Mr. Chairman, last night we had an extremely useful, pleasant and extremely instructive debate here on the “Mines” Vote. I should like to avail myself of the opportunity to thank hon. members on both sides of the House very sincerely for their contributions. This Vote deals with an important but also fascinating matter, a matter on which one can always speak positively. Because there is so much at stake for South Africa, there have always been very fruitful discussions in the past when this Vote was discussed. I therefore want to thank hon. members very sincerely for the pleasant way in which it was possible to dispose of the discussion of this Vote. I am sorry that I do not have much time at my disposal this afternoon, but I shall in the short time at my disposal nevertheless try to do justice to hon. members. At the outset I want to express my very sincere thanks in the first place to hon. members on the opposite side of the House, and I am thinking here in particular of the hon. member for Von Brandis. However, I also want to express my thanks to hon. members on my side of the House, particularly to the hon. member who is chairman of the Mines group, viz. the hon. member for Stilfontein, for the kind remarks which were made on the good wishes which were addressed to me now that I have taken over the responsibility for this very important Vote. I can give the hon. members the assurance that in the years which lie ahead it will not only be interesting but I hope also very stimulating to deal with the Department of Mines and all its extensive undertakings, undertakings which are very important and will become ever more important to South Africa in future. On this occasion I want to say that, unlike in the case of the Department of Labour—where the previous hon. Minister of Labour was in control of that department for many years—perhaps my predecessor in the portfolio of mines, although in the political sense, occupied that position long enough, yet not all that long either. For the few years he occupied that position he won considerable distinction for himself in this regard, and for the information of hon. members I should like to draw attention to one matter this afternoon which redounds to the credit of my hon. predecessor. This is something which is very important and which will become even more important, and we must thank him very sincerely for having had the insight to do this, viz. to come forward with the idea of the Minerals Bureau. It was his idea; he worked to achieve it. It is not a body which will have a long life, but I can give hon. members the assurance that for me, as Minister of Mines, and for all of us who need the information which this Bureau is going to make available, this Bureau is rendering a very special and useful service.

Mr. Chairman, you will probably allow me to refer on this occasion to something to which both sides of the House referred. It is a sad moment to return to this, but I feel that all of us are very deeply conscious of what happened recently. Hon. members will recall that a fire broke out on the Western Deep Levels Mine. The splendid thing which then happens in South Africa is that on such occasions teams of volunteers, the proto-teams, come forward and, at the risk of their own lives, try to extinguish the fires. In this case a proto-team also came forward, went down the mine like heroes and lost their lives. I think it says much for South Africa that its people work with such a disposition. It also means a great deal for us to know that such disposition was present in our mining industry. This is commendable and deserves the thanks of the entire country. On this occasion I want to say to the bereaved families that we sympathize with them and that these fathers and husbands died a heroes’ death for South Africa. Our sincere thanks to them for what they meant to the mining industry. All we can do now is express the hope once again that the safety aspect in our mining industry will always be accorded the highest priority in South Africa. If one bears in mind how many people are engaged in this industry, it actually surprises one that so few accidents occur. Nevertheless, one is always very sorry when they do occur. I want to convey the deepest sympathy not only of my department and myself, but also of this side of the House and, I think, of the entire House, to these families.

Today I want to confine myself specifically to one important matter. Unfortunately I do not have much time to discuss it. It is a matter which today affects and will as I see it, in future as well affect the most important sector in the mining industry, viz. the coal sector. Yesterday various hon. members put questions in regard to this sector. The hon. member for Von Brandis discussed it, and so did the hon. member for Carletonville and the hon. member for Stilfontein. These hon. members made observations which many South Africans are making these days, and which also gave rise to the Government occasionally seeing fit to appoint a commission to investigate questions of this type. The questions which always crop up among all of us are the following: How much coal do we have? At what price is it available? Is it wise to sell part of our coal? Is it being mined in such a way that we are deriving the full value from our coal, resources? These are very important questions in the minds of every South African who thinks about our sources of energy.

I want to say at once that coal is our most important source of energy. Seventy-five per cent of our energy is derived from it and for many years it will continue to be our predominant source of energy in South Africa. In view of the present situation we think that coal will also continue, for many years in future, to be the mainstay of the world’s energy resources. The further we progress, the more important it becomes. The coal reserves are still the greatest reserves of energy-carriers on earth. Many other sources of energy are emerging, but they are not yet as important as coal. At present oil is the predominant source of energy. This is due to the fact that it is a clean product, that a great deal of it is available, that it is not a product which creates pollution problems as coal does, that it is inexpensive, and in particular too, that it is easily convey able. However, if the world looks about it and takes cognizance of the life of its various sources of energy, it is clear that coal remains one of the most important sources of energy for the future. The same applies to South Africa as well. It is particularly important because it forms the basis of our petro-chemical industry, and because South Africa, as far as its industries are concerned—I am thinking in particular of the industries which have to feed agriculture and of industries such as the building industry and others which will have to feed our economy—will to a large extent be dependent on coal as its source material. Another important consideration is that a country which produces steel is also dependent on coal for the processing of steel. For that reason coal and steel go together. For that reason, too, the type of coal which is used in the steel industry is of the greatest importance to us in South Africa. Therefore the question also remains whether we have and are able to obtain sufficient coking coal, and whether we are able to overcome our problems in this regard. Coal is therefore our most important resource.

Hon. members will know that exhaustive inquiries are made into this matter from time to time. A commission, the Petrick Commission, was appointed, and there has been a great deal of discussion around this commission. The report of the commission is also a frequent subject of discussion. There are many misapprehensions concerning the Petrick report, and as a matter of interest I want to quote the terms of reference of the commission—

1. (1) the necessity, or otherwise, of conserving the coal resources of the Republic of South Africa … etc.
   1. (a) the means whereby conservation may best be achieved;
   2. (b) by means whereby the mining, treatment, marketing, distribution and use of coal may best be rationalized to secure the greatest recovery and optimum utilization of the coal resources;
   3. (c) the extent to which the application of conservation measures will involve control over the mining, treatment, distribution, marketing and use of coal and the implications thereof

Further terms of reference of the commission were to inquire into any other matter which it considered relevant to or necessary in connection with its inquiry. The question which arose was the extent of our coal resources and what we should do with them. It was with reference to that question that the commission was appointed. Out of its inquiry the very important Petrick report emerged. In view of the terms of reference of the commission the Petrick report is actually a document which determines for South Africa the volume of its coal resources and gives an indication of the weak points in regard to this volume and the flow of coal. There is one matter—which did not form part of the terms of reference of the commission—to which it did not give the necessary attention. Nor could I have expected the commission to have done so, for it was not asked to do so. The aspects into which no inquiry was made, are the geological, technical and financial aspects underground, to put it in that way. An inquiry into those aspects could offer a reply to the question of what is the cheapest and technically the best manner to mine coal and nevertheless know precisely what volume we have available for distribution and consumption in future. It is of course the task of the Department of Mines to find a reply to this question, and for that reason the Government Mining Engineer must consider the various coal-mining methods. The report also refers to the various mining methods. However, it is a very complicated situation because there are various or a combination of mining possibilities. A combination of mining methods could be prescribed by the Department of Mines, but to be able to do so the department must of course have the necessary data. The mining methods have a direct bearing of course on the flow of capital, the writing off of equipment, and so on. We must find a combination of mining methods which, as progress is made, will clearly indicate what alternatives will have to be used in future.

The Government is trying to deal with this matter by means of a Cabinet Committee under the chairmanship of the Minister of Planning and the Environment. The Cabinet Committee has the task of examining the policy in regard to our sources of energy. Departments with a direct interest in the matter are also serving on the Committee. The Cabinet Committee is advised by a policy committee. Serving on the policy committee are, inter alia, the Departments of Commerce, of Industries, of Foreign Affairs and of Finance, while Sasol and the Railways also have representation on it. All who are or who can be involved in our sources of energy are represented on the policy committee. The Cabinet Committee and the policy committee are the two bodies that have to advise the Cabinet on steps that have to be taken in respect of coal mining. The Department of Mines is the department with the know-how and which is responsible for mining.

Having considered my department’s contribution in this regard, I may now announce that it is my intention to appoint a committee of experts to assist the Department of Mines. The task of the committee of experts will be to consider technical aspects pertaining to mining engineering and to other matters, to be able to gather information required by the policy committee and eventually the Cabinet Committee so as to enable them to give further consideration to our coal-mining industry. The fact that I have now announced that there shall be such a committee is important, but equally important is the following: The committee of experts will be a committee on which both the public as well as the private sectors will serve. The reason for my doing so is because a great deal of the expertise is available in the private sector, and I am referring here to the bodies that do the mining and have the calculators and engineers—in other words, the people who contend with problems of this kind every day. Therefore I now want to issue an invitation to the private sector and tell them that we require their expertise as well. I therefore hope that I will receive the cordial co-operation of the private sector in the negotiations necessary to ensure that this committee is able to carry out its task. It is not merely a question of State involvement; it is a question, too, of all of us being involved in it. It is not only the Department of Mines, the Cabinet Committee and the Price Controller who are involved. Everyone who makes a living from these activities is involved in this. Consequently I regard this step as a step in the right direction. I know the private sector, on its part, will also make a contribution, and I am therefore inviting them to do their best to make a contribution so that we can find the necessary answers in future.

To support my case I just want to explain what is happening. Because we were hamstrung in the past by a price which we deliberately tried to keep low for the sake of the fact that the economy of South Africa must have a favourable energy price, something else happened under our very eyes. The mining methods were adjusted to the price. In other words, the more hamstrung the mining industry felt itself to be, the cheaper were the mining methods it adopted, i.e. the more it left behind, so much so that there are mines today which are only recovering 8% to 10% of the coal and are therefore allowing 80% to 90%—in the extreme cases—to remain unmined. However, the loss is too great.

The report also mentioned the figure of 24 000 million tons as being the quantity available in situ out of a reserve which we estimate could be approximately 91 000 tons—let us allow a margin of error of 5%. Twenty-four thousand million tons of coal may sound like a lot of coal, but in the life of a nation it is not as much as we think it is. Reserves to ensure our future existence have to be greater than that. However, there is another important problem as well. What is also very interesting is what this 24 000 million tons of coal comprises. A portion of that coal is not coal of a very high value. Therefore, quite a number of technical problems are involved here. That is why we think it is very essential to form a proper assessment of the complexity of what comprises these coal reserves and of the combination of possibilities, in order to create the possibility for forming a better opinion. Closely connected with this is the question of what South Africa should keep for itself, what we should leave unmined, and what quantities we dare export I want to point out that the export price is considerably higher than the price which we have at present fixed for coal in South Africa. Therefore coal exports compensate for the problems which arise elsewhere.

Of course, it is also in the interests of South Africa to have a cheap source of energy. In future it will remain in the interests of South Africa to keep as much of the coal as possible for its own purposes, and on the other hand to make the coal available as cheaply as possible. But this policy gives rise to other problems. One of those problems is the delivery of coal to the private industry. In this way we know that during this winter, as well as next winter, when the demand reaches a peak, there will be supply problems. My fear is that these problems may become aggravated in future. In order, therefore, to obtain all the necessary facts relating to these matters as quickly as possible, I deemed it advisable to establish a study committee with the terms of reference of submitting an interim report to my department so as to make it possible to steer matters in the right direction.

Will the committee confine its attention solely to the coal industry?

The committee will deal only with the coal industry. The position is of such a nature that we must not only know what we have, but also what we are going to have available in future. It makes a very considerable difference. If we knew that South Africa’s total exploitable coal reserve is X, we can determine how much coal South Africa can export over a given period, and how much it has to retain for its own needs over the same period. However, if we know that our exploitable coal reserve is X times 2, we can adjust the export programme to this accordingly.

That is why it is so essential—this is also what I believe—that we should be very careful in regard to the quantity of coal which is exported, until it is determined precisely how much coal is going to become available for export. In view of the possible exchange earnings it is also important therefore that existing problems be solved and that answers be found to the questions which still exist so as to obtain clarity on the future as quickly as possible.

The utilization of coal also presents another problem. The environment in which coal is found is vulnerable, vulnerable in this sense that it is damaged in the process of mining the coal. This is a matter I feel very strongly about. In South Africa coal is found in those fertile areas in which there is also a great deal of water. This was something which I came to realize very clearly when I was still Minister of Water Affairs. It is also true that coal is being mined in areas in which our best agricultural land occurs. The land which is affected in this regard in particular is land on which maize is being cultivated. I am mentioning this fact because I realize that although the mining of coal constitutes many benefits for South Africa, reproaches might subsequently be levelled to the effect that certain preventive measures were not taken in time. Therefore it is simply the sensible thing to do to establish an advisory committee with a view to future advice. Such an advisory committee must of course consist of representatives of those bodies most closely involved in the matter. One therefore thinks involuntarily of the Department of Agriculture, the South African Agricultural Union, the Department of Mines, the Department of Planning and the Environment, and so on. I am convinced that it would be a good thing if a permanent committee were established, a committee which could advise on and furnish answers to the divergent questions which inevitably arise. In addition the committee could give attention to representations received from time to time and could also advise the Department of Mines. I believe that the agriculturists will also feel far more reassured if they know that there is a committee which is looking after their interests, too. Therefore I want to express the hope that I will in this regard enjoy the cordial co-operation of the South African Agricultural Union.

Just in passing I want to make a further observation in regard to coal. Actually this refers more to the mining industry in general. During the past year or two the mining industry in South Africa has shown its mettle. Through its earnings the mining industry has, during the past two years, been able to keep the economy of South Africa very stable. With this I am not implying that other bodies do not make a contribution as well. However, it was the contribution by the mining industry that served South Africa well during this difficult period. Therefore, however enthusiastically one looks at the mining industry—and I myself am very enthusiastic—it is nevertheless essential that one should be careful, particularly as far as the future is concerned. The mining industry has an enormous potential.

While I am discussing this now, I also want to furnish a reply to the question put by the hon. member for Moorreesburg. When it is established that certain minerals are present in a certain area, those minerals have not yet earned any money. It is important to remember this. The mining industry is not dictated to as to where it wants to make its mineral discoveries. Some minerals are discovered very far from the existing infrastructure. Hon. members need only take cognizance of what it cost to establish the Sishen/ Saldanha railway line, and of what it is going to cost to develop the necessary infrastructure in the North West Cape. For example, water will have to be supplied over tremendous distances by means of pipelines. Electricity will have to be conveyed there over long distances. Roads will have to be built, and so on. These are all things which cost enormous amounts of money.

When the mining industry generates its production, it does so in ample measure. However, tremendous amounts of money have to be spent before that stage is reached. Therefore I want to issue the warning that, when possible development is discussed, people should not let themselves be carried away. What might happen is that they will be disappointed.

A great deal of the contribution which will be made by the mining industry in future will consist of minerals which occur in very widely scattered deposits. It is not only diamonds, gold, platinum and minerals which occur in heavy concentrations, which are being mined. Many of the products of the mining industry are products which are obtained in vast quantities from ore which occurs in widely scattered deposits. This ore frequently has to be conveyed over long distances and at high costs, only to be sold at a relatively low return. For that very reason very complex calculations are made of the quality of minerals. That is also the reason why many of the potential mining areas have not yet been opened up. That is also why the Bushveld igneous complex, to the north of Rustenburg—a rich complex which is already being developed—and which will be developed further in future—can be economically developed. It is a mining area which is situated near to the existing infrastructure.

In the years which lie ahead, however, the mining industry will have to rely on large amounts of capital which will still have to be provided from abroad. A very important factor in the acquisition of that foreign capital is stability and confidence.

The hon. member for Johannesburg North put a question to me last night in regard to the future of the mining industry. He will know—from his experience in the circles in which he moves he ought to know this—that, if it had not been for confidence in gold, South Africa would not have been where it is today. It was precisely that confidence in gold in recent years which enabled South Africa to engage in a struggle against foreign elements which tried to undermine the monetary role of gold. South Africa engaged in that struggle against very strong countries of the world. South Africa was victorious in the struggle. The victory has been achieved, not because South Africa is so strong but—and this is all that is at issue—because the world has placed its confidence in gold. As long as there is confidence in gold, and as long as the world remains unstable, the gold mining industry in South Africa will most certainly have a future. The only stumbling block is its price; what the world thinks it has to pay for that confidence, expressed in the price of gold. As the price of gold rises again, mining of gold and South Africa’s earnings from it, will increase, and it will be possible to mine new gold resources. This is therefore my reply to the question put by the hon. member for Johannesburg North. These, too, are the future possibilities of the gold mining industry.

South Africa, however, is a country with other possibilities that are as enormous. Of course we must be realistic enough to realize that many of these things which appear to have a wonderful future are things which involve an enormous amount of work in future. One of the important things which still have to be done is to find a method by means of which minerals which occur in widely scattered deposits can be economically mined. This is an important factor. That is why the National Institute for Metallurgy is of so much importance to South Africa.

It is interesting to pay a visit to this Institute. Hon. members who have already done so will know that the Institute is at present examining mineral samples from all over the country. The samples come from areas in which ore deposits do in fact exist. The Institute is aware that the ore is present in specific regions. The problem, however, is the economic mining of this ore. The Institute has been in existence for nine years already, and has up to now done valuable work. It is an institute which is of exceptional importance to the mining industry.

The National Institute of Metallurgy has for many years been under the competent leadership of Dr. A. J. A. Roux as its chairman. In addition Dr. Roux was also the chairman of the Uranium Enrichment Corporation. At present he is also chairman and president of the Atomic Energy Board. In view of the great developments which have recently taken place in the sphere of nuclear energy, as well as the tremendous amount of the initial work which has to be done before it can even be decided to commence the uranium enrichment process on a commercial basis—on top of the enormous amount of other work which eventually becomes simply too much for one person to cope with—Dr. Roux approached me and put it to me that the responsibility with which he had been entrusted had become a little too much for him. Of course I understood his position immediately. Actually Dr. Roux had already asked me before to relieve him of some of his responsibilities. However, I asked him to carry on for a little while longer. But now he is retiring at the end of this month as chairman, and I want to thank him very sincerely for the great contribution he has made. I am certain that all of us in this House will agree with me when I say that Dr. Roux was the man who has led and inspired us in this regard. On behalf of this House I express my thanks to Dr. Roux.

