House of Assembly: Vol107 - WEDNESDAY 22 MARCH 1961


The MINISTER OF JUSTICE (for the Chairman) brought up the Report of the Joint Committee on the Constitution Bill, reporting the Bill with amendments, and specially an amendment in the Title.

Report and proceedings to be printed.

House to go into Committee on the Bill on 23 March.


First Order read: Adjourned debate on motion for House to go into Committee of Supply and into Committee of Ways and Means (on taxation proposals) to be resumed.

[Debate on motion by the Minister of Finance, adjourned on 15 March, resumed.]


Mr. Speaker, since this debate began, the hon. the Prime Minister has returned from his catastrophic failure in London. This debate, I think, is not concerned with what did or did not happen in London or with what was said or what was not said. We are concerned with the consequences of what happened in London and in so far as those consequences affect the financial and economic life of the country we shall deal with them in the course of this debate. To begin with I want to move the following amendment—

To omit all the words after “ That ” and to substitute “ this House declines to go into Committee of Supply and into Committee of Ways and Means because of the uncertain future caused by the disastrous policies followed by the Government over the last 13 years culminating in the decision of the Prime Minister to withdraw the Republic of South Africa from the Commonwealth on 31 May 1961, and therefore calls upon the Government to withdraw its present proposals until such time as the consequences of the new situation caused by the Prime Minister’s failure at the recent Conference of Prime Minister can be evaluated.”

It is clear that the hon. the Prime Minister in no way realizes the enormity of the wrong that he and his predecessor have committed against the people of South Africa. The continued warning from very many different sources of the risk that he was running by pursuing his republic proposals at this juncture and under present conditions, has been only too tragically justified. It is clear that since last Wednesday the Prime Minister, trading on the well-known goodwill of the people of the United Kingdom towards the people of South Africa—not towards him but towards the people of South Africa—has been trying to save something from the wreck.


How disgusting can you become?


Withdraw that.



Mr. S. J. M. STEYN:

On a point of order, is it in order for the hon. member for Vereeniging (Mr. B. Coetzee) to suggest to the hon. member for Constantia (Mr. Waterson) that he is disgusting? Is that parliamentary language?


Order! The hon. member may proceed.


It is notable that whilst the disadvantages of the exclusion of South Africa from the Commonwealth are obvious and are becoming more obvious every day, all the statements—and there have been enough of them—which the hon. the Prime Minister has made since last Wednesday, have failed to indicate one single benefit to be gained by our country as a result of being excluded from the Commonwealth. I am afraid the hon. the Prime Minister is a man with a lucid and plausible tongue but a padlocked mind, and I say that a man with that type of mind is not fit to govern any country at all, let alone a country with the problems we are faced with in the human sphere.

Mr. Speaker, last Wednesday, the hon. the Minister of Finance said that there was some slight uncertainty as to our future position in the Commonwealth, but that he had examined it and discounted it and that should it occur that we were not to remain in the Commonwealth it would have no effect on our economy or on his Budget. Mr. Speaker, one is bound to ask what authority he has for saying that. The hon. the Minister has a notable record for being wrong. He is the man who thought that he was doing right in 1949 in killing immigration, which is one of the reasons why our present troubles started. We now have R1,000,000 on the Estimates to try and remedy that state by a new start. I am afraid it is a hopeless task to restart. He is the man who thought he could carve the country up into black, brown and yellow spots, ten years ago. We all know in this House, how we have been wrestling ever since to make the Bill introduced then workable, but we have not succeeded yet. He is the man who thought that he could create a High Court of Parliament, and he was wrong. And he is a gentleman who in this House and outside this House, all over the country, from one end to the other, assured everybody that our continued membership of the Commonwealth was a convention and a mere formality. That being so, one is bound to ask what is his opinion worth on which to base estimates, even for the next 12 months. The fact is that as a result of what has happened, no one can foretell what is in front of us. Some people may hope, but personally I see little reason for hope. The hon. the Minister himself since last Wednesday has been talking about storms worse than before which lie ahead of us, whatever that may mean—perhaps he can elucidate that when he replies to the debate. For example, Mr. Speaker, the Achilles heel of our economy is the question of private investment capital. Will the hon. the Minister seriously tell this House that the proposed withdrawal of South Africa from the Commonwealth will have no effect at all on the ebb and flow of private investment capital to this country? Will he tell us that the withdrawal of South Africa from the Commonwealth will help to expand our export trade with the very Commonwealth from which we are withdrawing? We had earlier this Session a statement from the hon. the Minister of External Affairs in which in effect he told us that we can write off the *Continent of Africa as far as the development of our export trade is concerned. Will the hon. the Minister tell us that withdrawal from the Commonwealth is going to enable us to build up and expand our export trade in the rest of Africa as a result of our withdrawal from the Commonwealth? No, Sir, the fact is that this Budget which we have before us was a trivial Budget when it was drafted, and now, in view of what has happened since, it is quite unrealistic. The hon. the Minister gave as his text for the Budget that the immediate aim was to stimulate development and to protect the balance of payments, and we shall examine his proposals in detail while this debate goes on. But one can say by the way that in the Budget there is no serious attack on the problems which he referred to and no major proposal in any part of his Budget for dealing with those problems. Sir, he based his Estimates on a Revenue of some R715,000,000 as against R730,000,000 last year, the difference being due mainly to the reduced demands of the Railways for capital. In other words, whilst the hon. the Minister is urging everybody else to expand and develop and to go ahead with full vigour, the Government Departments are reducing their capital expenditure and thereby are reducing purchasing power all over the country. His Loan proposals, Sir, are even more sketchy He proposes Loan Funds of R407,000,000. Ordinary sources will provide R187,000,000. He then has to convert internally loans to the very large figure of some R127,000,000, and the Minister himself said that that would present some problems. He also has to redeem, or convert external loans to the tune of R49,000,000, also a considerable sum. Now I do not know where the R49,000,000 are held, but I would be surprised if the greater part of it was not held in London. That brings up the question of what is going to be the position of Government stock in London. At the moment they are listed as trustee stock because they are Commonwealth bonds, but if we cease to be in the Commonwealth, they will surely automatically cease to be trustee stock, and the holders will have to divest themselves of them, will not be able to convert this stock, and unless the hon. the Minister can put us right on that point, it would appear that he may have actually to redeem in cash the greater portion of that R49,000,000. He then told us that he did not intend to go to the private money market for any new money this year. He then proceeded to announce that he was going to issue seven-year 5 per cent tax-free bonds, from which he hoped to get R14,000,000, from the private sector. Finally, he told us that the final R25,000,000 that he is going to require, would be covered by the issue of Treasury bonds. In other words, R25,000,000 from his loan programme he is going to carry over and carry it on to be paid for next year. Mr. Speaker, under present circumstances, that is not budgeting, it is mere speculation, mere hoping for the best, and of course the new developments have changed the whole position, as I will show

Now the world will have to re-assess us anew. They will have to make up their mind whether we are a better risk or a worse risk, and they are not going to make up their minds as a result of any lyrical words of the hon. the Prime Minister or any other members of the Government; they are going to make their own assessment. And who can say what that assessment is going to be? Even under conditions prior to last Wednesday, the Budget presented by the hon. the Minister was by no means a sanguine one. The hon. the Minister who has a pleasant liking for fancy dress, dressed himself up as a doctor at this stage— he was a tailor last year, but this year he is a doctor.


A witch-doctor.


He said he was a doctor, and thereby admitted that there was a patient to be attended to. He then told us that the patient was in a state of sparkling health and wearing a radiant look. He told for instance that agriculture and industry, who he likened to the liver and kidneys of the economic body, were in fine shape. Of course, Mr. Speaker, you know that the liver and the kidneys may be regarded as the sewerage disposal organs of the body. I do not know how agriculture and industry will react to that, how they will like to be regarded as such. But in any case, who told the hon. the Minister that agriculture was in fine shape? We have listened the whole of this Session to lamentations of the farming representatives as to the difficulties and problems with which farmers are beset. Which section of the agricultural industry told him that? Was it the Land Bank perhaps, the Land Bank which has had to lend farmers well over R100,000,000 in the last 12 to 18 months, not for expansion purposes but to save them from going bankrupt? And who told him that industry was in fine shape? The industrialists never tire of telling him and telling the Government that they have unused productive capacity and that what they desperately need is more customers. No, Sir, idle phrases like these, simply shake any confidence one might have on the judgment of the man who makes them. The hon. the Minister then gave us a list of ailments from which the body was suffering: The balance of payments; he said it was an old weakness. Well, I can remember how only a few years ago his predecessor told us with great pride of the large overall favourable balance we had in our payments. Why has that changed? The hon. the Minister offered no prescription for restoring that. He told us about the decline in reserves; the gross capital outflow of private capital last year amounted to the colossal sum of R194,000,000 and that was reduced by short-term borrowing of the Government to R164,000,000, but it was still more than the country can sustain for very long. The last issue of the Economist, after last Wednesday’s decision, says “ a renewed capital outflow from South Africa seems certain ”. So that the hon. the Minister should have told us how he is going to stop this decline in the reserves. He referred to the relatively small increase in exports and also gave figures of important exports which have declined. He told us that we cannot rely on any marked increase in exports during the coming year. Then, Sir, he said that the outflow of capital constitutes the most important economic symptom requiring attention. Now how is this learned doctor going to deal with that? The only remedy he offered was this: To point to the very large increase in the Defence Vote, strengthening our Defence Force for internal disturbances, and he said that that would reassure both the foreign investor and the communist agitator—strange bedfellows—that the Government was prepared to deal with unrest and disturbances. Did you ever hear anything like it?

Mr. G. F. H. BEKKER:

You are talking a lot of rubbish.


Mr. Speaker, as an advertisement to attract capital to this country, the Minister says: Lend us your money, we are increasing our Defence Force to deal with disturbances when they arise. Mr. Speaker, I ask you what would you do if you were a wealthy foreign investor and you were wondering whether you should invest your money in South Africa, and you were told that this is a good country to invest because the country is strengthening its defence forces to deal with riots and disturbances? What a guarantee! The hon. Minister went on to talk about the presence of adult. He told us that he had R112,000,000 expansional credit, but he was quite unable to tell us that there would be any corresponding economic expansion as a result of that. He told us that he was satisfied with the present interest rate, but he did not tell the House that it is common belief throughout the financial world that an increase in interest rates is inevitable and that of course means dearer money, and that in turn means a further brake on the development that the hon. the Minister so dearly wishes to see. The only bright spot in what he had to tell us, the only organ which was not suffering from some complaint or other, as far as I can see, were the gold mines, where he told us that there had been a 75 per cent increase and that the gold mines were flourishing. I do not see that that is any sound reason for specifically excluding the gold mines from any relief in taxation, which he gave to all the other sections of the industrial world. One thing he did do, which I think is right and sound, was to encourage the processing of base metals in this country and the encouragement which he proposes to give there, I think is perfectly sound, and I hope it will have a good effect. But he went on to talk about the sluggish rate of development, he told us that the rate of increase in the national product had declined during 1960. That was the factual picture which the hon. the Minister in his guise as a doctor gave us. It is quite clear that when he was drafting his Budget, he was uncertain and he was anxious. In his speech he pinpointed the problems, at least some of them: Lack of capital, the outflow of capital, the lagging in the development of the export trade, the sluggish rate of development—but he gave no remedies for those things. Of course if you have a doctor and he can’t prescribe any remedy, you ought to change your doctor, and I can’t help feeling, Sir, that if this doctor had prescribed that the country should change its Prime Minister as soon as possible, then the country would not need a doctor at all.

The hon. the Minister of Finance after giving us this long list of shortcomings in the economy asked us to believe that the economy shows sparkling health, exceptional vitality and is wearing a radiant look. The Minister, I am afraid, is whistling in the dark. He is asking us to join him in the land of make believe. All you have to do is to mention your problems and they disappear. The only trouble is that the hon. the Minister in his capacity as doctor has named the ailments, but I am afraid has no remedies.

Now the Prime Minister’s failure in London has faced us with an unforeseeable future and a potentially disastrous situation. I doubt if the hon. the Minister, after last Wednesday, could even raise a whistle at the present time. Who knows what the coming month alone may bring forth? The hon. the Minister talks about grave storms, more than before, grave storms ahead. The hon. Minister of Economic Affairs has had to appeal to exporters not to panic, giving them a blanket cover for any losses they may have in regard to higher duties on their exports. There is uncertainty as to the future of our trade agreements. The hon. the Minister of External Affairs spent an afternoon with the British Government discussing this question, and said afterwards that there were going to be no alterations. Mr. Speaker, I cannot accept that statement at its face value. There are far too many considerations to be examined for anybody to say. In any case, any new trade agreements that we may have to negotiate will become trade agreements with bargaining, horsetrading and all that goes with it, and it will be a very different thing from the non-contractual agreements which we have with Great Britain at the present time in regard to preferences. You have the fact again of the recent UNO resolutions on South West Africa: 74: nil against us. You have the immediate action of India in raising the position of our Indians in South Africa. You have, Sir, a very clear indication of the hardening in the attitude of the United States in respect of South Africa. You have the fact that withdrawal from the Commonwealth has been hailed not by our friends or would-be friends, but by our enemies, left-wing politicians all over the world, the communists, the Afro-Asian bloc, as a great victory. All these signs are ominous indeed, and they can’t be just brushed aside by the hon. the Prime Minister telling us that he is a happy man in respect of what has happened. Sir, how can the hon. the Minister hope to make accurate estimates of income and expenditure at the present time? The hon. the Prime Minister has come back posing as an injured innocent. He claims to have saved White South Africa. He has discovered a newfound affection for the United Kingdom. Two years ago, on his own admission, on his own statement, two years ago he and his friends in the Transvaal were not prepared to accept a republic inside the Commonwealth at all. Now, it is “ Me and Mac are going to save South Africa together ”. What the hon. the Prime Minister has done …


Why don’t you listen to Menzies?


Read carefully what Mr. Menzies has to say. What the hon. the Prime Minister has done is to place South Africa in the greatest danger. South Africa outside the Commonwealth under this Prime Minister with no change in racial policies, which of course is the basis of all our troubles, has got no’t only the Black nationalists but the whole world against her. We stand alone and we will stand alone against a mounting pressure which has been given an enormous impetus by what happened last week in London, and of which clear indications and signs have been forthcoming ever since.

Mr. Speaker, I say with all seriousness to hon. members on the other side, who take all this so lightly, that along the path we are taking to-day and at the rate we are moving, in not more than five years’ time their farms may be no more secure to them than the farms of the White farmers in the Highlands of Kenya. Let them remember what I say in the coming days and ponder seriously over where they are going to.

Sir, this development has been a tremendous shock to the whole country and to the economy of the whole country. The United Kingdom may be sympathetic in our sorry plight. They may be sympathetic, but I doubt how far they will be able to go to help us in the troubled weather we are riding into. Sir, trade treaties may be drafted but they will be trade treaties. Compare our Rhodesian trade treaty with what it used to be and see how trade is beginning to suffer as a result of that trade treaty. Incidentally, Mr. Speaker, some of the rates we are enjoying in respect of Rhodesia and the Federation at the present moment are based on the Commonwealth, and presumably we shall lose those too, which will make our position even more difficult. Business will continue of course, but it won’t be business as usual, Sir. As a result of loss in good will and confidence and the fact of the utter isolation into which we are walking and the increasing racial divisions in this country, the results are incalculable. In fact what hon. members opposite, if they would only think, have got to realize is that we are now facing a cold war against the whole world. The furious blast of propaganda, Sir, including the turning of the South African Broadcasting Corporation into a second Zeesan —the Zeesan to which the hon. the Prime Minister listened with such pleasure during the war, when he was not so friendly disposed to the then English Prime Minister as he is now (he did not do much to help the British Prime Minister during the war, but he is now hoping that the present Prime Minister will help him out of his trouble)—this furious blast of propaganda … [Interjections.]




Sir, I was referring to this furious blast of propaganda which started last Thursday, and which is intended to sweep the people off their feet and to bludgeon them into believing firstly that leaving the Commonwealth will have no economic consequences at all, and, secondly, that the hon. the Prime Minister is a hero who has saved White South Africa.


Hear, hear!


Both these propaganda blasts are completely untrue. In the first place the economic consequences in a short time will, I believe, render this Budget quite unrealistic. In the second place, so far from saving South Africa, the hon. the Prime Minister and his predecessors have landed us in a cold war, a cold war not just against the Black states, but a cold war in which the Nationalist Party will stand alone against the whole world. What can the outcome be?

Mr. Speaker, we must not leave the Commonwealth; politically, economically, financially, we dare not do so at the present time. However, I hope, even if it means postponing the proclamation of the republic, that all may not be lost yet. The declaration of a republic is a minor matter compared with what South Africa is facing in the near future. The hon. the Prime Minister can postpone the declaration of a republic to-morrow morning if he wishes to. He is the only man who can. So responsibility for what may happen rests upon him and upon him alone.


Our prophet of doom.


Order! I appeal to the hon. member to maintain order.


Mr. Speaker, this amendment of ours is not an idle one. Thirteen years ago we were a small, prosperous people, respected throughout the world, with much more influence in world affairs than our size warranted. We were looking forward, all of us, optimistically to a great future, with a great White population and a contented non-European population. That is 13 years ago. Look at us to-day. Look at where we have landed: A small, isolated country, held up to ridicule by the rest of the world, disliked by the rest of the world for our policies, and, according to the hon. the Prime Minister, practically outcasts of the great Commonwealth of Nations, because of the activities of this Government during the last 13 years. I say this amendment is not an idle one. I believe that unless the Government takes heed of it and realizes its implications, and does not disregard it merely because it is framed in parliamentary language and, therefore, cannot be as blunt as it perhaps should be—unless the Government takes heed of it, I verily believe that the country will be taking the penultimate step to the disappearance within a few years of the White man’s security in South Africa. I move.


I second.


Mr. Speaker, the hon. member for Constantia (Mr. Water-son) has treated us to a speech this afternoon which, I think, will make him blush when he reads it in Hansard. The hon. member moved an amendment which I suspect—and I think by to-morrow I will find that my suspicion has been correct—would have been completely different had he moved it at the end of tomorrow’s debate. Right at the outset I wish to say something about that amendment. There is really only one point in that amendment. It refers to “ the disastrous policy followed by the Government over the last 13 years, culminating in the decision of the Prime Minister to withdraw the republic of South Africa from the Commonwealth”. Mr. Speaker, hon. members of the Opposition are the people who have indoctrinated world opinion against South Africa’s policy to continue to exist as a White country. They have indoctrinated world opinion and, by doing that, they thought they would gain the support of the world, and that the world would never leave them in the lurch. And where are their friends to-day, those friends whom they wished would sympathize with their attitude? They wanted to turn South Africa into a multi-racial country and we said “ no”. They and the rest of the world are on the one side to-day but in the minority here in South Africa, and all they are getting from the world is sympathy, nothing positive.

The hon. member went on to say that the Prime Minister was not fit to govern this country. Thank heaven it is not for him to say who should govern South Africa and who should not. Since 1948 till to-day we have clearly seen how the people of South Africa have more and more rejected the United Party because of their objectionable policy. Their policy is objectionable because they want to turn South Africa into multi-racial country, as the rest of the world wants it as well. [Interjections.] I am talking about multi-racial in the political sense. The peculiar thing about the amendment of the United Party is that they want us to postpone the Budget and submit a fresh Budget once we know what the results will be of this constitutional position in which South Africa will find herself after 31 May. It seems to me that hon. members are as far removed from reality as the North Pole is from the South Pole. There are sufficient practical indications of what the real economic position will be, Commonwealth or no Commonwealth, republic or no republic. As far as that is concerned, anybody is able to predict with a reasonable amount of certainty and within certain limits what will happen during the next year in the economic field. But it seems ridiculous to me to ask that the Budget be postponed to a later date. The hon. member furthermore says that private capital will flow out of the country and we shall not get any money to develop South Africa.

That is the type of allegation which he makes, Sir. However, Mr. Speaker, when you analyse what is being said, not only here, but overseas, by people who know what the position is, you find that they contradict the hon. member. I shall come to that in a moment. He said that the Government would be unable to convert the overseas loans which mature during the course of the year, because he thinks they are in London. I am not sure whether it is London or America, but I do not think that makes much difference. It is a small amount, namely, R49,000,000, and if we cannot raise that abroad, I am sure we will be able to raise it locally. South Africa is determined to become a republic and look after herself financially and otherwise. We will not allow ourselves to be frightened.

