Mr. Speaker, there was a keynote to the hon. the Minister’s Budget speech—to give direction and impetus to the national drive for a more prosperous South Africa. I believe that for this objective to have significance, there are a number of prerequisites—the removal of uncertainty from the economy, the restoration of confidence and the closing of the psychological barrier that is stultifying economic growth. But when considered, Press comment on the Budget—I am not talking about first-flush comment—centres around such headlines as “the ‘Yes, but’ Budget”, “the ‘No-event’ Budget”, “much ado about nothing”, “the ‘Camouflage’ Budget”, the Budget that offers hope but without conviction”, “Labour concessions little more than a myth”, “Dr. D.’s gamble”, then clearly these prerequisites have not been met. And when yesterday, Sir, we read “Bring Jan Haak terug” … [Interjections.] If what Rapport says is correct, then one of the most influential sectors of our business community has told the Government exactly what it thinks of the Budget. It uses King Henry VIII’s “words, no deeds”. The grand design that we were told by the hon. the Minister to wait for in the Budget, has just not materialized. The Budget speech contributes little that is clear-cut and explicit to a properly motivated forward economic surge. Of course, there is much that it acknowledges: It acknowledges that the economic, monetary and fiscal policies of the Government have been wrong; it acknowledges that Government policies have been the basic cause of the down-turn in the economy; it acknowledges that the policies of the Opposition have been right; it acknowledges that the economy can no longer tolerate the illusions of this Government; and it acknowledges a need for a retreat from apartheid.

There are indications in the Budget that at long last the Government is coming in from out of the dark, but only by a few faltering steps. Proposed modifications to policy are so hedged in by “ifs” and “buts” that they fail to give the direction and impetus for a more prosperous South Africa that the hon. the Minister is looking for. All one sees is that the Government, economically tightly caught in its own whirlpool, is ineffectively splashing around, achieving attention more than giving stimulus. I therefore move the following amendment—

1. (a) adequately to reduce the high tax burden;
2. (b) to remove the numerous Government controls retarding economic growth or to provide South Africa with a bold, dynamic, clear-cut plan for sustained optimum economic development; and
3. (c) to make adequate provision for the welfare, prosperity and security of our people.”.

If you study the Budget, and particularly the figures, and you study the statistical survey that accompanies the Budget, the urgent need for a comprehensive blue print for the economy is very obvious, because what do these figures indicate? The average annual growth rate in real terms increased during 1971 by only 3,7 per cent, compared with 4,8 per cent for 1970 and 5,3 per cent for the five years from 1966 to 1971. This figure is even less than the 4 per cent given by the hon. the Minister and far less than the target figure for the average development wanted by the economic development programme. The real gross domestic product on a per capita basis, which some gentlemen on the other side had quite a lot to say about when we discussed this matter previously, rose by only 1 per cent. This compares with an increase of 2,1 per cent for 1970 and 2,6 per cent for the five years from 1966 to 1971. The seasonally adjusted consumer price index rose by 7 per cent during 1971, compared with an increase of 4,2 per cent the previous year. These are the figures that are given on page 24 of the statistical statement. They indicate the changes which took place between December, 1970, and December, 1971. During that period the increase was 7 per cent. The hon. the Minister in this somewhat smoke screen of a Budget gave a figure of 5,7 per cent for this increase. This, of course, is the average increase for 1971 over the average increase for 1970. It is a lower figure, but not of much interest to anybody.

The balance of payments account sustained a record deficit of R1 005 million, compared with R843 million during the previous year, and, as we all know, there was a sharp drop in our gold and foreign exchange reserves. For the tax year 1971-’72 there is a deficit of R130,7 million compared with the original estimate. I gave the figure of R91 million when I last spoke on this matter, but to that figure I have to add R39,7 million, transferred back from Loan Account to Revenue Account. What is interesting, Sir, is that the deficit took place despite the imposition of additional taxes last year, amounting to no less than R152 million—not loan levies, but taxes. If the hon. the Minister had drawn up his 1972-’73 Budget on a comparable basis to that on which he drew up his 1971-’72 Budget, he would have budgeted for a revenue deficit not of R137,3 million, but for a deficit of R242,9 million, because we have to add to the hon. the Minister’s figure the transfer of transfer duties of R45 million, loan levies which have been done away with, and the income tax which is substituted to the extent of 2½ per cent on company tax, amounting to R14,5 million, and 5 per cent on individual taxes, amounting to R46,1 million. These amounts last year went to the credit of the Loan Account; they will now go to Revenue Account, because the hon. the Minister has to bolster up his revenue. What is significant is that this deficit budgeting is not being done as a result of a reduction in taxation or of a larger than usual increase in the rate of Government spending. In fact, it is just the contrary; there is an overall increase in taxation and a substantial decrease in the rate of Government spending, and we still have this enormous deficit. Here you have the picture of the state of the economy; here are the real reasons for the tighter import control and for devaluation, and it is no good hon. gentlemen on the other side blaming all this on events overseas. These events might have been contributory, but certainly nothing more than that. Sir, the hon. the Minister admitted in the Other Place that the past year had been one of the most difficult years in recent times. This is certainly borne out by the Budget, where he has had to rely heavily on his reserves. He has reduced his 1971-’72 deficit on Revenue Account by using the full balance of accumulated surpluses on this account amounting to R72,5 million, and by then transferring R39,7 million back from Loan Account to Revenue Account. To balance his 1972-73 Revenue Account he has transferred income that previously went to Loan Account, as I said, over to Revenue Account, to the extent of R105,6 million, and he has taken R140 million from the balance of R 160,1 million that he still has in his Stabilization Account. Where do we end up, Mr. Speaker? He will have a small balance of R2,7 million on his Revenue Account, but his Stabilization Account will have been reduced to R21,5 million. Our cupboard is almost bare. What is interesting is that these moves from Loan Account to Revenue Account are a complete reversal of what we have had in previous budgets, a complete change in policy. Before we used to transfer from revenue to capital, and now we are transferring from capital to revenue.

The hon. the Minister obviously misread the economic signs. He was not prepared to accept that there was going to be, or was, a down-turn in the economy and he would not accept that his income would as a result be less than his estimates. He castigated, with bell, book and candle, everybody who differed from him, but it took his own Budget to bring home to the Minister the real state of the economy, because it is there in the Budget for all to see. His strategy for 1972-73 has got to be within the framework of what happened in 1971-72. One would have thought that the hon. the Minister was in the best position to assess the financial implications for 1972-73 and what 1972-73 was going to bring. After all, he has the full machinery of the State at his disposal; he has close contacts with informed opinion abroad, but he tells us that he does not know what the position is going to be for 1972-73. He tells us that he finds it difficult to estimate revenue because of the uncertainties involved. He has difficulty in estimating customs, excise and sales duties, so he pitches his Estimates the same as in 1971-72. He tells us that inland revenue is equally difficult to estimate, so he plans an increase of 7 per cent above the 1971-72 figure, but because he is completely unsure of his own figure, he immediately covers himself and says, “Perhaps I am erring slightly on the conservative side.” Mr. Speaker, the hon. the Minister misjudged the economic events of 1971-72. He is uncertain of the pattern of events for 1972-73, so he has decided on a gamble, and he is aided and abetted by the hon. the Minister of Transport and the hon. the Minister of Posts and Telegraphs. He, like the hon. the Minister of Railways, has committed all his reserves in the hope that he can bring about an upturn in the economy. He has got a good base to work from; we grant him that; he has tightened import control and he has devalued, but it is his subsequent moves which are all-important. Any real hope of a vigorous programme to promote the growth of the economy faded immediately with the hon. the Minister’s preamble to his own Budget speech, because what did he say? He wanted the highest growth rate compatible with our available resources—and the hon. the Minister’s ideas of available resources and ours are entirely different—and “within the particular social and economic structure of the South African community”. Mr. Speaker, it is this very restrictive Nationalist thinking that has held back our industrial development over the years. It is the point of view that provides the background to what the hon. the Minister calls his programme of action. Let us take a look at this programme of action. The credit ceilings of the banks have been raised by some R140 million. This, I am told, merely gives legal recognition to the existing position. Most of the banks are already so much above ceiling that the R140 million really means very little. We want to see, as does the hon. the Minister, as quickly as possible the change-over to the use of variable liquid assets and cash reserve requirements. On interest rates the hon. the Minister has panicked. This return to the controls that we had in 1955-’56 and during the gentlemen’s agreement, so-called, between the banks and the building societies and the Reserve Bank during 1969 and 1970 is again going to cause distortions in the capital market. It will be the death-knell of participation bonds and will give a fillip to the grey market.

Sir, the hon. the Minister has also left a number of important questions unanswered. If there is a serious decline in funds flowing to participation bonds, what will be the position of existing bonds if the present participants seek more remunerative investments for their funds, which in the main are for a three-year term, and withdraw them from these participation bonds? What will happen to the existing bonds? Where will the funds come from in future to finance industrial and flat building? Thirdly, in the over-all context of the Budget, does the hon. the Minister believe that the re-imposition of fixed interest rates is a good thing? Surely the stimulation of the economy and the pegging of interest rates are a very strange mix. We share the hon. the Minister’s concern that adequate funds should be available for the building societies so that homes can be built for our people, but we have said before, and I say again, that we believe that the correct way to deal with the matter is to allow interest paid on mortgage bonds on homes to be tax-deductible. If that should happen, then perhaps we could even tolerate a slight increase in building society rates, because at least the interest will come off tax.

Foreign borrowing by private firms has been eased, but it is still subject to control, and in any case the hon. the Minister knows that the recommendations he has made have actually been in operation since August of last year.

The home owners’ saving scheme we welcome, particularly since I recommended it to the hon. the Minister of Community Development on the 16th August, 1970. To refresh his memory, I refer him to Hansard, Volume 30, col. 4318. Hon. gentlemen opposite will remember the challenge I made to them to point out one single good thing in this Budget that has not been asked for by this side of the House. We are going to listen very carefully to hear what they say. With regard to this home ownership scheme, we would, however, like to see it wider-based so as to include higher income groups and somewhat more costly homes.

On wages and price control and import control the hon. the Minister really contributes very little. He is as elusive as ever. We still have no clarity on these issues, but we canvassed them very fully in earlier debates, and no doubt other members will again deal with them in this debate.

Then we have the suspension of building control and we welcome this. Of course, Sir, the shortage of building work on offer at present has just about suspended building control itself, and this is an indication of the economic state of the country. Nevertheless, we welcome it, because the formal suspension of building control will remove certain uncertainties that exist at present. We would, of course, have liked to see the control not suspended but abolished. This Government has a fixation about control. It believes that only the Government, and certainly not the private sector, should make the decisions; with what results we know only too well.

I now come to those major economic areas where the private sector hoped for sufficiently forceful action by the Government to show beyond any shadow of doubt that the Government was determined to stimulate the economy, subject to one very important condition: at the same time containing inflation within acceptable limits. Let us make it quite clear, Mr. Speaker; it is no good stimulating the economy unless you are going to be able to control inflation. Existing policies have led to a contraction in the economy developing, coupled with a steady rise in the rate of inflation. The targets of the economic development programme are not being met. Serious structural imbalances appear from time to time in the economy and the policy of curtailing consumption instead of increasing production has inhibited growth, has failed to provide maximum job opportunities and has brought about uncertainty and loss of confidence.

There were a number of essential issues which required to be changed. We needed, first of all, a sharp cut in Government expenditure. In this connection the hon. the Minister has done well. His cut-back is not only substantial but, equally important, he has learnt that a cut-back can be achieved. We needed a more realistic approach to industrial decentralization. The government believed that it could follow a policy of the big stick and of the carrot, and legislate to make things difficult for the industrialist in the existing complexes and at the same time offer him substantial inducements to move to the border areas or to the homelands. But what the Government failed to see was that unless you had a thriving and expanding economy in the established metropolitan areas, the private sector did not have the means nor did it have the will to venture into new industrial undertakings in the border areas or in the homelands. The Government also forgot, and it has to learn, that a slow-down in the economy means a drop in the income of the fiscus itself, and that in turn means the curtailment in homeland development.

Our policy has always been quite simple, i.e. develop the fast growing metropolitan economy and then, as the F.C.I. put it, use the spin-off from the urban areas to establish industries in the decentralized areas, and with it use White capital and White know-how and get away from all these clichés with which we have lived during the past few years.

As Raubenheimer wants to do in South-West Africa now.

The major essential policy change that is required if we want to avoid excessive inflation, is an acceptable policy of greater labour utilization. You have to couple it with a vigorous training and re-training programme and you have to have a maximum intake of immigrants. The hon. the Minister has now included a labour policy in his programme of action. He offered concessions in the use of additional Bantu labour to permit, he said, greater use of unutilized productive capacity. He will consider an increase in the labour ratio of Bantu to Whites of 2,5 to one in Pretoria and the Witwatersrand-Vereeniging complex on the following basis: It would apply only to existing industries; it would be on a selective basis; it would apply only to multiple shifts; among other factos—and he does not specify the other factors—the availability of housing and transport would be taken into consideration. Sir, these so-called concessions in regard to labour mean very little to urban industry. There is still to be control at every turn. The Physical Planning Act is to remain unchanged. Job reservation stays. It is hardly a dynamic policy to give encouragement to the private sector; and there still remains the statement of the hon. the Minister of Transport, and I quote what he said—

Sir, no employer is going into business with a sword hanging over his head, and this is the crisp point in the whole policy. The sword will still remain over the heads of employers. There is also the fact that a multiple shift requires more White supervisory labour. Where is this labour going to come from? If any existing unused capacity is taken up, the White labour shortage is going to be worse than it ever was before. So, where are we going to get the labour to supervise multi-shifts? Is it going to come from immigration? It is true that the hon. the Minister did say that extracting the maximum benefit from immigration to strengthen our skilled labour force is called for. It is quite right; we go along with the hon. the Minister. What does my friend the hon. the Minister of Immigration say on this issue? This is what he said—

Hear, hear!

Maybe “hear, hear”, but if you want immigrants these are two seriously impeding factors towards immigration. We would like to know what the policy of the Government is. Is it the policy of the hon. the Minister of Finance or is it the policy of the hon. the Minister of Immigration? They differed before; we know that. There is a difference of approach. We believe that we should encourage the maximum number of suitable immigrants that we can get. And “suitable” has very little to do with religion or language—as long as they are honest and decent, hard-working people.

If the hon. the Minister had really known what his labour policy was going to do to the economy, then he could have been certain about his own Budget, but he did not know, and nobody knows. Everybody interprets it in a different way. The hon. the Minister himself does not know where this policy is going to take him.

A further need is the active development of an export policy based on an expanding home market and meaningful exporting incentives. The hon. the Minister has increased the exporting incentives quite considerably. But I find that they are complicated and that they are not generally understood by the business community. I think the hon. the Minister will agree that in the past they have not had a great impact on stimulating our exports. We would prefer to see a simple and easily-understood straight tax concessions on export profits, perhaps something along the lines of the American DISC (Domestic International Sales Corporation). There 50 per cent of export profits that are retained by an export company—that is if they are not distributed—can be free of tax. This is a meaningful something to a man who wants to export: knowing that he is going to save 50 per cent on his tax.

One of the main issues requiring change, of course, is the pattern of taxation. We have said it ad nauseam from this side of the House and the business community has done the same. We believe that the objective has got to be to reward work and investment and not to penalize it. The small additional concession given by the hon. the Minister to married working women accepts this principle but unfortunately it does too little to implement it. We would have liked to have seen a much more positive approach to the working married women. Unfortunately the hon. the Minister has evidently been influenced by his reading of Shakespeare. He has therefore now decided “neither a borrower nor a lender be”. This, of course, only applies to the taxpayer. Instead of borrowing from the taxpayers as he did in the past, he is now going to take it from them. This is the sum total of the hon. the Minister’s tax recommendations. Of course, he does not follow the philosophy of neither borrower nor lender be when it comes to his overall Budget. There he prefers to follow the philosophy of one Artimus Ward, who said—

The hon. the Minister is trying to induce the public to believe that a change from the loan levy to income tax surcharges will leave everybody better off. Everybody is going to be better off. But the hon. the Minister knows that this is not the case. In future, instead of an investment in an interest-bearing, tax-free, repayable loan, all the taxpayer will have for his money is an income tax receipt. That is the difference. The marginal rate of tax and loan levy comes down from 78 per cent to 72 per cent. But what has happened to the marginal rate of tax, forgetting the loan levy? The marginal rate of taxation has now gone up from 66 per cent to 72 per cent. That is the tax rate. What did the Franzsen Commission say? They said that the maximum should be 60 per cent. The hon. the Minister does strange things; he listens to a commission one day, but he changes his mind and does the opposite the next day. We are now not paying a marginal rate of 66 per cent, but a marginal rate of 72 per cent. The changes that the hon. the Minister has suggested are not going to help productivity very much, nor are they going to increase the incentive for people to work. The barrier to production still remains. We believe that we can plan for growth with limited inflation. We would have done away with loan levies but would not have increased taxation. We have faith in our ability to run the economy of this country.

I have now dealt in some detail with the hon. the Minister’s programme of action, trying to analyse it in order to see what it really means and trying to see what it might do for the economy. The hon. the Minister does not tell us what his Budget is going to do for the economy. He describes it as a growth Budget, but what are his growth targets? Nowhere in this Budget does the hon. the Minister indicate what his growth targets in either real terms or in monetary terms are going to be. Nowhere in this Budget does he tell us what he thinks the rate of inflation for 1972 is going to be. It is all part of the concept of real growth. He is going to pump anything from R400 million and more into the economy by using his reserves, by raising the bank ceilings and by heavy foreign borrowing, but his Budget concessions do not provide much stimulus. There is a small flow-back to individuals of R33 million, companies get an injection of R12 million, married women are better off by R300 000, but there is nothing this year from the export allowance.