Of course it was not easy to find a successor to Dr. Roux. After long consideration the Cabinet decided, however, that Dr. Roux will be succeeded as chairman by Mr. Tommy Gibbs. Mr. Gibbs is himself a trained metallurgist. He is a Government Mining Engineer, and has been a member of the board from the beginning. He has an exceptional interest in the activities of the board and possesses the qualities of being able to lead people and keep them together. I believe that we are very fortunate in being able to obtain his services as chairman. To him as well I want to profess my sincere thanks for the many years of loyal service as Chief Government Mining Engineer. He retired at the end of May after 16 years of service as the Chief Government Mining Engineer. Mr. Gibbs is a very capable person. It is a pity that we have to lose him as Chief Government Mining Engineer. Nevertheless I want to thank him for the contribution he made over so many years. I am doing this on my own behalf, and also on behalf of all members of this House.

With what I have said up to now I think I have replied to many of the questions which were put. The hon. member for Von Brandis wanted to know how matters stood with Soekor. I can assure him that things are going well. As long as one is seeking, things are going well. The search on land has not yet been completed. Approximately R100 million has already been spent on the search for oil on land. However, one should not be under the impression that, because oil has not yet been discovered, the search was in vain.

Every hole which is drilled adds to the total knowledge in regard to the process of the research for oil. The main emphasis in the search has recently shifted to the coastal areas. It is not given to any of us to determine whether these are the best or the right areas in which to search for oil. As far as I am concerned, matters appear to be more promising at present. The indications are that the geological formations in the areas in which the search is being pursued at present might be more favourable. Hon. members must not infer from that, however, that I am of the opinion that oil is going to be discovered soon. We can only hope. In addition future development will determine how rapidly the search programme will be continued. I feel that it is also appropriate that we convey our cordial thanks and appreciation to the people involved in the search for oil. These are capable people, and they are doing their best to try to solve the problem in regard to the availability of oil.

The hon. member for Stilfontein indicated the problems which exist around the presence of White mine workers in the homelands. A deputation from the Mineworkers’ Union came to see me. We effected a compromise, and it was accepted—that as the hon. member also put it to the Mineworkers’ Union—the mining areas in the homelands are the exclusive property of the homelands in question. Until a date on which a homeland becomes an independent State, there will be full protection for people who have up to now been engaged in the mining industry there. This is of course the Whites. I have no intention whatsoever of granting general exemption without prior consultation with those involved. I have already promised that. The hon. member for Stilfontein also said that he was pleased that the mineworkers were still working a six-day week. I agree with him on that. I am also pleased that the mineworkers are working a six-day week. If that were not the case, South Africa would already have suffered heavy losses. In that regard the mineworkers are setting an example which might well be emulated.

The hon. member for Welkom referred to diseases—apart from pneumoconiosis—which ought to be compensated. The National Institute for Occupational Diseases is at present investigating this matter. I shall give personal attention during the recess to this matter and ensure that I am entirely conversant with the conditions to which the hon. member referred.

The hon. member for Welkom, as well as other hon. members, referred to gratuities for long years of service. The hon. member expressed the idea that people who have for example been rendering a service for 25 to 30 years—a service in which they have been doing risk work—ought possibly to receive special recognition for having done so. The Chamber of Mines sent me a memorandum. Unfortunately I have not yet had the opportunity of studying it. It is, however, a matter to which I, as well as the Chamber of Mines will give attention. I think that the Mineworkers’ Union will also give attention to this matter. I do not want to say anything further about this matter now, because the costs involved in this matter will have to be borne by the Chamber of Mines, and not by my department. However, I promise to institute an exhaustive investigation into this matter, with the assistance of the Chamber of Mines.

The hon. member for Pinetown put a question to me, and immediately became annoyed. I want to urge him not to become so annoyed. Perhaps the hon. member should adjust his temper to his age. He wanted to know what a member of the Department of Mines was doing at a Sabra Congress. I shall tell the hon. member what he was doing there. He received an invitation to attend that congress, and does the hon. member know what that congress was all about? It dealt with the mineral potential in the Bantu homelands. I cannot think of a better subject on which an official who has the necessary information may address such a congress. That is why this official attended that congress. If the hon. member wants to arrange a meeting at which young men who are interested in this matter are present, I shall send this official to address that meeting as well.

The hon. member for Etosha observed that we had escaped a world recession as a result of our mineral wealth. I in fact made the same remark at the outset and associated myself, inter alia, with what the hon. member said. The hon. member also referred to duplication between the departments and also between this department and outside bodies. Sir, duplication is a problem which one encounters everywhere. Perhaps the hon. member and I could discuss this matter a little later on. He could then tell me where this duplication which worries him, occurs. Perhaps we will then be able to do something about it. I do not want to say that duplication cannot occur; it occurs everywhere in the world. Every day there are things which are being duplicated. When this happens, one tries to iron out the difficulties. I am grateful for the remarks made by the hon. member in this regard.

The hon. member for Klerksdorp referred to mineworkers who, after years of service in the mines, are certificated and then struggle to find work. This is of course an important point which the hon. member raised. I want to say that I cannot furnish the hon. member with a reply on this point across the floor of the House. However, it is something which one must look into. I am aware of it, and there are others, too, who have already discussed the matter with me. I promised them that I would have this matter looked into urgently, for I can well understand that if a person who is still able to do something is certificated in this way, it could mean adversity for him. This is the kind of emotional and human problem which one should look into. The hon. member also said that these people should be rehabilitated. I agree with him.

I have already replied in part to the points raised by the hon. member for Johannesburg North. The hon. member also put questions to me in regard to the Mozambique Convention. I want to tell the hon. member that he should preferably not put questions to me about the Mozambique Convention in this House. Even if I could, I do not wish to furnish him with a reply in this regard. Part of that Convention is secret, and it is a sensitive matter. The less we say about it here or elsewhere, the better. However, I want to point out that consideration should be given to this Convention, by the Chamber of Mines as well. That is why I think that he and I should preferably not put questions to one another in this regard across the floor of this House. I do not think that this, particularly at the present time, is the place to do so. However, let us jointly express the hope that we are going to be successful and that we are going to receive a reply in this regard. Firstly, what is at issue here is the availability of labour. Secondly, what is also at issue, as the hon. member knows, is the question of remuneration. Negotiations on this are still in progress, and I therefore prefer not to furnish a reply in this regard now. Not only this department, but other bodies as well and the Cabinet, are involved in this. As regards the employment of Black workers to which the hon. member also referred, I want to point out that in the case of certain categories of work the matter is being dealt with by the Mineworkers’ Union and the Chamber of Mines. In addition the hon. member referred to the question of housing for the families of Black workers. Of course this is a matter which falls under the Department of Bantu Administration, but whether or not it does so, I am in fact studying a memorandum in this regard. I do not want to keep out of this matter altogether, and my colleagues and I will discuss it.

The hon. member for Moorreesburg is not present here at the moment, but I have already replied to the points which he raised.

The hon. member for Brakpan referred to the question of gratuities. I am pleased the hon. member raised this matter. He, as did the hon. member for Welkom, not only discussed this matter in the House but also discussed it with me in my office. They can go back and tell their voters that we will look into this matter, on the basis which I explained a moment ago. The hon. member also commented on rehabilitation, as well as the review authority. I want to tell the hon. member that I hope that I shall be able, after we have left the Cape, to make myself more conversant with the position in that regard and will be able to give more attention to it than I am able to do from here.

The hon. member for Brentwood discussed physical conditions in the mines, conditions to which the workers expose themselves. The deeper one goes down a mine, the greater the humidity becomes, and all kinds of other problems arise which have a great impact on a person. This is a very important matter. He did not put any question to me; he made a point, and the point he made was that as technology develops and we penetrate deeper into the earth, the greater these problems will become, and I agree with him.

The hon. member also asked me about vacant posts in the Minerals Bureau. You can understand, Sir, that the kind of people who have to fill these posts are not in plentiful supply. There are shortages everywhere. Nevertheless I hope that it will be possible to fill the vacancies there, and that the posts of many other bodies that have long lists of vacancies will also be filled.

The hon. member for Rosettenville also discussed the scheme for the rehabilitation of certificated mine workers, and complained that compensation for industrial diseases was dealt with by several Ministers. Yet I want to point out to him that the report of a commission of inquiry into occupational health has been brought out, but I have not yet read the report because it only appeared on my table a week or two ago. I hope that we may perhaps be able to find answers to the hon. member’s problems in this report. I do not know. For my colleague and I have not yet discussed it. But upon paging through it I must say that this report, which is actually a report which should go to the hon. the Minister of Health, made a very great impression on me, and that it is therefore highly likely that we will find replies in the report of the commission.

Finally, the hon. member for Kuruman discussed tiger’s eye gemstones. Tiger’s eye, as we all know, is this beautiful semi-precious stone which we have in South Africa. The hon. member’s problem is one which has already given me cause for great concern, for deplorably large amounts of this mineral are being exported from the country. Not only are we being stripped of tiger’s eye, but of many of our other semi-precious minerals as well. From what I have heard there are enormous quantities outside South Africa. It annoys me to think that this semi-precious stone, which could have been so valuable to us, is so cheap today precisely because it is in such abundant supply and because people are so keen to take it out of the country. I do not want to spend much time on this matter. I just want to tell the hon. member for Kuruman that I agree with his sentiments. In any event I have already issued instructions on this matter to various departments: Mines, Customs and Excise, Transport and the S.A. Police—the hon. member for Maitland will also be interested in this—to the effect that these bodies should immediately look into the matter of overhauling the machinery for combating any abuses which may arise from the distribution and handling of tiger’s eye. But I do not think that is enough. I think I should also say that we have issued special instructions to the effect that the matter of smuggling should be looked into, for large-scale smuggling is taking place in South Africa. Consequently we made a special request to the Police to look into this matter at once, and to see how we can plug the gaps. In addition I think we shall have to look at our legislation. I think our legislation probably allows people to get away with things which they should not be able to get away with. At this stage I cannot say what this legislation should comprise, but all I can say is that we should consider this, and I shall undertake, as soon as we feel we are able to introduce the necessary legislation—once we have the necessary knowledge and the necessary motivation—to come forward with legislation to see whether we cannot preserve these resources for South Africa.

I want to thank hon. members once again for the contributions they made in this regard, and I am looking forward to our discussion of this Vote again next year.

Mr. Chairman, may I ask the hon. the Minister whether a White Paper setting out the replies to the recommendations of the Petrick Commission could be compiled during the recess so that all the divergent points mentioned in the report can be summarized?

I do not think that it should be done at this stage, since there is still a great deal of information lacking. However, I know what the hon. member’s wishes in this regard are, but I do not think that it is necessary at the moment. However, I can discuss this matter with the hon. member again when further information to supplement the report of the Petrick Commission has been obtained.

The hon. member for Pinetown referred to the Mpelane mine. In his reply the hon. the Minister did in fact refer to the committee which had to inquire into the restoration of the environment near coal mines. Will this committee also inquire into the other mines?

The Mpelane are the huge dunes along the Zululand coast. As Minister of Forestry I knew those dunes very well, for at the time we wanted to protect and preserve them. It may, however, interest hon. members to know that in these dunes the normal quantities of titanium group minerals occur in the form of ilmenite, zircon and rutile. These are three heavy metals which are very essential in these times. Here we have a large portion of the known reserves of these minerals which can be sold at considerable prices. But they occur in the sand dunes and unfortunately this is one of our most attractive nature reserves. A major conflict is therefore developing, for these minerals are worth a great deal of money. But it is found in an area which is equally valuable as a natural area. Hon. members are now asking me, as a former Minister of Forestry, what is going to happen there. It is not easy. As far as I know there is an area which can be mined without great damage to the natural beauty. However, I want to give hon. members the assurance that before a decision is taken in this regard, I shall go there myself to see what practical plan we can make to do the one thing without omitting to do the other.

Votes agreed to.

Vote No. 24.—“Treasury”, and S.W.A. Vote No. 15.—“Miscellaneous Services”, Vote No. 25.—“S.A. Mint”, Vote No. 26 and S.W.A. Vote No. 16.—“Inland Revenue”, Vote No. 27 and S.W.A. Vote No. 17.—“Customs and Excise”, and Vote No. 28.—“Audit”:

Mr. Chairman, I claim the privilege of the half-hour. This is the first year when the budget of the Treasury has been presented to us in the form of a budget by objectives with a description for each programme within the department and the objectives for each programme very clearly set out. I will admit that when the idea of budgeting by objectives was first mooted, I was not in favour of it as I favoured the conventional system. But having seen the programmes laid out by the Treasury there is a lot to be said for this new system. I find the description of the responsibilities and the objectives of the Treasury to be very useful. I find these descriptions, objectives and responsibilities particularly useful to obtain an appreciation of the question whether the hon. the Minister has succeeded in achieving these objectives or whether he has not achieved them.

I want to deal this afternoon with programme 1 of the Treasury which is the programme dealing with economic policy and financial control. I regard this as being by far the most far-reaching and important of the Treasury’s programmes. The most important objectives of this programme and the most important responsibilities of the Treasury are set out in the first paragraph of the programme’s description on page 24-3 of the estimates of expenditure. I shall not read the whole of it but only what I may term “the guts” of the paragraph which indicate that the responsibility of the Treasury is to assist the Government—

I regard the four factors of economic growth, stability, a high level of employment and a sound balance of payments situation as being the cornerstones of the Government’s economic policy which it has laid down for itself. It is against these objectives, which the Treasury has laid down for itself, that the Government’s performance and particularly the Minister’s performance since he assumed office a year ago, must be measured.

Viewed against the achievement of any of the objectives I have read out, the Minister earns very few marks. Let us have a look at the first one, that of economic growth. During the past year the economic growth, as measured by the growth of the gross domestic product, was 2,2% which is about the lowest growth we have had in this country. Compared with the projected growth of the economic development programme of 6,4% it makes rather a farce of that programme. Even less satisfactory is the growth if measured against the GDP per capita which reflects the level of the standard of living of our people. The growth, measured thus, was actually a negative figure. Even less satisfactory than that is the growth if measured against the gross national product which includes our trade with overseas countries and which is the measure of what is available to sustain the standard of living in this country. That was also a negative absolute growth.

Then we turn to the objective of stability. To my way of thinking, in economic terms there are two factors which have to be taken into account when measuring stability. The first is stability of currency and the second is stability of prices. As far as the stability of the rand is concerned, even allowing for the weakness of the currency of our major trading partner, viz. the pound, which has been going down in value, the weighted average value of the rand has fallen by 14% in the past year. That, of course, was mainly due to the devaluation of last September. The stability or rather instability of prices is reflected by the current rate of inflation which is 11,3%. Inflation remains a very serious problem. It is disturbing that, after a period in which the rate of inflation was tending to go down, it is now again on the increase. It is on the increase because we are now feeling the effect of the devaluation of last September. For the first few months after that devaluation those effects were cushioned by the forward exchange contracts which allowed goods in at old prices, but those contracts have very largely expired now. The rate of inflation is also on the increase because food prices which have been fairly stable for a period are again on the increase. We have just had a big increase announced in the price of maize and we have also had an increase in the price of milk. These are important commodities in the consumer’s budget. We have had increases in administrative prices, in rail fares, steel prices, cement prices and in taxes such as the tax on petrol and sales taxes on a wide variety of goods. These are all factors which indicate that we cannot expect the rate of inflation to go down, it is more likely to go up.

I now come to the objective of a high level of employment. Unfortunately unemployment can only be measured in so far as Whites, Coloureds and Asiatics are concerned. In their case, admittedly, it is not a serious problem although unemployment has been on the increase for the past few months. However, where unemployment cannot be measured, because there is no means of measuring it, is amongst the Blacks, and there are indications that the problem of unemployment under the present economic situation is a serious one.

I now come to the objective of a sound balance of payments. Our balance of payments did show some improvement, as it should, after a massive devaluation such as we had last September. However, it is not showing anything like the improvement which would have justified a devaluation on that scale. More recently the reserves have been bolstered by the gold swop which is not anything that tackles the problem at its roots—it is merely an alleviation of the symptoms—because the strengthening of the reserves is certainly not a cure for the problem. I regard the position of our balance of payments and of our foreign exchange reserves as not being nearly as healthy as we would like to see.

While I am on the subject of the reserves, I should like to ask the hon. the Minister whether it is really necessary to have such a veil of secrecy over what is happening in regard to our gold sales to foreign banks and in so far as the gold swop is concerned. Questions on those subjects have been asked in the House, but the reply has been that it is not in the interest of the country to disclose the desired information. I should like to get some indication from the hon. the Minister as to why it is not in the interest of the country to disclose this information.

Viewed against the objectives which the Treasury has set down for itself—they are not objectives which we have set down at all—I can only say that this hon. the Minister has earned very few marks. However, I think it would be completely unfair of me to pin all the results which I have just mentioned entirely on him. The hon. the Minister, when he came into office, inherited a legacy of Government extravagance and Government mismanagement which made his position a very difficult one. Government spending over the previous three years—i.e. from 1972—had risen by 85% compared with a 65% increase in the production of the country. Government spending, therefore, had outstripped the production capacity of the country. The money supply had also increased out of proportion to the growth in the production of the country, by rising by 76% compared with the 65% of the GDP. This was a situation which was sustained and encouraged by a euphoric view that the gold price would continue to go on and on going up and that our exports would continue to be buoyant. It was also, however, a situation which had inevitably to lead to a rising rate of inflation and would inevitably result in a balance of payments problem if anything happened to the price of gold, and of course something did happen. This was the position which the hon. the Minister inherited when he took office. He cannot escape the blame for that position entirely, however, because he was a member of the Cabinet in another capacity at a time when the expenditure, which led to these problems, was incurred.

Which expenditure?

The high level of Government expenditure. Clearly the position was one which called for corrective action, and it is on the effectiveness and application of that corrective action that I think it is most fair to judge the hon. the Minister. It is here that I believe that his reputation and record are most suspect.

When one has to apply the financial brakes, one has to be very careful to apply them in time to stop when one wants to stop. One has to apply the brakes with the correct pressure, or else one either does not slow down in time, or one jars the economy and risks jarring that very fragile commodity, i.e. business confidence, which is so easy to break yet so difficult to mend. I believe that the hon. the Minister erred in not putting the brakes on government expenditure and on the growth in the monetary supply in time, and he cannot say that he was not warned. This is something we warned him about continually during the previous session of this Parliament.

Ad nauseam.

As a result of not applying the brakes in time, he prolonged the period of recession and made more drastic action necessary than would have been necessary if timely action had been taken. Hence the savage budget we had on 31 March. He damaged South Africa’s credit rating abroad because high taxation and restrictive measures are not conducive to a high credit rating. Through delaying the application of the brakes, he also postponed the corrective period until South Africa was running into political problems such as those on our borders and those in Angola which affected confidence in the country. This would not have been the case had timely action been taken. I believe that this delay in putting the brakes on Government expenditure and the growth of the money supply was the biggest single factor that damaged our economy.

