I wish to move the following amendment—

To omit all the words after “That” and to substitute “this House declines to go into Committee of Supply and into Committee of Ways and Means unless the Government, inter alia—

1. (1) takes active steps to create a climate which will encourage and stimulate a much quicker rate of economic development, having regard especially to the growing need every year for providing employment for the rising generation;
2. (2) adopts a more generous attitude to the needs of handicapped persons and social pensioners;
3. (3) undertakes to avert the increased dangers to national security arising from the Government’s policies; and
4. (4) undertakes to re-establish the friendship and co-operation of the Western world which we have enjoyed in the past and which offers the best guarantee of national security ”.

The hon. the Minister of Finance emphasized that this was a national security Budget. “If you wish for peace,” he said, “prepare for war.” If he will allow me I would like just to address a few words to his colleague, the Minister of Defence, in order to try to clarify the attitude of this side of the House to his Department. Sir, we have supported the hon. the Minister of Defence in his efforts to improve and enlarge the Defence Force, and we shall continue to do so, not blindly, but on a rational basis. We shall not oppose the increase of R48,000,000 in the Defence Vote, although, of course, we shall exercise our right to discuss it. But what we do object to is the crude attempt made by him and some of his colleagues to frighten people by emotional, almost hysterical speeches sometimes, into blindly rallying to take part in the defence of the country against unnamed invaders, and attacking this party in the process.

What did you say two months ago?

I want the hon. the Minister of Defence to understand that we are ordinary loyal citizens of our country and that there is no need to try to stampede us into doing our duty. That is no way to achieve national unity. I do not want to be controversial but I may remind the hon. the Minister that it is not this side of the House which has ever shown itself reluctant or unwilling to do its duty to the country in time of war or threats of war.

More than 20 years ago!

We do not need convincing of the dangers which beset us. We have been warning the Government for years of the perilous paths upon which it was leading the country and, believe me, Sir, we deplore most deeply the fact that our warnings were consistently ignored and laughed at, and that our warnings proved to be only too true. In these speeches that are made the Government is in effect telling the people that the Opposition has been right all along and that they have only just woken up to the fact. However that may be—whoever was right and whoever was wrong—we have to deal with the situation as it exists to-day, bad though it may be and bad though I think it is, and we shall act on that basis. In the discussions which will follow in the course of this debate, if the hon. the Minister will accept our intention to act in that way, and will deal with facts and not with fancies, he will find us ready to respond in a responsible way in this matter. We feel that is the level on which these grave matters ought to be discussed.

The hon. the Minister of Finance in introducing his Budget, based it on a three-legged platform, three main elements by which his proposals should be judged. Firstly, national security, internal and external; secondly, economic progress and stability, within the context of general Government policy—a most significant phrase, Sir. to which I shall refer later; and thirdly, social services. We have to judge in how far his Budget proposals are likely to attain his aim.

I will take them in reverse if I may, Sir. The hon. the Minister referred to alleviating the lot of handicapped and less fortunate members of the community, to the extent that our resources permit. It is apparent that the hon. the Minister, for reasons which he regards adequate, has felt that our resources permitted him to do very little indeed in that respect— something under R4,000,000; R1.50 per month for social pensioners, an increase in their pension of some five cents per day. In other words, that element has been practically neglected and the hon. the Minister has not been able to do more than make what is scarcely a token gesture of his sympathy with these people, and that leg of his tripod collapses as soon as you look at it.

The next leg is the question of economic progress and stability. Here, Sir, for the last five years emphasis has been laid, year after year, by this Minister and his predecessors, on the need for stimulating the growth, the rate of growth of economic expansion, for providing the spark to restore the rate of development to what prevailed in the earlier years, and which is so necessary if we are to match our needs with our opportunities. After five years, the Minister had to tell us of the slow rate of growth of the economy. He had to tell us that things have taken a less favourable turn in the last quarter of 1961; he had to refer to the unemployment, and a reference to the White Paper shows that as far as unemployment is concerned, the Minister was quite right to refer to the subject, because apart from mining, in the manufacturing industry for the last seven years there has been no increase in the index of employment at all, whilst in the construction sector there has been a sharp drop, particularly during the last year or so.

I must congratulate the hon. the Minister and his Department on the White Paper which they have produced, which I think is most valuable to all members of this House, but in it we see that the net national income increased by some 4 per cent last year as compared with about 9 per cent in the previous year. We see that the real income per capita of the population has increased since 1956 (the last six years) by some R5 per annum, and we see that the growth of capital investment in the private sector during last year showed a decline of some R100,000,000. I am going to follow the Minister’s very good example and not weary the House with numerous figures, but the figures do show quite clearly that after five years of effort, this Government in its attempts to expand the economy more rapidly, has failed, and all the proddings and exhortations have availed little or nothing, and I think the lesson that we have got to learn, and I hope the Government will learn it too, is that we cannot hope for rapid expansion of our economy within what the Minister calls the general context of his Government’s policies. You remember, Sir, the Viljoen Commission on Industrial Development; you remember that they recommended that the Government should shape its policies with an eye to their effect on the industrial and general economy of the country, and the position with which we are faced now shows how right they were. The Government ignored that advice and they expected the economy to shape itself in line with the Government’s policy. That is where, as a result, we find ourselves to-day. The hon. the Minister talked about liquidity. He seems to derive some comfort from the fact that in the private sector liquid resources increased last year by some R140,000,000 to the figure of R1,600.000,000. I can’t see any comfort in those figures. Because what do they mean? Surely they mean that there is at this moment in the hands of the private investor lying idle R1,600,000,000, enough money to pay nearly four times over for the large proposed Orange River Development Scheme.

What a wonderful scheme!

I am glad the hon. member is in agreement with this side of the House for once. Sir, it means this, that there is all this money lying idle. Why? I suggest it is because of the reluctance on the part of the private investor to tie up his money in longterm investments and in lack of confidence in the future of the country within the orbit of what the hon. the Minister calls “the general orbit of the Government’s policies”.

Bearing in mind what the Minister calls the shock attacks of last year, plus the restrictions which he had to take last year, import control and currency restrictions, and so on, plus the present war scare, surely it is clear that stimulants and incentives to the economy are more necessary than ever, even to maintain, let alone increase, the present restricted rate of development. The hon. the Minister in his speech dismissed boycotts with a wave of the hand. They mean nothing to him. It means nothing to him that outside the Federation, the whole Continent of Africa is closed to our exports, our trade. I must say that I think the growing reluctance of the world, or very large parts of the world, to trade with us is a most sinister symptom, and I think it is a grim threat to the expansion of our industrial economy, which according to the hon. the Minister of Commerce and Industries, has to depend on a vast extension of our export markets within a reasonable time if it is going to develop to its full capacity. When you think that this admirable White Paper shows clearly that of all our exports under 4 per cent goes to the Continent of Africa and that our imports from the Continent of Africa are also about 4 per cent, one realizes what we are missing in respect of what should be the most promising, the most quickly growing and the most rapidly expanding market for our export goods in the whole world.

Who is to blame for that?

Of course the hon. member’s Government is to blame for that.

Would your policy suit Nkrumah’s wishes?

I am trying to discuss the merits of this subject. Apparently the hon. member for Vereeniging has not even begun to study the implications of the White Paper. If he just keeps quiet for a moment he may get a better grasp of the subject.

Apparently the hon. the Minister under the plea which he put forward very eloquently of national security, has abandoned any idea this year of stimulating the economy and he has concentrated on national defence. I think it is a very dangerous attitude to adopt, Sir, as the hon. Minister will surely agree with me that in the long run national security depends upon the national economy. If you allow the national economy to wilt in any way, you are endangering national security. The hon. the Minister tells us that 55 per cent of the increased defence expenditure is going to be spent in the country, and that may put more money into the pockets of the people and create some employment. That may be so to a limited degree. But the fact remains that at best that is unproductive activity and unproductive expenditure. It may be necessary. But it certainly does not strengthen the economy of the country and the argument does not hold water that it does strengthen the economy. Sir, I can find nothing in this Budget, beyond pious words, which is calculated to encourage the economic development of the country or to restore confidence, beyond one or two minor concessions in the way of investment allowances and of course the long-term Orange River Development Scheme. Therefore in my opinion, the second leg of the hon. Minister's tripod also collapses. I can see nothing to encourage economic progress or to restore confidence. On the other hand, I can well see deterrents to economic development. Take the great increase in the amount of money which is being taken from the private sector! Quite apart from the extra taxes, the hon. the Minister told us that he expected on the present basis of taxation an increase of revenue of some R27,000,000 and if you add to that the proposed R36,000,000 of new taxes, you will see that he proposes to take from the private sector some R63,000,000 during the current year, an increase of nearly 9 per cent. The hon. Minister may say that he has no alternative, but I think he must agree with me that to take that large sum of money from the private sector at this stage, is bound to depress an already very quiet retail trade and to contract the whole market for local industries.

What about the present liquidity?

What about it? The present liquidity represents people’s savings, not intended to be spent on current expenditure.

But that is the private sector.

The hon. Minister of Information is telling us something! Sir, the question arises whether this is necessary. Bearing in mind the paramount importance in the interest of national security itself of sparing as far as it is humanly possible to do a somewhat bruised national economy from further shocks at this time, one is bound to ask oneself: Has the Minister really fully explored the possibilities of financing his requirements without imposing this heavy fresh taxation? I think for instance of the Bantu Development Fund. The hon. the Minister has accepted in principle the financing from Loan Account to the tune of R10,000,00 of the Native Trust, leaving R9.7 million to be found out of revenue for the Native Trust. Is there any reason under present conditions, and bearing in mind the importance of not attacking the economy if it can possibly be avoided, is there any reason why the whole amount should not be taken from Loan Funds this year? The Loan Funds are not causing the hon. the Minister any trouble this year, they are in a sound position. All the money that is required is for capital purposes, and we have to bear in mind that last year out of R17,500,000 which we voted for the Native Trust, nearly a third of that amount was not spent at all. Therefore by voting this large sum again this year, we run the very real risk that we are actually taking out the taxpayer’s pocket more money than is actually required during the next 12 months, which is the last thing we should want to do at the present time. If the Minister would take the full amount out of Loan Funds, he would save the taxpayer this year approximately R9.7 million. I also wonder in respect of the Defence Account. We are told that nearly R22,000,000 is to be spent on purchases overseas, abroad. Now the hon. the Minister knows not yet what he is going to buy, where he is going to get it, and still less does he know how he is going to get delivery. It has always been right through the years a most chancy business obtaining deliveries of defence equipment. We remember in the days of Mr. Havenga, how he told this House that his Government had agreed to equip two armoured divisions for the Middle East at a cost of R80,000,000. He asked the House to approve of that in principle and from time to time to vote sums which would be required for the purpose. I wonder whether in this case, having regard to the circumstances, we would not be justified in doing the same thing. Suppose we agree to the whole R22,000,000 as we are prepared to do, and suppose we only actually voted R15,000,000 for the current year, the Minister would thereby save an extra R6,000,000 to R7,000,000 in taxation for the current year. Of course there is a third factor: If the Minister persists in turning the Reserve Bank into a stock-jobber, which I hope he won’t, there is also the possibility, I suppose, of anything from R1,000,000 to R2,000,000 profits coming out of those transactions and going into the Defence Account. If all this did result, supposing the Minister took our advice, in a small deficit next year, what of it? Is it not more important at this juncture to spare the economy any more shocks than it is to run the risk of a comparatively small deficit? I think it is. I believe that if the Minister were ready to apply his massive mind to this question, he would find that it would be quite feasible to provide the money he requires, including the money for defence, without increasing the income tax or the company’s tax this year.

The one bright spot of course is the announcement of the Minister that the Government has adopted the Orange River Development Scheme. We laughed when he said it of course. We laughed, Sir, at the spectacle of the Minister after 13 years of urging on our part, solemnly telling us of the importance of conserving the waters of the Orange River! Is it any wonder we laughed? Of course we are supporting this. We only feel that if the Government had taken our advice 12 years ago, they would have been able to save the country many millions of rand.

Why did you not do it 15 years ago?

We were preparing to do so. But we accept the death-bed repentance of the Government in this matter: Better late than never. When we become the Government of this country, we shall certainly pursue this project with energy.

The third leg of the hon. Minister’s tripod, the one remaining leg, is this question of national security. He said that was the overriding factor and he said that we would be threatened very soon if we were not strong enough to deter a potential aggressor, and in defence it was necessary not only to ward off attackers but also to strike back at the aggressors. He made a semi-military appreciation of the financial and economic field. He rightly said that it is advisable to begin with a systematic appreciation of the situation. I fully agree with him. I only hope that his colleagues in the Cabinet will agree with him as well. Will the hon. Minister of Defence follow suit and favour this House with a systematic appreciation of the military situation as he sees it?

Are you serious?

I think that is a very offensive remark to make. Of course I am serious. Has the Minister of Finance never heard of a Minister of Defence giving an appreciation of the military position as he sees it? What nonsense! I wonder whether the hon. the Prime Minister will also follow suit and give us an appreciation of the political field. Because they are all part and parcel of the same thing. Peace or war often depends on the political aspects, and they are all part and parcel of the same thing, namely the country’s security. Without a broad picture, the whole position is quite impossible to judge and no one in this House can come to a firm conclusion as to what really the position is. I hope very much that the hon. the Prime Minister will see the force of that and that he will in the course of this debate give us political appreciation of the position as he sees it, which is making it necessary for us to embark on a large, full-scale defence expenditure. It is much better for the people to know where they stand, much better to know the best or the worst, as the case may be. I think the right thing to do is to have these appreciations from the responsible Ministers, objective. calm and clear. Meanwhile the question with which we are concerning ourselves, is what the Minister of Finance is doing to contribute to national security. As far as internal defence is concerned, we are voting some R120,000,000 to which we have to add some R41,000,000 for the police, because the police are our first line of defence in maintaining internal security, and I am sure we all hope that it will be the only line we shall ever need to maintain internal security. But I would say that with the expenditure we are indulging in, we are probably well on the way to being able to maintain internal law and order, and I would also say that is probably about as far as we have got at the present time, and that, according to the White Paper, is taking some 20 per cent of our total expenditure.

The other aspect of course is external defence, and here immediately the question arises: Whence comes this aggression which constitutes the external danger? Sir, if it is a question of combined operation by Black states or communist inspired forces, there can be no question whatever that the whole country, irrespective of political views, will stand four-square behind the government of the day in the defence of the country. Naturally we hope that it won’t be this Government, but if it were this Government it would make no difference to our attitude, and we would stand four-square behind them in such circumstances. Of course if it is an East-West war, a war between the East and the West, we shall not be without friends and allies, and then the position may be simpler. As far as we can see, the contingency at present is not urgent, but I do not suggest that it should be ignored, simply because it may not be urgent at this stage. But of course there is a third alternative and that is the possibility of international intervention under the pretext of enforcing international law, and of course if that were to happen, we should be up against quite a different proposition because we would have the whole world against us, and in that case R120,000,000, spent mostly in this country on training and producing small arms and ammunition, is a mere flea-bite. Beyond internal defence, I fail to see that this Budget does very much to prepare for war. On what scale we should prepare for war, I cannot say. Before expressing an opinion, I am entitled to have a political appreciation from the Prime Minister and an objective military appreciation from the Minister of Defence. But on whatever scale it is to be, the country should be told, and what is required is some kind of a blue-print, an objective towards which the country will be required to work and for which it will have to be prepared to pay. To equip the country fully with modern arms and equipment to fight a full-scale war might well cost not R120,000,000 but R1,200,000,000 or a good deal more. Without a clear indication of what is envisaged by the Government the country’s economy is going to wait every year in uncertainty and apprehension as to what fresh burdens are to be laid upon it or as to what fresh obstacles are to be placed in its way. On his own three elements, therefore, Sir, the Minister seems to me to have contributed very little, either to the national welfare or to the economy or to national security further than internal security. As far social security is concerned there is nothing to be said. As far as economic progress is concerned the Budget is very cold comfort indeed. It is quite clear that the phrase used by the hon. the Minister namely “the greatest possible measure of economic progress within the context of general Government policy” is a contradiction in terms. The last five years have proved conclusively that in that context no general progress is either likely or even possible. Lack of confidence, uncertainty as to the future, and the prospect of heavy increases in taxation are fatal barriers to economic expansion. This Budget certainly foreshadows very heavy increased taxation. It proposes, as a start, the development of the Orange River Development Scheme which will have to be paid for. Even if we borrow the money it has still got to be paid for. It envisages an accelerated development of the Bantustans. So far there has been a great deal of talk and waving of arms by the hon. the Minister of Bantu Administration and Development about the progress in the reserves, but the fact remains that as far as developing them into an economic viable unit is concerned, the whole task has not been scratched yet. Again the taxpayer of this country will have to find the money. Then we have this rearmament plan, a plan which is undisclosed, nobody knows what is envisaged or what is involved or what we are going to be asked to find in the way of money. If those three things between them are to be carried on in the way in which the Government says they are to be carried on, with vigour and decision and all the rest of it, I can only say that they are going to place a burden upon a sluggish almost stagnant economy compared with which the present rate of taxation is a mere bagatelle.

As far as national security, the third leg, is concerned, without more information and a much clearer picture of what it is all about, one cannot say more, Sir, than that on the face of it, the money we are asked to provide this year can do little more than provide for internal security. It does not begin to prepare the country for an external war.

In conclusion, Sir. may I just sum up in a few words our attitude towards this Budget for national defence. We believe first of all that if this Government proposes to defy the world this Budget is totally and utterly inadequate. We believe further that no country can stand alone against an organized and combined attack on a full-blown scale. We believe that our present position of isolation and friendlessness is due to the obstinacy of this Government in persisting in race policies which are not only anathema to the rest of the world but are rejected by the great majority of the people in this country. Thirdly, Sir, we believe that if the Republic blindly pursues its present course outside intervention in some form or other is a possibility that cannot and should not be ignored. In short. Mr. Speaker, as far as we are concerned this Budget contains nothing to alter our beliefs or to alleviate our apprehensions in the economic and the political and the military fields, all of which appear to us to-day uncertain and threatening to the country.

I second.

Never in the history of South Africa has there been a single Budget which by itself has conjured up so many distant visions as this one—great visions. When we think of this scheme, the Orange River scheme which the Government has announced and in respect of which the hon. member for Constantia (Mr. Waterson) has just claimed paternity for his party, we realize what a big scheme it is. I just want to say this to the hon. member for Constantia that little scheme which they submitted was child’s play compared to the one announced. They wanted to deviate a little water at Norval’s Point or Bethulie and let it run to the Fish River, and that was the end of their scheme. But in this case we have a grand scheme which will change the surface of a large portion of the Karoo, the southern Free State and the north-western Cape Province. It is something which will eventually offer refuge to millions of people by way of the agricultural activities together with the industries which will develop in the big cities and smaller towns. Mr. Speaker, I grew up in that part of the country. The little town where I grew up. namely Venterstad, and the old family farm are unfortunately situated in such a position that we shall be looking down upon those waters. However, water does not flow uphill. Nonetheless we wish to congratulate the people down below heartily on what is in store for them under this scheme. Like a Moses of days gone by we shall just have to gaze on the promised land without being able to enter it.

I want to associate myself with the remarks of the hon. member and congratulate the Minister on the White Paper he has tabled. The illustrations in it particularly are very revealing and they ought to make it very much easier for hon. members to form an idea of what the economic position of the country is than they have been able to do in the past. The Minister has stated his three objectives. The first is security against attacks from outside and against internal disturbances in respect of all races: the greatest degree of economic progress and stability within the context of general Government policy; and the alleviation of the lot of the handicapped and other less fortunate members of the community to the extent to which the means at our disposal justify it. Mr. Speaker, this is a realistic Budget in that it does what is humanly possible to do in respect of all these three, it gives us a balanced picture so that we may enter the year which lies ahead confidently in anticipation of the developments which lie ahead. Some of these essential new services, such as the increased amount for Defence and the increase in respect of Bantu development, will demand a great deal of money and in these circumstances I feel that on behalf of the aged, the social pensioners, we should direct a special word of thanks to the Government for the relief which this Budget is affording them. The hon. member for Constantia said it was a drop in the ocean—it was too little. However, I just wish to point out to him that the people are getting much more in the form of social pensions than people in other countries where they have a contributory scheme, and our people receive it without a contributory scheme. I am not saying they are getting enough. Their income is still very meagre, but I can give you this assurance, Mr. Speaker, that R18 per annum will relieve the lot of these aged people considerably. We thank the Government for that. I hope that when the pensions are again reviewed attention will be given to those people whose income is just too high to enable them to qualify for the old age pension. I want to point out to the Minister—and I have already done so on previous occasions in this House—that there is a fairly substantial gap between the income of those people who receive a pension and those who do not, in favour of those who do get it. As a result of this Budget the position to-day is that a person who has an income of R312 per annum is not eligible for the old age pension. But the person who does draw the old age pension, may have a total income of R474 per annum. I think this gap should be made smaller, and it possibly should eventually be closed altogether. This bonus on pensions is equivalent to the cost-of-living allowances which were formerly paid to civil servants, something which has now disappeared. I feel we should let these bonuses disappear eventually.

Before I deal further with the United Party, I notice that the hon. member for Houghton (Mrs. Suzman) is here. She too has issued a statement in connection with the Budget in which she said the following amongst others—

Mr. Speaker, what does that mean? She wishes us to accept her “integrated society”. That is what she wants this country to have—an “integrated society”. She has often said that. In that case, according to her. we shall be paying lower taxes. I can assure her that before South Africa accepts that “integrated society” she will rather pay three times the amount in taxes which she is paying to-day. Because her “integrated society” means the death of the White man in South Africa. I wish to ask her a question which neither she nor any member of her party has ever answered. Where she wishes to have this integrated society, does that mean that she ultimately wishes to have a homogeneous society, because they have to integrate in such a way that the integration is complete? This is the question I wish to ask her: Who must integrate with whom? Should the non-Whites integrate with the Whites or should the Whites integrate with the non-Whites? Does she wish to recognize those of a different race as being of her race, as happened in the case of a certain Mr. Song in Natal? What will the ultimate end of that policy be? If her policy is pursued to its logical conclusion, then at the outset when the Whites are in the majority, the Bantu will go about in conformity with White civilization. I am. of course, talking about the cultured Bantu. But thereafter when they are in the majority—she must remember that the Bantu is as attached to his culture as she is to hers —the Bantu will say that the Bantu culture should now apply in South Africa. She will then have to integrate with the Bantu. She will no longer be able to walk about dressed as a Westerner. No, all her curves will be richly decorated with Czechoslovakian beads. She will no longer be able to walk next to her husband, she will have to walk behind him. She will have to walk bare-footed through the thorns with her baggage on her head.

And a child on her back.

Mr. Speaker, that is the culture of the tiger skin and the red blanket. If she wants that, it is her business. But she wants to apply that to the hon. member for Johannesburg (North) (Mrs. Weiss) and she will certainly not accept it. If the hon. member for Houghton couples finances to integration she must take her medicine. I want to tell her that all this integration will not assist her in the least as far as the Budget is concerned; it will push the country economically and racially over the precipice.