The investment allowance is merely a continuation of the position as it exists at the moment. The new deal for building society shares is confirmation of what is already taking place. The change in the hire-purchase conditions does not represent an injection into the economy of any kind. Social and civil concessions amount to a mere R13,3 million, and from sales tax to a low R4,5 million—at last we have got rid of soap and some other things. These are far too little. There is little encouragement to saving. When you lower interest rates and fix them, what inducement is this for people to save? The policies of labour, import control, prices, etc., are not specific enough to remove the uncertainty that exists and are all inflationary; so that all in all there is a general call for growth in this Budget, but it is hopelessly insufficiently backed with specifics.

We go along with Assocom that the underlying aims of the Budget are welcome, but the Budget consists of aims and aims only. There are no effective deeds. Nevertheless, because of the impact of tighter import control and of devaluation, we shall probably see an improvement in the balance of payments during this year. We might even better the low 3,7 per cent growth rate we had in 1971. If the United States and United Kingdom stock exchanges continue to boom, we may find the spillover in our Stock Exchange, which might also improve, but because the major barriers to productivity remain, we are likely to have an unsatisfactory high rate of inflation for the year. There is one thing we cannot ignore. We cannot ignore the three Budgets presented by the three hon. Ministers, because their estimates of income were pessimistic enough.

The three hon. Ministers concerned, in terms of their Budgets, saw minimal growth for South Africa for 1972-’73 because they saw large deficits. The interesting thing is, of course, that at the Third Reading of the Railway debate the hon. the Minister, apparently under instruction, decided to change his tone. He then talked about the improvement in the economy, and was followed by the other Ministers. However, the factual figures are there before us. There have been three deficits in the three Budgets for 1972-’73. The year 1972-’73 will go down in our economic history as the year of the gamble, the gamble on growth, the gamble based on shifting sands. The end result of this Budget is likely to be inadequate growth, a high rate of inflation, more burdens for the people and a return to the disastrous square one. The philosophy of that side of the House is very clear and the hon. the Minister expounded it. He said that he believed that “sweet are the uses of adversity”. We do not. We believe in planning to avoid adversity. To avoid a tragedy of errors.

Mr. Speaker, I have listened to many speeches by the hon. member for Parktown during past years, but never before did I have reason to pity him in my heart so much as this afternoon. Never before did he speak to such an unresponsive gallery on his side of the House as was the case this afternoon. Only once did he succeed in getting any reaction and that was when he mentioned the name of Mr. Jan Haak in connection with a very unfortunate report that appeared in a Sunday newspaper yesterday. I grant him that this was indeed a blow far below the belt. Mr. Speaker, hon. members on that side of the House also have their troubles from time to time with their Press. The Sunday Times, for instance, seems to have sensed what the hon. member for Parktown was going to say. As a matter of fact, I have the impression that they had insight into his amendment because they replied in advance to what he was going to say. In an article by Prof. Silke, the well-known speaker on Budgets, I read the following. I refer to the first part of the hon. member’s motion which reads as follows—

This is what Prof. Silke had to say on this point—

Then he goes on to give this comparison—

Now compare our tax of R142 with Great Britain’s R288. The next figure he gives is for an income of R4 000. In South Africa the tax is R329 and in Great Britain R740. In spite of this the hon. member talks about the high tax burden in South Africa. I do not blame his side of the House for giving him so little support and showing so little reaction, because in all the years I have been sitting in this House, I have listened to fifteen Budget speeches by Ministers of Finance on this side of the House. Many of these speeches were indeed great speeches—but perhaps the greatest of them all is the one delivered by the hon. the Minister of Finance 12 days ago. I tried to figure out for myself why this was so and I could come only to one conclusion, namely that the Minister did so extremely well because he remained true to himself and true to his financial and economic philosophy. Most of all, he remained true to the solid National political philosophy of striving to promote the greatest good for the most of our people in line with the time-honoured slogan of the National Party “South Africa first.” In essence the Minister heeded the advice given to Shakespeare’s Hamlet “To thine own self be true, for it must follow as the night the day thou canst not then be false to any man.” Of course, the Minister could not satisfy everybody; as a matter of fact, nobody could have done that. Even I have some doubts about the wisdom of certain aspects of this otherwise admirable Budget. As a doctrinaire economist I feel it a pity, for example, that the Minister has found it necessary to impose interest rate control again. I believe that this sort of control usually turns out to be self-defeating. I sincerely hope that the Minister will find it possible to lift this control soon. But who am I to criticize? Hardly ever before has a Budget been greeted with so much popular acclaim than this one. Spokesmen for commerce, industry, labour, the financial Press, the banking community, and others—all acclaim this Budget as a wise and sound one. Have I said “all”? No, there is one exception, namely the body of men and women opposite. They have not acclaimed it as a sound Budget. But if I look into their eyes I seem to detect there the wish “that we were in a position rather to defend this excellent Budget than to criticize it”. It is no wonder, therefore, that the hon. member for Parktown made it the object of a challenge 12 days ago and repeated it again this afternoon, when he said the following: “Let any member on that side of the House, when he enters this debate show me one single thing the Minister has done this afternoon which is beneficial and which has not been offered by this side of the House, by industry, commerce and by every knowledgeable economist in this country. Now that is a challenge. We shall wait for the answer.” Mr. Speaker, I take up that challenge. How perfectly naive a man can become ! Numerous hon. members on that side of the House have from time to time asked just about everything under the sun. The hon. member for Parktown is perfectly correct. Those beneficial things done by the hon. the Minister in this Budget have been asked somewhere by someone in the Opposition.

But let us consider what would have been the state of our finances had the hon. the Minister acceded to all their requests. First of all, let us look at their hardy annual: to curtail official spending. Let us forget about what they have been asking during previous sessions and let us look only at what they have been asking during the current session. The hon. member for South Coast asked this year that a new Ministry be instituted. We know quite well that it would cost a few million rand. I think it was the hon. member for Albany who asked for the appointment of many more agricultural extension officers, which would also cost quite a lot of money.

Are you against it?

Of course I am not against it. But let me come to the point I want to make. Members opposite continually want the Government to curtail State expenditure, but at the same time they indulge in the politically popular pastime of asking for new services. When these are granted, they claim for themselves the credit for those beneficial things. Mr. Speaker, does this not remind you of Shakespeare’s words—

Let us turn to another popular request of theirs, namely increasing social pensions. But never did they dream, in the days when they were in power, to increase pensions to such an extent as in this Budget. In their time they paid only R10 social pension a month. Their R10 of 1948 inflated by applicable price indices would be worth R21 today. But I will be generous. I will add another R4 for good measure, in consideration of the high standard of living we all have today under this Government. Their R10 of 1948 is therefore worth R25 today. Now compare this R25 with our pension, which has been increased in this Budget to R41 per month. If the applicant deferred his application for five years, it will be R51 per month, compared with their R25. The hon. member for Parktown claims the credit for this good thing for his party. This just shows how ridiculous a man can become when he is blinded by the desert sands of 24 years in Opposition.

But answer the challenge.

Let us consider another popular theme of hon. members opposite, a very special theme of the hon. member for Parktown himself. For many years, when the economy was booming, the Opposition accused the Government of overtaxing the taxpayer. Only last year the hon. member for Parktown criticized the Government for overtaxing the taxpayers to the tune of R400 million. He furthermore censured the Government for using R180 million of our Stabilization Account to finance the Loan Account. This afternoon he censured the Government for using another R140 million out of the Stabilization Fund to balance its books. Mr. Speaker, if the hon. the Minister had heeded the advice of the hon. member for Parktown, he would have left that R180 million in the Stabilization Account and he would have found the money by means of loans. If he had done so, if he had found that R180 million through loans at 8½ per cent, the current rate of interest, the additional interest burden which we would have had to pay this year, would have been R15,3 million, and this would have had to be defrayed from revenue. If this Government had done what the Opposition had asked for all these years, namely, if it had not during the years of economic prosperity financed part of the Loan Account by surpluses on the Revenue Account, the interest burden would have been excessive now—perhaps double the amount of R209 million which we have to find this year.

*This, Sir, brings me to the conclusion that we would have been in a very critical situation if we had taken the advice of that side. Now I ask you, Sir: How hollow does that challenge by the hon. member for Parktown not sound now? I have a further charge, Sir, and it is a charge against the hon. member for Parktown and against the Opposition in general. I have frequently referred to the political responsibility we desire from the Opposition. Prior to 1969 they advocated, in season and out, the elimination of the so-called tax bulge. I did not find any fault with that; on occasion I advocated it myself. But in 1969 when the hon. the Minister did in fact proceed to eliminate this tax bulge, what was the reaction of the hon. member for Parktown? He then called it a “champagne budget for the upper income groups” (Hansard, Vol. 26, col. 3550). For years they had been advocating the elimination of that bulge, but the moment the Minister did that, they called it a “champagne budget” for the rich. Two years later, when the hon. the Minister was again obliged to make greater demands on the upper income groups, the hon. member for Parktown commented as follows (Hansard. Vol. 33, col 4229)—

Where have you ever seen a better example of a dualistic onslaught, Sir? Would the Opposition not, for a change, tell us unequivocally where we stand with them in respect of higher taxation for the upper income groups? Last year and this year it has asked for a drastic decrease of the taxation on these upper income groups. If the hon. the Minister should heed that request next year, are they not going to speak again of a “champagne budget for the upper income groups”? Please, let us for a change have a little responsibility from hon. members opposite.

Let us consider another popular, well-known and irresponsible assertion which the Opposition has with a considerable degree of success inflated to tremendous proportions, i.e. the steadily increasing cost of living which is supposedly bearing down so heavily on the poor man. I concede, Sir, that we are ourselves concerned about this considerable increase in the cost of living index, for it is a considerable one. But why does the Opposition always omit to mention the fact that the income of our people is increasing far more rapidly than the cost of living? I know the hon. member has often spoken of the expectation which a man has that his standard of living must rise, but just look at what happened during the past two years. According to the latest quarterly report of the Reserve Bank, which we have just received, we see that the average level of salaries and wages during the first nine months of 1971 was 10,1 per cent higher than during the same period in 1970. During 1970 salaries and wages increased by 9,9 per cent. Now compare this with the increase in the cost of living. In 1970 the cost of living increased by 4,2 per cent, while salaries and wages increased by 9,9 per cent. In 1971 the cost of living increased by 5,7 per cent, and salaries and wages by 10,1 per cent. What do hon. members opposite want to achieve with such a distorted, incomplete statement of the economic situation? Do they want to catch a few votes in that way? Possibly, although I doubt whether Oudtshoorn would acknowledge that they are right. Look how irresponsible this is. A dissatisfied worker is most certainly not an effective and productive worker. Throughout the business world the complaint these days is in fact that labour has become unproductive. Therefore I now want to make a serious appeal to hon. members of the Opposition, namely: Have done with this creation of a dissatisfaction psychosis among the workers of our country; for the sake of a few grievance votes you are destroying the prosperity of us all.

Sir, unfortunately my time is running out and I still have quite good deal to say; I must therefore make haste. I have already said frequently that there is only one effective remedy against this rapid increase in the cost living and against inflation, and it is that we should all examine our own conscience, that we should all work a little harder without demanding higher salaries. The hon. the Leader of the Opposition has often challenged me to indicate who those people are who are not working hard enough. Of course he wants to use this again, or misuse it, but I want to repeat: All of us, including he and I, can do no better than to examine our own conscience and work a little harder for the same salary. If we did that, we would keep this excessive increase in the cost of living index in check.

In the last few minutes at my disposal I should like to address myself to the hon. the Minister of Finance. During the past two years one unalterable economic fact has emerged very clearly again during the world-wide economic recession, which is that countries whose exports consist chiefly of agricultural produce and raw materials are hit the hardest in such a recession. With our predominant exports of agricultural produce and raw materials, metals and minerals, we cannot escape such a situation. Consider how the prices of these products —wool, fruit, diamonds, platinum, copper, antimony, etc.—have dropped during the past two years. Not only did this have a very prejudicial effect on our balance of payments, it also had a very prejudicial effect on our internal liquidity; it also made the task of the Minister of Finance an impossible one; it caused State revenue to drop sharply and forced the hon. the Minister to levy higher taxes at precisely the same time that tax relief was imperative to breath new life into a flagging economy. And now, Mr. Speaker, what of the future? Let us learn from this lesson which we have learnt during the past two years— and this has to a large extent been applied by this Government during the past two years and in previous years, despite the onslaughts which have continually been made on us by the other side—and this is that when our economy is flourishing, we must put away far more for the evil days to come. We did in fact build up a Stabilization Fund of more than R300 million—almost R400 Million—during those years, but let us learn from this experience of the past two years and let us build up our Stabilization Fund in the good years which again lie ahead—and please note, Mr. Speaker, there are good years ahead again for this country—to a much higher level than before so that when we again experience a time of recession in the world trade, as we have experienced during the past two years, we will not need to levy higher taxes when our internal liquidity drops and when the State revenue decreases. Sir, this is one of the points on which the Opposition have criticized us the most during the past few years. It has become a refrain from that side that we are taxing our people too heavily, but I find nothing wrong in our imposing heavy taxes at a time when the economy is flourishing. Let us, when everything is going well, put away enough for the evil day when we will need it.

Therefore I want to congratulate the hon. the Minister of Finance very sincerely this afternoon on this brilliant Budget which he introduced here 12 days ago. At the same time I want to congratulate him for having, in spite of the insistence of the other side that we should not overtax our people, continued in those prosperous years to put away this nest egg for the evil day. I just want to advocate to him that he should in future, in the prosperous years which lie ahead for us, put away an even greater nest egg. I have no doubt that a prosperous period lies ahead for us. When that prosperous period arrives—and it is imminent—will hon. members of the Opposition then give us the credit for it, as they are now blaming us for the worldwide recession which has had an effect on our country as well? Mr. Speaker, as far as I am concerned, I am convinced that there is nothing fundamentally wrong with the economy of this country and that the economy of this country, in spite of what the hon. member for Parktown suggested with reference to that report in yesterday’s Rapport, is in extremely capable hands.

Mr. Speaker, I doubt whether the hon. member for Paarl knew, when he rose and complained about a blow below the belt, whether he had been struck by a left hook or a right hook. Be it as it may, the hon. member was obviously nervous because he devoted most of his speech to critizing all the things the Opposition was supposed to have said in the past. As a matter of fact, I want to congratulate the hon. member on the amount of homework he did during the Easter week-end, because it seems to me that the hon. member made a careful study of the speeches of the Opposition. I do not want to deal with the hon. member’s speech any further, because there are quite a number of things I want to say to the hon. the Minister of Finance.

†I believe that the hon. the Minister of Finance did succeed to some extent in putting his critics in a quandary. His Budget has drawn various reactions from the pundits who write for the various financial journals, and it seemed at one stage that opinion between them was evenly divided. There were those who damned him with faint praise and there was the other school which praised him with faint damns.

We agreed very much with many things which the hon. the Minister of Finance said in his Budget speech. Many of his sentiments were unexceptionable from the financial and budgetary point of view. We admired the manner in which he has steadily drawn closer to the United Party and the advice and policies which it has advocated. In particular the hon. the Minister of Finance correctly identified three main weaknesses in the economy. These, he said, were the balance of payments, the low growth rate, and inflation. These are indeed the three features which this side of the House has stressed repeatedly in past years. He says, and we give him credit for his intentions, that it is the principal aim of the Government to remedy these three weaknesses. This also we welcome, but what we do not welcome is the timidity of action which is evinced when one reads his Budget carefully.

Of these three weaknesses low growth is without question the fundamental weakness in the South African economy. The other two, the deficit on a balance of payments and inflation, are to a large extent consequential on the low growth which we have experienced in recent years.

Let us take the balance of payments. This, surely, is in its simplest terms an insufficiency of exports and an excessive reliance on imports. Our merchandise imports went up by over R300 million last year, to R2 888 million. They went up by R300 million! Our exports, on the other hand, went up by only R60 million, to R1 481 million. This is a ratio of five to one a ratio in the figures of increase of trade of five times as many imports as of exports. This has produced a trade gap of R1 400 million. We have a balance of payments gap of over R1 000 million, yet it is in this situation, which has been growing and which has been identified by this side of the House for several years, that the Government has deliberately inhibited growth. I say it has deliberately inhibited growth because the hon. the Minister of Finance has in fact stood up in this House on various occasions and told us that that was his policy.

Let us take the other factor of the three, inflation. Fundamentally inflation is caused by a rising demand for scarce resources. Now it can be argued that inflation is mainly attributable to a cost-push situation or a demand-pull situation. But these things are irrelevant to the main cause. Cost-push and demand-pull are reciprocating mechanisms. The one feeds the other. The fact is that the growth of our gross domestic product has been only four per cent in the past year, while inflation has been 5,7 per cent. If it is argued, as has been argued from that side of the House, that it is growth which causes inflation, then how is it that we have now got to the stage where growth has dropped down to 4 per cent and inflation is still at 5,7 per cent? Sir, this contradiction proves two main things. It proves, firstly, that a high growth rate is not the real cause of inflation. A high growth rate is often accompanied by inflation, but it is not the high rate which causes inflation. In fact a high growth rate may conquer inflation. Sir, we have produced, deliberately, a state of stagnation, but still inflation continues. It now looks, and I think the Minister must begin to believe us, that the alleged cure of throttling back growth has been disastrously expensive.

This is a cure which we cannot afford. He has done grievous harm to the economy of the country. In spite of the punishment we have taken, deliberately imposed, the fever still continues to rage. Inflation is still current. Is there not something wrong in the reasoning, in the policy, in the philosophy which this hon. Minister has applied? Reliance on the wrong remedy has in fact compelled us to use many other undesirable medicines, undesirable suppressive drugs. We have import control; we have credit control; interest control; price control and we have had building control; fiscal control, through steadily rising taxes I may add. And we have had devaluation; that is a special magical medicine with very bad side-effects especially for pensioners and other people on fixed incomes. We have had all these controls, Government control after Government control, to remedy a situation which it has itself, by its own admission, created.

I said that devaluation and the gap in balance of payments are two of the weaknesses in our economy which the hon. the Minister has correctly identified. I have said though that these are side-effects of the main weakness, namely lack of growth. I should like to pause at the question of growth. I believe that the growth question is fundamental to the weakness in this economy and that we will not put the economy right until we have managed to put the growth right.