There were others, of course. There was the devaluation of last September. We on this side of the House have never hidden our belief that that was a major economic blunder. Too rosy a view was taken of the gold price, a view that was not justified in the event. There was then of course the fall in the price of gold. I reiterate that this high rate of expenditure and failure to brake it was the most damaging factor that this economy has had to endure. It is a fact that during the early months of last year, Government expenditure was allowed to expand at an alarming rate and had to be financed to a very considerable extent out of bank credit. The fact that it had to be financed out of bank credit was of course highly inflationary in that situation, and although the anti-inflation campaign was announced last May and was brought into effect last October, and an important leg of that anti-inflation campaign was the control of Government expenditure, it was not until the presentation of the budget on 31 March this year that we had any plan presented to us for the cutting of expenditure. That cut in expenditure has still not been put into effect. In fact, the hon. the Minister appears to be falling into the same trap this year that he fell into last year, because there was a rush of expenditure in April. April expenditure was 66% higher this year compared with that of last year, and considerably higher than the level of revenue during that month, with the result that bank credit had to be resorted to. This very high expenditure in April this year has given a very, very unfortunate impression to people in this country. It has given the impression that expenditure which should have been paid for last year was held over and paid for this year. That may or may not be true, but it is a very widely held view. It is a view which is very unfortunate because it affects the credibility and the credit rating of this country.

We still have not reached a position where we have actually seen cuts in expenditure. Those have still to come. I would like to say to this hon. Minister that while the intention to cut expenditure is something which we welcome, we are not going to get the benefit from it unless that expenditure is reasonably well spread over the whole year. A burst of expenditure such as we had in April can only lead to credit creation and credit creation can only lead to the boosting of other problems such as inflation and our balance of payments problem.

Mr. Chairman, the hon. member for Constantia said in his opening words: “I give very little marks to the Minister.” Indeed, this is what he did. From start to finish he tried to sound every negative note which could possibly be found in the economy. May I also add that this was done in a very unimpressive way. His allegation was that “we took too rosy a view of the gold price”. Was he not one of those who held that opinion? Did he ever tell us from that side of the House that there was going to be a drop or a slump in the price of gold? The Chamber of Mines did not make any such projection. They were with us, and they could not foresee what happened. It is almost tragic to see how the Opposition is acting in these difficult times in our economic set-up. One would have expected them to show a little confidence and will-power, and to tell us how, in these difficult times, when the position in the rest of the world is uncertain, we should adapt ourselves to this and how we can stimulate and advance our position. But what does the hon. member do? He stands up and tells the world time and time again that the economy of South Africa has collapsed completely, that nothing remains of it—mismanagement and the lot.

Must he praise the Minister?

That is correct. There are so many positive factors to which the hon. member and the Opposition could have referred, all tangible factors, factors which really exist and which do not have to be snatched out of thin air, substantial factors which do indeed prove that the economy of South Africa is one of the best in the world. We have the case of the loan of R12 million which Hill Samuel made on behalf of the Transkei.

At what rate of interest?

The hon. member is now putting a foolish question to me, but I want to tell him what Mr. Botha said of Hill Samuel, the man who negotiated the loan abroad. He said the following—

What does the hon. member have to say to that? Countries with which we do not even have any contact are so impressed by our economy, our policy of separate development and the development of the homelands, that Hill Samuel, an international financing organization, is able to negotiate a loan of this nature. A short while ago I read an interesting article in the Financial Mail which reminded me very much of the Opposition. In that article mention was made of the “confidence factor”. This “confidence factor” is indeed what we need in this economy and what we are aiming at. The Opposition too must contribute by having confidence, self-confidence and willpower. The writer goes on to say—

It is indeed true that the fear and pessimism which is shown by hon. members on the other side, inter alia, the hon. member for Johannesburg North, are factors which may cause great damage to our economy at a time when everything is in our favour for building it up. There are indeed favourable factors, and I want to refer to a few which have already been mentioned here. There are the IMF gold sales, for instance, and the gratifying and encouraging fact that there is a great future in the demand for gold and in its maintenance and stability. The demand for gold at the first auction of the IMF was 2 368 000 ounces, while only 780 000 ounces were available. This indicates confidence in gold, and the fear which existed that the price of gold would perhaps drop further in future or that the demand for it would decrease, is therefore unnecessary. This confidence in gold proves to us that there will be a stable demand for gold in the future, and the fact that the whole gold supply was sold at the auction is also an indication to us that the next auction will be successful. Die Burger alleges the following: “Goud tree uit die stryd as die oorwinnaar.” This is indeed the case, and I want to say very emphatically that it is not only gold which has emerged triumphant from the battle, but also the hon. the Minister of Finance of South Africa. We are aware of the astronomic task which is being accomplished by the hon. the Minister in the money spheres of the world in order to create and establish confidence in gold. I want to maintain that the favourable results which have been achieved are indeed chiefly the result of the dedication and ingenuity of our hon. Minister of Finance.

While we are awarding points, I also want to point out another positive factor, namely the gold swop agreement. This is one of the most ingenious pieces of work I have seen for a long time. In terms of this mechanism various positive results have been achieved, results for which we are grateful. In the very first instance it strengthens our balance of payment and our reserves to an amount, I think, of approximately R400 million. This takes place by means of the one single transaction. At the same time it shows an inherent power of our latent reserves. It is indeed a safety valve which does much to prevent our reserves from declining. It provides us with valuable currency as well as full value for our gold supplies. If it has to be bought back, it nevertheless remains a very useful loan which we have obtained in the meantime at a low rate of interest.

How can you say it is a low rate of interest?

Go and calculate it! The hon. member will see that we have made a very useful loan here at a very low rate of interest. If the hon. member works it out, he will see that the rate of interest is not more than 5%. If one considers this as a single transaction and a mechanism which we will be able to use again in future, then I believe that it is a very positive measure.

I know that the monetary measures which are at present being applied are perhaps not so strict, but I want to maintain that they are indeed essential. In spite of their strict application, in spite of the fact that they are restrictive and in spite of the fact that they hamper liquidity, it was originally the idea … [Time expired.]

Mr. Chairman, I do not feel at home in the company of the hon. members for Constantia and Ermelo when it comes to the discussion of high finance. I should like to bring a specific matter to the attention of the hon. the Minister, a matter to which I do not expect the hon. the Minister to furnish me with a reply today. However, it is a matter which, in my opinion, should be raised. I hope that in due course, when the hon. the Minister and his officials have given their attention to the matter, I shall receive a reply from the hon. the Minister.

The matter which I want to raise with the hon. the Minister is the question of levying income tax upon housing subsidies to municipal employees. I immediately want to say that I am not requesting a reduction of revenue. On the contrary, I am going to see whether I cannot give the hon. the Minister something extra. The Government and the provincial administrations pay generous subsidies on the rent which their employees pay upon housing loans. In many cases this amounts to a considerable sum. Depending on what a provincial employee earns, he may receive a subsidy of 48% or 54%, or even 60%, on his monthly payment. In other words, a provincial employee who pays R100 a month on a housing loan can easily receive a subsidy of R60 from the State. I think it is a praiseworthy practice on the part of the State and the provinces to render such assistance to their employees, and nobody finds any fault with this. In this case the subsidy is not calculated as part of the gross income of that employee of the Government or province. He is therefore not expected to pay income tax upon it. Of course, I have no fault to find with this either. I think it is a very good thing that this is the case. The same principle applies, of course, to the ordinary man who receives a housing loan from a building society. If his bond does not exceed R15 000, and if the property is not valued at more than R20 000, he may receive a State subsidy of 2% upon it, and that 2% is not taxed. I do not have any fault to find with that either. It is a very good arrangement.

However, in the case of municipal employees, this subsidy which is paid by the local authorities is subject to taxation. The Department of Inland Revenue says that the Income Tax Act does make provision for tax concessions in respect of housing subsidies which are paid to employees of municipalities. I am not very good at reading laws, but I do not think that the Income Tax Act makes provision for this concession in the case of public servants or employees of the provinces. I do not find anything in that Act which makes provision for this concession. I may be wrong, and I should be glad to be corrected.

Look at the next Order of the Day.

I think that, when it comes to this category of employees of the local authorities, who fall directly under the jurisdiction of the provincial administration, they should be treated in exactly the same way as the provincial employees and public servants. If the municipalities do not subsidize these employees, many of them will probably qualify for the 2% subsidy which is paid in respect of certain loans at building societies. The Government will give that money to them, and it will not be taxable. Under these circumstances I think that the principle may be carried through so that it will be applicable to municipal employees as well. I think that it will be a good thing for these employees to receive at least the minimum which is received by the man in the street, who can go to the building societies. This is a small matter, Sir, but I think that it is important to many people. If steps have already been taken to rectify this matter, I shall be very pleased, but nevertheless I just want to bring the matter to the attention of the hon. the Minister.

Mr. Chairman, I support the plea made by the hon. member who has just spoken. In fact, if he will vote with us on clause 14 of the Finance Bill, we will be very happy. In terms of that clause an exemption will be granted to any institution, council or body referred to in section 84 (1)(f) of the Republic of South Africa Constitution Act. That in fact refers to municipal institutions. His speech, regretfully, is therefore about two hours early, but other than that I have no quarrel with it whatsoever.

In so far as the hon. member for Ermelo is concerned, one has perhaps more to quarrel about. I think the importance of what the hon. member has said needs to be stressed in the following way. I do not think there is any lack of confidence in South Africa on the part of people who sit on this side of the House and in these benches. What there is, is a lack of confidence in the Government to use the resources of South Africa to best advantage. This is what has been demonstrated recently. Since I am talking about confidence, let me say that one has confidence in a Government on the basis of the facts which the Government gives one. This Government and this hon. Minister regretfully do not give us the facts, and do not answer the questions. Perhaps nothing is more classic than the hon. member for Ermelo, who ventures where the hon. the Minister fears to tread. We have asked the hon. the Minister to tell us about the gold swop agreement. He says it is not in the public interest to do so, but the hon. member for Ermelo gets up and tells us that the amount was R400 million and that the rate of interest was 5%. The only thing he has not given us yet is the period. Perhaps the hon. the Minister will fill that gap. With great respect, the trouble with the hon. the Minister is that he is asking for confidence on the basis of a blank cheque and not on the basis of facts.

If the hon. the Minister would take South Africa into his confidence, then I believe that people would put their shoulders to the wheel and get stuck in and do a job of work however bad the economic situation may be. But he continues to tell us that everything in the garden is rosy and that everything is going to be fine. When we talk about the objectives that the hon. the Minister has or should have, and when it comes to the fight against inflation, he is a failure. When it comes to preserving our foreign reserves he is a failure. When it comes to the question of encouraging growth he is a failure. When it comes to the question of maintaining living standards he is a failure. He is the one who told us that devaluation did not mean any drop in living standards, and yet the hon. the Minister of Economic Affairs got up the other day and said that we all had to accept that there was going to be a drop in our living standards in South Africa. Sir, with great respect, is that a story of success? Is that a reason for the hon. the Minister to come to us and ask us to give him our confidence? No, with respect, the time has come for the Minister to put his cards on the table. He got mightily indignant when we spoke about the fact that this budget which he presented was an example of window-dressing. He said that that was a terrible thing to say. But let us look at the facts. Let us look at the figures of the payments from the Exchequer Account before 31 March. Sir, they were low, and they were low by comparison with previous years. Payments this year amounted to R627 million, yet in 1975 they were R949 million and in 1974 they were R907 million, and this at a time when you would expect expenditure to go up each year. So you have a dramatic drop from R949 million in 1975 to R627 million in 1976. Then, after the budget, when it is no longer so necessary to have that kind of window-dressing, we find the situation that in fact suddenly the expenditure goes up. In 1975 it was R444 million and in 1976 it is R739 million, and if we include certain other payments in it we find the comparison is R763 million as against R454 million. These are dramatic increases, Sir, and they are not explained. This is a matter in respect of which I think the public requires to be taken into his confidence.

Let us look at the expenditure. In his budget the hon. the Minister said that he was cutting public expenditure. He was the hero, and the Financial Mail was quoted to show what a hero he was. The only problem, however, is that we have not yet seen the supplementary estimates. It is quite clear that all the expenditure which was contemplated at that time was not included in the budget. If that is not a case of not taking the country into his confidence, then I do not know what it is.

Let us look at some other things such as the picture that is presented in regard to the reserves. The hon. member for Ermelo spoke about the gold swop agreement. I agree, I think it is a good deal, but we need to know what the terms are. Can we look at some of the figures to see what the situation is? We have again tried to get the Reserve Bank figures, but the hon. the Minister says he is not in a position to give us the Reserve Bank figures. Yet, in reply to the questions that have been put in the House month after month, the Reserve Bank figures have been given. Suddenly, when it does not suit the hon. the Minister, he decides to hold back the figures of the Reserve Bank.

If you obtained the figures from the Reserve Bank, why do you ask me?

No, I obtained the figures from you in the past. I put questions on the Order Paper and you answered the questions. Let me give a comparison to try to put together figures, since we cannot get exact figures from the hon. the Minister. Let us look at the Government Gazette of 21 May 1976, which gives the position of the assets and liabilities of the South African Reserve Bank as at 7 May 1976. We find, interestingly enough, that under the item “Other Liabilities” the figure is R1 109 000 000. When we compare that figure with what this item has shown in the past, we find a dramatic increase. When we compare this figure with the figure given a month later, we find an even more interesting situation. If one looks at the figures under the heading “Notes in circulation”, one finds that within the period from 7 May to 28 May the amount of notes in circulation in South Africa increased by over R100 million. Yet there is not a word of explanation from the hon. the Minister. When one looks at the ratio of gold reserves to liabilities to the public, less foreign assets, one finds that the percentage on 7 May was 26,7%. By 28 May it was down to 25%. When we seek to compare this with some of the historic figures, we find for example that in May 1973 that figure was as high as 74%. The hon. the Minister merely says to us: “Have confidence on the strength of a blank cheque.”

Before I pass on to the next point I want to make, there is a non-controversial matter which I would like to touch on. I would like to convey my thanks to a man who perhaps gets very little thanks from the public, because none of us likes to pay tax. I refer to Mr. Schickerling, who has retired, but whose services are still available. He is a man who has filled the office of Secretary for Inland Revenue with great distinction and I think South Africa was lucky to have him. As far as his successor, Mr. Van der Walt, is concerned, I hope that he too will have a successful term of office and that perhaps he will not have to extract as much taxation from us as the hon. the Minister might like him to. At the same time, we know he will do his job.

I would like to touch on one last point which is perhaps topical, and that is the question of deposit rate control. Yesterday the hon. the Minister announced certain relief measures in respect of building societies. The first relates to fixed period shares, where there is now an increase from 7½% to 8% in respect of the amount which is tax-free. The hon. the Minister also lifted the amount in respect of which there was no control from R250 000 to R1 million. By only dealing with fixed period shares and by not dealing, for example, with subscription shares, which are after all the recourse of the saver, I believe that the hon. the Minister is not dealing fully with the matter. The hon. the Minister is also not making the situation competitive because there are still many other competitive savings which do not make the matter attractive to the building societies. [Time expired.]

Mr. Chairman, the hon. member for Yeoville started his speech in a tone which made him so ashamed of himself that he returned to more positive matters later on. He even thanked an official for the fine service he had rendered, and I should like to associate myself with this. Towards the end of his speech he also referred to the fine work which the hon. the Minister had done, as reflected on the statement made by the Reserve Bank yesterday. Since he referred to that report, he could have informed this hon. House of what appeared on the same page, i.e. of the loan of R80 million which Iscor obtained overseas yesterday. This is the answer to what was said by the hon. member for Constantia. This illustrates what confidence the world has in South Africa. What is more, this concerns Iscor and not even the Government. The hon. member for Yeoville said the hon. the Minister was not combating inflation. He said that the reserves were dwindling, that there was no growth and that the standard of living of all the people had not been maintained. According to him the Minister was nothing but a failure. I think the hon. member is somewhat drastic. I wonder whether the hon. member is unable to exercise restraint in what he say. I also wonder whether he is unable to present more facts for accusing a man of being a failure. After all, he is the only one who thinks so. The rest of the world does not think so. South Africa does not think so. The fact of the matter is, however, that when our Minister does well, brilliantly, excellently in South Africa and in the world, it is a death blow to them. They hate to see the Ministers in South Africa making progress and governing this country well. It does not suit them. It would suit them far better if we were to make a failure of Africa’s finances and economic affairs. This is what their politicking amounts to. We are not blind to this; we realize that this is so. They have one motive only: They want to see whether they cannot take over the Government by means of spiteful gossip because they cannot come into power on the strength of an economic policy. A Government may fall as a result of a weak economic policy, but no opposition in the world has ever come into power as a result of its economic and financial policy. This cannot happen. The sooner hon. members on the opposite side realize this, the better.

The hon. member for Constantia referred to a whole series of matters. He said that there was unemployment, that the balance of payments was dwindling, that prices were rising, etc. I should like to put a few questions directly to the hon. member. If we have to force down inflation in South Africa, whose recipe will he accept: The recipe of America, Japan and Western Germany, or the recipe of England? America was not afraid to accept unemployment. America allowed an extremely large percentage of its economically active population to become unemployed. America took strict monetary and fiscal measures and in this way succeeded in forcing down its rate of inflation. Now America has a real growth rate of which it may be proud. The growth rate is not negative as it used to be. West Germany did the same thing, but what did England do? England did not want to do this. At the moment we in South Africa have no unemployment to speak of. We all know that an unemployment rate of 2% is considered by the world to be sound. In this country we have no unemployment to speak of. The people who do not work, positively do not want to work. This is the situation. However, we do have those who are work-shy.