The hon. member also said “ we dare not leave the Commonwealth ”. He said it could very well be that the United Kingdom was sympathetic towards us but that when it came to trade agreements those were practical issues, and that the other Commonwealth countries would force the United Kingdom to do away with the preferences which South Africa was enjoying at the present moment. I immediately want to say something about these preferences. Only this morning there was a report from London in our newspapers to the effect that this question was raised by way of a question in the British House of Commons and that the Minister of State of Trade Relations, F. J. Errol, had replied to the question by a Conservative member as follows—

The existing Commonwealth preferences will not be affected. The bilateral agreements which were concluded subsequent to the Ottawa Conference in 1932 which determined Britain’s obligations towards South Africa in this regard, will not be affected by the change in the status of the Union.

Nobody will tell me that the hon. member did not see this report in this morning’s paper.


It does not suit him.

*Mr. E. G. MALAN:

What will happen if a Labour Party Government comes into power there?


If the hon. member for Orange Grove (Mr. E. G. Malan) would only wait till I have finished, he will know what my attitude is in this connection. If he wishes the Labour Party in England to tell South Africa what to do in her own country, I think he should rather go and live there. We will not allow them to dictate to us. The Opposition, of course, is very pleased that they have the opportunity of discussing Commonwealth relations in this debate, rather than finances, because they have no criticism to offer to this Budget. But that is by the way, Sir. How will our withdrawal from the Commonwealth affect our trade and how will it affect our financial position? That is the question around which the entire speech of the hon. member for Constantia centred. Mr. Speaker, many people are nervous about this issue but I contend that those are people who are not completely informed on the subject. I feel that it is necessary to reassure them and I hope that in the course of this debate the people of this country will receive that assurance. I say there is no reason to feel concerned about the position. In the first place it was announced that we would remain a member of the Sterling bloc and the agreement between South Africa and Britain has already been concluded. The second is the statement made yesterday in the British House of Commons and which I have just read to hon. members. There is at least one respect in which it will be better for us to be outside the Commonwealth than inside the Commonwealth in present circumstances. I am speaking purely about the economic point of view, Sir.

If you are outside the Commonwealth to-day, Sir, you are outside under a White Government with a Verwoerd as Prime Minister. If you want to be inside the Commonwealth, you have to have Albert Luthuli as Prime Minister, or else you get kicked out.




Yes, it will be a nonsensical Government under him. But that hon. member would like to subject herself to that because that is the policy she advocates. The investor, whether he be a local investor or an overseas investor, wants a stable government. He wants to be sure that his investment is safe and that it will be protected. If we had a multi-racial government with the non-Whites in the majority, he would not feel that his interests were being protected in South Africa. He will not feel secure; he will feel that his investments are being threatened as they are to-day being threatened in Central Africa. We hear of cases in Kenya, Tanganyika and Central Africa where people have property, but they want to pack up and leave. They cannot sell their assets, however, because they are valueless. That is what happens to investments made in countries where the only prospect is that of a non-White government. I contend that the stability which will be created by virtue of the fact that we have a White Government in South Africa, a Government which stands for the maintenance of White supremacy, will result in stabilizing investments in this country and attracting more money in future. The day when White supremacy is in danger in South Africa will be the day when no money will come to this country.

I want to return now to the question of preferences as such, the preferences which we enjoy to-day in Great Britain and in Canada as well. I am, however, talking more specifically about Britain. As far as that is concerned, I trust the hon. the Minister of Economic Affairs will enlighten us fully at a later stage, because there are actually three types of preferences which we enjoy in Britain. The first are the preferences under the Ottawa agreement with its amendments. Those are very clearly covered in the statement which appeared in this morning’s paper. They are to remain in force. In the second place, there are the preferential tariffs in respect of which there is no agreement but which are extended to all Commonwealth countries, and that applies to goods which enter the British Isles entirely free of customs duty, in other words, goods from the Commonwealth. The third is the sugar agreement. I should like to know whether all these three different categories are fully covered by the statement which was made yesterday in the British House of Commons.

The argument has been advanced that the other Commonwealth countries would force Britain to reduce these preferences or to abolish them because of competition or because of open hostility on the part of some of the non-White countries and so on. As far as I am concerned, I am not for one moment afraid that anything like that will happen. My reason for saying this is in the first place that our trade with Britain is too valuable to her. Nobody trades with another country just with the object of benefiting that other country. They trade because it is to their mutual benefit. South Africa is in this fortunate position that in respect of every country in the world she can have a trade balance favourable to those countries and unfavourable to herself, because we produce the gold to make good that difference. In respect of ordinary trade with England we have an unfavourable trade balance of approximately R150,000,000 per annum. Then there is sea traffic and other indirect imports to South Africa which give Britain an additional benefit of R100,000,000. Dividends and interest on British investments in the Union yield approximately R200,000,000 per annum. That gives a total of approximately R450,000,000 per annum which the British Isles get from South Africa, for which they get gold and for which they need not import from us. I have already deducted the poods. Nobody will tell me that England will jeopardize the priority which she enjoys by fighting about existing trade. Nobody will tell me that. In addition to that they have approximately R2,000,000,000 invested in the Union, an investment which they would like to see protected.

Mr. Speaker, when he argues that these countries would force the British Isles to try to abolish trade preferences, the hon. member for Constantia forgets, of course, that South Africa is in a very strong position as far as the entire Commonwealth is concerned, in that South Africa finds herself in the unique position of having three British Protectorates here, of which one is entirely within the Union, one almost within it and the other one on our borders. Those three territories can hardly exist economically without the assistance of the Union.


You can say good-bye to them.


I need not say good-bye to them nor need I welcome them. We are not the people, but they, who are in trouble to-day.


Do you want to blackmail them?


No, we will not blackmail them, neither will we allow ourselves to be blackmailed. The hon. member should understand that clearly. Those three Protectorates and the Union are so closely linked today, economically speaking, that the Protectorates will in any case not be able to exist without us. I do not think the people who own the Protectorates would care to fight with the Union and then be left subsequently with the Protectorates on their hands. I believe that the present economic arrangements as a whole will remain as they are. You cannot change some of them and leave the rest as they were. If the important thing changes, namely overseas trade, then trade within the southern Africa area, between the foreign territories and South Africa, must also change. I think, however, that there are so many implications attached to this matter that all parties will feel that the present position should be retained. I think I have said enough on this subject.

I want to return to what the hon. member has said about people overseas being afraid to invest money in South Africa and about money flowing out of South Africa. Here I have a report from the Financial Assistant of Reuter from London. He says—

The whole effect of South Africa’s withdrawal will, at this stage, probably be psychological.

He goes on to say that her withdrawal need not affect economical issues. It is expected to be a severe psychological shock to the stock exchanges. He then explains that it is a temporary thing and that the people will recover from that psychological shock. In connection with overseas investments there is a report from Reuter’s assistant in London in which he says this, inter alia

The effect on South Africa’s gold shares was not worse than expected…. Yesterday morning (that is Thursday just after the announcement) gold shares were sold at approximately 10 per cent less than the closing prices the day before. In comparison with the prices of a few days ago, the drop has been small.

Then further on—

As Dr. Verwoerd indicated the day before yesterday, the Union has every reason to maintain her good economic ties with Britain and to strengthen them if possible. It is very possible that there will be an accommodating attitude towards overseas investors and businessmen. The Union Government has always treated overseas investors with the highest degree of integrity … there is no reason to fear currency control in respect of the transference of dividends or other current payments from the Union.

And this is very important, Sir. This is in connection with the outflow of capital which worries the hon. member so much. He says—

Those people who became nervous after Sharpeville and the disturbances in the Congo withdrew their money. The people who did not take fright at that time do not easily take fright.

He concludes with this—

In all spheres except politics, South African shares are much cheaper and yield much higher returns than corresponding investments in other countries.

Well, Mr. Speaker, there you have it clearly. Here I have another article by Harold Fridjohn of the Rand Daily Mail which is more or less in the same vein. I will not read this one as well. It is quite clear that these people did not express their views without first having acquainted themselves of the true position. All this anxiety and fear which is being expressed here to-day is typical of the fear that they have manifested over the past 13 years. Every year we were told how the country had declined during that particular year and they then predicted how the country would further decline in the year ahead. Mr. Speaker, during the past 13 years the country has declined to such an extent that our national income is two and a half times as much as it was at that time, and it is continually increasing! The country is more prosperous in every respect than it was at that time and it is still progressing. Yet there were further predictions to-day of how the country would decline.

Now I should like to say something about our overseas trade, apart from this question of Commonwealth preferences. I have studied our overseas trade figures and I found that in respect of our trade with the United Kingdom during the past year we exported goods to the value of R227,000,000 and imported goods to the value of R315,000,000. There has been a decline in the imports from the United Kingdom. It is not a big decline but a decline nevertheless. I think we can ascribe that to competition from the Continent. Perhaps the Minister will give us further information on that. Our exports to Canada amount to R6,776,000 but our imports from Canada amount to R33,690,000, a difference of more than R30,000,000 in favour of Canada. Our exports to those countries are about one-sixth of what we import from them. That ratio seems out of proportion to me. We have the same position in regard to the United States. We import goods from them to the value of R209,000,000; and our exports amount to only R54,000,000. That is one-quarter. The impression you get from these figures, Sir, is that it is particularly in respect of heavier industrial articles such as motor vehicles, tractors, etc., that there is such concerted exportation to South Africa. I want to appeal to the Government—I have made this appeal before—to put machinery in motion to standardize motor vehicles, and tractors, etc., and then to do everything in its power to erect factories in South Africa to manufacture these articles locally. During the calendar year 1960 we imported heavy machinery to the value of R261,000,000. That is a very high figure, Sir, and nobody will tell me that with proper planning we cannot erect factories in this country which will eventually produce those articles that we are importing to-day. That is necessary with a view to our future exchange position.

I also want to say something in connection with our industrial development. The hon. member for Constantia tried to belittle what the Minister has done in his Budget in that respect. I want to say to that hon. member that he differs widely from the Chamber of Commerce as far as this matter is concerned. I admit that industrial development in South Africa could, perhaps, have taken place at a faster pace than it has done, but we remain the most industrialized country in southern Africa and the fastest developing country in Africa, We are doing everything in our power to encourage industrial development and to turn South Africa into a big industrial country. I want to read to the House what the Associated Chamber of Industries say about this Budget. This report appeared in the Rand Daily Mail of 16 March. It first says this—

Many leading economists believe it will have one big advantage—to bolster essential confidence in the country hit by outside fears about its future….

Just like the United Party, there are other people who have “ outside fears ”. Then it goes on—

The Federated Chamber of Industries described the Budget as a determined effort to stimulate capital investment.

The statements issued by the Chamber of Industries contains the following—

While the background of this year’s Budget differs considerably from the economic situation in the first quarter of 1960, the Minister has obviously adhered to a policy of economic acceleration as far as circumstances permit. This positive outlook is bold and is warmly welcomed by organized industry. The resilience of our economy provides a sound foundation for this.

That was what the Federated Chamber of Industries said, and their chairman, Mr. Leslie Lulofs, said the following in a further statement—

In particular, industry was well pleased at the various special investment allowances made available in the Budget.

What does the Rand Daily Mail say?


The Rand Daily Mail is a political United Party propaganda paper, but it, nevertheless, published these statements. I have quoted from the Rand Daily Mail. I am not concerned about what the editor of the Rand Daily Mail says. I very seldom read the leading article in a newspaper because the editors are, to a large extent, prejudiced. As far as industrial development is concerned, things have not been so easy during the past year for various reasons. Firstly, last year was an unnatural year. There were unrests. People took fright and money left the country.




Because some people believed that the United Party would help them to get into power if they created disturbances. Those people created disturbances and trouble. As Mr. Leslie Lulofs says, this Budget contains positive measures to encourage industrial development. I think in particular of the investments concessions which have been increased from 15 per cent to 20 per cent, and which will, in future, also apply to service industries. The most important industrial development, which we welcome very heartily, is the special concession to border industries, which may, in future, write off 30 per cent in respect of machinery and 20 per cent in respect of buildings. The time is now opportune for faster industrial development in the border areas. We have so often been told that this is not happening fast enough.


Where are the border industries?


Yes, Mr. Speaker there are people who tackle a project before they have planned it properly. They started their attack before they knew what had happened, and now they are sorry for what they have done: we do not do that kind of thing. We first plan. We have made such progress with our planning of border industries that we are to-day in a position to carry on. Our policy in regard to the establishment of border industries is now taking shape. Industrialists are coming forward and, before long, factories will be established to make this policy of ours a reality.

There are certain factors which deter industrial development.


That is the Government.


The hon. member says that because it suits him to say it, but he himself is scared to invest anything in these industries.

There was a scarcity of money last year because of the outflow of capital, with the result that you could buy shares on the stock exchange which gave you a return of 7½ per cent up to 10 per cent. I ask myself the question whether industrialists do not consider it a better proposition to purchase those shares than to start an industry? I want to ask the Minister this: As far as this 5 per cent tax free investment, which the Government offers, is concerned, it boils down to this, that per cent is subject to taxation in the case of a reasonably well-to-do person. Is that not a little on the high side, because, if a person can invest money in shares or securities on that basis without any risk, it may deter him from making an investment where there is an element of risk? All I want to know is whether this will not direct people’s money in other directions than in the direction of establishing new industries? I feel, however, that the position is improving in this respect. I have quoted from the report of Reuter’s financial correspondent, who says that people who are easily frightened have already become frightened, and that there will not be a further outflow of capital. Another factor is the high percentage of savings internally which is over 25 per cent of our national revenue. That ought to provide us with the necessary capital to make a reasonably good start with further industrial development. In this connection I should like to mention the four big basic industries with which the Government started—Iscor, Sasol, Foscor and the Electricity Supply Commission—and the developmental programme in that respect of about R1,000,000,000 which is envisaged. There the Government is setting an example and the people of South Africa can be confident that South Africa is beginning to develop.

There is another encouragement in the Budget which we welcome in particular, and that is the concession in connection with the processing of base metals. The hon. member for Simonstown (Mr. Gay) and other hon. members will remember that when we visited Vereeniging the year before last we discussed the question of sending raw material overseas at a low tariff to be processed there. Industrialists pointed out that they could process those raw materials in this country, and that additional foreign exchange could thus be earned. That impressed all the Members of Parliament who were present. I think the best thing the Government can do is to allow this 100 per cent on capital expenditure where processed minerals are sent out of the country. I think the Minister is aware of the fact that our railway tariffs are calculated to encourage the exportation of unprocessed minerals, so that it amounts to about £1 per ton, and I want to ask the Minister to revise that tariff as soon as possible, because that will be an added inducement to process minerals locally.

In conclusion I want to thank the Government for overhauling our defence system. This Budget provides for a 40 per cent increase in the expenditure on defence. If you wish to give investors the necessary confidence and a feeling of security as to their investment in this country, you have to ensure that your defence force is such that it will maintain security wherever trouble arises. I think this expenditure is one of the best items in the whole Budget. I am sure members of the defence group will have something more to say on this, but this is an important step which the Government has taken to increase expenditure on defence with R28,000,000 to R71.5 million; which is nearly 40 per cent.

I want to conclude. Much can be said about overseas trade, but that will take up too much time. We are dealing here with an elastic Budget, a Budget which, if South Africa finds herself in trouble, will ensure that we are on the safe side, and if South Africa finds herself in a favourable position, will yield a surplus. Our national income is growing. Last year it was over 8 per cent. That is very high and we can be proud of it. We are entering the republic with a Government which, as far as its loan estimates are concerned, is in a better position than any other country in the world. When we came into power in 1948 the Loan Account was insolvent. The assets totalled £430,000,000 and the liabilities £609,000,000. Our present Loan Account position on 31 March was a net national debt of only R2,466,793,000 but the Government has interest-bearing assets of over R2,500,000,000. There is therefore a credit balance in respect of the interest-bearing assets. As opposed to that the Government has non-interest-bearing assets to the value of approximately R650,000,000. Not a single penny of our public debt is unproductive. I think any country in the world will be proud if all its public debt is productive. I wish to congratulate the Government on this. I think it was wise of the Government not to have transferred money to Loan Account this year, in the circumstances, but I do believe in continually strengthening your Loan Account and I trust that wherever the Government has surplus money in future that surplus will be transferred to Loan Account. In this respect I associate myself with the remarks made by Mr. Pocock in one of his last speeches in this House. He said that South Africa was contributing far too little to the Redemption Fund and that the Government should amend the Act so that the annual contributions could be increased. In other words he was pleading that more money be paid out of Revenue Account into Loan Account. In one of his last speeches in this House Mr. Oppenheimer said that he felt that more money should be transferred from Revenue Account to Loan Account, but he did not say how much. I too feel that we should strengthen our Loan Account and I want to ask the Minister seriously to consider increasing the contributions to the Redemption Fund if he does not transfer it directly from Revenue to Loan Account.


Mr. Speaker, this debate takes place in the shadow of events which can only be regarded as tragic for our country, but I do not propose to make a long list of the possible consequences. Least of all do I propose to discuss such matters as the future of the Protectorates. I do not think it would give the best chance for the best handling of certain of these problems in future. But one cannot forgo saying this in passing, that when the Minister of Finance took this portfolio he said that he would not gamble with the finances of the country. I think he has kept that promise, but for the past 12 years more important things than the finances of the country have been gambled with by the Government. Secondly, I would like to say this in passing, that the hon. the Prime Minister on his return said that now our country was miraculously free. I would ask: Free from what? Free from criticism of those who are hostile to us? Are we free from that?


We are free from Nkrumah.


Are we free from fear, particularly the fear of being generous to those in our country who are less fortunate than we are? I am afraid not. [Interjections.]




Hon. members opposite, when we speak of the freedom of the individual, often ask us in what connotation those words are used in the world of to-day, in a modern society where there is an onus on the state to take greater and greater responsibility. What connotation has freedom of the individual country and freedom of individual opinion in the world to-day, in the sense that I am speaking of freedom of the individual within a country? Only those things which can be free in that sense, which are identified to some extent with the trend of civilization of the world in which we live, and I suggest that the policies which that side of the House have adopted are a long way from that.

I want to come to one of the most disastrous policies mentioned by the hon. member for Constantia (Mr. Waterson) which has resulted in our finding ourselves in the situation in which we are, because whatever one may say about economics, and I hope as a South African that we may save everything that possibly can be saved, but nobody can believe that the position will be quite so good, but at least I say that if we have lost some friends we will have retained some economic allies.


We have not lost friends.


Order! I ask hon. members to give the hon. member an opportunity to make his speech.


I say that we will try to save the maximum possible for South Africa, but no one can believe that things as a whole will be quite the same. But what I want to say is that primarily our troubles stem from the policy we follow, and to which the Government strongly adheres. The question is what will make a stable state of the Union and I suggest that the policy of apartheid cannot bring any stability to South Africa. The hon. member for Pretoria (Central) (Mr. van den Heever) claimed that this side of the House was capable of indoctrinating the whole world. Of course that is nonsense, but I will say this, that when this side of the House talks sense possibly the last people to listen to that sense will be the hon. members opposite.


We have had no experience of it so far.


And you have been on both sides, have you not?


I am not looking for a connoisseur of good sense in that hon. member. The basic problem was stated by the hon. member for Pretoria (Central), and it is the problem of the whole of Africa, and not only of the Union, viz. the conquest of poverty through industrial development. I am opposed to the policy of apartheid. This policy in South Africa alone, and irrespective of pressure from the outside world, leads to economic stagnation. There was a parliamentarian who said in this House that “ all politics in South Africa are Native affairs politics ”. Now we can go beyond that and say that the kernel of the problem on the whole of the continent of Africa is the problem of the development of a technology which will enable the people of the African Continent successfully to raise their living standards, and the problem which goes hand in hand with that is the problem of urbanization and the handling of the urban population, particularly the Africans. In a recent debate in this House there was a motion in regard to fighting Communism. If you wish to fight Communism I suggest that it is wise not to create the typical Marxist landless proletariat, and that is what the Government is doing at present. If you want to fight Communism it is not enough to put up a negative defence and to have guns and tanks to suppress riots. It is necessary in a battle for the minds of men to have some positive ideas to put before these people, against Communism. I suggest that in that respect the Government has failed lamentably.