I now come to the United Party and the speech made by the hon. member for Constantia. The amendment moved by the hon. member is so wide that you can turn in it with a wagon and 16 oxen. I shall have more to say at a later stage about a few aspects of it. The hon. member says we should conquer the African market and that the Government was to blame for the fact that we did not have it. Does the hon. member wish us to sacrifice our whole apartheid policy for the sake of trade with the rest of Africa? I should like to know whether that is what the United Party want. I do not think they really want it. They may say it but I do not believe that they really want it. The hon. member complained and said we had too many taxes; they say we are being taxed too heavily. But I wish to remind him that when the Minister of Finance introduced the bloc system that in itself was a lowering of the scale of taxation. Since then he has granted a 10 per cent discount and in present circumstances everybody in the country expected him at least to take this 10 per cent away. I do not know why the hon. member is so concerned about that in particular. The hon. member said the other day, not to-day, that the worst fears of the taxpayer had materialized. The impression I have gained from comments on the Budget has been that the opposite is the case. People expected to be worse hit than they have been. You can look at all the comments, Sir, and you will find that is the position. I think the remarks made by the hon. member have been nothing more than simply unjustified remarks. Nothing has motivated him in making them and I do not think we should pay much attention to them. It is clear from the amendment of the United Party that they are like a herd of Springbok running around in a frenzy—particularly after the recent elections. They can find no direction. That is why not even this amendment of theirs can find direction. And having listened to the speech of the Leader of the United Party last Saturday, we are convinced that the firing to which he has been subjected has rendered him completely frenzied.

The hon. member for Constantia said something else namely that we were dividing the country. He referred to the “colonial venture in the Transkei”. The hon. member said that our expenditure in that respect was too high. But they ask for increased expenditure every year, amongst others that the recommendations in the Tomlinson report should be implemented. I want to ask the hon. member this: When he talks about the “colonial venture in the Transkei” what about ex Judge Fagan who said that the United Party should accept the Transkei policy as far as it went because it fitted in with their policy of a race federation? Are they repudiating him to-day while electing him as Senator at the same time, or what is happening?

Mr. Speaker, I wish to state that everything is very sound as far as our finances are concerned. When we remember the irresponsible statements which we had from the United Party last year in June, it is surprising that everything is as sound as it is, if you have to listen to them as to what is happening in South Africa. Last year, on 20 June and on the few subsequent days we had a debate on the financial position. They painted the picture so black and raised so many bogies that I had thought that when we met this year there would be a number of United Party motions on the Order Paper condemning our financial policy. We have had 25 Opposition motions on the Order Paper but not one in respect of finance. Shortly after the commencement of this Session we had the no confidence debate. They did not utter a word about the financial position of the country. We then had the smaller Budget and not a word was said about finances. To-day, more than nine months after that last debate, is the first occasion that they are talking about finances and I think they are only doing so because they are getting ashamed of the fact that they have never raised it. I do not hold it too much against the United Party that they do not want to discuss finances—for two reasons. The first is because the financial position of the country is as sound as it is. The second is that they raised such bogies last year that they are afraid we may call them to account. But it will not avail them to try to run away from it, because I think we should in any event call them to account.

The debate we had last year took place during the week when our foreign exchange position was a its worst, just immediately after the Minister of Finance had announced measures to control the position strictly. Our reserves stood at only R142,000,000. The United Party predicted fairly maliciously that there would be devaluation. Mr. Speaker, at a time such as that, which was practically a semi-critical period, one would not have expected bogies to be raised to frighten the world; no, you should have created confidence and tried to explain to the world that our economy was inherently very sound and that we would be able to withstand all shocks. But we had the exact opposite from the United Party. The hon. member for Pinetown (Mr. Hopewell) made a speech on the subject which we find in col. 8525 of Hansard of last year. He said this, inter alia—

He even went further and said we would also have a great short-fall, and then he asked—

The hon. member for Benoni (Mr. Ross) also stated that it appeared as though the next step would be devaluation.

He knows nothing about it.

That is precisely the trouble; people talk about things that they know nothing about. But then the Leader of the Opposition came forward and said this—

Namely, the control measures of the Minister’s—

And the hon. member for Constantia who is unfortunately not here at the moment …

He will return.

… raised the same subject. In that same debate he said that he was moving an amendment because of the Government’s total inability to handle the situation. He went on to say this—

Where they made those pessimistic predictions at the time—devaluation, deficits, higher taxation—and where our position has subsequently improved as remarkably as it has, we can understand why they do not wish to talk about financial matters. When I stated in that debate that there was always a decline in the reserves at the beginning of a year, they asked where we were going to start this year. Mr. Speaker, we have started this year stronger to the tune of R100,000,000 than we started 1961. At the moment our reserves stand at a record figure since the war, in spite of the predictions of the Opposition—those dark prophecies of the prophets of doom on the Opposition side!

They call the Minister’s policy of pegging the foreign capital which is invested in shares in this country a kraal economy. But nothing scares away the flow of capital to South Africa more than the type of story we had from the United Party last year …

But the money has gone already.

Mr. Speaker, there is one thing which has struck me this Session. There are a few new United Party members who are far too big for their boots, and there sits one of them. He should rather confine himself to matters which he knows something about. If he concentrates on the law he may perhaps get somewhere some day.

Was it wrong what I said?

The member should rather leave financial matters alone. I say nothing frightens people more effectively than the stories about devaluation which we had from the United Party last year. Do they expect money to return to South Africa once it has left, or is on the point of leaving, if people take them seriously? Surely people were entitled to say that it was the official Opposition, the alternative Government some day perhaps in the future. There must have been people who believed them. I say that they were sabotaging the country economically in that way and they did so during a time of an economic crisis. That was an unforgivable sin.

I said something here last year which was completely misunderstood by the hon. member for Pinetown. I said that we would not change our non-White policy for the sake of economic progress. The hon. member subsequently said in his speech that I had said that our political policy had nothing to do with the country’s economy. That was not what I had said. I want to say this again very clearly to the hon. member: It will not avail the United Party to come and tell us to change our policy, as they are again asking in this amendment of theirs, so as to enable the country to flourish economically. Our apartheid policy is Government policy and we will not depart from it; we have been sent to Parliament to implement it. That is the “given” factor as he would have learnt in mathematics—if he does not understand what I said last year. He should fit his economic policy into that pattern. That was what I meant. Mr. Speaker, we can say this to the United Party: As far as that is concerned, they will not persuade us to depart from our policy.

Was that the reason why you declared Japanese White?

The hon. member should raise that matter with another Minister, but his information is quite wrong. The hon. member for Constantia went further and said he thought we were over-taxed and that more funds should have been taken from Loan Account. That would have stimulated the economy so much more. Particularly in respect of Defence and Bantu Affairs he wished more money to have been taken from Loan Account. I want to say this to the hon. member in the first instance that story about money being drawn from the private sector to the public sector and what a detrimental effect it has on the purchasing power of the country, is wholly exaggerated. The position is not as bad as people make it out to be, that money returns to a great extent to the private sector via the public sector. It is an exaggeration. The National Party adopts a very firm attitude in this respect. I notice that Prof. Lombard of Pretoria has also stated that we should have borrowed more money. We have had the story in the past that our budgets should show deficits instead of surpluses then it would fare better with the country, but our economy is based to such an extent on a wasting asset, our gold mines, that we can never risk that. We should remember that some time or other our gold mines will come to an end and on what will you base your economy if you have not in the meantime developed a very strong economy in the country without having incurred too heavy a loan debt which has to be repaid the day when they are no longer there? I can understand it this year because this year our greatest requirements are from current account and not from loan account. I can understand why nothing is being transferred this year from current account to loan account, but why the reverse is the position. But if that were to become general policy in future, I would be very disappointed. Thousands of millions of rand are needed to develop the Orange River Scheme alone with everything that goes with it, and to develop other industries to take the place of the gold mines one day. However, we should be careful that we do not saddle posterity with too heavy a debt and too little revenue to pay that debt. That is why we should continue to transfer a considerable amount from revenue account to loan account whenever possible. I think in time to come, as our economy grows stronger the Minister should consistently transfer a definite amount annually from the gold mines to loan account for development purposes. Recently the Government Mining Engineer made a statement on this subject. It was reported in the Cape Argus of 6 February. He said this—

He supports the idea that there should be large-scale development and by implication the idea that money should be obtained from this wasting asset. I wish to bring it to the notice of the Government that when it can again be done adequate provision should be made for that in the Budget.

I now wish to deal with the other remark of the hon. member and that is that our economic development was too slow. The Minister said the same and I am in complete agreement with him. The hon. member for Constantia says that the Government has failed to stimulate the economy and that it cannot happen within the framework of National Party policy. Well, I wish to give him the assurance that we shall not change our policy for the sake of stimulating our economy. He made great play of the Minister’s statement the other day in respect of stimulating the economy, that it was developing too slowly and inter alia that progress should be faster with a view to our strong reserves. I agree with that, within the frame-work of National Party policy of apartheid, but what have we had in the past? On every occasion when the Government has injected the economy the Opposition has approached it from the other side and given it an anaesthetic. They are for ever playing the role of prophets of doom telling South Africa and the world how bad things are here and how we are heading for disaster. They have been doing that for 14 years, but we have continued to progress. They have been spinning the wildest of wild stories about South Africa. I want to ask you, Mr. Speaker, how can you expect a foreign investor in these circumstances to invest his money in this country when he is always being frightened away, how can you even expect South Africans to make any fixed or long-term investments in South Africa, without some proviso? They are averse to that because they are continually being frightened away. But in spite of this laxity the real net income per capita has increased during the past 12 years from R213 to R261 per person according to the White Paper issued by the Minister, that is to say 23 per cent. According to the latest figures of the Department of Census and Statistics the standard of living, the real income, has increased during the year 1960-1 by 1.6 per cent. In the circumstances and with a view to the tremendous outflow of capital in 1960 and portion of 1961, I think it is quite a satisfactory achievement that there has been a per capita increase of 1.6 per cent.

I wish to say something about banking and other deposit-receiving institutions which are not always willing to follow the lead given by the Reserve Bank and by Treasury. On 7 December last year the Government and the Reserve Bank lowered the bank rate with ½ per cent to 4½ per cent. On that occasion Dr. de Kock, the Governor of the Reserve Bank, issued the following statement—

This is a very definite appeal that the banks should follow suit and make more money available to commerce. But what happened? The commercial banks reacted, perhaps with reluctance, but they did in case react. There is no legal power to force them to do so, although the Reserve Bank can force them to some extent by way of its policy in respect of deposits, etc. It can bring pressure to bear on them. Strong pressure was brought to bear on building societies but they refused to lower their interest rate. A great deal was written about this in the newspapers at the time and ultimately only in March, more than three months after the Governor of the Reserve Bank had made his appeal, the building societies reacted and then only partially. They only lowered the interest rate on deposits but not on the loans which they were granting. In other words, they have consistently refused to give the stimulant which they have been asked to give. Other deposit-receiving institutions, such as finance houses and trust banks, are simply turning a deaf ear to the appeal. They are charging very high interest rates and they pay high interest rates with the result that they attract the money away from the banks as well as from the building societies. They do not in the least fall in with any plan which may be introduced. The banks are beginning to lose the keen competition with these bodies. I just wish to point out that these deposit-receiving institutions, with the high interest they pay, where they lend out money particularly for hire purchase transactions, get 20 per cent and more back. It is practically a contravention of the Usury Act de facto, if not de jure. These people pay a high rate of interest and receive a high rate of interest and they simply ignore what the Reserve Bank or the Minister of Finance regard as being in the interest of the country. They continue with their policy. Their position over the last couple of years has been as follows: In 1948 their deposits amounted to R38.7 million, in 1956 they amounted to R86.5 million, in June 1961 they amounted to R220,000,000, nearly 600 per cent more than in 1948 and nearly 160 per cent more than in 1956, over a period of 4½ years. During the same period there was a decline in the Post Office Savings deposits. There was a decrease from R163,600,000 in 1956 to R144,600,000 in June 1961, a decrease of R19,000,000 or approximately 13 per cent. Take the building societies. In 1956 deposits amounted to R842,900,000, that includes their so-called shares, because building society shares are not real shares; they are deposits. It amounted to R1,223,900,000 in June 1961, an increase of R381,000,000 or something over 40 per cent. Take the commercial banks. Towards the end of December 1956 their deposits amounted to R1,020,600,000, and towards the end of June 1962 they amounted to R1,100,700,000, an increase of only R80,000,000, or 7 per cent. It is very clear from these figures that the banks are losing ground on account of this sharp competition. The building societies are afraid to reduce their rate of interest, because if they do the money will go to the deposit-receiving institutions. The banks are afraid to do so because if they do the other two will take the money away from them. In 1956 the commercial banks still had R1,020,600,000 in deposits and the building societies and other institutions together had R929,400,000, but in June 1961 the commercial banks only had R1,100,000,000 and the other two together had R1,443,000,000. In 1956, therefore, the commercial banks still had nearly R100,000,000 more in deposits than the other two together, whereas in June 1961 the building societies alone had R123,000,000 more than the commercial banks, and together with the deposit-receiving institutions they had over R340,000,000 more than the commercial banks.

That shows that there has been a terrific change in our investment pattern over the past ten to fifteen years and the danger exists that eventually the banks will no longer be able to afford to listen to the Treasury and the Reserve Bank to make credit facilities more readily or less readily available. Furthermore, if the banks are the only ones to react and not the other institutions, it will be less effective, because the banks handle a much lower percentage of our deposits. I wish to ask the Minister to regard this matter as something demanding speedy attention. I know his Department is dealing with it, but I wish to ask him to try to introduce legislation still during this Session so that for those purposes these institutions will fall under the same law, namely the commercial banks, the building societies and the deposit-receiving institutions, and so that, in the first place, the Reserve Bank or Treasury or both will have a say over rates of interest, and secondly, that all the provisions of the Banking Act which ought to apply to these institutions such as building societies and deposit-receiving institutions, will indeed apply to them as well.

The speech of the hon. member who has just sat down lacked that usual enthusiasm of his in support of the Budget proposals of the Government. I think the reason is quite obvious; he himself has really no enthusiasm for the Budget proposals. After having tried to give high praise to a Budget proposal which will put into the pocket of the pensioner not even 6d., as was suggested by way of interjection during his speech, but only 5 cents, it is quite obvious that he was trying to do some whistling in the dark to cheer himself up. He went about dragging red herrings into the debate by criticizing what hon. members had said about last year’s Budget and by trying to anticipate what they are going to say on this occasion. Only then did he come round to deal in any way with the remarks of the hon. member for Constantia (Mr. Waterson). The only real fault he found with the remarks of the hon. member for Constantia was that the latter did not seem to see great virtue in the gold reserves being as high as they are to-day. The hon. member for Pretoria (Central) (Mr. van den Heever) will know that low blood pressure, and also high blood pressure, are symptoms of human ill-health. As a parallel, excessive liquidity is not necessarily a sign of good health; it is sometimes a sign of economic ill-health, because it means that there is stagnation and an insufficient outlet for the profitable investment of money.

The point is that you stated that there would be no reserves at all by this time.

That was before the door was slammed on the transfer by foreign investors of their money and before South Africa broke faith in the outside financial world by the slamming of that door. But the hon. member forgets, as I say, that excessive liquidity can be, and is in the present circumstances, a sign of economic ill-health because it shows that there is insufficient outlet for capital investment, not because the money is not there, but because the confidence is not there.

I come back to the Budget. Let me commence by saying that the hon. the Minister appears to have come to the beginning of a new era in budgeting. Although the 1961-2 surplus will most likely exceed the Minister’s R5,000,000 mark, I believe we are now seeing the end of what has become popularly known as the Government’s traditional game of budget-bluff, the magic of the game being of course the surprisingly big surplus on revenue account produced at the end of each year. The bigger the surplus, the better the magic, but in reality of course it was no more than a game of blind-man’s buff as far as the taxpayer was concerned. But as I say, a new era in budgeting is seemingly now being unfolded.

The Budget for 1962-3 has been described as one which gives great care to detail but which misses the chance to inspire confidence. That, I think, is an apt assessment of the situation and I agree with it. So far as the concessions to pensioners are concerned, I commend the hon. the Minister for doing what he has done. But I consider that he could have done better, for the real benefit which goes to the pensioner is relatively small: in fact it is very small indeed. The claims of the pensioner for consideration will therefore generally still remain, and I need hardly emphasize that those claims are genuine and deserving. I regret, therefore, that no more could have been done for the pensioner in the present circumstances. Those concessions, moreover, will do little or nothing towards increasing domestic purchasing power in the coming year. My main criticism of the Budget proposals is that the Budget tends to weaken the country’s purchasing power at the very time when buyer spending should be increased in order to stimulate industrial output, or in other words, in order to get the wheels of industry turning faster. The Minister seems to have been content with trying to encourage the export of manufactured goods, but what is needed most at present is a boost to the buying power in the country in order to stimulate local demand for goods and services. With this Minister’s long record of surpluses, and with the hon. the Minister of Transport’s recent railway surpluses, the Government could have, and I believe should have, given the country a lead by raising the level of wages for the non-Whites and so simultaneously raising local demand for goods and services. That is a step which the chairman of the Board of Trade also recommends. He knows better than most what a stage of stagnation industry has reached and how depressed the whole market is, and that is one of the remedies which he sees for it. That would also have been a step which might have inspired confidence in the country’s economic future, but the opportunity has been missed. It is just another of the hon. Minister’s failures to inspire confidence; to obviate the building up of agricultural surpluses; to meet in some measure the distressing problem of poverty among the African community, and especially among the urban Africans; and to restore some new vigour into the present debilitated state of the home market. That is therefore what is meant when the critics say that the Budget is one which gives care to detail but misses the chance of inspiring confidence.

Sir, contrary to the views expressed by the Minister, the recent study by doctors Hopkins and van den Berg of Stellenbosch University, reveal, firstly, that South Africa’s economic growth has not been moving fast enough to meet the wishes of all its people and their needs and, secondly, that personal consumption spending has been falling off in recent years. As the hon. member for Constantia has pointed out, even the Minister’s own figures in his White Paper give the same indication. Taking into account the fall in the value of money and the rate of population increase, the Minister’s own figures show that the average income per capita is actually falling and not rising. That is an indication that the standard of living of the masses, if not of everyone, is also falling and not rising. That is starkly revealing confirmation of what I have said more than once in this House and which I repeat, namely, that the policies of this Government can be pursued only at the cost of rising levels of taxation and of falling standards of living for all. In this Budget and the White Paper presented to us, that situation is tragically demonstrated. We are very near the situation which I have indicated, where there are rising levels of taxation and falling standards of living.

If we turn aside from the figure aspects of this Budget for a moment, what do we find? We find that for the third year in succession the Minister has presented his Budget in an atmosphere of crisis. In 1960 we had Sharpeville, with the “winds of change” and the flight of capital it engendered. Last year we had the break-away from the Commonwealth, with the economic uncertainties it engendered and the slamming of the door against the transfer of capital by foreign investors. This year, as has already been pointed out, we have the rattling of the sabre. Both the domestic and the foreign investors are being told: “We must look to our defences”, because as the Minister added, “The Republic is under fire on various fronts; more, it is under crossfire”. He then went on to emphasize “South Africa is under fire, under threat of violence and disruption”. Let me remind hon. members that last year the Minister said this—

This year we find that he places first on his priority list “security against external attack, as well as against internal disorder”. This atmosphere of crises is a reflection on only one thing, and that is the mishandling of the situation by this Government. It reflects the dangers inherent in the Government’s policy of “apartheid” and it reflects that the Prime Minister’s granite-like racial policy is not all it is cracked up to be—for crack it must and crack it will. The spending of greater sums of public money on the security of the State will not prevent that crack, nor will it restore investor confidence. The wonder is that South Africa’s economy has stood up to so many shocks as it already has had from this Government.

Notwithstanding the United Party.

If the United Party had been in power, what a boom there would have been. There would not then have been the rattling of sabres and there would not have been three Budgets presented in an atmosphere of crisis. [Interjections.] I say the wonder of it all is that the resilience of South Africa’s economy has stood up to the shocks it has received at the hands of this Government.

Let us consider the gold mining industry. That industry is in stronger and better shape now than at any time in the past. That is so. not because the Police Force and the Defence Force are better equipped; it is so because of the sound planning and wise capital development which was commenced immediately after the last war, at a time when investor confidence in South Africa stood very high. [Interjections.] The hon. member for Vanderbijl Park (Dr. de Wet) can only think in terms of politics, but I am trying to think in terms of economics now. Let me explain. It was the injection of vast sums by private investors, mostly from abroad, into this industry over the post-war years that has been the prime stimulus of the country’s economic growth up to the present. That also accounts for the resilience of the economy that still exists in spite of this atmosphere of crisis which once again surrounds the Budget this year. Last year I said this—

I said that when the hon. the Minister of Finance had donned the garb of the great physician and before he had changed into the uniform of a Field-Marshal this year. But even without that change of dress it is already obvious that regimentation by force still lingers on in the minds of this Minister and the Cabinet as the cure-all for South Africa’s political and economic problems.

Writing in a recent issue of the S.A. Journal of Economics (December 1961) about the danger of the Government’s border development scheme having to be financed at the expense of the expansion of basic industries under private enterprise, the contributor expresses an additional fear: His fear is that “capital investment, the essential key to all activities in a modern society, will become more and more subject to authoritarian control and direction”. I think it is obvious to most business interests that regimentation or. to use the better term “authoritarian control and direction”, is already the key to the Government’s financial and fiscal policies. Sir, what has been developing over the past decade in that regard is now quite clearly discernible. This Government has slowly, but deliberately, been creating what might perhaps best be described as an economic infra-structure of control governing all business enterprise— private enterprise as well as institutional enterprise. But make no mistake about it, this economic infra-structure of control is there for political rather than for economic ends.

I say quite categorically that economic enterprise is being regimented more and more rigidly by this infra-structure of control in order to suit the political ends of this Government, or, put in other words, that this Minister and the Cabinet are steadily contriving to make the economy of the country completely dependent on the dictates of Government. That basically is the fear that is expressed by the writer of the article that I have quoted. But before I substantiate my assertion in that regard let me add this: I hope that no one will try to argue that what the Government is doing is no more than to adapt legislative and fiscal devices to much the same purpose as is being done by other Governments in order to co-ordinate and foster economic enterprise in their own countries. Everyone knows that following the economic disruptions brought about by two world wars, fiscal policies in a number of free countries have had to be used and applied to aid in the maintenance of financial and economic stability. But everyone knows equally well that fiscal aids to that end, in countries such as Great Britain. Canada or France for instance, are not designed to keep a racially dominated party in power or to make the economy of those countries wholly dependent on the dictates of minority rule. I mention this, Sir. because that, by the way, is the sort of argument which this Minister adopted in the dying days of last session to counter Opposition criticism about his failure to cure the economic ills that are facing the country. He used it towards the end of the debate on the 1961-2 Appropriation Bill when it was no longer possible to refute that sort of debating point. To discredit Opposition criticism he tried to stand logic on its head in this way: Admitting the dangerously low level to which our gold and foreign exchange reserves had tumbled by June 1961, he then rather piously asserted— and I quote from Hansard of 23 June 1961—

The implication, of course, was that apartheid and its consequences—Sharpeville, for instance, and our leaving the Commonwealth—had nothing at all to do with the drying-up in South Africa of private investment capital from abroad. What a spurious type of argument for a Minister of Finance to use. It is a complete non sequitor and a fallacious bit of logic which is to be found in the old latin tag: Post hoc, ergo propter hoc. I repeat therefore: I hope no one on this occasion will try to emulate the Minister’s efforts in trying to stand logic on its head!

