May I make an announcement in connection with the business after the recess? On Monday the 9th when we again assemble, the afternoon will, as has already been decided, be devoted to the discussion of private members’ motions and the motion which will then be dealt with will be the motion of Mr. Froneman. We will not sit on that Monday evening.

On Tuesday the 10th we will continue with legislation and on Wednesday the 11th we will go into Committee on the Estimates of Expenditure and deal with the Vote of the Prime Minister. As far as the Estimates are concerned, we will dispose of the Votes as far as possible in the order in which they appear in the Estimates.

Mr. Speaker, this is the third opportunity this year which Parliament has had of criticizing the finances of the country and of the Government. On the first two occasions, namely when the motion of No-Confidence and the little Budget, were under discussion, there was not even a vestige of criticism, and it was so marked that it excited a certain amount of comment. I think that comment has now stung the Opposition into some kind of action. They have felt that now at any rate they cannot allow the third opportunity to pass by without saying something, whatever it may be, about the finances of the country. But unfortunately for the Opposition criticism of this Budget (which was well received, if not commended in all responsible quarters) is not so easy. In addition the Opposition has said here that they are not questioning the major cause of the rise in expenditure, namely the Defence Vote. The priorities are apparently not disputed and that restricts the field of their criticism very markedly. They will now have to criticize how the short-fall of R51,000,000 has to be met, and then they remark generally upon the “weak spots” of the economy, and they complain that there is no stimulus to the economy in this Budget. That is more or less the pattern of the criticism in this debate.

Now I take the first point that they have made here. They said, this taxation of approximately R36,000,000 was really not necessary at all. The amount required, they say, could be met either by switching to loans or by deficit budgeting. There was a little disagreement as far as the second point is concerned. One hon. member suggested that we could afford to budget for a deficit because the Minister of Defence is not going to spend all. We can gamble on that. The hon. member for Jeppes (Dr. Cronjé) said; that, we could gamble on a 10 per cent rise in the net national income. Now in fact, of this shortfall of R51,000,000, we are already meeting 30 per cent out of Loan Expenditure which normally would have been met out of Revenue —that is the R5,000,000 which we are now retaining in the Revenue Account instead of transferring it into Loan Account as is the usual practice, and then the R10,000,000 in respect of Bantu Administration which we are now writing into the Loan Account. So only 70 per cent of this short-fall of R51,000,000 has to be met by taxation. And now they come with their suggestion that more of this —not only 30 per cent, but more—should be transferred to Loan Account, or we should now enter the field of deficit budgeting. Well, Sir, as far as the latter is concerned, whatever chance you take, whatever gamble you are prepared to make, the effect is the same. I am afraid that it is going to have an effect on the confidence of overseas financiers in the stability of the country if we were at this stage to embark on deficit budgeting. I say “at this stage”, because while I have always said that we should follow a policy of flexibility as far as our fiscal and monetary policies are concerned, there are naturally limits, and the circumstances must determine what those limits are. At the present stage the danger is this that inflationary pressures are likely to come about if the prospects of an upswing in our economy, as is very probable, comes about during the next 12 months. Then that, plus the fact that we have a very liquid position at present, of about R1,600,000, would bring about inflationary pressures which we would have great difficulty in overcoming and which would tend to reduce the confidence of financiers overseas in our own position. And remember what effect any inflationary pressures would have on the gold-mines for instance! If hon. members take those factors into consideration, they will see that it is a very real danger in the existing circumstances to contemplate any deficit budgeting. The hon. member for Jeppes has said that I can speculate on a 10 per cent rise in the national income. That is a very high rise. I notice that West Germany, which is at the top of the table (between 1952 and 1960) has had an average rise of only 9.6 per cent per annum. The hon. gentleman wants me to speculate on a 10 per cent rise, when the Bureau for Economic Research in their forecast only predict a rise of 5 per cent! No, Sir, I am not prepared to take that gamble. An unbalanced national Budget, it has been said, is like pants without braces—you can’t keep them up for long.

Try a belt.

I do not want to take this gamble of the pants falling down. But the interesting part of this suggestion of the hon. member for Jeppes is that he wants me to speculate on a 10 per cent rise in the national income, and then he still, as gloomy as he is about the economy of the country, expects that we will be allright! I must take this gamble when he himself implies that such an increase will not be realized! But a further reason is that even if there is a marked upswing in our economy during the next 12 months, the revenue from income-tax for the coming financial year would not benefit from it. The revenue from income-tax is based mainly on the year ending on 30 June 1962 and even if there is a sharp upturn in the economy, as is quite probable, that will not be reflected in this year’s income. Therefore I say that in all these circumstances this suggestion is ill-founded. I am not prepared to gamble under these circumstances and go in for deficit budgeting when the circumstances are as they are to-day.

The next point at which hon. members directed their attack was that they overemphasized the slow rate of growth in our economy over the last number of years and by implication they almost suggested that was peculiar to South Africa, and that no other country had such a slow rate of growth in recent years. Added to that, they pointed the finger at the slow rise in our fixed capital investment and at our high liquidity. These are all points— admittedly weak points in our economy—which I mentioned in my Budget speech—they have not raised one weak point that I did not mention in the Budget speech. But the difference is this: They over-emphasized and over-stressed those unfavourable aspects of our economy and they did not say a word about all the “bright spots” in our economy as I did. They are not quite as pessimistic as they were last June. I must congratulate them, but I think they are still unreasonably gloomy. But I cannot and I do not think the country can take too much notice of their gloom when you look at their history of forecasting. The last occasion when we had any comments on our finances was in June of last year. This is what hon. gentlemen opposite said on that occasion about our finances. Hon. members will be able to judge at the end of this debate, when I will give a statement in connection with our immediate economic prospects, how far these gentlemen were accurate when they ran our economy down and cursed our finances by bell, book and candle in June 1961: This is what the hon. member for Constantia said on 20 June—

And now?—

And now? At that time the hon. member spoke about a possible debasement of our currency, devaluation and he said: “Do not believe the Minister of Finance if he tells you there is not going to be devaluation; he is bound to tell you that.” His whole speech was in the shadow of a possible debasement of our currency. He was not the only one. The hon. member for Pinetown (Mr. Hopewell) said—

That was the statement he made. I have already said that in both the private and the public sector capital has flowed to South Africa since June of last year.

