay down, by means of regulation, the period within which building loans have to be repaid. In the same paragraph, however, it is provided that the period shall not be longer than that laid down in the Building Societies Act of 1934. The Commission already has the power to come to an agreement as regards the period of repayment of building loans.

Clause 19 amends Section 50 of the principal Act so as to correct the assumption that regulations must be issued in respect of a local authority as to local authority housing loans, in view of the fact that the powers of local authorities in this connection are fully prescribed in the relevant section, the object being, in any case, to leave the consideration of each case to the discretion of the local authority subject to the approval of the Commission.

Clause 22 amends Section 77 of the principal Act. This section of the principal Act is really the section which deals with regulations and which provides for the issue of regulations in respect of those matters which I have already mentioned and which has, from our experience in the practical application of the law, shown to cause duplication or to place under restraint the discretionary powers of the Commission, which is essential for the orderly and reasonable application of the law. In the preceding clause, an attempt has been made to do away with these contradictions. Flowing from that as a logical consequence, the enabling provisions of Section 77 disappear, that is to say, from the amendment already moved. Certain specific matters in respect of which regulations must be promulgated and which are necessary if the principal Act is to be administered effectively, are being retained, or inserted by way of the proposed amendments.

The last portion of the Bill simply removes certain difficulties which have been experienced in practice. For example, Clause 4 provides that the Minister of Housing shall not be confined to a serving medical officer for nomination to the Commission, but may nominate any other medical practitioner who has the qualifications laid down in the Public Health Act of 1919. All that Clause 5 does is to adapt the ranks of officials who may serve on the Bantu Housing Board to the change in the ranks in the Public Service and the change in the name of the department concerned. Nor does the change in Clause 7 embrace a new principal, it merely confirms legally the establishment of a redemption fund for the redemeption of sub-economic loans and lays down that the Secretary of Housing must invest all payments which he receives in respect of such redemption fund with the Public Debt Commissioners.

This procedure has hitherto been followed, but there has been a measure of doubt as to whether sufficient legal provision had been made for it. The object of the amendment in Clause 10 is to enable the Commission to require interest to be paid at the prevailing rates of interest on money it has to pay to local authorities for the benefit of borrowers or buyers of commission houses to cover municipal fees. In advancing that money the Commission protects its own interests in the property, because local authorities may attach those properties on which fees are outstanding. In the fifth place Section 66 of the principal Act does not provide specifically that the State’s share in losses sustained under schemes erected in terms of it, shall be appropriated by Parliament from Revenue funds. The amendment in Clause 20, therefore, merely puts it beyond any doubt that funds for this specific purpose must be appropriated by Parliament and merely confirms the existing position. In the sixth place, the object of Clause 21 is to make the provisions of the State Property (Immunity from Rating) Act applicable to certain properties of the Commission. In the first place, the object is that inasmuch as the Commission is saddled with a task which is of national interest, and inasmuch as it cannot be compared with people who embark on private housing schemes with profit-making as the object, the Commission’s expenditure in respect of property which it holds on behalf of the State, should be kept as low as possible, and in the second instance, where the Commission owns property, to encourage private authorities who are regarded by the State as the bodies responsible for the housing of their inhabitants, to take over such property and to develop it themselves. The object of the amendment, therefore, is to exempt the property of the Commission which it has not sold or let. from municipal or divisional council rates and taxes, with this proviso that if a local authority should offer to take any land over from the Commission for housing purposes and for the purpose of developing it, and the Commission should refuse to hand it over, property tax will be payable. We already have various examples of exemptions of this nature in other legislation.

Then I just wish to announce, Sir, that in the Committee Stage I intend moving the deletion of Clause 2. As it stands at the moment parliamentary control may become involved, whereas I achieve the object which I have in mind under Clause 13. I shall, therefore, be satisfied with Clause 13 and withdraw Clause 2.

May I, before dealing with the Bill, wish the hon. the Minister, in his first venture in his new important responsibility as Minister of Housing, the best of good luck! The Minister has taken over a most responsible portfolio, and I can assure him that, although we probably won’t always agree and will probably criticize, we will endeavour to do so in a constructive spirit and with the aim to assist the development of housing wherever possible.

The hon. Minister has given a pretty fair summary of the Bill before us, and may I say right away that to a very large measure we agree that the provisions of the Bill have become necessary due to changes in the set-up of the Commission which now becomes the Department of Housing and to certain other Government legislation. This has necessitated adjustments in the Housing Bill to meet the new situation, and a large number of the clauses of the Bill deal entirely with administrative effects flowing from that feature, and, also in the second place from procedures which have developed as between the Housing Commission, local authorities and provincial administrations in the administration of various features of the Act, and which the Bill in its present form will now place above all doubt as regards legality. As far as those matters in general are concerned, I do not propose to debate them. It is something that has to be done as experience has shown, in the best interests of the progress of housing in our country.