Now substantiate your claim.

I will. Let the hon. member for Standerton also not try to stand logic on its head, for nowhere in the free world will he find a parallel to the conglomerate type of regimented infra-structure which this Government is creating to control economic enterprise in South Africa. I need do no more than make passing reference to some of the arbitrary restraints on free economic enterprise about which much has already been said in this House in the past. I refer to the many shackles to free private enterprise which have been forged in recent years mainly in an effort to give effect to the Government’s racial ideologies, shackles which have been forged against free private enterprise. Import control has been operating so long and so persistently that I need say no more about it. But we also have job reservation, influx control, arrests without trial and such-like strangleholds on employer and employee relations. In addition we now have the group areas concept with the uncertainties and the disruptions it creates for all town dwellers; we also have the new Bantustan concept with the insecurity it brings to the urban African. That was the commencement of what I call the economic infra-structural control. But this “authoritarian control and direction” goes even further than that. Let me explain briefly what is happening.

I come to the financial system at the hub of which stands the S.A. Reserve Bank. I speak with some reluctance about an institution of such high standing and of such high repute in the international financial world, but the circumstances are unusual and I think they must be ventilated. Twice during 1961 the Reserve Bank was obliged to alter its discount and interest rates in order to suit the needs of the Treasury. On both occasions there was consultation subsequently but there was no prior consultation with the commercial banks and other financial institutions. That, I believe, was a clear departure from both a customary and a salutary banking practice, for after all the commercial banks are the institutions mainly responsible for carrying out the country’s exchange control regulations and also its monetary and banking systems. I would not have mentioned the matter in this debate but for two reasons. The first is this that the Governor of the Reserve Bank himself mentioned the matter in his annual address delivered on 9 August 1961. He used in respect of the raising of the bank rate the rather cryptic phrase, “It was more a case of following or acquiescing in the current trend than giving a lead”. My fear and I am sure the fear of many others is that this is evidence of financial regimentation at the behest of the Government. The Financial Mail, for example, very fairly in my opinion and naturally with due respect to the individual concerned, says this of the Reserve Bank’s current role as depicted in that address—

In this Budget again we have the position where the Reserve Bank is to be used as a stock-jobber on a non-profit basis in order to repatriate South African scrip from abroad at the discretion or the dictates of the Treasury. I ask, Sir. whether anyone can be blamed therefore for feeling disturbed about the development which seemingly has taken place, which seemingly has brought about a situation in which control is being exercised through the Treasury. I said at the commencement that I spoke about this with reluctance. If I am wrong the hon. the Minister will be able to put me right. But those two instances which I have quoted make it necessary that the matter should be ventilated. As I see the position, my fear is that this also is part of the infra-structure of control over economic enterprise.

I come next to exchange control about which one can speak more freely. Last year, for the first time in the history of this form of arbitrary control, powers were taken to regiment the way in which private investment capital from abroad could be used or invested in South Africa. I have mentioned this “closed door” restraint which was announced on 16 June last year. In terms of that announcement certain foreign investors’ funds are blocked in non-transferable accounts held in South Africa. The position has admittedly now been eased to a degree in the Minister’s recent Budget speech. But the fact that the owners of blocked funds will now be allowed to participate in a type of forced external loan, i.e. in a five-year non-negotiable bond issue bearing interest at 5 per cent and redeemable without transfer restriction in five annual installments, rather indicates that the “closed door” restraint will continue to operate for at least five years longer. The second form of relief which the hon. the Minister announced is no more really than a relaxation which will still be subject to rigid exchange control. Let me say at once that exchange control, with or without these relaxations, is no substitute for investor confidence.

Finally, it seems to be quite inevitable that the newly planned capital expansion programme in respect of certain State-controlled undertakings will strengthen the hold of the Government over the economy as a whole—over the private sector no less than over the State-controlled sector of the economy. Sir, the blueprint in preparation for these expansion projects will provide for a capital outlay of some R2,000,000,000 over a period of 12 years. It is to all intents and purposes a State-sponsored and State-controlled scheme. No wonder then that business interests generally are disturbed, not by the expansion of State enterprise as such but by the powers this expansion scheme will place in the hands of the Government. The Johannesburg Chamber of Commerce in particular has felt compelled to take a more careful look at this whole scheme. I myself feel that this is a case in which Parkinson’s Law may well find a place and become securely entrenched. The Law which Parkinson discovered and which is named after him is, as hon. members may know, a law of growth. So applied to this scheme it will remain a law of growth: Ostensibly a growth of output but essentially a growth of power in the hands of those who control the scheme. To put it in another way, Parkinson’s Law can be expressed in more simple terms as follows: Ministers and their powers to regiment economic enterprise generally are bound to multiply.

The effect of all this may be summarized as follows. The South African economy has not only become entangled in a network of arbitrary controls—controls on the free flow of capital; on the acquisition of land and the siting of industrial enterprise; on the use and the movement of labour; on the free choice of occupation, and on the right to buy or sell on the markets of the world. But it is quite obvious to me that the private sector of economy has to a marked degree already lost its character as free private enterprise and has assumed a new role of controlled private enterprise. Viewed in that way I say that this conglomerate of control over economic enterprise has no parallel elsewhere in the free world and I challenge the hon. member for Standerton to prove the contrary. Sir, that is basically the reason why we have now had Budget speeches delivered in three successive years in an atmosphere of crisis. That is the position which the policies of this Government have brought about; that is the reason why, as the hon. member for Constantia has indicated, there is a stagnation of progress in our industrial development and a growing form of unemployment arising.

Have you not got a crisis in Rhodesia with a completely different policy?

In the circumstances that I have outlined the economy of this country as a whole is hardly likely to be able to face up to still another year of crisis by the time the next Budget is due.

I listened attentively to the first two Opposition main speakers on the Budget and I could not help coming to the conclusion that these two hon. members were competing strenuously to see who could be the best prophet of doom. It seems to me that promotion in the ranks of the United Party is made according to the yardstick of who is the best prophet of doom. I have never before listened to such unrealistic criticism as that to which we had to listen here to-day. The hon. member who has just sat down says that on one point he agrees with the hon. the Minister and that is on the question of pensions but, of course, he says that he himself would have been able to do much better and would have been able to grant much bigger amounts. However, he does not tell us how he would have done it. Whenever proposals are put forward by the United Party we find that they do not tell us what positive steps they themselves would have taken. When they do venture an opinion as to what they would have done, we find that the effect of their proposal, if implemented, would have been absolutely disastrous for the country as a whole. The hon. member for Port Elizabeth (South) (Mr. Plewman), for example, says that what this country needs at the present time is purchasing power. We could very easily retain import control and build up the purchasing power in this country even further, but what would be the logical consequence of such a step? Inflation on a large scale. But that is the proposal put forward by the hon. member. He talks about poverty amongst the non-Whites. Surely he should have acquainted himself with the poverty that prevails in other African states, where there is much greater poverty than there is in South Africa. I shall come back to this point in the course of my speech to show that per person we in South Africa are contributing more to the development of our underdeveloped non-White population than any country in the Western world in respect of its underdeveloped peoples. I shall prove that to the hon. member by means of statistics. One moment he says, “If the United Party had been in power”, we would have had a Utopia. May I remind the hon. member that during the last year of their regime they did not even have the courage of their convictions to submit a Budget to the public.

Nonsense.

It is not nonsense, it is the truth.

I shall deal in the course of my speech with the hon. member’s concern over the new role which the Reserve Bank is going to play. The rest of his speech was tendentious and designed to create a climate or, as they say in their motion, to create the atmosphere that we are living in a totalitarian State, that we are heading for a dictatorship. That was the whole idea underlying the hon. member’s speech. Mr. Speaker, I want to say that very few Budgets have been preceded by as much speculation as the speculation which preceded this Budget. The public was aware of the essential requirements in respect of defence, in respect of the development of Bantu homelands, in respect of public utility industries and in respect of irrigation, and this gave rise to enormous speculation. There were rumours about a possible increase in direct taxation; there were even rumours about a possible increase of 60 cents per bottle in the price of brandy; there were rumours about an increase in the duty on motor-cars and tyres, and the possibility was even mentioned of the introduction of a sales tax. The result was that when the Budget speech was eventually delivered and when it was realized in what an extraordinarily ingenious way the various requirements had been met without disturbing the balance of the economy, there was a general feeling of relief. Indeed one can say that both in this House and outside there was a feeling that the Minister had actually made tax concessions. More than ever before in the past enormous pressure was brought to bear on the hon. the Minister in the framing of this Budget as the result, as the Minister himself put it, of the prevailing socio-political atmosphere. Indeed we can say that he was subjected to the very strongest pressure, but as the result of his thorough planning and the fact that he deliberately set out to achieve three objects, which I do not wish to repeat here and to which reference has already been made a number of times, he immediately placed himself in this position that in the process of achieving these objects he also revealed a measure of originality which was lauded even in the overseas Press.

In my opinion there are two outstanding characteristics of this Budget. In the first place it testifies to thorough planning, and that is made abundantly clear by the fact that although in this Budget nearly R120,000,000, that is to say 67.3 per cent more than last year, is set aside for defence, the taxpayer only pays an additional R21.5 million in indirect taxation and R14.2 million in direct taxation, that is to say, only a total of R35.7 million. And the taxpayers’ obligations are being lightened even further if one bears in mind that this year the savings levy of R18.6 million is being repaid to them. Actually therefore the taxpayer only pays R17.1 million, which is indeed a very small premium to pay for a peace policy of this magnitude. Thorough planning therefore is the first feature of this Budget.

Its second feature is the ingenuity that it reveals. This ingenuity is revealed in the two measures of relaxation of exchange control in respect of the transfer of the proceeds of South African securities held by non-residents.

We were all sorry that it became necessary to block that capital, but the way in which the Minister set about granting relaxation has met with general approval. As a matter of fact the United Party was so disconcerted by the hon. the Minister’s method that in their first criticism they did not have a single word to say about this ingenious method, and even this afternoon there was only a passsing reference by the hon. member for Port Elizabeth (South) to the so-called rather unpleasant task which the Reserve Bank is now called upon to fulfil.

They were the people who accused us in the first instance of a breach of faith towards the foreign investor when we had to introduce this measure last year. Naturally, as I have already said, we were all sorry that we had to do this, but eventually those same critics of this step expressed their appreciation of this measure, and in this Budget—and in this regard the United Party is as silent as a grave— the Minister makes use of the very first opportunity that he has to come to the assistance of the non-resident and he does it in such an ingenious way that partially they will again be able to repatriate their funds at the official rates of exchange; moreover, he does it in such a way that our own position is not endangered. One can get no better proof of our bona fides towards the non-resident while at the same time protecting our own interests. But in the first statement issued by them the United Party makes no reference to this matter at all.

I should like to proceed now to deal with the United Party’s criticism in their first statement after the Budget speech—criticism which they shouted from the housetops and which serves as a basis for the amendment that they moved here this afternoon. In broad outline it amounts to three charges. The first is that the tempo of our development is too slow; secondly that the hon. the Minister of Finance has not succeeded in stimulating our economy; as a matter of fact, that his efforts have failed, and in the third instance that this Government is leading the country to a dangerous position of isolation. That is contained particularly in the fourth paragraph of their amendment.

As far as the first criticism is concerned, namely the so-called slow tempo of economic development, of which we have heard so much from both speakers of the United Party this afternoon, a particular feature of this Budget is the very fact that in its diagnosis it not only reveals the strength of our economy but also the weaknesses which have to receive proper attention. That is why the Minister was able to admit candidly that the rate of growth of our economy has slowed down to such an extent that it gives one cause for concern because if we take into account our wealth of natural resources, it should definitely have been possible to make more rapid progress. The hon. the Minister did not try to conceal that fact. But this is not the first time that this important statement has been made in South Africa; it was made as far back as 23 September of last year by the hon. the Prime Minister when he stated on behalf of the Economic Advisory Council that it was generally realized that the present rate of expansion and development was not sufficient to absorb the growth of the population. The fact that this statement was made as far back as 23 September of last year proves that the Planning Council had been investigating this problem for some considerable time. The difference between ourselves and the United Party is that we see these problems in advance and then take the necessary steps, but that planning is lacking in their programme, and that is precisely why, in pursuance of the statement made by the hon. the Prime Minister, the Advisory Council recommended that the measures announced in the past three years to stimulate industrial investment should be further supplemented by concentrating more positively in our taxation policy on the encouragement of investment and development. And that is precisely what is being done in this Budget. Let us look at it for a moment. The hon. member for Constantia (Mr. Waterson) says, “I can find nothing in this Budget which is calculated to stimulate development.” I sat here for a long time this afternoon waiting to hear whether the hon. member would again use those words, “I can find nothing in this Budget …” That is a classic expression that he uses in every criticism of the Budget. I have heard him use that expression at least 14 times, and this afternoon he again came along with the statement, “I can find nothing in this Budget which is calculated to stimulate development.” Although the hon. member belittled it, the amount set aside for defence is not to be used entirely for purchases; all that money is not being withdrawn from circulation. On the contrary, 55 per cent of the increased Defence Vote will be spent in South Africa, and it goes without saying that it will have a very important stimulating effect on certain branches of the engineering industry. Fifty-five per cent will be invested in South Africa, but the hon. member for Constantia belittles it.

However, that is not the only stimulant contained in this Budget. Obviously the R25.2 million set aside for the purchase of land and for the development of the Bantu homelands will promote investment.

In the third place, the development of this majestic Orange River scheme, which has gripped the imagination of the entire population and where so much of our own material and our own labour will be used, will provide an enormous stimulant, the scope of which one cannot even determine at this stage.

Then we come to the fourth point, and that is the direct effort to stimulate export trade, in the first instance by means of a contribution of R500,000 and in the second instance by means of the special income tax concession to exporters who increase their export turnover, and in the third instance by extending the investment allowances in respect of equipment, machinery and buildings.

Then I come to the fifth point, the concession of R3,800,000 to pensioners which will, of course, stimulate consumption. It can have no other effect. All that is being done by the State in this Budget, and yet the hon. member for Constantia comes along and says, “I can find nothing in this Budget that is calculated to stimulate development.” The whole of this Budget is based on two fundamental cornerstones; it seeks to maintain a balance between the security of the country on the one hand and economic stability on the other. Here again the Government is implementing what the Planning Council announced as far back as 23 September, but nevertheless this effort is treated with scorn. No, it is supposedly not big enough! But the hon. member for Constantia has failed to tell us what they would do. I shall deal in a moment with his proposal that we should have budgeted for a deficit.

The basic reason for the slowing down in the whole rate of growth of our economy is attributed by the United Party to our policy of apartheid. But let us look at other countries for a moment in this respect. During the period 1952-60 South Africa’s average real national income per head rose by 1.4 per cent; in Australia it rose by 1.4 per cent; in New Zealand by 0.9 per cent and in Canada by 0.9 per cent. I use these figures because they are the latest comparative figures at my disposal. I concede that the rise in countries like West Germany. Italy, the Netherlands and England has been considerably higher than in South Africa, but after all in this respect we do not compare unfavourably with countries like Australia, Canada and New Zealand, and those countries have no colour problems to which the situation there can be attributed. In the second instance we must remember that during that period from 1952 to 1960 imports became much more expensive for South Africa, Australia. New Zealand and Canada, while exports of raw materials yielded much less. In the case of the older countries imported goods were cheaper and exports yielded more, or let me put it differently; the terms of trade of the raw material-producing countries weakened vis-à-vis the industrial countries, and this naturally had an enormous effect on our figures and those of Australia and New Zealand. What also affected us and Australia and New Zealand very detrimentally is the fact that 1952 was a particularly favourable year in respect of wool, for example. In 1952-3, for example, our geographic income rose by R300,000,000, and this had a very adverse effect on the comparative period 1952-60. It is therefore quite unrealistic to attribute the slowing down in our rate of growth exclusively to the Government’s colour policy. It is a statement which is devoid of all truth. What is of much greater importance is that we fully realize the weaknesses and that in this Budget we are again doing everything in our power to apply the necessary remedies.

That brings me to the second aspect of the criticism of the United Party, and that is that the Minister’s efforts in the past two Budgets to stimulate our economy have failed. In the first place we must remember that our economy is based on private initiative. We are continually reminded by the United Party—even the hon. member for Port Elizabeth (South) again did so this afternoon—that the State must limit its role and that it must not enter the sphere of private initiative. If they want the State to ment. then it presupposes that the State itself take active steps to promote industrial develop-must become an entrepreneur. How does the United Party reconcile these two conflicting approaches? It is time they told this House precisely what they wanted. They themselves suggest no positive remedy; one cannot infer from a single sentence that the Opposition suggests a specific remedy, except for the proposal that we must budget for a deficit, a proposal with which I shall deal in a moment. If on the other hand they want the State to make more concessions, then it can only mean one of two things. It either means increased taxation—and that they do not want either, and indeed that would result in the withdrawal of a great deal of purchasing power—or it means that the Government must budget for a deficit. We have had the valuable contribution in this debate this afternoon from the hon. member for Constantia. on behalf of the official Opposition, that we should budget for a deficit! In this connection I do not want to repeat the argument in respect of the gold mines; that has already been mentioned by the hon. member for Pretoria (Central) (Mr. van den Heever). But now the Opposition comes forward with a terrific plan, and that is that we must budget for a deficit! That is the only positive idea that originated from the fertile brain of the United Party. Mr. Speaker, we have always prided ourselves on our stability. What would be the effect on our stability if we were to budget for a deficit? What would the effect of it be on the outside world and in what light would that step be viewed in this country?

They are just stupid.

The result of it would be enormous inflation which would hamper the whole of our economy but, what is even worse, a large section of our population would be robbed of the provision that they made for the future. Here I am thinking of pensioners and other persons. Does the hon. member want to suggest that the official policy of the United Party is that we should rob that section of the population of the small savings that they put aside? Is that the official policy of the United Party? Because that is the logical consequence of the hon. member’s proposal that the Government should budget for a deficit.

He did not say that; you were not listening.

The only course that can be followed in these circumstances is the path indicated by this Government, and in this connection. apart from what I have already mentioned as stimulants which are being used by the Government, let me just mention a few others. There is the 12-year programme of Iscor that will cost R560,000,000; there is the Escom expansion programme (1961-70) which will cost R400,000,000, and there is the doubling of Sasol’s capacity programme which will cost R59,000,000, and a further R16,000,000 over a period of three years for the supply of raw materials for synthetic rubber. And yet in spite of this it is alleged that our efforts have failed. The hon. the Minister, as I have said, has candidly admitted what our problem is. Indeed it is the Minister’s duty in his Budget to reveal our strength and our weaknesses to the public in a realistic way. But there have been other factors which have had a retarding effect. In the first instance there was the enormous outflow of capital that we experienced last year and which counteracted the stimulants provided by the hon. the Minister. Generally speaking there was this chaos that was created by the turbulent events that took place in Africa, and which had the effect of hampering these remedies. Sir, these remedies, as the result of circumstances beyond our control, have not yet gone through a proper trial period, but nevertheless the United Party comes along and says that these efforts have proved a failure. Sir, industry in particular and our economy in general appreciate these repeated efforts in this Budget, and the fact that this Budget has made an impression is proved by the comment made by the Evening News of London on this Budget when it stated that the British Chancellor of the Exchequer would be well advised to pay attention to these measures introduced by the hon. the Minister. They take notice of these measures but hon. members of the Opposition belittle them.

Another aspect that we have to take into consideration in this connection is the reduction in capital formation, to which the hon. member for Constantia also referred. Superficially viewed this may be described as a very unfavourable trend. The capital formation in 1960 was R1,159,000.000; in 1961 it was R1,075,000,000. a reduction therefore of R72,000,000. However, there is an explanation for that. Over the past year there has been a reduction of R73,000,000 in the stock-in-trade of manufacturing industries and commerce, and this reduction is attributable entirely to the fact that businessmen had excessive supplies on hand and reduced their stock-in-trade. Another important point that should be mentioned in connection with the accusation that our efforts have failed is the fact which comes to light when one analyses the statistics contained in the quarterly bulletin of the Reserve Bank, the December 961 issue. The facts which I now propose to mention also prove that overseas confidence in our economy is returning. This analysis shows that the nominal value of ordinary shares, as well as the undistributed profits of foreign-controlled companies, has increased by a total of R46,000,000. This is extremely important if we remember that this happened at a time when there was a net outflow of private capital to the tune of R152,000,000—more than in any post-war year —and this increase must be attributed to the favourable climate created by the hon. the Minister in his previous two Budgets. And yet the United Party says that the Government’s efforts have proved a failure.

They are bankrupt.

I come now to the third and the last point of the United Party’s criticism, which practically amounts to this that the Government is heading for isolation and leaving us without a single friend in the world. Briefly that is the content of the fourth paragraph of their amendment. Mr. Speaker, here the basic difference between ourselves and the United Party comes to the fore. While the United Party still looks to assistance from abroad—there was even a time when they measured our economic progress by the amount of money that entered this country from abroad—we on this side of the House believe that the first requirement for good friendship is to ensure that our own country’s economy is powerful and strong; that in that way we will command the respect of the world. Furthermore, we believe that the bonds of friendship must be strengthened and cemented by means of trade and an interchange of economic activities. World trade plays the greatest role in South Africa—a much greater role than in many other countries. We import more than most big countries purchase from us, and these imports will grow together with our economic growth but not at the expense of our economic growth. In spite of this, however, we are accused of heading for isolation, and the implication is that we have been heading for isolation particularly since the establishment of the Republic. Let us review the facts for a moment.

What has happened in respect of our foreign relations in the financial and economic spheres since the establishment of the Republic in this short period of one year? In the first instance, towards the end of last year it was announced that we had borrowed R14,000,000 from Western Germany and Italy, two countries which serve as new monetary sources for this newly established Republic. Previously we had never borrowed from these sources. Does that look like isolation? At the beginning of this year a new market for our sugar was established in Japan. We have also established a new market for our sugar in America. In Japan we have obtained a new market for our pig iron at a value of R180,000,000.

And 50 new Whites.

Go on sneering.

On 20 October last year it was announced that the Industrial Development Corporation had concluded an agreement with the First National City Bank of New York for unsecured revolving credit facilities not exceeding R3,500,000. Does that look like isolation? Towards the end of September 1961, a private mining company in South Africa obtained a loan of $30,000,000, the biggest loan ever obtained by a private company in South Africa. Recently we have had the announcement that a R22,000,000 refinery is to be established here by a foreign company. A week or two ago we learned of the establishment of a R9,000,000 synthetic rubber factory in co-operation with a group of foreign companies. And above all, within the short space of one year since the establishment of the Republic, our exports of goods have reached a record figure of R926,000,000, in the first year of the Republic’s existence. Does that look like isolation? Recently the hon. the Minister of Economic Affairs announced that 160 persons had applied for permission to start industrial developmental projects in South Africa. Is that isolation? And then the Opposition actually come along with the accusation, an accusation which they shout from the house tops, that this Government is heading for isolation. If ever a crime was committed against South Africa, the Opposition did so in shouting those words from the house tops. Do they believe that they can promote the South African economy by doing that sort of thing? No, since the establishment of the Republic, there has been the greatest interchange between South Africa and the outside world in the financial and economic sphere, a fact which must necessarily give rise to stronger bonds of friendship. Our aim to strengthen our economy is not based on self-conceit or selfishness: we do this because we know that we also have obligations to fulfil in respect of the non-Whites—and this brings me to an important point that I want to make in connection with our obligations towards the non-Whites. Per person we in South Africa are making a greater contribution to the development of our underdeveloped non-White population than any other Western country does in respect of the development of underdeveloped peoples. According to the official figures of direct State contributions in the form of foreign grants and loans to underdeveloped countries, the contributions of the various countries are as follows: France contributes a little more than R12 per person per annum; America R9.7. Britain R3.8. the Netherlands R3.22, Western Germany R3.10, Canada R2.13, Belgium R1.98. Italy 74 cents, but South Africa contributes R22 per annum per person, and in our case there is no question of loans. Here we have the best evidence that in our progress and in building up a strong economy, we constantly realize that we also have obligations towards our non-White population.