The hon. member for Jeppes (Dr. Cronje) told me that he would not be here to-day, but that I was at liberty to say what I liked about his contribution. So I shall avail myself of the opportunity. He said—

And now? The hon. member for Hillbrow (Dr. Steenkamp), progressive as ever, was a little bit ahead of the Jeremiahs. He said—

The Leader of the Opposition said—

Had the hon. member referred to portfolio investors, and only those portfolio investors who are speculators, then there may have been some truth in his statement, but the capital that has remained here and that has flowed in from portfolio investors who are not merely speculators or tickey-snatchers, has been very substantial indeed. Listen to this oracle—

Those were the measures which I took in June in order to stop the outflow of this capital by reason of the repatriation of South African shares by South Africans. The measures which I took in that regard, he said, were not going to be successful, severe as they were! And now?

And now?

Hon. members are trying to wriggle out of this difficult position. I appreciate their difficulties. As I said at that time, our trouble at that time was not a general economic trouble, it was limited to the balance of payments problem. That was our problem. And those gentlemen said that we were on the brink of disaster! Let me say this, Sir, that Britain was also in balance of payments difficulties at that time, so was Australia, New Zealand. They also took measures. The hon. Leader of the Opposition knows what a success our measures have been in respect of our balance of payments position. Let me tell him that our reserves stand to-day at R324.7 million, the highest they have been, I think, for the past 11 years.

Why?

I heard the hon. member for Transkeian Territories (Mr. Hughes) speak last night, and I cannot blame him for asking me “why”? He does not understand, obviously. Let us see what the position was of England and what it is to-day. This is what they say about Britain’s position as at the 27th of this month—

They have yet to recover. We are through with flying colours. They say—

That is the balance of payments crisis—

The influential Financial Times says—

Compare that with the position in South Africa. I shall come back to this at a later stage in my speech. Those, Sir, were the prognostications of gentlemen who now again are so gloomy about what is going to happen. That is why I say that we really cannot take too much notice of these prognostications of hon. members opposite. Although they are not as pessimistic as they were last June, they are still fairly and unreasonably gloomy.

I mentioned those unfavourable aspects, such as unemployment particularly in certain sectors; the weakness of our liquidity position; the slow rate of growth which I thought ought to be higher, the slow rise in fixed capital investment. But I mentioned those things in their proper perspective and I also mentioned the compensatory and more than compensatory bright spots in our economy, as did the hon. Minister of Economic Affairs. But that total picture is distorted by presenting a one-sided picture as was done by the hon. members for Constantia, Port Elizabeth (South (Mr. Plewman), Pinetown (Mr. Hopewell) and Jeppes. I now want to deal with the slow growth: I said that I hoped we would be able to achieve a better growth in future. But what is the real answer to this slow growth in South Africa? An answer is given, Sir, in the report of the Bureau of Economic Research. There they give the rates of growth in respect of various countries, West Germany, the Netherlands, Italy, United Kingdom, South Africa and the United States. Australia, New Zealand and Canada. They ask this question—

Not these highly industrialized countries. They say this—

So although we would like our rate of growth to be higher—and we are doing everything to bring that about—I do not think there is anything alarming in the position when one considers that the terms of trade for countries who are not highly industrialized have turned unfavourable. The hon. member for Jeppes said yes, but one of our biggest exports which place us in a more favourable position was gold. The gold price has not fallen, it is true, but neither has it risen. Our terms of trade, the average price of our exports, including gold, fell over the period from 1952 to 1960 by 18 per cent. There was no rise, but in spite of the gold being here it could not maintain the export prices which prevailed in 1952 all through. All the other countries which are given by the Bureau of Economic Research in this table showing rates of growth higher than South Africa, except Italy, showed either an increase in the average prices of their exports or a much smaller decrease than South Africa. We must remember this too that the proportion of the population which is economically active is probably decreasing in South Africa. There is a greater proportion of children and old people; there is a larger proportion of non-White children at school, whereas in the United Kingdom, Germany and Netherlands the proportion appears to be increasing.

What does the Minister mean by a greater proportion of non-White children? Is that in comparison with White children?

There is a greater proportion now at school than there was a couple of years ago. The rise in real income per capita, therefore, under-states the rise in real production per worker, and a comparison of the rate of growth of real income per worker must therefore be more accurate and will also be more favourable to South Africa.

The next point was that there was sluggish ness in our private fixed investment. As far as that is concerned I think it is necessary that I should give the true figures, because wrong conclusions have been drawn, even by the hon. member for Constantia. I think it may be as well to give the correct figures. The gross domestic capital formation, including inventories—that is the figure quoted by them —decreased by about R70,000,000 in 1961 and on that their criticism was based. But fixed investment—that is capital formation excluding inventories—actually rose in the same period by R30,000,000. Fixed investment rose by R30,000,000 in 1961 and of this approximately R25,000,000 was in the private sector. Twenty million rand represented the increase in investment by manufacturing concerns, mainly machinery, plant and equipment. It is true, as hon. members have argued and as is supported by the Bureau’s figures on page 18, that as a percentage of national income, net private fixed investment is considerably lower than in the period from 1950 to 1956. And then, as though anticipating the argument which the hon. member for Jeppes used the Bureau goes on to say this—

And that was the one drawn by the hon. member for Jeppes—

It was as though they almost anticipated the argument used by the hon. member for Jeppes!—

They go on—

I can only remind hon. members of the very heavy investment which we had in the gold mines in the early 1950’s. Many of the industrial developments of more recent years have been in less capital-intensive industries, for example, in textiles and therefore they require less fixed investment. This was the argument on the sluggish growth, the sluggish rise in fixed capital investment. We would like it to go up. We are doing our best to bring that about, but the conclusion that because that rise has been sluggish, there has been stagnation, is the one conclusion which the Bureau of Economic Research says we should not come to!