The hon. the Minister himself in his remarks referred to one feature, and that was that, when introducing this Bill dealing with these very necessary changes, the opportunity was taken to introduce certain new features, and the hon. the Minister enlarged on them, particularly with regard to Clauses 13 and 15, which introduced to a very considerable extent new principles in the Bill. I should like to say at the very outset: How much grief would the Minister and his Department be spared if the temptation to slip these little new things into a perfectly useful Bill had been resisted a little more strongly. It is a pattern which we have become so accustomed to, that in a Bill which is good to the extent of 90 per cent, we find 10 per cent to which we have to object very strongly. That applies in this case. How much better would the legislation eventually be if this temptation could be resisted and these contentious matters be brought before the House on their own and dealt with on their merits, not being wrapped up in a Bill which you want to accept as being in the over-all interest of the country.

The present Bill follows in that respect this very well-known pattern of being used as a vehicle to carry through one or two features to which we object, features which make substantial inroads on the authority and the powers of provincial administrations and local authorities. They may be quite necessary. The hon. the Minister has referred to the question of the change of names of townships, that the authority should be granted to the new Housing Department to change the name of townships where it is found necessary to do so, and he referred to the case of the Western Native Townships. Nobody queries the necessity of changing certain names, but there is machinery provided under the existing law of the land for local authorities or the provincial administrations to carry that into effect. I cannot for the life of me see why that authority has to be handed over to the Department of Housing. Statutory authorities have been created in the Constitution of the country to do this work and it seems to me that we are, as has been the case since the original Housing Act was conceived, steadily making inroads on the rights of these other authorities, in order to create a bigger and bigger Department to deal with housing.

The original concept of housing certainly did not envisage the setting up of a body which was going to be a very large property owner in the country. The original concept, and the principle which to my mind is still enshrined in the Act, even as amended, is one under which the Commission, or the Department as it is now, helps to find the finances necessary and gives technical advice and assistance, encouraging the development of housing, and then leaves the rest to the authorities concerned in the area affected. There, surely, you have people who know the requirements and the needs of that particular area better than a statutory body in Pretoria. The ownership of the various schemes carried out by the local authorities, remain with the local authorities, to control, to supervise and maintain, and to repay the necessary loan funds to the Commission, and it appears to me that we are now enshrining a principle in the Bill which goes beyond the original conception, the original principle that Parliament had in view when the whole of this housing organization was set up.

Take Clause 7 dealing with the investment of certain sinking funds. The matter there also is one, as I understand from investigations made, of putting into the Statute more or less a principle that is adopted at the present moment, namely that the local authority which sets up its sinking fund to meet the liabilities in respect of loan funds raised from the Commission, will be limited as far as the investment of such sinking funds are concerned. Originally, in the early days of housing, a local authority invested such funds itself with approved institutes. Interest accrued back to the fund and the borrowers from the fund—those acquiring housing loans—gained the benefit of any higher rate of interest at which the local authority could invest. These investments were subject to the approval, in those days, of the province or the Commission itself, or at that stage the Housing Board. Later it apparently became incumbent upon local authorities to invest their sinking fund through the Secretary of the Public Debt Commissioners. There is this possibility, which we have to face, under this new system, that the rate of interest accruing on an actuarial basis will probably be lower, and that the individual borrower will be called to pay just that little amount more eventually on his loan. However, it is a system that apparently has been accepted by the parties concerned, and I do not propose to enlarge any further on it, except to say that it is a job that could apparently have been done in a simpler way.

We come to Clause 15, one of the new provisions in the Bill, a provision to which we have to take objection. The alterations proposed do not seem justified and there seems no real reason why the same control that the Minister envisages could not be exercised through the local authorities concerned and the Provincial Administration. Clause 15 which introduces a new Section 43bis in the original Act, deals with the Commission’s right to change the name of any township in which the Commission is carrying out a scheme, if they feel it is necessary. In the second subsection of the clause there is a provision that the Commission shall not exercise its powers, unless after consultation with the Administrator of the province concerned and the local authority concerned, and after duly considering the representations, if any, of such Administrator and local authority. The hon. the Minister has given the example of the Western Native Townships. And has also said that this provision would be likely to apply only in certain provinces and probably not in others, as for instance, the Cape Province. But once this becomes the law of the land, it is competent to apply the provision anywhere. It is a principle which I for one do not like. It is a duty which apparently can be carried out quite as well by the local authority concerned who would know what names want changing, who would know from the inhabitants what new names would be most suitable; and surely the names of your streets and townships in any area as a whole should be largely governed by the wishes of the inhabitants in that area. In most areas a poll is taken of your local public to decide on a name, or otherwise the decision is based on some historical association, and surely those authorities are perfectly competent to do any renaming if necessary. Why then pass an Act of Parliament authorizing another authority to do so?