It is now acknowledged by the hon. the Minister that more growth is indeed necessary. He said that we originally found ourselves in the shallows and miseries— using a Shakespearean quotation—but he now suddenly declares very bravely that we should take the tide at the flood. Indeed, Sir, we should take the tide at the flood. But does the hon. the Minister take the tide at the flood? It seems to me that, if one analyses his Budget carefully, he has only paid lip service to the concept of taking the tide at the flood. In fact, very little has been done. The hon. the Minister has, I think, the best of intentions but I believe that he is crippled by the policies of the Government and that until the policies of the Government are changed it will be impossible for the Minister to escape from the strait jacket in which he finds himself.

Let us examine the growth needs of this country. We have in South Africa four main manufacturing areas. These areas are Pretoria-Witwatersrand-Vereeniging, Durban-Pinetown, Port Elizabeth-Uitenhage and the Cape. These are the four main areas in which growth and especially manufacturing growth in South Africa take place and can take place. These four areas alone are responsible for 80 per cent of all manufacturing output in South Africa, that is, 80 per cent of the total. This means in effect that they are responsible for 75 per cent of all secondary industries in South Africa. It is on secondary industry that we must rely for escape from our economic quandary in the next 20 years. Now, I have said 80 per cent. In 1967-’68 these four areas produced R2 000 million out of a total of R2 400 million of manufactured production. The economic development plan requires that manufacturing should grow at 6,6 per cent per annum if we are to achieve the necessary, the essential target rate of 5,5 per cent growth rate per annum. If we pursue the present policy of this Government, which is to cause growth in these four areas to stagnate, or even just to proceed at their present rate of 3 per cent or 4 per cent per annum, this means that in order to achieve that 5,5 per cent over the next 22 years, these four areas will at a growth rate of 3 to 4 per cent per annum, only double their production in the next 22 years. It means then that if we are to achieve the objective of the economic development plan, which is to push up our manufacturing production to R12 000 million, the other areas namely the nonmetropolitan areas or the rural areas, will have to do all the rest. This means that they will have to double, double again, double again and double again their production. They will have to double their production four times in algebraic terms or produce sixteen times as much in arithmetic terms. It means that they will have to produce 16 times as much in the next 22 years as they are now producing. For these rural areas, which as yet have little infrastructure, this represents a growth rate of 14 per cent per annum. This is clearly an absurdity and yet it is upon this basis that the Government’s economic policy rests. This is how it plans to defeat the trade gap and how it plans to defeat inflation. It is an absurdity.

What will the cost and the consequences for South Africa be if we have to go on like this? In South Africa we have a rapidly rising population. Not only do we have a rapidly rising population, one of the higher population growth rates in the world, but combined with it we have rising expectations and rising needs. We have a population of approximately 22 million, of whom only about 4 million, or maybe 5 million, are at this moment satisfying their basic needs to the extent that they are enjoying some measure of the pleasures and the luxuries of the more advanced 20th century society in which we live. The remaining 17 million are not enjoying this and they will not rest content until their expectations in at least some degree are also fulfilled. How will we satisfy these expectations? If we maintain growth on the present basis which I have described and on the present levels as described, we can only satisfy them by rising imports. If we are not producing the commodities in South Africa, we must import them. The alternative is to slip steadily backwards to degradation and poverty.

How will we accommodate the new Black labour which is coming on the market? It is now rising to the figure of something like 100 000 new jobs per annum to be satisfied. I believe that the current figure of new jobs which have to be created per annum are 85 000, but soon 100 000 new jobs per annum will have to be created. How can we do this in a stagnant economy? How can we do this if we rely on growth in rural areas where there is no adequate infrastructure and depend on those areas for a 14 per cent growth rate per annum?

How will we preserve peace and buy time for South Africa. We need time more than anything. We need a growing economy and economic strength. If we follow our present policies, if we continue with this stagnant form of growth, how will we buy time? How will we achieve constructive change if we have insufficient time?

How will we maintain internal strength and deterrence against subversion if the cost of the deterrents rises every day? When I was in France a few months ago I was told that the cost of maintaining their deterrents, their defence forces, at the present level will Increase by 7 per cent per annum. Now, Sir, if we import weapons, and munitions from France or other parts of Europe, and to this cost is added the differences brought about by devaluation, the cost of transport, the cost of brokerage, the cost of loans and whatever else goes into the final sum, it means that the cost of armaments, maintained at the same level in France, will double every ten years. If, instead, we have an increase in the cost of deterrents rising at, shall we say, conservatively, 10 per cent per annum, it means that the cost will double every seven years. How can we pay for our safety in this situation if we have a non-productive economy, a stagnant economy, a growth factor based on 3 per cent in our metropolitan growth areas, the four areas I have mentioned, and a fictitious 14 per cent somewhere in the bundu? How will the hon. the Minister find the necessary revenue to meet Government expenditure? Already taxes, as between 1971 and 1972, show an increase of 27 per cent in personal income tax. We paid 27 per cent more in personal income tax in 1972 than we did in 1971. Against this, the revenue from company tax rose by only 3,3 per cent. I ask the House to look at this discrepancy where rising revenue is urgently needed: 27 per cent additional is coming from private sources, from individual personal tax and 3,3 per cent from company tax. Why is this happening? It is because we are killing the goose that lays the golden eggs. That is quite simply the reason. That is the problem.

What has the Budget done for us, and especially, what has the Budget done about those twin pillars of growth, namely labour and capital? Let us examine its nine main features, as identified by the hon. the Minister of Finance himself. He mentioned nine points in his summary at the end of his speech. Firstly, he says he has relaxed credit restrictions to promote production and exports. What has actually happened? Banks have been allowed to increase their ceilings by 5 per cent for discounts and advances and by 10 per cent for investments. This is not a massive injection of capital. The hon. member for Parktown pointed out that banks have already been exercising this right to some extent. It will make very little appreciable difference on the capital market. The hon. the Minister has expressed the hope that some of this increased credit will be applied to base mineral development. This is a cause which is very dear to my heart and I have pleaded in this House before for precisely such development. But where was the hon. the Minister when the St. Croix decision was taken, when the Saldanha decision was taken? Is the hon. the Minister aware that we will soon have no export port for iron ore, no adequate export port for manganese, and that Saldanha cannot be brought into effect until about 1980? Is the hon. the Minister entirely nonchalant about the fact that we may have to do without additional iron ore exports between now and 1980, with a potential loss of R400 million in foreign revenue and a further loss of R100 million in Railway revenue? This is the cost of this wrong set of priorities which is being applied. The hon. the Minister knows that we have nothing against Saldanha, but we believe that his priorities are entirely wrong and that we cannot wait from 1972 to 1980 for something to happen which we need now.

What does Haak say?

The second point or remedy raised by the hon. the Minister was the promotion of savings. Home-ownership is a good idea and nobody is going to quarrel with it. One could take a petty view of this and say that it takes too long and produces too little money, but essentially it is a good and a constructive idea. It does not meet the objective of saving, however. If we are to save, we must have the means with which to save. High taxes frustrate saving. We have various examples. As I have said, we have an increase of 27 per cent in revenue from private individuals. We also have the conversion of levies into direct tax. If levies have any virtue at all, which I doubt, it is that they do contribute to savings and that they put money out of harm’s way. These savings are now, by the Minister’s own action, to be converted into higher tax. We are asked to be content with a little more take-home pay. I think the tax aspect of this matter is perhaps the most important one and this has been lost sight of.

The third point is that we are now promised a more flexible labour policy. The Minister talked about multiple shifts on a selective basis. We do not know what “selective” means, but we think we know. He also said that quotas in the metropolitan areas may be maintained if a doubling-up takes place in rural areas. All these adjustments are to take place within the basic framework of our society and I think that when the Minister speaks of “within the basic framework of our society”, he is talking about keeping within the basic framework of the Physical Planning Act. That is not our society; it is their society.

The fourth point is that we have curbed State expenditure. This is good old United Party policy. We have begged the hon. the Minister for years to do this, but he has told us for years that it is impossible to do it and challenged us to show where it could be done. He has succeeded and we congratulate him on curbing the rate of increase on State expenditure.

He has increased social pensions, admittedly by on infinitesimal amount, but it is a step in the right direction. It is a good step, but as I will show, it has little or nothing to do with growth.

There are also increased tax incentives for exporters. This is again good, but ineffectual without a steady growth of the domestic base. One cannot produce exports out of a vacuum and exports are based on a broad domestic base. Until such a base is established and the cost of production is brought down in order to export competitively abroad, one has in fact achieved nothing. We have not reached the stage where we are satisfying the essential needs of our own people. We cannot fulfil the needs of our own people and we are importing from abroad very heavily to do it. How, in this situation, can a massive export programme be achieved? We must first broaden our base and supply our peoples’ basic wants. On that basis we can then begin to think seriously of a massive export programme.

There has been a reduction in sales duties, but if I may say so, that was only a little bit of soft-soap.

There is an improvement in the companies’ cash position. The loan levy o-f 7½ per cent on dividends has been reduced to 3 per cent and there has also been the abolition of the loan levy on individuals. A 10 per cent surcharge now goes on top of the existing surchage and the levy is to be taken away. We have here the imposition of a direct tax or a surcharge on a tax in the place of a levy, whereas a levy, if it has any merit at all, at least contains some saving content.

This, then, in the hon. the Minister’s own words, is what he has done for growth in South Africa. Let us examine these nine major points of his Budget and ask ourselves where, if anywhere, there is any major impetus given to growth or any major contribution given to the growth concept or any major break-away from then stagnation concept which has been built into Government policies, into the Physical Planning Act and into the whole system over the past few years. We cannot get out of this situation unless we change the basic policies. In his Budget speech the hon. the Minister used the word “growth” no less than 18 times. Eighteen times he paid homage to “growth”. He has done honour to “growth”. He has said that this is what we need and what we should have. But, in fact, he has done very little about it. If I in reply, may quote Hamlet, I would say that his precepts “are more honoured in the breach than in the observance”.

Mr. Speaker, when he began speaking, the hon. member for Paarl expressed sympathy with the hon. member for Parktown after having listened to him. I must to a larger extent sympathize with the hon. member for Von Brandis. The fact is that in this Budget as a whole the Opposition did not get what they were actually expecting. They allowed the country to believe that we would have an immense deficit at the end of the past financial year. They allowed the country to believe that this would inevitably lead to our having a greater amount of tax levied this year. I think they particularly looked forward to this because in their political history a key election awaits them in the Oudtshoorn constituency. The fact of the matter is that in this Budget they got what they were not expecting. Instead of an immense deficit, the shortfall on the Revenue Account was only about R4,5 million. Instead of considerable new taxes that were to have been levied on individuals and companies, and an increase in the sales duty, no new taxes were announced. It seems to me that hon. members on that side of the House have actually been prepared by the Budget for the second blow they are going to receive in Oudtshoorn in a week’s time.

I do not think they expected the hon. the Minister of Finance to still be able to announce pension and other concessions, particularly to the lowest income groups, in spite of the fact that we are going through a difficult time in which no reasonable person can expect tax concessions to be made. I consequently want to say that this Budget was the last thing that hon. members on that side of the House expected at this time. This also explains why there is no vehement criticism against the hon. the Minister of Finance today. The criticism expressed by the hon. member for Von Brandis is criticism we have been listening to for some years past, i.e. that South Africa must have a much higher growth rate than the target rate of the economic development programme. In the modern world, with all the problems we have in this country with respect to size, the composition of our population and the fact that we do not have a bulk market in South Africa itself, in spite of the fact that industrial production has not yet reached the level that it has in older, established industrial countries, the fact is that South Africa can be glad it has maintained a real, net growth of 5,8 per cent per annum over a period of ten years. Although this growth rate has levelled off slightly to 5,3 per cent in the past five years, I think we can nevertheless feel satisfied that throughout this decade we could still achieve a rate slightly higher than the rate aspired to as the optimum rate in the economic development programme.

I want to state that this Budget is an extremely important one because it comes at a time when our economy must take a new course. Our country as a whole has for some time now, particularly since July, 1969 when share prices decreased considerably, been waiting to see in what direction our economy would move in the future. Therefore not only the general population and the man in the street, but also industrialists, shopkeepers and everyone have been waiting the announcements that were to be made in this Budget by the hon. the Minister of Finance. I think that if one looks back after a year at the effect this Budget is going to have on our economy, hon. members on the opposite side of the House will also have to agree with me that our economy has entered a new phase of growth. This Budget’s entire set-up contradicts the criticism the hon. member for Von Brandis directed against it. The whole emphasis of this Budget is on balanced growth. As the hon. the Minister of Finance indicated, there are chiefly three tasks he sets himself, firstly the balance of payments must be straightened out and placed on a sound footing, so that our reserves can again be sufficient for safety’s sake. Secondly we must maintain a greater real growth per annum and thirdly we in South Africa must be able to maintain the necessary economic and price stability.

The measures announced by the hon. the Minister must also be seen against this background. If our total endeavour were solely to facilitate a greater degree of growth, greater even than the aim the Government has set itself in recent years, it would be of no use to us unless we could maintain the necessary price stability in South Africa. When the careers of various Ministers of Finance in South Africa are one day reviewed, and when the career of the present Minister of Finance is one day taken stock of, it will be possible to say that at a stage vitally important to South Africa he withstood that temptation to strive for maximum growth. If this had been his only endeavour, and if he had not applied restrictive measures in the past few years, particularly to combat private consumer spending, the inflation rate in South Africa would have been much higher and we would have been much worse off than we are today in respect of our biggest export product, i.e. gold. By specifically adopting this policy he made it possible for our gold-mines to have a much longer life, so that we can draw much more for South Africa from this vital source.

I just want to point to a few general aspects of this Budget. In the first place I want to point out that as far as our poor section of the population is concerned, our social pensioners, the old-age pensioners and others, the Minister has very thoroughly taken their position into account in this Budget. We realize that they cannot augment their income by hard work. Since we have in the past year, 1971, had an increase in the consumer price index of 5,7 per cent as against the previous year, the Minister has this year granted a R3 million increase in respect of old-age pensions. By doing this he granted them an increase of almost 8 per cent, which is considerably more than the increase in the cost of living. In this respect he has consequently eased the position for that sector of the population which cannot improve its own financial position by earnings, and he has given them more than they lost through the increase in the consumer price index.

But does he do this every year?

The Budget also emphasizes for us the most important aim in our national economy. In the first place, the balance of payments must be set right. If we look at the White Paper published in conjunction with the Budget, we notice that in the past three years alone the exchange standard has dropped as never before in recent history.

In 1969 it was still 96 per cent, as against 100 per cent in 1964. In the year 1970 it had dropped to 94 per cent, if one includes gold, but in the year 1971 the exchange standard dropped to 89 per cent. This emphasizes the particular fix South Africa has been in the past year, i.e. that the price of its products, particularly minerals, on the one hand decreased considerably on the world market, and that at the same time the price of goods that have to be imported evidenced a large increase, so that South Africa, since it has to import in order to grow, was in the unenviable position, with this adverse standard of exchange, of having had the biggest trade balance deficit in its history. But I think the situation can be corrected by this Budget. One must not see the Budget proposals in isolation; one must also look at the steps the Government took in the preceding months—in the first place the introduction of import control and then devaluation in December of last year.

The combined effect of all these measures will inevitably be such that in the coming year less will be imported and that our balance of payments and the standard of exchange will have a chance to recover so that we will have a more balanced development in our foreign trade in the coming years. But, Sir, this Budget also aims at achieving the optimum growth rate for South Africa and at the same time, as I said, maintaining economic and price stability in South Africa. For the achievement of this optimum growth rate and for the maintenance of the necessary economic and price stability, one must lay down two prerequisites; one is that our entrepreneurs must have a greater degree of confidence in the general trend of the economy, and the second is that a greater sense of thrift must be developed, particularly amongst our younger generation that still has to purchase goods on a large scale. This house ownership savings plan the Minister of Finance has announced must consequently be seen against this background, i.e. the necessity of developing a sense of thrift amongst our young people. I read the criticism issued by certain bodies to the effect that the price limit of R16 000 for a house is allegedly unrealistically low.

Sir, I want to accept that the position here in the Cape is more or less the same as in the rest of the country. I can take you to my own constituency where a hundred houses are being built now on plots that are much bigger than those on which houses were built in the past in the Northern Suburbs of Cape Town, and the selling prices of very good houses will be less than R14 000, not only this year, but hopefully in the year 1973 as well. I therefore want to reject the criticism that the limit of R16 000 per house is too low. But at the same time I want to make this statement: Since this plan is now being announced for the first time and since it takes into consideration the conditions existing at this stage, I believe that the Minister of Finance will also show himself to be compliant in this respect, just as he has shown himself to be compliant in respect of the utilization of labour and in respect of the question of foreign loans by the private sector. If it should appear that this limit of R16 000 under this savings plan is an unrealistically low one, I simply do not doubt that the necessary adjustment will be made in the years ahead.

Sir, I think the most important objective we must pursue in South Africa at this stage is to facilitate greater production, and to do this we must strengthen the confidence in our economy of our businessmen in general. I think the best criterion one can apply to determine whether the necessary confidence in our economy has been activated is not what financial editors write in newspapers; it is not what the so-called shadow Minister of Finance on the opposition side says; it is that general criterion, i.e. the Stock Exchange of South Africa. The Stock Exchange reflects the feeling of banking institutions, of investment bodies and even of the ordinary citizen in South Africa, and the fact is that in the past two weeks the hon. member for Von Brandis also received a good reply in that respect, because not only have we seen an increase on the Stock Exchange—perhaps a little more rapid than we expected and perhaps too rapid to be sound in the long run—but there are also signs that this growth on our Exchange can be maintained. What happened on the Exchange in the past two weeks is a mirror for the whole of South Africa; it is proof of general confidence in our economy. I believe this upward trend we have just seen is in fact only the beginning of a new phase of general confidence in our economy that will be cultivated throughout South Africa in the coming year.