The next point I want to refer to is the argument used particularly by the hon. member for Constantia. He made a direct statement. He said—

In other words, there is no stimulus for economic development in this Budget! But, Sir, if the hon. member had looked at the Argus of last night or the previous night, he would have seen in big banner lines on the front page “Big South African Defence Budget boosts Industry.” There was a long article under that which disclaimed the whole support of his criticism that there was nothing in the Budget to stimulate our economy. Let us examine this statement coming from the chief financial critic of the Opposition. Let us look first at the taxation measures. There is an extension of the investment allowances which is a direct incentive to increase economic activity. There is the concession to exporters, two forms of concessions, concessions which have already made the Financial Times in London comment that that was a matter which should also engage the attention of the Chancellor of the Exchequer! There is the local expenditure of the Department of Defence. In 1961-2 the local expenditure was R42,000,000. This year it is R65,000,000. In other words, there is an increase in local expenditure of R23,000,000 which must act, as the Argus has already said, as an incentive to local industry. There is also an additional amount for social pensions of R3,500,000 on which will stimulate consumption. The total expenditure on the revenue account is R74,000,000 more than in the main estimates of last year, but it is only necessary to extract taxation to the extent of R35,700,000. In other words, although the expenditure is very much greater, that difference between the expenditure and the amount extracted from the private sector, is available for stimulating industry and the economy as a whole.

But in this Budget there are also some very positive stimulants on Loan account. The new works which have been approved under the Public Works Vote are R15,600,000 in comparison with R11,600,000 last year. The new works for the Department of Water Affairs, apart from the Orange River scheme, is R11,000,000 this year compared with R7,000,000 last year. The Native Trust get R25,000,000 for 1962-3 as against an actual expenditure of a little over R12,000,000 in 1961-2. The Provinces get an additional amount of R5,600,000 on loans, particularly for schools and hospitals, which will stimulate the building trade. They get R5,600,000 more than they had last year. That is the stimulus. They also get an additional amount of R5,000,000 in subsidies. I can go on to the Department of Community Development. They get R5,500,000 this year as compared with R4,000,000 last year. But in addition there is the accelerated national road programme which has been approved by the Government which will also entail a large expenditure of R31,000,000 in 1962-3 as against R19,000,000 in 1961-2.

If one looks at these things—and I do not suggest that this list is exhaustive—even the items which I have mentioned have already been yielding results, and that shows that the criticism of the hon. member that there is nothing in this Budget to stimulate the economy is just complete and arrant nonsense.

Having disposed of the two main lines of criticism, I want to come to points which have nothing to do directly with the economy of the country, but points of a financial nature that were raised in the course of this debate. The hon. member for Kensington (Mr. Moore) said that the “blocked rand” loan encouraged capital to leave the country in contrast to our previous strenuous efforts to attract capital. He referred particularly to inducements given to the American South African Investment Corporation.

That is another example.

Yes, that is another example. He said the terms of this loan, this “blocked rand” loan, were so very, very favourable. But in almost the same breath he asked me to make them still more favourable! Where they are now non-transferable he asked me to make them transferable! I must say I have a little difficulty in understanding the logic of complaining that the terms are too favourable and at the same time suggesting that they should be made still more favourable. Let me say at once that the comparison with the American South African Investment Corporation is very misleading. The difficulty with ordinary portfolio investment in South Africa is that foreign investors can sell their shares to South Africans and in that way take capital out of the country. But the shares of the American South African Investment Corporation cannot be held by South African residents, so the ordinary danger attaching to portfolio investments in South Africa does not apply in their case. If other persons are prepared to come with schemes on the same basis, they will also be considered. The hon. member asked whether there have been any others to whom facilities were granted. There have been no others, because there have been no applications. But if any similar scheme which does not expose our balance of payments position to a sudden withdrawal of capital, as in the case of ordinary portfolio investment is put before us, it will be very sympathetically considered. We do not wish to encourage the foreign investor to withdraw his capital as the hon. member has said, but we do feel an obligation to the foreign investor to relax controls as far as possible, and that is the genesis of these schemes. I hope that many overseas investors here, portfolio investors, will not in fact withdraw their capital altogether, but that they will re-invest in South Africa. The terms of the loan are indeed favourable. What the hon. member forgets is that these holders of “blocked rand” are under present conditions already entitled to invest in Government stock with a maturity of five years or more. The only difference now is that he can get his capital back in five annual instalments at 5 per cent, instead of all at once after five years at 5.⅞ per cent.

He still gets the bonus, the difference in the exchange.

He will get that same bonus if he invests in the ordinary Government stock. In both cases he gets it. He can now invest in any Government stock with a maturity of longer than five years. What we are now doing is to create a special stock and there he can get his capital back at the rate of 20 per cent every year, instead of waiting for five years for the whole amount, but he gets a lesser interest than he would get if he were prepared to wait five years. So this is not such a very great point.

Will you tell me what is your objection to allowing blocked rands to become transferable—for non-residents?

That comes under the scheme for relaxation which I am going to deal with now. The hon. member has asked me for details of this scheme. He put a lot of questions. He asked how the Reserve Bank would buy in London? He did not say in so many words that they would send over their president to go and buy there, but he suggested something like that! He asked whether the Market Securities tax would be payable? I am always very thankful for this solicitude for the Treasury on the part of hon. members. I think it was a welcome sign and if hon. members are so solicitous about the payment of this tax, it is a point which we shall certainly look into. But this scheme still has to be worked out. All these points and many more are being considered. What I said in my Budget speech made this very clear. I said that “further details would be announced in due course. The total amount of such orders accepted will be limited, and the limit will be fixed by the Treasury from time to time in accordance with the position of the balance of payments and the state and trend of the Johannesburg Share Market”. The hon. member’s suggestions, although they are not entirely novel, will all be borne in mind when we come to decide on the final form.