What is the total expenditure on non-Whites?

Before I conclude I want to come to another point made by the hon. member for Constantia. He says that we must not overlook the possibility of foreign intervention. He accused the hon. the Minister of Defence of making reckless emotional speeches, and he draws the attention of the outside world to the possibility of intervention. I think it was extremely irresponsible to make that statement in this House.

Let me say in conclusion that this Budget was born out of the needs of the moment. That is why it is a realistic Budget. On the one hand it reveals the outcome of 14 years of effort to build up a powerful and dynamic national economy. The success that we have achieved must be attributed to the deliberate efforts of the whole of the nation itself, a nation which has been blessed with enormous powers of perseverance. On the other hand such a dynamic economy, just as in many other countries of the world, brings about certain problems, and the remedies to be applied to solve these problems are revealed most clearly in this Budget. It is up to the entrepreneur now to follow; the time is past for the entrepreneur to sit back and to think that he is investing his money safely if he puts it into his own coffers. The best security for the entrepreneur’s money in South Africa to-day is to make his investments to-day and not to wait until to-morrow. This Budget meets the immediate requirements of this country in every respect because it succeeds admirably in maintaining the balance between the present two essential and fundamental requirements of national security and financial stability.

The two speakers on the Government side have both made rather peculiar speeches. First of all, the hon. member for Pretoria (Central) (Mr. van den Heever) spent a good deal of his time criticizing speeches made last session by hon. members on this side, and now the hon. member for Mayfair (Dr. Luttig) has spent quite a lot of his time suggesting arguments which the hon. member for Constantia (Mr. Waterson) did not use. In his opening remarks he complained that the first two speakers on this side were prophets of doom. Surely he should read his own Minister’s Budget speech. There he will see that in the second paragraph of his Budget speech the Minister said this—

Yet the hon. member expects us to dismiss that and to say that all is well and to believe the propaganda of the Minister of Information. The hon. member then suggested that the hon. member for Constantia had criticized the economic strength of this country. The hon. member for Constantia did not criticize our economic strength. He admitted that our economy was sound. But our complaint is the way in which this Government is misusing our economic strength. Finally, the hon. member for Mayfair referred to the Orange River scheme and suggested that was a very important factor. But we are now dealing with this Budget and in this Budget only R2,000,000 is being provided. Credit is being taken on the Government side for the Orange River scheme, and yet three years ago the Minister of Water Affairs at Cradock said that the Orange and Fish River scheme could be forgotten; that he would never give his support to the scheme. That was on 12 May 1959.

We wanted the bigger one.

Year after year, over the past 14 years, members on the Government side have laughed at the hon. member for Albany (Mr. Bowker), and yet the schemes which were envisaged by the late Mr. Conroy are now being adopted by this Government, and we find that they are trying to claim the credit for it.

You did not do anything about it.

They are trying to claim the credit in this year 1961 for hundreds of millions of expenditure, and yet only an amount of R2,000,000 is to be spent this year. Sir, this Budget is a laager Budget—and you can spell “laager” either way. Criticism of this Budget is fully justified. The Minister of Finance sketched the background of the financial picture, and some glaring omissions are apparent at this stage. I do not believe that the Minister would try to suggest to us that this Budget is popular. I am quite sure that he realizes that in many quarters his Budget is not popular at all. But I go further and say that the fundamental principles of taxation have been abandoned. The load has not been distributed evenly according to the capacity of the people who bear it. It is only right that there should be fair distribution of the tax burden. But before dealing with the tax burden I want to deal briefly with the country’s financial position. The Minister in his Budget speech said this—

That was part of the chief criticism of the hon. member for Constantia. One of the most serious factors giving evidence of the slow growth of our economy is the growing figure of unemployment. Only the other day the Department of Labour in a statement said that there were 33,682 South African jobless at the end of January—2.3 per cent of the country’s manpower. There were 2,513 more unemployed at the end of January than at the end of December. The Department says that the increase is experienced every year during January and is due to the large number of juveniles who enter the labour market for the first time. The Department goes on to say that the increase in unemployment gives no cause for anxiety. Certainly it gives no cause for anxiety in Government circles. But let the Government go to the unemployed people and ask them if there is any cause for anxiety. Let the Government look at the unemployment queues in our big towns. They are young people with no employment looking for work, frustrated in their efforts. Then we have those in the middle-age group of 50 to 55 looking for work. There are hundreds of them. Some of them have got tired of even registering. Yet hon. members on the Government side say everything augurs well for the economy. Are they really serious when they say that?

What percentage is unemployed?

The hon. Chief Whip is only interested in percentages. I should like him to see some of those percentages as they stand in the queue; I should like him to hear what their difficulties and troubles are.

That is not the point.

That is not the point as far as that hon. member is concerned. That is why he nearly lost the nomination.

He nearly missed his place in the queue.

Yes, not only would he have been unemployed but I think he is unemployable. [Laughter.]

Order!

It is just as well that the hon. member was asked to keep quiet. Another figure which is causing concern is that in respect of building plans passed. The value of the building plans passed fell by 28 per cent in 1961 and the number of building plans passed is a significant and sensitive indicator of economic change. One is inclined to suggest that had the R10,000,000 which the Railways applied for and failed to use, been used for necessary housing during the past year this might have given a stimulus to the economy. An examination of the White Paper shows that the standard of living is not increasing at a satisfactory rate. The gross national production, that is the gross aggregate value of national production, increased by only about 3 per cent in 1961 over 1960. After allowing for the fall in the value of money in this period this means that the gross national production rose by only 1.5 per cent in 1961, which is a quite negligible increase. When one takes into account that the population is increasing by at least 2 per cent per annum one can see that on this basis the average per capita is falling. In other words, based on the latest official statistics, the standard of living is actually falling. When we examine the figures recently submitted by the Reserve Bank in its last quarterly return we see that the position shows no material improvement. Even on the basis of the figures quoted in the White Paper, the Minister will see that there has scarcely been any improvement since 1956-7. In other words the standard of living is virtually no better than it was five years ago. This gives cause for far more concern than members of the Government are prepared to admit. When one realizes the substantial increases in living standards throughout Europe, Britain, America, Canada and also to a somewhat lesser extent in Australia and New Zealand, increases which are considerably higher than those in South Africa, one cannot be complacent, Sir, and say that all is well.

Are you quite sure of your facts?

I am quite sure of my facts. I am quite sure that as far as America. Canada and Britain are concerned the standard of living has increased. In the case of New Zealand and Australia it is about the same. But I go further than that: Would hon. members opposite not like to see the standard of their own country better? Hon. members opposite always look for the lowest figure and say “Well, we are doing better”. Hon. members opposite have no ambition at all, Sir. They take the lowest figure and then they say: “We are better than that.” They ignore the fact that there are other countries with better figures; they are satisfied with the lowest. The lowest is good enough for South Africa according to them.

Mr. Speaker, the Minister said this: “The gross fixed investment increased moderately in both the public and the private sectors but the net private investment showed little change.” That was what the Minister said. That is not what we are saying. It is not we who are running the country down as Government members are so fond of saying, but that is the Minister’s own statement. In another portion of his speech he said: “The sluggishness of net private fixed investment remains a source of concern.” Here the Minister has not only glossed over the position but has, in fact, grossly understated the seriousness of the capital position. The White Paper, on page 3, shows that the gross capital formation, i.e. investment, on all counts has fallen by R70,000,0000 in 1961. For the private sector the fall is nearly R100,000,000, i.e. from R727,000,000 to R630,000,000. When depreciation is deducted, and the depreciation allowance, I submit, will be greater for 1961 than for 1960, the net investment by private enterprise will be found to be well over R100,000,000 less in 1961 than the year before. As fixed investment is the most important part of total investment it is not clear how the Minister can say that net private fixed investment shows little change. What is more, private investment is, in fact, lower than in any other year since 1954, with the single exception of 1960. Closely allied to the investment decline is the question of liquidity in the economic system, to which reference has already been made by the hon. member for Port Elizabeth (South) (Mr. Plewman). Slackness of the economic activity indicates an unwillingness on the part of the public to invest. Obviously the Minister expects overseas investors in the main to disinvest over the next five years. His scheme for blocked rands is spread over a period of five years. Surely the Minister is making very heavy weather with something that could be accomplished much more simply by making the blocked rands transferable to non-residents only and only for security dealings. In that case the Reserve Bank could buy the blocked rands where reserves permitted it. I suggest that this would be a much more convenient way of dealing with this problem because the effect of the Minister’s scheme in dealing with blocked rands is a cumbersome one. Then the Minister has suggested something new in dealing with investments in this country, namely, to allow the Reserve Bank to become a buyer of shares on the London money market. I suggest that the effect of that will be to increase the shares on the London market and decrease the shares on the South African market.

Then we do not buy.

Mr. Speaker, I suggest that the hon. member confines his interests to open-air cinemas. He has not been too successful in that field either. When there are liquid funds lying idle and we have the Government dealing in securities as well through the Reserve Bank it suggests that the Government is trying to inject confidence in the country which basically the investing public do not have.

You indulge in personalities every time you have to answer.

Mr. Speaker, I said that hon. member would probably be unemployable and his interjection has confirmed that. The Minister has given us a threefold aim of Budget policy in South Africa, namely national security, the greatest degree of economic progress and stability within the context of general Government policy and thirdly to alleviate the lot of the handicapped and other less fortunate members of the community. The highlight of the Minister’s Budget is the amount spent on defence. As the hon. member for Constantia (Mr. Waterson) has said no one objects to adequate steps being taken to defend the country, but no Government has done more to destroy the esprit de corps of the Defence Department than this Government. The present Minister of Defence has had his hands full in endeavouring to undo the damage caused by his predecessor. The Government’s earlier neglect of the real needs of the Defence Department have resulted in the present necessity to spend. If external danger is as real as threatened by ministerial statements, the economic recovery will be slow if, indeed, it does not decline. The investing financier does not only want a satisfactory return on his investment but he also wants to be sure that his capital is safe. That is possibly one of the many reasons for the present liquid position and is the result of the scare talk of this Government. It is no good the Minister of Defence coming on the one hand with scare talk and the Minister of Finance telling us that grave dangers are upon us and the Minister of Information trying to tell us that all is well. Whom must the investor believe? The investor wants to take the least risk and to keep his capital liquid rather than get it tied up. The Government side must not blame this side of the House they must look to the statements by their own Ministers and their own actions.

Can I ask a question?

I will answer an intelligent question. When one examines the Defence expenditure in detail though, one cannot but come to the conclusion that the Defence Vote is principally to keep the Bantu in his place. If we examine the Defence Vote briefly we will see that the Vote is to be increased by some R48,000,000. The increases can be summarized briefly as follows; Salaries, wages and allowances, R7,394,000; Non-White labour, R1,827,000; Payments to A.C.F., R1,176,000; Armaments, R1,467,000; Radio and radar, R2,347,000; Mechanical transport, R2,383,000; Aircraft and air fuel the small amount of R1,056,000; and Special equipment and reserve stocks, R14,410,000. If we examine the amount to be spent on permanent works on the Loan Account we find it is mainly for bungalows, officers’ messes, compounds, etc. Nowhere in the analysis of this Budget expenditure do we find figures which suggest that an outside attack is imminent or that it is necessary at the present moment to detect and repulse hostile forces, because nowhere in this Budget is there an indication that the equipment is to be purchased for that purpose. Instead the provision for mechanical transport stands at R5,075,000—an increase of R2,383,000 over the previous year. Mechanized transport is necessary for the rapid movement of forces within South Africa, and one cannot but think that what the Minister of Defence said a year ago still holds good, namely, that the Defence Force is maintained for the internal defence of this country for which purpose the citizen force and police commands have been coordinated with the Army, or in brief “bombs for Bantustans”.

The second claim of the Minister is that there is the greatest possible degree of progress and stability within the general context of Government policy. Before I touch briefly on border industries I would like the hon. the Minister of Economic Affairs during the course of this debate to give us some information with regards to his export drive, some indication about these deputations which went overseas. The hon. member for Mayfair (Dr. Luttig) spoke with pride about the amount of export business which we have got with Japan. While I do not for one minute decry that business, Mr. Speaker, I would draw the Minister’s attention to the White Paper and the amount of export business which we do with Africa. I would like to know from the Minister of Economic Affairs whether his Government has abandoned the African market, whether they see any prospect of retaining the market we have or whether we will eventually lose it, whether there is any prospect of increasing that market and what steps he is taking to develop it. While one realizes that there is a resistance to South African exports when it comes to certain branded goods, there are many products made in this country which are not branded and there is a possibility that a market could develop in respect of those goods. We know very little from the Government about the advance of the export market other than ministerial statements made during the recess. The Minister has had the opportunity of sending three deputations overseas and I think the time has arrived when we should have a lengthy statement from the Minister indicating the results of those visits and what will accrue to South Africa as a result or rather whether the amount that will acrue to South Africa will be in excess of the market we have lost in the rest of Africa. As the hon. member for Constantia has suggested, perhaps the Minister could make it much more simple than that and table a report. Because I think the country is very anxious indeed to know what the real prospects for an export market are. While many industrialists have sent representatives overseas and while there is reference in the Budget speech to the encouragement of exports, that reference is far too vague for us to criticize at this stage—and I am not merely saying this in the sense of carping criticism. The Minister said in his Budget speech that the details would be worked out later. But such details as were given were of such a general nature that it is not possible for us to criticize them in detail. On the basis of the Minister’s statements in his Budget speech one could see various means of getting over some of the tax difficulties. But the remarks were so general that it is not possible to criticize them at this stage. I am quite certain that by the time we get the necessary legislation before us you will find that many of the apparent loopholes have been taken care of by the Minister’s Department. But at the present moment it is not possible to criticize those in detail except to say that they are far too general and I would suggest, on the first reading of the Budget speech, that they allow many opportunities for evasion. But as I have said it is not fair to criticize them just on the basis of the Budget statement. I hope that the Minister of Economic Affairs will tell us how this market is to be developed because we will have to look for an external market. According to the Government’s plan the internal market is to be looked after by border industries. Here I want to touch briefly on border industries to illustrate the effect they can have on the economy of the country. No one can object to decentralization of industry if it is for the economic good of the country. The economy of the country is essentially a unity and the chief concern should be for the increasing number of unemployed and the lack of employment opportunities for the growing population. The danger is that the Government’s policy of separate development will lead to fragmentation of the economy. The policy of artificially fostering industry in the border areas will result in the maintenance of industrial colour bars and the restrictions on the mobility of the latter which would retard economic progress. The Minister of Bantu Administration and Development said only last year that to maintain our present state of full employment now jobs would have to be created annually for 8,000 Whites, 5,000 Coloureds and 18,000 Africans. But one of the immediate effects of the establishment of border industries is shown by the reaction of the clothing industry in Natal which employes some 10,000 workers, which regards the establishment of clothing factories at Hammersdale as a move which has had an unsettling effect on the industry. Here I want to re-emphasize what I said earlier. No one objects to decentralization when it is in the economic interests of the country. But in the case of the Hammersdale factories which purport to be employing 1,000 Africans from the Umlaas Reserve, I would like to be satisfied that the factories there are employing only people from that reserve. Because I think if the Minister will go to that area he will see Cato Manor slums—for want of a better name—which are growing on the fringe of that area, slums which are likely to cause a considerable headache in that area if the present condition is allowed to continue. This area is producing a wide range of clothing at greatly reduced costs compared to similar garments manufactured in Durban. And Hammersdale is only 40 miles from Durban. Slum conditions are already developing round this area and they are eloquent testimony of the potential Cato Manor slums and all its concomitant evils. Shirts from these border industries are being sold at R1 each wholesale, but the production of a comparable article in Durban costs R1.65. This has had a considerable impact on the manufacturing and retail trade. When money is tight the tendency is, when conditions such as those obtain, for people to buy on price and price only and not branded names. The appeals to the Government by organizations representing the industry have been brushed aside. The industries concerned have been told that it was a matter of Government policy. Yet the weekly wage paid at Hammersdale is considerably less than that paid in Durban. And at Hammersdale you have people living in sub-economic conditions, getting a sub-economic wage, competing with factory employees in Durban who get an economic wage. No wonder, Mr. Speaker, that the resultant product is produced at a price which is sufficiently keen to push the other out of the market. If the Minister tries to tell us that the liquid position of the country is such as to encourage future investment is it surprising that the tendency on the part of industrialists is to keep their capital liquid until they see how the picture is going to develop? They are anxious to invest but they would like to make sure that the economy is not going to be undermined. An industrialist having an industry in one area is faced with this position: He knows the quality of his goods and he knows that the nature of his product is such that he can compete under normal conditions but he also knows that if he does not move to the border area and pay border areas rates he may lose the whole of the business which he enjoys at present. He has the choice of keeping a few selected personnel and keeping his factory near a well-populated White area, transporting them as he does to-day 25 and 30 miles by car in order to keep his business goodwill and turnover, or moving to the border area. The result is that the economy is disrupted, in that the danger exists of an existing business closing down and a new business being started on the border of the reserves. That is causing a considerable amount of concern and I suggest that the Government’s actions so far in an attempt to decentralize as illustrated by the examples I have given, show beyond doubt that insufficient care is being given to its decentralization policy. This border industry scheme is undermining existing industries, as has been illustrated by the representations which industries in large towns have been making to the Government when they found that sub-economic wages were being paid in these border areas.

I come now to the final leg of the Minister’s proposals, that is to alleviate the lot of the handicapped and the less privileged members of the community, and his efforts at alleviation is cynicism at its worst, I suggest. The Minister’s proposals show additional taxes to the extent of R35.7 million but the effect of this is that indirect taxes, i.e. customs and excise duties, will amount to nearly 40 per cent of the total taxation, which I submit, Sir, is an exceptionally high proportion, especially in a country with such a large number of poor people. Indirect taxes have in fact more than doubled over the last ten years from R113,000,000—that is 29 per cent of the total taxation in 1952-3 …

More than doubled in the total amount?

I will give the Minister the figures. Indirect taxes have, in fact, more than doubled in amount over the last ten years from R113,000,000, i.e. 29 per cent of the total taxation 1952-3, to R232,000,000, i.e. 38 per cent of the total taxation, in 1962-3. I am dealing with the question of the uneven spread of the burden of taxation. When you have a higher percentage of indirect taxation I submit that you are spreading the burden unevenly. The concession to pensioners appears very small especially when you realize that these people will have to pay more for liquor, petrol, gramophone records and paperback fiction. Surely it is not unreasonable to suggest that these are tax burdens which are felt by these people. The Minister by his own Budget proposals has shown that he will not create the impetus to engender new virility into the economy. National security is not ensured by guns and bullets alone. It demands first the loyalty and goodwill of every section of the community, and the winning of friends overseas. This Government has estranged the loyalty of virtually the whole of the non-White population inside South Africa and has lost many friends overseas. It has failed to maintain economic progress at a rate consistent with the increase of the population and the reasonable rate of economic development of all its people. It has failed to alleviate the lot of the handicapped and less fortunate members of the community. I therefore have much pleasure in supporting the amendment moved by the hon. member for Constantia.

I should like to reply to the allegations of the hon. member for Pinetown (Mr. Hopewell) that there is so much unemployment in the country, but I just want to do it ad hoc. He was generalizing and he knows as well as I do that all generalizations are false. If he analyses the unemployment figure he will see that it is not as catastrophic as he depicted it. I have before me the statistic quarterly of the Reserve Bank for December 1961. I have compared it with the data of the Department of Census and Statistics contained in their monthly bulletin. If we look at manufacturing industry, the employment figures are precisely the same as for last year, and stand at 120, with 1953 as the basis. If we look at construction works, it is also precisely the same. Both are 105—last year and this year. Therefore there is unemployment and we will not deny it. We regret it, but it is not of such national scope that we can regard it as a catastrophe. I can understand that the hon. member wants to exaggerate it because he is always one of those hon. members who succeed in making much out of little. There is 2 per cent—that is what we read in the paper this morning. Now he says the hon. the Minister must go and see what that 2 per cent looks like. He says they are queueing up. Let me assure him that those unemployed have a Department of Labour which is much more concerned with their welfare than the Opposition is. The first consideration of that Department is to try to find employment for those people. But if he analyses that figure of 2 per cent he will find that a large number of them are married women. Although they have no work, they are not exactly unemployed, although they increase the figure.

I want to reply to what was said by the hon. member for Constantia (Mr. Waterson) in respect of the Reserve Bank. It would be a pity if he leaves the Chamber now. I regret having to call him back, but if he has to go he must. Mr. Speaker, I concede that there is unemployment in the building industry, because building decreased from 102 to 89. Those are the figures up to December 1961. The Government, the Minister of Labour, the Minister of Finance and the Minister of Economic Affairs are at pains to see whether they cannot do something for the building industry. The reason for it is that the building societies did not have the funds to make loans. We know now that the deposits of the building societies have increased and that before long that matter will be in order.

Then the hon. member for Constantia belittled the suggestion of the Government to make the Reserve Bank what he called a “stock-jobber”. He calls it by that name because it has a derogatory meaning in the stockbroker’s business. The hon. member for Port Elizabeth (South) (Mr. Plewman) had a different approach, namely that the whole financial policy of the Government was subject to control measures which are again conditioned by the ideological approach of the Government. The hon. member for Pinetown (Mr. Hopewell) frankly objected to the Reserve Bank doing this work. I want to reply to all these three points. All three hon. members object to the bank doing this.

What do we find if we analyse the matter? We know that high prices obtain on the London Stock Exchange, whilst for the same shares there is a higher price in Johannesburg. We also have another problem, viz. that there is not scrip available on the Johannesburg Stock Exchange. The hon. member says that these measures we are adopting will make prices rise more in London than in Johannesburg, but then I say he should not buy. But he evidently wants to buy in a higher market and sell in a lower one. Then no profit can be made, and nobody will buy shares in London if they are higher there than here and he can obtain them here. Only a fool would do that. Perhaps the hon. member for Pinetown would do it, but not I.

The hon. members for Constantia, Port Elizabeth (South) and Pinetown would surely not object to shares being bought in London, irrespective of who buys them. Then at least we have common ground there. Do they object to the Reserve Bank buying them? It seems to me the hon. members for Constantia and Pinetown object to it. I am not sure that the hon. member for Port Elizabeth (South) really objects to that. He objects on other grounds. But let us take the first objection, that the Reserve Bank buys them. If the Reserve Bank buys shares and sells them here at a profit, do hon. members object to its making a profit? The whole measure is being applied to ensure that capital does not leave the country unnecessarily. Do hon. members perhaps want the control measures over the movement of capital to be abolished, or do they object because these profits do not go into the pockets of their stockbroker friends? If that is the case, it is the most unpatriotic thing I have heard from the United Party for years.