I want to say a few words about the balance of payments. At the beginning of this year, after the gold price had dropped a great deal last year, the hon. member for Yeoville made mention of this. We all know that if the price of gold drops by $10 per ounce, it means a loss of R200 million to South Africa. The hon. members on the opposite side who participated in the no-confidence debate this year, thought they were on to something. They said that there would be a shocking deficit on 31 March 1976. The hon. the Minister and his team of advisers who worked on this budget and made estimates came fairly close to the actual position, however, and when the hon. the Minister presented his budget on 31 March, there was a surplus of R93 million. And yet hon. members on the opposite side maintain that the hon. the Minister and his department made such a blunder last year! As the hon. member for Ermelo indicated, the gold mines, the Chamber of Mines and others, had not taken the drop in the gold price into account, but the hon. the Minister and his department had been more far-sighted. They were conservative in their estimates. We must thank them for this and take our hats off to them. They should be given credit for this and should not have to hear stupid statements such as these made by the hon. member for Yeoville. It is difficult to maintain the soundness of the balance of payments in South Africa. The hon. the Minister emphasized this time and time again, not only in dealing with the budget, but also wherever he spoke. It is not for him alone to have regard to the balance of payments at all times; it is the duty and responsibility of every man and woman to help keep the balance of payments sound. The position is that our reserves have to make provision for approximately three months’ imports. Whose responsibility is it to ensure that the balance of payments is all square? After all, it is not only the Government who imports; it is all the importers in the country who have to see to this. It is all the buyers in the country who have to see to this.

But who controls it?

We find that people import goods which are too stupid for words, but do so at enormous prices. If we come across something like this, surely it cannot be the hon. the Minister’s fault alone. Moreover, we are a party to GATT and for that reason we cannot simply introduce price control. We have to comply with that international agreement and the hon. member for Yeoville knows this. Twenty per cent of our imports are consumer goods, but we cannot put an abrupt end to the import of such goods. There are things such as pepper and certain groceries which we do not produce in South Africa. Therefore it is essential for us to import certain articles. We also have to import textiles from overseas. We import these from countries with which we have a swop agreement. The Government cannot put an abrupt end to this type of export either. The position is that we have to pay for the goods which we obtain from them and if we export to them, it helps. The matter of imports and exports has many facets.

There is a sphere in respect of which I want to ask the hon. the Opposition to use their influence. I ask them for their assistance so that it may be ensured that South Africa will do more as far as its invisible imports and exports are concerned.

We also export agricultural products, of course. During 1974 the export of agricultural products represented 31% of the total South African export trade. From 1970 to 1974 the agricultural sector earned plus/minus R3 423 million for South Africa in foreign exchange. The average contribution of agriculture to our export for the period 1970 to 1974 amounted to 33,5%. We must have regard to the fact that the amount earned by agriculture in foreign exchange was sufficient to pay for 45% of the capital goods imported during that period. This gives one a clear picture of the worth of the contribution of the agricultural sector.

This year however, the weather has not favoured us. We have had floods, etc. The export of the agricultural sector is going to drop—it must drop because we do not have the necessary supplies at our disposal for export—but is this the fault of the hon. the Minister? The hon. member for Yeoville said the hon. the Minister was a failure because the reserves were dropping. If our reserves are going to drop over the next 12 months as a result of the fact that we do not have the necessary agricultural products for exporting, will the hon. member still say that the hon. the Minister is a failure? Is the hon. member himself not perhaps the failure?

We must also think of other spheres as far as export is concerned. In this regard I have in mind the services we are able to render. The Republic of South Africa has excellent professional men and they have earned this country much honour apart from the foreign exchange they have earned for us. I am thinking of our highly skilled engineers who have constructed railway lines, hydro-electric installations, irrigation projects and sugar and cement factories in other countries, and who have undertaken the sinking of mine shafts. We must also have regard to the shipping services we render. We render those services not only to South Africa’s importers and exporters, but also to bodies in Europe, North America and the Far East. We think of the air services as well as the postal and telecommunication services. We also render agricultural technical services in Africa. In addition there are health services which we render elsewhere. I wonder whether the hon. the Minister can use his influence in some respect so as to inspire those people who are involved in these services, to earn even more for South Africa in the form of foreign exchange by further extending the services which we export. In this regard I have in mind insurance services as well. We have a very large back-log as far as invisible exports are concerned.

Perhaps I am asking a great deal, because I know the hon. the Minister is a very busy man. Apart from the budget which he presents annually, he has five departments to manage. All the financial institutions fall under him as well. There is a whole series of such institutions—simply think of all the banks and building societies. We know that international affairs occupy a great deal of his time. There is the question of gold sales, and he also has to meet obligations he has towards the International Monetary Fund. He has many affairs to deal with and physically it is virtually impossible for him to do more, but in spite of this I nevertheless ask him to see what he can do about the matter I have just mentioned. [Time expired.]

Mr. Chairman, the hon. member for Yeoville is known to be a person who has a very thin skin, someone who becomes angry and annoyed quickly. I think he was guilty of another gross offence yesterday when he shouted out excitedly: “He is a failure! He is a failure!” referring to the hon. the Minister. I think that this was far-fetched and that the hon. member was being very arrogant and presumptuous.

Yes.

The hon. the Minister was not the only one the hon. member for Yeoville was trying to hurt by using those words. Through the Minister he also launched an attack on the expert officials—and there are many of them—who assist the hon. the Minister in his daily task. In my opinion, he launched a bitter attack on the officials of the Reserve Bank as well, the people who participate with the hon. the Minister in planning financial policy. I think indirectly he also launched a bitter attack on the member of the hon. the Prime Minister’s Economic Advisory Council, because they are co-responsible for the economic and financial policy followed in this country, and indirectly he also made a contemptuous reference to those gentlemen who make projections of economic development trends and draw up economic development programmes. That hon. member is laughing now. He is hiding his shame behind his hand. The hon. the Minister is not the only person who is responsible for these matters. The ultimate responsibility is his, of course, but he has advisers who assist him. I shall take notice of the thousands of industrialists, businessmen and dealers in South Africa who speak highly of this hon. Minister and his work, his purposefulness and his honesty, rather than of the hon. member for Yeoville.

Naturally, the Opposition always has instant solutions for our country’s problems. Both the hon. member for Yeoville and the member for Wynberg—I shall return to him in a moment—have instant solutions for our problems, but fail to take into consideration the basic socio-economic and political principles of the country. They are people who plead for higher wages and salaries and then, in the same breath, warn that we are promoting inflation in this way. There are people, inter alia, the hon. member for Constantia, who, earlier this year, in reply to the budget debate, attacked the hon. the Minister for spoiling the pleasures of the taxpayer by imposing a customs duty on petrol. For them, the issue is more the pleasures of life than the serious position in which the world and our country find themselves and the necessity of keeping our country economically and financially sound.

The hon. member for Constantia is unfortunately not present, but nevertheless I want to reply to a few of the things he said. On a number of occasions—including today—he has asked why the Treasury has not created any long-term investment plans for the public sector. The accusation he is levelling at the Government is therefore that this department does not take any trouble to carry out long-term planning. He also asked whether the Treasury determined priorities in drawing up its budget, and also whether cuts are first imposed on items with the lowest priorities. He then expresses his concern by saying that he does not think that the Treasury, the department and the Minister will be able to answer these questions positively. I think I can tell him, in all honesty, that the answers in every case are in the affirmative. Long-term planning is indeed carried out, there priorities are determined and cuts are first imposed on the items with the lowest priorities. Why do I say the answer is in the affirmative? Why am I prepared to stick my head out and say, as I said earlier this afternoon, too, that there are thousands of traders, businessmen and industrialists who agree with me? It is because the responsible experts who have to take these decisions and who have to carry out planning in the interests of South Africa, probably realized just as clearly as the hon. member for Constantia, or more so, that long-term planning and the determination of priorities is of the utmost importance in creating a sound financial and security policy for South Africa. These experts have wide experience and are men with years of service. They lean heavily on the recommendations and studies on these matters and on the economic trends and the problem areas, which are carried out every day and every year by commissions and boards.

When the hon. the Minister delivered his Budget speech earlier this year, he said inter alia the following (Hansard, 1976, col. 4265)—

After all, the hon. the Minister would not say these things if this was not the case. Surely the hon. the Minister would not try to pull the wool over South Africa’s eyes and fool the country. South Africa is a modem State and we have some of the best economic and financial minds in the world at our disposal. We do make use of the knowledge of many of these people and this knowledge is utilized, so that with their assistance we can carry out long-term planning in order to keep South Africa’s financial structure as sound as possible and so that South Africa’s development programmes may be such that stable growth and private initiative will not suffer. The hon. member for Constantia mentioned this at the beginning of his speech and it is fitting, too, that we should look at the task of the Treasury for a moment in view of this target budget system before us. I do not want to weary hon. members and therefore I shall merely mention the main points. The first chief aim of the Treasury is—

This is an immense task and instruction to carry out, to determine the policy and to ensure that it is carried out.

The second aim of the Treasury is—

In his wisdom the hon. member for Wynberg said something on a previous occasion which was, I think, intended to be an accusation directed against the Minister, but which was completely unjustified. In his wisdom, the hon. member for Wynberg announced that the hon. the Minister does not consult the provincial administrations or go into session with them when the provinces’ requirements are determined. He was even a former member of the provincial council, but even if he had not been there, his common sense could have told him that the hon. the Minister must—and he does indeed do so—hold intensive discussions with the various provincial administrations in order to determine their requirements, to tell them what the central Government is able to do for them and to warn them that they must not spend beyond their means. [Time expired.]

Mr. Chairman, the idea occurred to me that if the hon. the Minister of Finance has supporters like the hon. members for Sunnyside and Worcester, he needs no opponents. I should like to hear from the hon. member for Sunnyside whether he means that the responsibility for the balance of payments is not the responsibility of the hon. the Minister. According to his speech it would seem as though the responsibility …

May I answer you?

No, of course not. According to the hon. member’s speech, it would seem to me that he wants the farmer to share the responsibility with the hon. the Minister. Of course this is absolute nonsense, because the hon. the Minister of Finance is in charge; he is the man who decides what should be done about the balance of payments. I hope the hon. member for Sunnyside understands this now. The hon. member for Worcester holds against me the fact that I said that there was no long-term planning and no priority planning. This is so and I confirm it. The programme description under Programme 1: “Economic policy and financial control,” also indicates clearly that one of the Treasury’s aims is “advising the Government on policies relating to financial relations between the Government and the provinces”. I should like to dwell on this for a moment. The hon. member for Worcester maintained that I had supposedly said on one occasion that the hon. the Minister did not consult the provinces. I do not believe I put it like that. What I did say, was that I felt that the hon. the Minister lays down certain provisions in respect of what the provinces require, and afterwards says to the provinces: “This is what I think you need. You must make do as best you can.”

†If one looks at the Financial Relations Act, one finds that the subsidies paid to the provinces are based on a formula which is composed of two items. One is the financial requirements of the province and the other is the province’s capacity to pay. What is very interesting about this section of the Financial Relations Act is the latter part, which deals with criteria. It states quite definitely—and I think the hon. member for Worcester will agree with me—that the hon. the Minister will determine the criteria. The hon. the Minister does a little consultation with the Administrators and he talks to them, but he takes the decisions and decides what the criteria should be. In the past he has decided what the criteria are, and then he has said what he believes the financial requirements of a province are and what he believes that province’s capacity to pay is. Having arrived at those two criteria, he then proceeds to dole out the funds. That is what I object to, because it is, to my mind, the wrong way to do it. I believe the provinces should be allowed to do their own budgeting. The provinces should bring their proposals to the hon. the Minister and say what they believe their financial requirements and capacity to pay are.

I think it is on that basis that the subsidy should be arrived at. In any case, this formula was determined more than five years ago and apart from a vague idea, we do not know the details of it. I know a committee is reviewing it at present, but it is taking an awfully long time. Last year the hon. the Minister told us that the committee had been appointed and that it was investigating the matter. The next year has arrived and we have not yet heard of any new formula. The hon. the Minister should tell us whether there is going to be a new formula and, if so, how the formula is going to work. What has happened now is that the hon. the Minister, as a result of his decision based on his criteria, has cut down the provincial subsidy very considerably. The Cape Province worked out that their subsidy should have been R493 million this year. The actual amount the hon. the Minister allowed them was R457 million, leaving a shortfall of almost R36 million. I do not know how the hon. the Minister worked out how the Cape Province was going to make good the shortfall. It seems to me that the hon. the Minister disregarded the fact that there was going to be a shortfall and did not suggest to the provinces what he felt might be the way in which they could raise the shortfall. He left it to them entirely, because he knew very well that there were only two ways in which they could make it good. These two ways were to tax hospital patients and to increase motor vehicle licence fees. The hon. the Minister must have known that. He knows what the provinces can do. And so the Cape Province actually did tax hospital patients. Most hospital patients now have to pay a daily fee which is just about twice as much as they had to pay before. I am sure the hon. the Minister must have know that that was going to happen. I do not believe the hon. the Minister should be so callous about the matter. If a man is ill, he must surely not be taxed. However, that is exactly what has happened. In arriving at his criteria, and in applying the criteria, the hon. the Minister knew full well that hospital patients in the Cape Province were going to be taxed twice as much as before. The daily fee is now R12 instead of R6 for the average case.

Motor vehicle licence fees have been increased on an average by approximately 50%, while the licence fees for heavy vehicles have been increased on an average by approximately 100%. It is in this regard that I am most concerned. I notice that the licence fees for vehicles weighing 12 001 kg and more last year were R350. This year it is R950, an increase of R600. It is these heavy vehicles that are used for haulage of commodities which cannot be conveyed by any other means. If licence fees go up from R350 to R950, then inevitably haulage charges must go up sky-high. And when haulage charges go up, the prices of commodities also have to go up as the increased licence fees have to be covered. In arriving at the relevant criteria and in determining the various factors in the formula I have described, the hon. the Minister has added considerably to the cost of living. The hon. the Minister should have known that. In doing this kind of budgeting for the provinces he was doing something highly inflationary. I believe the hon. the Minister should take the full responsibility for it.

And the provinces should spend just as much as they like!

The provinces should not spend just as much as they like. Not at all. But the hon. the Minister knew that there would be a shortfall of R36 million. Why did the hon. the Minister not rather give the R36 million, which he could have taken out of indirect taxation, rather than allow the provinces to tax the two particular sources I have referred to, i.e. hospital patients and haulage vehicles? The tax paid by hospital patients only covers about 8% of the total costs of the hospital services. So why on earth we have to tax hospital patients I do not know. Why the hon. the Minister did not give the additional amount to the provinces and allow the provinces to provide hospital services free, gratis and for nothing, I do not know. This is a very good point for next year’s budget. [Time expired.]

Mr. Chairman, the hon. member for Wynberg probably greatly regrets not having been in the provincial council when the debate on the issue of vehicle taxation was conducted there. It was, of course, a debate in which his party came off very much second best. It is apparent that the hon. member is still very fond of the provincial council. I wonder, therefore, why he came here.

As far as the finances of the country are concerned, hon. members on that side of the House, inter alia, the hon. member for Wynberg and the hon. member for Constantia—complain that the hon. the Minister of Finance did not succeed in pruning Government expenditure. When a start was made with the anti-inflation programme, hon. members on that side of the House put certain questions to hon. Ministers. They wanted to know, inter alia, what the hon. Ministers were doing in order to prune Government expenditure. When the hon. the Minister of Finance reached an agreement with the Administrators of the provinces—an agreement which was not unilateral—that was an effort to curb Government expenditure in that way, too. I do not know, therefore, why the hon. member for Wynberg wants to repeat a debate here which was conducted at great length in the provincial council. The hon. member refers to hospitals and speaks about a tax on patients. Surely this is absolute rot. After all, there is no such thing. In any event, there is no earthly reason why a hospital patient who can afford it—and after all, this is the basis on which it is done—cannot make a contribution.

I think hon. members opposite have today allowed a valuable opportunity to slip through their fingers. The hon. member for Constantia said that he had initially been opposed to the switch over to target budgeting. However, he added that he now admitted that he had been wrong. He also expressed his satisfaction with the budget introduced by the hon. the Minister of Finance. For my part I, too, want to convey my sincere congratulations to the hon. the Minister and to Government departments which have already made the switch to target budgeting systems. Apart from the other important benefits inherent in target budgeting, it is an important step in the combating of inflation.

In the times we are living in, we must determine our priorities correctly, particularly in the economic sphere. The system of target budgeting makes this possible. Government expenditure—that is to say, the current expenditure by the authorities—on services which must be rendered to the community—comprise an important part of the country’s gross domestic expenditure. This is important because Government expenditure also includes services such as education, research economic services, social services and, last but not least, the vital matter of defence. Therefore, when the Government budgets for all these things and does so in accordance with an integrated budgeting system, it is far easier, even for the layman, to pass judgment on the wisdom of such a budget. That is why I am of the opinion that the hon. members opposite—and the hon. member for Wynberg, who referred to this, in particular—have allowed a valuable opportunity to slip through their fingers. The hon. member was unable to put his finger on any of the things of which he accused the Government, specifically the hon. the Minister of Finance. He said with reference to the various programmes that the hon. the Minister had failed in his attempt. Surely, however, it would have been very easy for the hon. member—since he was referring to target budgeting—to pinpoint accurately what he regarded as the hon. the Minister’s failure. Consequently, at that stage he had to haul the hon. the Minister over the coals for not having succeeded in restricting Government expenditure in that specific respect. He could have launched his attack from many other angles, but he failed to do so. He only spoke in vague terms. Target budgeting will give us on this side, and the Select Committee on Public Accounts, too, a better insight into the handling of the finances of the various departments. Overspending or under spending and fruitless expenditure ought now to be restricted to a minimum. Officials who were over-ambitious in the development of their departments will have to watch their step. It has happened in the past, for example, that apparatus has been purchased for research when the merits of the project have not been duly ascertained in advance. One could mention innumerable examples of this kind. Such purchases may perhaps appear to be ineffective at a later stage and will then have to be written off as fruitless expenditure. But with target budgeting, where the budget of a department is broken up into its smaller subdivisions, we shall perhaps be able to eliminate mistakes of this kind. While referring to the services of the Select Committee and the work done by that committee, I want to say with reference to the integrated budgeting system that I am of the opinion that the Committee on Public Accounts ought to sit during the recess, too, so as to be in a position to exercise fuller control over expenditure by departments. Government expenditure—and I have already said that this also includes expenditure on education and defence—is determined largely by the requirements of the country at a specific period. It is also determined by growth in population and the economic growth of the country, and in South Africa this must necessarily show a tendency to increase. But it is also determined—and this is important—by outside factors, exogenous factors, as is the case now in regard to the expenditure by the State on defence, which causes Government consumption expenditure to show a tendency to increase in spite of the fact that we should very much like to keep Government consumption expenditure at a low level in these times of inflation. As far as defence expenditure is concerned, it would be foolish to curb Government expenditure. The demands made on the economy from day to day in a fast changing world make it very difficult, of course, to compile an economic development programme and then stick to it. That is why it is necessary for one to adapt one’s targets constantly. But if Government consumption expenditure increases at too high a rate in comparison with what is acceptable for a balanced economy, then in my opinion, private consumption expenditure must be kept in check. If necessary this must be enforced by means of fiscal and monetary measures. The Minister must be congratulated on the steps he has taken to curb Government expenditure.