The hon. member also suggested that the “blocked rand” be made transferable. The same suggestion was made by the hon. member for Pinetown (Mr. Hopewell), who added that the Reserve Bank should be allowed to buy “blocked rand” as the balance of payments permitted. Now, the mere transferability of “blocked rand” would be of much less value to foreign investors than the scheme which is proposed in this Budget. I can only refer the hon. member to the article by “Lombard” in the latest edition of the London Financial Times. If the Reserve Bank were to buy the “blocked rand” it would be lending an official colour to an unofficial exchange rate. There are many countries, particularly in South America, where they have three or four rates, but we do not want to encourage having more than one official rate.

Then the hon. member for Jeppes (Dr. Cronje) made the suggestion that overseas investors should be allowed to use “blocked rand” for fixed investment. Now, Sir, that is admirable. It is also a thing which we are contemplating, but the difficulty is this, that if you do allow it it would give the favoured investor, this man who either gets the “blocked rand” here by buying shares in London and selling them here—then he would have a 20 per cent advantage over his competitor who is already in South Africa. So, although the object is laudable, I think it would result in an injustice to the South African manufacturer who is already here, whether foreign or local. It would not be quite fair to him.

*The hon. member for Paarl (Mr. W. C. Malan) suggested that “blocked rand” be made available to tourists. We know that even in Holland this cannot be done. If you are an American who has shares in Phillips and you sell them on the Amsterdam market, you cannot utilize the proceeds to pay your hotel account or to purchase bulbs. You have first of all to convert that money at the bank. There is little difference between the two rates at the moment but this does not necessarily mean that there will always be this little difference. However, if we agree to this, it will have the same effect as that which I mentioned just now. It will establish a second nonofficial rate of exchange and this will bring about a considerable and uncontrolled loss in foreign currency. Our problem is to make these concessions, but in such a way that we can always see what their effect is. We do not wish to make concessions the effects of which we cannot determine. The two schemes which we have have this advantage that we will always know precisely the effect which this has on our balance of payments.

When a scheme of this nature is introduced, is it not advisable to give details of it in the Budget speech?

No, with respect, I do not think so. I do not think the Budget speech is intended for that. The Budget speech gives the wide, general principles and when they have to be further worked out it is done separately. If all these details, not only on this matter but on all other matters, were given, the task of delivering a Budget speech would become superhuman, and it would tax the patience of hon. members much more than under the present system.

The hon. member for Port Elizabeth (South) (Mr. Plewman) said that the Treasury was controlling the Reserve Bank, and he linked that with the Governor’s statement in his annual address that the increases in the Bank’s interest rates in 1961 were “more a case of following or acquiescing in the current trend than giving a lead”. Let me tell the hon. member that the relationship between the Treasury and the Reserve Bank is very good indeed. The Treasury realizes its functions there and we have not had, and I hope we will never have, the difficulty which they had in Canada where the Central Bank is entirely State-owned and all the shares are held by the Government, but in spite of that they have had trouble. Our relations have always been very harmonious and we have both worked in the interest of South Africa, and we have not refrained from consultation whenever an important issue has had to be decided. But why the Governor of the Reserve Bank made that statement is this. The element of uncertainty and hesitancy in the economy in 1960-1 made lower rather than higher interest rates desirable from the domestic point of view, but the external position, the balance of payments at the time, exerted an upward pressure on interest rates to which the Bank eventually had to yield. But it would have been wrong to give a lead, in regard to the domestic economy, in raising rates. On the contrary, I think the Bank very properly resisted the upward trend, as the Governor said, as long as possible. In all this there was no disagreement with or dictation from the Government. On the contrary, there was the closest collaboration.

*The hon. member for Pretoria (Central) (Mr. van den Heever) asked that the income barrier to old age pensions should be reviewed. I think that he has a point there but this is not a matter for the Treasury; it is a matter for the Department of Pensions and I hope that they have taken note of what he has said.

He also asked that the Reserve Bank or the Treasury should have a say over rates of interest not only of banking institutions but also of other institutions, and I think that he referred particularly to building societies and other deposit-receiving institutions; and that they should be linked up under the provisions of the Banking Act so that there can be control over them because otherwise the policy of the Reserve Bank and of the Government may be frustrated. This is a matter which I have referred to a committee, a departmental committee of the Treasury and of the Reserve Bank, and I am now awaiting their recommendations. However, this is one of the matters which will be considered.

The hon. member for Johannesburg (North) (Mrs. Weiss) asked why there should be decreases in education, bursaries and grants. On the contrary, there are considerable increases. There is an extra R1.5 million on the Education, Arts and Science Vote, apart from the additional subsidies to the provinces.

Then she also referred to I.D.A.—not the lady, but the International Development Association—and said she didn’t think we could have very much help from it because it only lent small amounts and only for road and water projects. But I would remind the hon. member that I.D.A. was started only about two years ago and it is still feeling its way. It will probably lend larger amounts in future and take a more active part in the development of undeveloped countries than it is doing up to the present, and it will also spread its help over a much wider variety of projects, as the hon. member has suggested.

She also said that the loans from the International Bank of Reconstruction and Development and from I.D.A. bring supervision and suggested that might have a deterrent effect on South Africa obtaining any loans there. I can only say that we, i.e. the Government and Escom, have already had about ten loans from the World Bank and we have not found the supervision onerous so far. In fact, the relations have been excellent. We have not found that there is anything which indicated an attempt to interfere in our domestic affairs.