Sir, I should like to point to a few steps the hon. the Minister announced to strengthen this spirit of confidence amongst our industrialists. In the first place I want to emphasize the tremendous saving in State expenditure that the Minister was able to announce. At the same time he could also assure us that he believes that there is still the necessary reserve capacity in our infrastructure to carry the necessary expansion in our economy, in spite of the relative decrease in State expenditure. But what is also of importance is that the hon. the Minister is confident that next year and in the years ahead he will be able to balance his Budget without levying new taxes. He could even go further and make certain concessions, particularly to companies. He was able to almost completely abolish the loan levy on dividends that companies receive. The fact that the Minister could reduce, from 78 per cent to 72 per cent, the rate at which the very richest taxpayer paid tax and the loan levy is an indication that he is confident that in the coming year the trend of the economy will be a favourable one. I believe that this confidence of his will also engender confidence in our merchants and industrialists.

The fact that the Minister could somewhat reduce the sales duty on certain items—perhaps not on a spectacular scale —and that he saw his way clear to abolishing the sales duty on certain items, indicates that he has the necessary confidence in our economy, and I think this will filter through to our country’s entrepreneurs in general. But what is also important in this connection is that he made certain concessions to the banks as far as their credit ceilings are concerned and that he simultaneously took the brave step of instituting interest rate control on participation bonds and deposits. If I myself, as someone in the business world, must express my opinion. I would say that there was no single factor that contributed more in recent years to our growth rate dropping than specifically the high interest rates and the relative shortage of capital.

Although these concessions, as far as the credit ceiling of banks is concerned, may perhaps not appear to be extensive enough in the long run, I believe that the fact that there will be greater credit available for industries, and that we can simultaneously expect a downward trend in interest rate patterns, will create new confidence in the business sector. In this connection I also want to welcome the fact that the hon. the Minister announced that the Treasury would adopt a more lenient attitude towards applicants in the private sector in respect of foreign loans. On tours I myself undertook recently it struck me how much interest there is in South Africa; what also struck me is the little confidence that industrialists have in their own country. I therefore believe that in future we shall not only obtain greater investments in South Africa from abroad, particularly after devaluation, but also that the bodies abroad will be prepared to loan money to private undertakings in South Africa.

Mr. Speaker, all these measures, and others I could also mention, indicate that the green light has been given for the industrialists of South Africa to show some daring. I believe these steps, which at this stage should only be seen as pointers and which will be followed up as the necessity for further action arises in future, will create the necessary confidence in the industrial life in South Africa and that in the present year we will not only have a growth rate of 4 per cent in our economy, but also move closer to the target rate. That is why I sympathize with hon. speakers on that side of the House who have to criticize this Budget. It is particularly significant, as far as I am concerned, that the message of this Budget, i.e. one of harder work in South Africa, is virtually the same message that came from one of the greatest men ever born in Oudtshoorn, i.e. Lagenhoven, who said that dying is not an art; even the worst of people can manage that. To live properly is an art that even the best of people cannot manage every day. We on this side believe that we must live and work for South Africa and not that we should create a spirit of pessimism in South Africa as hon. members on that side of the House are doing.

I think that during the course of what I have to say this afternoon, I shall be dealing with the greater part of the comments which the hon. member for Vasco has made in the speech he has just delivered. But there is one thing he said with which I should like to deal straight away. That is that he appeared to give some credit for the fact that prices on the Stock Exchange have risen in the lost fortnight to the hon. the Minister’s Budget. I would like to remind the hon. member for Vasco that shortly before our Minister of Finance delivered his Budget speech this year, another Budget was delivered in Britain, where permission was granted to investors in Britain to invest in other countries including South Africa.

Why do they prefer South Africa?

I can assure him that that is the major factor which has caused the recent increase on the Johannesburg Stock Exchange, namely English money which has been bringing the yields on South African securities more into line with the yields obtainable on British securities on the London Stock Exchange.

Home sweet home !

Other speakers on this side of the House have already commented on the aims of the economic policy which the hon. the Minister of Finance enunciated in his Budget speech, namely, firstly, to improve the balance of payments position; secondly, to achieve a more rapid rate of real growth in the economy, and, thirdly, to curb inflation. We have indicated from this side of the House that we agreed with that diagnosis of the problems of our economy, but we would stress, and stress very strongly, that the primary problem of the economy, the primary problem of the three identified by the hon. the Minister, is the lack of real growth. Until real growth is accelerated, there will be no answer to the other two problems identified by him, namely inflation and the balance of payments. I would suggest going even further. I feel that the need for real growth is even greater and more urgent this year than it was last year, because two new elements have appeared on the economic scene in South Africa. The first of these is the situation arising from the devaluation of the rand. If we do not grow, and if we do not grow in the right way and in the right places—and the right place is in the export industries—we will be dissipating the advantages of devaluation and we will be left only with the disadvantages, the main one of which will be a high rate of inflation and the danger of further devaluation later on.

The second new factor which has appeared on the economic scene this year is the factor of deficit budgeting. Deficit budgeting is something which we experienced in the year 1971-’72 and we are going to have it again in 1972-’73. It will therefore cover a two-year span. It does not only cover the finances of the Treasury, but it also covers the finances of the Railways and to a lesser extent those of the Post Office. I suggest that deficit budgeting in itself is highly inflationary, because it means that we are living off our savings—in other words, we are not financing our current expenditure out of our current income and the Government is living beyond its means. When added to deficit budgeting you have the considerable injection of new money into the economy by way of a heavy overseas borrowing programme, then the whole fiscal position becomes highly inflationary.

I would suggest that it is quite clear that the need for real growth is absolutely vital if we are not to be caught up in a vicious circle of deficit budgeting followed by inflation, causing further deficits which ultimately can only result in further inflation, or the need for higher taxes, or the need to cut expenditure further, or a combination of all three. It seems to me that all three hon. Ministers, namely the Ministers of Finance, of Transport and of Posts and Telegraphs, are relying very heavily, or are even gambling, on sufficient growth taking place in order to break this vicious circle. I therefore believe that it is more than pertinent to examine whether the programme of action of the hon. the Minister of Finance is likely to achieve the aim of growth and likely to achieve it in sufficient measure.

I suggest that it is axiomatic that economic growth depends on the greater use and the better directed use of our resources. That means that greater use should be made of our labour resources, including greater productivity, and that greater use should be made of our natural and raw material resources, our capital resources and our entrepreneural resources. I intend dealing, during the time at my disposal, primarily with these measures contained in the Budget which will affect the supply of labour and the supply of capital.

First of all I want to say a few words on the subject of business confidence. In a private enterprise society or a capitalist society such as we have in South Africa, business leaders will only proceed with their expansion programmes or undertake new projects if they are confident that they will succeed in making profits by doing so. To have such confidence, they must feel assured that they will have available to them the necessary capital, the necessary labour, the necessary plant and the necessary material, and that they will have an expanding market for their products.

At the moment, as during the last few months, business confidence is at a low ebb. I think we only have to read the latest survey of the Bureau of Economic Research of the University of Stellenbosch to have that confirmed. I suggest that business confidence has been at this low ebb because businessmen have not been certain about certain important factors. They have not been sure of certain overseas factors that effect them, such as currencies; they have not been certain about prices for exports; they have not been certain about what is going to happen when Britain joins the Common Market, but they have also not been certain in respect of some homegrown uncertainties. In that regard I refer specifically to the uncertainties surrounding the supply of labour. I hope that the Government does appreciate the importance of it, so that when it applies the measures announced in the Budget to affect the supply of labour, it will do so with certainty and clarity so that businessmen will know exactly where they are going to stand. I regard this as being particularly important because the overall fiscal picture of the Budget can hardly be described as one which is going to encourage expansionist ideas. We have higher company tax, we have higher individual income tax, we have sales taxes and excise taxes at historically high levels, and we still have hire-purchase restrictions on a severe basis. To me the whole Budget conveys the impression of being a damping-down Budget and if it were not for the fact that there is a slight glimmer of change in direction in regard to non-fiscal measures, such as labour measures, and that there is a slight new emphasis on the supply side of the demand —supply equation, I would find the whole position very depressing.

Now I would like to make a few comments on the measures taken in regard to the labour supply. We on this side of the House welcome any measure that is going to lead to greater employment opportunities for non-Whites, particularly the Bantu, in the urban areas. I hope that these measures which have been announced will be meaningful enough to result in some measure of real growth. But I find it regrettable, in fact highly regrettable, that these concessions have been granted so late, that they have been granted so reluctantly, that they have been granted so negatively and that they have been granted in such small measure. To me it is a pity that positive steps were not taken three or four years ago when the shortage of labour really started to become acute, because had they been taken then, many of the problems with which we are faced now, particularly inflation, would not be nearly so severe. I have serious doubts as to whether the reluctant and timid steps which have been taken in regard to the labour position, are going to provide the assurances needed by businessmen before they make their plans to expand, or even whether the steps that have been taken will be sufficient to provide a significant increase in the labour force in order to ensure increased growth. How much better would it not have been had the Government come forward with a bold, comprehensive, imaginative plan to deal with the labour situation? I have in mind a plan such as advocated by this side of the House, a practical plan which would have included such measures as housing and allied social measures, a plan which would have included training measures, a plan which, in consultation with the trade unions, would have included increased opportunities for non-Whites to use the skills they have and the skills they are capable of acquiring with proper training. But no; for the time being we must be satisfied with a slight loosening up of the ideological strait jacket which surrounds the Government’s labour policies and I must express grave doubts whether this will be sufficient to meet the situation.

I should now like to comment on some of the steps included in the Budget which will affect capital, savings and investment. Here I must again say that I have grave doubts whether they will be effective. It would seem to me that the lifting of the credit ceiling on banks’ lendings, is really doing little more than making honest men of the bankers—in other words legalizing an existing de facto position. It seems to me to be unlikely that these measures will provide any considerable additional amount of finance to the economy. As far as the plans contained in the Budget for savings are concerned, I join in welcoming the home-owners savings scheme. I hope that as far as those categories of the population are concerned who can benefit from it, it will succeed in, on the one hand, encouraging thrift and, on the other hand, increasing home ownership. In particular I hope that the Coloureds and the Indians who, I think, are well place to benefit from this scheme, will take full advantage of it, because I regard home ownership amongst those sections of the population as being a force for good and a force for stability.

I also welcome the new series of national savings certificates, although past experience has shown that this is not a very exciting form of investment. The total figure of national savings certificates and Union Loan Certificates outstanding on 31st March, 1971, the latest figures that are available to me, indicated that this was 70 million, which was a reduction of R6 million over the past year. In other words, there had been a dis-saving on this type of investment over those twelve months.

Against these measures that have been taken to stimulate savings, we have to balance the fact that personal income tax and company tax have both been raised. Raising personal income tax, particularly at the higher levels of income, will do more harm to the ability to save than, I think, will be done good by the other measures contained in the Budget. I think that the hon. the Minister will probably agree with me that the overall effect of the Budget, i.e. higher rates of taxation on individuals, particularly individuals in the higher income groups, plus higher rates of company tax, balanced against these particular incentives, the home-ownership scheme and the new series of national savings certificates, will on balance not be any incentive to increased savings. I regard this as a serious deficiency of the Budget. The fall in savings which we have been experiencing in South Africa for the past few years, has become a very serious problem. In 1967, 12,8 per cent of the gross national product was saved, whereas five years later, in 1971, that figure had fallen to 10,4 per cent. Had the 1967 figure applied in 1971, an additional R325 million would have been saved, which is the equivalent of roughly three-quarters of what was invested in 1971 in private residential buildings.

The matter which I find most disturbing so far as measures taken which will affect capital are concerned, in fact I find it deplorable, is the re-introduction of control over interest rates. I think it is well to recall what the hon. the Minister had to say when he released the banks in August 1970 of their obligation to limit their deposit rates, which was applying at that time. This is what he said in Hansard (Vol. 29, Col. 1538) of 12th August, 1970:

I suggest that what applied in 1970 applies with even more force today. The control which the hon. the Minister of Finance has announced is being imposed at a time when there are definite prospects of improved liquidity in the economy as a result of an improvement in the balance of payments and there are therefore indications that market forces will lead interest rates down to a lower level in any case. But the Minister not satisfied with control over deposit rates has extended this control now to participation mortgage bonds. After his abortive attempt last year to damage participation mortgage bonds schemes by attempting to force them to invest a portion of their funds in Government stocks he now seems intent on destroying them altogether by making them comply with an unrealistically low interest rate. I would suggest that participation mortgage bonds are not an evil but that they fulfil a real need in our economy. They provide a good investment channel for certain types of investor, such as widows, orphans and trusts and charitable institutions who are not bothered by high marginal rates of taxation and they provide a very important source of finance for construction projects such as flats, commercial and industrial buildings. I hope, and I appeal to the hon. the Minister, that even if he decides to proceed with the control of interest rates on participation mortgage bonds for future schemes, he does not tamper with existing schemes. To impose an unrealistic rate of 8½ per cent on participation mortgage bonds could well lead to wholesale calling up of the funds invested in them, which in turn would lead to completely chaotic and dangerous conditions developing in the mortgage and property markets. Even though I believe that the financial institutions which have to deal with clients’ funds and investing clients’ funds in mortgage bonds, will find other means of investing in mortgage bonds than through participation mortgage bond schemes, those other means are going to be less efficient, more costly and also more costly to administer.

All in all, I am convinced, as the hon. the Minister obviously was convinced himself in 1970, that control of interest rates is likely to be ineffective. But if it is effective, it is going to interfere drastically with the free flow of investment funds into their most productive uses. As such, it is going to be a serious impediment to the proper and healthy growth of the economy. It is therefore a step that I cannot deplore too much. It must lead to uncertainty in the capital and property markets. What sort of development can you expect in flats when flat developers know that the Minister is killing an important source of their finance? I say again that the uncertainty resulting from steps of this nature is a real impediment to the economic growth of our country.

To recapitulate on the Budget as a whole, I would suggest that fiscally it continues to be a damping-down Budget, monetarily it is an inflationary Budget, but not a reflationary Budget, and that it does too little to stimulate real growth, savings and business confidence. Therefore, it does too little to fight inflation.

Mr. Speaker, I have been listening now to three Opposition speakers on financial matters, and I thought that these three hon. gentlemen would analyse the Budget on an economic-scientific basis, but, apart from the hon. member for Constantia, who mentioned a few things which he welcomed, I am afraid that the hon. members merely dealt haphazardly with a few random points, dragged in a few political issues, and did not analyse the matter on an economic basis. I just want to quote something the hon. member for Parktown, which his Leader said on 27th January, 1959. In the No-confidence Debate of that year, he said (Hansard, column 17)—

This Government has since 1958 given direction and guidance to our economy. It has throughout taken steps when it had to. The hon. member has moved an amendment this afternoon which clashes with the statement his hon. Leader made. Now they are objecting to certain matters. Today they want more action from the Government, while the Leader of the hon. member said at the time that we may not interfere. Over the course of years the hon. members must now make out a case for themselves and decide where they want to be. No, Sir, I can convey to the hon. the Minister my sincere thanks, appreciation and congratulations for having brought us, with the smallest Government Department, what is most certainly the best Budget of his career in this sixth Budget of his. It is being generally well-received and sincerely praised.

Let us see who are praising it. The hon. member for Parktown made quite a number of quotations this afternoon. I just want to mention to the hon. member a few parties that have praised it. Inter alia, the editor of the Rand Daily Mail said—

That is what the Rand Daily Mail, which is most certainly not a friend of ours, had to say. The political correspondent of the Star said for example—

Neither is this newspaper a friend of the National Party. The Star concedes reluctantly—

Sir, this is what they are saying. Let us consider what the other businessmen are saying. The hon. member also referred this afternoon to the businessmen. Firstly I want to take the banking sector. I am going to take the general banking sector. We see first what Mr. D. P. S. van Huyssteen of Volkskas has to say. He says—

He welcomes it, and Volkskas most certainly has a say in the economy today, a far greater say than hon. members have who objected to it here. What does the Standard Bank say? Mr. Gordon Oxford, the General Manager, says—

It is the Standard Bank which has this to say. It also in this way praises the Budget. Let us consider what a certain Dr. F. J. Cronjé, of Nedbank, had to say. He was a former member of that party; he sat in this House and was one of their main speakers. He said that the lifted credit ceilings was a step in the right direction. He thought it was the right thing to do; things were going well. Let us see what the Association of Chambers of Commerce has to say. Sir, we know that these are their friends, and that these people control 86 per cent of the economy. The President, Mr. M. L. Scher, said—

Not only I, but he, too, congratulates the Minister—

Let us look even further. Let us consider opinions from across the length and breadth of South Africa. Let us see what the Chamber of Mines has to say. The president, Mr. J. W. Schilling, says—

This is a positive attitude. They want to contribute their share for South Africa. That is more thon I can say about this Opposition. Even the Federation of Trade Unions welcomes this Budget. This is the labourer of South Africa, the friend of the National Party, and they know where they should seek their salvation. Let us glance at the newspapers. The hon. member quoted what the newspapers had allegedly said. I take the Cape Times of 30th March. I read there : “S.A. Budget welcomed in London”. It is welcomed even in London, not only here in South Africa. Let us look at the “Business Report” of the Cape Times —“A shrewd Budget all round”. There it stands in large print. The people are jubilant about it. Let us consider the newspaper headlines in the Rand Daily Mail of 30th March : “Industry and Commerce, two cheers”. There is jubilation. Die Burger says : “It could be the turning point.” Things are going very well. So we can go through all of them. Here is one report which reads—

In this way we could quote them all.

But I want to go further. The hon. the Minister told us that he had three objectives—the improvement of the balance of payments, a more rapid growth rate and the curbing of inflation. I think it would be the right thing to do if we tested the Budget against these three objectives. Let us not approach it from a political but from a financial-economic point of view. Throughout my speech I want to point out to hon. members how consistently this Budget answers to these objectives of the hon. the Minister. It is admitted by all economists that it is difficult to achieve a balance between economic growth and stability. That is what the hon. the Minister told us in his speech. I quote—

The hon. the Minister knew that it was very difficult, but he tackled the problem and gave us the right medicine.