There he goes!

Of course the hon. member for Constantia will now go because he does not like me to chide him for being unpatriotic, because he knows it is true. I say the hon. members are unpatriotic if they object to the Reserve Bank making this profit, and I shall say why.

Nonsense!

The reason is that the Republic is in an embarrassing position, and if a profit has to be made out of this embarrassment they want it to go into private pockets, but we say that should not be the case, but that it should go into the pockets of the State itself, because it is the State which is embarrassed and if a profit is made in this way it should go to the State and to nobody else.

And if there is a loss?

I shall reply to the hon. member for Port Elizabeth (South) because he has a bee in his bonnet in regard to control measures and the discretionary exercise of powers. I shall come to that, but I first want to conclude on this point. I say that if the Republic is embarrassed, it is wrong for any private individual to want that profit, and it is wrong for a political party to plead that a private individual should get it; and if they do not agree with me I quite understand it and I expect nothing else from them, because if they have any approach at all it is one which is absolutely unpatriotic, as they have always been.

Then I come to the next point. We have at least agreed that if there is too little scrip we must buy it in London and bring it here. We are agreed, at least amongst ourselves, that the Reserve Bank ought to do so because it is the body which controls the outflow of capital. We say the Reserve Bank must make the profit because it is patriotic to allow the State itself to make a profit out of its own embarrassment. I have said further that this mode of action is one of the cleverest things I have ever seen in a budget, and therefore I describe this as being a clever budget.

That brings me to the point raised by the hon. member for Port Elizabeth (South). He made a number of wild statements here. He says that the whole financial policy, the whole fiscal and monetary policy of the Government, are calculated to be linked to some ideological standpoint the Government is supposed to have and which he does not support. When I asked him to explain and to substantiate this, he said that there was job reservation—which I will not discuss now because we have heard so much of it already—and there is influx control, but he did not say that these should be abolished. He simply used words with some psychological association or other in order to be derogatory. Then he said there is import control. The import control is effected along a variety of fronts. Does he perhaps want us to use only one traditional front, namely that we should make money scarce so that there will be fewer applications for and grants of loans and fewer jobs and less money in circulation? I can imagine that is what he wants because they have a depression mentality. The United Party wants this country to have a malaise, to deteriorate, to have a depression, and they want everything that is bad, because if the country is prosperous things go badly with them.

I ask whether he wants the old orthodox measure? That is the depression approach, it is a well-known approach. When the State wants to protect its foreign currency, it applies those measures, but we did not do so. We did apply monetary measures, as he wanted us to do, but very few of them. At the end of the year when the State takes a large share of earnings for itself and there is a deficit and rates of interest have risen, then they say there is a credit squeeze, but there was not really one; it was only temporary. Furthermore, we restricted hire-purchase agreements. I do not know whether he has forgotten, but the motor trade absorbed one of the greatest shocks in order to protect our currency. Originally the motor trade took 10 per cent as a deposit when selling a motor car with payments spread over 30 months. That was later increased to 50 per cent, and the instalment period was 18 months, but that was prolonged to 24 months, and to-day the deposit is 33⅓ per cent. That was one of the measures adopted by the Government to protect its currency, to restrict imports. Then, of course, we applied fiscal measures. We levied customs duties and taxes on luxury goods, and in addition we have import control. I think it is presumptuous of the hon. member to say that our whole fiscal, monetary and economic policy are being regimented. What proof does he advance? That the Reserve Bank is now going to do the work of a stockbroker and that the Government will block the rands if certain shares are sold here, and he admits that the Government in fact affords the opportunity to invest that money, but he objects to the five-year basis; i.e. he deprecates that the Government is perhaps going to continue blocking rands for five years.

But may I ask the hon. member this: Can he suggest another measure which is more effective than this? If he is honest in his criticism, he must say: Apply this measure. Or else he must say: This is no longer necessary. Then we can at least argue about something and know what we are talking about. But simply to make wild accusations is wrong. He himself has concepts which no modem economist supports any longer. He is an old Victorian. He dates back to the days of Marshall. I am surprised at the hon. member. Usually we can find each other, but when we discuss these discretionary matters, whether in regard to economics or law, we do not see eye to eye.

The hon. member and the hon. members for Constantia and Pinetown all made great play of saying that too little is done for the underprivileged. But did they not read the White Paper? I really want to congratulate the Minister and his Department on this White Paper. It is more detailed than any we have had before, and I hope this is a precedent which will be followed in future.

But to continue with my argument, if hon. members look at the White Paper they will see that under (B), Social Services, 40 per cent of the expenditure of our country is in regard to social services. Last year it was 44 per cent. It constitutes a great proportion of our expenditure. [Interjection.] The hon. member for Drakensberg (Mrs. S. M. van Niekerk) should rather not discuss finance, but Danskraal, because her trouble is that she does not realize that when one is working with percentages and the ratio different it may be that the percentage diminishes, but the amount one spends increases. My point is that social services constitute a large proportion of our expenditure. What is more, if we look at the index figure for cost of living, we will be surprised to see that the adaptations made by the Minister in respect of the increase in the cost of living must be made sporadically because there is always a certain increase in the cost of living. An increase of 2 per cent is regarded as normal, and that is what happened over the past nine years. Here is the table of cost of living. In 1953 the basis was 100. These figures are taken from a UN publication. I have a whole series of them here. I shall not bore the House, but I will just take our own figures from our Department of Census and Statistics. In 1954 there was an increase of 4 per cent over 1953. In 1955 there was an increase of 3 per cent. In 1956 there was an increase of 2 per cent over the previous year, which is normal. In 1957 there was an increase of 3 per cent, which is also normal. In 1958 there was an increase of 4 per cent. That was above normal. In that year we made adaptations for the pensioners. In 1959 it was an increase of 1 per cent, which is less than normal. In 1960 there was an increase of 2 per cent, which is normal, and according to this year’s figures which have just been published, the increase in 1961 is 1 per cent, which is also normal. In fact, it is less than normal. When we look at the food figures, the index figure for food is lower than the general index figure. When the Minister grants an increase of R18 a year, it seems small, but it is in line with the index, and why should we make it more? We should all like to give these people R600 or R800 a year, but it simply cannot be done. If the expenditure under (B) had increased above 44 per cent, those hon. members would either have said no, or else they would have been the first to criticize.

What does it include?

I should like to reply to another point raised by the hon. member for Port Elizabeth (South).

First reply to my other question. What are the social services? What do they include?

If the hon. member does not know what social services are and what they include, I could easily tell him, but he is wasting my time. He knows as well as I do what they are. The whole thing includes pensions and other matters, and it is usually these under-privileged people who make most use of it, and the hon. member knows that as well as I do.

The other point raised by the hon. member is that as the result of increased taxation we are busy doing two things. On the one hand— I do not know whether he really meant it that way, because the point is a little above his head—but he said we are endangering our own currency, and on the other hand we are endangering the standard of living because of the increased taxation. I have already replied to the second point, that if we have regard to the standard of living it cannot be said that by increased taxation or even by the economic policy, or even the fact that our national income is not increasing as fast as we would like, we are endangering the standard of living. I have already replied to the point that it is taxation which acts as a brake on our national income. Let me reply to the other point, that increased taxation will endanger our currency.

All economists in the world will agree with me that when the level of taxation is under 25 per cent, calculated in terms of expenditure as compared with national income, one is not yet endangering one’s currency, the measurement of values. I do not know whether I am making myself clear to the hon. member, but I want to say that when the burden of taxation is less than 25 per cent it cannot be said that the currency is being endangered. I may perhaps tell the hon. member why that is so. As soon as taxation becomes too high, entrepreneurs spend money on all kinds of unnecessary changes and improvements, because their approach is this: I must in any case give it to the Receiver of Revenue and therefore I might as well spend it on myself. That means that they buy unnecessary goods and so push up prices, and that they use labour which can be used more economically elsewhere and that pushes up wages, and in that way they push up prices and endanger the currency. The hon. member intimated that we have reached that dangerous point. But I say that when you are below 20 per cent the currency is still safe. What is the position here? I again refer to page 17 of the White Paper, and I take total taxation as a percentage of net national income: In 1942-3, 14 per cent, in 1959-60, 14.2 per cent—that is still far from 20 per cent. In 1960-1 it was 13.9 per cent. It was even reduced. Therefore what he regards as a danger is actually a safeguard, and when we come to this year, to the Estimate, the figure will not be above 13.9 per cent. I have made my own calculation, but I do not really trust it because I do not have all the data. [Interjections.] Is there any hon. member who has all the figures for 1962-3? According to my estimate, that percentage is lower this year than last year. It is not a case of when the Nationalist Government was in power and when the Minister of Finance was here; it is because the National Party is in power and because we have this Minister that we are in this fortunate position; because over the years we adopted measures intended to put us in this sound position. Hon. members opposite think it is their criticism which saved us. But if we were to have listened to their criticism I do not know where we would have landed.

Mr. Speaker, you will forgive me if I revert to why I think this is a good Budget. I have already said that it is an astute Budget. I can understand hon. members opposite sneering at this, because they do not want to believe it. But it is also a fair budget. We have not heard the slightest objection from them to the 10 per cent increase in income tax or the 2½c excise per bottle of natural wine. The hon. member for Kensington (Mr. Moore) always talks about petrol. Perhaps he will do so again, but hitherto I have not heard a word of objection to the 1c increase per gallon of fuel. I can imagine somebody objecting to it, because when raw material in the process of production is taxed right in the beginning, it has a cumulative effect on the cost of the final product, and there they have a point, but it is so small that we need not even mention it. If we consider that if a vehicle which uses 20 gallons of petrol has travelled 1,000 miles, it is only 20c more due to taxation, and if it is a transport contractor he will still make a profit without even having to pass on the extra cost to his customer. If it is a stationary engine, a large unit of 100 horsepower, and if it runs for eight hours, the cost of its fuel will be 1,280c and the increase will be only 40c. [Interjections.] Yes, that is correct, calculated according to prices at the coast.

That brings me to the 2½c tax on unfortified wine. I am at liberty to discuss it because I am not a wine farmer. I can understand the wine farmers perhaps feeling unhappy about it, but I am a consumer and perhaps that gives me the right to discuss it. Has the liquor trade which complains about this borne in mind that we have taken steps to make wine available to our Native population in the near future? They should consider that there are more than 12,000,000 Natives, and let us take it that there are 4,000,000 of them who will be able to buy liquor, and if the liquor trade succeeds in selling four bottles of wine a year to 3,000,000 Natives they have an increased consumption of 12,000,000 bottles, or one-sixth more than their present consumption. That is a 17 per cent increase, and I think that the slight criticism we have had in regard to the budget, and which comes from fairly high liquor trade circles, is absolutely unjustified, with all respect to them. I am glad, and I want to congratulate the United Party on not having objected to the Defence expenditure, although they made other suggestions which I do not want to discuss now. But there are people in the country who object to it and I think they deserve a reply. That is the criticism of the Chambers of Commerce, of Assocom. These people are traders. What I am about to say does not apply to the Afrikaans Sakekamers, because they welcome this budget. I am directing my remarks to Assocom, and to one of their spokesmen who objected to the increased taxation to be devoted to Defence. What I find strange is that these businessmen are always the first to feel the effects of riots and of threats from abroad. Now I find it strange that they are the first to complain about the premium they have to pay to safeguard them from those shocks. That criticism is certainly not motivated by considerations of self-interest. I think that criticism is motivated and conditioned by considerations other than their own interests. I find it surprising that these people should criticize the extra taxation. This group is the one which has the least right to complain about this matter, and I will say why. The contributions of this group towards the formation of capital shows the least progression. I again refer to the White Paper. If one looks at the schedule dealing with capital formation, one will see that the contribution by commerce to capital formation deteriorated from 159 to 72. I do not think they have played their part in regard to capital formation as a whole, and I think that this group really has no right to talk. If we look at page 1, at the contributions made by commerce to our national income, we find that their contributions have diminished. According to page 1 of this schedule their contributions amounted to 15 per cent in 1949-50. That is appreciable, but it was reduced to 14.2 per cent in 1954-5 and they did not have the courage to stop the deterioration, with the result that it was further reduced to 12.6 per cent. They should first put their own house in order before trying to tell the Minister of Finance how to frame his budget.

I say this is a clever budget, a fair budget and one which is not being criticized anywhere except by people who have ulterior motives. I want to state that the Minister is indeed fortunate, but he is not “lucky Theophilus”; he is fortunate in the sense that he is the Minister of Finance who can to-day pluck the fruits of his actions in the immediate past, and those of his predecessors. He is fortunate in being a member of a Government which, in regard to finances, is a Government which has the courage of its convictions and does not mind even doing something unorthodox. Therefore I want to congratulate the Minister and the Government heartily on this Budget.

There are so many flaws in the arguments of the hon. member who has just sat down that I could keep the House occupied for the next 40 minutes in analysing them, but I think that would be very unproductive an effort in this House. I would just point out a few of the mistakes one does not expect an economist to make. For instance he attacked the commercial people, private transport and other people for their lack of capital formation, and he pointed out how the capital formation has fallen. If he had taken the trouble to read the footnote to the figures he quoted, he would have found that in the capital formation of commercial undertakings are including the trading stocks of the country, and they ran down tremendously in 1961, not because these people were unpatriotic, as the hon. member suggested more or less, but for the simple reason of import control. They came down by R60,000,000. So if anybody was unpatriotic in regard to the drop in capital formation, it was the Government’s policy, and he cannot blame the commercial people. If one wants to use these figures presented in the White Paper, one should at least know what they mean. I will give another example. The hon. member says that the economists have laid down the criteria that once taxation goes over 20 per cent or 25 per cent, as the case may be, it is a sign that a country is overtaxed and that then it starts killing incentives. And then the hon. member quoted the figures from the White Paper to show that taxation according to the White Paper is only 13.9 per cent. Mr. Speaker, when economists talk about taxation, they do not only include central Government taxation, but also provincial taxation and municipal taxation, etc.

That does not make such a difference.

How does the hon. member know? Because I have seen the estimate that total taxation, if you include all these things together, is very nearly 20 per cent in this country. So there again the hon. member made a very elementary mistake. And then just a third point: This hon. member and so many members on the other side when they try and point out how good the employment position really is in South Africa, say: Look at our employment position, our unemployment figures represent only 2.3 per cent of the working population. That is the type of argument we get over and over again. Well, Mr. Speaker, one must first see what an unemployment figure means. The hon. Minister also quoted this 2.3 per cent, and then they go on and say that by international standards this is not bad. But if one wants to make international comparisons, one must see to it that your unemployment figures are calculated the same way as other countries calculate their figures. To give you one example: It is accepted commonly that the way the English calculate their unemployment is such that if they show 3 per cent unemployment, calculated the American way it would show 5 per cent.

I did not mention a single overseas figure.

I am talking about the Minister of Finance and other speakers who mentioned the 2.3 per cent as not really bad. Let me just for the edification of the hon. member read what Hupkes and van den Berg say in an objective assessment of our unemployment figures—

There is not the slightest doubt that our official statistics, even in respect of Indians and Whites, completely understate the real unemployment position.

But I want to come back to the Budget. This Budget is a mile-stone in the economic history of South Africa. For the first time in our history the Government is going to spend R1,000,000,000 on Loan and Revenue Accounts. The billion rand mark has been passed. But let me first also associate myself with other hon. members who have referred to the White Paper. I pleaded a couple of years ago that we should have a White Paper which would give one a more complete economic background to the Budget that one is about to debate, and I am very pleased to see a tremendous improvement in this White Paper. I only hope that the hon. the Minister will not be satisfied with this and that as more statistics become available, he will constantly expand on it. One cannot really interpret the Budget in isolation properly; one needs this type of document that gives a wider national account if one wants to make a reasonable assessment of any particular Budget. But I must also warn the Minister that by giving us so much information, as in this White Paper, one finds that it is really quite an indictment of Nationalist Party economic policy. In fact if one had the ingenuity, one could criticize the Government only on the basis of the White Paper and one need not go to any other source at all for criticism.

The over-riding factor in this Budget is the greatly increased military expenditure, an increase of R48,000,000, bringing the total figure of military expenditure to R120,000,000. This might seem a very large figure standing by itself, but again I think one must judge this figure relative to national income, and we find that relative to national income it does not even represent 3 per cent of the total national income of this country, and by most international standards that certainly cannot be regarded as excessive military expenditure. If it appears to some people that this is a big figure, then it really only appears so because we spent so little in the past on defence. If wisely financed it should have no adverse effect on our economic development or on the welfare of the people.

The hon. Minister of Finance will certainly agree with me that national security does not rest only on military expenditure and the amount of resources of the country and the efforts you apply to defence. Just as his Budget rests on three feet, I would suggest that the country’s national security also rests on three legs. The first one is undoubtedly military preparedness, the second (even more important for a small country) is to have powerful friends and allies in the world, and the third leg on which the national security of any country, particularly a country in our circumstances, should rest is a rapidly developing economy, a dynamic economy, with rapidly rising standards of living for all the people. Surely from the point of view of internal tension and dissatisfaction, there is no better cure than a rapidly rising standard of living for all the peoples, and ultimately of course, one’s military strength depends on one’s economic strength. The modern sinews of war are economic.

I intend confining myself very largely to the third leg, our economic development and the pace at which it has developed in the past. In passing, however, I would just like to refer to the second leg, the question of having powerful allies and friends, which will be dealt with more fully by other speakers on this side of the House. I would just like to ask the hon. the Minister how he thinks the policy that has lost us so many friends and alienated so many of our Western allies in times past, in the past 14 years, is likely to gain us friends in future if the Government’s policy is persisted with? Surely that in itself is one of the most cogent arguments for national security, that we must change our policy. The hon. the Minister only has to study the sorry record of the voting at the United Nations to see how the Western world has turned against us.

I should like to turn to the third leg, so to speak the economic leg of national security. The hon. Minister has stated as his aims: (1) Security; (2) the greatest possible degree of economic progress and stability, within the context of general Government policy. Of course the Minister immediately is severely handicapped by this qualification. I think he realizes that himself because if one reads through the speech, it appears again and again. The hon. Minister seems to be fully aware that he cannot really do his job as well as he would like to do it because of the limitations imposed upon him by the Government’s general policy. Most objective observers surely must admit that it is the racial policies of this Government for the last 14 years, that has so largely destroyed the confidence of the overseas world in South Africa, and to some extent has destroyed confidence in South Africa itself, because unfortunately for the Minister he will still find that the people who make this country grow and who make this country hum. very largely belong to the Opposition, people who don’t really believe in his policies. The generators of income, the generators of new enterprise and all that, by and large in this country simply do not accept that the Government’s policies are practicable or that they can ever be carried out. I think the hon. the Minister will agree that this confidence is crucial to South Africa at the present moment. So many important people have said before that every other ingredient for rapid economic progress is present in the South African scene except confidence. It seems to me the one ingredient that is retarding our economic growth and how it has retarded our economic growth I will show statistically in a moment or two. It is this lack of confidence that has cut off the flow of overseas capital which despite what the hon. member for Mayfair has said, is essential. If you analyse the economic history of South Africa, you will find that the most rapid economic growth coincided with large inflows of overseas capital, and it is very largely the stoppage of the inflow of overseas capital, and in fact the outflow of capital, that has resulted in South Africa’s economic growth slowing down. If we look at the last 17 years and analyse our economic growth during those 17 years, we find a great slowing-down. Optima of December 1961 has made certain calculations on page 201, where it is shown that the growth of the real income per capita over certain periods has declined. It points out that from 1945 to 1948 (when the Smuts Government was in power) the increase per capita income was 3.5 per cent; between 1948 and 1954 it was 2.8 per cent—and in that period we had the windfall of an increase in the gold price, which made an appreciable difference, and we had the inflation of the Korean War which also tended to step up the increase in national income; in the last period, from 1954 to 1960, the increase was only 1.4 per cent. In the long run a slow-down in the rate of our economic growth is as great a threat to the national security (for the reasons that I have already given) than military unpreparedness.

This slowing down of the economic growth in South Africa is undoubtedly due to the severe drop in the net investments expressed as a percentage of our net national income. If the hon. Minister will turn again to “A Survey of Contemporary Economic Conditions and Prospects” by Hupkes and van den Berg, on page 18, he will find a table there which shows “net fixed capital formation as a percentage of net national income at factor cost, 1950 to 1960”, and we find there an alarming drop. We find that between 1950 and 1952 the rate of investment increased from 17.3 per cent to 21.6 per cent, but since then it has slowly dropped and in the last year for which figures are available, 1960, it was only 13.2 per cent. But what is even more alarming is the even greater drop in private investments. Whereas in the peak year of 1952, it was nearly twice as high as Government investments, viz. 14.3 per cent, it has steadily dropped until it was only 6.4 per cent in 1960. Now I don’t have to tell the Minister of Finance that your rate of economic growth depends entirely on the rate of investment, and with the productivity of capital in this country, we simply cannot have rapid economic growth with the rate of private investment (the most productive part) being as low as 6.4 per cent. It is simply not possible. If we want rapid growth in this country, the growth that I think is within the reach of this country, we should invest at least 20 per cent of our national income, and at least two-thirds should be private investment, as was the case in the past. Therefore the result of this slowing-down in investments has meant that we have performed, internationally speaking, very poorly, despite the fact that we hear from all sorts of important people that South Africa has one of the most rapidly growing economies in the world. The facts speak otherwise, because again this publication of Messrs. Hupkes and van den Berg gives a table on page 7 where they compare our per capita income with that of other countries in the world. We find that the Western European countries all have considerably higher rates of growth than we have. West Germany leads with 6.9 per cent, the United Kingdom, the lowest in Europe, 3.4 per cent, and you will recollect how the whole world has the impression that the United Kingdom’s per capita income is not growing rapidly enough in the times in which we live. Yet our growth is considerably below that of the United Kingdom, namely 1.4 per cent, compared with 3.4 per cent for the United Kingdom. The only countries that are on a par with us or below us are the United States of America with 1.4 per cent and Australia, New Zealand and Canada. It was one of the main issues in America during the last presidential election, this slow growth, because Americans are well aware that in the communistic world the growth is at a rate of about 5 per cent per annum, and it was one of the promises of the Kennedy Administration that it would try and lift the American rate of growth to nearer that figure of 5 per cent. Even the great powers like the United States of America realize that you endanger your national security in the modern world if you grow at such a slow rate. Yet that rate is comparable to our rate. The only ones that were lower were New Zealand and Canada.