The hon. member for Houghton (Mrs. Suzman) raised the question of the gold mines and said that apart from concessions to the deep-level mines, no concessions had been made to encourage the gold-mining industry to explore further fields and to mine medium-grade ore. I would remind the hon. member that the formula tax itself is encouragement for the mining of low-grade ore, since no tax is payable until the profits exceed 6 per cent. That, by itself, is an assistance to the mining of low-grade ore, because they do not pay any tax if the profits are under 6 per cent. But the formula tax is also lower now than it was in 1947. This Government has lowered the formula tax. As regards exploration and prospecting, a concession was granted in 1958 allowing a producing mine to deduct from its income, expenditure incurred in connection with exploration and prospecting in new areas. So the hon. member is not quite fair in saying that no concessions have been made, apart from the deeper-level mines, to encourage the mining industry to explore new fields or to mine medium-grade ore.

*The hon. member for Paarl (Mr. W. C. Malan) asked in connection with export concessions that these should also be made applicable to the fruit industry. I take it that his argument is that any concession which is given in respect of income tax will not assist the Fruit Board because it is not a profit-making nor a tax-paying institution. The canning industry can be assisted in this way, but the idea is that under the other scheme which I mentioned, for which we have set aside the amount of R500,000—the manner in which this will be disbursed will be determined later— this will also be of application to the fruit industry. The details have still to be worked out but the intention is to cover all exports and the point which the hon. member mentioned will be borne in mind.

The hon. member for South Coast (Mr. D. E. Mitchell) complained that agriculture was scantily treated in the Budget speech. I am sorry the hon. member is not here, because I would have liked to remind him that the Budget speech is not the whole Budget. It must necessarily be brief and deal with principles. The Budget speech should in all circumstances be read together with the printed Estimates. If you want to see whether any particular sector of the economy has been neglected or not, it is no use looking only at the Budget speech. For instance, I had very little to say in the speech itself about commerce and health and the mines, and probably about a number of other things as well; but if I take agriculture and I refer to the Budget, the hon. member will see that the Department of the Minister of Agricultural Technical Services gets an amount of over R18,000,000 and the Department of the Minister of Agricultural Economics and Marketing has over R36,000,000 on the Budget. These are certainly not scanty provisions. I think the hon. member—it is rather characteristic of him—is never more vehement than when he is wrong, and he was particularly vehement on this point!

The hon. member for Durban (Point) (Mr. Raw)—and I am glad to see that he is here— as usual spoke ab fib on many subjects. Apparently he subscribes to the philosophy of Oscar Wilde that nothing succeeds like excess. [Laughter.] He is gradually acquiring a reputation for unreliability and inaccuracy which I am sure is not the envy of any other member of this House.

The hon. member says the expenditure on social services has dropped from 44.3 per cent to 40.1 per cent, a drop of 4.2 per cent, and he refers to the diagram in the White Paper. I interected at the time when he spoke that he did not understand, and I think I must now try to make him understand. It is quite true, but the absolute amount has increased from R186,000,000 in 1952-3 to R324,000,000 in 1962-3, an increase of R138,000,000, or 74 per cent. The decline in the percentage on that diagram is principally due to increases in expenditure on national security and economic services. I want to ask the hon. member whether he disagrees with those expenditures on economic services and defence?

Don’t try to get out of it that way.

The hon. member is under the illusion that the Social Services in the diagram in the White Paper reflected only social pensions, because he duly proceeded to hang his whole argument on the position of the poor social pensioner. The figures given by the Minister of Pensions, which I do not want to repeat, show the generous increase that has been made to our social pensioners over the years since 1948 when the maximum pension was only R120, whereas it has now gone up to R294; far in excess of the rise in the cost of living. Even this last year the benefit to social pensioners was about 6½ per cent. But I want to give the hon. member this figure. In 1960-1 the social pensions and maintenance and family allowances were 7.18 per cent of the total expenditure on the Estimates. That is not all social services. The hon. member does not realize what falls under that. This is social pensions and maintenance grants and family allowances. Last year they were 7.18 per cent of the total expenditure on the Estimates. But what were they in the year when the party of the hon. member was in power? The last year, 1947-8, they were only 4.1 per cent of the total Estimates. The hon. member therefore sees that it is much better not to venture where angels fear to tread!

The hon. member for Rondebosch (Sir de Villiers Graaff) also made one of his incursions, one of his unhappy incursions, into the field of finance, as I showed when he intervened in June last year. He says I grabbed back the savings levy due this year for an increase in the tax.

You did not listen carefully. What I said was that you paid back a certain amount and seized back roughly 80 cents out of every rand.

The hon. member said at the time that this savings levy —we were going to grab it at some time or other, and now here it is! We grabbed back 80 cents of every rand that was due for repayment. There was R18.6 million repayable under the savings levy and we took R14.2 million. That was his argument. But unfortunately the argument would have been much more accurate if the hon. member had also pointed out to the House that it would not have been necessary to take back a single cent if it were not for the fact that we had given a discount to both personal income tax payers and companies in the last two years. If it had not been for that 10 per cent discount to personal income tax payers and the 3 per cent in the case of companies, it would not have been necessary to take back a single cent! So that is the half-truth which the hon. member would not have told, I think, if he were to have consulted his brother. That is not the right type of thing to say. If you want to talk about economics you must give the whole picture, and not do it half-way.

The hon. member also asked why the International Development Association—or he suggested that they could be asked for funds for the development of the reserves. Have I got the hon. member correct this time? You either suggested that we should ask the I.D.A. to help in the development of the reserves or …

I did not mention it by name. I said there were institutions overseas which could be asked for assistance.

I thought you mentioned the I.D.A. That is one of the possibilities; but unfortunately they were not prepared to write into their constitution, the agreement, any help to a country which was itself not economically under-developed in respect of certain regions which were underdeveloped. That they were not prepared to do, but they did go so far as to make it wide enough to provide assistance, e.g. for the Protectorates. They would then give the assistance to Britain, which is not under-developed, and Britain would use it for the development of the Protectorates. The most I could do, was to peg a claim for us that when these reserves become constitutionally in the same position vis-à-vis South Africa as the Protectorates are to Britain, then we would be in a position to approach them.

Then you would have to start reporting to UN, no doubt.

Well, I do not know whether Britain sends reports to UN on the Protectorates.