If we consult authorities from the U.S.A., like P. A. Samuelson, Hains and Zawadzki, we find that their definition of this aspect is as follows : To achieve a balance between the annual addition to the available supply, goods and services, i.e. economic growth, and a situation where the supply (i.e. the production) and the demand (i.e. the amount of money and credit available), is sufficient to make the desirable economic growth of the national economy possible without unleashing inflatory or deflatory forces, is definitely a very difficult task. This the authorities will tell you, and this is what the hon. the Minister said, but with this Budget the hon. the Minister has succeeded in accomplishing this. For that we are very grateful.

This inflasionistic pressure which could develop, may come from two sides, i.e. from the supply side as well as from the demand side. It is therefore situated in the financial as well as in the real sphere. Let us in the first place consider the demand side. The four most important inflasionistic factors in regard to demand are the following: The monetary supply, the available monetary income, consumer spending and the overseas demand. I am going to deal with each of these four factors, and on this basis find to what extent this Budget meets the requirements set by the Minister. Let us first consider the monetary supply. The monetary supply consists for the most part of two elements. Firstly there are the excessive deposits on call which are the result of Government expenditure, and secondly there is the excessive granting of credit by the banking sector in the form of loans and overdraft banking facilities. These are the two elements, and in this respect the Budget succeeds handsomely. Government expenditure has definitely been reduced. The hon. members know this. This is in fact a matter which they kicked up a great fuss about in the past, but when it suits them, then the State is not doing enough.

Let us consider what happens in the case of the available monetary income. I referred to this during the discussion of the Part Appropriation Bill, and I pointed out in full detail how wages have increased far more rapidly than the cost of living. The facts which I stated in February during the Part Appropriation debate, are underlined by a Mercabank publication of March, 1972, on page 5. In other words, a month later they underlined precisely what I had said. The hon. member for Parktown admits that this is the case, and I am pleased that he is doing so. To this can still be added that the Minister has, in this delicate situation, taken the interests of John Citizen to heart, and he has placed this first by abolishing the compulsory tax levy, which in effect means that John Citizen will have more money at his disposal to meet his needs. That is what the hon. the Minister wanted, and that is what he did.

Thirdly, we may also consider consumer spending. What happened in this sphere? We know that the gross internal spending rate decreased in 1971, and that it was 11,2 per cent in comparison with 14,3 per cent in 1970. The real rate of increase in the gross internal spending of 9 per cent in 1970 was forced down by the anti-inflasionistic measures of this Government to approximately 4 per cent in 1971, which indicates that an equilibrium has been achieved between spending and the gross internal product. What more can we expect of a Government than to achieve this, in a period of overseas problems which have had an effect on our economy? I think that what has been accomplished here is a miracle. These facts are known to the Opposition. They know that the Government has not only succeeded in combating inflation, but also in creating the necessary climate for the next round of economic growth. Now they are talking about the economic growth. This Government has already created that climate.

Let us consider the position in respect of overseas demand. The overseas demand in respect of goods and services which have South Africa as the country of origin does not produce problems in so far as it increases the inflasionistic pressure, but there are other problems which have an effect on this. This situation is reflected further in the balance of payments which has since 1964, shown a deficit, and to which I shall return at a later stage.

In addition, I want to consider the supply side. As I have said, there are two sides, i.e. the demand side and the supply side. The supply side is situated for the most part in the real sphere, and the influencing of the real sphere occurs for the most part through the fiscal instruments. Here, too, the Budget has succeeded in stimulating the stream of goods and services in order to bring about stability. This is true, and we cannot get away from it. The emphasis in this Budget did not fall only on fiscal measures, this Budget meets the need to establish a mixture of fiscal and monetary measures. Mr. Speaker, an excessive application of monetary measures without the support of fiscal policy can, under inflationistic conditions, unleash expectations which lead to excessive increases in interest rates, and here, too, the Government has taken the necessary steps which will prevent such a situation. Not only is it the purpose of the timeous announcement of deposit rate control to prevent an interest rate war, but also to protect John Citizen, and particularly in that sector which is sensitive to interest rates, i.e. housing.

Mr. Speaker, I want to express my thanks for the house ownership savings scheme envisaged for the middle and lower income groups. Here I want to add that this National Party will always look after the interests of the worker, not only as far as his salary is concerned, but also as far as his housing is concerned.

Sir, let us consider public debt. If this Government is as bad as is being made out, then the position as far as our public debt is concerned, should also be a bad one. In South Africa we cannot finance all our expenditure from revenue; we must, in part, finance our State expenditure from loans, and in this way our public debt, originates. It is important that we should consider the structure of our public debt. The State must, as with all other lenders on the money and capital market, compete to finance its loan programmes. Marketable Government stock forms the most important loan instrument in this regard. To impart suppleness to the monetary and capital market it is essential that the market should have adequate securities at their disposal, i.e. instruments of debt which are easily marketable. Public debt as a percentage of the gross national product has decreased during the past decade, as is clearly indicated in the statistical survey on page 35, from 45,6 per cent in 1961, to 41,5 per cent in 1971. As against this the gross national product has increased from R5 277 million to R13 141 million over the same period, i.e. by 59,9 per cent. Mr. Speaker, these figures are self-evident. While the gross national product has increased, the total public debt, as a percentage, has decreased. This underlines irrefutably the sound method of financing by this Government.

In addition, it is important to take a further look at the method of financing, and the best comparable criterion here is the marketable internal public debt as against the non-marketable internal public debt. I want to put it to you that in the year 1960-’61 the marketable internal public debt was 78,6 per cent as against a non-marketable internal public debt of 21,4 per cent. For the years 1970-’71 the marketable portion increased from 78,6 per cent to 83,1 per cent, while the non-marketable portion decreased from 21,4 per cent to 16,9 per cent. This development indicates that the Government itself is striving for a suppleness in respect of our negotiable instruments of debt. If you are able to do this you bring suppleness to the capital market and you find that the money will flow and in that way stimulate the economy.

Let us take a further look at our loan levies and at the effect which this Budget will have in this respect. What has the hon. the Minister done here? This is a very important component of our public debt, to which this Budget is giving attention. Between 1962, when this component was first introduced, and last year these increased from 14 per cent to 43,7 per cent. As hon. members know, loan levies are not marketable and while in 1962 they amounted to only 2 per cent of the total marketable internal debt, they amounted to 7,7 per cent in 1972, which is a tremendous percentage. The fact that this increased so tremendously shows us that the monetary market must have been negatively affected, as the hon. member will agree. This element is now being eliminated from public debt, and is it not a good thing? I want to know whether the Opposition does not agree with this? This compulsory form of savings levy, together with the 5 per cent which will now be paid back, is in accordance with our objective with this Budget, and it results in tremendous economic growth. The hon. the Minister announced that it would put R30 million into the pockets of John Citizen, but according to the Secretary for Internal Revenue I see it as R35 million.

Another important aspect which we may consider is the short and long-term public debt. It is very significant that in respect of the marketable securities debt, the short-term debt for the years 1961-’71 increased from 11,4 per cent to 22,1 per cent in 1971, while the long-term debt over the same period decreased from 88,6 per cent to 77,9 per cent. This trend is in its essence structurally unsound. It is distorted, and we cannot allow it, but in this case as well the hon. the Minister has come along and rectified it. Now we must also note that it is primarily the banking sector and the building societies which are interested in the short-term Government stock and that their portfolio of long-term Government stock is diminishing progressively, as also appears from the statistical survey. The short-term stock is a liquid means; it is a good substitute for money. That is why these two sectors, the banking sector and the building societies, pay special attention to this, for they can very easily convert it into money without any risk of capital loss. A too great increase in the liquid means is potentially inflationistic and undesirable from the point of view of monetary control, and for that reason it was essential that the hon. the Minister give consideration to this matter, which he subsequently did. In addition, I should just like to say that the holders of the short-term Government stock, the banking sector and the building societies, went too far here. These two groups are the two groups which are absolutely dependent on monetary stability in South Africa to ensure their progress and their planning. Therefore I want to advocate here today that this unfavourable trend should be revised and that as far as the compulsory prescribed investments by these institutions are concerned, consideration should be given to a possible increase of the percentage which has to be invested on a long-term basis. If the hon. the Minister could pay attention to that I foresee that even our public debt could in future be better maintained.

I also want to refer to another matter today, and this is in connection with something contained in the majority finding of the Franzsen Commission, in its report on the monetary and physical policy of South Africa. I want to put it that land is one of our most important production factors, and I want to put it further that land is scarce in South Africa. By virtue of this fact, land fulfils a dual purpose today. In the first place it provides space on which production can take place, and it provides living space. The second point is that it serves as a means of entrenchment against the erosion of money in times of inflation. Let me also put it to you that capital gains tax is not a strange phenomenon in the United States of America, England, France, Germany and Sweden. Unfortunately land has become a speculative element within the South African national economy, to such an extent that it has an influence on the cost structure of everyone, from the householder to the farmer. Over-capitalization has become an accomplished fact in this country, and I want to put it to you, Sir, that this is something we cannot allow. Since land is a relatively scarce commodity, I can see no objection in principle to the elimination of speculation concerning it. I want to put it that capital gains tax on a discriminatory basis and only in respect of land will, in my humble opinion, be able to contribute to land no longer being utilized as a means of entrenchment in South Africa. When I advocate this, I want to say that it should be discriminatory in respect of the surface area as far as our agricultural land and the land in our residential areas is concerned; our people must be able to obtain land inexpensively so that our young people can build houses, and the young people who want to make a career of farming are able to obtain agricultural land more cheaply. I am excluding mineral rights and any other rights attached from this subterranean rights, water rights, to it, but I am advocating that consideration should be given to the surface area and that we should no longer allow this to be a speculative commodity in our national economy. On the day we are once again able to provide our people with inexpensive land, I shall be a very happy man, and thousands of young married couples, and also hundreds and thousands of young men who want to make a career of farming will join me in rejoicing if this were to happen. Once we have succeeded in doing that, we would have made a great deal of progress. But it is not only the Government, but also the private sector which will have to make a contribution to this end.

The hon. the Minister also told us quite a good deal in the Budget about the promotion of exports. South Africa is to a certain extent dependent upon capital inflow to carry out our financing programme. As a result of political pressure a vast capital outflow developed in South Africa in the past between the years 1959 and 1964. Capital inflow is unfortunately not the safest remedy for financing an unfavourable balance of trade, something which South Africa has been experiencing since the second quarter of 1964. Nor can gold be relied upon in future as an item for bringing about a favourable balance of trade. It is essential therefore that certain priorities will have to be set today in order to determine which sectors of the economy constitute the greatest possibilities for proceeding with export promotion. As the hon. the Minister put it in his Budget speech, it does in fact appear as if the refinement of our base metals presents exceptional possibilities. I want to allege that the sector which presents the greatest possibilities for the expansion of exports is the mining sector. It so happens that the world prices for primary commodities are low, and considering the possibility of Britain’s entry to the European Common Market, there is the prospect of only marginal increases in the export of agricultural produce. Therefore we cannot expect a considerable income from that sector, in spite of any large harvests which we may have. By virtue of the foregoing it is therefore of fundamental importance that very serious attention should be paid to the marketing of refined and semi-refined minerals and metals. I think it is in the national interest that the refinement of minerals and metals should receive an absolute priority, particularly since we have during the past two decades been virtually giving away our minerals and metals abroad. The refinement industry offers two tentative possibilities which could have a beneficial effect on the economy. It could contribute to a sound growth level of our national product, and as earner of foreign exchange it could also contribute towards eliminating the deficit on our balance of payments. In addition it constitutes the possibility of saving on foreign exchange, and could make us internally self-sufficient. It will also be able to assist us in other spheres. It is general knowledge that South Africa has the largest chrome and manganese reserves in the entire world. This competitive ability which we have we should exploit to its maximum extent as quickly as possible. Other minerals which could be mentioned in this regard are for example fluospar and antimony. This situation indicates clearly that the longer the delay in obtaining the maximum value from these mineral resources, the more the overseas buyer will become conditioned and equipped to processing their own minerals, and our unprocessed raw materials. We shall have to act very quickly, and seen as a whole an attempt to process ore to a maximum extent will also contribute to alleviating the pressure on our infrastructure, for in the case of the Railways for example it would improve the position in regard to railway lines and rolling stock, since it would not then be necessary to transport all the raw materials to the harbours. Only a portion thereof will be transported to the harbours in the form of refined minerals. If we take a further look at our contracts for the supply of raw materials in the long-term, it is also clear that it is very essential that priority be given to this matter, for many minerals are linked to the business cycle fluctuations overseas, which is very detrimental to us. Time does not allow me to go into all these aspects in full, but I do want to point out that the Government has in this respect as well taken timeous steps, by appointing the Reynders Commission for example. I think that we should in this respect as well convey our praise and our gratitude to the Government. The hon. members of the Opposition, however, have overlooked this development.

I therefore advocate the refinement of our raw materials, and ask that urgent attention should be paid to this matter. I request that a positive climate should be created by means of the following four aspects : Railway transportation rates, power supply tariffs, financing of exports, and import protection for the refinement of these minerals and metals. It is very clear to us that freight and harbour facilities is one of the most important elements in this export promotion attempt. It is of the utmost importance that we should give consideration to this matter. I put it that if these facilities are provided, the annual estimated value of the exports, as furnished by the Department of Mines, could amount to R1 334 million by 1988—equal to approximately one and a half times our annual gold production. The steps announced by the hon. the Minister to promote our exports are in general very, very welcome. This is now a team effort, in which the private sector can no longer point a finger at the Government, but will have to contribute its own share. I would urge the hon. the Opposition rather to ask their people to look into this matter.

In conclusion just the following: Thank you for this wonderful Budget. [Interjections.] Let us go to meet the future with faith, hope and confidence. Let everyone do his duty, apply his services productively and work to live in our beautiful country,

Mr. Speaker, the hon. member for Sunnyside relied heavily in his opening comments upon quotations as to the early reaction to the Budget, but he did not tell this hon. House what the background climate was which preceded the thinking of the hon. the Minister of finance in preparing the Budget, the climate in which we had seen the economy of South Africa reduced to an almost all-time low, the man in the street suffering, the harsh implementation of a tax policy, a high and almost uncontrollable cost of living and a rate of inflation which was certainly unhealthy for South Africa. It was against this background that possibly the finance houses and the financial Press have breathed a sigh of relief that at least something was done to stabilize the economy in its disastrous state. Initially I want to thank the hon. the Minister of Finance for one concession he has made, namely the reduction of the sales tax by almost 50 per cent in its application to the boat building industry when, last March, he authorized the reduction of the tax from 30 per cent to 15 per cent. Thereby he saved the industry from annihilation and he revitalized that industry which is playing a tremendous part in the growth factor in this country. I think as a result of this concession which he made after he had been approached by the yachting industry and sportsmen throughout South Africa, we can now look forward to the 1973 International Atlantic Rio Race attracting some 100 entries from overseas. The boost to South African tourism and publicity and goodwill as a result of this gesture is almost immeasurable.

I want to follow the various images which the hon. the Minister of Finance has endeavoured to create during past years in his steering of our economic policies. He has on occasion endeavoured to reveal himself as a doctor administering to the needs of the economy, as a gardener in pruning the economy, as an engine driver in keeping the economy along the twin rails of parallel development, and in this year’s Budget has endeavoured to create the image of the benevolent Bard prescribing for the revitalization of what is obviously a flagging economy. The hon. the Minister has waxed poet and drawn heavily on quotations from Shakespeare, but one almost hoped that he would have been slightly more patriotic in his fervour by quoting from South Africa’s own Leonard Flemming who exposed so brilliantly and so incisively our own South African way of living, our philosophies and our shortcomings in his “Fool on the Veld”. This House will long rate the Trinity of the 1972 Budget speeches, that of the hon. the Minister of Transport, the hon. the Minister of Posts and Telegraphs and that of the hon. the Minister of Finance, as the most revealing in the whole history of the Nationalist Government. For South Africa the moment of truth has arrived. We are experiencing stagflation, that is stagnation and inflation. A once wealthy country with a vibrant economy, massive reserves and international recognition, we are now faced with these facts and with rejection in the way of growing hostility of the word at large. We have in fact reached the stage where we must review the hon. the Minister of Finance in his role of Old Mother Hubbard, who “went to the cupboard to fetch her poor dog a bone; when she got there, the cupboard was bare and so the poor dog had none”. The hon. the Minister will forgive me when I say that we on this side of the House see him rather in the role of a pilot on a salvage tug making a desperate effort to escort a badly crippled ship of State from stormy waters into relatively calmer seas. For all too long the hon. the Minister, together with the hon. the Prime Minister, has been playing the role of the hopeless optimist. They have not only been misleading themselves, but they have been misleading the public of South Africa as to our economic welfare. They have misrepresented the course the economy is taking and they have ignored the storm warnings which have been sent out so clearly by financial speakers throughout the country’s economy.

No, by the useless pessimists in the United Party. [Interjections.]

The hon. Minister has refused to accept the predictions of the business world; in fact, he has allowed himself to follow the path of bureaucratic arrogance and State mismanagement. This Government cannot escape the responsibility for the present state of the economy. For all too long it has legislated for outmoded ideologies; we have remained overtaxed and over-governed despite the comparison the hon. the Minister likes to make with the situation overseas. The man in the street in South Africa is concerned with what is going on here …

Hear, hear!

… his misfortunes here, his inability to have his children educated and to bring up his family under the present circumstances. He is not concerned with the economy of France, Belgium, Britain or America. The Nationalist Government has built up a top-heavy civil service and the Government has drained our economic resources in order to build up uneconomic border industries. The Government has discouraged immigration at a time when our manpower resources are taxed to breaking point. We have hamstrung our economy with the physical planning legislation, job reservation and other restrictive labour legislation. But the real tragedy of the present Budget as presented by the hon. the Minister of Finance, lies in the stark fact that once again he has budgeted for an economy hide-bound by past prejudices and circumscribed by present Nationalist inwardthinking attitudes. He has ignored the wider horizons and the exciting challenges of a South Africa which accepts the truth that we are a country of some 21 million persons, that we have the economic potential to cater for the wants of such a population, that we have untapped labour resources with which we can justify the fullest use of our vast mineral reserves. To this extent the hon. the Minister of Finance has presented only a half Budget. He has again ignored the real potential of our great country.