I do not want to comment too much on the Budget. It is the same kind of Budget that we had last year, giving a shot in the arm, and there is no point in analyzing the composition of that shot in the arm. It is only an intensification of the last Budget, and it contains two important things, relief to the taxpayer of 5 per cent, and expenditure on defence and the reserves. In so far as the policy of the Government is directed to the conquest of poverty in any area in Africa, we will support that policy. We will also support the policy of establishing industries in the border areas provided it does not cut across the main economy of South Africa, but it does not solve the problem of the urban Africans, because all it does is to give a certain number of them employment in towns near the reserves and the others remain in the cities, and so the same problem survives. You are not creating a sphere in the border development in which the African can rise to a high position such as that of a doctor or a lawyer. There is not enough scope for them to develop as the result of these border industries. In the reserves there may be some prospect of creating greater opportunities, but there are two men with whom I agree in regard to this matter. The first is Dr. Bisschof, one of the commissioners on the Tomlinson Commission, who said that having examined all the facts separate development will not work, but it must be tried because you can turn back from the development of the reserves to integration, but you cannot turn back from integration to the development of the reserves. The other gentleman with whom I agree comes from another country. He is Mr. Menzies, who says it will not work. [Interjections.] For one thing we have not got the money. The hon. member for Pretoria (Central) was speculating whether we could raise R49.000 000 abroad and he said that if we could not we must raise it ourselves. I agree with that, that we should rely on ourselves for what we cannot get outside: but as the basis for reserve development, which will demand hundreds of millions, it is rather inadequate. At present there are something over 3.000. 000 Africans in the reserves, 3,000,000 in the White agricultural areas, and 3,000,000 in the cities and the Tomlinson Commission estimated that within a short time there would be 6.000. 000 Natives in the urban areas. If the Minister wishes to develop industries, that will not make them go back to the reserves, and that is why it will not work. The Government is proposing to do what no other country has ever done, and that is to stop the drift to the towns during an industrial revolution, because it is the policy to continue that industrial revolution, but they cannot in any way control that stream to the towns by applying the pass law regulations. That is like trying to prevent people from drinking by applying prohibition. The only way to do it is to decrease the areas of poverty. To the extent that the Government is doing something to develop the reserves they are attempting to strike a balance between the demand for labour in the urban and rural areas. But if you wish to press on with industrial development, you cannot avoid drawing out more from the reserves, and I believe we should not be afraid of drawing more African labour into the towns to solve the poor Black problem as we solved the poor White problem. That is why this scheme cannot work. It is difficult to work on the basis of the Tomlinson Report, which predicts that certain things will happen by the year 2000 because the world has difficulty in looking that far forward. Where is the Government going to buy the time? Put the point is that if you take into consideration the demands made on the brain power of South Africa in our administrative system—and we have a good administrative system—and if you consider the demand of commerce and industry for brain power—and by brain power I do not just mean top executive brains, but the ordinary white-collar brain power—and if you consider the demands of all the other facets of the economy and you suppose that the White population can supply it, you are living in a dream. There are only a few who will rise to that level, even with all the educational facilities that are provided, and and we will not have enough of them. But, apart from that, as long as you give no opportunities to the larger or major part of your labour force to rise above a certain level in a differentiated economy, you cannot succeed in expanding the economy, because you get the problem of lack of incentive and a too rapid turnover in workers of low efficiency. You also get a too low producing power. You get a technological machine which somehow has to keep a population of 15,000,000 employed, geared, owing to the difference in purchasing power, to the level of the consumption of 5,000,000, which is not a feasible proposition. These things are being said from a wider angle and a wider conception than the purely economic, to which I am trying to stick at the moment. Like Mr. Menzies, I am trying to stick to the practical argument, but on the economic argument alone —and the overseas world can also analyse the situation because they have economists who have studied the problems of backward areas, like the whole of the South-Eastern European area where the standard of living was not much higher than that of our Black population. People who have applied planning and technical brains to that same problem elsewhere, are not likely to be misled by the kind of solutions we offer. And a solution has now been offered to the world—apartheid. Our great difficulty was to find out what it meant on its positive side, at any rate; we know what it means on the negative side, and until the statements of Dr. Eiselen and later Dr. Verwoerd in this House in 1959 and recently the Minister of Bantu Administration and Development in the December issue of Bantu, it was not clear what it meant in positive content. But it has now been tried in its positive content before one of the most influential tribunals of the world by Mr. Eric Louw, before the United Nations, and they did not seem to regard it—and had it been a practical and just solution they would so have regarded it—they did not regard it as a new and original contribution to this problem which is not exclusive to us. And this is the solution of the Government, apartheid.

But on the other side, on the negative side, on the prohibition side—because it is that which has earned us the name of the “ polecat of the world ”—in the interference and the prohibitions and the barriers put in the way of freedom of opportunity of people, freedom of movement of people, this Government seems to be quite unconscious of a very significant thing that happened in the outside world. At the end of World War I there was a tremendous urge towards what was called the self-determination of people, after President Wilson came with his 14 Points. There were many realists at that time who said that these countries would be worse off if they followed a policy of self-determination. But it did not stop the tendency to self-determination, which is still going on to-day—the breaking up into smaller units, even in a world which should be moving towards bigger units. At the end of World War II, the world had a tremendous revulsion in another direction, a revulsion against the doctrine of race, because they had seen it operating in its extreme form in two of the allegedly most civilized countries of Europe at the time. That revulsion of feeling is something that must be taken into account, because there is something actually that is world opinion as distinct from the exploitation of that world opinion by Moscow or others interested in moving the world in a certain direction. That side of the House is very fond of equating the two; of trying to prove that world opinion is only a Machiavellian operation of something that comes from Moscow. But there is a basic world opinion and it is set against what South Africa is doing.

*Mr. G. F. H. BEKKER:

What are they doing in Basutoland?


I suggest that the hon. member for Cradock (Mr. G. F. H. Bekker) is inviting me to interfere in the domestic affairs of another nation; I do not propose to be drawn into that. I am the last to say that we as a country should bow, if we are right, to an outside opinion if it is wrong.

Mr. G. F. H. BEKKER:

We have been right for 300 years.


What I want to ask hon. members on that side is this: Even if we are right and the whole world is wrong, do they think they can maintain their position in the face of that? Mr. Speaker, it is time for us in this country, I agree, to ignore world opinion but to face the facts of our own life here and to face what is justice in our own country.


That is our policy.


If the Nationalist Party’s policy is a policy of facing facts, then surely facts take on a strange appearance, because last year the hon. the Minister of Bantu Administration and Development, at the height of the emergency, when we had pulled out all the forces of the country, was able to say that never had race relations in this country been better.


He was right.


I say the time has come not merely for the Nationalist Party but for the people of South Africa to face the facts of the South African situation, because now, more than last week, whether we survive and whether we master those facts, depends on our own innate moral and spiritual qualities and the courage we have to face the future. I have faith in the future of this country, but I only have faith if we as South Africans begin also to have faith in those things in which we used to have faith—in justice, in decency, in compassion.

Mr. G. F. H. BEKKER:

That is what we are doing now, but you want us to surrender.


We must abandon the fear of being generous to other people, because we might get swamped in some tidal wave that Nationalists imagine, so we are held back from generosity and decency by fear. The Nationalists have used that argument on every platform in the land; it is no use denying it.


It is a wrong analysis.


Well, if the hon. member for Standerton (Dr. Coertze) would like to rise later on and give us the correct technical analysis, I am sure there will be someone on this side who will be pleased to knock his argument down. [Interjections.]


Order! Hon. members must give the hon. member an opportunity to proceed with his speech.


Sir, my allotted time is expiring. I have dealt with what I consider to be the most disastrous form of the policies which have been carried out in South Africa, and it is for that reason that we move a further amendment—

To omit all the words after “ That ” and to substitute “ this House declines to go into Committee of Supply unless and until the Government abandons its disastrous apartheid policy ”.

I say in conclusion, whatever hon. members opposite may say, and whatever may be the ideals of apartheid, that in practice it is a policy that denies to a large bulk of the human beings of South Africa what the Nationalist Party would want for themselves. Mr. Speaker, let me make a historical comparision in conclusion. At one time there was a man in this country called Milner, and he knew what was best for South Africa. He thought he knew what was best for South Africa and did he endear himself to the Afrikaners? No. The Afrikaner now stands in relation to the Africans of this country in the same relation that Milner stood to the Afrikaner. Now the hon. the Prime Minister and his Government say: “ We know what is best for all the races in South Africa,” and if he thinks that it endears him to the hearts of the people, then why is the Government in this Budget spending R10,000,000 on defence?


I second. In 1948 when the Nationalist Government came into power, General Smuts is reported to have said “ Now we shall become a small boastful nation ”, and listening to the speeches that have been made in this House over the last 13 years, and more particularly listening to the speeches made in this House the last two days, it is clear that Gen. Smuts’s prediction has come only too true. Sir, the bare facts of the case are that at the present moment South Africa is out of the Commonwealth, isolated from that large family consisting of 650,000,000 people, occupying one fifth of the earth’s surface and carrying on a third of the world’s trade. South Africa is in isolation at the foot of a hostile Black continent, shunned by her former friends and universally hated. Four-fifths of her internal population is in a state of ferment and unrest. Most of her remaining people are worried and apprehensive of the future, that is to say those people who do not make up the small boastful nation that those in power have become in South Africa.

The hon. member for Pretoria (Central) (Mr. van den Heever) made an astonishing statement. He said that he would be thankful that the hon. the Prime Minister has saved South Africa from becoming a multi-racial country. Must one remind this House that South Africa is a multi-racial country? Must one quote the figures of population in South Africa and to remind this House that although there are 3,500,000 Whites living in South Africa, there are also 1,500,000 Coloureds, 500,000 Indians, and nearly 10,000,000 Black people, all of whom are citizens and live in this multi-racial country of ours?


Under the Minister’s own Act.


Under the Minister’s own Act, as the hon. member for Salt River (Mr. Lawrence) points out, all these people are citizens of South Africa is a multi-racial country and it is our palpable failure to accept that fact, to adjust our policies to that fact, to give rights to people of all races in South Africa, which has caused us to be put into this splendid and solitary isolation in which we are at present. Sir, I have mentioned that we have become a boastful nation, and certainly the hon. the Minister made some pretty boastful utterances when he made his Budget speech here. Coupled, of course, with his boastful utterances, there were, as becomes really a member of the medical profession, albeit the Minister has awarded himself this diploma, a few cautious statements and provisos and one masterly understatement which I feel I must quote. He said we cannot assume that the capital outflow will shortly be completely arrested. This statement, Sir, was made in the peak of one of the most disastrous balance of payments situation in which this country has ever found herself, and a situation which clearly is not going to get better as a result of the happenings of the last week.

Now I want to examine some of the physical characteristics of South Africa referred to by the hon. the Minister of Finance. He has told us that South Africa has fine qualities, that we enjoy sparkling health, exceptional vitality and an exceedingly robust constitution. I want to remind him that in that fine physical body there are the seeds of its own destruction, planted there by the chief physician himself, the Prime Minister, and nutured by the chief physician’s assistants. Thirteen years after the initial appearance of the seeds of destruction, we find that we have developed a full-grown cancer in our body. The strong beat of the heart to which the hon. the Minister referred, the adequate red blood cells, the satisfactory circulation and the efficient kidneys and liver are slowly but devastatingly being eaten away by this cancer, the cancer of racial discrimination, the cancer of apartheid, the very thing which, as I have stated earlier, has led South Africa to find herself in isolation at the foot of a hostile continent. The hon. the Minister himself noted some of the symptoms of this spreading disease. He told us about the balance of payments situation; he told us of the stagnation of our national income because of the declining investment from local and other sources, due of course to the loss of confidence and uncertainty in the future of this country. He prescribed two main remedies for this, and I wish to examine these remedies in some detail. The first remedy, of course, was the voting of considerable sums of money for the purchase of arms and ammunition to strengthen our Defence Force so as, he said, to be able to deal with any signs of internal unrest. I want to tell the Minister that one Black face sitting in this Parliament would have done far more to restore the confidence of overseas investors in South Africa and to set at rest the fears of the local inhabitants of this country than R17,000,000 which he is voting to be expended on arm and ammunition. The other prescription which the hon. the Minister has handed to us for the treatment of our symptoms is to expend something like R18,000,000 on the development of the Bantu areas. I want to spend some time on this too, simply because it has become so important again over the last few weeks, important because it is being used by our own propagandists abroad to justify the policy of racial discrimination, although clearly with scant success, and secondly because it is constantly being used in South Africa in order to provide for those who still bother about it a little ethical justification for the Nationalist Party policy of racial discrimination. In itself, as the hon. member for Musgrave (Mr. Williams) mentioned, there is no objection to—indeed there is full support for—the idea of developing under-developed areas in South Africa, and the Bantu territories certainly fall in that category. They are over-populated, under-developed, poverty-stricken areas which clearly need the injection of much capital and enterprise to try to rescue them from the dreadful stagnation into which they have fallen. But, Sir, to try to put this forward as a quid pro quo for depriving the 6,000,000 Africans who live in the White areas of all rights, is palpably false, and indeed it becomes downright dishonest if we try to consider the injection of capital into the Bantu reserves and the development of those areas will result in providing permanent homelands for the millions and millions of Africans who are living permanently to-day in the White areas. Sir, one does not want to go again into the old, old story of what has to be done in the reserves, of what was recommended in the blueprint put forward by the Tomlinson Commission for the development of the reserves, but I think one must once again remind those who are taking some refuge behind this ethical consideration for the policy of racial discrimination, that the Government has not begun to carry out one-tenth of the recommendations of the Tomlinson Commission. Four million pounds have been expended during the last five years on the Native reserves as against the £50,000,000 which should have been expended by now; £500,000 for the Bantu Development Corporation, of which something like £70,000 has been spent on the development of secondary and tertiary industries. As to the villages and towns of which the Minister of Bantu Administration is so proud, what is the economic basis of those urban areas; on what are people living there? How are they sustaining themselves if it is not on the earnings of the migratory workers working in the White areas? Where are the factories belching smoke, the busy machines, the 50,000 jobs a year that have to be provided for the Africans in the Bantu areas who have to be removed from agricultural employment if some diversification of activity is to be carried out and if something is to be done with the economy of those areas? Where, most important of all, are the basic services that are so desperately needed to develop those areas agriculturally as well as industrially? Where are the towns, the transport facilities, where are these things on which the Tomlinson Commission said something like £50,000,000 would need to be expended. I looked through the Brown Book of capital development on the Railways and I see very little, if any, money has been set aside for the development of railway lines in or to the reserves. None of these basic requirements for this major justification for the policy of racial discrimination has been carried out by this Government. It is a sorry picture, Sir, and one is led to the ineluctable conclusion that this is nothing more than a propaganda gag which is not going to help the country at all. We know from the hon. the Minister’s Budget and also from what was mentioned by the hon. member for Pretoria (Central) that a certain amount is now being put aside for the development of industries on the borders of the reserves. This is, of course, in place of the old idea of the Tomlinson Commission that industries should be developed in the reserves with White capital and enterprise. This, of course, is simply a means of keeping capital development in the White areas and attempting at the same time to inhibit the flow of Native labour from the reserves into the White industrial areas. It is astonishing to see to what complicated lengths this Government will go in order to carry out its fanatical obsession with the apartheid policy.

Sir, the normal locational factors that determine where industries should be, the ordinary economic desiderata such as proper transport facilities, adequate supplies of raw materials, power, proximity to the market, availability of suitably trained labour, these are not things that apply to South Africa. South Africa has to use a completely new basis for the location of industry, and the basis has to be a development of separate areas for the White and Black sections of the population. Great inducements are offered in this Budget and in previous Budgets to try to get industrialists to locate their factories where the Government wants them to be located—special concessions as far as railway rates are concerned; buildings to be provided; special rates of depreciation on those buildings and on plant and machinery and, most important of all, and quite devastating in its effect on the rest of the economy, the application of lower wage rates to those areas than the rates that apply in the developed industrial areas of South Africa. Sir, I want to point out to the Government that the economic dependence of this country on African labour is not lessened by border industries; it remains the same. The economic integration of African labour remains the same, and our dependence remains the same whether that labour is living in the White areas or residing in the Bantu Reserves, as dormitory reservoirs of labour and coming out to work in the industrial areas on the borders of the Reserves. This whole scheme which the hon. the Minister thinks is one of the major prescriptions that he has for the difficulties that we are experiencing in South Africa is doomed to failure, and it is doomed to failure for three main reasons. Firstly the Government is not prepared to vote the necessary money for these plans; it is not prepared to do so for political reasons. Can one imagine the hon. member for Wakkerstroom (Mr. Martins) or the hon. member for Heilbron (Mr. Froneman) stumping around their constituencies explaining why the Government has voted millions and millions of pounds of White taxpayers’ money to develop the Reserves?


We do it gladly, and I invite you to come on to the same platform with me when I do explain it.


I should be a very interested spectator. Sir, it has taken a very long time for hon. members to get around to the voting of this money which, after all, was prescribed at least five years ago as the minimum required and which has been watered down to practically nothing since that time. The second reason why it is doomed to failure is this. One of the main recommendations of the Tomlinson Commission for the development of the reserves was the injection of White capital and enterprise into those reserves, and that recommendation has been rejected out of hand by the Government, and, thirdly, the Government is attempting to carry out two completely incompatible things; it is attempting to build up a tribal economy and at the same time to build up a modern agricultural and industrial state. These two things are mutually incompatible and therefore the whole basis on which the Government’s excuse for its policy of racial discrimination is based, is doomed to failure. [Interjections.] Sir, that is self-explanatory. You cannot have a tribal economy which is based on the most backward type of economy and build up a modern agricultural economy at the same time. I think that would be obvious even to that hon. member. Sir, the main trouble with the Tomlinson Report and the main trouble with the Government, and therefore the main trouble with South Africa to-day, is not so much that the wrong answers are given but that the wrong questions are asked. The Government has asked the wrong question to find out what is wrong with South Africa to-day, and obviously the wrong questions which are asked lead to a wrong direction of policy. The question that the Tomlinson Commission should have asked and that the Government should have asked is not whether it is possible to carry on with separate development, no matter at what cost, but it should have compared what happens to South Africa under a plan of separate development to what could happen to South Africa if its economy was developed as one unit; if our inadequate resources of capital and labour were applied to developing this country in a most modern way and not with racial ideologies as the basis. Sir, if that question had been asked and if the right answer had been given to that question, South Africa could not possibly have found herself in the position in which she is to-day, isolated from every civilized industrial country in the world. She could never have found herself out of the Commonwealth, because she would have had to make adjustments to the policy which the country was following, a policy which would lead them to proper economic development of the country. Sir, if ever it was necessary to ask that direct question it is necessary to do so to-day, because now, as the result of 13 years of following the wrong path, we are more than ever going to be thrown upon our own resources in South Africa. It is impossible at this stage to gauge exactly what are going to be the economic effects of being out of the Commonwealth. Nobody knows. It is true, as the hon. member for Pretoria (Central) quoted this morning, that there was a question in the British House of Commons about trade relations with the Union, and the answer was that those relations would not be affected by our being out of the Commonwealth. But, Sir, that is the present position, and none of the agreements that we have at the present stage is incapable of abrogation. Nobody knows what will happen in the future; nobody knows what pressure is going to be brought to bear on Britain by other Commonwealth countries with whom we compete for markets. Nobody knows what is going to happen to our future trade relations, not only with Britain but with the rest of the Commonwealth. I should not have to remind this House that 50 per cent of our products were sold in the Commonwealth. Our great hinterland for the export of our products is the rest of Africa. We should have been the workshop of the continent of Africa, instead of which we are going to find ourselves facing more and more disastrous boycotts, boycotts not only of our manufactured goods.


Our goods are at present being boycotted by some Commonwealth countries.


The boycotts will be intensified. There was always a tacit disapproval if one Commonwealth country boycotted the goods of another. Now that tacit disapproval disappears. South Africa, because of its racial policy and not because it is becoming a republic, had already found itself in the most undesirable position of being frightened to label its own manufactured goods “ Made in South Africa ”, of being ashamed to do that because it was losing its markets. Those goods were first labelled “ Produce of the Empire ”, then later they were labelled “ Produce of the Commonwealth”. Not even that loophole is now open to us, and clearly we are going to find not only that our manufactured goods are boycotted but also—and perhaps much more dangerous for us because we are largely a raw materials exporting country, largely dependent on our exports—we are going to find ourselves faced with handling boycotts of unidentifiable goods such as raw materials, minerals, agricultural products. I do not have to remind this House of the disfavour in which South Africa found herself at Geneva with the International Labour Organization. All those things stem from one thing and one thing only. We ask the wrong question in this country and therefore we also get the wrong answer. What we have to do now is to search our souls and look for the correct answer. What we have to do is to reappraise our entire racial policy in South Africa; to develop our internal resources to the utmost. That is the least we can do in the meantime until we can make the necessary adjustment which we hope will get us readmitted to the Commonwealth of Nations and to the forums of the civilized world. We must at least develop our own resources in such a way that we have decent internal markets in South Africa.


That is our policy.


If he could explain to me how all the other racial factors in policy, such as job reservations, restrictions on mobility, pass laws, the industrial colour bar, how attempts to immobilize large portions of the population in the more backward rural areas of South Africa, are developing South Africa’s productivity to the full, he will be performing a miracle. Because all these things run counter to the general development of our economy, and these are the things that we have to have a complete reappraisal of, and, if we do this, we are already setting our course in the same direction as every other civilized industrial country, and it is the only salvation for South Africa, the development of all our resources, all our material and human resources to the best possible advantage, to their fullest productivity.


And a Black Government.