I should like to refer to other measures adopted with a view to combating inflation. There is the curbing of expenditure by the provincial administrations, about which the hon. member for Wynberg has just made a fuss; there is the control of State corporations; there is the control of increases in the money supply and the increase in the minimum liquid asset ratios. Then, too, there is the offer of treasury bills which has been increased and there have been special issues of Government bonds. All this affords us a degree of control over the increase in our money supply. But in spite of this it is still true, and cannot be explained away, that the country is undoubtedly importing too much and exporting too little today and that there is therefore an imbalance between import and export, which cannot be explained away either. In the debate on the Economic Affairs vote I said that we were saddled with a dilemma; whether we should export more or import less, and I pointed out that it was almost impossible to do either of these two things in the short term. That is why the solution I should have liked to suggest, but did not get round to was that we should exercise self-discipline. Domestically we must consume less and limit our imports. We must buy South African and thereby stimulate our South African industries. [Time expired.]

Mr. Chairman, I want to congratulate the hon. member for Malmesbury on an exceptionally interesting discussion of the economic climate and certain structures which are related to developments in the financial sphere. If one could express a wish about the man on the street’s approach to financial matters, one should like to see each developing a new evaluation of the value of money. It remains a simple fact that the extent to which one values the money in one’s pocket is a measure of the value one sets on the monetary system of one’s country. To the extent that one regards the money in one’s pocket as being of lesser value, to that extent does one regard the whole monetary structure of the country as being of lesser value.

I should like to exchange a few ideas about the financing of the smaller municipalities in our country. I know that this is a sphere which has been transferred by way of delegation to the provinces and by the provinces to the various bodies in control of local managements. Nevertheless the local managements perform a very important task in our national set-up, namely looking after our people, and this House certainly has an interest in looking after our people because it is from the means of livelihood of our people that we recover our taxes. The smaller municipalities of our country are finding it more and more difficult to make ends meet in regard to the financing of services to their residents, and the modernization of those services. Funds for the provision of such services are obtained from two main sources, namely the levying of rates on property, and levies on services provided. This has a particular effect on people who are no longer economically active and here we have in mind in particular our elderly people who live in the smaller towns on the platteland. We can argue that it would be more economical and convenient, and even more desirable, for these people to live in old-age homes, but then our platteland towns will forfeit one of their typical characteristics. Those people lend our little towns a richness of character, and it is of great importance to us that they retain their individuality and continue to live in their houses, because those houses still serve as the house for the children for the Afrikaner of this country, even though they themselves are adult and even though they already possess their own houses.

Another section of our population which is directly affected is those population groups who live in their residential areas situated alongside the White residential areas. It sometimes happens that services such as sanitation or power supply have to be linked up with the services provided to the White town, providing those services demands expenditure on a large scale. However, one could argue that this could be recovered by increasing the rates levied on the services. However, this in turn gives rise to demands for higher salaries so that the people can make a living, and the higher salaries, of course, have to be paid by the employers.

When the smaller municipalities negotiate loans in terms of the right granted to them by the provincial administration, they have to pay higher interest rates because the municipality does not qualify for a lower interest rate, since it is not a big borrower. There are a few grade 1 borrowers, as they are classified on the capital market, bodies such as Escom, Iscor and the city councils of Johannesburg, Durban and Cape Town. These are bodies with a high degree of security and those securities have a high discount rate. These bodies can borrow money on the capital market at an interest rate that varies between 10½% and 11½%, whereas the smaller municipalities obtain loans at interest rates which vary between 12% and 14%. To give you an idea of what such a loan costs for the smaller municipality, I want to point out that if it borrows an amount of R500 000 at an interest rate that varies by 0,2%, the difference in interest over the normal period of 25 years will result in additional expenditure of R25 000. If it borrows an amount of R3 million over a period of 25 years at an interest rate that varies by 2%, it will pay R1,5 million more in interest alone. Those higher costs must be recovered from the pockets of the people living in the town. A system is being planned in this connection, namely the formation of municipal loan consortiums. We want to ask that the Minister and his experts give these people a sympathetic hearing. The idea is that representatives of all the municipalities in a specific region should serve on one central body. Each municipality retains its own individuality and right of management, but as far as its borrowing power is concerned, it will form a unit together with the other municipalities in a specific region, which can enter the capital market for a central loan. In this connection there will be two groups, viz. the primary borrowers and the secondary borrowers. The primary borrowers will be the big municipalities and the secondary borrowers, the smaller municipalities.

What will Standerton be?

Standerton is one of the primary borrowers. It can then be arranged that the secondary borrower need not stand alone and enter the capital market. Through the umbrella committee it qualifies, together with the other towns in the district, for a larger amount and by so doing can save interest to the advantage of those people from whom it has to recover rates. This affords our people the opportunity to negotiate those loans with joint and several responsibility, without this involving a higher risk. I therefore advocate the establishment of these municipal loan consortiums which could also make the regional development association more meaningful, because they could then draft an overall plan for the development of the regions in our country. When the various towns and municipalities act jointly, then they offer a better loan security, and it has already been determined by legal opinion that it will not be necessary to tamper with existing ordinances very much in order to arrange this matter to the advantage of the ratepayers in the various towns.

Mr. Chairman, I have sympathy for the hon. member for Standerton in regard to the financial plight of the smaller municipalities. I hope he will understand it if I say that I do not have enough personal knowledge of this matter to take it any further. The hon. member for Malmesbury talked about Government expenditure and the balance of payments, matters to which I should like to come back. The hon. member for Worcester, who, like the hon. member for Malmesbury, has also disappeared from the Chamber, commented on the remarks made by the hon. member for Yeoville in regard to the comparative success or failure of the policies of the hon. the Minister and of the Government. I think it would be fair—I do not think the hon. the Minister would ask anything more—to quote what he himself said and set out as his own criteria in his budget speech. I should first like to quote the following words—

A little later on he said—

Finally, he said in his summary of the budget that the objectives—apart from that of expenditure—were threefold—

These are the four keys to the budget as he himself saw it, factors which were underlined by the very substantial increases in taxation—direct and indirect—which he introduced and which all of us are compelled to pay.

Where do we stand now? What does the evidence show so far this year in regard to the facts as they have appeared? One which has already been mentioned by the hon. member for Yeoville is that Government Gazette No. 5113 of 14 May, which sets out the statement of Exchequer Receipts and Issues for April 1976 as compared with April 1975, shows that the monthly expenditure figure was R739,5 million in April 1976 as compared to R444,4 million in April 1975. It is not only a question of an increase of 66,4% in one month, but also an increase of R295,1 million. This increase must go against the R718 million which the hon. the Minister has set as his objective. Government expenditure in April this year reflected an increase of about 27,8% on that of March 1976. One must add to that the 10% increase in salaries and wages granted to the Public Service, an increase which will cost say R60 million. Therefore, of the R718 total increase for the year—the task which the hon. the Minister has set himself—R355 million has already, in effect, been spent, and this means that only R363 million is left for the remaining 11 months. The result is that the hon. the Minister has left only a 5% or 6% increase over last year’s expenditure or about 0,5% per month for the rest of the year. Naturally the month of April may prove to have been atypical in that it may include a substantial element of delayed payments from the previous fiscal year—the window-dressing referred to by the hon. member for Yeoville—but this simply leaves a lesser margin for this year.

The second key is the defence of the country. Here, in so far as the figures are known, expenditure has risen dramatically.

The third key is the balance of payments position and inflation. To take the latter first, the facts are as follows: The wholesale price index started to rise in January of this year. The monthly rises have been 14,4% in January, 14,9% in February, 15% in March and 15,8% in April. The consumer price index closely follows a similar pattern, but as one could have expected, there is a small time lag. However, if one takes the monthly changes at an annual rate which certainly are early warning signals one could say that it had dropped as low as 8% in February, but rose to 10,8% in March and to 16,4% in April. We have had, too, an endless list of price increases covering basic commodities and services which have yet to be fully reflected in the cost of living. Our balance of payments position does not give cause for satisfaction either. Imports in terms of both value and volume have continued to rise—not fall as anticipated—in part, presumably, as a result of purchases for defence and strategic purposes, though undoubtedly the necessity for official loan repayments has also played a significant part. That arises from the fact that this Government chose, or was forced, to borrow extremely large sums on a short-term basis last year.

The fourth key is economic growth. However, to talk about the maintenance of economic growth is to tell a sick joke. It is nothing more than that. We have now had growth below the margin of safety for the second year running, and this Government and the hon. the Minister have explicitly admitted that all they can do is to wait and hope that recovery elsewhere in the world will pull us up from the present gloomy state in which we find ourselves.

In so far as the interests of the less-privileged members of the community are concerned, I advise the hon. the Minister or the Government to canvass the opinions of those people. That is all they have to do—to canvass the opinions of the poor and the old, irrespective of colour—to see that the less-privileged people are a disaster area. Everything has gone against them and they are powerless to defend themselves.

On the basis of the evidence so far, one can say that the hon. the Minister has had four strikes. On three he has struck out. He has swung and missed. On the fourth, namely Defence expenditure, judgment can only be reserved. Finally, I come to the money supply which is the cardinal point in the fight against inflation. That shows an increase of 16,8% over April of last year. Comparing April of this year with March of this year, the figure is only 2,4%, and that is an annual rate of about 10%, already an increase from the 7,2% during the first quarter.

The people will only heed the call to accept a lower standard of living if they see that they have an equitable part to play and if they can see that the result will be in the interests of all. If, on the other hand, they see that the immediate outlook is gloomy and is likely to get worse, and that one party to the contract has failed to fulfil his side of the bargain, they will know where to place the blame.

The hon. the Minister has made explicit and dogmatic claims, and the judgment of him and this Government will hinge on their performance. As we have said, the initial evidence is not good, and it is no use exhorting people to make sacrifices if none are seen to be made by this Government. It is said that the road to hell is paved with good intentions. I do not want to question the faith with which the hon. the Minister has stated his objectives, but the final judgment will hinge on the likely result, i.e. a lower standard of living for all of us, and if the hon. the Minister and this Government persistently fail to take the necessary action, his credibility and that of the Government will have vanished. Whatever way one tries to put the pieces of the jigsaw together, the outlook is either the continuation of growth below the level of safety, increased unemployment, unrest and a crunch on the private sector, or even greater inflation and ultimately another devaluation. In short, if the Government simply forces others to face unpalatable reality, simply because it refuses to make the drastic curtailments required and demanded of its own expenditure by our present situation, the people will know fairly where to place the blame.

Mr. Chairman, the hon. member for Johannesburg North made certain statements here. He referred to the aims of the hon. the Minister and mentioned figures to indicate what our balance of payments was. He also advanced certain reasons for our balance of payments being what it is. However, he then said: “The initial evidence is not good.” He then quoted a saying which I take amiss of him. He said: “The road to hell is paved with good intentions.” However there is another saying which goes: “When one lays hands on a man’s pockets, then one lays hands on his soul.” This is also a saying I have heard. Often that saying is so true, particularly in these financial debates. In the discussion of the country’s financial policy this afternoon, we saw that if one laid hands on the pockets of hon. members opposite, one also laid hands on their soul. Perhaps we do this sometimes with unfortunate consequences for that side of the House. In discussions of this kind there is always an undertone of fear, pessimism, uncertainty, doubt and anxiety among those opposite. This is so different to what we on this side of the House are used to. The Government on this side of the House is constantly stimulating confidence, optimism, positive action and certainty, which is a concomitant of stability. Perhaps one of the biggest problems we are saddled with in the economy today is the fact that too many of our people are too optimistic. This speaks volumes for South Africa and the conduct of this Government. However, a pessimistic undertone is to be detected year after year on that side of the House. I think the time has now come, since all of us here are talking together about objectivity, productivity and effectiveness, for the Opposition to ask themselves whether the negative fear and pessimism which has gripped them is to their advantage as a party, or to the advantage of our economy and our country.

In the short time at my disposal I should like to discuss another matter and I shall therefore leave the Opposition at that. The hon. the Minister will probably reply further to what has been said by their side. The hon. member for Sunnyside discussed the growth in agriculture and the large amounts of foreign exchange earned by agriculture in South Africa. He pointed out the value of this. All the facts mentioned by the hon. member are correct. When we participate in a financial debate, one of the things which the Government, and all of us on this side of the House, always wish to try and do is bring about stability and confidence. When we want to create confidence in the economy of South Africa we must have the courage and the will to take disciplinary steps sometimes as well. We must display financial discipline. Since we are discussing our wish to make our economy stable, I am pleased that the hon. member for Sunnyside also referred to this large amount which is derived from agriculture and which assists us in supporting our economy. In the time at my disposal I should also like to discuss briefly the finances of agriculture. In spite of what the Opposition has said—that to them things are uncertain, that they feel uneasy and that they are pessimistic—I should like to say that they have allowed an opportunity to slip through their fingers in this debate. Our fiscal and monetary policy is printed and anyone can study it. By means of the target budgeting we introduced this year in various departments, it is our aim to select priorities, to set our goal and then to try to achieve it. By means of this kind of budget we try to determine whether we are getting value for our money. I think the Opposition should make a study of this before they enter the budget debate next year. They must also come up with more concrete facts. As I have said, since we have to stabilize our economy I want to ask that generally speaking, we should do everything which could assist in encouraging and stimulating exports. Here I have in mind assistance on the part of the government in connection with the conveyance by air of certain types of vegetables and fruit. There are new markets which can be developed apart from those we already have. I should be obliged if the hon. the Minister could perhaps consider whether assistance is not justified in this regard and where whether, particularly as far as air freight is concerned—since we now have large aeroplanes—we could perhaps open up new markets and thereby open up new possibilities within South Africa, possibilities which up to now have in fact been latent.

I should now like to discuss finance in general and say a few words about the Land Bank and its financing. It is striking, since we are dealing here with a responsible body which has been carrying out financing since 1912, that as a result of the conditions which developed, when farming became more and more important, it concentrated on providing better and more finance, and—and I want to equate the two—on financing more judiciously. In recent times the Land Bank has done a great deal in this country for the farmers of South Africa as a result of the stability it has brought about. In the few minutes at one’s disposal, one cannot do justice to this great task and action of the Land Bank as a financial institution in South Africa. I should like to refer to the amendment of the Act in 1974 by means of which we enabled the Land Bank to provide short and long-term financing for production requisites by way of promissory notes. We know the history of how production credit for agriculture came about in 1938, and how it has developed since then.

I want to say this afternoon, to the credit of our hon. Minister and the board of directors of the Land Bank, that at the moment, with credit being as expensive and limited as it is, they have introduced a measure which will result in further stability for South Africa’s agriculture. Farmers are now placed in a position to borrow money by way of a promissory note for the purchase of cattle, machinery and implements and also to pay the debt which they may have incurred in purchasing these means of production requisites. They have here taken a positive step, a step which compares favourably with steps taken by other credit institutions. The Government can never agree to socialistic measures, and the Government and its institutions—even though the Land Bank is an autonomous body—do not move in the sphere of private initiative, but carry out selective financing with great skill in order, by so doing, to stabilize South Africa’s economy further. If we enter the future in this way, particularly in the light of the outstanding tax structure we now have for everyone in the country, I think that the Government and the hon. the Minister can be pleased and can boast that we in South Africa have one of the best fiscal and monetary policies in the world. However, we can still attempt to bring about improvements. We in South Africa have a right to be proud of having displayed such judgment and discipline. Our people have the knowledge which has enabled us to build up such a fine economy, people who have created a structure in accordance with which each of us can act to achieve success not only for ourselves, but for our country too. [Time expired.]

Mr. Chairman, I want to congratulate the hon. member for Heilbron on his positive contribution to the debate. It is always a pleasure for us to listen to him. However, it is a pity that during this debate we also had to listen to so many jeremiads and lamentations on the part of some members of the Opposition. It got so bad that it felt as if we were standing beside the economic grave of South Africa. Surely our country’s economy is not nearly as weak as some hon. members of the Opposition, the hon. member for Constantia in particular, maintained here this afternoon. In spite of setbacks—there will always be setbacks—surely we in South Africa have every reason to be grateful for our financial and economic position. Looking at the world around us, we see economic and political instability. In the outside world we see monetary instability. We see countries which are getting deeper and deeper into debt because they are unable to pay their foreign debts, particularly their oil accounts. We see countries whose balance of payments is weakening, we see countries with negative growth rates and we see the increasing problem of unemployment and labour unrest in the world. One also sees that inflation is eating away at the wealth of nations. One then realizes how grateful we must be that we here in South Africa are in such a favourable financial and economic position. We, too, have problems—I shall deal with them presently—but in the midst of the economic instability elsewhere in the world, over the past 28 years South Africa has been able to continue growing peacefully. Looking at South Africa’s growth over the long term, we find that it has been exceptionally stable. In the years from 1964 to 1970 the growth rate was 6,2%; an exceptional growth rate and almost a world record. During the year 1973-’74 we had a high growth rate of 7%. In 1975 things did not go so well with us, because we, too, were hit by the economic recession in the rest of the world. Our growth rate then dropped to 2¼%. Over the same period countries like America, West Germany and the United Kingdom had negative growth rates. In the years 1974-’75 the USA had a negative growth rate of 3%, West Germany a negative growth rate of 3¾% and the United Kingdom a negative growth rate of 2¼%. In Italy the negative growth rate was as high as 4%. These countries fared so badly, whereas we had a positive growth rate of 2¼%. Surely, then, we have no reason to hang our heads. This year our growth rate will probably be low again because we have to tighten our belts in order to rectify our balance of payments. However, it is expected that by next year we shall be able to make up the backlog to a certain extent. One sees, therefore, that South Africa’s achievement in the field of economic growth has indeed been remarkable over the years. Whereas the rest of the world has grappled with negative growth rates, we have moved ahead on most economic fronts and have maintained a reasonably high real growth rate over a long period.