But there are signs that the Cabinet’s blinkers are coming down. Last year the hon. the Minister indicated that he was prepared to have a dialogue with the industrialists. It is known that this year an excellent brochure prepared by the Federated Chamber of Industries was presented to the Government and was discussed with parties on both sides of the House. There are clear indications that in that brochure it was made clear to the Minister of Economic Affairs, the Minister of Finance and other Cabinet Ministers that our problems are in no way short-term and that they cannot be conquered by stop-go policies. They are long-term problems. Our labour situation is desperate; our balance of payments position is serious; inflation remains an illness which will not be conqured overnight. The Government is at last taking some steps to recognize that commerce and industry know no politics; they talk in the interests of South Africa, unlike the philosophy of the Nationalist Government itself.

We have a significant change of direction in the Government’s economic policies. It was only last year that the “demp” schools’ philosophy was being propounded across the floor of this House and that the hon. the Leader of the Opposition and we on this side of the House, propounded a “growth” philosophy that pleaded for a higher growth rate. It was supported by such men as Mr. Jan Haak who said: “Give us 6 per cent; give us increased immigration.” We have had our economy damped down until we experienced the situation just prior to this Budget, where we had reached a stage of chaos and crisis. As a result of this, we are now not even holding the 5,5 per cent growth rate which the Economic Advisory Committee in its economic development programme for South Africa, propounded. The chairman of the Economic Advisory Committee, Dr. Riekert, has made one startling statement, namely that the 5½ per cent which has been suggested as the optimum growth rate, is based on the acceptance of the situation as is, ignoring the fact that we have no statistics indicating the proportion of our non-European population that is either unemployed or under-employed. What a scientific basis on which to project a programme up till 1975! The Government continues to ignore the fact that the silent majority, which has no vote in this country’s destiny, will inevitably dictate our economic well-being. It is to the hon. the Minister of Finance’s credit that he has at last paid some attention to the appeals by the private sector in reducing in some small measure the incidence of a marginal rate of personal tax plus the loan levy. But he would have done much better had he reduced this rate to the Franszen Commission’s 60 per cent limit and thereby given a real incentive to industrialists to use their entrepreneuring ability and restore our country to the growth path we are seeking. For all too long the Government has been suspicious of the business sector and it has seen them as being anti-Government, which of course is stupid and irrelevant. Perhaps the viewpoint of commerce and industry is best expressed and most concisely stated in the annual report of Rand Mines when the chairman, Mr. C. S. Barlow stated, inter alia :

Without profits we cannot possibly go forward, nor can the economy expand. Methods other than the increased taxation of profits and the removal of management incentive through over-taxation must be found to finance the country’s needs if growth is to be encouraged. During the No-confidence Debate the Prime Minister pooh-poohed the idea that the economy was running into difficulties, but the facts speak for themselves. The building industry is in dire straits and cannot see a revival of constructional activity until 1973 according to the Bureau of Economic Research at Stellenbosch. The motor industry, on the hon. the Minister’s own acceptance, is struggling for profits, and is in the doldrums. The hotel industry is in a mess and is heading for lean times during the next few years. The clothing industry has reached the point almost of collapse. The fishing industry is almost on its knees. In the Cape alone some 46 trading companies whose debts may eventually exceed R10 million went into provisional or final liquidation during the month of February. It is assumed that if businesses continue to crash at the present rate as many as 750 could be wiped out during this year. This is surely not a prosperous state of affairs with which the National Government can preen itself. It is against this background that we on this side of the House make our plea to the Government not to underestimate the profit motive in the need for the motivation of our economy, for nothing can be more damaging than the excessive Government controls and bureaucratic interference which the business machine has been experiencing. It was Dr. Anton Rupert who highlighted the impact on the Treasury of profit curbs when he drew attention to the fact that a 15 per cent drop in turnover could result in a 45 per cent drop in profit with disastrous results for the tax collector.

The Budget of 1972 will remain a stop-go budget. Despite all the token assurances and gestures by the hon. the Minister of Finance, nothing that has been done is likely to restore the long-term confidence of business or create overseas investment in this country on a long-term basis. I do want to remind the hon. the Minister that if he pays heed to the profound statement made by his colleague, the hon. the Minister of the Interior that time is running out for South Africa and that we only have this decade in which to make or break our great country, then he must be more urgent and more perceptive in his approaches to our fiscal and monetary problems. I want to quote from the Chamber of Industries who stated in their report:“If we want to promote actively the implementation of a meaningful export programme,” and we must export or explode in South Africa, “then we must pay heed to the necessity that South Africa today cannot afford to mount costly programmes of disproportionately rapid decentralization” at this moment. This was stated for the very valid reason that experience already gained as clearly demonstrated two real cost limitations on such ideological decentralization. The first is the high cost of creating adequate industrial infrastructures when and where these are required, and the second is the high cost of compensating industrial firms for moving to remote areas against economic trends.

I do want to place on record one blunder which the hon. the Minister of Finance made in his speech and one which should not be repeated in the future Budget speeches of Ministers. I refer to his announcement of further minor concessions to the motor trade, made at five minutes past three on the day of his speech. The hon. the Minister of Finance overlooked the fact that the Johannesburg Stock Exchange remains open until 3.30 p.m. and the indication that certain concessions would be made to the housing industry and to the motor industry was immediately interpreted into action, and profitable action, by persons who knew which companies on the Stock Exchange stood to benefit from the benefits bestowed on them by these tax concessions. After all the trouble the Minister takes to have his Budget remain secret until it is presented in the House, this I think he will agree, was a severe error of judgment.

I now want to come to a less satisfactory aspect of the hon. the Minister’s Budget proposals. I refer to the minor concessions which were made to the motor industry. The hon. the Minister stated that the motor industry has been going through a difficult period as a result of his previous taxation and H.P. restrictions and that sales were at a comparatively low level just at a time when the Government’s desire to force phase three of its local content programme requirements through, was calling for considerable capital investment by the industry itself. He stated that he felt that this sad state of affairs justified some small concessions to the industry. I believe that the Minister has hopelessly underrated and underestimated the impact of the motor industry as an inflationary influence on our South African way of living, and he has also underestimated the effect which the high costs of motor cars, motor servicing, tractors, and general sales is having on the man in the street. We do not regard the concessions made by the hon. the Minister as significant at all. In fact, they will have almost no bearing on the sales of motor vehicles. It is a fact that cars in South Africa are probably of the highest price range in the world, and in this regard I want to take three examples. The Volkswagen Beetle, as manufactured in South Africa, is 43 per cent more expensive than in Germany; the Toyota Corona is 100 per cent more expensive than in Japan, and the Ford Capri is 35 per cent more expensive than in Britain. I will come to the argument that we must pay for the luxury of a motor industry, but one cannot at this moment in time when the country is struggling under such economic disabilities, justify these high prices in the light of the Government’s present policies. I make no apology for a restatement of some of the facts of the matter, because I believe that it is today only economic reality which is making the Government face the facts of the situation. Just as they have in the last three Budgets made concessions in the field of labour restrictions, in the field of Bantu restrictions, I know that they may now do so in the field of the motor industry, if it is to be restored to a healthy state and if the man in the street’s interests are to be given due regard as well. If the hon. the Minister is sincere in his desire to use his budgetary armoury of fiscal and monetary weapons in order to curb inflation as one of his three primary objectives which he has stated himself, then his treatment of the motor industry lacks direction and lacks responsibility. In fact, the Government’s handling of the motor industry in South Africa, which is the third largest industry after mining and farming, has been inept in the extreme. It is the Government that is responsible for the industry’s trouble and which is also the cause that the taxpayer is paying artificially high prices for private cars that these cars are not of a standard which is enjoyed by persons overseas where quality is given regard to, and that our repair costs are also disproportionately and inordinately high. This hits at the farming industry, the distributive industry, the transport industry and at the man in the street, and has become a point which is a burning issue in South Africa and one for which the Government should have due regard.

I want to refer briefly to the initial implementation of phase three of the motor industry, which calls for a total local content by 1976 of some 66 per cent. This policy was announced in 1970 and implemented in January, 1971. The hon. the Minister knows full well that the Franzsen report has questioned the Government’s wisdom in implementing a policy which calls for an investment of R160 million at a time when our country is experiencing the pangs of inflation. The Franzsen report recognized that way back in 1962, at the time of Sharpeville, the implementation of phase two as a gesture to revitalize the industry and the South African economy was acceptable. That took place at a time when we had a surplus of labour, raw material and capital; but to force phase three on an industry at a time when we were short in both managerial skill and manpower, was absolute folly and has had as a result this tremendous upsurge in the inflationary trend. The Government has come back and said that it must stand by the industry. But in the very same breath the hon. the Minister, in addressing an international meeting of the Motor Trade, made headlines when he told the world at large that the public was being made to pay for the high cost of phase three by the motor industry. In everything the Government has done about phase three, it has been wrong. It has assumed that there would be a reduction in models in order to bring about a larger scale of manufacturing production, and so lessen unit costs. But the bald facts are that in this country, like in any other country in the world, we have 15 manufacturers producing some 41 or 43 different models. Nothing the Government has done since 1960 has stimulated the tendency to reduce the number of models. The hon. the Minister of Finance, and possibly the Minister of Economic Affairs, have overlooked the fact that many of the overseas countries have placed in South Africa their plant and equipment for the manufacture of vehicles, which have been thoroughly amortized and stand in their books at almost zero. In order to maintain face we will have all the Japanese, American, Continental and British vehicles manufactured in South Africa at an average of 5 000 vehicles per year per manufacturer—a ridiculous state of affairs, which can only drive up the costs of motoring to South Africans at large. In the same degree we are paying up to 50 per cent and 100 per cent more for our local replacement components than we would have paid had these been produced overseas. In addition, none of the Government’s policies in promoting the growth of the motor industry to this vast and unnecessary extent, have resulted in the saving of foreign exchange. What we are not paying for the import of vehicles, we are paying for the import of capital equipment and those parts which cannot be made here. To make it worse, we had the incident last year when, because of the high taxation on motor vehicles through sales tax, the hon. the Minister of Finance did not realize that the motorist would use his privilege and start using the light commercial vehicle as an alternative, a vehicle on which he paid neither import duty nor sales tax. So today we have a fantastic growth in the light commercial vehicle business, which is not helping the country. They are brought in either unassembled or fully assembled on their wheels, and the country is lapping them up. We have not only expended unnecessary foreign exchange, but we have done a disservice to the motor manufacturing industry. Until the Government gives some indication that it will impose its local content programme on the light commercial vehicle as such, it is no good merely endeavouring to impose a further H.P. responsibility on the purchaser of light commercial vehicles if he is not a legitimate user or a farmer. These vehicles sales are increasing and the motor manufacturers are struggling against the fact that they have invested fantastic rates of capital.

In conclusion I do want to say one word about the quality of the vehicles that we are having to use in this country. Because of the tremendous rate of development in the motor industry in America, Europe and Britain, almost every year models are coming out with new safety devices and new and improved technical devices. Because of our intention that we will force an uneconomic phase three content policy on the industry, we are going to be left with obsolete vehicles with all their inherent dangers, which in many cases are resulting in the sort of death rate which we are experiencing on our roads at the moment. It is unforgiveable that we should deny to the South African public the right, if they so desire and are prepared to pay the legimate taxes, to have the best the world can offer in this country.

In addition, because of the Government’s labour policies, the man in the street is finding it exorbitantly expensive to run a motor vehicle—not because of the basic price, which is heavy enough, but because of the high costs of repairs. It is known today that the ordinary mechanic is earning as much as R400 per month. The current rate for repairs is some R6-50 per hour, and the ordinary man in the street just cannot face a break-down of his vehicle. This Government must face up to the fact that it is necessary, in consultation with the trade unions, to see to it that the number of mechanics who are available to service the tractor fleet of our farmers and our industrial and private motor vehicle fleet is increased almost threefold. In order to do that, we will have to train the non-European further, and he is capable of being trained. To deny him the right to be trained will merely mean that the present motor-owning population will run the risk that through badly serviced cars the danger element on the roads will not decrease but increase.

Mr. Speaker, I support the amendment.

Mr. Speaker, the hon. member for Gardens did his best, but had a very difficult task. He is a trained economist, but did not accomplish much. In the course of my speech I shall reply to certain of his arguments. Three things he said here really surprised me. He said : “We are living in a state of uncontrolled cost of living at the moment.”

Yes.

Is the hon. member not aware of certain things which have happened in South Africa? Does he not realize that last month the cost of living rose by 0,4 per cent, in January by 0,2 per cent, in December by 0,4 per cent and in November by 0,3 per cent? Over the past four months the cost of living has increased by an average of 0,3 per cent per month. [Laughter.] No, there is no need to laugh about that. The hon. member must stop his cackling and listen carefully now. Calculated over a period of 12 months, it means an inflation rate of 3,6 per cent.

Go and tell that to the housewives.

Until November we had an inflation rate of just over 7 per cent per year, but the breakthrough came in November, and here are the figures to prove it. How, then, can a man like the hon. member for Gardens say that we are living in a state of uncontrolled cost of living? Surely the increase in the cost of living has been brought under control; in the past few months the situation has changed. The hon. member went on to say: “Nothing will restore business confidence in South Africa.” I want to say to him that, under the present circumstances more business confidence is prevailing in South Africa than ever before. If he does not know this, he is a stranger in Jerusalem; then he does not move in business circles. No, the hon. member should not come here with such wild statements. The hon. member then went further and attacked the Minister about a “blunder” he had allegedly made by broadcasting his Budget speech while the Stock Exchange was not closed. Why does he not propose that we should have a general public holiday on the day the Budget Speech is delivered; that everything should be closed on that day; that nobody may do business on that day? Is this what he wants? It was a childish statement. It is a statement which he had read somewhere in a newspaper and he then repeated His Master’s Voice here.

Sir, at the beginning of this session the Opposition Press and hon. members opposite made swaggering statements every day about the terrible “economic mess” in which we had allegedly landed. In addition, their newspapers said how hon. members opposite would attack us in the no-confidence debate. One of their newspapers— I think it was the Sunday Times, but I am not sure—spoke of the eight financial stars they have on that side who would supposedly demolish us on this side. But what in fact happened?

What does Rapport say?

It really was a spectacle. You will remember, Sir, that after the Minister of Finance and the Minister of Planning had spoken, hon. members opposite lay scattered on the financial plains. All that remained for us on this side of the House to do, were some mopping-up operations. That is all we had to do. I think that Press reporter is still squirming in embarrassment because, as the hon. the Minister of Community Development said on occasion, he did not even see candelights which he regarded as stars; he only saw fireflies. Never in my life have I seen such confusion as we got from the financial speakers opposite who have participated in the debate thus far. They reminded me of a lot of wild mules jumping over the paddock gate one by one and each following his own direction. Each of them had his own policy, to such an extent that the hon. member for Parktown, the main speaker of the Opposition on financial matters, became so despondent and frustrated that in the Third Reading Debate on the Part Appropriation Bill he said to the Minister —I think you will find it in column 1550: “It does not matter what the hon. member for Constantia said. I at the moment speak for the United Party on these issues.” And what did he tell us then? He told us then that in principle the United Party supported devaluation and that it supported import control in principle. Sir, today it again fell to our lot to listen to this group of speakers.

You have said nothing yet.

The hon. member should just wait a little. Sir, as far as their arguments about this Budget are concerned, they are as lost and forlorn as they were in the debate on the Part Appropriation Bill. We have heard absolutely nothing from them about the central theme of this Budget. I sat here listening to the hon. member for Gardens. He spoke for minutes about the motor car industry; he did not speak about the central theme of the Budget. Hon. members opposite sought arguments about secondary things which are not important. The Hon. member for Parktown issued a wild challenge to us. Let us take a look at what he in fact said.

He said—

Sir, this is the typical parasitical political approach of the Opposition. [Interjection.] I shall still come to that if the hon. member would only give me a chance. I listened to him; he should listen to me now.

But then you should not be so funny.

Sir, this Budget is a good one; last year’s Budget was also a good one, and the one the year before that was also a good one. These Budgets were designed to meet the requirements prevailing at the time. Sir, the requirements of the time determine whether one should apply popular or unpopular measures. It is typical of the United Party that they want to go along with the stream when measures are introduced which are popular among the voters and the taxpayers and beneficial to them, and want to pretend that it is their policy which is being followed by the Government. I want to accuse the United Party of not having a long-term or even a short-term economic policy at all. They have never given it to us, although they continually ask the hon. the Minister for a blue print. But what do they do? They have a purely negative approach to the economy; it is based on exploiting the bottleneck of the moment, and in this way they want to stir up grievances.

A vulture policy.