I don’t know why the hon. member thinks that prosperity must necessarily lead to a Black Government. That is not what the world wants. The world only wants to see a change of direction of policy in South Africa, a reasonable acceptance of just policy which will enable all our citizens regardless of colour to play their full part in the responsibilities of government and in the economic development of South Africa. This, Sir, is all the world demands of us. It does not demand capitulation to a Black Government.


One man one vote.


They demand reasonable concessions based on justice and based on good economics, and if we can reappraise our policies yet, if we can turn in a new direction, the obvious advantages to us will not only be economic, but the country will once again be readmitted in the circle of civilized nations of the world.


There was something which struck me particularly in both the speeches made by hon. members of the Progressive Party, and that is the emphasis they laid on the fact that in this Budget we are devoting particular attention to our defence. It seems to me that they are concerned because we are devoting attention to our defence. The fact is that in recent years we never spent such large amounts on defence, but in comparison with other countries, even the amount now on the Estimates is much smaller than that spent m other countries. The normal amount devoted to defence is in the vicinity of 15 per cent of the national income. Even the amount we are now spending does not even come near that figure. Why do these hon. members object to the fact that we are starting a comprehensive defence programme? What is their objection? I cannot follow that argument at all.

The second point which struck me particularly in the speech of the hon. member who has just resumed her seat was that she mentioned a series of points where we are not supposed to implement our policy of separate development, but the important announcement made recently by the hon. the Minister both in the Other Place and elsewhere, that a special director is being appointed to carry out a five-year plan, was not mentioned at all. The hon. member did not mention even that. That is typical of what we get from those hon. members, just the statement of a negative aspect, without devoting any attention to what we are trying to do positively. I agree with one statement made by the hon. member for Musgrave (Mr. Williams) when he said that the Minister has not gambled with the finances of the country. I agree, and that is one of the intelligent things the hon. member said.

But I want to deal with the hon. member for Constantia (Mr. Waterson). It has been a long time since I last heard such an outburst from that hon. member in this House, and that at a time when our Prime Minister has stated that he is waiting until the debate in the British House of Commons has taken place. All of that the hon. member for Constantia now forestalls, but I must say that that outburst by him shows me that hon. members opposite do not enjoy the support of their own followers in connection with the crisis in London which they think they have. That is the actual position. Here we had a case where the people of South Africa, English-and Afrikaans-speaking, have had to choose between membership of the Commonwealth on the one hand and the honour of South Africa on the other, and patriotism triumphed, and that is what upsets those hon. members, not the fact that they feel hurt as the fact that they do not enjoy the full support of their own voters in South Africa, English- as well as Afrikaans-speaking. The time has now arrived for the Opposition to push this petty party politicking aside in the new period we are facing and to develop that patriotism together with us and to make South Africa even greater. One point which emerges from what the hon. member and the hon. members of the Progressive Party said is the so-called fear that there will be an outflow of capital on a large scale.

This argument about the outflow of capital is surely one which we will repeatedly hear in this debate during the next few days. Let us just analyse the matter briefly. In a speech made by Mr. W. B. Coetzer towards the end of last year before the Economic Institute, he gave important figures in regard to this matter—

Foreign investments in South Africa amount to £1,527,900,000. Of that amount, *£226,000,000 has been invested in the public sector and £162,200,000 of it is a long-term investment.

Having analysed the matter he comes to the first conclusion in regard to the public sector, viz. this—

Our first conclusion is therefore that the £226,000,000 is of such a nature that there will be no great danger of an unexpected and detrimental outflow of capital.

Then he deals with the private sector, and finds that of the £1,390,000,000, £906,700,000 comes from the sterling area, £182,200,000 from the dollar area and £213,000,000 comes from the O.E.E.C. and other countries. After having analysed the position further, he comes to the conclusion that of the amount of £906,700,000 coming from the sterling area, possibly £33,000,000 will be vulnerable in so far as immediate repatriation is concerned. After having dealt with the matter further, he comes to the conclusion that the sterling area as such with its £906,700,000 is in the position that it has been investing in the Union in such a way that there is little danger that abnormal liquidation of investments here will take place. Now it is true that this conclusion was arrived at before the crisis of last week, but what has now happened in addition? In the first place we remain in the sterling area, and in the second place Empire preferences are being retained. In the final result, these investments were made in South Africa by countries in the sterling area not mainly as the result of our membership of the Commonwealth, but simply because it was good business, simply because the investment pays good dividends, and in the fourth place investments by countries in the sterling area are assured of a very stable Government and a favourable climate for industrial development here. That therefore disposes of the investment of £906,700,000 from countries in the sterling area.

I now come to the £182,200,000 of the dollar area, and in this regard Mr. Coetzer says—

Of the total of £182,200,000 (from the dollar area) only £34,500,000 is in the indirect group which therefore theoretically is liable to be withdrawn recklessly, but of this amount £23,500,000 consists of mortgage loans, therefore leaving a net amount of £11,000,000 for practical realization at short notice.

And these are investments not made by Commonwealth countries, but by the dollar countries, and it does not affect our relations to the Commonwealth countries. Then Mr. Coetzer continues—

The O.E.E.C. and other areas have a total investment of £213,000,000; here we find that a total of £159,900 000 represents shareholdings and undistributed profits, and if debentures and mortgage loans are added it will amount to a total of £187,200,000, therefore leaving a balance of £25,800,000 in short-term obligations, of which, however, only £8,200,000 falls in the indirect group which may be subject to withdrawal.

Therefore to sum up, the total amount which may possibly be vulnerable for repatriation is the £33,000,000 of the sterling area, £11,000,000 from the dollar area and £8,200,000 from the O.E.E.C. and other areas, making a total of £52,200,000, in comparison with a total investment of £1,527,900,000. These facts controvert the statement which is so easily made that suddenly a tremendous sum of short-term capital will flow out of the country as the result of the crisis which arose in London last week.

It is understandable that what happened in England last week completely overshadowed the introduction of the Budget in this House, but it need not necessarily have been the case, as the result of the fact that under these circumstances particularly it is of the utmost importance that we should devote attention to our economic and financial stability. Of course pessimistic prophets will try to paint a gloomy picture. We had that here again today. Lack of confidence in our country and in our economic potential is characteristic of these prophets of doom. More value is attached to the critical and mostly distorted opinion overseas than to our own really sound financial position. But the first reply has already been given to these prophets of doom. Last week, after the Stock Exchange, on the announcement of the crises in London—that very sensitive and reliable barometer in regard to political developments—had shown a depreciation of between 15 per cent and 20 per cent at its opening on the first day, prices again rose on the same day. The reason for that rise was the fact that neither in this country nor overseas was there any panic selling. Many smaller shocks in the past have resulted in greater selling on the Stock Exchange. This remarkable phenomenon must be ascribed to the almost unanimous confidence the people in this country have in our following the honourable road chosen by the Prime Minister at the conference table in Lancaster House, London, and in the second place, to the confidence investors abroad have in the stable Government of South Africa and its unshakeably sound economy in recent years. That is clearly proved by the comment of the financial correspondent of the Argus of 11 March, in which he used the following very interesting words—

When you look back at what has happened in the Union and elsewhere in Africa over the past 15 months or so, you may well wonder what other economy could have stood up to such stresses and strains as those imposed upon the Union, and to have come out of it as well as we have done. My broker friend tells me that over the past 18 months or so no less than R1,000,000,000 has been disinvested in South African securities. What other country could stand such disinvestment, related proportionally to the total investment, and still have its currency intact and not have to resort to restrictions on the transfer of capital by non-residents?

That is the first reply to the predictions of the prophets of doom.

The second theme will of course be the matter I have already touched on here, viz. the so-called shortage of capital which we will experience in both the public and private sectors. They usually add to that that in the past we have already suffered from a tremendous shortage of capital. Now it has always been the financial policy of this Government, in spite of the most strenuous opposition by the Opposition, and the most severe criticism, to encourage savings so as to make us less dependent on foreign capital. As against that, the idea still exists in the minds of certain people, who lack confidence in their own national economy, that South Africa cannot develop without a considerable inflow of foreign capital. In the light of our experience in recent years, and particularly in the past year, I see no reason why the inflow of foreign capital or its availability should be the determining factor in South Africa in regard to our development and progress. I want to say this very clearly. I see no reason why it should be the predominating factor in our development and progress. I want to remind hon. members that in the past 20 years of the existence of the I.D.C. it has never yet turned down a single proposition as the result of lack of capital. For the past three years the Industrial Financial Corporation with its capital of R10,000,000 is waiting for propositions. During the past two years there has been, generally speaking, no scarcity of capital for industrial development. The liquidity of the banks increased to R300,000,000, whilst rates of interest were reduced.

As a result of the serious outflow of capital last year, I just want to make one remark. The large-scale selling of South African shares by foreign investors had the result that the gold index of the London Financial Times decreased from 90 in January to 62.6 in August, but due to the confidence and interest internally it again rose to 75 in August last year. These few facts which I have mentioned sufficiently prove that this story told by the prophets of doom in regard to a capital shortage is devoid of all truth.

Now we come to the next point which we will get from the prophets of doom, viz. that as the result of our ceasing to be a member of the Commonwealth there will be a great outflow of capital. The reply to that rests, in my opinion, with ourselves in the first place, and that is the confidence we ourselves have in our economy. As I sat listening here this afternoon to the speeches of hon. members opposite, I could not help wondering what effect these scaremongering speeches must have on investors overseas who had invested their capital here and who still intend doing so? Was there not a whole series of suggestions as to what might possibly happen to scare away capital? My point is that it is the duty of us all, not only on this side of the House, in this crisis in which we find ourselves, jointly to show the greatest confidence in our sound financial position. And let me tell you, Sir, that we have the right, the full right, to have the fullest confidence in our economy. I want to mention a few examples.

During the Part Appropriation debate the Opposition expressed great fear in regard to the outflow of foreign capital last year, when our reserves decreased from R304,000,000 to R180,000,000 by the end of last year. That was an important point of attack by the Opposition. But let us remind hon. members that as recently as May 1958, our reserves fell to R135,200,000, in spite of the fact that we had then borrowed R48,000,000 from the International Bank and from the Monetary Fund, and that furthermore, the commercial banks at that stage showed an increase of R234,000,000 in foreign short-term deposits, which was of course an extra burden. That position which we had as recently as May 1958, was surely much more serious than the present position. But peculiarly enough, our economy was so strong and our people of such a calibre that we fought back and not only repaid those short-term obligations, but in fact also in those 18 months built up our gold and common reserves to R304,000,000 at the beginning of last year. In that short period of 18 months we brought the reserves back to R304,000,000.

Another fact which I would like to emphasize is very remarkable, and it completely justifies our having the fullest confidence in our economic position. In this young country of ours our savings in 1959 amounted to R1,144,000,000, i.e. almost one-third of our net national income, and last year it amounted to approximately R1,168,000,000. These savings ensured that during the past year we could have full employment and that we had our own capital available for capital development. Last year the hon. Minister of Finance said in Bloemfontein—

Thanks to the high level of internal savings which over the four years from 1956 to 1959 amounted to no less than 23 per cent of our gross national production, we were enabled to finance all our internal capital requirements during that period from savings.

What is remarkable in regard to these savings is that during this period the company savings remain reasonably constant, viz. R1 50,000,000 in 1957, R160,000,000 in 1958 and R154,000,000 in 1959, but personal savings increased by R1 10,000,000 to R350,000,000 between 1958 and 1959.

If we now take into consideration that the national debt by the end of 1960 was R2,300,000,000 and that during the past three years it increased on an average by R152,000,000, and that only R212,600,000 came from abroad, the possibility is not excluded that in future we can comply with this requirement also from our own savings.

Mr. Speaker, this is no ordinary achievement, and if there is one factor which contributed towards instilling confidence in our internal economy, both in this country and abroad, it was this policy which the Nationalist Government has followed ever since it came into power in 1948. As the result we became much less dependent on overseas capital, but in implementing this policy we received no assistance from the Opposition. They wanted to spend money and make us more dependent on foreign capital. There were some hon. members opposite who pleaded that we should borrow more money abroad in order to import still more! I say, Sir, that our savings is one of the greatest factors which instilled confidence both inside and outside of this country, and we all have every right to be proud of it.

Let us remember one factor, viz. that South Africa is one of the few countries in the world which did not receive any Marshall aid after the last war. What we have achieved here was as the result of our own strength and determination. But of course we welcome the inflow of more foreign capital for further development, and the concomitant technical knowledge. But as I said before, there is no reason why the inflow of foreign capital or its availability should be the determining factor in our development and progress. That we will continue to attract foreign capital is proved in the first place by the fact that during this past year, which was a particularly difficult one, foreign investment in the Union still took place on a considerable scale. We read this in the Budget—

In 1960 official and banking institutions were responsible for a net capital inflow of approximately R32,000,000 as the result of the revolving credit of a group of American banks which brought in a net amount of R14,000,000, a Swiss loan of approximately R5,000,000, a drawing of R9,000,000 on the International Monetary Fund, and a short-term loan of approximately R14,000,000 which was received by the Reserve Bank from a foreign banking institution.

The second reason why we will continue to attract foreign capital—and this has nothing to do with membership of the Commonwealth —is that in this stable country of ours the yield on investments still compares very favourably with those in other countries. The dividend yield on American private direct foreign industrial investments in 1958 amounted to a total for all areas of 5.5 per cent, 2.9. per cent for Latin America, 6.6 per cent for Western Europe, but 12.6 per cent for the Union of South Africa.

Another reason why under present circumstances we can have the greatest confidence in our own economy is that our diminishing reserves result in a decrease in foreign obligations. Since October last year, for example, we reduced our external public debt from R220,000,000 by R32,000,000 to R18,000,000, and this amount we can pay off with the gold production of four months. Even our total national debt of R2,300,000,000 should cause us no concern in the light of our annual gross national production of more than R5,000,000,000. We must remember that in this Budget the gross national production in the past calendar year increased by more than 6½ per cent. After taking into account increased prices, it means that the full national production increased by just over 5 per cent in comparison with 3½ in 1959. The per capita increase of the total national production in 1960 was therefore still 3½ per cent. According to international standards, this increase is very sound indeed, and it took place despite the particularly difficult year we had last year.

To come back to our national debt, Sir, I want to say that it is amongst the lowest in the world. To-day it is slightly higher than 50 per cent of the revenue of the country for one year. In other comparable countries it is usually from 70 per cent to 80 per cent. To this must be added that our taxes are amongst the lowest in the world. In 1958-9 the percentage taxation was 14.6 of our national income. In Australia it was 24.5 per cent in 1957-8, and in the same year in Canada it was 19.3 per cent. In the United Kingdom it was 29.4 per cent and in Holland 23.2 per cent as against the 14.6 per cent in South Africa.

Mr. Speaker, I believe that I have now effectively proved why not only we on this side of the House but the whole of the House, including the Opposition, can justifiably have the fullest confidence in the sound financial position of South Africa. There is, however, one point I wish to deal with and which emerges strongly from this Budget. It is a matter which in my opinion does not only affect us on this side of the House, but one which should enjoy the attention of all hon. members. That is the question of imports, particularly over-importation. In 1957-8 there was over-importation to the large extent of R160,000,000. In the past year there was over-importation to an amount of over R120,000,000. South Africa unfortunately is still in the unenviable position that the ratio of imports to national income is over 30 per cent, and it is one of the highest in the world. I want to concede that in respect of this problem we have made tremendous progress in recent years. If we compare our imports and exports (excluding gold) over the past 20 years, we see what progress has been made. In 1938 the imports amounted to R191,600,000. By 1959 it had risen to R997,400,000. In 1938 our exports were R67,400,000 and by 1959 it had risen to R857,800,000. Therefore we can see that tremendous progress has been made in this respect. But, Sir, I want to state that this import tendency is still the greatest single factor which causes the imbalance in our balance of payments position. In comparison with 1959 our imports last year increased by approximately R133,000,000. We know that this is a matter which continually receives the attention of the hon. the Minister of Economic Affairs as well as the Government. Because even the Prime Minister, in that important statement he issued on 9 December last year, and which to my great surprise the Opposition ignored in the Part Appropriation debate, told us the following—

It is, however, generally realized that import control can serve only as a temporary measure and that it must be supplemented by positive steps and other measures which will result in a permanent improvement in the balance of payments.

And then follow the various positive steps the Government intends to take, but in regard to the content and scope of which I have not yet heard a single word spoken by any member of the Opposition, either of appreciation or criticism. Here we have planning in the true sense of the word. The steps suggested to attain this object is an increase of the purchasing power of the lower income groups, together with an increase in their standard of living and higher wages. That will surely satisfy particularly the Progressive Party. Then there is the systematic expansion of the production potential of public undertakings and Government Departments; the taxation and budgeting policy which will ever be aimed at the development of private capital formation and investment in developments. That is precisely what is being done in this Budget. Then there is the promotion of exports, apart from the expansion of the Union’s trade representation, by sending three special missions abroad, as we know the hon. the Minister of Economic Affairs has done. And, finally, there is the effective protection of our industries. That is the basis on which this whole Budget we have before us rests. But as I said before, the task rests on all of us to assist in combating this import tendency and to make the Minister’s task in that connection as easy as possible.

Mr. Speaker, I want to conclude. In this new period we are entering we need confidence in the first place—confidence in ourselves and confidence in our sound economy. I have adduced sufficient reasons why we can justifiably have the fullest confidence. Of course we have tremendous obligations to fullfil in respect of our defence, border industries, and the development of the Bantu homelands. Of course, Sir, in this new era we will have to cope with many problems. However, we have confidence that we shall be able to do so. But in the light of this Budget, in the light of our sound financial position, everybody in this House ought to join us in saying: We have seen yesterday; we know today; we do not fear to-morrow.


Mr. Speaker, my colleagues and I feel that the limited time allotted to us in this debate should be utilized by us in discussing what we regard as the most crucial matter in the history of our country. I refer to the internal relations presently existing in our multi-racial community. The events of the last few days indicate the absolute necessity of our having to deal seriously and, may I suggest, most urgently with the problem of our internal relations in South Africa. We consider that the importance of this moment in our history cannot be exaggerated and transcends all other considerations of the Budget. It is for that reason that I propose to confine my remarks to-day to that aspect. In deference to the statement made by the hon. the Prime Minister yesterday, wherein he indicated that an opportunity would be afforded to this House to discuss fully the events which led to South Africa’s withdrawal from the Commonwealth and the implications which flow from such withdrawal, I do not intend to deal specifically with that matter this afternoon. Nevertheless, during the course of my remarks, of necessity I will have to make some brief references to the situation that has arisen as a result of the hon. the Prime Minister’s action.

There can be no doubt at all that the Prime Minister’s decision to withdraw South Africa’s application to remain a member of the Commonwealth must have the most far-reaching effects and the most far-reaching implications for our country and for our citizens. It must be obvious to everyone what additional dangers this decision has brought to our external and our internal relations. Let me say immediately that I am inclined to the view that in this grave hour no good purpose can be served by indulging in wild recriminations. We can do far more for our country if we approach the unfortunate position in which South Africa finds itself to-day with calmness and with the seriousness and the dignity that the occasion demands. I repeat that the importance of this moment in our history cannot be exaggerated. It is one of the most vital moments in the history of this country. We must all, surely, be convinced that time is running out on us and that if we wish to save our country for ourselves and for our children we must, as speedily as possible, do everything humanly possible to improve our internal relations in South Africa. And, Mr. Speaker, when I speak of internal relations let me say again that I mean not only the internal relations between White and non-White, but also the internal relations between the two sections of our White population in South Africa. We have to do, I say, as speedily as possible, everything that is humanly possible to restore better relationships between the races in this country.

Let us remember that in this country there exists a very large section of our population which has always attached considerable value and importance to our Commonwealth relationship. I want to say, with the greatest respect, that these people have every justification for that attachment. To this large section of our people—and I am talking of White people as well as a large section of the Coloured people—our Commonwealth association was a matter of great tradition, apart from the benefits and the security which that relationship gave us. This feeling, therefore, on the part of a large section of our people must be appreciated and must be respected. The hon. the Prime Minister’s decision to terminate South Africa’s membership of the Commonwealth has been a shattering blow to them. We must accordingly appreciate their immediate reactions, and we must, in the interests of our country, do everything possible to bridge the widening gap which this latest situation has created between the English-speaking and the Afrikaans-speaking sections of our population.

Sir, I repeat that wild recriminations will only tend to aggravate the serious situation with which we are faced. I make this appeal now to all sides in this hon. House: Let us remember that we are all in this crisis, the Afrikaners as well as the English-speaking sections of our people. Our destinies and our future in South Africa, and the future of our children in this country are inextricably interwoven. If ill fortune besets our country none of us will escape. We will all suffer in the end. Let us therefore, in this desperate hour, forget our political affiliations for a moment and let us prepare ourselves immediately to give serious thought as to how we can ameliorate the strong outside pressure—and I refer particularly to the outside pressure at this stage—which at present threatens our country and which, in the near future, is likely to become more intensified. I say that if we wish to diminish this outside pressure our first duty is to improve, as speedily as possible, our internal relations. It is by improving our internal relations that we can overcome and diminish this outside pressure. Whether we like it or not, in all honesty we have to admit—and it hurts me as a South African to have to say this—we have to admit that South Africa has become the most isolated and the most politically detested country in the world. In a brief period of 13 years South Africa has fallen from occupying an exalted and respected position among the nations of the world to becoming almost a leper amongst the nations of the world.