Now I know the hon. the Minister in a speech compared South Africa with Australia and Canada, and suggested that the probable reason why they did not grow so fast was because the terms of trade changed against them, and became more adverse, and I take it the implication was that the same applies to South Africa. It is true that our terms of trade have become more adverse, but not to the same degree as in these countries. But what the hon. Minister overlooks completely is that we have something that neither of these countries have the good fortune to have, namely, the tremendous increase in gold production, an automatic stimulator to any economy in the world. The hon. the Minister must be aware from his White Paper that from 1955 up to 1961, gold production steadily increased from R365,000,000 to R576,000,000. Very few countries in the world are in that fortunate position of having an almost automatic regulator of economic growth, and this Government has governed South Africa in one of the most fortuitous periods in our history when we have had this very great expansion of gold production, allied to our other national resources. Had the national administration of this country been better, we would not have ranked amongst the countries with the lowest growth of the rate of income in the world. We would have been amongst the fastest growers in the world. I think the Minister realizes that too, because he complains about the rate of growth. Now funnily enough when I made this point in the past, I got very little agreement from the other side, but I am pleased to see that this year the hon. Minister of Finance himself agrees, that our rate of growth is much too slow, taking into consideration our potentialities, and of course much too slow taking into account the national security of the country. The alarming thing is that despite the slow rate of growth which we see in South Africa, there nevertheless seems to be a substantial over-capacity in industry and agriculture. Surpluses in agriculture are rising, and as far as industry is concerned, if one looks at the information given in the “Survey of Contemporary Conditions and Prospects”, one sees that there are various estimates of over-capacity in industry in this country. Apparently this is not a very accurate figure, but it is put as high as 23 per cent by the Chamber of Industries. According to the survey made by the Bureau of Economic Research itself, after receiving answers from 380 manufacturers in regard to their returns, indicates an average increase of 17 per cent was possible at that stage with the existing equipment, without any extension to the works. They also quote an opinion that an excess capacity of 15 per cent in industry is probably available. Whatever that figure is, everyone seems to be certain that there is a considerable excess capacity in industry, and there is certainly an excess capacity in agriculture in this country. The other alarming thing, apart from this excess capacity, is of course the trend of employment rates in South Africa. If you look at this valuable White Paper once again, at the graph on page 7, which gives employment figures from manufacturing industries, construction industries and mines, one finds that since 1957 there has been no increase in employment in the manufacturing industry at all. Mr. Speaker, all authorities are agreed that we must primarily in the future look to our manufacturing industry to create the extra jobs that are required for our rapidly growing population and we must primarily look to our manufacturing industries for an advance in our standard of living in future. But here we see that in the last four years there has been no increase in employment in the manufacturing industry at all, and as far as construction is concerned, there has been a drop. The only increase was in respect of mines. There is little doubt therefore that if we take into account these figures together with the unemployment figures to which I have already referred, our economy in the last four or five years has simply not generated enough jobs for the new young people that come onto the labour market each year. Our unemployment figures do not measure the extent of that shortage of jobs at the moment.

Unless this position is corrected, how are we going to attract large numbers of immigrants from overseas? The danger to South Africa, if we do not develop rapidly economically, if our standards of living do not rise rapidly, is we will in ten years’ time not be able to attract any immigrants from Europe. I have already indicated how rapidly the real income has risen in the Western European countries compared with South Africa, and those are the Western countries from where we have to draw our immigrants. In a country like Germany wages have increased during the past three years by 20 per cent.

What about Australia and Canada? Did they not draw immigrants, although their rate of growth was the lowest in the world?

The same thing will happen to them in ten years’ time if they do not speed up their rate of growth. That is the one point. The other point is that they already enjoy a very high standard of living, in Canada in particular.

The income per capita is one of the highest, but not the standard of living, because you can buy so much less for the higher wage you receive.

Surely it is a simple arithmetical proposition that the Minister should be able to understand: If our standard of living remains static or increases only very slowly, and standards of living are rising rapidly in Western Europe from where we have to draw our immigrants, it is only a question of time. People don’t emigrate from one country to another to draw lower salaries and wages and to live on a lower standard of living. They emigrate primarily to improve their standard of living. At present our wages of skilled workers are still considerably higher than in Europe, but if the hon. the Minister has any experience of industry, he will realize how the gap between our skilled wages in this county and skilled wages in countries like Germany, Holland and the United Kingdom has closed during the last ten years. He will realize how hard it is already for industry to draw skilled workers, because they do not regard the difference sufficient to emigrate to this country. I do not think the hon. the Minister must dismiss this lightly. The rapidly rising standards of living in Europe from where we must draw our immigrants and our slowly rising standards of living, will have that result. The hon. the Minister himself has pointed out that our national income only increased by 2 per cent in 1961 compared with 1960, and if you take into account the population growth and the increase in retail prices, it amounts to this that the standard of living remained virtually constant in the last year or two.

I have just sketched the economic background against which we must judge the Budget. I think the hon. Minister will agree that it is a background of a great slowing-down in the rate of our economic growth, which has resulted in South Africa presently having one of the slowest growing economies in the Western world, it is a background in which we see growing unemployment, and a large over-capacity in industry and agriculture. In those circumstances, I think the hon. the Minister will agree that his aim with this Budget should have been firstly to follow measures that will catch up the slack in our economy, the slack of over-capacity in industry and agriculture and the slack of unemployment in our industry by placing more purchasing power in the hands of the consuming public, and secondly, he should have framed a Budget that at all cost would attempt to increase our very low rate of private net investment. The hon. the Minister could have used the increased military expenditure to this end, very successfully I think. I am sorry that the hon. the Minister has lost a golden opportunity in not increasing purchasing power to take up that slack, as the Minister himself seems to admit when he says “I feel that this Budget need not exert any undue retarding effect on the economy”. I suggest that in the present context that should not have been the psychological attitude of the hon. the Minister. He should have ended up by saying “I don’t think this will cause too much expansion”. He should not end his Budget speech by saying “I don’t think it will cause too much retardation”, because what we need now is not retardation but expansion.

I don’t brag when it is not necessary.

I suggest that the hon. the Minister based his whole Budget on the wrong psychological spirit. We need expansion and not retardation. The hon. the Minister will surely admit that with the present overcapacity in agriculture and in industry, and with the present unemployment, an increase in the national income over next year in the order of 10 per cent would have been desirable, and it could have been achieved without any danger of inflation, because we have the idle resources, human resources, industrial resources and agricultural resources and an increase even of the order of 10 per cent would not bring in its wake inflationary consequences.

What does your friend, Mr. Hupkes, say?

Yes, but he did not know what the Budget was going to be. From his knowledge during the last few years, Mr. Hupkes knows that this is a very cautious Minister and he was not going to introduce an expansionary budget, because the hon. the Minister must remember that in controlling R1,000,000,000 worth of expenditure in this country, he can exert a great expansionary influence on the economy. Apparently the hon. the Minister is not aware of that, but that is in fact so. If this were to happen, assuming that we had a 10 per cent increase, which I say can take place without any dangerous inflationary consequences at all in view of our idle capacity in this country, I suggest the Minister could then have financed increased military expenditure and could have alleviated the lot of the handicapped and less fortunate people in this country to a very much greater extent than he has.

On spec?

I will come to that in a minute. On the existing basis of taxation, with a 10 per cent increase, he could have achieved that. The hon. the Minister must know the old adage that if you don’t speculate you don’t accumulate. The hon. the Minister says that this would have been a speculation, a gamble. I ask “What if it had not come off?” What would the consequences have been? The only consequence of such a gamble could possibly have been that he would have a deficit at the end of the year, and I say that under present circumstances a bit of deficit budgeting would not do the economy any harm at all, because what we require is an increase in purchasing power. There is nothing sacrosanct about balancing a budget. If the Minister in the past realized that a surplus from time to time if you have a too rapid expansion and inflationary phases, is desirable, so if you are not developing fast enough, and you have idle resources, the Minister should not be afraid of deficit budgeting. Because under present circumstances deficit budgeting of the possible order that might occur, would not be inflationary at all. That is the point that I want to make. It would really be quite a safe speculation on the part of the Minister. I think the hon. the Minister is estimating his revenue on a very conservative basis. The hon. the Minister estimates that on the present basis of taxation he would get R38,000,000 extra over the next year. Now of that R38,000,000 extra R16,000,000 alone represents taxation of gold-mines, which almost automatically increases, as the Minister will admit. So only R22,000,000 is left. If you look at that R22,000,000 which the Minister expects on the existing basis of taxation, it only represents an increase of 3½ per cent in taxes over the previous year. Now it seems to me that the hon. Minister is speculating far too conservatively if he thinks that is the only growth that he can possibly have. It seems to me very much in fact that this Government’s policy has shaken the Minister’s confidence in the economic future of our country, because it should be possible to grow far faster than that. Because if the hon. the Minister has under-estimated the possible taxation that he may gain in the next year, and on the other hand over-estimated the expenditure which after all he has done regularly for the last three years, then it is going to have a most depressive effect on the economy. That is why I say he should have gambled a bit, he should have seen that 10 per cent increase in the national income is possible, and he should have tried to use the budget as the instrument to achieve that. Had he done that, there would have been no need to increase taxation. And I say again that even if the speculation had not come off, even if the gamble had not come off, a bit of deficit financing at this stage, where we have unemployment and a surplus capacity in industry and agriculture, would not be inflationary.

We now come to the far more difficult question of how to increase the rate of investment, particularly private investment, which I think the Minister will agree is running at much too low a level. Let me start by admitting right at the beginning, to use the Minister’s words, that under the socio-political system of apartheid that we have had, that is a very difficult problem, because we have already seen how it slows down the rate of investment. From 20 per cent it has come down to 13.2 per cent in the last eight years. Here again the Minister could, even in this context, even although his hands are tied to some extent as a result of apartheid, have done much more than he has done. There is no better way of stimulating investment than to increase purchasing power, and he could have injected more purchasing power into the country through his budget. Then he would have stimulated investment far more. Because what the hon. Minister has done to stimulate investment is simply to extend measures that he has taken last year and the year before for another five years, like investment allowances.

Is that all?

And the Minister has at last not carried over the surplus from Revenue to Loan Account, which is also a stimulatory measure.

Is that all?

If you look at the budget as a whole, there is very little. My time is limited, otherwise I could give the whole picture to the Minister. On balance the budget may at best be slightly stimulating, put slightly more purchasing power into the hands of the public. The Minister will of course refer to military expenditure, but he himself has admitted that only 55 per cent of that will be spent locally; in other words, 45 per cent will be spent overseas, and that is most deflationary, that is money that is going out of circulation in our country. On balance this budget is at best only mildly stimulating, only mildly inflationary.

You want it to be stronger inflationary?

No, I am sorry I have not more time to work out a table for the hon. the Minister to point out how much he has taken away with one hand by extra taxation and how much he has given with his other hand. You will find that if you strike the balance, this budget at best is only mildly stimulating. The Minister himself admits that when he says that it won’t be too retarding.

I will give another idea the hon. the Minister could have used to stimulate things a bit more. His scheme to repatriate capital over the next five years through the use of loan bonds and so on to England, shows that he has not got very much confidence that there will be an inflow of capital again. I suggest to the hon. the Minister that if he had rather used the blocked rands to allow overseas investors who want to start new industries here to use that money, it would have been far more stimulating than his present method of repatriation. He could at least have used that in addition. Had he allowed owners of blocked rands to sell such blocked rands to people who want to start new industries in this country, it would have been a very stimulating measure. I am just throwing that out as an idea to the hon. the Minister. But of course the real thing is that if the hon. the Minister wants to increase the rate of private investment, he must restore the flow of capital from overseas. Evidence has shown that in those periods when we have had a rapid inflow of capital from overseas, our economic growth has been at its highest. But I am afraid he will only be able to do that if he reverses so many of the racial policies that this Government is carrying out here. [Time limit.]

We have had very few arguments worth replying to from the other side this afternoon and this evening. Actually we have had very little that is original and very little that is new. However, the hon. member for Port Elizabeth (South) (Mr. Plewman) made an observation here to-day which I feel I cannot allow to pass without replying to it. The hon. member talked about the defence expenditure and described it as the “creation of crises”. In these times in which we are living, we do not expect to find persons in this House still talking about the creation of crises when we try to promote the defences of the country. As far as increased expenditure is concerned, I would remind the hon. member that whereas only 16 per cent of our revenue is being devoted to defence this year, other countries are spending considerably more. If this expenditure creates crises in South Africa, then I do not know how one would describe defence expenditure in other countries. This year the United Kingdom is spending not 16 per cent but 24 per cent; Australia is spending a comparable figure, namely 15 per cent; Canada is spending 28 per cent; the United States of America is spending 56 per cent. The hon. member has the bravado (not to use the word audacity) to talk here about the creation of crises when we vote money for internal security. But the hon. member for Constantia (Mr. Waterson) and the hon. member for Port Elizabeth (South) also talked about the accumulation of liquid assets and referred to it as “a stagnation of the economy”. When my hon. friends mentioned an increase of R140,000,000 which is supposed to be an indication that we have liquid assets that we do not know what to do with, they did not tell the House at the same time that as against that we must take into account the very favourable balance of payments which increased during this period and which is partly due to the holding back of liquid assets in South Africa. Nor did they take into account the fact that in the previous year commerce carried very large supplies, and that it is a normal phenomenon that when these supplies are exhausted normal spending takes place again. But the hon. member ought to be pleased that he is able to talk about liquid assets to-day, because with the great economic growth which awaits the Republic it is perfectly clear then that we have the capital available in South Africa for that growth.

The hon. member for Port Elizabeth (South) dealt at length with an infra-structure and he tried to indicate that the Government should not take part at all in the economic activities of this country because this infra-structure is supposed to conflict with private interests. The hon. member did not tell us very clearly what he meant by an infra-structure. If he meant that the Government should not spend money on an item such as the Orange River scheme and on the development of Sasol and that the Government should not have spent money on the development of Iscor and assets of that kind, I want to ask the hon. member whether any other authority has been prepared or in a position in the past to undertake these great developments. Apart from that, our attitude is that we must create permanent assets. But the hon. member indicated, although he did not put it that way, that he meant that the development of the Transkeian Territory amounts to the creation of an infra-structure in which the State is taking part. Let me put this to the hon. member: Who is to do it then? Is private enterprise in South Africa willing to tackle this development? I think his observations were misplaced.

But I want to come to the hon. member for Jeppes (Dr. Cronje). The hon. member was very quick this afternoon to make an accusation against the hon. member for Standerton (Dr. Coertze) and to say that the hon. member should compare comparable things and that he must be careful how he uses his figures. Shortly afterwards the hon. member for Jeppes came along and alleged that the rate of growth in the Republic had slowed down very much and he compared us with the United States of America. He went on to say that at this stage we really had a retarded rate of growth and that was an indication that things were not going well with the South African economy. I want to tell the hon. member for Jeppes now that if he uses figures then he too should compare comparable things. If he compares the United States of America or any other country with the Republic of South Africa and then goes on to ask what our position would have been but for the fact that we have gold, I want to say to the hon. member at once that he too must compare comparable things and that it is only reasonable to compare comparable national groups. Because in not one of these countries do we find that there is a small group of Whites having to carry a large non-White population. Would it be a fair comparison to take the United States together with 800,000,000 non-Whites dependent on it and enjoying the standard of living which obtains in the Republic and to compare it on that basis with other countries? Where would the U.S.A. have stood then? I say that if the hon. member wants to be fair and if we compare population groups, then it is clear that the rate of economic growth of the population group which has to carry the economic burden in this country, is the most rapid in the world.

But I do not want to dwell too long on the remarks of these hon. members. Like the hon. member for Jeppes I should also like to talk about “confidence I want to say that the hon. the Minister of Finance described one of the legs on which he based this Budget as “economic progress and stability”, and when we talk about economic progress and stability, it is very closely linked with the monetary policy of the country, with the question as to how and where we raise money, what money we get and for what period we get it. I should prefer therefore to talk about the public sector rather than the private sector, with which the hon. member dealt, and I contend that this Budget gives expression to the policy of the Government and more particularly to the two strong pillars on which Government policy is based in our country and on which it should continue to be based for the future. These two pillars are monetary independence and industrial productive power. You will permit me, Mr. Speaker, to say this, not only in the light of what has been said on the other side to-day but also in pursuance of what has been said to us continually in the past few years, namely that we are borrowing money on short-term and investing it on long-term and that the fact that we do so is an indication, as the hon. member for Port Elizabeth (South) said, that we have to raise emergency loans. The hon. member called them emergency loans. They concentrated their whole attack over the past few years on this matter. Hon. members on the other side also say that we are unable to get money abroad and that is why we are forced to borrow money in the Republic because nobody is prepared to lend money to us. The hon. member for Port Elizabeth (South) went further and came forward with the stock accusation that public monetary sources have dried up to some extent. He did not tell us what those public monetary sources were; whether he was referring to monetary sources abroad from which we can borrow or whether he was referring to the accumulated internal resources. I want to say, however, in contradistinction to what the hon. member alleges, that the truth of the matter is that the loan pattern over the whole world has undergone a change, and it is for that reason that we are borrowing as we do. International risks have become greater and greater and it is because of that fact that not only the Republic but other countries as well are not able to borrow as hon. members say we should borrow. I want to tell hon. members that England herself, the conservative England which set the investment pattern for the Commonwealth and other Western countries, can only borrow money in the way that we are borrowing it to-day, because as far as she is concerned the investment pattern has also changed. I want to substantiate that statement by referring to the International Finance Statistics, the latest edition of February. Here we see that England borrows only 8 per cent of all the money that the State is able to borrow for a period of longer than 15 years; that England borrows 14 per cent of the capital that she borrows for periods varying from 10 to 15 years. In other words, only 22 per cent in England is so-called safe capital which hon. members on the other side want us to borrow. England can only borrow 22 per cent, and I want to point out too that 38 per cent of the capital which Britain borrows is on short-term. But what is the position in this country?

Tell us why.

I shall come to that in a moment. As against this 22 per cent which England borrows on long-term, South Africa still borrows 89 per cent on long-term. It has only been necessary for us to borrow 11.2 per cent in the short-term market. If there is any question of emergency loans, therefore, then England is in much greater distress that the Republic of South Africa. The tendency to-day is more to borrow in the international market on short-term, and there is a reason for that. The reason is that international risks have become greater and greater, not only as far as the Republic is concerned but in the whole of the world. I go further and say that in the second place long-term overseas loans are too expensive. Hon. members say that we are unable to get them. For my part I say that we can get them, but we do not always want them because they are too expensive. I will prove that too. I notice here that England borrows in the following way: Her “Treasury Bill rate ”, a very short-term, is 5.4 per cent; her “yield on war loan” is 6.4 per cent; and then there is what is called the “yield on conversion, 1964”, that is to say, a loan which is to run for a long period, of which two years are still left, and for that she has to pay 5.65 per cent if she can get it. What is the position in the Republic? Our present tender rate is only 3.76 per cent as against England’s 5.4 per cent. Why then should we borrow in another market? Furthermore, while there is no indication that England is able to raise a long-term loan, what is the position here? We are borrowing on a 20-year term at 5⅞ per cent. Hon. members must bear in mind what I said a moment ago as to the interest rate that England has to pay on shorter term loans. The Pretoria Municipality raised a 20-year loan at 6¼ per cent. Escom raised a 25-year loan at 6⅛ per cent. There is no longer such a thing in England as a 25-year loan because I contend that she cannot raise such a loan. We are able to get money in the Republic more cheaply therefore, and I shall deal in a moment with the availability of money. I say that these attacks are misplaced when hon. members say that we have to borrow in this way because we are in difficulties.

I want to come to another portion of the money market, and here I want to say that it is not true that we are unable to borrow money in other ways as well. We can get money in ways other than in the traditional money market, namely in the form of bank loans. As the Minister has also indicated, we do borrow money from time to time from private banks, from bankers who are conservative people. In recent years bankers have got so much confidence in us that we now find bankers clubbing together and making available investment money to the Republic of South Africa. Not only are we getting this money to an increasing degree but we are getting it from various countries. The hon. the Minister has told us that we are borrowing in Italy and Germany, and it will probably not be held against me if I say at this stage that there is available from other private sources $100,000,000 of which we are not making use, and on Saturday I had the privilege of seeing such an offer of $60,000,000. Money is available therefore. It is not always necessary for us to make use of offers because in most cases we are able to get the money internally.

But I want to proceed to the next point and express my conviction that it is in the best interests of this country to borrow as little as possible from abroad. We must reach the stage of financial maturity and it is essential that we reach that stage as soon as possible. On 31 March 1962 our foreign debt will be 7 per cent of the total debt, and I see from the White Paper that last year we had to redeem R77,280,000, which we had to pay back to countries abroad, and we were able to do this by borrowing only R48,000,000. In other words, increasingly the tendency is that where we redeem loans we do not have to borrow further money to the same extent. In other words, financially we are becoming more independent and I want to express the conviction that the sooner we can become financially independent, the better. I want to point out that independence from the outside world in the financial sphere means greater stability for our State. In this connection I want to mention a few arguments. In the first place the foreign market is risky. Just as in the case of an ordinary bank, it is not always available when we want to make use of it. When you need money nobody wants to give it to you but when money is plentiful you can get sufficient. I want to put it this way, that it is risky to rely too much on a flow of capital from abroad. Britain’s own funds are no longer of such a nature that she can borrow as she pleases, and Britain is struggling to-day to meet her obligations towards Commonwealth countries as well as other countries. Furthermore, there is also another important argument and that is that greater financial independence saves us foreign exchange. We must remember that if we borrow from the outside world, it means that we continually have to send back interest payments as well as capital repayments, and sometimes repayment has to take place at a time when it may not suit us very well. That is why it is sensible to keep as much capital as possible internally, with the further object also of saving interest. Taking the present outstanding foreign debt, I have worked out that if we took a rate of 6 per cent, which I believe is conservative and realistic at this stage (I am thinking particularly of long-term debt) then this year we would have to send overseas R11,207,000 just in interest payments. But there is a further argument and that is that short-term loans raised internally do not bind us to the same degree as long-term loans from overseas investors. It may be argued that it is better to get long-term loans and that it is dangerous to raise short-term loans because repayment also has to be made within a shorter period and that we may be caught on the wrong foot. My reply to that is that with the improvement of our internal money market this danger is becoming less and less. I therefore dismiss the argument that there is that danger as an argument which is no longer valid.

But the important argument is the following: By becoming more independent we also have a duty towards our own capital resources. Our own money market is increasing and we have a responsibility towards it; we have a duty towards our own people, towards our own investors within the Republic. Here I want to mention the emergence of a new institution in the shape of the acceptance and discount houses. The headway made by discount and acceptance houses—a new institution in the Republic—has been astounding according to the quarterly bulletin of statistics. From 1956 to 1961 their available funds increased from R3,900,000 to R126,000,000, and I make bold to say that if this tempo continues we shall have an enormous amount of capital available for loans from this source alone within five or ten years. There is also a further increase in assets. I do not want to weary the House with a whole series of figures, but I should like to mention just one and say that from 1949 up to 1960 the total savings with our commercial banks increased from R529,000,000 to R1,150,000,000. The figure more than doubled. The indications therefore are that funds in the money market are accumulating and are available for investment. I say therefore that we need not be afraid that we will not be able to get funds to make us financially independent. On this occasion I also want to say to the hon. member for Constantia that capital formation is increasing more rapidly in the private sector than in the public sector. I say that because the statement has been made on the other side that we are draining the private sector. They say that when the private sector gets money we drain it to such an extent that nothing remains for the public sector. By implication that means that we are taking up all their available money. But what is the truth? On the basis of statistics contained in the Quarterly Journal of Statistics I am able to say that capital formation in the public sector, or, as it says here, the gross capital formation of public authorities, increased from 1949 to 1960 at a rate of approximately 110 per cent.

What is the increase in the private sector which hon. members suggest is being drained to such an extent? If what they say is true then the increase in the private sector should be smaller. But that is not the position. The increase there is not 110 per cent but 125 per cent. We are therefore taking capital from the private sector at a slower rate. As a matter of fact, we are taking it at such a rate that there is always a balance left that is available for internal use.