I also want to deal with our country’s basic problem, viz. the problem of our balance of payments, about which a great deal has already been said today. I do not think we need not be too pessimistic about this. The economic recovery in America and West Germany is already well on its way, whereas countries like Japan, France, the Netherlands and Belgium, and the Scandinavian countries as well, are getting their affairs in order. The recovery in these countries ought to boost our exports and this, in turn, should have a favourable effect on our balance of payments. As far as our golden goose, our gold, is concerned, I want to say that we are grateful that the first gold auction by the International Monetary Fund did not go off unsatisfactorily. Indeed, it seems that the gold price will not drop much further. Over the long term there may be an increase in the gold price and this will be to our advantage. I want to share the hon. the Minister’s optimism in this regard. The hon. the Minister is a good prophet. A few years ago, when everyone was pessimistic and the gold price was only about $40, the hon. the Minister predicted in the Senate that within a short period the gold price would be about $80. We know that the hon. the Minister’s prediction was confirmed and that the gold price did indeed rise to a level far higher than $80. At the time that the hon. the Minister made his prediction, the Opposition in the Senate laughed at him. Today the hon. the Minister has reason to laugh at them. There are other factors, too, that play a role. The position in Angola has in the meantime become more peaceful and the latest détente effort by our hon. Prime Minister has created more confidence in our political stability. The hon. the Prime Minister’s visit to Europe which is to take place shortly will also contribute towards stimulating confidence. All this can assist in promoting an inflow of capital to South Africa from abroad. Furthermore, we also expect that our fiscal and credit policy will begin to bite. The aim in this connection is to bring about a drop in imports and an increase in exports. This too can benefit our balance of payments.

However, what is of great importance is that although we have been hard hit by various factors from outside; in spite of the fact that we have had to pay millions of rands extra for oil, we are still able to pay for our imports and our creditworthiness abroad is still unquestioned.

I want to raise one last problem. It is the problem of inflation. The hon. member for Constantia reproached the Government about the high rate of inflation in South Africa. I wonder if the hon. member fails to realize that inflation is a world-wide disease. Surely everyone knows that. We know that there is virtually no country that knows how to deal with it; that no-one has an answer to it. Inflation occurs throughout the world; inflation occurs both in countries which have devalued and those which have revalued. Rich or poor countries, socialist or capitalist countries, all are saddled with inflation, and in all of them the problem is of equal severity.

One of the major causes of inflation is the vast increase in bank credit and money supply. Throughout the world money is being created in an uncontrolled fashion. Over the past few years a country like America has pumped millions upon millions of dollars into the world to eliminate its balance of payments deficit. Money has also increased as a result of increased salaries. Those increased salaries have not, unfortunately, always accompanied higher productivity.

Virtually everything possible has been done by the authorities in South Africa to combat inflation. However, one country alone cannot smash inflation. The roots of the disease are too far away and too deep and too widespread throughout the world for that. In order to combat inflation effectively, a joint international effort in this regard will have to be implemented, and joint steps against it will have to be taken world-wide. It is therefore foolish of the hon. Opposition to want to place the blame squarely on the shoulders of the Government. If the Government is guilty, then this necessarily means that every other government in the world is guilty. No other government has been able to dream up a magic solution to the problem of inflation. [Time expired.]

Mr. Chairman, the hon. member for Bloemfontein North has mentioned many topics. He has mentioned inflation, the reserve balance and the growth rate. I am sure the hon. member will agree with me that the growth rate in South Africa is perhaps more important than in many other countries, because we have here an exploding Black population for which we have to create work opportunities in the future. For this reason our rate of growth is absolutely essential for our future prosperity.

I think it is generally accepted that one of the major problems which will inhibit South Africa from realizing this undoubted potential which it has for growth, is the problem which might arise in the future of attracting foreign capital on a satisfactory scale. South Africa is richly endowed with natural resources. It has labour, technical and entrepreneurial skills, but the catylist which is required to make all those ingredients work for us, is capital.

Apart from the political uncertainties which exist; which are very real, and which perhaps discourage investments in Southern Africa, there are other factors—factors which are not of a political nature, but more of a financial nature—which, in my view, are equally discouraging to foreign investments in South Africa. It is these other factors, which the hon. the Minister is capable of rectifying, which I would like to discuss today.

The major factor, in my opinion, is the doubt which hangs over the future of the rand. The hon. the Minister has maintained on many occasions that the rand is not over-valued when compared with the currencies of our major trading countries. Therefore, in his opinion, there is no question of a formal devaluation of the rand under present circumstances. I believe that this kind of answer is too simplistic, and as such it in fact fails to convince. I believe that, perhaps, Professor Milton Friedman, when he was here in South Africa, put his finger on the problem when he stated that we cannot tie the rand to the American dollar, and not devalue if our inflation rate continues to greatly exceed that of the United States. Seen against the background, what are the chances of the South African inflation rate in the foreseeable future dropping to the level anticipated for the United States? Because if these chances are seen to be slim, the next questions that must be asked are: What are the chances then of the rand not being formally devalued again against the dollar in the foreseeable future? Sir, it is this kind of doubt that must be removed, because whilst this kind of doubt hangs over the rand, there will be a reluctance on behalf of foreign investors to take the currency risks involved in exchanging hard currency for rands. I think the development of the security rand market is a step in the right direction, because in this market foreigners who wish to invest in South African quoted securities can do this via the security rand market. This enables them to buy their rands at a rate which takes into account many factors including the one I have just mentioned. The fact that there is this discount on the market, which has on occasion exceeded 30%, I think illustrates my earlier point that there is a fear hanging over the future of the rand. But what about foreigners who would like to invest in unquoted securities? And what about South African borrowers who would like to borrow money abroad? These people are at a disadvantage over the foreigner who wishes to invest in quoted securities to the extent of the discount on the security rand market, and this must logically act as a discouragement to this kind of investment in South Africa. I think there is a case that can be made out for extending the security rand market to include these categories. I believe that foreigners who wish to invest in non-quoted shares, should be able to do so via the security rand market, and in addition that South African borrowers of overseas capital should also be able to use this market if they so desire. Should the Government agree to this principle, it would obviously mean that the size of the market, as it is at present constituted, would in all probability prove to be far too narrow to cater for the volume of the business which would be done through this market, because there would be too much competition for the limited amount of rand available, and so the result of this would be to narrow the discount to a level which might negate the whole purpose of this market.

The question would then have to be faced as to how this market could be broadened so that it could cope with the kind of volume that would probably be placed through it. I would suggest that this could be done by allowing South Africans who wish to invest abroad in investments which are considered by the authorities to be in the interest of South Africa, to use this market under controls stipulated and applied by the Reserve Bank. If this were done, there would be numerous advantages to South Africa. Firstly, the market could be broadened in a controlled manner, which, whilst it would not add to South Africa’s net foreign reserves, would remove rands from “soft hands”—people who are reluctant holders of rands—to “firm hands”, who are people who have a definite purpose for those rands. I think this in itself would be of great benefit to our economy. Secondly, it would create a free market in rands, in which the true value of the rands can be assessed and which would make it possible, at the right moment, for the authorities to extend this free market to all private capital transactions, leaving the official market to handle only current transactions, in other words all transactions relating to goods and services. I think there is a large body of opinion that believes that the present defensive measures taken to protect the rand are in many instances in fact self-defeating because it encourages people to speculate on the probable devaluation of the rand, and it discourages the purchase of rands by those who would make those rands work for the benefit of our economy. A two-tier market, the official market handling all current transactions and a free market in rands not restricted by exchange control, to handle all capital transactions, would create the right climate for attracting large amounts of foreign capital and at the same time protect the official market against speculative pressures. In this climate and with the right kind of taxation structure, South Africa could in my opinion become a very desirable haven for capital, because there are surely very few countries in the world which offer such opportunities for the employment of capital today as South Africa.

Mr. Chairman, I have listened attentively to the hon. member for…

Randburg.

Yes, and he will not be elected there again. This I want to tell him today. However, I do not think we should be so quick to refer to and draw a comparison between our rate of inflation and that in America. The rate of inflation of 10% in America is not comparable with a rate of inflation of 10% in South Africa. The tempo at which money circulates in American institutions is three or four times faster than it is with us. In other words, an increase of 10% in the money which comes into circulation in America is calculated by certain people as equal to more than 25% of the total growth rate of France.

†The hon. member for Johannesburg North always gives the impression that he is his own advocate, his own lawyer, and that he has a fool for a client. That is the impression he wishes to create. When any hon. member gets up to speak, he smiles as if to say: I know what you are going to say.

*A man by the name of Blanchard, probably one of the foremost experts in this field, has the following to say—

Now the hon. member is laughing at me. The hon. member must not laugh at me. I do not want to repeat it and I do not want to go into too great a detail about the arguments advanced by the hon. member, but I think the hon. member at the back over there has a number of excellent points he thinks he wants to make. Those are matters to which the hon. the Minister will reply.

I want to express my full confidence in gold. Experts have said that the shadow of important events often anticipates the events themselves. In other words, we see the shadow side of gold at the moment and there are reasons for it. Gold is being manipulated and we have to ascertain why it is being manipulated. The fact that speculators entered the money market some time ago caused people to become panic-stricken when the price of gold dropped. However when one considers the gold price realistically, one realizes that gold has a bright future. The rapid increase in the price of gold caused people to believe that the price of gold would not drop in the very near future. One has to agree with them that if the price of gold has not been manipulated, the price of gold would have been well in excess of $200 today. The diminishing price is therefore a manipulated price.

†The expansion of the US Treasuries is the prime means whereby the Federal Government supports its massive expenditure in excess of revenue. The price of almost all goods and services is continuing to rise. Yet at the moment the price of gold is down. The US Treasury does not want to admit it, but gold is a manipulated metal, unlike other commodities which move up and down, based on supply and demand. Because gold is held as a reserve asset of the great nations, each nation has basic interests in the metal. The nations who wish to expand their money supply without any constraint are engaged in a monstrous global experiment. They are in the process of substituting fictitious paper promises in exchange for real assets. When the nations of the world and especially the Arabs, begin to understand that paper currencies are depreciating rapidly, even more rapidly than they realize, and flee to gold, the price of gold will rise substantially and the US Government could find embarrassingly few takers for its dollars.

*Since one can expect the price of oil to be increased again in the near future, there will also have to be an adjustment in gold.

†Hence the US Treasury’s propaganda and manipulation by auctions and threats of auctions, through both the Treasury and the IMF. I am certain that in time to come the forces tending to manipulate the price of gold downward will lose to those seeking to remonetize it. The IMF is really the brain child of America, having originated when America was at the height of its power at the end of World War II. That institution does not recognize the proportionate political and economic strength of other nations. Thus they have shifted their support to the Bank for International Settlements. All of the various agreements that have been announced publicly have been coached in terms which are aimed to weaken gold. If one looks at the decisions taken in 1974, one finds that on 13 June 1974 a compromise agreement was entered into between the USA and the more gold-orientated countries of the EEC. This agreement provided that gold could be used as collateral for international borrowing and that the value of gold used as collateral would be set by the lender. Furthermore, it was decided that such dealings did not necessarily have to take place in the free market. In other words, the lender determined that.

*I can continue in this vein. Unfortunately time is catching up with me and I shall not be able to refer to all the examples I am able to furnish in this regard. However, when considering all the obvious things, I think Von Mises has said a very true thing.

†As Ludwig von Mises pointed out, no nation is powerful enough to abolish the gold standard. What Von Mises meant was that, although the official gold standard of governments may be abolished, the people’s gold standard, viz. their trust in gold, cannot be destroyed by governments.

*Mr. Chairman, we shall find that more and more people will be turning to gold in the foreseeable future. There are still a few auctions to come. The first auction was a success. The fact that America is building its economy on a false premise, is something we have to take cognizance of. We have to take cognizance of the fact that we shall find, after the presidential election in December, that the price of gold will increase and that there will be further increases after that. [Time expired.]

Mr. Chairman, it is always pleasant and interesting to listen to the hon. member for Langlaagte. This afternoon I should like to put a few matters to the hon. the Minister in connection with building societies. As regards the issue of the lending capacity of building societies, I should like to refer to the position if there are no guarantees by employers or contributions by employers which can be of assistance in making loans available to a person. At the moment, the position is that a building society can provide a borrower with 82,5% of the purchase price or the valuation which the building society places on the property. If we take an example where the purchase price is R18 000 and a loan of 82,5% is granted, this means that the loan amounts to R14 850. The borrower has therefore to pay in R3 150. In the example mentioned the borrower must also, before the property and the bond thereon can be registered in his name, pay the building society inspection fees of R40, a house ownership insurance premium of R30, estimated interim interest of R165, a life insurance premium of R71 and registration fees of R140 with regard to the bond, and registration fees of R400 with regard to transfer.

These different items total R846, and together with the balance of the purchase price, we get a grand total of R3 996, or R4 000 in round figures. For our younger people in particular, it is not easy to have a sum of R4 000 available if they want to purchase a house. The position is then that the people usually have to borrow that R4 000 at other institutions, perhaps even on a second bond. On such a bond, interest is payable at a high interest rate, and of course, because the amount must be paid back over a shorter term, payments are high too. It can therefore happen very easily that a person with such financial burdens may neglect his property. This can also result in a failure to remit the payments—payments to the building society and/or payments on the money borrowed on a second bond or otherwise. When I compiled these figures, I did not even take into account such items as the improvements to one’s property that one usually wants to carry out in the form of a garden or curtains and so on.

I am convinced that over the years an exceptional record of a prompt and reliable payment relationship between the borrower and the building society has developed. Representatives of building societies, too, have said that if one looks at the records of the building societies relating to arrear bond payments, the figure is unbelievably small.

I therefore want to ask this afternoon that consideration be given to the possibility that building societies be allowed to grant people 100% loans without additional guarantees or security being provided apart from the property itself. After all, the building society has the property as security and the normal tendency is for properties to appreciate in value. It does occur in very exceptional cases that properties do not appreciate in value. I am not asking that there should be unlimited amounts or that loans be granted left, right and centre. I merely ask that consideration be given to the issue of moral security.

A man’s record of service, the faithful service he has given wherever it may be, is something which the building societies ought, in my opinion, to take into account. The building societies must not invest in the property only, but in the person as well. I am convinced that the building societies will not write off a cent more in the form of bad debts than they do at present.

If a loan of R18 000 on a purchase price of R18 000 is granted to a person and he pays in all the amounts I have just mentioned in connection with advance fees, costs of registration, and so on, which amount to R850, this will amount to an investment of almost 5% which he must make before the property can be registered in his name.

There can be restrictions on the amounts which can be borrowed by way of 100% loans, and the term of repayment can be longer or shorter as circumstances may demand, and the payments can probably be higher. The condition of compulsory life assurance could also be linked to the granting of such loans.

I believe that if permission is given for the granting of such loans, it would have an exceptionally favourable effect, because it could reduce the purchase price of properties and give the purchaser a stronger negotiating position. As far as properties are concerned, I believe that the building contractors will be able to build in accordance with the specific demand. A demand can be created for cheaper housing. By means of a provision that building societies must keep a certain percentage of their funds available for loans of this kind, the position could in my opinion be reached in which a demand to which the building industry would have to react, could be established.

I am convinced that it is important that as far as possible, everyone with a family should have a house of his own and a piece of land of his own. It is true that if one can acquire this on one’s own, one is so much more proud of it and looks after it so much better. I believe, too, that it would result in a greater degree of stability with regard to the propensity, among our young people in particular, to move around.

A home of one’s own is probably the most important aspect for every person. With reference to my earlier appeal, I therefore want to say that building societies must be allowed to, or must themselves allow, the monthly payment to be more than a mere 25% of the income of the borrower. In other words, a person must be able to invest more of his income in his house than into things whose value depreciates, as is at present the case.

There is another aspect relating to the building societies’ interests which, in my opinion, will have to be attended to. I understand that some building societies require interest before money is being paid out, whereas others do not do so, and the interest rates differs, too. I understand that there are also building societies—I speak under correction—which demand interest on a loan on a property in respect to which a new loan is being granted to a purchaser of the property, and that in that case an interim interest is required from the new borrower, but interest on the existing loan is also required until such time as that loan is cancelled. As I see the matter, this looks to me like double interest. In my humble opinion, the whole issue of interest and its application by building societies requires further attention. In fact, I believe that there should be a greater degree of uniformity among building societies with regard to the matter of interest.

My plea is that we should at all costs avoid a widening in the gap between the supply and demand of housing in the future.

Mr. Chairman, I have listened to the debate with interest. It has been a remarkable and in some ways a strange debate. It has been a debate of great contrasts. On this side of the House we have had speeches by hon. members whom I believe to have a balanced approach. They are positive and objective and are not prepared to become pessimistic because there are a few problems—of smaller magnitude and importance than in most other countries of the world. On the other side of the House we had the contrast. Almost without exception, hon. members were pessimistic and negative. From some of their speeches one had difficulty in knowing what economy one was dealing with.

†I am fast coming to the conclusion that in no field of activity are the Opposition parties more unconvincing or more unimpressive than in this extremely important field of finance. Time after time, in these debates, we get this derogatory, negative, pessimistic approach. Of course we have problems. When has these been a greater economic depression on a world-wide scale than in the last two years—with the single exception of the great depression of the early 1930s? When have we ever seen our gold price go up to nearly $200 per ounce and then for a long time stabilize around the $180 mark, to drop suddenly down to $130 and $127? Is there no such thing as a business cycle? Things do not always go up; they also turn and come down. We are obviously now on the lower reaches of the business cycle. We all know that. So is the whole world, however. The most important thing we have to do under these conditions is to keep a sense of balance and perspective and not be wafted about by strange statements that emanate from people whom I believe should know better. The hon. member for Constantia admitted that he criticized us when we brought in this remarkable innovation of a budget by objectives. Yet, with a fine piece of irony the hon. member uses this budget by objectives and uses the exposition as set out by the Treasury in order to attack this Government. He uses the objectives relating to economic growth with stability, a high level of employment and a sound balance of payments to do so. What is wrong with those as objectives in a difficult world? He says among other things that we must watch the issue of credit and the increase in the supply of money. This was also referred to by the hon. member for Johannesburg North. In other words, that implies that one has to apply certain financial disciplinary steps to one’s economy. Yet what does the hon. member say in the same breath? He refers to the budget as being a savage budget, although I believe it is an absolutely realistic budget, and then he says that one is doing damage to one’s economy because in the eyes of people abroad one is in fact bringing them under the wrong impression. With respect, the hon. member has completely missed the boat. If he goes abroad and talks to the world’s leading bankers and financiers he will find, as I have found, that throughout they speak with the greatest approbation of this budget. I have living proof that that has been said to us on many occasions and that that has been used by these people as a yardstick to judge our performance and to judge our capability to handle the present situation. It is the reason why some of the biggest and most famous banks in the world are still prepared to lend us money and to invest in South Africa. It is also the reason why some of the biggest industrial groups in the world—as I discovered again on my recent visit to Germany and Switzerland—were able to say to me openly, without any reservation, that they were immensely impressed with the South African economy, with the Government’s determination to hold the line against unnecessary spending, to show the financial discipline which is needed and also to safeguard South Africa and protect its geographical integrity. They added that too. That is why they were able to tell me of specific instances where they are prepared in the near future to continue to put money into this country, in important spheres of industrial and other activities. That is what one finds when one goes abroad and talks to these people.