Of course she does.

If that is a condition for the assistance, then certainly we would have to consider it very carefully.

I do not know whether it is a condition for the assistance.

Anyway, at the moment there is no question of it at all. It may be a matter for discussion later when the position has changed. But it is no use, as the hon. member has done in another respect, supported by the hon. member for Germiston (District) (Mr. Tucker), to make a statement when we do not know what the future constitution will be. I refer to the statement he made in regard to Article 73. I will not deal with that now, although I will probably deal with it later. The point is that at the moment there is nothing on which we can go either way, because we do not know what the constitution is.

But surely the Transkei will be a territory developing towards independence.

When the hon. member gets the constitution, he can bring his strictures to bear. But the only thing I can ask is, if all this is true, why should the hon. member take this opportunity to bring it to the attention of people who are prepared at UN to gang up against South Africa? Why should he do this when there are other ways? If he wants to warn the Government, is this the proper way to do it? In whose interest is it? For whose benefit is it? I can imagine that those who are ganging up against South Africa at the United Nations would not take it amiss that the hon. member raised the point here. But I say again in whose interest is it to raise it? If he wants to raise it in the interest of South Africa, then surely there is another way of doing it.

Yes, here.

The hon. member can criticize the Budget as much as he likes—this has nothing to do with the Budget —but if he wants to warn the Government he can do so personally or he can write a letter if he would like it on record.

What is Parliament for?

No, I say that is irresponsible action. If the hon. member were to consider it more calmly I think he would find out …

On a point of order, is the hon. member for Ventersdorp (Mr. Greyling) entitled to use the word – saboteur — as he has just done now for the umpteenth time?

Did the hon. member use that word?

I did use the word but the sense in which I used it was this—I said “That is how our country is sabotaged.”

Order! The hon. member must withdraw the word “saboteur”.

I withdraw it.

The hon. the Leader of the Opposition also said that these unprovoked threats of aggression would not have been made if we had still been in the Commonwealth. But the hon. member forgets that our gravest threat is from a member of the Commonwealth.

Which one?

The gravest threat of an army of liberation comes from a member of the Commonwealth. Let me also remind the hon. member that while we were still in the Commonwealth, it was Commonwealth countries who took the lead in declaring economic war against South Africa. While we were still the fellow-member of those countries they did not hesitate to declare economic war on us. But the hon. member says that we would have been safe if only we had been in the Commonwealth!

When last has there been a war between members of the Commonwealth?

I can only say of the hon. the Leader of the Opposition: O sancta simplicitas!

*I have received complaints to the effect that the trade is abusing the increases in duty particularly in respect of liquor and paperbacked books by introducing further price increases over and above the additional duties. There is no objection to a small additional price margin. Indeed, the duty on liquor was calculated in such a way as to enable the trade to make a little more, but to my sorrow I must say that it is alleged that the price increases are far higher than the increases in duty warrant. I want therefore to direct a word of warning to the trade. If the prices concerned are not lowered to a satisfactory level, the complaints which I have received will have to be investigated. If no justification is found for the higher prices, the government will not hesitate to enforce reasonable prices through the medium of price control.

I have been saved the necessity of going into a detailed appreciation of our military position. It has been very fully canvassed by the Minister of Defence, by the Leader of the Opposition and by the Prime Minister. They all agree that there are three possible directions from which South Africa may be attacked. There is full agreement in that regard. The hon. the Leader of the Opposition has also stated that he approves of the Defence expenditure and that in regard to the second of the possible threats, that is to say, unprovoked aggression from some kind of “army of liberation,” they would be prepared to stand with us. We say on this side of the House—and I hope they will agree with us— that in view of these possibilities we have to be as strong and vigilant as possible in all these cases. But as far as unprovoked aggression is concerned, we must be so strong as to deter any unprovoked aggression by any so-called “army of liberation”. It is a potential danger, but it is a danger that will become real if no steps are taken. We have an example in a country like Israel surrounded by enemies. What has safeguarded Israel against aggression is the fact that she is, and is known to be, armed to the teeth. She is well-prepared; that has been the deterrent and that, I think, is also what we should have. We should be fully prepared for all eventualities, but actually so strong that it will deter any likely aggressor who wants to invade South Africa under the guise of an “army of liberation”. I know— and I am glad that we have not heard too much of it here—that one can overstate or understate a threat of aggression of this nature. The five foolish virgins took the risk of understating the danger in which they were, with disastrous results. The Government prefers— and I hope the Opposition agrees with us—to take their stand with the wise virgins who had oil in their lamps when darkness befell them. This view of ours that I have mentioned now, has the backing of four ex-Chiefs of Staff, of our own General Staff, and of General de Guingand—that one must rather be on the safe side, that one must rather over-estimate than underestimate the danger.

Now that the Opposition has declared itself in favour of this expenditure on Defence, I trust that we have heard the last of the suggestion that this danger is imaginary, that it has merely been blown up for ulterior motives, with the corollary, of course, that because it is imaginary, we need not be on our guard. I hope that after the stand the Opposition has taken, we have now heard the last of that story. Sir, vigilance is not fear. To have a sense of danger is not the same as being panicstricken or being hysterical. If you have this sense of danger, it merely results in preparedness at all times against every eventuality, and that is what we are striving for. The present Budget provision is a modest distribution—and certainly not the last and the greatest—that we pay as a premium for our policy of peace and to ward off this unprovoked aggression. Our contribution now only amounts to under 12 per cent of our total expenditure. The hon. member for Ceres (Mr. Muller) and the hon. the Leader of the Opposition have mentioned the percentages which are spent on Defence by other countries: The United States over 50 per cent, Britain almost 24 per cent, Canada over 30 per cent, Australia 23 per cent, I think. They are all spending this money on Defence in spite of their policies. But in the world in which we are living these countries —and we too will have to follow suit—are learning to live with crises. That is the only way in which they can be safe.