Then we come to 43ter in the same clause which has two sub-sections. There it proposes that the Commission be provided with the power that where any street, park or open space or land shown as a public place, in a general plan of any existing township or portion of any existing township in which the Commission is carrying out a scheme, is closed at the request of the Commission, the ownership of such land will then vest in the Commission, notwithstanding anything to the contrary in any law contained. Those again seem to be very sweeping powers, and I should like to ask the hon. the Minister to envisage the case where a local authority on local Government land has set up a township, or may be a private individual has set up a large township, portion of which has been developed or is being dealt with under a scheme by the Commission. The Commission acts as an agent for a Government Department in the establishment of a housing scheme, such as, for instance, the naval scheme at Simonstown. I may say that they have put up a very good scheme there. But once it has been established their work is done, and the Department concerned for whom they bought, then takes over. In this case, the local authority may have owned the land. The Commission for its reasons, which may be well-founded reasons, decides to close certain of the roads, certain of the open spaces, and they then lay down that the land comprising such streets or open spaces being closed, will then vest in the Commission. Why should the Commission take it over if it was not theirs in the first place? They probably started on land set aside for that purpose by the local authority, and that happens in cases where the land was not sold to the Commission. I can understand that where the Commission purchases land and pays for it, and later closes a road or public place, that the land so becoming vacant remains vested in the Commission. But there are cases where that, of course, would not apply, and it is something of which I think we have to take cognisance in the Committee Stage and will have to move an appropriate amendment.

I then come to sub-section (2) which says that whenever the Commission for any reason considers it necessary that any street, park or open space or any land should be closed, the local authority concerned, shall take the necessary steps to effect the closure. What about other residents in the area. They may not even be resident in the area affected or being dealt with by the Commission itself, but in an adjoining area, people who have to depend on these roads for access to their homes and businesses. Those people have invested in those areas as a result of the facilities provided by such roads, parks, public places. These were some of the reasons why they invested in residential property in that particular area. Then the Commission comes along and does away with the very incentive that induced them to go and live there. For what reason does the Minister think it is necessarty that Parliament should pass an Act to give the Commission the power to take away from those particular people the very incentives which induced them to make their investments in landed property? Then again, if it is necessary to deviate a road or close a park—and these things happen in every local authority area where there is a change in town planning—then surely it is the local authority and the Provincial Administration of the Province concerned that should do so. They already have the power, as a matter of fact, it is their responsibility. Why is it necessary to duplicate these powers and to hand them over to the Department of Housing? In the majority of cases I believe the local authorities and the Provincial Administration have had no difficulty with the Commission; they have co-operated well. At the beginning there were some snags, but I think they have all settled down now to do a good job. It is again one of the practices which is steadily whittling away the authority, the rights and the powers of the Provincial Administrations and the local authorities and causing part of the ineffectiveness of local Government in this country. In Department after Department you find the same principle being applied. More and more power is being taken by Departments. “This” is taken away and “that” is taken away from local authorities; powers which they have proved through the ages that they can exercise well. But somebody gets it into his head that “anything you can do, I can do better”, so give me that power. In that way you land yourself in endless trouble.

Clause 15 of this Bill contains certain features in regard to the name changes, the closing of certain areas and the acquisition of land, of which we do not approve wholly but we shall not hold up the second reading of the Bill on that account. We shall return to those particular features in Committee and introduce such amendments as we may think appropriate.

I want to deal with Clause 19, which deals with Section 50 of the Act. There in general the same principle applies as that which applies in Clause 22, which deals with Section 77 of the principal Act. The Minister explained at some length and quite accurately the position in regard to the framing of certain regulations under the original parent Act—all covering various aspects of housing. Clause 19 proposes, inter alia: “Subject to such provisions as may be prescribed by regulation, a local authority may … with the approval of the Commission….” Again this is an encroachment on the existing constitutional set-up of local government. A local authority is subservient in its province to the Provincial Administration. It takes its authority from the Provincial Administration. The Provincial Administrator of a province has to approve of whatever a local authority does. He can either approve or withhold authority. Why is it necessary now to introduce another department? Instead of the constitutional authority, the Provincial Administration, another department altogether, namely the Housing Department, has to approve of the local authority’s regulations. Those regulations may be affecting housing as far as the Commission is concerned, but they may also affect a number of other responsibilities which are essentially the responsibilities which are controlled by the province, responsibilities such as health, access, roads and all the other things that flow from those. Why then have two authorities overlapping one another in this respect? It only creates more confusion.