Hon. members have stated that there are problems in connection with the balance of payments. Yes, there are problems. The balance of payments would be even better than it is if we did not have to contend with some of the malpractices with which we have had to contend during recent months. The rapid drop in the gold price in September, together with the very unfavourable development of our export markets because of the world depression, forced us to devalue. I will defend that devaluation throughout without any reservations. If we had not devalued we would have been in the most complete mess today that you could imagine. I want to say that if, at that time, some of our people had been a little bit more patriotic and, instead of keeping their money abroad when they had sold abroad, had brought it back strictly under the exchange control regulations, and had not kept hundreds of millions of rand abroad under the leads and lags phenomenon—which sometimes seems to cause mirth among our critics, but which is a very serious thing—we might not have had to devalue. What are we finding now? Although we have hit that problem on the head by means of devaluation, we now find that wide scale over-invoicing is taking place. My colleague, the hon. the Minister of Economic Affairs, referred to this in the House a few days ago. I want to say that this is an extremely serious matter. It means that some of our people in this country are conspiring with certain people outside to put false amounts on invoices above the true amounts. This means that a larger amount of money is being sent abroad than should be sent abroad, and that the balance is being held there. I want to give the House the assurance that we are looking at this as a matter of the greatest urgency. I hope we shall succeed in exposing a few of these people’s activities, because I can assure the House that we shall know how to deal with them. The amounts involved here are not just a few million rand; they are very large indeed. This does nothing to assist us in the problem of the balance of payments.

*Certain hon. members expressed their confidence in gold here this afternoon, and I want to identify myself with their views. The IMF is going to auction gold every few weeks for some years to come. In my opinion, the first auction can hardly be considered a success from the viewpoint of our enemies, who clearly and deliberately wanted to bring down the price by their actions. I do not think they succeeded in doing so, but we shall have to see what the future holds. In the long run, however, I have every confidence in gold and I believe that the price will gradually recover, especially when these practices and uncertainties are eliminated.

†I have been criticized for not disclosing the full details of the gold swop agreement. In the first place, the important parties with whom we entered into this remarkable transaction—it was very much to our advantage to receive that amount of cash which we needed so badly without in any way adversely affecting the price of gold—were the first to say that, for obvious reasons, we should keep this absolutely secret. I am astonished at the hon. member for Yeoville for attacking me because I was not prepared to give the world this crucial strategic information. I would have thought the hon. member would have known better. [Interjections.] The hon. member for Ermelo did not give away anything which should not be known. The facts he mentioned were all known and if the hon. member will look at my statement he will find them there.

No.

The amount is there; the hon. member can look at the difference in the reserves. However, I am not prepared to disclose this crucially important part of our gold selling strategy under the conditions in which we have to operate today, seeing that important parties abroad are doing their best to bring down the price of gold and are, in fact, doing everything possible to make it difficult for us to market our gold in an effective way. I am not prepared to do it. The most reputable parties abroad, with whom we have done this deal, have said to us: “Whatever you do, this must be absolutely secret for obvious reasons. ” I hope the hon. member for Constantia will also pay attention to that point, because he has also criticized me on that.

I think what has been very much left out of account, when talking about the financial policy and the budget of the Government, is not only that we have in fact gone very far towards holding the line against unnecessary Government spending, but also that we have in fact succeeded in financing our expenditure in a very substantially non-inflationary manner. That will remain our policy and I think it is something for which the hon. Opposition has not given us any credit. We can take money from the Stabilization Account—we are in fact drawing R240 million—but that money has to be used in order to finance the all-important National Supplies Procurement Fund, from which we finance the purchase of our strategic materials. If we draw that money for use here, then the Reserve Bank has to put that amount as a loan into the National Supplies Procurement Fund. That is outright inflationary financing. When one calls on one’s Reserve Bank to make loans, nothing can be more inflationary, because it is new money that is being pumped straight into the economy. That is why we have kept the amount allocated to the Budget strictly within the limits of R240 million.

I should now, in the context of the budget, like to refer briefly to the extremely important step we have taken of announcing the issue of National Defence Bonds. These bonds will be on sale at post offices, banks and the Treasury as well as other places from 1 July 1976. We have announced that the terms will be 9½% interest per year over five years. If kept for the full five years there is a further 3% bonus interest at maturity which brings the average interest per annum to more than 10% on these five-year bonds. A few days ago I received a letter from a schoolmaster who said he wanted to tell me that as far as he and his little school were concerned—his school is a little rural school—all of the children were going to buy at least one National Defence Bond through their parents. He also said: “As far as we are concerned, you need not have offered any interest at all.”

*This is the spirit of our people. However, what happened when the statement was issued? The very next day I had to read in the Press that the hon. member for Constantia and the hon. member for Yeoville had criticized us in this connection. And what was the criticism?

†It was said that we must not issue the bonds at 9½% interest per annum, but that we should make the interest tax-free. If the interest is to be tax-free, then the interest rate has to be lowered. The pattern of interest rates in the country has to be maintained. There are building societies and other institutions that have to have their share of the money available. Keeping a balance in the pattern of interest rates is extremely difficult, and the Reserve Bank, the Department of Finance and the Treasury are constantly having to study this with the Public Debt Commissioners.

If one were to make the interest tax-free and reduce the rate of interest, one would negative the whole purpose of the scheme and favour the big-scale and rich investor. But what are we trying to do? Through a patriotic gesture, we are telling the public that we need all the financial assistance that we can get for defence, and that we want to make it possible for the whole population, rich and poor, big and small, to participate so that they can feel they are doing something to contribute to this all-important cause. I think it is a matter of the greatest regret that our hon. friends of the opposition parties should immediately have jumped in with this criticism which is unfounded and which has no merit. It simply confuses the issue. In the same edition of the Cape Times in which this criticism was published the financial editor gave what I thought was a balanced and perfectly correct view. He said that this was, in fact, financially a very attractive issue, and that we had managed to keep a very good balance.

Why do you not read the whole of what I said?

I repeat: I think it is a matter of great regret that we have this negative carping attitude on a matter like this.

Be frank. Put the facts before the House as they were said.

Is the hon. member telling me that he did not say in the press that the 9½% interest should be tax-free? That is the point I am getting at.

What did I say people should do?

Never mind what people should do. People should of course buy the bonds.

Do not change the facts.

I am getting quite accustomed to this hon. member. When he is cornered by his own statements he comes back around the comer and tries to make out that one is not stating the facts. [Interjections.] At least the hon. member for Constantia admits the facts.

The hon. member for Yeoville had a lot to say about window-dressing. He has learnt a new word. I do not know whether he knows the meaning of it.

I know it.

The hon. member also accused me of withholding information from the public.

That is right.

I want to say that the hon. member is grossly irresponsible. He is peeved because I refused to do two things. I refused to make public the detailed terms of the gold swop, and I take the fullest responsibility for it. I also refused to make public certain details of loans taken up and repaid by the Reserve Bank. I did this because I consulted with the Reserve Bank, and the Reserve Bank was absolutely emphatic that it would be in the best interests of the country not to make those things public. In any case, they are an autonomous institution. There is a long tradition of this autonomy, and if anything like that has to be made public, they do it according to their own judgment. As Minister of Finance, I am not prepared to interfere under those conditions. Because I did those two things in reply to two questions by the hon. member for Yeoville, he got peeved. [Interjections.] Now he makes all sorts of attacks on me and says that I did not put all my cards on the table. I wonder whether there is any country in the world where more information on the financial situation of the country is made available week after week and month after month than in South Africa. Information is made available by all sorts of financial authorities. This charge of window-dressing is beneath my dignity to reply to. I believe it is beneath my dignity …

Answer the facts! [Interjections.]

If the hon. member for Yeoville wants to persist, I shall deal with him during the Third Reading of the budget debate.

Answer the facts!

Order!

The hon. member had a lot to say about the very heavy expenditure which is now taking place, and the hon. member for Johannesburg North also referred to the same thing. Firstly, the question of expenditure from the Exchequer is a seasonal thing. That is my first point. The second point—a very important reason for the high Exchequer issues in April—was that some funds outside the Exchequer, such as the Special Defence Account, which usually end the financial year with a substantial balance, in fact ended the 1975-’76 financial year with very small balances. As a result of that, they had to draw on the Exchequer much earlier and on a bigger scale than usual.

The Government could have used the Stabilization Account, as I have said earlier, but that would simply have meant that the Reserve Bank would have to make loans available to the Government, something which would be outright inflationary. Therefore, we preferred, as a temporary measure, to issue the money for this from the Exchequer. I believe, and the hon. member can be quite sure that spending does not go on at this rate. It has to be looked at over the period of a year. Exactly the same situation existed last year. I have many Press cuttings in my office, Press cuttings from last year, in which people said that we were spending out of all proportion to the budget. At one point somebody even ventured to state that we were going to have a deficit of R1 000 million. It was absolute nonsense. We ended the financial year with a surplus.

It is not as simple as all that. Some people talk of mismanagement. Managing an economy under these conditions is not the simplest thing in the world.

*I agree with what the hon. member for Worcester said. He said that these derogatory remarks which were made by some hon. members here today were actually also a reflection on the most senior officials, people who are among the most competent in the world in this field. [Interjections.] I have never taken any step or any decision concerning these important financial matters without the unanimous recommendation of my top officials and of the Reserve Bank and of the hon. the Prime Minister’s economic advisers. Where could anyone show me an abler team of experts? I do things in this way, but still I am told that there is mismanagement. As far as I am concerned, that is a disgraceful remark to make.

†To talk about the effect of these things abroad it is a terrible thing to be done by someone within the country. I want to tell hon. members here that we have, from the side of the Treasury—and when I speak about the Treasury, I mean the whole financial authority—more regular consultations at top level than many have had in years. I am very happy to be able to have such consultations. It is of the greatest assistance to me, and I believe it is of the greatest value of this country. The decisions that we take, as to the credit ceiling or the building societies, etc., are all the result of careful consultations and discussions at the highest level. I may mention that we have now announced certain measures to improve the position of building societies under the difficulties which they are encountering at the moment. I think it is time that these things were clearly stated. The hon. member for Wynberg talks about the provinces and asks whether we consult with them. The hon. member for Wynberg has a very remarkable idea in regard to subsidies.

I did not say that at all.

The hon. member put a view here with regard to the whole question of financing of the provinces which is really standing the issue on its head, because the hon. member knows that there is a very clearly defined formula and that you work the thing out according to that formula with the provinces. In fact, on the side of the Treasury, one of our most competent officials is working almost full time on the provincial finances. He is virtually in daily contact with the provinces, and not only when we draw up the budget, but right through. Incidentally, we are revising this formula and it is not an easy thing; it is not as simple as the hon. member might suggest. There will be a new revised formula by the end of this year, and it has called for immense work by a small group of highly competent people. But what did we do? We worked out this formula and we got the amounts for the provinces. I had to look at these and I said that I must hold the line against Government expenditure. Among the expenditure that had to be pruned was that of the provinces. That was my judgment and the judgment of all my top officials, otherwise we would have got a complete imbalance again. I got the Administrators in and we discussed this very fully. We had extremely useful and constructive discussions, and they accepted, as the result of these discussions, certain amounts. But the provinces also have an autonomy and they have certain sources of their own finance, and in looking at their position they, too, have held the line against unnecessary spending. For instance, the increase in expenditure in the Cape Province’s budget is not 6% above last year; that is much less than the inflation rate. But they, too, have certain problems and they have to look at their own sources of financing, and it would be a very undesirable thing for the Minister of Finance directly to interfere with the provinces in regard to matters of financing over which they have the fullest autonomy. But we do discuss these things, and I think the hon. member must accept that it is done with great care and responsibility. As I say, a great deal of time has been spent on the formula, and the new formula will be devised by the end of this year.

Is the formula also being directed at capital expenditure?

Yes, the first exercise is the revision of the formula which we have used up to now, which is on current account, and we are definitely also looking at the capital account. It is a more difficult exercise, in fact, but I can assure the hon. member for Green Point that we have studied this matter very carefully. The hon. member has just raised another point, a topical one.

The hon. member for Yeoville asked why subscription shares at building societies were not also included in the interest revision we made. The building societies themselves did not raise this; what they asked for was what we were in fact able to give them.

*I just want to say here that I am unable, unfortunately, to go into all the various points raised by my hon. friends. But I listened very carefully and I have fairly comprehensive notes. My officials and I will go into all these points very thoroughly, those raised by the Opposition as well, and we shall do our best to give effect to them where we are able to do so. I should be glad to discuss these matters with any of the hon. members who raised them.

†In so far as the hon. member for Randburg is concerned, he raised an interesting point in regard to foreign capital, more specifically in regard to blocked rands, or security rands, as they are now called. I really do not see how we can allow South African borrowers of foreign capital to use the security rand market without restrictions. That will be a risky thing to do. I met Prof. Friedman and had a long and interesting talk with him. He is a very brilliant man, but, as I said to him, the difference is that he is in a position where he can speculate in the true sense and that he can philosophize over a wealth of things as an academic scientist and economist of great repute. Unfortunately I am in a less exalted position because I have to stay on the ground and have to try, with my officials and my departments, to keep the economy running as well as we can. If one is going to lift these restrictions one is going to have some very awkward situations, particularly at the present time.

The question has also been raised about the difference in the rate of inflation in the United States and the rate here and the effect this has on the rand. This is so, but I do not think that that is the only factor to take into account when weighing one currency against another. As far as we are concerned, we have to do our best to handle this inflation, which is an enormous problem and indeed still a worldwide problem. I was looking recently at the latest report of the OECD, the group of 24 most important industrial countries in the world. In that report it is said that the rate of inflation in those countries is on average today still just under 10%. It is as high as that. Germany has the lowest inflation rate, 5,2% but several of the other countries are well above us. It is therefore unfortunately still a world phenomenon and we have to do our best to somehow raise productivity and to keep a check on unnecessary spending, both in the public sector and the private sector, and we have to exercise restraint wherever we can in regard to salaries and wages without impairing incentives, because if one impairs incentives, one immediately adversely affects trends towards productivity. It is an extremely difficult problem and is extremely closely connected with the balance of payments and if one can improve the inflation rate, one can improve also the balance of payments, without any doubt.

Finally, as far as the balance of payments and the growth rate are concerned, we would naturally like to see an improvement in the price of gold, which would be of direct assistance to us, not only from the point of view of the balance of payments, but also for our revenue receipts to the Exchequer, because the tax on the gold-mining companies is an important source of revenue. We may have to exercise a little patience in that regard and first let the cause of all the uncertainties that we have had to contend with during the last few months, run their course. As far as the state of the world economy is concerned—the other important factor, because we trade with the world on a big scale and the commodity price market abroad is accordingly of particular interest to us—there are signs of improvements. The Americans are quite adamant that their economy is improving, and we hope that the West Germany economy, which shows signs of an upward movement, will maintain that upward movement and that this trend will spread to France and Britain as well as to other countries. This can only have good results for us, because that will certainly directly improve our export values and therefore our balance of payments. For the rest, our country is always ready to attract and to use foreign capital. We have always regarded this as of great importance and our views have never changed. Although at this moment it is not as easy to attract especially private capital from some countries as it has been in the recent past, we are nevertheless still able to obtain substantial capital requirements and I can give this House my absolute assurance that we have a very high credit rating abroad. If one really wants to be greatly encouraged one only has to travel in Europe and America, meet their leading bankers and financiers and hear their views of South Africa and the economic performance and potential of South Africa. It does one’s heart good to talk to those people, people who really do count for a great deal.

*Mr. Chairman, with these few words I want to thank hon. members for the debate which has taken place here. One does not object to criticism, but I do want to express the hope that some of the hon. members in the Opposition benches will be a little less pessimistic from time to time and will realize that our country has had problems in the past as well. The fact is that the economic cycle goes up and down. Presently the cycle will go up again, and then we shall prosper again, our growth rate and our standards of living will rise, and then, perhaps, we shall be able to look back over the past few months and to see the whole situation in its true perspective. Finally, I want to saý that I have every confidence in the South African economy.

Votes agreed to.

Chairman directed to report progress and ask leave to sit again.

House Resumed:

Progress reported and leave granted to sit again.

Mr. Speaker, I move—

As is customary this Bill deals with miscellaneous matters affecting the State Revenue Fund, and the Railway and Harbour Fund.

Since the various clauses are explained in the explanatory memorandum which hon. members already have before them, I do not deem it necessary to explain all the clauses in detail. However, I should like to elaborate on certain clauses in a little more detail.

I should like to point out to hon. members that clauses 11 and 12, as is the case with clause 13, are re-enactments of section 3 of the Finance Act, No. 48 of 1947 and section 3 of the Finance Act No. 34 of 1954, respectively. I have to explain that, as a result of the commencement of the Exchequer and Audit Act, 1975, it has become essential to consolidate all the previous Finance and Finance Adjustment laws in order to get rid of redundant provisions. While the provisions in the said articles are still necessary, they have to be reformulated to comply with present requirements, and since this means several minor changes, the existing sections cannot simply be incorporated in the consolidating Bill and the object is first to re-enact them and then incorporate them in the consolidating Bill in the latter form.

In respect of clause 14, I should just like to mention that the provision is being included in the Finance Bill, and not in the Income Tax Bill, because it is not considered to be an income tax measure but more a staff matter, or rather a service benefit. Organizations and bodies, the staff of which are therefore exempt from income tax, include, inter alia Government departments, provinces, local authorities, educational institutions, scientific research councils, and so on.

The effect of the proposed provision will be that no income tax assessment in respect of the housing benefits concerned will be issued after the promulgation of this Finance Bill. It is therefore with retrospective effect since in the past assessments, in terms of a Cabinet decision, were not made in respect of public servants and certain other employees. People, for example municipal employees, who have been assessed in the past, will not receive this benefit with retrospective effect, except in respect of assessment years for which assessments have not yet been issued. I could just add that it now appears that, unlike the Railways and Harbours Administration, the Department of Posts and Telecommunications is not covered by the provisions contained in this clause and that I shall move an amendment in the Committee Stage to include the former department as well.