There is one point that I want to deal with here. Hon. members have said that we are in this danger because of our policy. They say that our policy has lost us friends. I do not want to go into the question as to how far they are correct in their interpretation of who are “friends,” because the hon. the Prime Minister has dealt with that, but I want to say that even on the basis of the Opposition’s interpretation of who are “friends,” the very interesting question arises: What is the relation between “friends”, in the sense in which they use the word, and policies? In this regard one is struck by a few things. We know what the policies of India are; we know of her policy of aggression as far as Goa is concerned. We know that policy is not acceptable to Great Britain, but in the sense in which the Opposition uses the term, Britain in spite of a policy which she abhors, is still “friends” with India. What is the position in regard to Ghana? We know that her domestic policies are anathema to Great Britain, that Britain not only deplores them but has no words in which to describe her feelings about them, but yet in the sense in which the Opposition uses the word, they are still “friends” of Great Britain. The question that I pose to myself is what is the relation between policies and “friends”, in the sense in which the hon. the Leader of the Opposition uses the term? I think if one asks oneself why Ghana’s policy has not lost her her “friends” and why India’s policy has not lost her any “friends”, in the sense in which the Leader of the Opposition uses the word, then the answer is that it is not the merits of the policy which determines friendship in the sense in which hon. members opposite use the word, but it is what are the demands of the Afro-Asian countries. When you have a global strategy based on the principle that it is more important to placate the Afro-Asian countries, to appease them, than to keep your old friends, and you are prepared to placate them whatever their domestic policies are, then I say in fact the attitude of these countries to any other country is determined not by the merits of the policy of that other country, but they are determined by the demands of the Afro-Asian countries. As long as those Afro-Asian countries are not satisfied, they must be appeased and placated. If their own policies are not what one expects them to be or what one would like them to be, that does not make any difference; but when it is another country, then the test is not the merits of the policy of that country, whether it is Ghana or South Africa, whether it is the policy of the United Party or the policy of the Government; in all cases the determining factor will be what is the attitude of the African countries towards that policy. It may be as bad as it possibly can be, as long as they are satisfied with it, then there will be “friendship”; but it may be as good as we can make it, if they do not like it, then in terms of the present arrangement it seems to me that does not affect the question at all.

I appreciate very much that the Opposition has supported the expenditure on Defence; that they have said that they will stand with us to resist aggression. But now I want to ask them why spoil this decision, why soil this gesture by belittling South Africa’s value to the West —her value economically, politically, strategically and technologically? What is the sense of belittling it? What is the sense of proclaiming that this additional expenditure for which my colleague is asking is only necessary for internal peace? What is the sense of that? If they are prepared to agree to it, why make this qualification which can only detract from the value of their decision? Why should they stress our isolation and lack of “friends,” in the sense in which they use the word? In whose interest is it? I am afraid they are in effect tarnishing the lustre of their patriotism by adopting an attitude of this kind. I do not know in whose interests it is but it would be interesting to find that out.

*I want to conclude. The whole basis of our economy is confidence. That is what we need; it is what the whole world needs. The Opposition complains about the lack of confidence by investors; that the Government is doing nothing to restore that confidence or to win it. After this debate of four days’ duration I want to ask what the Opposition and its Press have done to strengthen the confidence in South Africa’s economic future? Take the contributions to this debate. I challenge anyone to tell me in what respect the Opposition have made a contribution towards strengthening and increasing confidence in South Africa’s economy? Their contributions continually breathe the spirit of a lack of confidence in our economy, a spirit of a lack of confidence in our ability to obtain foreign loans; a lack of confidence regarding the aims of our Defence expenditure. This is what the Opposition is doing and this is what their press is doing outside.

I would like briefly to summarize what this Government is doing to reaffirm and strengthen confidence in the economic future of South Africa. In the first place there is the Orange River scheme which is a great act of faith, a step which you cannot take if you do not have confidence and faith in South Africa. This scheme, including Escom, entails in the first phase up to 1968, an expenditure of R125,000,000. Then there is Iscor. Once again the Government is prepared to expand Iscor because it has confidence in the economic future of South Africa. The expansion in the case of Escom up to 1970 will entail an expenditure of R320,000,000. In the case of Sasol the anticipated expenditure up to 1970 will be R60,000,000 plus a further R16,000,000 for raw materials for an artificial rubber factory in South Africa. These are not signs that the Government is afraid for the future. In the case of Foscor the expansion up to 1962-3 will cost a further R3.3 million and in the case of the Industrial Development Corporation the expansion up to 1972 will entail a further expenditure of R60,000,000. Here we have a total expenditure in excess of R1,300,000,000 within the next six or eight years. This is what the Government is doing to demonstrate its confidence in the economic future of South Africa. Fortunately, however, it does not stand alone. What is private enterprise doing to reveal that confidence in South Africa? Caltex is to spend R22,000,000 on a refinery here in Cape Town; the Railways will spend R8,000,000 on harbour facilities in this connection. In the case of the artificial rubber factory which I mentioned, private enterprise is to invest R9,000,000 in it. This is over and above the investment of Sasol. Take the motor industry—the great expansion in connection with the manufacture of spare parts. We know of the great industrialist from England who is here now and who brought an investment of R1,500,000,000 to this country. Then there is the chemical industry, the expansion of artificial fertilizer production as well as of paper and chlorine; there is also the carbon-black undertaking which recently came into production. These are all tremendous expansions which are being undertaken here by private enterprise. In the textile industry great expansion is being planned in accordance with the aim of the Government in regard to import replacements. The investment in the next ten years in the private sector will probably amount to more than R50,000,000. In the mining industry there is the possibility of a great investment in the copper deposits of Phalaborwa. The figure which the hon. the Minister of Economic Affairs gave here the other day is also interesting. The Import Control Committee for new industries approved of the following new undertakings in 1961: First quarter, 32; second quarter, 40; third quarter, 59 and fourth quarter, 70, a total of 201 new undertakings approved by this Import Control Committee. The hon. the Minister pointed out that 40 per cent of the capital was foreign capital. And then hon. members on the other side complain that we cannot obtain capital from abroad!