Then I come to Clause 22 of the Bill, which amends Section 77 of the principal Act. I do not intend wearying the House with the number of deletions contemplated in this clause. I want to say, however, that Section 77 of the parent Act was regarded to a very large extent as one of the keystones of the Housing Act. It so happens that I was one of the representatives of local government who sat with the Government Department in the early stages to help to draw up the various provisions of the original Housing Act so as to meet local government requirements. Section 77 provides that the Minister can make regulations covering almost every facet of housing administered through the aegis of the local authority. It very largely includes, amongst other things, the granting of individual housing loans. That is the type of housing loan granted to a person of certain standing, of a limited earning capacity, a person who has been approved by the local authority as a fit person to get an individual housing loan to build his home. The regulations govern the limitations of the loan, the period for which it is granted, the size of the building, the drawing up of the plans, the nature of the building, the cost of construction, the occupant’s earning capacity, the sale or the letting of houses, to ensure that there will be no exploitation of the housing loan from a speculation point of view, the maintenance or repair of a house built because it remains security for the loan until it is repaid, the bonding of the house (the municipality or local authority concerned accepts responsibility for the loan) are also now to be repealed. These regulations were laid down as a standard throughout the Republic, the Union as it was at that time. So that in any part of the country the same broad principles apply and individuals were treated on an equal basis. The Minister in his remarks said that it was proposed—so does the explanatory memorandum—to deal with these matters by ad hoc decisions of the Commission. Human nature being what it is, one can immediately realize the risks and dangers immediately introduced when one starts making ad hoc decisions which can differ all over the country dependent on the different people who make them, particularly as far as these types of regulations are concerned. There is a risk, you cannot avoid it; human nature being what it is. It appears there also that whilst in certain cases relaxation may be necessary in order to clear away any obstacles, the withdrawal of any standardized regulation altogether does not seem justified. It exposes the whole set-up, and particularly the individual house owner, which is one of the most important aspects of national housing, to certain dangers. Private home ownership is one of the most important aspects of housing because it encourages in particular those people who would otherwise never have been able to acquire a home, to do so and thus give him that sense of responsibility which comes with home-ownership. They must be safeguarded. Those were features which were considered important when the original Act was drafted. As far as I know, there may have been minor snags in administration, but in general it appears to have worked well. It seems that the withdrawal of those safeguarding powers, as proposed in the legislation now before Parliament, and handing them over to ad hoc control will be very largely a case of handing them over to bureaucratic control which can vary from place to place, as I have said, at the whim of an individual.

I think I have covered the main features of the Bill with regard to the doubts which we have about it. In his opening remarks the hon. the Minister said that he wanted to stream-line housing so that it would fit into the changes that have come about because of group areas and various matters relating to Coloured legislation which is now part of the law of the land, and which impose certain responsibilities upon local authorities. This Bill has introduced in some of its clauses, certain provisos to meet these new conditions. Well, that is the law of the country and you cannot batter your head against Table Mountain all the time. One cannot oppose the adjustment of one law in order to meet the demands of another, as much as you disagree with the original law. But I am not going to argue about those things to-day.

In other cases, Sir, the Bill may provide short cuts which some of the officials administering the Housing Act may deem necessary. But without question, Sir, this is another of those measures which are steadily and repeatedly whittling away the authority of both the local authorities and the Provincial Administration. In that respect it is a dangerous Bill. It weakens the whole set-up of local government a weakness which is so apparent at the moment right throughout the country. It has also been weakened largely by over-centralization. Certain of the features of this Bill which I have already outlined, are breaking down local autonomy and replacing it by bureaucratic control, something which is not good for the country.

I want to ask the hon. the Minister, when he replies, to tell us whether these local authorities themselves, or through their institutions, have been consulted in regard to the new features which this Bill introduces and whether they have accepted them. My information is that they have not been consulted, not in general, at any rate, and that there is strong feeling in most of the provinces with regard to the introduction of this additional control of the taking away of the powers of local authorities and handing them over to this new Department of Housing. I should be glad if the Minister will tell us whether the Provincial Administrations have been consulted with regard to these new features in the Bill? And what has been their reaction?

I want to conclude on this note Sir. In this particular measure we are dealing with an amendment to the Housing Act of the country. Housing is probably the nearest of all needs to the individual concerned. It is imperative that all persons under a particular scheme, should be treated on the same basis as far as possible. That was why those regulations were adopted. The Act allows fairly wide latitude to local authorities and the provinces in dealing with private individuals. That is where the latitude is necessary, where officials are in contact with the individuals concerned and know exactly what the local needs are. The Act itself allows that latitude, a latitude which is largely to be taken away by this Bill. Those two authorities are in the best position to know the needs of their own areas and the needs of their own people. They are in the best position to deal with the important features arising out of the housing conditions in their particular area. To introduce an ad hoc basis now, as I have said, is to introduce risks which are inherent, human nature being what it is. I believe that this mass removal of safeguards, safeguards which have shown through the years to be effective, is both dangerous and unjustified. It is important that housing should not be held up. For that reason we are not opposing the second reading of the Bill. We are going to vote for the Bill. But we shall return to the points which I have mentioned in the Committee Stage and where desirable move the necessary amendments in an endeavour to re-introduce into this Bill those features that we think are essential or to eliminate from the Bill those features that we think are unnecessary.