In respect of clause 17(d) I want to mention that, in terms of section 4(3) of the State Tender Board Act, 1968, the board may also exercise its powers on behalf of a Bantu Homeland Government, but when the Transkei becomes independent, the board will no longer be able to conclude contracts on behalf of the Transkeian Government in terms of the existing section and consequently the latter Government will not be able to make any purchases in terms of contracts which have already been arranged by the board. At the same time the Transkeian Government will not yet be in a position to regulate all such contracts itself, and to perform the functions bound up with this, and it has consequently asked that in the interim the existing arrangement in terms of which it is a participating party to futures contracts, be continued. More than 300 contracts are involved here.

I or the Minister concerned, will be glad to furnish further particulars if any hon. member desires more information in respect of any clause.

Mr. Speaker, first of all, I should like to express the appreciation of this side of the House for the very lucid explanatory memorandum that was provided with this Bill. This is an omnibus measure, covering as it does a very wide spectrum of subjects. It is not to be expected that there would be many members who would be able to understand it all without an explanation of the different clauses of this Bill. For that the memorandum was extremely useful, and I want to express my thanks to the hon. the Minister and his officials for providing us with it. As I have said, this Bill covers a wide variety of subjects, subjects which are very largely unrelated, and can therefore best be discussed in the Committee Stage. At this stage I merely wish to touch on three subjects included in the Bill, subjects which I regard either as being of public interest or as introducing somewhat of a new principle.

The first clause I should like to deal with is clause 14, which I think introduces somewhat of a new principle. This is the clause that exempts from taxation housing benefits enjoyed by public servants, railwaymen, employees of public bodies such as local authorities, employees of non-profit-making institutions and a host of other employees, including, I think, Cabinet Ministers. We did note that the Post Office employees were not exempted from the tax. I am glad to note that the hon. the Minister intends moving an amendment in that connection. I can tell him that we have already placed such an amendment on the Order Paper ourselves.

It would appear to me that the aim of this clause is to give employees, in the categories to which this tax concession is applicable, a concession which is not enjoyed by the private sector of the economy, thereby making it easier to obtain and retain their services. To use a tax exemption of a fringe benefit, or, in fact, to use a tax benefit of any kind as a weapon for competing in the labour market seems to me to be a new principle. Surely, if salaries in these categories of employment are not competitive enough to obtain and retain the services of people, those salaries should be adjusted. It is much more satisfactory to have competitive salaries which are pensionable for one thing—and therefore carry with them higher pension benefits—than it is to try to redress an imbalance by means of a concession such as is contained in this clause. To me it seems to be a very quaint way of trying to get an edge on the private sector in the employment market.

I believe, too, that this concession, as defined in this clause, has thrown the net open very wide indeed. Casting the net so wide has also introduced a number of anomalies, however. I believe that the net has been cast so wide that there is now a very strong case for forgetting about the aim of trying to get a competitive edge in the labour market and extending the concession not only to the people covered by this clause, but also to all taxpayers. I say this because this concession is going to cover a vast number of employees. It will cover employees of universities, schools, charities, trade unions, research institutions, associations for the promotion of commerce, industry and agriculture, pension funds, provident funds, stock exchanges, closed cooperatives, amateur sports clubs, ecclesiastical, charitable and educational institutions and so forth.

Even the Houghton Golf Club.

A very, very wide range of employees will be covered by this concession. Why should the manager of an amateur sports club, for example, receive this concession and not the manager of a hotel? They both do similar jobs.

I believe, too, that there are many employees in the private sector and persons who up to now have not been exempted, but are now exempted in terms of this clause, who are actually and have actually been enjoying this concession. In other words, they have had housing benefits and have not been paying tax on those benefits. I believe that has more or less been the general practice. I believe that the hon. the Minister should recognize this situation and allow it. Certainly he should allow it up to a reasonable level of taxable income.

The next clause I should like to deal with at this stage is clause 16 which introduces the nickel rand coin. I believe this is a matter of considerable public interest. I believe, from reading between the lines of the explanatory memorandum, that the reason for introducing this coin is the relatively short life of the R1 note. Am I correct? I am referring to the relatively short life of the R1 note.

I shall deal with that.

Certainly I shall be sorry—and I think most hon. members on this side of the House will also be sorry—to see the demise of the R1 note.

You cannot buy anything with it anyway.

As a note it has proved itself useful and it is also one to which we have become accustomed. By abandoning the rand note I believe we are admitting defeat. I think we are throwing in the towel and admitting that inflation has beaten us. By abandoning the R1 note, we are psychologically accepting that the value of the rand is no longer in the note class—in other words that the Republic’s unit of currency is no longer worthy of being represented by a note. It now has to be represented by a nickel coin. I believe that this is psychologically a terrible admission of defeat, an admission that the value of the rand has decreased to such a marked extent.

You cannot even nail it to the mast any more.

I appreciate the fact that if the R1 note disappears, the R2 note will probably come into its own, but I do not think many people will welcome the thought of having to carry more hardware in their pockets by virtue of having to carry around with them rand coins which will be bigger than any existing coins.

Other countries with units of currency similar to ours still have notes to represent their unit of currency equivalent of our rand. Here I am thinking specifically of the dollar which is of similar value to the rand. It is still represented by a dollar note. I wonder whether the problem of the short life of the R1 note is not attributable to the fact that we are not printing it on paper of a sufficiently high quality. Alternatively, have we not made the actual physical size of the R1 note too small? It is a note that is considerably smaller in size than notes of similar value used in other countries, and here I include the dollar note. We on this side of the House do not object to the introduction of a rand coin, but we do not want to see the rand note disappear. I believe that the hon. the Minister should investigate the possibility of either printing the note on a better quality paper or of increasing the size of the note so as to make its life a longer one. Then rand notes and rand coins can be used as parallel currency. If he were to do that the public would very soon indicate by usage which they prefer.

Finally, I want to speak at Second Reading on clauses 21 and 22 because I think they embody matters of public interest. These are the clauses which enable the hon. the Minister of Defence, in consultation with the hon. the Minister of Finance, to credit any portion of the ordinary Defence Appropriation to the special defence account, which of course means that details of the expenditure of any such money credited to the special defence account will not be disclosed. I fully appreciate that there probably is a need for secrecy in large areas of defence expenditure, and we would support that need for secrecy. If details of that expenditure cannot be disclosed, it is well and good; that has our full support.

In view of the enormous sums that are being spent on defence, we on this side of the House have in the past, and still do, pressed for a joint committee of this House, a watch-dog committee of this House, to examine and watch over defence expenditure in camera. In recommending such a committee, we are in no way casting any aspersions on the hon. the Minister of Defence or on his control of expenditure or on the Chief of the Defence Force, the Quartermaster-General or on anybody else. I believe that the Government itself can only be assisted if such a committee were to be formed and were to operate properly.

As I have said, a huge amount is spent on defence, and it is inevitable that there should be some wastage of this expenditure, wastage in the administration of stores, inefficiency in some areas and lack of control in others. This is brought out very, very clearly in the Auditor-General’s report on the accounts of the Department of Defence. I do not blame anyone, when such a vast amount of money, such a vast amount of stores, is in question, that there are, in fact, shortcomings. Therefore I believe that a committee of this House, such as I have suggested, can only be helpful. It need not in any way be prejudicial to the security of our defence situation. It need not even report to this House. However, the existence of such a committee, working in camera, and watching expenditure and examining expenditure, can only improve the position. I hope the hon. the Minister will consider that recommendation very carefully.

Mr. Speaker, I think this is really a Bill which can be discussed more comfortably in the Committee Stage, but at this stage I want to associate myself whole-heartedly with what was said by the hon. member for Constantia with regard to the explanatory memorandum. I think it was very well prepared and it facilitated our task considerably. The hon. member for Constantia is quite right when he says that a new principle is being introduced in clause 14 with regard to the housing benefits which are afforded and the income tax people will not have to pay. However, I am amazed that the hon. member, during the discussion of the Vote of the hon. the Minister of Finance, joined the hon. member for Yeoville in complaining about the State spending money so recklessly. However, he has now pleaded for increased salaries. We should not make this concession; the Government should pay higher salaries. Where do we stand with the Opposition? One moment they say we are spending too much and the next they say that we should not make any concessions but should rather pay higher salaries. Higher salaries mean increased State expenditure.

It is a good thing for the Minister to introduce this new principle. It is the duty and the responsibility of this Government to ensure that the country is being administered and managed in the proper way. If the State does not have the competent officials, this cannot be done. For that reason this amendment is a good one, and I support the principle. However, I just want to point out—and this is something we may consider—that all the people do not receive equal subsidies. There are officials in the same category where the one official receives the subsidy while another does not. In other words, to a certain extent one official will be receiving a benefit while the other does not receive it. I should like us to consider this matter in future.

As far as clause 16 is concerned, I just want to point out that in 1964, when this legislation in respect of our coins was introduced, it was my humble privilege to serve on that committee. For that reason I am greatly interested in this matter since the R1 note is now going to disappear. The hon. member for Constantia said that if the present R1 note could be increased in size, it would probably have a longer lifetime and would not become tattered so soon. I think just the opposite is true. If we were to introduce a note which is bigger than the present one, it would have to be folded three or four times before one is able to put it into one’s pocket. The hon. member did not mention the value; he suggested that the note should be bigger. “The note is too small”, were his words. Probably a case could be made out to the effect that paper of not a sufficiently high quality is being used, but to my mind a sufficiently good quality is being used. It will be impossible to improve on that score. I am personally very sorry that this note may disappear. If one has ten R1 notes in one’s pocket, they will be very lighter in weight and will take up less space than ten of these new R1 nickel coins. It will weigh considerably more, but I am convinced that it is unlikely that any person will carry around ten coins such as these; people would rather use the R2 note. The R2 note will now become far more popular than it has been in the past. The hon. member suggested that this was a psychological mistake and, by doing this, we admit that we have lost the struggle against inflation. Surely, this is far-fetched. I do not know where the hon. member got that argument from. If we were to replace the R1 note with a nickel coin, it would not be an admission of anything. We are only doing it because the nickel coin has a longer lifetime and will last longer than the paper money. It will still have the same value and the statement of the hon. member is therefore quite unfounded.

I was truly astonished this morning when I learned how much it cost to reprint the R1 notes to replace the old and tattered ones. This is a process which has to be carried out every three or four months and which entails expenditure of up to R4 million. The expenditure is enormous and since we have to fight inflation and avoid unnecessary expenditure, we have here one of the methods the hon. the Minister is using to contain inflation. If we were to print new R1 notes continuously, we would be spending enormous sums of money in this respect while the money could be utilized for far better purposes.

While dealing with coins, I want to raise the question of the half-cent piece. I think the half-cent piece may just as well disappear just as the tickey had disappeared at that time. At that time I pleaded for the retention of the tickey, because I was very fond of the tickey and I found it an attractive little coin. After all, it did not fit in with the decimal system because of its insignificant value. For this reason I think the half-cent coin should also disappear. As a matter of fact, one is able to buy very few articles today with half a cent. For example, articles which cost 7½ cents cause more nuisance that the value it has. I therefore ask the hon. the Minister and his department to consider whether the half-cent coin should not disappear as well.

I want to content myself with this. I want to thank the hon. the Minister for the legislation and any further aspects we want to discuss with him, we shall discuss during the Committee Stage.

Mr. Speaker, as the hon. the Minister has pointed out, the Bill is like the curate’s egg: it has a large variety of parts, some of which are good and some bad. If we deal with them seriatim, starting from the beginning, the provisions in clause 1 deal with the Economic Co-operation Promotion Loan Fund. Obviously, we support the concept of this fund, but the difficulty I have in this regard is whether at this stage we should be appropriating more money for it when there is no indication that we are using the money that is already in the fund.

What fund are you referring to?

The Economic Co-operation and Promotion Loan Fund. The information available is that at the end of the 1975 financial year, there was almost R25 million with the Public Debt Commissioners. The issue I want to raise with the hon. the Minister is if we do appropriate this amount of money to this fund, whether it is actually going to be used during the coming financial year or in the near future. The problem we have is that it seems that until the end of the 1975 financial year only R15 million had been lent in toto. We are in favour of economic aid being given and we are in favour of the whole concept behind the fund, but at this stage, where we have a shortage of money, the question should be asked: Do we need to vote more money during the current year? If we have to build up the fund, we can do it next year, when perhaps the situation will be better, or we can do it the year after. I really want an explanation as to why this money is being voted and is to be paid at this stage.

The second question which arises is in connection with clause 3, which deals with the issue of a loan raised by a subsidiary company of the Armaments Development and Production Corporation. The question I want to ask the hon. the Minister is whether it should not be a wholly owned subsidiary and whether there are any subsidiaries which are not wholly owned. If there are subsidiaries which are not wholly owned, I think different principles have to apply in regard to the guarantee, because then it should not be our obligation to guarantee the total liability which is involved. I should like to hear from the hon. the Minister whether there are situations where there are not wholly-owned subsidiary companies. I raise these points at this stage so that the Committee Stage may be expedited in that the hon. the Minister can obtain the answers meanwhile.

In terms of clause 4, the question I wish to raise with the hon. the Minister is whether it is not possible that the accounts of the company SOF (Pty.) Ltd. will become available to us in the House. We have an interest in it now because of the question of a guarantee, and I want to know if Parliament will receive these accounts.

Clause 5 deals with a sentimental matter, because Delville Wood is a sentimental matter to many people, not only to those who were involved in it, but also to their descendants. I want to know from the hon. the Minister if it is not possible that instead of paying that money to the Revenue Fund, to use the amount for a living memorial for the victims of wars in which South Africa has been involved. I deliberately used the words “living memorial” because I am more in favour of a utilitarian and useful memorial than of statues and things of that kind. I wonder if the hon. the Minister will not consider that.

The next point I want to raise is in connection with clause 6. I have grave difficulties with the provisions regarding the National Film Board. The reason for the difficulty lies in the statement made in the explanatory memorandum, namely that in view of the financial position of the National Film Board we have to write off what is, in fact, a very substantial sum of money, some R3 million plus. If we look at the accounts of the National Film Board, we do not see the accounts of an insolvent firm. On the contrary, if we look at the accounts of the National Film Board as they were in 1975, then, unless something drastic has happened since, we find a situation that the total assets of this fund amounted to R4,735 million. We now propose to write off R3,344 million, the result of which will be that this fund will have a very substantial surplus. With respect, in the accounts I see that there are land and buildings of R2,7 million, equipment of over R1 million, as well as some available cash, stores and all sorts of other items. The only matter which is relevant here is that if we look at the revenue and expenditure account, the situation is, in fact, that there is an excess of expenditure over income for the 1975 financial year of R½ million. I do not know what the position is in regard to the financial year 1976. If we look at the expenditure and we look at the interest situation, we see that even if we write off the loan—the interest amounts to some R311 000—it will not mean that the accounts will then be balanced. There will still be a shortfall. What is required here is not the writing off of R3,344 million, but a look at the finances of the board, to see whether it needs additional subsidies in order that it may function without being faced with this situation. But the bare statement that the board is in financial difficulties does not; on the face of it, warrant a writing off of this very substantial sum of money.

As regards clause 7, I merely want to make the point that R40 million is a large sum of money and that it seems now as if it is the intention, as it says here, to capitalize it on the basis that presumably either the IDC should not or cannot in the future repay this money. It is clear that the IDC itself is using this money in order to lend it out in turn. It is therefore really in the nature of a loan transaction and not in the nature of a capital transaction itself. In other words, it is borrowing and lending money, and to my mind in these circumstances the question of whether it should be capitalized, is something which needs a little bit more of an explanation.

In regard to clause 8, I should like to ask the hon. the Minister whether he prefers having a debate on the full financial implications of the Transkei’s independence under the next piece of legislation, or whether he would like to have it during this debate. We need to have this debate at some stage. If the hon. the Minister would like it now, then I am quite happy to get involved in it, but if it were more appropriate to deal with it during the debate on the next piece of legislation, I am quite happy to leave it until then. The hon. the Minister of Bantu Administration and Development is presumably telling the hon. the Minister of Finance not to have a debate at all. [Interjections.] I do not blame him. However, I do think that we are going to have a debate on this issue sooner or later and the hon. the Minister knows it. If the hon. the Minister indicates in his reply that he prefers not to have it now, then we will have it in the debate on the next Bill, or in the Committee Stage of this Bill.

I should like to skip a number of the clauses of the Bill and come to clause 14. As the hon. member for Randburg is going to deal with this clause in detail, I will not comment on it, except to make one simple point. Firstly, I do not know why this really is in this piece of legislation. The reasons do not convince me that this is not a tax matter and should not have been in the income tax legislation. Secondly, in order to make sure that there is no uncertainty and no confusion, the hon. the Minister should prepare himself very adequately to deal with the situation which the hon. member for Randburg is going to deal with and which the hon. member for Constantia has already touched upon, viz. in regard to the private taxpayer and his position in the light of this now being part of the law.

The next matter I should like to touch upon is the question of the rand note. What I should like to say is very simple. In any society in which inflation is taking as heavy a toll as it does in South Africa, it is not surprising that we are converting a note, which used to mean something, into a coin which in time will take the same sort of course, unless inflation is arrested, as the hon. member for Sunnyside said in respect of the ½ cent coin. Hon. members know that the ½ cent coin did at one time mean something in South Africa. Yet, today a Nationalist member of Parliament gets up and says that it is no longer worth anything. There can be no greater indictment of the hon. the Minister of Finance than that perpetrated by the hon. member for Sunnyside. He is telling the hon. the Minister that the ½ cent means nothing. The hon. member for Sunnyside has forgotten that the hon. the Minister of Economic Affairs has got price control regulations which, in fact, fix certain prices in terms of ½ cents. However, the hon. the Minister of Finance is sitting there, condemned by one of the members of his own party that some of his money is worth nothing in the system today. This is the tragedy of what is happening here today. With great respect, I think we need to look at the implications, the psychological implications, of saying to people that we are converting a note into a coin.

The psychological implications of turning a note into a coin are serious. We have the situation now that we have a 50 cent coin. The question that has to be asked is: What is going to happen to the size of the rand coin? Are we going to have a riksdaalder kind of size? What are we really going to create here? By creating a situation where one has to walk around with a mass of metal in one’s pocket, the Minister is creating a psychologically adverse situation for money in South Africa.