I say therefore that there is no reason for fear as suggested by hon. members on the other side. I want to refer now to developments in the local money market, and I do so on the basis of what was said on 19 March by Mr. Spiro, chairman of Union Acceptances Limited. I want to quote what he said in substantiation of the statement that I made a moment ago. And hon. members must remember that Mr. Spiro is not a politician. He said—

That is precisely what I tried to prove. Mr. Spiro went on to say—

I want to come now to the observation made earlier in this debate by the hon. member for Jeppes in connection with the rate of growth. I have already pointed out that the hon. member’s figures are not comparable. However, I want to read out to him what Dr. van Eck said, as reported in the Transvaler of the 20th under the heading “Van Eck praises South African economy”, followed by the subheading “Tempo of growth much faster than world average”. Then he says the following—

He said this at a Rotarian lunch. According to the report he went on to say—

Here I want to pause for a moment and say one or two words with regard to something which is sadly lacking in the capital market. We are rapidly moving towards the state where we are becoming an export country, and at the moment there are no facilities for the financing of these services and goods to overseas buyers on a long-term basis. It seems to me that this is a defect which should be remedied. In Britain the position is that banks and insurance companies finance contracts, which have to be carried out by British industrialists for a period of five years. That makes it possible and easy for them to raise the necessary capital for the carrying out of longterm contracts. This is a facility which is sadly lacking in South Africa, but at the same time there are indications that the necessary steps are being taken to meet this need. As a positive contribution in this connection I want to express the hope that ways and means will be found, with the co-operation of the hon. the Minister of Finance and his Department, to meet this need.

Mr. Speaker, hon. members on the other side must not say that we want to be isolated. Here I want to associate myself with the observation made by the hon. member for Mayfair (Dr. Luttig) that we must think positively and that we must think big. Like all countries with a great future, our country also has three stages of financial development to go through, the first stage being that of money-borrower. We are going through this stage and we have really progressed beyond it. The second stage is to become self-sufficient. I want to give hon. members the assurance that if they do not have the confidence, we certainly are confident that the stage will be reached when we shall become money-lenders. That would be the third stage. At the moment we are borrowing money abroad not so much because we cannot get the money here but because we have to bear in mind our balance of payments position. As long as that is necessary we shall have to raise overseas loans in order to get exchange so as to be able to balance, but as we become self-sufficient, the need to borrow overseas becomes less and less, and the day is rapidly approaching when we shall be able to rely on exports to fill the gap and no longer on foreign loans.

I also want to say that I am grateful that the hon. the Minister has held out the prospect that an amount will be made available for market research and market development, because it is only by stimulating our exports as a raw material-producing country that we shall be able to reach the stage were we can safeguard our balance of payments by means of exports. Here too it is a wise policy on the part of the State to encourage in South Africa the establishment of industries which will replace imports and build up our exports.

Before I conclude I want to make one further observation in connection with the blocked rand. We have many foreign friends who have confidence in the Republic, just as we have confidence in it. Hon. members on the other side apparently have no confidence in the Republic. Just as funk capital may find its way into a country, so too a country may attract unreliable foreign investors, and I want to congratulate the hon. the Minister on the fact that he has succeeded in granting a privilege to those investors who want to liquidate their investments here and then transfer the money, namely the privilege of first lending the money to the State before transferring it. When we look at the past and when we look into the future and see all the signs of economic growth—the creation of greater assets by the State, greater opportunities for our people to save, more exports, etc.—then we cannot help feeling confident. As a matter of fact, we do feel confident and when hon. members on the other side talk as they do about confidence in the future, their arguments are misplaced, because a great future awaits us and as far as the borrowing of money is concerned we shall be able to find all the money internally to do what ever this country finds necessary to do.

Mr. Speaker, at the outset I should like to say a word or two about a point which was raised by the hon. member for Standerton (Dr. Coertze) in his speech with regard to the price of petrol. I do not want to discuss the price of petrol now, because the case I have already made out in this connection, is as strong to-day as it has ever been. I have asked on many occasions that the railway rates on petrol to the interior should be adjusted. The pipeline commission told us that petrol could be piped from Durban to the Witwatersrand at a cost of less than 1d. per gallon whilst the South African Railways charge us 7d. per gallon. I think, therefore, that the hon. member for Standerton should use his influence with the Minister of Transport and the other members of the Cabinet, to see to it that we get a fair deal in the interior. This is all I want to say about this subject.

The hon. member for Soutpansberg (Mr. S. P. Botha) admitted, I think, that gold was our sheet anchor and that without gold we in South Africa could not introduce any of the schemes which have been put forward by the hon. the Minister of Finance. On this, I think, we all agree. Great assistance is, of course, also to be obtained from wool. But if the hon. member for Soutpansberg knows of any sources from which the Minister can borrow money, he should tell him, because I am sure the hon. the Minister is anxious to borrow money at low rates—he is very keen indeed. When comparisons are made with Britain in regard to rates of interest, it should always be remembered that the scale of income tax in Britain is so high that it influences every operation. It is a factor which often decides investments. I gathered from the remarks made by the hon. member that he considered it would be a good thing if we did not borrow abroad and if we were self-contained if we could rely upon our own resources not only for defence, but for finance as well. That seemed to me to be his main theme. He said we should think big. But, Mr. Speaker, in defence we should not think too big for our boots, although that is what we have been doing. We should rather remember that South Africa is a small country. The hon. member also said that the economy of the country was being carried by a small section of our population—chiefly our White section. However, Sir, they are not doing too badly out of it despite the sacrifices they are making! We of the White community are doing very well in this country. In fact, I think we are flourishing compared with the other sections of our population.

I do not wish to cover the whole field of the budget, Mr. Speaker, but if I were to do so, I would say that this budget was a pedestrian affair—a little off here and a little added there, a few more taxes and a little extra given to old age pensioners. It is a small affair, while we need something with vision. That we did not get. However, I wish to confine myself to two aspects where I think I can be of assistance to the hon. the Minister, and these aspects relate to the relaxation of exchange control. I know only a little of this, but this little might perhaps be of assistance to the hon. the Minister. In the debate on the Part Appropriation Bill, I put forward a suggestion to the hon. the Minister to the effect that he should as a first step make blocked rands negotiable amongst non-residents; in other words, if a resident of London holds rands deposited in Johannesburg, he should have the right to transfer them to another resident of London. The hon. the Minister did not, however, comment upon my suggestion when he replied to the debate. I do not take that amiss, because he had to cover a wide field. Although he did devote a great deal of time to me, he did not reply to this specific suggestion. I should like him to do this in his reply to the present debate, because I think that whatever scheme is introduced in connection with blocked rands, these should be made transferable as between non-residents. This is my first point. When the hon. member for Soutpansberg spoke about our being self-contained in so far as the raising of our capital requirements were concerned, I thought of the policies which had been adopted by all Parties in the past. In this connection, I should like to refresh the memories of hon. members in regard to the period during which the Nationalist Party has been in office. Here I come back to that first budget which was in reality a United Party budget but which was introduced by Mr. Havenga as the first budget of his second series. Here is a short extract of his speech on that occasion—

But now, Sir, it is a magnet for repelling capital. In another part of his speech he said—

That was the policy of Mr. Havenga as it was the policy of his predecessor, namely to attract foreign capital, and not to repel it. Then, the following year, we had the following opinion from the Governor of the Reserve Bank, Dr. de Kock, who said this in July, 1949—

He went on to describe how we might be able to get capital from the United States and from Switzerland. He said an American company had offered to participate in the exploitation of mines in the Free State and the Government fully recognized the importance of this promising arrangement to obtain a considerable participation of American capital in the development of the new gold mines—

That is to say, that if they could get foreign capital from the United States of America, they would be prepared to change the lease formula in their favour. Surely, Sir, that is making South Africa the magnet for foreign capital? Dr. de Kock then made the following appeal to South African shareholders—

In other words, we should give away our mining rights in order to attract American capital. That was bending over backwards in order to please America! But more recently, the present Minister’s predecessor, Mr. Naude, told us of a new plan he had introduced with the approval of his party and the Government. He said—

(i.e. companies from America)

He went so far as to say that this new company which he had in mind—the American-South African Investment Trust Company— would not be taxed on its share operations, but they would be permitted to withdraw their shares and their capital too after five years if they so wished. What was the condition attached to this? This, namely, that no South African should be allowed to be a shareholder in the company. The other day the hon. member for Port Elizabeth (South) (Mr. Plewman) asked to what extent this had been extended. Was it only Mr. Engelhard who was to be the beneficiary under this system? At any rate, this is what this Government has done in recent years to obtain capital from abroad. But what are the Minister’s proposals to-day? We were trying, as I have proved, to attract capital in the past, but the present proposal of the hon. the Minister is a strong inducement to overseas people to take their money out of South Africa! Yesterday I wrote a letter to an investor overseas about the Minister’s first proposal and I advised him to get in and fill his boots. It is a wonderful proposition for a man overseas. Let us have a closer look at this proposal. In terms thereof, we are going to assist overseas investors to take their money out of South Africa and to sell their South African investments. Now, Sir, there are two kinds of overseas investors in South African securities: firstly, the investor who has no confidence in South Africa, whose policy is to flee from the wrath to come and who see the future as being dark and dismal; and secondly, that kind of investor who believes in South Africa. In terms of this scheme of the hon. the Minister, he asks for this faith in South Africa for only five years. I want to take the case of an investor in the second class to demonstrate how the Minister’s plan will work out. I find it very interesting and I am sure that the overseas investor will find it interesting as well. I am wondering what the British Government is going to do about it! I want to demonstrate what will happen to an investor falling in the second class who wants to take advantage of the Minister’s plan. Say, for instance, this investor has shares which he can sell on the London market for £1,000; but now there is a disparity in prices of 20 per cent as a result of which the shares are selling on the Johannesburg Stock Exchange for 24s. There might be a company who sells at a little less or at a little more, but all this is adjusted by switched arbitrage which is permitted by the Government. 20 per cent is, therefore, the general overall difference in prices. Now this investor sends out his shares to the Johannesburg market under the Minister’s scheme, because the Minister is very clear in regard to his scheme when he says that an investor can either be a owner of South African shares or he can buy them on the London market. He can, therefore, buy shares in the London market now for £1,000, send them to South Africa and sell them for £1,200. What happens now? He says he is sending them for conversion under the Minister’s scheme, i.e. a five-year loan at 20 per cent repayable every year with interest. So let us see how it will work out, and let us take the first year for this purpose. We must remember that the London investor is thinking in terms of £1,000 although out here it is £1,200 or R2,400. During the first year he will then receive £200 back as a return on his capital. In addition he receives £60 interest because it will be interest on £1,200 at 5 per cent and, in addition, a bonus of £40. So he sees that he is doing well because he gets £200 of his capital back plus £100 besides. But that is not all. In London he is not going to pay income tax on the bonus but on the £60 only. During the second year, he will get 11 per cent; 12.6 per cent during the third year; and 16 per cent the fourth year. For the last year he will still have his £200 invested. Out here, however, he will have £240. What does he get back? He receives back £200 in capital, plus £12 interest and £40 bonus, i.e. £52 which gives him a 26 per cent return. This is a very good investment and the hon. the Minister will understand why I advised the overseas investor I wrote to to get in quickly. I should like to put this to the hon. Minister, namely that when this investor has bought the hon. the Minister’s bonds, why should they not be negotiable? Why cannot they be sold in London? The hon. the Minister will then have his loan and the investor can sell in London.

I now want to come to the blocked Rand scheme. The Reserve Bank will go into the market as a stock jobber and arbitragist. I hope the Reserve Bank is not going to be used for that purpose. Under the second scheme of the hon. the Minister, the position is that not only is the Government, and the Reserve Bank, going to induce people to take their money out of the country, but they are also going to arbitrage to provide shares for all institutions in South Africa. And the reason for that? A scarcity of scrip! But there never is a scarcity of scrip in South Africa! There is a scarcity of blue chips— good investments which can be handed over to trusts, etc. But, here again, South Africa does not want more blue chips! What we want is risk capital. We want venture capital; and there is no such capital forthcoming because there is no confidence in the Government. That is the story. The hon. the Minister said that prices were high in Johannesburg. But, Sir, they are not. The prices of these blue chips are lower than what they were quite recently—about two years ago at the time of Sharpeville. If institutions buy these now on the free market in Johannesburg, they will be getting first-class investments. So let us have a look at it again and see how this scheme of the hon. the Minister is going to operate. How many institutions buy shares to-day? The fact is that they have been buying shares in a big way! I want to compare what they do with what the ordinary investor does—the man who goes along to his broker and says that he wants 100 of these shares or 500 of those. If he buys on the open market he pays the Minister market securities’ tax of ½ per cent on those shares. Finance companies do not do that, Mr. Speaker; they can sell shares to each other and pay no market securities’ tax. Just think what revenue the hon. the Minister is losing in this way. If a man has a property and sells it, he has to pay the ordinary transfer duties, and if the ordinary investor buys shares on the open market, he has to pay market securities’ tax of ½ per cent. In addition to that he has to pay his broker. I should like to know how the hon. the Minister is going to let the Reserve Bank buy in London. Is it going to buy through the London jobber? What a time they are going to have when the hon. the Minister comes into the Kaffir market and says “the Reserve Bank is coming into the market, boys. Get ready”. But let us assume that the Reserve Bank buys shares. How then is it going to sell them to these institutions, these open end trusts? Is the Reserve Bank going to sell without having to pay market securities’ tax? Is that the intention? Or is the hon. the Minister going to say to it that in addition to the rake-off in profit, it must pay taxation in the same way as every other investor in the country does? This is something I should like to know.

In this connection, Sir, I should like to make the following suggestion to the hon. the Minister: If he is going to carry out his plan, do not let the Reserve Bank come into the market, but let the Bank issue permits to other people to go into the market with the Reserve Bank only controlling operations. If that is, in fact, the hon. the Minister’s plan, i.e. that the Reserve Bank should enter the market, I suggest that the Reserve Bank should instruct its broker who arbitrages in London to buy shares for it. This can be done by telephone as they do every day from the Johannesburg Stock Exchange. They just telephone and make deals while on the telephone. In the same way, the Reserve Bank can deal with its arbitragist in London. I suggest to the hon. the Minister that he should do that, rather than let the Reserve Bank chase these stocks. For this opinion I have a very interesting associate. I should now like to quote from the report I referred to briefly on Friday, namely from the annual general meeting of Sankor, one of the associate companies of Sanlam. Sankor is a very good company and has been floated as an investment company. The chairman of that company made an excellent speech at the annual general meeting of this company which was held on 31 January 1962, in respect of the year which ended on 30 September the previous year. From this speech I want to quote the following extract. The Chairman said this—

What is this Chairman suggesting? He has two constructive ideas. The second one I have argued for years. He says that if we have State corporations—the question is whether you can get buyers for some of them. But let us take a real blue chip like Iscor. The suggestion is that Iscor should issue shares to these trusts. Iscor can pay a dividend, and then the Minister will get the money because they are all his shares at present. The hon. the Minister, on behalf of the Government, can get this money and invest it in the Orange River Scheme or any other scheme. Mr. Speaker, I think this is a first-class constructive suggestion.

I am not going to labour the other suggestion, but it is this. We know that in South Africa it has been the custom of overseas companies to float subsidiaries here, and when they float subsidiaries the usual capital framework is, that they will give South Africa a fine block of preference shares but the equity they hold for themselves. The equity is held by the parent company overseas. Now, the Australians have queried this practice. I am not suggesting that it should be done for the companies already in existence here, but when a company comes to South Africa and the Registrar of Companies has to consider their capital framework, he should give consideration to that.

Sir, those are my suggestions to the hon. the Minister, and I want to make it perfectly clear that I have had no correspondence with or suggestions from the Johannesburg Stock Exchange—none at all. They would not do that. As a matter of fact, if there is any doubt in the mind of any hon. member, I want to say that when I came to Parliament, although the Minister of Finance of the day thought it would be a good thing if I remained on the Stock Exchange Committee to preserve a liaison, the members of the Stock Exchange Committee felt they did not wish to be associated with any political group. The suggestions I have made are suggestions I have made in the interest of South Africa.

The hon. member for Kensington (Mr. Moore) has in general made certain positive suggestions which are mainly of a technical nature. I shall therefore express no opinion, because those are suggestions he made to the Minister of Finance. But what surprises me a little are his representations in regard to Iscor. When Iscor was established that side of the House did not want it to be a State undertaking, but now that Iscor is a success they advocate the issuing of shares to the public. Mr. Speaker, the facts are these. Iscor stands there as a monument to show what can be achieved, and the fact is that to-day we have the best and the cheapest steel in the world. If we are to distribute Iscor shares to the public, as is now suggested, there will be pressure for the price of steel to be increased because they want larger profits. What assurance have we that when there are large numbers of private people who hold shares, there will be the same amount of ploughing back of profits into Iscor, as is the case at present? The fact is that Iscor is planning great expansions, which will chiefly be financed from its own resources. It will not be possible to carry on with those expansions out of profits if a large number of Iscor shares are in private hands. They would insist on dividends. In the past it was the policy of the State that those shares should remain there for the sake of having cheaper steel for the use of all the associated industries which were built up around Iscor. I think there is little justification for making a change in that policy now.

The hon. member also referred to the currency control we have. Surely it is a fact that as long as there is this difference between the prices of shares on the London Stock Exchange and the Johannesburg Exchange, that control must remain, and we can only refer to the experience Britain had, and tell the Minister of Finance that he has our support in adopting this cautious policy. Britain also applied this control at one time, currency control outside the Commonwealth, just after the Second World War. They had control for seven years and then, as the result of pressure from the U.S.A.. it was relaxed to some extent, and in 1946 it suddenly was dispensed with, with the result that within five weeks Britain lost over $1,000,000 of capital which went abroad, and for 11 years thereafter she again had to apply currency control. I think we can learn a lesson from that, and that we should not be in too much of a hurry to dispense with currency control as long as conditions remain as they are.

But I would like to deal with the hon. member for Jeppes (Dr. Cronje), who is not here now. He referred this afternoon to confidence. He said there was a lack of confidence here, but we know this old story of theirs. During the past 13 years, at election after election and year after year, we have heard these depression stories. The last election again produced its quota of these stories. The Opposition used every opportunity to try to derive political gain from the prevailing economic position. They tried to create unrest and confusion. It is the old pattern. The hon. member for Jeppes said that we must change our policy. He said—

I see that just after the hon. member returned from his visit to America towards the end of last year, he also stated in a Press interview: “Americans confident in South Africa’s stability if policy changes.” But how is this policy to be changed in order to create that confidence? The hon. member went further and said—

Now I want to ask the hon. member this: How far are they prepared to go to regain this confidence? He said this afternoon: “We must reverse our racial policies,” but if we do so we must accept the policy of the hon. member for Houghton (Mrs. Suzman), because surely that is the opposite of our policy. But how far does he want to go? Mr. Speaker, we are aware that there is pressure exerted in the United Party to go further. Last year that party held a congress in Bloemfontein. They had a secret agenda and, inter alia, there were resolutions from quite a number of branches that they should go so far even as to allow the Bantu to sit in this House. Does he want to go as far as that? No, the fact remains that going further in the direction of political integration will not necessarily instil confidence in our economy. We can just look at Africa. The fact that the Federation adopted a policy of partnership did not lead to greater investment there. On the contrary, the Federation applied currency control before we did. The policy of partnership engendered no greater confidence there than our own policy. They also suffered shocks and capital flowed out. But even in Kenya we see that the Cape Times Financial Correspondent writes about the “serious flight of capital”. Even there the policy followed did not instil confidence. That is so even in Ghana— “Ghana tightens its belt again”. During the past week we saw that industrialists there are not even at liberty to take their full dividend abroad. It is said that 60 per cent of it has to be invested there. No, a change of policy per se will not create confidence abroad.

But the hon. member for Jeppes also said that we should have confidence; confidence is what we lack here. But I want to ask the hon. member this. He himself has no confidence in South Africa. He admitted it in the latest annual report of the Nederlandse Bank—

He then expected it to have a very bad effect on his bank, but now he says this—

They were uneasy, but nothing happened. He goes further and says he is gratified by last year’s report, because things went well with the bank. He says—

He is satisfied with the commission they earned. He says, further—

They therefore made greater profits.

A good bank, is it not?

Yes, but it is also a good Republic and a good Government. He is not only the shareholder of a bank but also of the Republic of South Africa, and why must he always paint such a gloomy picture of the Republic as he did to-day? There is no necessity for it. And it is not only this bank which showed the results. A summary of the profits of our undertakings shows that throughout there was an average increase in the profits of all institutions of 9 per cent above those of the previous year, when it was 13 per cent. There is therefore a general improvement in business conditions. It is always being said that we must change our policy and that it is the Government which is responsible for all these things. The hon. member for Jeppes also said that other countries like Australia and Canada received capital and therefore they had a greater increase in business. But the hon. member himself has referred to the report of Hupkus and van den Berg. He referred to the fact that in South Africa during the past ten years there was an average increase of only 1.4 per cent in our net per capita income. But in the same report we see that in spite of the larger capital sums which went to Australia their increase was also only 1.4 per cent, and in spite of the large amounts which went to Canada their increase was only .9 per cent.

But I want to go further. I notice from a report by the National Bank of Australia that in spite of the large influx of capital there was a decrease in Australia. According to the White paper, it seems that in the last few years we had an increase in the per capita income. For the past three years it was R341, R353, and now it is R361, an increase, but in Australia, which is held up as the example and which obtained all the capital, we see according to the report of the National Bank of Australia that for the past three years it was £A263 and that it then fell to £A255, which therefore indicates a falling tendency in the national income. I notice that there was a tremendous increase in unemployment. In September 1958 there were 60,000 unemployed, in 1959 52,000, in 1960 53,000, but last year there were 109,000, in spite of all the capital Australia received. In regard to Canada, the net income fell from $1,181 to $1,139 and then to $1,127. In Canada there is also a falling tendency. The mere fact that capital flowed in does not in itself prove that it resulted in economic development.

It is said every time that it is our policy which resulted in this outflow of capital, but I want to ask what about the statement of the hon. member for South Coast (Mr. D. E. Mitchell) when he said, “We will march”? What was the effect of that statement overseas? Did it not frighten away capital? We saw that when the hon. the Minister of Transport introduced his budget he pointed out that at the time we became a Republic ships which had regularly touched at our ports avoided them for an appreciable period because they were afraid of trouble. Did that not cause capital to flee? And what about the hon. member for Wynberg (Mr. Russell)? I read in The Times of 18 August 1960—

Surely it must have had an effect. And we know what happened, the Republic was established and there was no trouble, and at the last Congress of the United Party they adopted a resolution that if they come into power again they will lead the Republic back into the Commonwealth only if it is in the interest of South Africa to do so. But listen to this. The hon. member for Wynberg was not satisfied with that. In the Cape Times of 18 August 1960, he referred to this resolution and said—

Mr. Mitchell moved the motion “only if it is in the interest of South Africa”—

[Laughter.] Now Mr. Russell does not agree with Mr. Mitchell and he says—

He goes still further, referring to this proviso, “only if it is in the interests of South Africa”, and says—

It is this sort of story, that there will be “tumult on an unprecedented scale”, which has done the harm, but now we see something different. I see that at the last election one of their candidates said this—

That is as the result of our becoming a Republic. He says—

Do you know, Sir, who was the man who said that South Africa may be stranded with a thousand million rand exports? That man was Mr. Moolman, and it should be remembered that our total exports were not even R1,000,000,000. He will still be coming here, but the fact is that he is a business man from whom one expects a greater sense of responsibility than this. But it shows to what lengths even a business man will go if he wants to make political capital.