Mr. Speaker, the hon. member for Simonstown (Mr. Gay) commenced by congratulating the hon. the Minister on his enhanced status. I also from this side of the House want to congratulate the Minister on this occasion and also to congratulate him on this important measure which is one of the first he has to pilot through here as Minister. I also want to say that the hon. member fr Simonstown tried to set a negative tone which we are accustomed to from the Opposition. But if we summarize everything he said and all the objections he mentioned, it is that the powers of the local authorities are being ignored in this Bill and that they are not consulted. The hon. member sets out from a few wrong premises, but I will revert to that later on in my speech.

I want to commence by saying that the underlying principle of this Bill is that the Department of Housing has now reached its full stature as a full Government Department; and further that the efficient functioning of this Department should be ensured. I want to begin by pointing out that this amending Bill draws our attention to this important milestone which has been reached, namely that we now for the first time have a real Department of Housing. In this respect other countries are far ahead of us. Most of the European countries have for a long time already had a separate portfolio for housing, but we started on a small scale. We started with housing in this country in 1920 as a sub-division of the Department of Health. At that time, in 1920, it was called the Central Housing Board. Gradually it grew, and now I want to point out that this Government played an important rôle in the development of this Department which has now become an independent Department. We think, e.g, of the Housing Act of 1957, when housing was taken out of the hands of the Provinces because there was a danger of the various Provinces each starting to move in its own direction; and a matter which is of such national importance could no longer be left in the hands of the Provinces. Therefore it was centralized. The powers and the funds were taken out of the hands of the Provinces and placed in the hands of the Central Government, with the result that there was centralized control and a central policy.

Furthermore, this legislation emphasises the fact that in future we will be dealing with an independent Department, so that we will no longer be dealing with a National Housing Office, but with a Department of Housing; that we will no longer be dealing with a National Housing Commission but with a Department with its own Minister; that there is no longer a Secretary of the Central Housing Office, but that he now also gets the status of the Secretary of Housing. I say this step was essential for various reasons, firstly because the scope of the work of the Housing Commission and the Housing Board increased so much. If we remember that in 1920, when a start was made with the housing and the Central Housing Board was established, R11,000 was placed on the Estimates for housing and that in the year 1921-22 just over R6,000 was budgeted for, and we see what is being done to-day, we can appreciate what tremendous development there has been. Since this Nationalist Government came into power, since 1948, every year no less than R20,000,000 was spent on housing. If we further remember that from 1939 to 1948, in those ten years before this Government took over, an amount of R61,919,866 was spent on housing, we again see what the development was. With that amount of money, 13,038 houses for Whites were built, and 31,707 houses for non-Whites. From 1948 to 1960 R243,083,608 was spent on housing, for which 34,527, houses for Whites and 165,893, houses for non-Whites were built.

The hon. member for Simonstown sighed and said, “Well, we must just abide by that”. It seemed as if he was really disappointed. He said that we could not oppose the inevitable. But was it not also the principle of the United Party that they always favoured separate residential areas? Now he pretends that he just has to be satisfied with it, whereas they have always favoured the same principle.

Mr. Speaker, not only did the number of houses increase, but if we look at the standard of those houses we can congratulate the Housing Commission and the Department of Housing on the work they did. As I said, during the past ten years R20,000,000 per annum was contributed towards this fund, and this year, with the money repaid and the funds voted the amount will be increased to R27,000,000. According to the report of the Controller for the year 1960-61, the capital of the Housing Fund which must now be administered and controlled by this Department is already an amount of R277,899,320. It is a tremendously big fund which will increase until eventually it will be sufficient to cover its obligations without further implementation.

What is the reason why this fund increased to such an extent? In the first place, one can say it is due to the natural increase in the population, as happens in any country. That natural increase results in more houses being required. But furthermore, never before have so many attempts been made to clear up the slums in our towns and cities as during the regime of this Government. That increases the scope of the work. There is the resettlement of racial groups in what have become model residential areas, of which experts from abroad speak with the highest praise. They say that we tackled a gigantic task and completed it very successfully. All of this shows why the work increased so much. For the rest, there is the replanning of cities and towns. If, e.g., we go to one of the large cities to-day and see how national roads and speedways are being built and how everything must be replanned because in days gone by those factors were not taken into account, we can now understand why the work of the National Housing Board, and now of the Department of Housing, has increased to such an extent that it justifies a separate Department with its own Minister.

It is only the scope of the work which necessitated this new Department. Another reason is the importance of that work, and I want to emphasize that. One can forget about community building in our modern society unless one also bears housing in mind, and unless one starts with housing. Experts in this sphere, any sociologist, will tell us that there has been found to be a very high correlation between bad housing and ill-health. Criminologists have discovered a high correlation between bad housing and juvenile crime and crime in general, and social evils like drunkenness, etc. There is a high correlation between bad housing and the breakdown of family life. That is why this step and any other step which permits housing is not one which should only be judged by its scope, but by its importance in any modern society.