They run with the hares and hunt with the hounds. Sir, surely they know very well that in the economy you can move in only two directions. On the one hand you can move in the direction of restrictive, unpopular measures; on the other hand you can move in a direction of growth or expansion, in which case you introduce popular measures. But this Government moves the economy in one single direction, namely the direction which is in the national interest. It moves the economy in the direction which ensures price stability as well as labour stability, regardless of whether it has to introduce popular or unpopular measures. After all, it is very easy for the Opposition to clamour for popular measures during the unpopular period. It is no secret what measures the Government is going to introduce; they know what steps it is going to take. Then they clamour for the popular measures because they know that the economy is going to swing some or other time, and when it does, those members make the claim that it is as a result of their policy being applied. The reply to that hon. member’s statement is that it is not a matter of whether one does something popular or not. That is not what matters. What really matters and what is important, is at what stage one applies that measure. That is the crux of the matter. And in this, the stage at which one decides to do this, the Opposition has no say. It is for the Government to decide in its discretion, when it should be done. Let us take the example of the raising of the credit ceiling, the 5 per cent and the 10 per cent granted in the Budget. After all, the bankers in South Africa have been agitating for many years for the total removal of all controls. I should like to see the bankers take some note of what the hon. member for Constantia said here today. I do not blame the bankers and the banks for agitating for the removal of those controls. They want to make as much profit and do as much business as possible; they do not want to be restricted. But the only responsibility they carry is that they must ensure that their shareholders receive dividends. The economic welfare of the country, however, is the responsibility of the political economist, the one who governs. The bankers are not people who need go to the polls to account for their deeds. No, but we have to do so, we whom the nation has called upon to govern. Therefore we and the Minister see the interests of the nation in perspective and if he then decides that there should be controls, they are introduced. What has the opposition done now? All these years, the Opposition, together with the banks, has clamoured for the suspension of the controls because they want to be popular with the banks. When the prevailing circumstances allow it, it may be done. They have requested this for three or four years now and at present the prevailing circumstances justify the suspension of a percentage of those restrictions. It was done, not as a result of the appeals made by the United Party or the banks, but because of the circumstances in the country, and in spite of this the United Party jumps on to the wagon and says everything that is popular is what they asked for and is their policy. To me it is honestly one of the most unoriginal and most ridiculous challenges the hon. member could have issued to anybody. There is no time to deal with example upon example. I merely want to say the hon. member surprised me by coming with such a challenge and saying that everything in the Budget which is good and which is beneficial to the taxpayers is their policy which they suggested. It is so naïve that it really cannot be true.

But it is the case.

I want to illustrate further how the United Party talks in all directions. In this way they can rest on their laurels and say that they had the wisdom to tell us. In the Third Reading of the Part Appropriation Bill the hon. member for Parktown made a strange statement. In column 1555 he said—

Up to that point he predicted a good year for 1972 and then he added that he hoped there would be an improved balance of payments as well. Then he went on to say—

Now the hon. member says that we will be heading for a recession after 1972, but in 1972 we will have a good year. But he does not tell us what the fundamental problems are of which he spoke. He does not tell us what the fundamental problems before devaluation were. According to his argument, however, those fundamental problems will disappear in 1972, only to reappear suddenly after 1972. He says this because if there is no recession in 1972, he can say there were no fundamental problems. If there is a recession, he will say he predicted it. That is the sort of argument they use. If this is their economic theory and insight and if this is the sort of economic statement these people make, I have a dreadful fear that a catastrophe would strike us if they should ever govern.

I should now like to associate myself with the other hon. members here and congratulate the hon. the Minister on what I regard as a masterly Budget, based on absolutely sound and recognized scientific and economic principles. We appreciate the fact that it was a very difficult Budget and that incisive decisions had to be made, and well-founded decisions were in fact made.

Why was it necessary?

The hon. member will have an opportunity to speak. If any risk was involved in this, it really was a calculated one. But I want to tell you once again, Sir, that these decisions were well-founded and were not chancy guesswork as the hon. member for Parktown wanted to give out here this afternoon when he spoke of a “gamble”. Some press reports also stated that the hon. the Minister could be compared with a tight-rope walker who could lose his balance at any moment and plunge to the ground. I want to reject these reports with the contempt they deserve, because they are mere wishful thinking and, as far as I am concerned, absolutely uninformed and very superficial comment. The hon. the Minister and the Government are at all times fully aware of the circumstances and they had full control over the situation. They knew exactly what had to be done and in what direction the economy should be steered.

Is that why you were in a mess?

No, we are not in a mess. Every Budget arises from the consequences of the previous one, with the result that this Budget must be seen in conjunction with the previous one if one really wants to understand it. [Laughter.] It is so clear to me that that brains trust at the back there really understands nothing of this whole matter. [Interjections.] Throughout last year’s Budget and this Budget there runs a golden thread which achieves the objective of stability. In a capitalist democracy such as that in which we are living, the Government cannot do everything. The Government can merely guide the economy in the direction in which it thinks it should go, and then take the necessary measures to that end. The problem, and it is a problem which exists throughout the world, is that the time which the measure takes to infiltrate into the economy and the time which the powers and laws take to show their effect, cannot be determined with certainty. The other item which cannot be determined with certainty either, is the grade or the effect or the intensity of the economic activity which that measure will cause. These variable factors are not known to anybody, in whatever part of the world he may be. I want to say to those hon. members opposite that they are the last people who should come and pretend that they possess any superior knowledge of these matters. In actual fact they have no conception of them. Although these variables are unknown, although it is not known when the reaction to measures taken will come, it is nevertheless very clear that the Government knows, and knows exactly, in what direction the economy is going to move. There was no gamble involved in that. It was done on the basis of scientific principles. I want to say briefly that the objectives in this Budget, as indicated by other hon. members as well, were perhaps conflicting priorities to a certain extent. They will be capable of being realized by the ten points of action mentioned by the hon. the Minister in the Budget. One can in fact describe this Budget as an expansionary-deflationary Budget. Over the past two years the economic stream has moved in a direction of very high economic activity and very high inflation. What has happened now? That stream had to be stopped. The previous Budget was designed to do this and in fact did so. That stream was reversed so that it became a stream of low economic activity, which led to a cooling-off in the economy. We have reached the stage now where the economy wants to cool off too much. For that reason this Budget must reverse that stream again and guide it in the direction of higher activity once more. In spite of this, the hon. member for Parktown says of the hon. the Minister that “he misread the economic signs”. The hon. the Minister knew exactly what went on. I want to say that maintaining the balance between the economic streams so that the one or the other does not get out of hand and does not harm the citizen of South Africa is an art, and it is because of the competence of the hon. the Minister of Finance that he has controlled them so beautifully. This matter is in fact a very difficult one which must be manipulated carefully. The art in modern political and economic process is to be able to do this today. When one has a government such as this one, one, can look ahead with confidence. When one has a Minister of the calibre of the present hon. Minister of Finance to hold the financial steering wheel, one need not be concerned that one’s economy will be managed badly. Then one can proceed with confidence in the knowledge that it does not matter what the problems are abroad—as we have had in the past—and one can carry on in the knowledge that they will be handled with absolute dignity, competence and confidence.

Mr. Speaker, the hon. member for Pietersburg has waxed very enthusiastic about this Budget. He talks as an experienced businessman but I wonder how he would deal with any business where he has three branches each of which has made substantial losses and then try to tell the shareholders that they have managed very well in the past year? That is the kind of argument he used this afternoon.

The State is not a business. [Interjections.]

In other words, it does not run according to business methods? You waste money no matter how you spend it and then you expect the public to believe that? What a remark to make! I hope the hon. member is going to tell that in Oudtshoorn.

By what percentage will the profit grow?

Order!

The Government is not concerned with making profit, nor with making losses, but it is concerned with balancing its budget. This Budget has not been balanced, and this is a hard fact. In the way the hon. member for Pietersburg has been talking, he has almost convinced himself that the Minister has shown a surplus. Earlier in his remarks he suggested to us that businessmen were satisfied with this Budget. But can I draw his attention to the latest edition of the Financial Mail, in which an article appears under the heading “Much Ado About Nothing”. It reads as follows—

That is the comment of business, and yet the hon. member tries …

Rapport too tells us what the businessmen think.

Before I deal with the hon. the Minister’s speech in detail, I should like to raise one or two queries with the hon. the Minister on one or two matters. The first is connected with the grey market. I support the remarks made by the hon. members for Parktown and Constantia in this regard. I suggest to the hon. the Minister that he takes to heart particularly the remarks made by the hon. member for Constantia. The position with regard to the development of the grey market can become very serious indeed. I particularly want to draw his attention to the discipline which he has introduced with regard to participation bonds which are generally dealt with by trust companies. The interest rates on these participation bonds are going to be restricted. Many millions of rands are invested in participation bonds. When a portion of a bond becomes due, you will find the position that one of the participants may have, shall we say, a R4 000 stake in a R100 000 bond. What is the position when that person wants to draw his money? He is in that syndicate for R4 000 at an interest rate of 10 per cent per annum. But now the new rate will be 8 per cent, I believe. Therefore, you will have under the same bond two rates of interest running. Has the hon. the Minister considered that? What will he do when there is a general run on the part of people interested in these bonds asking to withdraw their money? Has the hon. the Minister made any enquiries in regard to the extent of these bonds? Does the Minister know how much is invested in participation bonds in this country and what the time period for these bonds is, Most of them are for three years, and in some cases for five years, and they virtually amount to revolving credit. They are very seldom called up. The interest rate is the market rate. When the hon. the Minister depresses the rate below the market rate, he knows as well as I do that the people will go to the market to invest wherever they get the best security. These participation bonds are secure. They are generally very well managed by trust companies, who see to it that they are first-class mortgages and that the mortgages are well managed.

They are doing it already.

The hon. member for East London North suggests that they are already going to the trust companies asking for their money to be withdrawn. I should like to know from the hon. the Minister whether he has the position under control, whether he knows what the position is, whether he knows the extent to which money is invested in these participation bonds. If he does not know, he may get a very severe shock later in the year if he does not get one sooner. There is another matter to which I should like to draw the hon. the Minister’s attention. That is the question of the realignment of currencies. The hon. the Minister said very little on that. He was strangely silent on the realignment of currencies. Does he regard the present position as fixed, or does he think that the realignment of currencies is temporary? Does he anticipate another international monetary conference similar to the Bretten Woods Conference? I submit that the recent realignment of currency arrangements was a temporary feature and essentially a political arrangement. I suggest to the hon. the Minister that possibly a more permanent agreement will be obtained and that the present rates may or may not hold, depending upon the attitude of the American Government when it passes legislation in this regard. I should like to know from the hon. the Minister whether he anticipates that the present rates will hold or whether he anticipates any difference in the near future.

There is another matter which I should like to raise. I see that the hon. the Minister of Economic Affairs is present and I should like to raise the matter of price control The Sunday Express has two reports —“Prices pegged on radios, cameras, fridges, cars; new list backdates to November the 1st” and on the same page—“Top-level talks on relaxation of price control”. Which of the two is correct. Are prices to be pegged as they were on the 1st November or are we going to have relaxation? I hope that the hon. the Minister of Economic Affairs will indicate sometime during the debate or during the session what he intends doing about this recent statement by the Secretary of his department in regard to price control.

I his opening remarks the hon. the Minister said that this Budget was designed to give direction and impetus to the national drive for a more prosperous South Africa. On the contrary, it is a Budget of the conjurer who creates the illusion when in fact the true scene is different. The ordinary taxpayer may pay the same amount this year as he did last year, but the difference is that whereas last year he received the promise that he would get something back after probably seven years, this year the whole amount is taken as tax. Last year a portion was taken by way of a loan levy, but this year there is no loan levy. Although the man in the street appears to be indifferent to the Budget, he will realize in time—it is our duty to tell him that—that it entails in fact an increase in taxation, because this year there is no prospect of any return.

On the evening of the Budget one of our newspapers carried the headline “A R30 million bonanza”. However, there was no bonanza at all, because it was the return of our money which we had lent the Government. We were compelled to lend that to the Government seven years ago and we received 5 per cent interest thereon. It is no bonanza at all; it is a quite misleading headline. In fact, too many of the headlines on this Budget have been written too soon and when they had studied the matter carefully, they had to revise their opinion, as the Financial Mail has had to do.

The hon. the Minister would have done much better if he had told the country frankly what the position was. He should have told the country that its financial position was serious and that he did not only have to increase taxation but also to use reserves. In essence that is what this Budget is about. This Budget virtually tells us that taxation is increased, because there are no more loan levies. Despite that and despite using the reserves there is still a deficit for the current year, and he cannot give us any assurance what the future will bring; he is hoping that things will become right. In fact, he is the inveterate optimist although there are many who have proved him wrong. The hon. members accuse us of being pessimists but we have from time to time been proved right. In fact, we are in the dangerous position of high inflation and slow growth. Yet we must increase our productivity if we are to overcome our balance of payments difficulties. To get the economy going, requires an all-out effort on the part of every section of the community and I propose to analyse the Budget from the point of view of the various groups who are affected by this Budget. I shall start with the overseas investor.

The Minister subscribes to the private enterprise system, but I suggest that he should make a study of all the obstacles which the overseas investor must circumvent when he invests in this country. The Minister holds out a sop to industry by saying that the authorities will be prepared to consider allowing industry in the Pretoria, Witwatersrand and other areas to employ additional Bantu labour in order to work multiple shifts even where the ratio of Bantu labour exceeds 2,5 to 1. Naturally this concession can only be granted on a selective basis. I wonder how the Minister or his overseas office is going to explain what the selective basis is going to be to an overseas investor, how he is going to apply it, which firms are going to get it, and so on. This change of direction and easing of policy requires further investigation. Will the Minister tell us whether this is a temporary or a permanent relief? Is it to be the temporary or the permanent position? If the latter, how permanent? The Minister knows that the cost factor is basic to the building of an export market and in order to have an adequate spread of costs there must be an adequate local market to provide the basis for an export market. You do not build up an export market in isolation. You build an export market on the basis of the local market, because only on the basis of a local market can you get a spread of costs. Your administrative and technical charges, and your high cost factors which are spread over the production as a whole must be taken into account and must be spread over the local and the export markets. You use your local market to test out the efficiency of your product and its acceptability, and from there on you go to your export market, whether it is in a neighbouring territory or overseas. Your fixed charges and semi-fixed charges are spread over the production as a whole and we would like to know from the hon. the Minister whether he will take the local market into account. Or will he only allow the formula to be applied to the export market? Can the Minister help in reducing the amount of red tape involved in employing the amount of labour required? Has the Minister ever tried to get a Bantu employee? Does he realize the amount of red tape that is involved? Does he know about the hours of waiting, the number of manhours wasted in trying to get suitable labour? I had the experience this week-end of making a personal inspection to see what is involved in trying to get Bantu labour. When a Bantu employee gives notice and wants to work elsewhere and the employer wants to employ another Bantu from the same district he calls on the registration office. In this case the registration office inspected the Bantu’s passbook, still called a “dompas” by Bantu, and entered the particulars on a form. Thereafter the boy had to be taken to Pinetown, to the Magistrate’s office. After a delay of about half an hour the contract was completed and the Bantu taken back to the neighbouring village where he had to be registered. The whole process took three hours, and it only took three hours because I was in a privileged position. I was with the Bantu. It is an all-time record that we got through in three hours. Some Bantu standing in those queues had been there for three days They go there every day. I also know of an earlier case of a Bantu who worked for an engineer. He worked for this firm for ten years and had become an expert in field work for the surveyor and at the end of one particular year he took his annual leave. He decided to take his annual leave at home in the Umbumbulu Reserve. After his annual leave, instead of the Bantu returning, his brother turned up at the firm. The employer asked him what he was doing there and he told them that he had come to take his brother’s place. He told him that his chief had sent him and that his brother had to stay in the Reserve until he came back. In this way ten years’ efficiency was thrown in the gutter. Fortunately, steps were taken and after two days in which the employer chased around, and after a lot of red tape, the first Bantu was returned to his work and the other sent back to the Reserve. The unqualified Bantu who had not worked for a year was sent back. You can go on in this way. I am quite sure that everybody on this side of the House and everybody who is prepared to be equally frank on the other side of the House, would illustrate the red tape, the waste of labour hours and the complete frustration which follows most attempts to get new Bantu staff in the urban areas.

Or a return of your old ones.

As the hon. member for South Coast said, even if you want your old workers to return. This is so, despite the fact that we in Natal have Bantu Reserves very close to our towns. In fact, I do not believe there is a single town in Natal which does not have a Bantu Reserve area within five miles of the town boundaries. When the Minister talks in his Budget speech of finding a new formula, we just wonder if he realizes what is involved. I wonder whether the Minister has any influence over the Minister of Bantu Administration, whose systems demand many man-hours to ensure that the labour unit is correctly allocated. At the present moment, the Minister of Bantu Administration’s organization is busy with the Kwa Zulu Organization. They have taken various units from various Bantu commissioners’ offices all over Natal to look after the new Zulu office. In the meantime the administration work in the other offices is falling behind. Perhaps the Minister will indicate to the Minister of Bantu Administration that it is time the red tape is cut and that it is time for a bit more realism to be introduced into the organization. I raise these queries with the Minister as he is anxious to encourage overseas investment in this country, and while the involved processes of labour employment tax the wits of the South African industrialists, they are a mysterious maze to the overseas investor. I would like to know whether the Minister is intending to encourage overseas investors to invest their funds in this country on a more permanent basis. Does the Minister know how many overseas companies have a relatively small capital account and a large loan account? Has he considered encouraging such firms to convert their long-term loan accounts to share capital and so provide a more permanent investment?