Do you think that is the whole story? [Interjections.]


Never mind the whole story, we have to face the facts, and the sooner we do that the better it will be for our country.


May I ask the hon. member a question?


No, I have a very limited time now. The hon. member can make his own points in his own speech later.

Mr. Speaker, I say it is an unfortunate situation that has arisen. To-day we are without a friend in the world. [Interjections.] And what has brought about this awful change in the status which South Africa enjoyed some 13 years ago? There is only one answer. The whole of the civilized outside world detests the racial policy which South Africa has pursued during the past 13 years. That is the answer. And particularly, may I say, in the last two or three years the inflexible, rigid attitude adopted by the present Government under the leadership of the present Prime Minister has added to that detestation. The whole of the civilized world has given the answer to the hon. the Prime Minister’s inflexible decision of making no political concessions of any kind whatsoever to the non-White people of this country. That has been the hon. the Prime Minister’s attitude, and I say that that, more than anything else, has brought about the unfortunate position in which South Africa finds itself to-day.

Mr. Speaker, surely no greater proof of this world condemnation is needed than the treatment which South Africa has received at the United Nations a few days ago when not a single other nation voted on our side. Surely by this time we are all convinced—we must all be convinced that a change in our internal relations is absolutely necessary if we are to save the country we all love.

In the brief time at my disposal I wish to deal specifically with the position of the Coloured people, and to show how there has been a great deterioration in our relations with them even over the last year. I want to emphasize how absolutely necessary it is for this Government to do something urgently—and when I say urgently I mean really urgently, immediately, in reappraising the Government’s attitude towards our Coloured people. We on these benches have, times without number, in this House and outside the House, pleaded with the Government for a change of heart towards the Coloured people. I want to say that we have been supported in those appeals on innumerable occasions by outstanding opinion in this country, by men who hold very exalted positions in Afrikanerdom in this country, men who include many intellectual Afrikaners of Nationalist Party affiliation; men whose conscience has been aroused as a result of the unfortunate treatment which has been meted out to our Coloured people. But up to now our appeals and these appeals which came from this important section of Afrikanerdom in this country have fallen on deaf ears. Apart from wishy-washy statements which have been made in this House and in public declarations from time to time of what is being contemplated for the Coloured people, the only real answer that the Coloured people have received has been the firm statement by the hon. the Prime Minister confirming the intention of the Government to adhere to his inflexible apartheid policy. This statement, unfortunately, was in due course backed by the Federal Council of the Nationalist Party. And this has been the only answer so far given to the Coloured people at a time when, I suggest, they had every reason to expect that the appeals for a reappraisal of the Government’s attitude towards them, which were made by these intellectual Afrikaners and many outstanding leaders of the Afrikaner Churches, would have achieved better results. Is it any wonder, therefore, that the patience of the Coloured community has become almost exhausted and that an announcement was made only a week or two ago by Coloured leaders that a serious attempt is now to be launched to organize a national front in consultation with African leaders in opposition to the Government apartheid policy? [Interjections.]

Mr. Speaker, I want to say in all conscience that one cannot blame these Coloured people for this attempt to form a common front against the Government. The present Government has been in power for the past 13 years, and there is no gainsaying the fact most of the impact of the harsh laws that the Government has introduced in giving effect to its apartheid policy, has descended upon the Coloured people of this country. During these 13 years one Act after another passed by this Government has imposed upon the Coloured people extreme hardship and great indignities. I have not the time during the course of this debate to enumerate many of those Acts on the part of this Government which have, throughout these 13 years, hurt the pride and the dignity of our Coloured people …


You can’t.


I quite agree I cannot. It is not necessary for me to recapitulate those Acts. A mere reference to any volume of Hansard during the reign of the present Government will reveal in no uncertain way the indignities which have been inflicted upon our Coloured people. I say that the attitude of this Government towards our Coloured people throughout the whole of their reign … [Interjections.]


Order, order! I appeal to hon. members to give the hon. member an opportunity to make his speech.


Thank you, Mr. Speaker. I say that unfortunately the attitude of the Government towards the Coloured people, throughout the whole of the reign of the present Government, can only be described as one of ill faith and gross insult. It is all very well for Government spokesmen to claim that during the period of the reign of the present Government there has been established a Department of Coloured Affairs which employs Coloured men; that certain avenues of employment have been made available to a section of the Coloured people, and that plans are in contemplation for increasing these avenues of employment. I have not the slightest doubt that during the course of this debate we will hear the same answer by the hon. the Deputy Minister for the Interior and other Government speakers; the same answer that we have had to every appeal that we have made here. But these answers are wholly irrelevant, Mr. Speaker, and they in no way meet the charges of ill faith and gross insult which have been inflicted upon the Coloured people over these many years.

How can the establishment of a Coloured Affairs Department compensate the Coloured people for the grievous harm that has been done to them in the carrying out of the harsh terms of the Group Areas Act? How can the fact that the Government has, through this Coloured Affairs Department, given employment to a small section of Coloured people, be an answer to the justifiable complaints that the Coloured people have made throughout the years with regard to the job reservations determined by the Government? No, I am afraid that this Government has completely overlooked the human side in dealing with our Coloured people. And it is the human aspect to which I want to draw attention. How can anything that the Government has in contemplation for the Coloured people be an answer to the recent declaration made by the Group Areas Board in regard to the Cape Peninsula? I do not know whether the hon. members of this House realize the implications of such a declaration. Cape Town in particular, and the Cape Peninsula in general has always been regarded as the traditional home of the Cape Coloured people. They have helped the White people of this city to build up and develop the Mother city of South Africa. And now the recent decision under the Group Areas Act has the general effect of reserving for White ownership and occupation practically all the land on the mountain side of the Cape Flats railway line. This means that the Coloured families who for generations have lived in Cape Town proper, will be driven from their traditional homes and banished into areas which they describe, and which some European supporters describe as the “ bundu ” on the other side of the suburban line.


Did you, as a former member of the City Council, co-operate in the planning of the Cape Peninsula for the Coloured people?


Yes. I want to say this, Mr. Speaker, that when the City Council had a free hand in this matter they did everything possible to remove slum conditions, to take these unfortunate people out of the slums. And they did not impose upon them this apartheid rule by force of law. I want to ask the hon. the Deputy Minister who has now interrupted, can he imagine any greater hardship being inflicted upon these Coloured people than being removed forcibly from their traditional homes to areas far removed from their work and far removed from the facilities they have been able to enjoy for generations? Is it any wonder, therefore, that certain leaders of the Coloured community now advocate that their people should remain where they are and not allow this indignity to be inflicted upon them? There is, unfortunately, a movement afoot to regiment these people into an attitude of not giving way and not complying. Is it any wonder, in the circumstances that I have described, that our Coloured people have become despondent and hurt as a result of the indignity that was inflicted upon them by the recent referendum for a republic?

In that referendum the Government specifically excluded the section of the South African electorate—not only a section of the community, but a section of the people who are on the Voters’ Roll in South Africa—the Government specifically excluded them from participating in the referendum and having a say, however small, in the destiny of their own country. In accordance with the inflexible policy of apartheid as enunciated by the Prime Minister, the Coloured people were told that in any decision on the republic it was only the White people of South Africa who would have a say, and accordingly the Coloured people were placed in the same category as the Africans and the Asians in being denied the fundamental right of having any say in the future destiny of their own homeland. This unfortunate decision on the part of the Government was interpreted, and perhaps rightly, by the Coloured leaders as a directive by the Government to the Coloureds that their place was with the Africans. What other interpretation could reasonably be placed on the Government’s decision? The registered Coloured voters who were on the legal Voters’ Roll of this country were specifically excluded from registering their votes in the referendum. They were placed in the same category as the Africans, and this despite the fact that the conscience of intellectual Afrikanerdom had been aroused and appeals were made to the Government for a reappraisal of the Government’s attitude towards the Coloured people. That was the answer that the Coloured people received to those appeals. In all the circumstances, therefore, can the Coloured leaders be blamed for now deciding to explore the possibility of their linking with the Africans in the formation of a common front against apartheid? Have we not strained their patience to the uttermost? Has not the Government, by its conduct towards these Coloured people, virtually driven them to such a step?


Those leaders do not represent the Coloured people and you know it.


I hope you are right, but I take a very dim view of the situation. I take a very grave view of the situation. And if the hon. the Deputy Minister will allow me to proceed I hope to try and prevail upon him and the members of the Cabinet to take a similar view.

Mr. Speaker, I say that the Government has virtually driven these people, out of sheer frustration, to adopt this unfortunate attitude. What reward have the Coloured people received for their loyalty and their steadfastness during last year’s disturbance when they ignored the appeals made to them to join the Africans in open revolt against the Government. We remember how one speaker after the other in this House, including many members of the Cabinet …


What reward did you get?


Fortunately I was not called upon by the Africans to go over to their side. One speaker after the other on the Government side in those perilous days paid tribute to the exemplary conduct of these law-abiding Coloureds. Those tributes were well deserved because we knew, and the Government knew, that by reason of the harsh discriminatory laws the Government had applied to these people we had no right to expect their loyalty, but notwithstanding that, their leaders came forward and rejected the appeals made to them by the Africans to join with them in open revolt against the Government. Their leaders came forward and appealed to the working-classes amongst the Coloured people to remain calm and not to participate in the revolt. [Interjections.]


If any hon. member makes an interjection again, I shall ask him to leave the Chamber.


We would have hoped that because of the exemplary conduct of these people in these perilous days there would have been a change of heart on the part of the Government towards them. It now appears quite obvious that because of the continued infliction of the Government’s apartheid policy the Coloured people are not prepared, and indeed are unable, to endure any longer the indignities which are constantly being inflicted on them. As we have seen in the Press, and as we have heard from Coloured leaders, they have now decided to explore together with the African leaders the formation of a common front against this Nationalist apartheid. I say it is a thousand pities that this situation should have been allowed to develop, and I say that the Government alone is responsible for this unfortunate position. I say that the Government is dissipating the chance of bringing them over for all time, the Coloured people, to the side of the White people in this country. I am afraid that the Coloured people have now reached the crossroads and that there really is a grave danger of their throwing in their lot with the Africans. I use the words “ grave danger ” advisedly, because we who are in contact with the Coloured people realize the dangers that lie ahead if they give effect to their determination to seek help from the Africans. The Government should not disregard the gravity of the situation. It is all very well for the hon. the Deputy Minister to tell the House that these so-called Coloured leaders who are adumbrating this new approach to the Africans have no following. I hope he is right, but I am afraid they have a certain following, and unless the Government does something at this stage to show a change of heart towards the Coloureds, I am afraid that there is every possibility of the Coloured people going much further in linking up with the Africans. I say that the Government should not treat the situation lightly. At the same time I want to say this, and I hope that this will be brought to the notice of the Coloured leaders, that they likewise should not take the gravity of the situation lightly, and I appeal to them not to act hastily. I still feel that the destiny of the Coloureds lies with the Whites in this country. Theirs is the Western way of life, like ours, and they really have no alliance at all with the Africans. For the White people, and for the Government particularly, a decision whereby a substantial number of the Coloureds enter the ranks of the Africans in a political alliance must be viewed with the greatest apprehension, particularly at present. But to my mind there is the same danger for the Coloureds in any such decision. I agree that whilst amongst the intellectuals there may be some political affinity between the Coloureds and the Africans, amongst the rank and file there is no affinity whatever between the Coloureds and the Africans. The Africans, I am sure, deep down have as little love for the Coloureds as for Whites. Indeed, I am not so sure that they do not have greater respect for the Whites than for the Coloureds. Likewise, the Coloureds have no real affinity for the Africans. I am sure that the Coloureds would much rather ally themselves with the Whites. The real danger in the matter lies in people making decisions at a time when they are driven to it by sheer frustration. That is the real danger I want to bring home to the Government, that out of sheer frustration the Coloureds may make a decision to link up with the Africans, which they will regret and we will regret. This is the unfortunate position to which the Coloureds have been driven by the discriminatory laws imposed on them.

I want to appeal to and warn the Government not to treat the proposed formation of this common front lightly, but at the same time I want to warn the so-called Coloured leaders against making a decision which may do irrevocable harm to the Coloureds and which may alienate them from the Whites for all time. Even at this eleventh hour I feel that the Government could do something to avert the dangerous situation which is developing, if only the Government would forget its rigid apartheid policy and genuinely try to eliminate the sources of the frustration and grievances of the Coloureds. If they do that, I feel that the Coloureds will still be a faithful ally to the White people, and we need allies. The decision rests with the Government. There is nothing that we on this side of the House can do to ameliorate the unfortunate trend in the attitude of the Coloureds. We have done our best to persuade the Government to relax its relentless drive against our Coloured citizens. I want to warn the Government that if it pursues this policy of discrimination against the Coloureds, it alone will be responsible for bringing about a militant non-White unity which will not only spell disaster for the Government but for the whole of the country. Surely it must be obvious to the Government that any genuine step taken by it even at this late stage to introduce a genuine reappraisal of its attitude towards the Coloureds must help us tremendously against the outside pressure which at present threatens the country. Surely it must be obvious that we cannot any longer continue the racial discrimination against the Coloureds. Surely it is the bounden duty of the Government in this critical period to take positive steps to avert the grave dangers which threaten South Africa if we continue with our discriminatory laws against our Coloured people. I repeat what I have said so often in this House. Here is a heaven-sent opportunity for the Government to do something immediately to indicate to the outside world a change of heart towards the Coloureds, whom I am certain still wish to ally themselves with the Whites. If in the face of the dangers which threaten our country, the Government is not prepared to do something on the lines I have indicated, they are losing what perhaps may be their last opportunity of saving South Africa for ourselves and our children. I was struck very forcibly by a leading article written a few days ago in the Burger in which the writer, after pointing out the dangers brought about by our internal and external relations, made an eloquent appeal to all South Africans of all races and all political beliefs to approach the situation with dignity and with the Statecraft it requires, and he concluded by saying—

Let us prepare ourselves for the coming test by strengthening ourselves, inwardly, in the first place by examining and improving our internal relations as fast as possible.

I appeal to the Government to heed this request. I appeal to the hon. the Prime Minister, who is not here now, and to the Government, to give absolute priority to examining and improving our internal relations as fast as possible. Heaven knows whether we still have time left, but I am convinced that a serious step taken by the Government now to indicate a real change of attitude towards the Coloureds must bring tremendous relief to the country. Sir, I appeal to the Government to give this appeal its earnest consideration immediately.

*Mr. HAAK:

Mr. Speaker, the hon. member for Peninsula (Mr. Bloomberg) has referred to the Coloureds and the proposed co-operation between them and the Bantu. He expressed certain misgivings about it, but earlier in his speech he virtually sought to justify it and to blame this Government for the fact that such co-operation may take place. [Interjections.]


On a point of order, Sir, you have issued a warning that if any member interjects, you will ask him to leave the Chamber, and the hon. member for Outeniqua (Mr. Holland) has just made an interjection.


I asked a question. I was not in the House when you gave your warning, Sir.


I shall give the hon. member another chance. The hon. member for Bellville may proceed.

*Mr. HAAK:

The hon. member for Peninsula referred to the resolution passed at UNO and to what has now happened at the Prime Ministers’ Conference. He pointed out that this resolution was passed unanimously against South Africa and suggested that we should change our policy. The hon. member for Houghton (Mrs. Suzman) said that all the money that we were spending to promote the establishment of industries in the border areas would be spent much more fruitfully if we had one non-White here in this House. Let me tell the hon. member that those countries which are attacking South Africa would never be satisfied with one non-White member in this House.




On a point of order, the hon. member for Houghton has again made an interjection, in spite of your warning, and I cannot see how two yardsticks can be used.


Order! I order the hon. member for Houghton to withdraw from the Chamber for the remainder of the day’s sitting.

Whereupon Mrs. Suzman withdrew from the Chamber.


Off you go!


Order! Who said that?




I order the hon. member to withdraw from the Chamber for the remainder of the day’s sitting.

Whereupon the Deputy Minister of Bantu Administration and Development withdrew from the Chamber.

*Mr. HAAK:

I was saying that the other countries will never be satisfied with one non-White representative. They want “one man, one vote ” and that is the only thing that will satisfy them. If we want to satisfy those countries, then we must accept the consequences of such a policy. The hon. member for Peninsula also referred to the establishment of the republic. He adopted a much more moderate attitude than the hon. member for Constantia (Mr. Waterson). We know the hon. member for Constantia as a person who likes to predict a particularly sombre future for us. You will recall that in 1954 he prophesied that South Africa would have to go on a diet of locusts and castor oil. That prophecy proved untrue. To-day South Africa is almost twice as strong as she was then. On this occasion, now that we are becoming a republic and leaving the Commonwealth, he has again predicted a very dark future for us in spite of the fact that businessmen, industrialists and others have adopted a much more moderate and wait-and-see attitude. While the hon. member was speaking this afternoon, this is what happened on the Johannesburg Stock Exchange. I quote from this evening’s Argus

Rand Stock Exchange recovers. Confidence flows back.

That is the reaction of the Stock Exchange, but the hon. member predicts a very sombre future. Even in the Sunday Times there appeared an article in which we read the following —

In essence, the encouraging feature is that there has been no panic selling from abroad; it was the Rand which had panicked early on Thursday.

It was on the Rand that there were the first signs of panic. There was no panic on the foreign exchanges. As far as the exchange in Paris is concerned, we read that there were no sales at all. It is clear therefore that this feeling of mistrust expressed by the hon. member for Constantia because of recent events is not shared on the Stock Exchange.

But we are in this position to-day, now that our hon. Prime Minister has decided to withdraw our application for continued membership of the Commonwealth—and the Prime Minister of Australia has agreed that that was the only thing that he could do—that whether we agree with that decision or not, we must accept that fact and make the best of it. But we find that there is a tendency to represent this decision as something terrible that will lead to economic disaster. But even in the Economist of October last year we read the following—

Ousting South Africa from the Commonwealth would not mean the end of trade; and it is worth pointing out that British investment in the Union is valued at £900,000,000 and that the big banks and companies like Union-Castle are interests not likely to be jeopardized. The Nationalists are already arguing that trade need not follow the flag out of the door. Existing agreements do not contain clauses saying that they will be dissolved in the event of a break with the Commonwealth, and, in any case, deals between White men can always be renewed.

Even the Economist says that this will not mean that our trade will suffer. We know that Canada is one of the countries which objected to our continued membership unless certain conditions were attached to it, but nevertheless when Mr. Diefenbaker arrived in Ottawa he stated immediately that Canada was in favour of the continued existence of imperial preferences between these two countries on the present basis, and the article says that this statement was loudly acclaimed by members by thumping on their benches. There we have one country which has imperial preference arrangements with South Africa. I can well understand that they are anxious to retain those arrangements, because we are importing goods to the value of about £17,000,000 from them and we are exporting goods to the value of about £3,000,000 to them. A cancellation of imperial preferences may affect them adversely, and the same applies to Britain. There it was stated in reply to a question that in all probability imperial preferences would be retained. I do not want to go into that now but I believe that just as this right was given to Ireland so it will be given to South Africa, because Britain is anxious to retain this trade. We know that we are not the only country whose reserves have dropped. Britain too has an ever-growing unfavourable trade balance at the moment. I read in the Statist of October that Britain’s share in world trade has again dropped by a further margin—

In this situation British exports are particularly affected, with Britain’s share in world exports of manufactures falling faster than usual. After the steady fall from 25.5 per cent in 1950 to 19.6 per cent in 1955 and 17.3 per cent in 1959, the U.K.’s share dropped to 17 per cent in the first quarter of I960 and to 16.6 per cent in the second.

Here it will be seen therefore that Britain’s share in world trade is steadily falling, and it is causing the greatest degree of concern. Only last year the British Prime Minister addressed 400 of Britain’s prominent industrialists and urged them to try to increase their exports. They are perturbed. They need our trade, and the reason is perfectly clear. The British attitude with regard to trade relations with South Africa, which is one of her best markets, was clearly stated in the Bulletin for Industry issued two years ago. This is what it stated with reference to trade with South Africa, and this is the official policy as confirmed by the British Treasury—

The maintenance of a high and rising level of exports to South Africa is of particular importance to us, because under the special arrangements for the sale of the Union’s large gold output, the amount of South African gold acquired by the U.K.’s reserves is reduced by every increase in the Union’s trade with the dollar area and the continental members of the European Payments Union.