But this Bill also provides for efficient functioning. The hon. member for Simonstown objected to certain steps now being envisaged to free the hands of the National Housing Board so that it can act more speedily and more energetically. He argued from three premises, all three of which are wrong. Firstly, he set out from the premises that we want to by-pass the local authorities completely. The Provincial Administrators are no longer recognized or consulted. That is a wrong supposition. If he had read this Bill correctly, he would have seen that only in extreme cases—and that is how it should be—those powers will be in the hands of the Department of Housing, and only as a last resort will that Department use those powers. The second wrong supposition is that the local authorities, which he lauded so much, are very enthusiastic in assisting in this matter. I think if he visits the offices of this Department and he takes them into his confidence he will see how many local authorities were unwilling and had to be forced. Are there not enough examples in Johannesburg and other places where the local authorities adopted a negative attitude and had to be forced to do certain things? Now he wants us to protect those angelic local authorities. If the local authorities are wide awake and take the lead in providing housing, they will never for a moment find it becoming irksome. There is nothing in this Bill to restrict them in any way or to hurt their dignity. He sets out from the supposition that the Housing Commission will act utterly irresponsibly in regard to expropriation, the closing of streets, the renaming of areas, etc. He should, however, remember that this is a responsible Commission which acts under the control of the Minister, and therefore there is not the slightest reason to fear that they will act irresponsibly. He is really casting a slur on the good name of responsible people. He can just forget about that.

The hon. member also had much to say about the regulations. In the Committee Stage the various clauses will be dealt with and the regulations to which he objects can then be discussed. But if these regulations are carefully considered, it is clear to us that the provisions for abolishing the regulations are aimed at nothing else but relaxing those restrictive regulations where they exist and where experience has shown that we are faced with impossible situations where we cannot take action because the regulations bind us, in order that this Bill may function properly. I think, Sir, we can say with certainty that all welfare organizations and anybody who is conscious of the need for the provision of houses, and who has to cope every day with the increasing need for dwellings, can adopt no other attitude than to be grateful for this Bill and these steps which are intended to provide for the housing needs of our people.

I have listened with interest and care to the reasons advanced by the hon. the Minister in moving these amendments, and I agree with a great deal of what he said. I have reason to believe that it is to one’s advantage on an occasion such as this to agree with the hon. the Minister to the greatest possible extent. But there are two clauses to which I think attention should be drawn, particularly if one looks at the scope and objects of the principal Act to which these amendments are to apply. I do not think it was ever the intention that this Housing Act was designed to take the place of private enterprise in the sphere of building houses, nor was it ever intended to supplant local authorities in the administration of housing schemes and townships. It was designed, I believe, to fill the gaps left by these two bodies so that adequate housing could be provided for the people. What private enterprise does not do, the bodies established under the principal Act should do, and I believe it is in that light that one should look at the amendments proposed by the hon. the Minister in the Bill presently before the House.

Clauses 13 and 15 are the clauses I have in mind, and, dealing firstly with Clause 13, that is a provision whereby the Commission is given power to purchase or acquire affected areas under the Group Areas Development Act, that is to say, properties which have been virtually sterilized under that Act and which can be dealt with by the Group Areas Development Board alone, save where it has waived its pre-emptive right. Now, there is in terms of Section 30 of the principal Act already a power for the Commission to purchase, expropriate or otherwise acquire properties. One wonders then why, that being so, there is in addition now another power to acquire properties, and the difference seems to be this, that the existing power is qualified. The Board or the Commission may purchase or expropriate land which is required for constructing a dwelling or carrying out a housing scheme. It can only acquire land where it is required for that particular purpose. But as I read the proposed amendment, affected properties can be purchased or otherwise acquired, even though there is no intention to use that land for the purpose of a housing or building scheme, and it seems to me to open the door, by giving to the Commission powers which it did not previously have, whereby the Commission can buy up land and hold it merely as a property owner, although it does not have the intention of acquiring it and of developing that property under a housing scheme. That seems to me the result of this proposed amendment, and bearing in mind that the object of this Commission in terms of the Act is not to become a property owner solely, I believe that the proposed amendment is an undesirable one and one which is too wide.

The Group Areas Development Board itself has power to develop land, to construct housing schemes, to lay out townships, etc. It has very wide powers. By means of this proposed amendment we are creating a third body with similar powers. Certain municipalities can do it, the Development Board can do it, and now we are to have a similar power vested in the Housing Commission. I believe it to be undesirable that we should have a number of statutory bodies with powers as wide as that, powers which can overlap the powers and functions of a local authority and which may compete in that field with private enterprise. I believe it would be to the advantage of the community if the powers given to this Commission were limited merely to those necessary to enable it to fulfil its functions of filling in the gaps which local authorities and private enterprise do not fill.