But I want to go further and show to what extent South Africa is being sabotaged by no less a person than the Leader of the United Party. In the Cape Times of 10 March 1961 he said this.

On a point of order, may the hon. member say that South Africa was sabotaged by the Leader of the Opposition?

The hon. the Deputy Minister should not say that the Leader of the Opposition sabotaged South Africa.

Then I withdraw it, but I want to indicate in what an utterly irresponsible way he acted. During the election in Pietermaritzburg he said this—

[Interjections.] Here we have a statement. South Africa has not even applied yet. South Africa must adopt a waiting attitude, mainly as the result of Britain’s application, but to say this in regard to such an important matter which will affect our economy on all fronts and to create the impression that South Africa cannot join as long as the Nationalist Government is in power, is utterly irresponsible. I want to say that this statement made by the Leader of the Opposition deserves the strongest condemnation as something aimed at undermining the economy of South Africa. There is no reason for it. It is a calculated undermining of South Africa and one can only express one’s strongest disapproval of it.

Apart from that, I have mentioned a few matters here which are calculated to harm South Africa economically and to derive political advantage from it, but I also want to mention another example. It was known that South Africa would leave the Commonwealth, and although it was said in the British House of Commons during the debate on the extension of our preferences that the fact that we left the Commonwealth would not affect our preferences, in spite of that the Opposition steadily made use of it, and the hon. member for Constantia (Mr. Waterson) said the following in their own publication—

Small wonder that the other newspapers also repeated what he said—

Here a lead was given by the No. 1 speaker of the United Party on economic affairs. The fact is that this year has passed. There is no possibility of these preferences being ended.

What about sugar?

I can tell the hon. member something about sugar, if he wants to know. I do not want to say too much about sugar, but I want to remind the hon. member that this sugar agreement was entered into for a period of eight years and the price was fixed eights years ahead. That agreement was entered into between the Sugar Association and the British Government. It was not entered into with this Government, and it had nothing to do with preferences, but when this agreement was first entered into it was during the war years. Then there was a shortage of sugar and there were attempts to encourage the planting of sugar-cane. In 1943 the first agreement was entered into. In the first year South Africa got 7s. 6d. per ton more from Britain for her sugar. Then the agreement was entered into on an eight-year basis. The following year the world price of sugar rose to £16 per ton and South Africa received £14. 12s. 6d. The next year it increased to £21 5s. and South Africa received £16 4s. 6d. per ton. In 1945 the world price was £27 5s. a ton and South Africa received £18 17s. 6d., more than £8 less per ton. So one can go on. Even in 1950 we received £16 a ton less than the world price. Then there was a surplus of sugar and now the agreement has been terminated. The Sugar Association in South Africa and overseas took legal opinion which supported the standpoint of the Association that this agreement was still binding. They did not proceed further to institute litigation, but a compromise was arrived at in regard to the price. The fact is that it resulted in a loss of income, but if the Sugar Association wanted to insist on their legal rights, the position might perhaps have been quite different. A compromise was arrived at, but this history shows that in the years when the world price was high our sugar was sold below that price, because that was to Britain’s benefit. But now that the position has changed … [Interjections.] I want to revert to this fact. It was said that we would lose our preferences, but we have not lost them. We still have it and Britain still has it also, and in spite of the fact that we became a Republic outside the Commonwealth, our exports to Britain and to the Commonwealth countries increased from 51 per cent to 52.8 per cent. There was therefore an increase in our percentage of exports to Britain, and also in regard to our imports from Britain. There was a fall in the actual figure as the result of our restricted imports, but the percentage of what we imported from Britain during the year we became a Republic did not decline: on the contrary, it increased. In Australia there was just the opposite tendency, but I do not want to mention the figures.

There has been reference to boycotts, etc., but the fact is that our exports of canned fruit to Britain have increased. We maintained our position there, and the greatest percentage of canned fruit imported there came from South Africa. Then followed Australia and the U.S.A. There was reference to Commonwealth preferences. It is perhaps a fact that there was some uncertainty created, but the uncertainty about the continued existence of our preferences, and the fact that people tried to import more goods because they thought a stop would be put to it, was not the result of our leaving the Commonwealth, but the result of Britain’s decision to try to join the Common Market, and it affected not only us but every country of the Commonwealth. The Economist described it as the “Commonwealth’s Pilgrim’s Progress It referred to New Zealand as “the sacrificed land”; she was being sacrificed, and it referred to Australia as “the Wallabies’ Worries”, and to Canada as “awaiting the tiger No wonder that the Economist came to the conclusion that “old friendships fade. The club is not what it was. The far-flung Empire became the glorius Commonwealth, and then suddenly it seemed nothing but a noose around Britain’s neck”. Canada strenuously objected. Mr. Donald Fleming said—

In regard to Australia, it was said—

There was thus the strongest reaction in those countries, and it also created uncertainty on their part. Therefore if there was any uncertainty it was not because we became a Republic, but because of Britain’s decision to try to join the Common Market.

But there were also other circumstances which led to the flight of capital here, apart from the way in which the Opposition acted. We know capital fled because there was talk of devaluation. But that did not take place in South Africa only; here it was much less. Devaluation started in Britain. Last year in June for the sixth time after the war it had a balance of payments crisis and there was strong talk of devaluation. Canada devalued and Australia and New Zealand also had balance of payments problems. Here there were certain people who would have liked to see devaluation. The Financial Times wrote—

The Cape Times said—

The Argus warned against the danger of devaluation; others favoured it, but the fact is that these rumours resulted in the fact that according to The Statist Britain alone in this period lost over £600,000,000 in flight capital simply as the result of these devaluation rumours. This also had an effect on our economy last year.

There was reference to shares. The fact is that when shares drop it is always the Government’s fault, and there is reference to Sharpeville to our leaving the Commonwealth. That had its effect on share prices, but when share prices rise we hear nothing about that; then it is not due to the Government’s contribution but to “the buoyancy of the market”. We admit that share prices fell, but the fact is that our share prices rose considerably since Sharpeville. In May last year the average index figure for our industrial shares was 72, and in December it had risen to 95, which proves that there is confidence in our industries. The index for commerce rose from 96 to 115. Our financial shares rose from 116 to 145, and our mining shares from 78 to 101. There was therefore a generally rising tendency, and there were rumours overseas as well as here which caused this. But thereafter there was again a big rise on the London market. Prices had fallen there also at that time, but they rose, and it is interesting to note that even after the election here prices rose still further, and small wonder that the London Daily Mail wrote—

Those were its conclusions, but we hear nothing about that. We only hear about the fall in the price of our own shares. Let us, however, look at the London Stock Exchange, at the corporation stock, as it is called. South African stocks fell by 9 per cent, but in the case of Australia one loan fell by 6 per cent and another by 8 per cent. There they do not have the problems we have here. Those of Rhodesia and Nyasaland fell by 10 per cent. That of Birmingham, which is in Britain itself, fell by 7 per cent, as compared with 9 per cent in the case of South Africa; the Corporation of London fell by 7 per cent, the London City Council by 9 per cent, Middlesex by 9 per cent, precisely the same fall as in the case of our own Corporation shares on the London Exchange. We admit that shares fell. Losses were perhaps suffered, but what was the position on the London Exchange. In regard to textiles during the past year there was a much greater fall on the London Stock Exchange than on our own. I will read out the list. Textiles: English sewing cotton: the maximum was 42s. 7d. and the lowest was 23s., a fall of almost 50 per cent. The next is Fine Spinners, which fell from 31s. 10d. to 19s. 4d. Lancaster Cotton fell from 70s. 4d. to 44s. 9d. We therefore see the tremendous drop there was in textiles. Take steel. Colvilles fell from 81s. 3d. to 42s. 4d., almost 50 per cent. Take the engineering industry. Babcock and Wilcox fell from 36s. 9d. to 18s. 9d., again a fall of 50 per cent. That is how it was on the London Exchange. But just let something happen here which makes share prices fall and it is immediately the fault of the Government. The fact is that the position was worse for the London investor than for our own investor. If we want to regard it in terms of losses, then they lost more there than our investors lost here.

I just want to refer to a final aspect, namely that our investments in building societies have decreased. It is an admitted fact that we sent money overseas to buy shares. Savings were withdrawn from the building societies to acquire those shares on a scale unprecedented in our history. That resulted in a decrease in building activities. We could not maintain the same tempo. For the year ended 31 March 1961, there was still an increase of 7 per cent in deposits with the building societies. In the Federation there was a decrease. The position was much more advantageous here than in the Federation where a policy of partnership was followed. We must, however, also bear in mind that in regard to building activities satiation point had to some extent been reached. I see in the report about the building trade that—

Then we see another interesting thing, that according to The Statist also foreigners are withdrawing their capital from building societies. They write—

They therefore also withdrew capital from the country, but at the moment we know that the building societies are recovering, not only through capital from abroad but through drawing more of our own capital. The fact is that we shall have to learn to depend on our own capital to a greater extent. We are in the position to do so. Britain can no longer provide it on the scale on which it did so in the past. We know that even last year Britain had to apply strict measures to restrain the outflow of capital to foreign countries—

The fact is this: We must do the things that we have to do ourselves. This Budget indicates the direction, not only to raise the standard of living and to ensure that there will not be a greater measure of inflation, but to afford security not only in the economic sphere but also in the military sphere, so that we can hold our own against anyone who may want to attack us in any of these spheres.

Mr. Speaker, I should like to express surprise as a new member at the unwarranted attack I have just heard from the hon. the Deputy Minister of Economic Affairs who has just sat down. There was nothing constructive in what he said; it was a speech made up from press cuttings. I should like to say at the outset that the present situation here in this country has been brought on by the policy of the present Government. I would like to refer the Deputy Minister to this because it seems to me that it is going to be very difficult for the hon. the Minister to negotiate after the speech that we have just heard. I did not expect the hon. the Deputy Minister to indulge in a political attack but to analyse some of the aspects of our international situation and the Budget. I should like to say here in reference to what the Deputy Minister has just said concerning the statement by the hon. the Leader of the Opposition that there was perhaps not the opportunity of becoming a member of the European Common Market as long as the present Government remained in office, that this may well be true. I would recommend the hon. the Deputy Minister to study the Treaty of Rome, Clauses 135 and 137 and also to remember that Britain when applying for membership will be quite sure to protect the Commonwealth. France has already got protection for Algiers in the European Common Market. But we cannot expect the same consideration being outside the Commonwealth; an independent application may well lose out.

The hon. member for Soutpansberg (Mr. S. P. Botha) who spoke a little earlier referred to Dr. van Eck and Mr. Spiro. He was quoting from papers regarding the statements of these two gentleman and I should like to point out to the hon. member that Dr. van Eck in his statement is saying that we can be financially independent whereas Mr. Spiro says that since exchange control was imposed last year it has become progressively more difficult to find foreign capital seeking investment in this country. The increase in savings and the interest shown by institutions have not been matched by new capital issues. I would like to remind the hon. member and the Deputy Minister of the remarks of Sir Oliver Frank, until lately the Chairman of Lloyd’s Bank who said—

I should like to join with the hon. member for Jeppe (Dr. Cronje) who spoke earlier on and other hon. members in expressing appreciation to the Government for this White Paper which we have had issued on this Budget. It has facilitated the studying of the Budget considerably. I would also like to record my appreciation to Government Departments who have worked conscienciously and efficiently throughout the year which has, of course, incidentally assisted the hon. the Minister of Finance to steer the South African finances through the troubled waters of the last financial year and emerge with another surplus. A small surplus it is true of R5,000,000. I should like to join with the hon. member for Port Elizabeth (South) (Mr. Plewman) who said that at this time he felt that the Budget was going back to the days before Mr. Havenga instituted the methods of obtaining the current annual surplus. This was a method with which I could never agree. I think it is now time that we recognized that perhaps this Budget has taken a different turn. It has changed and it has now been restored, let us hope, to its primary role which is to balance revenue from current sources with spending for current purposes.

I would like to touch upon the increased allocation of funds to the four provinces. I know that this R4,900,000 which the hon. the Minister mentioned for schools and hospitals is only, of course, a temporary measure. It will only partly alleviate the situation which urgently requires adjustment. I know it is premature at this stage to speak on financial arrangements between the Central Government and the four provinces before the commission has submitted its report. But I do wish to say this that during the years that I was in the Transvaal Provincial Council I consistently urged the necessity for a reconsideration of the reduction in the present system of subsidies under the amended Financial Relations Act, the present arrangement by which provincial governments are subsidized on their 1956 expenditure figures plus 6 per cent which figure last year and other years has, of course, been increased. It has been calculated on the compounded amount of the previous year in keeping with the increase in the extra statutory allowances from 6 per cent to 7½ per cent. But even that is still not sufficient to cover the shortfall which the provinces experience every year in balancing their budgets. I feel the time has arrived for executive committees, with the taxpayers of South Africa behind them, to put up a very strong case indeed to the hon. the Minister for a substantial increase in both subsidy and loan funds to the provinces. You will remember, Mr. Speaker, that the Transvaal has half the White population, half the schools and half the teachers in South Africa and that she contributes more than 70 per cent to the Government’s inland revenue.

Turning to the Budget, Sir, according to international standard rules I heared Mr. Selwyn Lloyd last year delivering his Budget speech overseas and he also touched on this that you could judge a budget on two tests. It must deal adequately with your current problems and also, most important, will Jan Burger be better off as a result of the Budget? In examining this year’s Budget one cannot agree that it meets this test. Now is the time when the hon. the Minister is asking this House to vote this very large sum of R790,000,000 for us to raise these certain matters which are greatly perturbing the people throughout South Africa. And Jan Burger is now presented with a Budget with an increase in direct and indirect taxation of R14,200,000 and R21,500,000, a total of R35,700,000, with a 10 per cent income tax rise. The 10 per cent rebate is to go. Here I would like to say that the hon. the Minister last Wednesday cushioned the blow to the taxpayer to a certain degree by mentioning that repayment comes this year of the compulsory loan levy of five years ago. But this compulsory loan levy has an interest rate of 4½ per cent and I do not think that the present taxation which the Minister is imposing is going to have any interest rate on it at all. In fact this Budget which the hon. the Minister announced as being “all square”—he said “whatever comfort it may be, I offer the thought that but for the increased expenditure on the Defence Vote there would have been no short-fall in revenue to be met”—is “all square” because of the extra taxation which Jan Burger is paying. As the Press put it last Beer for Bullets”. Jan Burger is paying for Defence but he is paying for the policy of the Nationalist Government. He is no better off under this Budget and if he wants to know why he must look to the Central Government, because the crux of this matter is South Africa’s inability to obtain sufficient capital to finance her development. This has been touched upon by other members, but I would like to refer to it briefly: Surely the success of this Budget depends on South Africa’s economy continuing to expand and flourish so that it can provide the increased revenue which can be transferred to Loan Account. The hon. the Minister in his Budget speech said that the comparatively slow rate of growth in our economy remained a source of concern. We are presented in this Budget with that. I would like to ask the hon. the Minister why there should be decreases on such things as education, bursaries and grants and very much larger increases on other things in this Budget. With education as the battlefield to-day I think we could have seen something like a 68 per cent increase in the education vote. In this Budget the taxpayers are contributing to a defence insurance policy that would not have been necessary if the Government’s political policies had not taken South Africa into an isolated friendless position, isolated politically and economically and geographically at the tip of Southern Africa outside the Commonwealth, with no alliances. Do not let us delude ourselves in thinking, as the hon. member for Constantia (Mr. Waterson) said earlier on, that R120,000,000 is enough; “it is just a flea-bite”. Because if we need to defend ourselves truly here on account of the present Government’s policies, we must remember that guided missiles and loading machinery cost hundreds of millions of rand. To-day we are threatened by modern warfare; we are threatened by missiles from far away bases; by missiles launched by distant submarines, by missiles released by distant aeroplanes and eventually there will be missiles released from artificial satellites. We shall also have to face a germ warfare and a chemical warfare. Before this we had the bulwark of the Commonwealth behind us to protect us. Now we have to pay for all ourselves.

I would like to ask the hon. the Minister, concerning his statement earlier this parliamentary session, whether he expects aid for the Transkei from the World Bank Fund. The Minister, when he made this announcement said that “there was a distinct possibility that the Republic would be able to get aid for the Transkei from the International Development Association, the IDA”. Now in this booklet on the International Development Association you will note, Mr. Speaker, that one of the first things is that its aims are “to promote economic development and increase productivity and thus raise the standard of living in the less developed areas of the world”. In other words, increasing the productivity and raising the standard of living are linked. The Minister in referring to the International Development Association is, I think, referring to one of the lesser international financial organizations established for the support of under-developed countries. I am sure the hon. the Minister has seen this booklet. If he looks at it he will find that it cannot contribute the amount of money that is needed for the self-government plans of the Government for the Transkei. It distributes only very small amounts for road building and water work projects. Of course, I think the hon. the Minister knows these facts very well but the general public may be confused by the somewhat similar names of essentially differing international financial bodies. It is very easy to confuse the International Monetary Fund, the International Bank, the Reconstruction and Development Fund, the International Finance Corporation and the International Development Association, particularly as these establishments are often referred to by their initials only, making confusion worse: i.e. the I.M.F., the I.B., the I.F.C. and the I.D.A. The 1960-1 annual report which I have here of the International Development Association mentioned by the hon. the Minister shows that the only investment in Africa in the 1960-1 year was in the Sudan for a dam on the Blue Nile to the tune of 13,000,000 United States dollars, that is about R9,000,000 at the current rate. Only three other countries received aid from the I.D.A., namely Honduras in Central America received R6,000,000; Chile R14,000,000 and India R42,000,000. These sums are certainly useful but they are not impressive and the aid if obviously proportioned to the size and operation of the country and thus India received 60,000,000 dollars to help 500,000,000 people. That works out at about 12 United States cents or 8½ South African cents per head of the population. So much I feel for the hon. the Minister’s statement. It was the hon. member for Transkeian Territories (Mr. Hughes) who stated that the population in the Transkei was clamouring for employment. It is known that there are 1,500,000 people in the Transkei but of these over 500,000—they are a large proportion of the wage-earners— work outside the Territory in order to earn a wage. It is an established fact that only modern industries could employ people of the numbers needing employment in the Transkei. The capital cost of an industrial establishment per worker is as Mr. F. P. Spooner says in his book “South African Predicament”—

It seems to me that it follows that the ten-year plan which we are told about concerning the amounts that are allocated in this present Budget, the ten-year plan during which period the people will also increase, will require something like R300,000,000 for the first ten years alone. Here we are told that it is going to be R140,000,000 for the first five year plan. We are told also by the hon. the Minister that a portion of the sum allocated last year was not spent, R7,500,000. It seems to me in this ten-year plan that the Government is offering R128,000,000 in ten years. And the puny sum that will be handed out by an organization which is a subsidiary of the World Bank, such as the International Development Association, should be viewed against these far more realistic requirements. The R300,000,000 would be required to develop only one territory. If this went further the funds required would run into thousands of millions of rand —far behond the capacity of any world bank to lend to any under-developed country.

I would like to refer here to a cutting from the London Times. I am sorry the hon. the Minister of Information is not here. For the information of the hon. Minister for Information I would like to inform him that the overseas London Times is a paper of standing and high repute, not only in Britain but it is read all over the Continent of Europe and in the U.S.A. Its articles are read with interest by a large body of public opinion in those countries. They mention aid proposals for under-developed countries and they say there is one danger—

That is something of which we shall have to be careful in raising any loan. There is, of course, the other point on which I should like to have the hon. the Minister’s opinion and it is this: Has the hon. the Minister considered that loans such as loans from the International Bank and the World Bank and its associates would bring with them an interference in the internal affairs of the Republic by the lender? Because the World Bank does not accept the backing of gold reserves for loans. No, Mr. Speaker, gold reserves are merely a security for currency but not for loans. So the lender country demands some say in the spending of the money that it lends. We know with the construction of the Kariba Dam in the Central African Federation experts from the World Bank went out there every few months to see that the money they were lending were being spent in the right way. They will be doing this also in South Africa. I think that is a point that must be considered by the Minister.

Mr. Speaker, if we are to be given for South Africa an expanding economy then we need much more foreign capital to be attracted to South Africa. I would like to join here with the hon. member for Kensington (Mr. Moore) and ask whether the hon. the Minister really believes that the policy which he is pursuing with shutting the door on foreign capital is going to attract foreign capital to South Africa? Because we ourselves know that in the past we have depended a great deal on this foreign capital. The Minister of Economic Affairs last year said, in reply to a question from the hon. member for Jeppes—

Regarding foreign capital two factors must be remembered. These two factors are: That the capital which is provided here in South Africa for the development of our industry and our mining all came from overseas, very nearly all came from overseas. While the success through capital investment within South Africa was remarkable, hon. members should not forget that practically as much capital money has been lost in the market here as has been successful. The riches of this country are to a great extent the results of the investment of foreign capital. We should be grateful for the foreign capital which has been sent in and we should never grudge the investors a penny. It seems to me that if we wish to pursue our economic development, if we wish to have car plants, if we wish to have car factories in Port Elizabeth, if we wish to have three oil refineries, if we wish to have the development of our gold mines—and the hon. the Minister knows that it costs R20,000,000 to finance one single gold mine whose life is only 30 years—if we wish to have these things, we as a young developing country must be ready for foreign capital to come in and help us develop it. It is for this Government to attract capital by offering favourable interest rates and competing with the rest of the world for the capital which there is on the market to-day. It seems to me that the hon. the Minister and hon. members have all been caught up in the web spun by the Nationalist Government. Because we have a great country with a great economic future and we have a strong belief in its tremendous potentialities, and also in the inherent goodwill and common sense of the majority of South Africans. But I feel that hon. members opposite must not neglect the interests of South Africa for the sake of party machine dictation. The least that can be expected from representatives on the Government side is that they should use all their influence to ease the financial burden on the taxpayer and to safeguard the future of a truly independent South Africa.

Mr. Speaker, to be honest, having listened for the past half an hour to the hon. member for Johannesburg (North) (Mrs. Weiss) I feel so discouraged that I am tempted to throw in the towel in this struggle in this country. It is really a long time since I have heard such a message of doom as the one we have just heard from the hon. member. The hon. member for Johannesburg (North) complains about all the dangers which are threatening us as a result of the policy of this Government. I think it is easy merely to say that dangers are threatening as a result of the policies of a Government without being specific and saying precisely what those dangers are and exactly which policies are endangering the future of this country. I think that when members of the Opposition again talk about policies in the future, it would be just as well if they told us which policies were endangering our future. It is easy to make accusations without stating your grounds for making them. It is easy and convenient when one member has referred to policies which are creating dangers, simply to repeat what he has said without anybody telling us to which policies they object. If the Opposition say that this Government is following a policy which is endangering the future of our country and the people, I want them to tell us whether they are referring to the policy which this Government is following to try to ensure that White civilization will continue to exist in this fair country of ours. They should tell us whether they are against the policy of this Government which is aimed at meting out justice and fair treatment to all sections of the community in this fair fatherland of ours, a policy which, while ensuring the continued existence of the White nation at this southern-most tip of Africa, ensures at the same time that justice will be done to the non-White sections of our population.