That is their attitude. They are very anxious to have our gold, and that is why the reaction was so favourable when our Prime Minister announced that South Africa was remaining a member of the sterling bloc. Of all the countries of the sterling bloc South Africa is in this fortunate position that to South Africa the sterling bloc, relatively speaking, is of less value than to all the other members of the sterling group, because we have never participated in the dollar pool. Since 1954 our imports from the dollar countries have been abolished and we are therefore in a very strong position. It caused a favourable reaction on the London Stock Exchange when it was announced that South Africa would still remain a member of the sterling bloc. I think that this economic relationship will continue to exist, but I feel that we must not exaggerate its importance. We are aware of the fact that in any case it is a dwindling asset. We know that Australia abandoned it in 1957 and replaced it with a reciprocal agreement, and a year later New Zealand did the same thing. But talking about imperial preferences, to which reference will perhaps be made a great deal in the days which lie ahead of us, I want to quote from the publication, “ Britain, the Commonwealth and European Free Trade ”, compiled by the Economist Intelligence Unit, which says the following—

The system of preferences is highly erratic in its operation and its importance, save for a few U.K. exports and imports, is frequently over-rated. There does not appear to be any direct connection between the giving of preferences and the U.K. share of Commonwealth markets, and vice versa. The system was certainly highly effective during the ’thirties when world trade was declining— tariff preferences tend to have a greater effect in times of trade contraction, less when it is expanding—but as the shape of Commonwealth economies began to change and they ceased to be complementary to the U.K., the importance of imperial preference dwindled. It may well be that, with a few major exceptions such as butter among imports, its most important contribution to the development of U.K.-Commonwealth trade was to establish and protect certain trade flows and that, once established, trade would continue to follow the same pattern even if preferences were to disappear altogether.

Here the attitude is adopted therefore that if it should disappear the pattern of trade will remain unchanged. We also know that a change is taking place in Britain and that Britain is participating with the Outer Seven in the Common Market. They want to try to establish an entity, and imperial preferences represent an obstacle. There is an ever-growing opinion, therefore, even in political circles, that such an entity should be formed in the economic sphere, and since there is that feeling it means that we cannot be so sure that imperial preferences, as we know it to-day, will continue to exist very long.

But when we look at the Budget, it is clear that it is a very realistic Budget. It was framed on the basis of the world position as it is today. It is clear that there are signs of retrogression and recession. I refer to the U.S.A. Last year there was a great outflow of gold. Unemployment rose to 4,500,000, which is 7.5 per cent of the working population, and it is anticipated that the unemployment figure is going to rise even further. When we look at the industrial production of the U.S.A., that tendency becomes even more apparent. Her whole industrial production has fallen within a year from an index of 167 to 151, which represents a very great drop. Her profits, generally speaking, are 4 per cent lower than they were last year. It is clear therefore that there is a recession in America at the present time. It may be checked soon, and we hope so, but we also know that a recession abroad affects South Africa, and we must remember that it may affect our exports. With the restrictions which have now been imposed to check the outflow of gold, there has been a curtailment of certain imports which may affect South Africa. When we look at Britain, with whom we conduct one-third of our trade, we find that there is also retrogression there. Her balance of payments has dropped by £100,000,000 in comparison with the previous year. We know that there are many industries, particularly the motor industry, where there is large-scale unemployment or where they are only working part-time, and from a survey that has been made it appears that fully 5 per cent of the industrialists are anticipating a drop in production.

But that is not the position in those countries only. Australia is also experiencing difficulties. Her balance of payments has dropped. Her reserves to-day stand at £6,000,000 less than the figure during the crisis of 1955. Canada too is in a very weak economic position. Her unemployment figure is about 10 per cent. Her national income has fallen by 1 per cent a year. There is retrogression there and in many sectors of her economy Canada is back to-day where she was in 1956. It is true that in Europe there is not so much evidence of retrogression at the moment. Fortunately the old saying that when the U.S.A. sneezes, the rest of Europe catches a cold, is no longer true to the same extent to-day, but we must bear that in mind and also the fact that our exports may be adversely affected. If the depression continues, South Africa’s exports will be reduced. We must also bear in mind the fact that the prices of certain products are lower. Already our wool export is down by R15,000,000 in comparison with last year, and as a result of the changes in the contract our uranium exports are spread out over a longer period. It would have been extremely unrealistic therefore to introduce a Budget here which does not have regard to trade conditions in the world, and I feel that the hon. the Minister did bear those circumstances in mind when he introduced this Budget. He acted conservatively and played for safety. When we look at past years, we find that in spite of the prophecies that there would be a standstill and that our economy would stagnate, there are signs of progress. It is true that our reserves have dropped and that there has been an outflow of capital, but those factors are not the only signs of prosperity or otherwise. When we look at our imports and exports we find that there has been a great increase. Our imports have increased from £488,000,000 to £550,000,000. Our exports have also increased by approximately £9,000,000, but when we look at these results, it is clear that South Africa has imported goods on too large a scale. Our adverse balance of trade was £118,000,000. South Africa is importing far too much, as the hon. member for Mayfair (Dr. H. G. Luttig) has correctly said, and that is why this step taken by the Minister of Finance to increase import duties on certain non-essential goods is welcomed so much. It may result in reduced imports, but at the same time it may also have a stimulating effect on some of our industries in that some of these goods may be produced in South Africa. When we look at the latest import and export figures for the past two months, we find, according to this evening’s Argus, that a very good start has been made this year. The Argus says—

Good beginning to the year: R54,000,000 surplus.

We notice, therefore, that, as far as our imports and our exports are concerned, there has been a surplus of R54,000,000 during these two months, which represents an improvement on the position as it was last year. But, apart from this improvement in our trading position, we find, when we look at our commercial activities, according to banking returns, that, whereas the average for 1959 was 1,513, it was 1,648 in December last year, an increase of 135 points. In other words, as far as our commercial activities are concerned, there was an improvement last year. Moreover, this surplus of R38,000,000 proves the viability of our economy. It is also proved by the big Railway surplus. But, apart from that, according to the latest return, it appears that there has been a considerable improvement in our net national income. During the previous year there was an increase of 2.3 per cent; during the past year there has been an increase of 8.6 per cent, which is a great improvement on the position during the previous year. We are often told that in the industrial sphere we have come to a standstill, that there has been stagnation in the past four years. The hon. member for Jeppes (Dr. Cronje) is so fond of making that statement. The latest census figures for our manufacturing industry are now available, and I notice that in the year 1958-9 the number of our undertakings increased by 900 to more than 13,000. I notice that the cost of material used rose by £23,000,000; that the gross value of our production increased by £45,000,000 and reached the figure of nearly £1,500,000,000. The net yield of our industries also increased. Our production has continued to increase therefore. But that increase is indicated not only by these production figures. We also find that the number of employees increased during the same period by 11,000. But, apart from that, we find a very great increase in salaries and wages. Salaries and wages increased during that same period by more than £11,500,000. We find that the average income of the industrial worker in this country increased from £356 to £365. This naturally raised his standard of living. I notice that the latest figures which are now available indicate that during 1960, from January to December, there was an increase of more than R2,000,000 in wages. There we have an indication that the position of the worker in industry in this country has improved. The number of workers did not increase to any great extent during this period. But, apart from that, we find that, in the past year, there has also been an improvement in turnover in our trade. Our turnover in the past year has increased by 11 per cent, and the net profits, expressed as a percentage of our trade income, has increased by 4.3 per cent. There has also been an improvement in trade therefore. As far as companies are concerned, we also find that their profits have increased. According to the Financial Mail of January of this year, there has been the following increase in the income of companies in comparison with the previous year—

The table shows again a 13.1 per cent increase in profits before tax and of 15.3 per cent in net profits after tax in the last year.

This is a great improvement on the position of the previous year. In spite of the accusation, therefore, that there has been stagnation and retrogression, we find that not only has there been progress with regard to production and that there has been an improvement in practically every sphere in comparison with the previous year, but that our national income has also increased. No wonder that, in spite of the setbacks that we experienced last year— and nobody can deny that there were setbacks —the Statist had to admit—

Although South Africa has good reason to regret the financial consequences of this year’s unhappy turn in her racial problems, her economy must be said to have withstood this severe new test remarkably well.

In the circumstances, therefore, South Africa has emerged from it very well. When we compare our position with that of other countries in Africa, and even with countries of the Western world, we find that the wages paid to our workers in South Africa are much higher than the wages paid to workers in any other part of Africa, and when we compare the wages of the White workers, we find that we are fourth on the world list. We are much higher on the list than even Western countries where there is great economic progress and prosperity.

Our expenditure on defence has been attacked in the course of this debate. The hon. member for Mayfair has referred to it, but I want to point out that this expenditure on defence only represents 10 per cent of our revenue account. Ten per cent of the estimated revenue is being used for defence. When we compare our position with that of other countries, we find that Australia spends 6.7 per cent, Canada 26 per cent and Britain 25 per cent of their revenue on defence. The amount we are spending on defence therefore is not out of proportion at all. We must keep pace with the improvements which have been made in arms and with the new military technique. This Budget, in which provision is made for increased expenditure on defence, shows that we are still far behind other countries. I also have comparative figures here indicating the expenditure on defence in comparison with the total purchasing power of the countries concerned. We find that the United States spends 9.7 per cent of her total purchasing power on defence and Britain 7.2 per cent. As against that, South Africa only spends 1.7 per cent. Spain spends more and Canada spends 5.1 per cent. It cannot be said, therefore, that our expenditure on defence cannot be justified. When we compare our expenditure with that of other countries, we find that we are spending very little. The inference cannot be drawn from this expenditure on defence, therefore, that South Africa is spending this money because she is afraid of internal trouble.

I want to conclude by saying that our taxation not only on companies but also on individuals is much lower than the taxation in other countries in the world. According to a return that was recently completed by the First City National Bank, our maximum taxation on undistributed profits is only 25 per cent, while in most comparable countries in the West and in the United States it goes as high as 52 per cent. The same applies to taxation on dividends. On this list of approximately 12 countries South Africa is second last; it is only Italy which is lower on the list than South Africa. The same applies to the maximum taxation on individuals. But here we have a very important tax concession that was made by the hon. the Minister of Finance and that is that no foreign dividend tax will be levied on that portion of a company’s profits which is held back in South Africa. This is an important concession, particularly to the American investor in South Africa, because, according to the income tax of the United States, they only pay taxation on that portion of the profits of their foreign companies when the money is brought back to the United States. There is now a proposal in the United States that those companies should pay taxation on their full profits. This is a concession which is going to help foreign companies operating in South Africa. We are faced with this position to-day that many countries of the world are competing to attract industries to their areas. It is not only South Africa which is anxious to have industries near the reserves because the labour resources are available there. There are few countries in the world which do not try to attract industries by way of tax concessions, and in taking steps to attract industries to certain areas where we have ample labour resources, it is not only a praiseworthy effort but it is a step in the right direction. This policy has been criticized in certain quarters, but we are convinced that not only can it be justified, but that it is in the interests of South Africa that it should be implemented as quickly as possible. Not only do we stand for the decentralization of industries in South Africa, but we are convinced that the steps which are being taken here will also encourage foreign industrialists to establish their industries in South Africa.

Mr. Speaker, when one looks at this Budget as a whole, it becomes clear that it is a realistic Budget. When I look at statements made by industrialists such as Mr. Lulofs, then I come to the conclusion that this is a Budget which is welcomed and that it will have a stimulating effect on our industries. Viewed against this background, therefore, we are convinced that in the circumstances this Budget is not only a good Budget, but the best that could be introduced with an eye to the future welfare of South Africa.


The hon. member who has just sat down took some comfort from the Stock Exchange reports to the effect that there has been no panic selling of Union stocks overseas in recent days. I think the hon. member should realize that most securities are at a pretty low figure already and they do not very easily slump still further. It is quite obvious, from the reports that he quoted that there is nervousness on the Stock Exchange, and that nervousness is likely to continue for the worst has not yet come; the republic is still to be established, and the Union is still a member of the Commonwealth. The hon. member also relied on trade agreements being made or renewed in future after South Africa has ceased to be a member of the Commonwealth. The hon. member for Constantia (Mr. Waterson) has already indicated how adverse to the Union the renewal of the trade agreement was with the Federation of Nyasaland and Rhodesia. History, unfortunately, has an awkward way of repeating itself and it may very well repeat itself in that direction as well. I leave the hon. member there. It was significant, however, that in all the quotations that he gave the House he only quoted one report which gave a favourable impression in regard to the Budget.

Speaking in support of the amendment moved by the hon. member for Constantia, let me first say this. Budgetary forecasting with accuracy has never been this hon. Minister’s strong point, as another huge surplus on Revenue Account of R34,000,000 again reveals. The actual surplus, however, is likely to be much nearer the order of R40,000,000. But now the hon. the Minister has also shown that historical forecasting with accuracy is not his strong point either. It is quite true that on Wednesday, 15 March 1961 when the hon. the Minister introduced his Budget, he did so on an historical occasion for South Africa, but in doing so he missed the point in two important respects. Firstly, he misjudged the needs of the times and he produced a hotchpotch, disappointing and quite unimaginative Budget that did not fit into any big occasion, either political or economic; and, secondly, while posing as the super bio-economical prognosticator as to South Africa’s future, he missed the soothsayer’s fateful warning: “Beware of the Ides of March.” For, Sir, before the 15th day of March 1961 had ended— before the Ides of March had passed—history was to record the grim and sombre fact that South Africa was to forfeit her Commonwealth membership. Moreover, as other hon. members have already indicated, to drive the fateful position still further home that South Africa stands alone in a critical and friendless world, the United Nations Organization on the very next day condemned South Africa’s stewardship of South West Africa by 74 votes to nil. That is a dreadful score, with only worse to follow. South Africa stands alone, and let us not forget that we are terribly vulnerable in our loneliness. At this tragic moment in the life of South Africa there is a need above all for clear thinking. In saying that I do not omit wise planning in the scheme of things as well. But to couple in one breath, as the hon. the Minister does, the foreign investor with the communist agitator, when he said “ the foreign investor as well as the communist agitator must rest assured that more than ever before we are now prepared to deal with unrests and disturbances and day by day we are becoming better prepared still”, is far-reaching, Sir. That statement fills one with foreboding as to the Government’s planning and as to the use of power. I say to the hon. the Minister deal with the communist agitator as you will; deal with him harshly if you will, if that is the appropriate remedy. But I say with equal force that it is idle to contemplate, as the Minister apparently does, that the foreign investor will be inspired with confidence by such a declaration of military strength or show of power. The foreign investor knows full well, even if the Minister does not, that force and the use of force is not the key to future economic and political stability in this country. Sir, to repress civil unrest or racial disturbances by force is no doubt the easiest way of dealing with the problem, but in the long run, of course, it is the most costly way. Repression by force has no lasting effect and it provides no remedy for the root cause of legitimate unrest. I say that the discriminate and lawful use of military power and force of arms is one thing; their indiscriminate use in the hands of inexperienced youths and frightened men is another thing. In that regard history records yet another fateful warning: “ Beware you use not the strength of civilization without its mercy.” I hope the hon. the Minister will heed that warning when, to quote his words again, “ day by day we are becoming still better prepared to deal with unrests and disturbances ”. Sir, the hon. the Prime Minister may stick with granite determination to his party’s racial ideologies—and it would seemingly take an earthquake or an economic collapse to unstick him—but the foreign investor is a knowing person, he is concerned with safe and profitable investments, not with military technique as a counter to economic stagnation or economic disruption.

That brings me to the economically tight corner in which the country finds itself at present, with prospects, unfortunately of the situation becoming tighter still as the political and economic consequences of South Africa’s forfeiture of its Commonwealth membership runs its course. We all know that the inherent strength of South Africa’s economy is quite remarkable. It is quite remarkable even in the hands of this Government, but there is a limit to the shocks and set-backs that it can bear. I say that the shock of being outside the Commonwealth might well result in South Africa becoming politically and economically “ the sick man of Africa ”, instead of being as it could have been, its financial leader, its technical consultant, its workshop and its supplier of capital and consumer goods. What we will attain in the process is, of course, that we will lose the African market entirely. I do not propose to dwell on the heavy outflow of private capital funds that commenced early in 1960—shortly after the Sharpeville incident— except to say two things. The first is that last year’s outflow of some R162,000,000 capital is by far the biggest on record in the country; and secondly, that further flight of private capital can be expected in the current year. I think that possibility must be taken into account when the Minister tries to satisfy this House as to how he is going to raise his loan moneys for the coming year. Sir, when two years ago I referred to the country’s balance of payments difficulties as “ the sore thumb of the economy ”, I was likened by the Ministers opposite to a prophet of doom, but now the hon. the Minister himself expresses the problem in these terms, “ the outflow of capital constitutes the most important economic symptom requiring attention ”. Let us see what actually has happened in that regard. After more than a decade of business welfare that followed upon the injection of capital into the economy for the development of the new goldfields, the country is now badly in need of some further economic stimulus. Many businessmen and industrialists in the Union are understandably in a mood of disenchantment and frustration and they are legitimately looking to the Government for a cure of the country’s apparent economic illness. But in that regard the danger is that the Government is again misreading the signs, and that the stimulus to economic revival which it has in mind may well be self-defeating in the long run.

Sir, the hon. member for Mayfair is not here; he would have been pleased to know that I am referring to the Government’s proposal to meet the current situation. The Government’s proposal falls into two parts. Firstly, the Government hopes to stimulate our export trade by sending three top-level missions abroad. I do not want to belittle their efforts, but it is trade not talk, that we are wanting. To the outsider, moreover, it may well seem, in the present political climate, that just as “King Kong” has gone to London, so the three other live shows go east, west and north to put South Africa economically on the map again. In that regard, I do not want to be facetious but my own impression is that “ King Kong ” will show the best results. Secondly, the Government is trying to create an economic boom by injecting some R600,000,000 capital funds into certain State enterprises over a period of years. The information available to me is that it is proposed to inject some R540,000,000 to R560,000,000 into Iscor over 12 years; to inject R60,000,000 into Sasol over seven years, and R24,00,000 into the South African Broadcasting Corporation over five years. Theoretically that is an excellent scheme and everyone would want to see it succeed, provided, of course, it is also economically and fiscally sound. I do not want to jump to conclusions about the success or otherwise of that scheme, but I do think it is prudent to draw certain distinctions between the present scheme and the economic boom that followed upon the injection of a substantial amount of capital funds into the development and exploitation of the new goldfields from 1946 onwards. In the first place, the capital outlay on the goldfields was economically inspired. The guiding force behind that project was confidence in the foresight of free private enterprise and profit being the motive force of the project, capital investment was subject to normal business and banking checks and safeguards. That was what gave the public security and guided them in investing their money. Secondly, of course, that money came from private and corporate savings, and in the main it came from the external market. The present scheme, to the contrary, is really politically inspired. The motive force behind the venture will be the determination of the Government to bolster up an eroding national economy. That being the motive force, it will not be a question of meeting some foreseeable economic demand. The money has to come from public funds, in the main, either as contribution from the Loan Account or in the form of banking credit against State guarantees. In other words, all this money that has to be injected into these State enterprises will be Government-sponsored. Theoretically, as I have said, it is an excellent scheme, but I come to this vital question: Where is the money to come from for the expansion of these State enterprises which the Government has in mind? The Minister chose, very conveniently, to be silent about these capital projects in his Budget statement, and no wonder because, in the coming year 1961-2, he has on hand a heavy repayment programme to meet maturing loans. The sums repayable on Loan Account in 1961-2 amount to R177,500,000, which is a re-financing plan on an unprecedented scale in this country. Sir, in passing, I would like to indicate as well that the redemption of loans over the next four years, i.e. 1962-3, 1963-4, 1964-5 and 1965-6, is going to be a very heavy one as well.

Business suspended at 6.30 p.m. and resumed at 8.5 p.m.

Evening Sitting


Before calling upon the hon. member for Johannesburg (North) (Mr. Plewman), I just want to say that I am now withdrawing the prohibition on interjections, but I ask hon. members to be reasonable and to give the hon. member an opportunity to make his speech.


When the debate was interrupted by the suspension of business, I had indicated that the hon. the Minister had on hand a refinancing programme of unprecedented scale for this country in the redemption of loans which are maturing during the coming year, 1961-2. I had also indicated that during the following four years there is a very heavy refinancing programme as well. It is difficult, of course, to give exact figures as the national debt is continually growing and short-term loans are constantly being built up. But the figure for the coming four years is likely to be of the order of R600,000,000, which gives an average refinancing commitment of something like R125,000,000 per annum. Now, for the coming year 1961-2, the hon. Minister must find some R400,000,000-odd on Loan Account. In addition the Land Bank and the Industrial Development Corporation are known to be knocking at the door of the local money market for R6,000,000 for the Industrial Development Corporation and R10,000,000 for the Land Bank. Feelers have twice been put out to test the money market in respect of these two gilt-edged issues, and on each occasion the issue has been delayed because the prospects of getting the money were unfavourable. Feelers are also out in the market at present in regard to a new Escom loan, which is also a gilt-edged issue. Indications are that Escom will go to the market at the beginning of the new financial year, in April, for R16,000,000. The Financial Mail of 17 March says this—

Escom’s ideas are not at the moment what the market would have preferred …

That refers to the interest offered and the terms offered, but it goes on to say—

It is quite possible it might get away with an issue on the suggested terms.