However, the strengthening of confidence in the economy of South Africa is also given expression to in the foreign loans which we have already obtained both in the private sector and in the public sector. I have already mentioned the Rand Selection’s 30,000.000 dollars and T.D.C.’s 5,000,000 dollars, as well as the loans of the Government. In connection with government loans I would just like to say that there are very good prospects for the further renewal of existing loans and the obtaining of new loans abroad. This is the degree of confidence that there is. That confidence is being strengthened not only by our careful economic policy, not only by the fact that we are not prepared to gamble lightly with our finances and to take chances, but also as a result of the fact that we have fulfilled our financial obligations towards the outside world promptly throughout, to this extent that many of the commitments are redeemed even before due date. There is, for example, this R13,500,000 revolving credit which we did not have to repay but which we did repay; then there is the redemption of our gold withdrawal of R27,000,000 which has not yet fallen due. Foreign investors are also enabled at the earliest opportunity to repatriate blocked funds partially.

There are a few examples of what the Government is prepared to do. These schemes which I have mentioned here are a picture of the measure of the confidence of the Government in the economic future of the country. This is a prospect for an economically-strong nation which has plans, which has confidence and which also generates confidence. It is not sufficient to have self-confidence, but if you do have it there is a far bigger opportunity to create confidence from outside. Mr. Speaker, on the barrier dyke which has now transformed part of the Zuidersee into fertile soil, stand the words: “’n Volk dat leeft, bouwt aan zyn toekomst” (a nation which lives builds its future). That is what this nation and this Government are prepared to do. We ask and we call upon the people to build up their future together with us. However, you cannot build up a future if you have not even made the necessary study. That is what they had to do in Holland; they first had to make the necessary study and frame the necessary plans to tame the sea. After this followed the work to give effect to those plans and eventually it was the confidence which these people had, the people who framed the plans and who did the work, in the future of their country and in their own ability, in their own energy. This glimpse into the future which I have painted —and it is not in the distant future; it is only up to about 1968-70—this glimpse into the future is something which we can, if we want to, change into history. We can cause it to become reality and we can cause it to become history. But then I want to say that if we want to make this image a reality, if we want to make it history, then we have no place for prophets of doom, for people in our midst who are weak-kneed. Then we do not have time—and we do not need them—for all the doubters and the hesitators who cannot make up their minds as to whether they wish to participate in this tremendous development which is before us or not. No, we only have room for the practical idealists and for the ideal realists, for people who love their country, people who have confidence in their nation, people who wish to build up their own future with confidence.

Debate resumed.

Question put: That all the words after “That”, proposed to be omitted, stand part of the motion.

Upon which the House divided:

AYES—83: Bekker, M. J. H.; Bezuidenhout, G. P. C.; Bootha, L. J. C.; Botha, H. J.; Botha, S. P.; Cloete, J. H.; Coertze, L. I.; Coetzee, P. J.; Cruywagen, W. A.; de Villiers, J. D.; Dönges, T. E.; du Plessis, H. R. H.; Fouché, J. J. (Sr.); Frank, S.; Froneman, G. F. van L.; Greyling, J. C.; Grobler, M. S. F.; Hertzog, A.; Heystek, J.; Hiemstra, E. C. A.; Jonker, A. H.; Jurgens, J. C.; Knobel, G. J.; Kotze, G. P.; Kotzé, S. F.; Loots, J. J.; Louw, E. H.; Malan, A. I.; Malan, W. C.; Marais, J. A.; Marais, P. S.; Maree, G. de K.; Maree, W. A.; Martins, H. E.; Meyer, T.; Mostert, D. J. J.; Mulder, C. P.; Muller, S. L.; Nel, J. A. F.; Nel, M. D. C. de W.; Niemand, F. J.; Otto, J. C.; Potgieter, D. J.; Potgieter, J. E.; Rall, J. J.; Rall, J. W.; Sadie, N. C. van R.; Schlebusch, J. A.; Schoeman, B. J.; Schoonbee, J. F.; Smit, H. H.; Stander, A. H.; Steyn, F. S.; Steyn, J. H.; Treurnicht, N. F.; Uys, D. C. H.; van den Berg, G. P.; van den Berg, M. J.; van den Heever, D. J. G.; van der Merwe, J. A.; van der Merwe, P. S.; van der Spuy, J. P.; van der Walt, B. J.; van der Wath, J. G. H.; van Eeden, F. J.; van Niekerk, G. L. H.; van Niekerk, M. C.; van Rensburg, M. C. G. J.; van Staden, J. W.; van Wyk, G. H.; van Wyk, H. J.; van Zyl, J. J. B.; Venter, M. J. de la R.; Venter, W. L. D. M.; Verwoerd, H. F.; Viljoen, M.; Visse, J. H.; von Moltke, J. von S.; Vosloo, A. H.; Waring, F. W.; Webster, A.

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

NOES—38: Barnett, C.; Basson, J. A. L.; Basson, J. D. du P.; Bloomberg, A.; Bowker, T. B.; Connan, J. M.; de Kock, H. C.; Dodds, P. R.; Durrant, R. B.; Field, A. N.; Gay, L. C.; Gorshel, A.; Graaff, de V.; Henwood, B. H.; Hickman, T.; Higgerty, J. W.; le Roux, G. S. P.; Lewis, H.; Malan, E. G.; Mitchell, M. L.; Moore, P. A.; Plewman, R. P.; Raw, W. V.; Ross, D. G.; Russell, J. H.; Steenkamp, L. S.; Steyn, S. J. M.; Streicher, D. M.; Suzman, H.; Swart, H. G.; Taurog, L. B.; Thompson, J. O. N.; Timoney, H. M.; van der Byl, P.; Waterson, S. F.; Weiss, U. M.

Tellers: H. J. Bronkhorst and T. G. Hughes.

Question affirmed and the amendment dropped.

Motion accordingly agreed to.