I have dealt briefly with the overseas investors. I now come to the South African industrialist. I commend to the Minister a programme for sustained industrial expansion in South Africa prepared by the South African Federated Chamber of Industries, which was handed to the Minister of Economic Affairs on the 23rd February of this year. I do not propose to examine this document in detail. Copies have been made available to both sides of the House. Many of the suggestions offered have been made in the House in earlier debates by hon. members on this side, but the ideas are summarized in a single document and we will be interested to learn of the extent to which the Government is prepared to accept the sound advice offered. The Federated Chamber of Industries believe that official policies have not been effective in promoting economic development nor in containing price inflation. In the time available it is not possible to analyse the whole of this programme. I would, however, join issue with the Minister when he says, “To a large extent the improvement of productivity is a task for private enterprise.” If he holds this view, there should be the minimum of Government interference in the handling of labour. It is in the interests of private enterprise that there should be very little interference. So far very little opportunity is given for training labour in the urban areas, it being principally confined to the border areas and the homelands. It should not be necessary to remind the Minister that decentralization which is uneconomic is a drag on the economy as a whole. I would emphasize the importance of encouraging the industrialist to train his labour in the cities and in the townships. Many an industrialist would be quite prepared to provide night training classes on his own factory premises. The Minister will know that overseas it is common practice in many factories to have training classes in the factories during working hours. When I was in Japan a couple of years ago I found that in one section of one of the big motor industries there men were taken off the production line from time to time in order to give them a week’s or a fortnight’s special training. As part of the routine, members of the staff were given in-service-training from time to time. Some years ago when I was in Manchester I found in the textile industry that arrangements had been made with the Manchester Polytechnics to hold extension classes in the factories so that the workers could be made more efficient. I suggest that far too often in our industries today where we employ African labour, we give them a crash course of training for six weeks, as the hon. the Minister of Transport told us the other day is done in the case of shunters, and then we leave the employees to get on as best they can. If they have a certain amount of resourcefulness, they make progress, and if they have no resourcefulness they are fired. In this way manpower is being wasted, whereas a lot of this waste could be avoided if you had a proper training scheme. If you had these employees properly trained so that they could become more efficient, they would increase their productivity. I suggest, Sir, that this Budget is lacking in imagination, because I see no provision in the Estimates for increasing the training of employees, particularly in the urban areas, because our industries in the urban areas will remain, despite all the talk about decentralization and despite all the talk about industries in the homelands. The hon. member for Von Brandis indicated earlier this afternoon what the position is in regard to the development of industry in the urban areas. Industrial development will continue in the four principal metropolitan areas, and it is essential to have training and re-training programmes if we are to get higher productivity and greater efficiency out of the workers in those areas. Sir, we are inclined to fail to realize that South Africa does not have very much mass production. I would remind the Minister that South Africa has a White population of approximately 3½ to 4 million, whereas the city of Sydney in Australia has a population of 3½ million, which is almost equivalent to the total White population of this country. Many—in fact, the majority—of our factories are on a single-shift basis. Neither our towns nor our border areas have a sophisticated transport system capable of transporting workers to and from factories on shift basis. Virtually none of our towns provides transport on a shift basis, and yet we are using modern machinery. But modern machinery only earns money when it works. Whenever the machine is idle, it is earning no money, and if you can work on a shift basis, as they do in most modern industrial countries, you can cut down your overhead charges and place yourself in a position where you can compete in the export market. So long as we have our factories on a single-shift basis, we will find ourselves in danger of being excluded from the export market.

We can only get export markets by running our factories on a shift basis. A visit to any highly industrialized country in the world will confirm that industrial efficiency is measured by the horse-power used per man hour, and labour-intensive factories have difficulty in competing in the mechanized world. We concentrate all our efforts on labour-intensive industries, whereas the rest of the world is concentrating on machine-intensive industries. When the tendency in the world is towards automation and when nations are combining to form a common market, we in South Africa are urged to establish labour-intensive industries and to break up our country with independent self-governing states. It is little wonder that the FCI shows signs of growing impatient with this Government. Another class of person affected by this Budget is the managerial and professional class. There is no incentive for them in this Budget. The tax adjustments which are being made in this Budget in their favour are very meagre indeed. As far as the White worker is concerned, he is told by the Minister that it is expected that organized labour will exercise moderation and responsibility in wage negotiations, yet in this Budget he gives virtually no relief except the remission of duty on soap. The Minister enjoins industries to keep prices down by cutting their profit margins, and he enjoins labour to keep down their demands for increased wages.

When we come to the Indian and Coloured workers, we find that they are earning bigger incomes as the result of the shortage of White workers. They are demonstrating that given the opportunity they can provide the work and the services. If they can maintain the quality and establish a reputation for reliability, it is only a matter of time before the cottage building trade and the motor repair business will fall into their hands. The economic laws will prove themselves in time to be stronger than the political obstacles placed in the way of the ambitious. We are already finding today that backyard factories are starting in Coloured and Indian townships and that they are getting their custom from the White areas. This proves that so far as the ordinary man is concerned, whether he is Coloured or Indian, he is determined to get to the top and to ensure a better standard of living for himself.

I come now to the final class of persons, namely the Bantu, who finds little for his comfort in this Budget except that soap may be cheaper. I draw the Minister’s attention to a phrase in his Budget speech when he said there was a slight rise in registered unemployment, which still remains, however, at a very low level. Reading that phrase in its context to the other remarks, indicates that the Minister was not including Bantu unemployment. I would like the Minister to tell the House in the course of his reply whether the Government has any idea of the number of Bantu unemployed in the White areas or in the homelands, including the transit areas, because despite all the talk in this House, until the public knows the extent of Bantu unemployment in the country, we will not know the extent of the possible explosion about which the Minister of the Interior warned us. Every unemployed Bantu militates against the possibility of increasing the productivity of this country.

We have said in previous Budget debates, and we will go on saying in this Budget debate, that we will not be able to increase productivity unless we improve training and face up to our responsibilities as the bearers of Western civilization and prove to the outside world that we are prepared to accept our responsibility to ensure that as far as possible all sections can make their contribution through proper training to the economic development of the country as a whole. Social welfare for all the peoples of this country depends on their economic welfare. Their economic welfare depends on the incentive given to private enterprise and to the worker to produce goods and services to the maximum capacity. Our security rests not on guns but on full stomachs, adequate clothing and housing. This Budget has demonstrated how the Government has failed in this ideal. One financial paper has described this Budget as “much ado about nothing”. I would describe it as “a comedy of errors”, if it were not so tragic.

Sir, according to a certain newspaper, a very important newspaper, the Opposition is proud of the fact that they have no fewer than eight, possibly ten, financial stars on that side of the House. According to this newspaper, these men will be able to speak with authority on financial matters, and according to this newspaper they are well qualified to make an aggressive attack on the Budget speech. Sir, I have listened this afternoon to the first five of these stars. If what we heard here this afternoon from hon. members on that side was an aggressive attack, then I would be very glad to be described as a man with a very timid temperament. If the first five speakers on that side are financial stars, then I pray that this side of the House will be spared the embarrassment of being described as a “star-studded” side as far as financial matters are concerned.

*Mr. Speaker, you will allow me to leave the hon. stars at that. I want to react to one single statement made by the hon. member for Parktown, i.e. his statement that the policy and the activities of this Minister and of this Government in respect of financial matters, were based on guess-work. I want to tell the hon. member for Parktown that this is not the case, and since hon. members on that side are taking a delight in making a fuss and raising a dust because the South African economy is experiencing somewhat difficult days, I want to take them back six or seven or eight years into the past. I want to take the hon. member for Parktown and his fellow stars back to the Budget we had in this House in 1965. Sir, seeing that they say that everything this Minister has done, is based on guess-work, you will allow me to quote fairly extensively from the Budget speech delivered by Dr. Dönges in 1965. And what one Minister of Finance does, the next one does too, because we are, after all, a party which has a direction and a course we follow. It is not a case, as the hon. member said, of our going one moment and stopping the next. You must simply listen to what Dr. Dönges said in 1965, because it is based on sound financial foundations. Dr. Dönges said—

This is what the hon. the Minister has done once again this year. Dr. Dönges continued—

Of the policy to which the then hon. member for Constantia referred as the stop-go policy, Dr. Dönges said: “We of the National Party do not set about it in this way.” He said—

In 1965 the Minister of Finance said that seen against the background of the economy as it was at that time, he would adapt these measures at his disposal to the best of his ability, but that it was doubtful whether that would be sufficient; and when it became necessary to do so later on, the present Minister of Finance and this Government brought in that other instrument in order to bring about the effect on our economy which we do have today. Now, however, hon. members opposite must pay very close attention. It was in 1965 when the Minister of Finance said the following—

And now I want the hon. members to listen—

I want to tell the hon. member for Durban Point that I am coming to the point now—

I repeat—

He continued by saying—

And then Dr. Dönges said—

At that time the hon. member for Hillbrow was not a member of this House yet. At that time the hon. members on that side of the House followed the same pattern. When we said that we would not gamble with inflation, or might not gamble with inflation, those hon. members said that we should simply allow things to follow their own course, because that was not so bad. [Interjections.] It is recorded here. Dr. Dönges said: “They turn at the siren voices.” What did our then Minister of Finance say?—

By means of this new measure he has brought in, i.e. the sales duty, the present Minister has succeeded in cooling down the South African economy, and in doing so, he has been faithful to the statement made by Dr. Dönges at that time. I quote—

That is the National Party Government for you. As far back as 1965 they saw these things hon. members on that side of the House see only now, and about which they want to make a big fuss. As far back as 1965 our Minister of Finance saw the existence of danger signals. At that time hon. members on that side of the House said we simply had to live with this inflation, because it was the fashion in the modern world and it had to be done in that way. They must listen to us. I say there is continuity in the things we do. The hon. members must listen once again to what we said in 1965. These conditions we are experiencing today, are not so very strange to us, and I say this because as far back as 1965 we said—

That was in 1964—

The hon. member for Hillbrow must listen now—

We foresaw that as far back as 1965. Now that the hon. member for Hillbrow is able to make some political capital out of this, he emphasizes this thing day and night …

Especially at night. [Interjections.]

In 1965 there was not yet any question of the rate of inflation we have today, but already at that time this Government saw that it could come about. I want to tell the hon. member for Hillbrow that at that time we did not even have a Physical Planning Act. In consequence of local circumstances and circumstances elsewhere in the world, signs were clearly visible that dangerous tendencies were developing. I want to say in passing that we now want to emphasize the fact for once and all that the Physical Planning Act was introduced in order to serve a purpose. That purpose was to assist this Government in its policy of decentralization. It was said here, as it was said over the length and breadth of the country, that this Act would not be employed to strangle the South African economy to death. Now that different circumstances have set in, the Minister of Finance is able to come forward wisely and, without tampering with the principle of this Act, promulgate certain proposals and regulations which will be for the good of the South African economy. This means, in other words, that this Budget has also been adapted to the circumstances of the day.

It is a bird-shot Budget.

The hon. member for East London City should rather keep quiet; I do not know whether the hon. member is also among those eight or perhaps ten stars. I hope not.

There is something else I want to add, and for that reason I want to make haste. Hon. members on that side of the House were not all that clever. In 1965 Dr. Dönges said in his Budget Speech that it had been found that an annual growth rate of 6 per cent would probably give rise to serious bottle-necks as far as the balance of payments as well as skilled labour was concerned. He went on to say that it was improbable that it would be possible to achieve this growth rate of 6 per cent per annum over a full period of five years. In those days we realized that what had come, could not remain forever.

Mr. Speaker, I do want to draw attention to some comments on this Budget. Because the time at my disposal is limited, however, I just want to refer to a single South African personality. Every statement of this very person is put forward here and elsewhere, in season and out of season, by the hon. the Opposition. I am referring to Dr. Jan S. Marais of the Trust Bank. I am making use of his point of view for the reason I have just mentioned here. Dr. Jan S. Marais said—

Not pitched far enough.

Those were his words. No one has quoted him here today. How come? Those hon. members may check their Hansard reports and they will find that Dr. Jan S. Marais is quoted in season and out of season. But when he describes this as a shrewd Budget, they say nothing about that. Because the time at my disposal is short, I want to sum up, also for the edification of the hon. member for Parktown. The same Dr. Marais says—

Not only for the Trust Bank, but also for its subsidiaries—

These are the sectors in our economy which are in difficulty today, i.e. the unit trust movement and the building society; now they will prosper. He went on to say—

Now this is the person quoted by hon. members opposite in season and out of season. Already the light of five of the stars has faded today, and this person has never been called to the fore. No, if this were to have been an aggressive attack on the Budget of the hon. the Minister of Finance, it had not come off. We want to tell the hon. the Minister of Finance that he may proceed with confidence; that, on the basis of the one point of view I have mentioned here, he has the support of the country, and that this side of the House and, I believe, most of the people outside as well, will support him in this.

Allow me now to bring one very important aspect of our national Budget to the attention of the hon. the Minister. The Land Bank Act was placed on the Statute Book in, I think, 1912. Since that time circumstances, including social circumstances, have changed altogether. I want to mention one example and content myself with that in this regard. A person inherits 200 morgen of land without a house on that property. He is a hardworking farmer who has acquired a house for himself in town, with the aid of a building society loan. In other words, he does not use agricultural financing to obtain for himself a roof over his head. With the aid of a building society loan, he buys a house for himself in town. He sleeps in town and farms on the farm. Sometimes it happens, as it did in my case when I was still farming actively and entered politics, that such a person sleeps on the farm and farms in town. [Interjections.] This person has succeeded on his own to purchase another 300 morgen of land for himself, for which he himself paid. However, he still lives in town. This person then purchases a further 300 morgen of land so that he has now acquired, say, in a high rainfall area, a unit of approximately 900 morgen without a house on it. For the financing of that, he needs R7 000. This amount is granted to him by the Land Bank. However, in terms of section 25 of the Act that person must occupy that security. Therefore this person is able to get hold of this amount of R7 000 but now he has to have a house built for himself on that property for an approximate amount of at least R14 000. So hon. members can understand that the loan of R7 000 is useless to him. Consequently we ask the hon. the Minister to give his attention to this matter and to amend the Land Bank Act, if necessary. Every case ought to be given the opportunity of being treated on its own merits so that assistance may be offered to people in deserving cases. The principle I want to bring home here, is that funds for agricultural financing are very limited in South Africa today. With the new developments in the field of transport we may have the position of a person living in town and being able, nevertheless, of managing his farming operations successfully. Therefore, what we are advocating is that residential facilities in towns should rather be provided by means of other financing so that the Land Bank will make provision for agricultural financing exclusively.

I want to conclude just by telling the hon. the Minister of Finance that we were a little concerned about this so-called “aggressive assault” on our return to Cape Town. But I think any fear of that is something of the past now.

Mr. Speaker, before coming to the hon. member for Smithfield, I should like to react to something which was said by the hon. member for Pietersburg. He got up this evening and as usual praised this particular Budget. But I remember very well that when he spoke during last year’s Budget he said that the Budget was so good that we would have no more inflation within six months’ time.

I did not say that. Quote my Hansard.

The hon. member for Smithfield referred to two matters to which I would like to react. Firstly, he referred to the question of financial stars. My feeling is that he chose a very unfortunate topic in talking about financial stars. After reading the week-end Afrikaans newspapers, one is very surprised indeed to hear anyone on that side of the House talking about financial stars. I want to say that I have listened very carefully to speakers on this side of the House, and that each and every one of them has put up a very sound economic case, a case which we want that side of the House to answer. In every case up to now they have completely begged the question.

The hon. member for Smithfield also touched on the matter of the manpower shortage. I am very pleased indeed that he did this, because in my speech I want to deal specifically with the question of the manpower shortage. I believe that this National Party Government has let South Africa down shockingly through their lack of planning for South Africa’s future manpower needs. During the recess I made a point of reading through a number of speeches made by some of South Africa’s top experts in economics and labour. I want to say that without exception I found that the underlying theme of each and every one of these speeches dealt with the question of the manpower shortage in South Africa and the consequences that this lack of manpower will have on the future development of South Africa. I think it is very interesting indeed to listen to just a few extracts from some of the speeches which these people made. I refer firstly to a speech made by Mr. Melville Pels, president of the Johannesburg Chamber of Commerce. He said the following: “The labour shortage in South Africa has become so serious that it is affecting the whole basis of competitive enterprises and grave consequences, stretching far beyond a slower economic growth rate, are likely unless more effective use is made of non-White labour.” Then we had a very short comment from the vice-president of the South African Federated Chamber of Industries, who said : “We do not have the White manpower to fuel the economic advance of this country.” I go on to quote the president of the Transvaal Chamber of Industries, who said : “No time should be lost in building a well-planned labour force of all races on a country-wide basis.” These comments do not only come from commerce and industry. I also found a comment made by the hon. the Deputy Minister of Bantu Administration and Education, who said : “South Africa’s White population is totally inadequate for the country’s skilled labour needs.” Finally, I come to a comment by the hon. the Minister of Finance, who was reported as follows : “Dr. Diederichs, the Minister of Finance, has listed trained manpower as one of the two critical resources that are particularly scarce in South Africa.” My point in raising this particular matter is to show that despite all these warnings from experts in the various fields, this National Party Government for almost 25 years now has in its usual dogmatic and stubborn way refused to face up to the fact that a White population of 4 million people, however skilled, talented or even dedicated, simply cannot provide the skills that are needed for a country with a population of 22 million people. This is very obvious to everyone except the National Party Government. I want to say that the Government finds now that the inevitable has happened and that it is faced with the true facts of life, with the real labour problem in South Africa. But fortunately, in the process the Government has learnt two very important lessons : Firstly, it has learnt that immigration is not the panacea, or that wonderful cure-all that they believe it to be and that, at its very best, it can only ease the labour problem, without providing a solution to it. Secondly, the Government has learnt, I believe the hard way, that the other comfortable alternative of trimming our growth rate to fit the White manpower potential of South Africa, is also not feasible. So we find that at this very, very late hour, the Government is faced with the fact that it has to bow to the inevitable by allowing non-Whites into posts that have been traditionally filled by Whites. We on this side of the House are thankful for small mercies; and so we welcome the fact that the Government, faced with the situation where a combination of devaluation and import control will create even greater demands on our already limited domestic labour force, has now agreed to allow more non-Whites to do Whites jobs.

You want unlimited employment.

I believe that we must see this so-called “concession” in its true perspective; because when you examine it a little closer, you find that it really is no concession at all. What has happened in effect is that the Government has given recognition now to something which has been happening for a long time and something which will continue to happen in future despite the provisions of the Physical Planning Act, job reservation and influx control. Although the Government, facing the reality of the economic situation, is now prepared to allow available non-Whites to replace non-available Whites, it is not enough. I believe that the Government, having been forced into this position, must now also have the courage to see to it that this new labour force is adequately trained. Not the present wasteful on-the-job-training, but planned, organized and effective training is necessary. Above all, this new non-White labour force must be recognized by the Government as a stable, responsible and permanent labour force. You see, Sir, there is very little point in allowing non-Whites to fill White jobs unless they are trained to do the job properly. If any benefit is to be derived from the relaxation of job restrictions, that relaxation must be part of a comprehensive, overall training programme. This training programme must embrace better education and better in-service training for the non-Whites. It would be quite useless to make any concession unless the concession is hacked by some form of planned training.

Business interrupted in accordance with Standing Order No. 23 and debate adjourned.