Now, coming to Clause 15, which was dealt with to a certain extent by the hon. member for Simonstown (Mr. Gay), the provision there is that where the Commission is carrying out or has carried out a scheme in a township or portion of it, the Commission may change the name of the township. Now, if one looks at the definition of “scheme” in the principal Act, one finds that it is a proposal for the building or development of two or more houses. Bearing that in mind, if one looks at the amendment introduced as Section 43bis, the Commission has power to rename a township, even although its interest, i.e. the interest of the Commission, in that particular township is a trifling one, namely the construction of a few houses on the outskirts of that township. I have no doubt it will be argued that type of situation will never be taken advantage of, that the Commission would never want to rename a township if its interest in it is only a very slight one, but if that is so, surely it is unnecessary to give that power to the Commission and this proviso could be reframed, so that although I do not agree with the power to rename at all, if that power is inserted it should apply only when two things are complied with, namely that the Commission has a large interest in the area in question, and it secures the approval of the local authority concerned.

So far as the second sub-section is concerned, admittedly the Commission has to consult the Administrator and the local authority, but it need not listen to or agree or act upon any representations made by these two bodies, and consequently that sub-section gives very little by way of a safeguard for the inhabitants of the township concerned.

So far as the second part of Clause 15 of the Bill is concerned, the amendments introduced as Section 43ter, it seems to be undesirable to give to the Commission powers whereby it can, of its own volition, take over public spaces, public parks, streets, etc. Surely it is sufficient to allow the Commission to exercise the powers it already has to acquire these properties by way of purchase or expropriation. There are those powers in the principal Act. They can be exercised for the purpose of acquiring these particular properties. I do not see why that is not sufficient, and of course in either of those cases there are certain sanctions imposed on the Commission, in the sense that it has to find the money to purchase the property if it wishes to do so, or alternatively, if it is going to use its powers of expropriation, there are a great many safeguards laid down in the principal Act relating to arbitration which would safeguard the person from whom the land is being taken.

For those reasons I take the view that although the majority of the amendments introduced by this Bill are either desirable or consequent upon the Department of Housing having been formed, certain of the amendments, namely those I have dealt with, whilst they are certainly, as the Minister said, not in conflict with the principal Act, they do extend its powers very considerably and I believe in an unwarranted fashion.

You and all these hon. members who have served in this House longer than the hon. member for Zululand (Mr. Cadman) and I, were all faced once with the task of delivering a maiden speech, so you know exactly how we feel about it. I need not try therefore to dissemble our feelings. I just want to tell you that I have recently acquired a greater and a better understanding of the fatalism of the two slaughter oxen which a farmer was transporting by lorry. The area was very hilly and the road wretchedly bad, with the result that the oxen were landing on their knees one moment, on their hooves the next moment, first against one railing, then against the other and eventually one ox said to the other in the utmost despair: “Oh, if we can only reach the abattoirs alive!”

Mr. Speaker, I have often heard the situation of a new member of this Assembly compared to that of somebody going to school for the first time. I do not know whether that is a fair comparison, but if it is I wish to say that I feel at home in this school and hope that I shall make progress here. In the school that I knew previously, I very much wanted to sit at the back, but for some incomprehensible reason I had to sit in front. Here I am obliged to sit at the back, and it is a great relief to me to note that even a bald head is a disqualification for the front-bench.

It is my pleasant privilege, before coming to what I actually have to say, sincerely to congratulate the hon. member for Zululand on his maiden speech. Naturally, I cannot judge of its quality and what prospects he and I have in this House. I gladly leave that to your mature judgment and that of the older members, but I do want to say that I like his calm attitude and I believe that he, like the rest of us, has the will to serve here in a spirit of goodwill and co-operation with his side and also with the other side, and in that spirit I wish to congratulate him very sincerely on his speech.

The need for suitable housing especially for the lower and middle income groups most certainly does not have to be debated in this House. Everyone who knows the social conditions, especially in the urban areas and the industrial centres of the country is only too painfully aware of the great need for housing which still exists and of the fact that too many slum areas still exist in our country. I think that, when we consider the wealth that we possess and the comparative space that we still have, even in our cities, it is a situation which in the long run we cannot allow to continue to exist. I think, therefore, that both sides in this House would welcome any steps which are designed to bring about an improvement in this condition.

As the representative of an electoral division in which this need has made itself felt among a considerable number of voters, and as the successor of a member who served for many years in this House and, among other things, devoted himself to clearing slum areas and providing better housing for the underprivileged, I wish to subscribe wholeheartedly to the principles underlying this Bill. I mentioned firstly those measures—the figures have been given here—which are intended to facilitate the application of the principal Act and make it more practical especially by the elimination of cumbersome procedures and protracted and redundant legal steps. I am not in favour of removing necessary provisions, but I feel that in the times in which we live and in the face of the diverse needs which exist, and with an eye to the formidableness of the task that we have to perform and which the hon. the Minister and the Department have to perform in this sphere of life, we have no time to waste on trivialities and cumbersome procedures, and therefore I feel that any attempt which is designed to remove these obstacles deserves to be supported. The keener the competition in the economic life of any country, the more earnest are the efforts of business managers to better their undertakings so that they are both economic and efficient and I think that if the State, which after all possesses cumbersome machinery, follows that example, it deserves our support in every respect.