These are strange terms to use if money were available and if the Union were not in the economically tight corner to which I previously referred. It is significant that it should be said: “ It is quite possible that it might get away with it.” It goes on to say—

If it does, it will be by the skin of its teeth and thanks to the goodwill that investors bear it.

So, Mr. Speaker, the position then is that there is a heavy commitment of something like R440,000,000 before the year has even commenced. The hon. the Minister is faced with the problem of raising R50,000,000 for redemption outside South Africa and something like R128,000,000 for repayment of internal loans. Moreover to finance the loan programme for 1961-2 he is obliged to raise R250,000,000 in new money. By overtaxation in the current year and by investing trust money in the form of pension funds and other such moneys in the hands of the Government, he is assured of raising something of the order of R150,000,000 internally, and he tells the House that he hopes to raise some R55,000,000 externally. But his real problem of course is going to be to raise the crucial R40,000,000 internally which he is going to be short of at present. He proposes to do that in two ways. He proposes getting from a new issue of Treasury bonds some money and the rest by the issue of Treasury bills. But the indications are of course that there is a shortage of money, and in that regard I would point out firstly that domestic capital formation has been falling off heavily since 1958. I have available the figures in respect of only two years, but it fell from R1,130,000,000 in 1958 to R986,000,000 in 1959 and the fall will probably be substantially the same in respect of the year 1960. Secondly to repeat what the hon. the Minister said—

The outflow of capital constitutes the most important economic symptom requiring attention.

That is again indicative of what I have said, namely that the flight of capital in the coming year is likely to be quite an embarrassment. Lastly, it is also likely to cost the country in dearer interest rates quite a substantial amount, either to raise what the hon. the Minister intends to raise as well as to raise R128,000,000 for the redemption of internal loans. It is true that the hon. the Minister is relying on raising R25,000,000 in short-term money by the issue of Treasury bills, and the hon. Minister justifies that by saying that he expects that the short-term debt will decrease by some R60,000,000. Now the hon. the Minister obviously has information which is not available to me, but the latest Bulletin of Statistics for February 1961 does not reflect any appreciable reduction in our short-term debt. It reflects in fact that at the end of November 1960 the short-term debt stood at the financially dangerous level of over R300,000,000. But what is significant about the hon. Minister’s decision to rely on short-term borrowing to the extent which he has stated, is that the policy of borrowing short in order to spend long has now become accepted budgetary practice, and of course it is a dangerous practice.




Has the hon. member never had an overdraft at the bank?


That is not a parallel.


It is. If the hon. member says it is not, let him advance his arguments in due course. I say it is a dangerous practice. You see, Sir, already the average term of our funded debt has been falling consistently since 1949. The average term of our funded debt stood at 11 years in 1949 and it has now fallen to eight years in 1959. I say there has been a very substantial fall in the average term of our funded debt. That adds to the difficulties, that adds to the problem, because it simply means that within the next four years your refinancing and your redemption problem is going to become much greater. Short-term debts have to be paid at short intervals. Therefore I end where I began, by saying that the hon. the Minister’s Budget is a hotch-potch, disappointing and unimaginative Budget which does not fit in in any big occasion, be it a political occasion or an economic occasion.

*Mr. F. S. STEYN:

The whole speech by the hon. member for Johannesburg (North) (Mr. Plewman) can perhaps be best disposed of by referring to one or two of his arguments. His main argument is that the Union, and later the republic, will be faced with certain refinancing problems. But this contradicts a criticism used by the United Party’s main speaker who in fact criticized the Budget because the expenditure on Loan Account had fallen. What logic is there when the main Opposition speaker contends that there should have been increased expenditure on Loan Account, while the hon. member for Johannesburg (North) emphasizes the problems of refinancing. And then I want to say this: The hon. member has advanced a problem, but he has not uttered one word of criticism to the effect that we have failed to take any of the steps necessary for the refinancing of our state loans. In conclusion, another argument which he used at the outset in emulation of the hon. member for Constantia (Mr. Waterson) was the following; he expressed his pessimism as regards the possibilities of our entering into full treaty agreements with the United Kingdom to replace the present system of Empire preferences in view of what he has described as the unfavourable results of the trade agreement between the Union and the Federation. May I point out to hon. members that the Union had a huge favourable balance of trade with the Federation at the time the trade agreement was entered into, and quite obviously the party to a trade agreement which has a very unfavourable balance of trade, will try to improve its position. If we were to apply that argument to our case, the United Kingdom which has a favourable balance of trade with the Union will have to make far greater concessions to the Union when trade agreements are entered into. These are just one or two examples of the hon. member’s logic.

The main criticisms which have been advanced are actually criticisms which fall outside the scope of the Budget. After the hon. the Leader of the Opposition had played his political trump card before all the players at the table, such as Mr. Menzies and Mr. Macmillan had made their bids, the United Party were in a quandary. The hon. member for Constantia has now tried to camouflage this problem by reaching the supreme heights in his expressions of doom and lack of confidence in the future of South Africa, and his prophecies of doom are embodied in the central portion of his amendment in which he says that the uncertain future of our country has been caused by the disastrous policies which this Government has followed over the past 13 years and which have now culminated in our leaving the Commonwealth. I want to submit that over the past 13 years this Government has not adopted any new policies. During this debate hon. members have referred in the sharpest and most unbridled language possible to the Government’s so-called prejudiced racial policies. Let us now examine this accusation in the light of the truth. What of the pass system? Is this something which has been introduced during the past 13 years, or is it a system which has been ameliorated over the past 13 years by the introduction of the reference book system? What about influx control? Is this a recent innovation? No, this is a system which was applied on a haphazard basis by means of the old pass system and which has now been rationalized by the introduction of labour bureaux which correlate the demand of the employers on the one hand and the needs of the work seekers on the other hand. Hon. members have attacked the colour bar in general, but the colour bar was being applied voluntarily throughout South African industry until it was broken down to a certain extent by the pressure of the manpower requirements of the country towards the end of the last war, and in our gold-mining industry it has been enshrined in legislation for the past 40 years. It is nothing new. And then hon. members opposite have linked with this question the cry of job reservation. The hon. the Minister of Labour recently made the relevant figures available in the form of a brochure, and from that brochure it appears that not even 1,000 people in South Africa have been directly affected by the introduction of job reservation. This is not a radical change. What is it in actual fact other than the application of the traditional colour bar, accompanied by certain concessions to the requirements created by the present manpower position? Hon. members have criticized the group areas legislation. Mr. Speaker, the principle of group areas is to be found in the legislation of the Transvaal and the Free State in which the majority of South Africa’s White people live and that principle has prevailed for generations. It has also been implemented throughout South Africa by means of the conditions governing the laying out of townships and conditions contained in deeds of transfer. This is nothing new, this is not a new policy which has been introduced during the past 13 years. A radical change which has in fact been introduced during the past 13 years relates to housing within the framework of the group areas legislation, that is to say, the provision of housing to the Bantu workers of South Africa on a scale which is unprecedented in this country and the world. Then there is the extension of the education facilities of the Bantu and the extension of the hospital facilities of the entire Bantu and non-White population. Mr. Speaker, there has only been one basic change in policy during the past 13 years, namely that the direct representation of the Bantu in this Parliament has been ended as an affirmation of our principle that we are not prepared to share control over the historically White areas of South Africa with the Bantu, but that the Bantu will exercise their powers of government in their historic areas only.

*Mr. RAW:

Is that the only difference?

*Mr. F. S. STEYN:

The other point to which the hon. member is probably alluding is the fact that the Coloured voters have been placed on a separate voters’ roll. I do not want to enlarge on the question of the Coloureds at the moment, but I just want to say that the fact that the Coloured voters have been retained on the parliamentary voters’ roll as fellow electors of the Government of South Africa at a time when the Bantu have been removed, is a positive recognition in principle that the Coloureds form part of the Western community which will occupy and govern White South Africa for all time to come, in accordance with the arrangements made between the parties. This is a positive policy which is of the utmost value as far as the Coloureds’ future is concerned.

The whole basis of the criticism both here and abroad is not that certain changes have been introduced. They do not want facilities. They want the vote. They want the vote because they want the country. That is the root cause of the hatred found abroad. It is not our change in policy, but the ambitions of the Pan-African movement, the Pan-Africanism which will not tolerate any White or non-Black African in Africa except as employees who will remain through the grace and with the permission of the governing Black African castes. They tolerate the Coloureds just as little as they tolerate us, and because the Pan-African movement has adopted that standpoint and because the outside world wants to gain the support of the Pan-African States, the outside world is opposed to us.

A further reason why we have had to leave the Commonwealth is not because we have introduced a change in policy, but because the Commonwealth has changed tragically. This is not the old Commonwealth. Let us examine one or two significant figures. The average value of the United Kingdom’s annual exports to South Africa for the years 1957 to 1959 was R345,000,000 and the average value of the Federation’s exports to the Union during this same period was R25,000,000. The two together totalled more than R370,000,000 per annum. The average for the remainder of the Commonwealth, in which Canada, New Zealand and Australia played the major part, was only R111,000,000 per annum. The rest of the Commonwealth did not sell goods on any large scale to South Africa. The Commonwealth partner which has sold most to us has been the United Kingdom; and to whom have we sold our goods? The average value of the goods which we have sold to the United Kingdom during the three years I have mentioned was R217,000,000 per annum, and for the same three years the average value of the goods we sold to the Federation was R106,000,000 per annum, giving a total of R324,000,000 per annum. But to the rest of the Commonwealth, including even Canada, Australia and New Zealand, we only sold goods to the value of R47,000,000 per annum. We have only had important trade relations, important connections, with the United Kingdom herself. Let us use another small test to examine our real links with the Commonwealth. Let us examine the visitors who come to the Union. During the year 1958, which is a good example, the Federation naturally was easily at the top of the list with 105,000 visitors. Then followed the United Kingdom with 12,200 visitors, and Australia with 945 visitors, New Zealand with 279 visitors, and Canada with 485. All the other African countries—separate statistics as regards our Commonwealth friends Ghana and Nigeria are not available—excluding the Portuguese territories and the then Belgian Congo, only provided 1,003 visitors, while Malaya, our other partner in the old Commonwealth, provided 142; and India, Pakistan and Ceylon together less than 70 visitors. That is the difference. The old original five members of the Commonwealth were States which had ties of interest with South Africa in terms of trade and human relations, but this Commonwealth has changed into a conglomeration of nations which have neither a commercial nor a human interest in South Africa. For this reason I completely reject the submission that our imminent withdrawal from the Commonwealth must be attributed to changes in our policy or to the policy of this side of the House. It is due to a change within the Commonwealth and in the international sphere.

The basic problem facing South Africa has also been discussed during the debate on this Budget, and the hon. member for Houghton (Mrs. Suzman) has taken it upon herself to say: Rather than spend the R17,000,000 which we are devoting to the Bantu homelands, we should have had one Black country. That would have meant far more to South Africa as far as gaining the goodwill of the world is concerned. Allow me to make it quite clear that we do not believe that South Africa should ignore the criticism c)f the outside world. We believe that our leaving the Commonwealth, is like a window which has gone open and which has revealed harshly to all South Africa how hostile the outside world is to us. But unlike the hon. member for Constantia, our solution is not that we should shut the window once again, that we should simply return to the Commonwealth under whatever conditions may be laid down and then say that all is well. Whether we open or close the window of our Commonwealth membership, South Africa’s position remains substantially the same. We must therefore face the basic problem that South Africa must develop to the best possible extent the economic and social potentialities of her own people. The criticism of the United Party and the Opposition has always been that as a result of the colour bar and other policies which we uphold we are not making full use of the potential of our non-White manpower resources. In this regard, the United Party further says that we should change our whole domestic policy to provide in the first place for the permanent and unrestricted utilization of non-White labour in our economic life and linked with this, the gradual extension of their political representation. Mr. Speaker, we stand inexorably by the policy that we cannot utilize the Bantu as a permanent and normally integrated part of our labour force in South Africa’s economic life because in essence the Bantu is a migrant labourer. I do not want to cover all the arguments relating to this most contentious matter, but I am merely making this point once again with a view to the further development of my argument. I first want to submit two ancillary points in this regard, namely that the United Party has begun to move in the direction of conceding that we are right as far as this matter is concerned. No one less than the Leader of the United Party stated in his policy speech before hon. members at Fernwood two weeks ago that his vision was that the political rights of the people of South Africa should be granted on a group basis because people were beings which acted on the basis of group affinities in the political sphere. Hon. members opposite have therefore gone a long way towards realizing that the Bantu would exercise political power as a Bantu group just as any group is inclined to exercise political power on a group basis. If hon. members would only go further after this first little uncertain step which their leader has taken, they would also be forced to the same conclusion as we; namely that once we start granting political power, we shall eventually have to give full political rights and allow the Bantu to take over all political power. In the second place I want to refer to Mr. E. P. Bradlow, the President of the Johannesburg Chamber of Commerce, who in a recent presidential address to that Chamber, as reported in Commercial Opinion of February 1961, conceded for the first time that our industries should be made Whiter. He made this statement in the course of a speech which differed radically from our policy, but in advocating higher wages he said—

Our most urgent task is to raise the level of Native wages. We must achieve this for two reasons: Firstly, in order to release those forces which in advanced countries have expanded domestic markets and raised living standards so rapidly.

In other words, to stimulate the purchasing power—

Secondly, because the European can only be made secure in South Africa if a large part of the industrial labour force consists of White workers.

We have now already gained one disciple in the political sphere and one disciple in the economic sphere.

Mr. Speaker, to us this Budget is an important milestone along the road towards giving effect to the concept that a separate economic life and consequently a separate political life can be created for the Bantu.

*Mr. RAW:

A separate economy?

*Mr. F. S. STEYN:

I say that this Budget represents significant progress in that direction. In the first place the Budget makes provision for an increased initial and investment allowance up to 30 per cent in the case of machinery and 20 per cent in the case of buildings for border industries. The Budget provides R2,000,000 to the Industrial Development Corporation for the development of border industries. In addition to the normal increase of R1,800,000 which is being transferred to the Bantu Trust, a special amount of R10,000,000 is being provided to the Trust which means that a total of R15.5 million is being made available to the Trust for the development of Bantu homelands, apart from the purchase of land. These amounts are sufficient to make possible a full-scale start with border industries and homeland projects as full-scale experiments. The planning stage is past. The stage of vast expenditure has not yet arrived. No one can spend vast amounts on full-scale projects until experiments have first been carried out. But these amounts are not meaningless as regards the realization of the principle that we wish to give the Bantu an economic livelihood while he lives in his own areas where he can exercise political powers. I just want to complete my submission that this development is aimed at giving the Bantu the opportunity to make a livelihood while he lives in his own homelands where he can exercise political rights, whether immediately outside the Bantu areas or within the Bantu areas themselves. In principle there is no difference except for the dependence of the White industries concerned on non-White labour. But hon. members will not criticize that aspect because after all that is the utopia they want to create. This is therefore not a point on which they can criticize us. I want to conclude my submission in this regard by just referring to one further matter. It is always argued with great emphasis that we can develop South Africa’s economic potential and exploit it to the full if we will give all the non-Whites the fullest opportunity to do work for which they are naturally equipped. But have hon. members who emphasize this point, ever asked themselves what the debit aspects would be which would flow from economic integration? If, as a result of economic integration, there were to be Bantu foremen, for example, who would be earning good salaries in all spheres and who could purchase goods, we would, not only have many Bantu holding all sorts of posts, but we would have social unrest amongst the White population who would offer resistance and amongst a large primitive Black population who would find the social structure of which they form part, completely strange to them. Such a disastrous experiment would result in labour unrest, disturbances, clashes and conflicts which would eliminate the apparent economic benefits which hon. members are so eager to obtain.


May I ask a question?

*Mr. F. S. STEYN:

No, I am sorry; my time is too limited. Mr. Speaker, there is just one aspect which I should like to raise, and this relates to South Africa’s foreign capital requirements. All sides concede that the balance of payments position is a problem, and I just want to take this opportunity to direct the attention of the Government and the country to the Association for the Promotion of the Protection of Foreign Investments which has been established in the European Economic Community. This Association was originally established in 1954 and has already made substantial progress. The object of the association is as follows—

The object being to help to remove the disregard of vested foreign rights and interests in international business which have become more noticeable after the last war.

And if I can just briefly summarize the general underlying principle of this association, it is that a multi-lateral international treaty should be entered into by which private investments will be guaranteed in all countries. The aim is to encourage private investors to invest without fear of losses in under-developed countries. This plan was originally conceived by Dr. H. J. Abs, the financial adviser to Chancellor Adenhauer. It has received the support of Prof. Ludwig van Erhard, the German Minister of Economic Affairs; it has also received the support of Lord Shawcross of Britain, and of great American financiers such as Mr. Firestone, who is the head of the concern with that name. This plan has already made such progress that we can state that in other countries of the European Economic Community it has become an accepted international aim. The original draft treaty of the association has been adjusted and a second association with similar objects has been established in Switzerland which, to a certain extent, is perhaps the leading champion of this idea to-day. This concept has already been discussed at the meeting of the International Chambers of Commerce and at other international meetings. I am merely mentioning this matter for this reason. If we appreciate the problem facing South Africa, we should try to do something more than to say: “ There are difficulties.” We must try to say how we may be able to help, and I believe that by giving support in Africa and in the international sphere to this concept of an international guarantee for private investments, we can open the door to investment in South Africa because the world is afraid to invest here as we form part of the undeveloped African continent. If we can remove that fear by means of a system of guarantees, we may be able to break through at this difficult time.

But over and above all this, Mr. Speaker, and this I say in conclusion, South Africa’s future depends on the diligence and confidence of her people. And for one thing I thank my Creator to-night, namely, that I can cherish the sacred conviction that the pessimistic and hostile statements which hon. members opposite have made do not emanate from the hearts of the mass of the United Party supporters nor of the English-speaking people of South Africa. They, too, are children of South Africa.

*Mr. W. C. MALAN:

Mr. Speaker, I want to start where the hon. member for Kempton Park (Mr. F. S. Steyn) has just ended, namely, that this hate propaganda of the United Party, especially as expressed this afternoon by the hon. member for Constantia (Mr. Waterson), does not come form the heart of the United Party public. I have already had the experience of an Afrikaans-speaking member of the United Party as well as that of an English-speaking member of the United Party who, during the week-end, gave me the assurance that they certainly did not agree with this propaganda now being conducted by the United Party. The Afrikaans-speaking member said this: “ I have never voted for the National Party, but now I agree with Dr. Verwoerd’s action.” The English-speaking member said this in the Cape Argus, under the pseudonym of “ Fairplay, Huguenot ”—

Hats off to Dr. Verwoerd for his courageous stand and the way he conducted himself. I was an anti-republican to the last, but, although I regret it, I maintain it is better to be out of the Commonwealth than in it and be dictated to by any Black state in Africa.

Mr. Speaker, the amendment moved by the hon. member for Constantia this afternoon is nothing but a compliment to a very well-balanced Budget introduced by the hon. the Minister of Finance. Instead of waging an attack on this very well-balanced Budget, he tried to divert attention to other matters. I do not want to allege that South Africa is not experiencing critical times. Precisely for that reason we must put our heads together and our shoulders to the wheel, to make South Africa economically sound. This budget of the hon. the Minister of Finance does much in that direction. There are concessions in regard to tax relief to companies (3 per cent); then there is the concession of 5 per cent in respect of personal income tax which will have the effect of making more money available, which will benefit commerce and industry. But it will also have the effect of making more investment capital available. [Interjections.] These concessions, and those in connection with capital depreciation, are of very great value. It is again proof of how well disposed this Government, just like its predecessor, is towards the industries of the country. This concession is again proof of the protection policy which the Government is applying in respect of our own industries.

*Mr. RAW:

May I ask the hon. member a question?

*Mr. W. C. MALAN:

No, the time is too limited. Mr. Speaker, what we need are not small critics, but men with vision, men with imagination; such as a young South African industrialist who has developed his undertaking to such an extent that he is to-day manufacturing one out of every five cigarettes bought in the Western world. That is the type of industrialist with vision whom we require. And I may add that he achieved it without any Commonwealth preference.