A second and very important principle which I wish to support wholeheartedly is the granting of the necessary powers to the Commission to acquire and develop immovable property for housing purposes. I think the real implication of this extension of the powers of the Commission and its great possibilities will be best understood by those of us who have had experience of local authorities which for a variety of reasons are not in a position to do justice to their housing programmes. I say a variety of reasons, Mr. Speaker, and here I wish to mention the scope of the programme of activities which may be one of the reasons. There may be fair and unfair preferences in such a programme. It may be a question of inability but unfortunately we also know of cases where there was marked unwillingness on the part of local authorities to carry out, and to be helpful in connection with, a housing programme. Therefore I do not see this power which is being given to the Commission as an encroachment upon the powers of local authorities; I would rather view it positively as a step which supplements their activities and efforts. I also like to think of it as a very efficacious measure to encourage them to make the fullest use of the facilities which the Government is creating for them. I trust that they—and by that I mean all local authorities—will make a maximum effort along these lines in this important sphere of housing.

The replanning of an existing urban area which is achieved in this way, as well as the question of naming in this connection, is of the utmost importance to my mind. I can perhaps best illustrate the principle which I support in the amendment by referring to the example of areas bordering upon the electoral division which I have the honour to represent. The Minister gave as an example the Western Native Township, one of the areas bordering upon the Westdene constituency. What he says is perfectly true. It is also true of other areas and here I refer specifically to the Sophiatown area and I want to ask you, Mr. Speaker, whether you think that it is possible, whether in the wildest flights of your imagination you think it is possible, for the modern urban area for Whites which is envisaged on the territory of the former Sophiatown, to retain the name of Sophiatown and for any local authority, or even the Department of Housing, to have any success with an urban area for Whites which is established on that land and which retains the old names, in which I include all the street names and the existing names of squares and parks.

Further, I contend that it is not feasible to lay out and build a town, in accordance with modern needs, on the basic plan of such an antiquated urban area and that, to my mind, is another reason why those powers should be granted to the Department. It is true that result can be reached by the application of the existing method for which there is legislative provision, but that prescribed way is so lengthy and so difficult that there is little prospect of achieving what is envisaged in connection with any area which has to be replanned. I have in my constituency, too, an example to support this viewpoint. We have the example there of a portion of a park, which was acquired for the building of a church. It was acquired through the usual channels and let me tell you, Mr. Speaker, we had to wait for nearly two years to commence with the building of that church which was made possible in that roundabout and laborious way. I say, therefore, that the principle of giving the Department the right itself to acquire immovable property for the development of housing projects and the accompanying right which it acquires to plan the area afresh and to give new names is a very important and commendable principle embodied in this Bill.

As far as this question of names is concerned I would also add this with the regard to the specific area to which I referred just now, and I want to tell you that it is the earnest desire of the people who have lived all these years in that vicinity and who have had to do with all the problems and all the evils that existed there, that I should urge in due course that when those streets and those new urban areas and squares are given names, the persons who took the initiative in connection with the clearance of slum areas in South Africa should receive recognition.

A very important principle which is also contained in these amendments before us is the principle of house ownership. These measures before us contain a strong incentive to house ownership, a principle with which I should like to associate myself. The hon. The Minister and the Department are exploring every possible avenue to make it possible for the greatest possible number of people to own their own houses, and I would be the last person who would want to place any obstacle in the path of such a praiseworthy effort. I say therefore that I wholeheartedly subscribe to the principle of house ownership and I should like to support any effort to extend it. I feel so strongly about this point that I am quite prepared to support the measure which rather indirectly brings pressure to bear upon local authorities; I refer to the loss of taxes in certain circumstances in terms of Clause 21. I think it will provide just the necessary incentive to local authorities to put that ground to productive use.

The remaining amendments which we have before us are in my opinion largely of a consequential nature or relate mainly to the financial implications which have to be put right in the light of these amendments. I have no fault to find with these amendments therefore and I leave it at that. I hope with all my heart that the spirit in which this House has accepted and supported these amendments to the principal Act will be a great encouragement to the hon. the Minister and his Department, that it will be an indication to them that the work which they have done so far has been appreciated in all quarters and that it will be an inspiration to them to continue to follow the path which they are already following.

Mr. Speaker, it is a pleasure to be able to congratulate a new member of this House, and I would like very sincerely to congratulate the hon. member tor Westdene (Mr. van der Spuy) on a very thoughtful and well prepared address which was well delivered. I am sure that if he continues in future in the objective manner in which he has addressed this House to-day, he will have, and I hope he will have, a very happy period as a member of this House. I would, if I may, also like to add a word of appreciation for the hon. member for Zululand (Mr. Cadman) who, like the hon. member who has just down, I am sure created a very good impression on this House. I would wish him, too, a very happy period as a member of this hon. House.

Sir, I understand that it has been agreed that it will be convenient to adjourn at this stage and I therefore move—

That the debate be now adjourned.

I second.