Mr. Speaker, I do not want to minimize this so-called Commonwealth preference because it is undoubtedly of great value to us. But when we blindfold ourselves with this Commonwealth preference, as the hon. chairman of the Deciduous Fruit Board blindfolded himself with it, then it becomes a dangerous principle for us. I quote what the chairman of the Deciduous Fruit Board said in June last year—

As a fruit farmer I cannot be blamed if I give vent to our concern about the possibility that the preference could, in fact, be terminated if South Africa’s membership of the Commonwealth should be ended.

I considered it my duty to write this gentleman a personal letter in which I pointed out his mistake, and I pointed out to him at the same time how dangerous it was when an agricultural leader entered the political sphere. Since then this gentleman has not expressed himself any further on the question of Commonwealth membership, except that he recently admitted in a Press interview with the Argus that he was wrong at that time—

Mr. Fernhout said that the deciduous fruit export to Britain was dependent not upon membership of the Commonwealth, but on the General Agreement on Trade and Tariffs.

But, unfortunately, he goes on to overemphasize the value of the Comomnwealth preference, and in this same Press interview he says “ that Britain takes 75 per cent of the Union’s total exports of deciduous fruit”. But I have here before me the report of the Deciduous Fruit Board, which is signed by this same Mr. Fernhout, chairman of the Deciduous Fruit Board, and in this report of the board I read that, during the past year, 1959-60, the exports of the different kinds of fruits were as follows. This is the percentage of the exports to Great Britain, or the United Kingdom. In the case of peaches it was 67.8 per cent; in the case of pears 65.3 per cent; in the case of grapes 64.5 per cent; and in the case of apples 68 per cent. The total of this is much nearer to 65 per cent than to 75 per cent. Here again the hon. gentleman makes himself guilty of a gross exaggeration, and he does so only to emphasize the value of the Commonwealth preference to South Africa.

I just want to repeat that I am certainly not minimizing the value of the Commonwealth preference to South Africa, and I am minimizing even less the value of the United Kingdom as a market for our farmers, but I want to emphasize again that if we are going to be blinded by …


May I ask the hon. member a question?

*Mr. W. C. MALAN:

That hon. member, in any case, knows nothing about fruit. I want to emphasize again that it is dangerous for us to be blinded by the value of the market of the United Kingdom if it is to prevent us from developing other very important markets. I continue with this interview of the chairman of the Deciduous Fruit Board with the Cape Argus. He says—

What I fear is this: That if this is the beginning of the end of the Commonwealth, Britain may join the European Common Market.

Here, Mr. Speaker, he has in fact got a point. But now I ask: If that is so, why not go into that European Economic Common Market with all her might? I do not want to bore the House with long lists of figures but I would like to give a few examples of what could in fact be done. According to this same annual report and previous annual reports of the Deciduous Fruit Board we find that in the year 1955 only 189,650 boxes of grapes were exported to Germany for example, one of the countries of that European Common Market. That was 6.8 per cent of the quantity exported to Britain. It increased until 620,730 boxes of grapes were exported to Germany in 1960; that was 18 per cent of the exports to Britain. As far as prices are concerned we find that in 1960 prices in Germany were 5d. a box higher than in Britain. There were altogether five markets which produced better results than that of Britain. We have the same position with apples. In 1955 apples exported to two of the countries of the European Common Market, namely Germany and Belgium, totalled 22,627 boxes and 30,779 boxes, respectively. This constitutes 6.6 per cent of the exports to Britain. By 1960 this increased to 120,782 boxes to Germany and 296,835 boxes to Belgium, and the two together have now increased from 6.6 per cent in 1955 to 24 per cent of the exports to Britain in 1960. Mr. Speaker, here one finds the same price tendency, namely that prices are also somewhat better than prices in Britain, and that is after the customs duties payable in those countries have been deducted. After it was deducted the net proceedings, f.o.b. Cape Town, was in any case higher than the net proceeds in the case of exports to Britain. And these results were achieved despite the fact that the Deciduous Fruit Board spent more than £100,000 on advertising in Britain last year. More than R200,000 was spent in Britain as compared with virtually nothing in the countries of the European Common Market. These results were obtained in spite of this fact. What is more, the markets of the countries of the European Common Market are developed by the Deciduous Fruit Board through the London office. There is no direct contact in any of those countries, or with more than one of those countries. Further, all our labelling is in English; our weights on the boxes are all in pounds while the Continent deals in kilos. In spite of this fact there is progress. How considerably higher could South Africa’s progress not be if it developed those markets with vision and imagination. If one developed a market in the language of the people, if one developed a market in the weights understood by those people, then how phenomenally could South Africa not progress if those markets were developed with vision and imagination. But, Mr. Speaker, we are still in the grip of the colonial mentality, which wants to do everything only through the British offices and British agents. Let us in Heaven’s name get free from this colonial mentality. I feel that this outcome of events, which was not our desire but which was forced upon us, will assist us in getting free from that colonial mentality and that we will explore other markets which are in fact worth while. I do not want to talk about the North American market. There is also a virtually unlimited market for us, for our grapes, for example. But we unfortunately find this position among so many of our exporters. I recall, for example, the case of the Dairy Board which last year got an order for cheese from Germany. Again a London office was instructed to execute the order. Unfortunately the London office did not select its best cheese, but its lower quality cheese. The best was kept for the British market with the result that South Africa lost the market in Germany. I want to make an urgent appeal to the hon. the Minister of Agricultural Economics and Marketing to appeal urgently to the various boards and other exporters to make direct contact with the countries of the European Common Market, that they should establish direct trade connections and not always operate through the London office because in that I foresee an enormous possibility for the expansion of our markets in the countries of the European Common Market. In that, Mr. Speaker, I foresee that we will earn tremendously more foreign currency for South Africa, and the farmers of South Africa, particularly the farmers of the Western Cape, the fruit produce will produce much more if the market is there. I want to appeal to the hon. the Minister to give his attention to the matter and to see that our boards and other exporters are diverted from this colonial mentality because through it South Africa is losing very valuable oversea markets and valuable foreign currency.


I hope the hon. member for Paarl (Mr. W. C. Malan) will get higher prices for the deciduous fruit of the Western Province. I hope he will be successful in his persuasion of the hon. the Minister of Agricultural Economics and Marketing who is not here to listen to his speech, although the Minister belongs to his party. When we have a constructive speech coming from a member of his own party from the Western Province, the hon. the Minister is not in the House. I hope the hon. member for Paarl will address his remarks to those boards of which he spoke. They are the people who understand it.

Mr. W. C. MALAN:

I have already done so.


Well I am very glad that the hon. member has done so. What he can achieve by telling us who come from the Transvaal about their troubles, I do not know. But if we can help him we will help him. We will buy the fruit. It is good fruit.

I now want to say a word—and very little —about the tragic events of last week. I do not propose to dwell on those events. I feel rather as a citizen of this country must feel if he finds that this country is at war. That is the feeling. We are alone in the world, and naturally we turn to each other for comfort and discussion, for sympathy in this very, very difficult period we are living through. We have seen what has happened at UNO, we know what has happened in London and we must take counsel very seriously together. I am not the only person who thinks that way. Hon. members on the other side in their speeches have been following the same trend of thought, but not the same trend of speech. Here we have the hon. member for Pretoria (Central) (Mr. van den Heever) making a special point of the fact that we are going to increase our Defence Vote.


Why not?


No reason why not. Then we have the hon. member for Mayfair (Dr. H. G. Luttig) who makes a great feature of the Defence Vote, the first time it has ever happened here in a debate. And we find one hon. member after the other, even the peace-loving member for Bellville (Mr. Haak) making a point of the Defence Vote. For many years in this House we have been asking to have our Defence Department put on a proper basis. We have offered our co-operation. When the hon. the Minister of Justice was Minister of Defence we offered to establish with him a National Board for Defence and to work with him on the board. He spurned our efforts. We have heard the hon. the Minister of Justice year after year turn down our best efforts. We supported him in creating the Special Equipment Fund. We have done everything we can. Well, the Opposition to-day is even more serious than it has ever been. We are thinking of defence, and I want to make a suggestion. I am sorry that the hon. the Minister of Defence has gone out. Mr. Speaker, I should like to make the suggestion I made here some years ago, that we have a secret session in this House to debate defence. Then we can tell the Minister what we think of the present defence preparation in South Africa. If we were to do it now we would be accused of being unpatriotic. We require a secret session so that we can talk frankly and tell this House what we think of the Defence Force.

The hon. member for Kempton Park (Mr. F. S. Steyn) told us that our criticism so far had been outside the Budget. His was very much outside as well. I propose to say something inside the Budget. I should like to discuss certain features of this Budget with the hon. the Minister of Finance. I think it is an opportune time and I think he has been neglected by so many of his own speakers that he will welcome this opportunity. The theme of this Budget, the hon. the Minister of Finance told us, was the promotion of development and to strengthen our balance of payment. A very worthy objective. How did he tackle it? In the first place he said he would reduce company tax by 3 per cent. That, of course, we welcome. Commercial companies, industrial companies, mining companies—but not gold-mining companies! Not the step-child of South Africa and our economy! They are not to have any reduction! No reduction in their taxation scheme, but for every other company in the country there will be a reduction.

That was the first. But, the hon. the Minister said the gold mines had one privilege which they have retained over the years; they have the privilege of writing off capital against profit. They have it before income tax is charged. It is very necessary, because, as the hon. member for Pretoria (Central) says, what we need in this country is risk capital and the chief outlet for risk capital is gold-mining ventures. We see the rich Free State—there is a lot of poor Free State as well. It is a risky undertaking, this development of gold mines. The hon. the Minister told us that if the gold mines had this privilege he should extend it to base mineral mines. There is nothing wrong with that. But he does not extend the taxation of gold mines’ profits to the base mineral mines. When we mine for coal or iron or chrome or copper or asbestos, then we have the ordinary company system of taxation. But when we mine for gold we have a much more severe system. There again we get that distinction, that discriminatory taxation against the gold mines.

Then the hon. the Minister of Finance came to the balance of payments. How did he describe it—as an old weakness in our economic system. Where would the balance of payments have been last year had it not been for the gold mines? Where would South Africa have been when we had that great reduction in our gold and foreign holdings? We should have been in a perilous state, worse than 1949, and that was the worst we have touched. The gold mines have saved us in our balance of payments.

Now I come to the next point. The hon. the Minister told us, with great confidence, that the four companies, Iscor, Escom, Sasol and Foscor, were going to have a development programme to cost about R1,000,000,000. I should like to ask the hon. the Minister, what have these four great undertakings paid him in dividends over the last five years? Nothing from Foscor. Nothing from Sasol. Escom I would exclude because it provides services to the community. But Iscor! We have been told in this House year after year of the great prosperity of Iscor. What do they pay the hon. the Minister in dividends for his Exchequer? I should like to know whether he is getting dividends as an ordinary shareholder in a South African company gets. Are they paying their share into the Exchequer of South Africa? Or is everything being ploughed back after they have paid the ordinary company tax?

That brings me to this point of the outflow of capital which has been referred to by the hon. member for Kempton Park. The hon. the Minister of Finance tells us that there was an outflow of capital but that South African investors seized the opportunity to acquire these foreign investments. My report says, “ Foreign investments ”. I presume it is the investments of foreigners, foreign investors. The euphemism is, of course, that these investments have been repatriated. They have come back to South Africa. Well, it is only a euphemism; we would like to see them go overseas again.




Because that would mean that capital from overseas was being invested in this country. How does capital come to South Africa? Does it come to South Africa through the purchase of industrial shares? Does it come in any great quantity from the hon. the Minister’s loans? He has the greatest difficulty in raising loans nowadays. Does it come to commercial enterprises? When it comes to commercial enterprises they very often retain their holding and we do not share in the equity (very often) in South Africa. When capital comes to South Africa the finest avenue of approach is through the gold mines, because the South African gold mines are listed on the stock exchanges of the world: London, Paris, Amsterdam and New York. And because of the position of the gold mines we are able to get capital through that avenue into South Africa. I should like to ask the hon. the Minister what the gold-mining industry has done that he should have discriminated against it in this way when he was reducing taxation all round? They have given him good service and I should like to say what the service is.

In the new developing Free State gold mines —and they are very proud of the fact—the Welkom News tells us that in four years they have doubled their production. And this is the position of production generally in South Africa: I am taking gold only and not uranium for the period of 1957 to 1960. It increased from R425,000,000 to R536,000,000, an increase of RI 11,000,000. I repeat the question: where would the balance of payments have been over these three years without that R111,000,000 in production from the gold mines? And, in addition to that, there has been the production of uranium, approximately R100,000,000—R98.5 million—last year. From the two together the production of our South African gold mines was R634,000,000. When we consider what happened a few years ago, what our position was then and we see this great production, we realize what South Africa owes to this great industry and to the entrepreneurs who risk their capital in the Free State and on the far West Rand where we have the richest gold mine in the world. And the biggest shareholder is the hon. the Minister of Finance on behalf of the taxpayers of South Africa.

I now consider another aspect of this, not only the production of gold but what they pay into the Exchequer in South Africa. I am quoting these figures from the hon. the Minister’s White Paper, a very fine document indeed. This is the position in the payment of normal tax from the gold mines. I am taking, again, from 1958-9 to 1961-2 (estimated). It is approximately right. Over these three years normal tax has doubled: the normal tax paid into the Exchequer has risen from R32,000,000 to R64,000,000. That is the contribution to the Exchequer. How would the balance of the hon. the Minister’s accounts have been without the gold mines? The hon. the Minister is prepared to help the mining of base metals. If uranium comes out of a mine for base metals, it is a base metal, but if it comes out of gold mines it is taxed as gold. That is another raw deal they have had from the Government. But I go on from there. I should like to say that we have a formula for the taxation of the gold mines, and that there have been Ministers of Finance in the past who have been able to see the difficulties of the gold mining industry. I quote now from the first Budget speech by Mr. Havenga in his second series in 1948, when he said this—

The Government recognizes the important part which this industry plays in the economy of the country, and in view of that tact and while the price of the products of other companies are free to rise, the price of gold is fixed, and it has come to the conclusion that some relief is justified at a time when the Treasury can reduce taxation. It is therefore proposed to reduce the tax formula to , instead of . The exemption from taxation of ore yielding less than 6 per cent profit will therefore continue.

In other words, Mr. Havenga said in 1948 that we must assist the gold mining industry. Since then the tax has been increased once and has been reduced once, and now it is still the same formula as it was in 1948. All through the years, while other companies have obtained relief, there has been none for the gold mining industry. Now why do we have this excessive taxation of gold mining? The argument is that when you take gold (or any other precious mineral) out of the ground, you are taking the patrimony of the State. In the mouths of more ignorant people it is referred to as “ the hole in the ground” argument, that when a mine is worked out all the State has left is a hole in the ground. I should like to quote a former Minister of Finance, who stated the “ hole in the ground ” argument in these words—

Many people are under the impression that the gold mines belong to the mining companies, but they belong to the State. All minerals belong to the State, and we give them out to the mining companies on certain terms and conditions as laid down by agreement or by law. Every year the permanent mineral wealth of our country deteriorates by millions of ounces of gold, by hundreds of thousands of carats of diamonds and untold millions of tons of coal, chrome, manganese, asbestos and other minerals. We have heard about mines getting exhausted in some cases. In every case we are reducing these permanent assets, and I want to pose the question whether it is not reasonable that we should at all events try to restore the loss of assets by providing for other permanent assets such as railways, telephones, roads, hospitals, schools, etc.

This is a very sound statement. The Minister mentioned these other minerals, but they are not treated like gold; they are treated like any industrial or commercial company. All this is agreed to. When a company gets permission from the Government to produce gold, the Government gives them a lease, and in that lease the Government’s share of the profit is laid down. Now there is only one fair way of dealing with gold-mining problems. That is to say that when the Government has taken its share by the lease, whatever that may be, after that the gold mines should be taxed as any other mine or company is taxed, whether it is a base metal company, a commercial or an industrial company. But they are not. They are taxed by this discriminatory taxation.

Now, how has this tax come about? I want to say frankly that it is not only this Government that has taken up this attitude. I am disappointed that members from the Rand and the Free State do not go over the top together and say that they will not stand for this any longer. If it were farmers, they would all stand together. Why cannot we Transvalers and Free Staters do the same to give our industry a chance? The reason why we have had this taxation is because a committee was appointed to work out a formula, and these are the members of the Committee: The Secretary for Finance, the Government Mining Engineer, the Commissioner for Inland Revenue, the Government Mine Surveyor and the Secretary came from the Union Revenue Department.


They should have had van den Berg on it.


Well, he would have been as sympathetic at least as the others were. Every commission that has considered gold mining taxation has been prepared to say that the system is unfair, and there have been two well-known commissions. The one was the Steyn Commission on Income Tax. They said this—

We regard the application of different rates of taxation to different enterprises as unsound in principle. It is our view that as far as income tax is concerned, the nature of the taxpayer’s business should not be taken into account in fixing the rate of tax, but that in relation to each special class of taxpayer, uniform rates should be applied to all types of business.

And the Viljoen Commission said the same thing, but they both left it in the air. The Steyn Commission had no option, because the Minister of Finance, having appointed a commission to report on the Income Tax Act, two months after appointing the commission issued a directive to say that they were to exclude consideration of the gold mining companies; that was his own special preserve. That is why we are in this position to-day.


Why do you not mention the concessions given by the Government to the gold mines?


I have done so, and in the Committee Stage we can have a real set-to about it. At last we have the Rand members interested.

Now I want to say a word about this taxation. In the case of companies it was reduced this year from 30 per cent to 27 per cent. The present formula for mining taxation is this: The percentage tax,

There was once an important member of the House who said he did not understand the formula and he did not think anybody else in the House did. Well, any Standard 7 schoolboy could tell him what it meant. It is a simple formula. I made this suggestion some years ago, that instead of this formula we should have the formula the 300 to preserve the low-grade mines taxation. But now that we have reduced the Company Tax by 3 per cent, this is my proposal to the hon. the Minister: that he should make the formula . If he were to do that, and make that gesture to the gold mining industry, it would create confidence overseas and show that this Government is out to help the overseas investor, as I think the hon. the Minister is. I think he is quite genuine in what he says. It would give him that opportunity.

Now I want to refer to another matter. At one time Mr. Strijdom as Prime Minister and other Ministers made an appeal to the farmers especially to spread their investments, not to invest their money in buying more land, but to invest it in industry and mining shares. I think that is an excellent thing. But why are people not as anxious to invest in our industrials as they should do? The reason is, because it has become a virtue in South African financing to plough back profits. It has gone so far now that the ordinary investor does not get a proper return and he is not encouraged to invest. I think the hon. the Minister of Economic Affairs can give his attention to this as well. It is regarded as a virtue to plough back profits, and I want to give one example of this. I am quoting from a company report and I will quote in pounds, because the last report of the company was in pounds. This is the position of the company: The issued capital is £304,000. The value of the equity funds, the ordinary shares, leaving out the preference shares, is £2,160,000. The net profit of that company after taxation was £277,000. Leaving out the preference dividend, it was £255,000. They paid a dividend which people may think is a good one. They paid a dividend of what they called 20 per cent, or £61,000. But the earnings of that company were 84 per cent of the capital. Why? Because they have been ploughing back for years and years. The assets of the company were very much more than the capital, several times as much as the capital, so that the share-, holders are not getting a fair distribution. They were told that they were getting 20 per cent, but it was not 20 per cent on the assets, but 20 per cent on the issued capital only. This is about 3 per cent on the assets. It is that which discourages investment. The investors are not getting a fair deal.


What do you suggest?


I would like the Minister of Finance and the Minister of Economic Affairs to consider this. I am not trying to make suggestions. I have no cut-and-dried solution.


Are you in favour of an undistributed profits tax?


No, I am not going as far as that, and I will tell you why. In South Africa our system of taxing companies is out of date. We should have a system of taxation similar to Britain. We tax the rich shareholder in exactly the same way as the poor one or the one of moderate means. When we say we are taking 30 per cent of the company’s profits, we take 30 per cent of the profits of every shareholder in that company. Some of them may be millionaires and some may not be liable to pay income tax at all as individuals. Our system does not operate fairly. We should have a system where you say that when you pay a man his dividend you have given the Government an amount on account of his income tax. If it is less than his income tax, he gets a credit, and if it is more than his income tax the Government pays him out the difference. That is the system in Britain and in all modern countries. We should also have that system. When I mentioned two commissions which pointed out that this system of taxing the gold mines was at fault, it was not only these commissions; The economic aspects of the gold-mining industry were discussed by the Social and Economic Planning Council, and they made suggestions. They condemned the system and made the suggestion that gradually—not in one year—the Government should get back to a system where gold-mining taxation fell into line with the taxation of all other companies. Until we do that, I do not see much hope of improving the position. I make this appeal to the Minister. Extend the reduction of taxation this year to the gold mines, and I am sure we shall win the confidence of investors both here and overseas.


The hon. member for Kensington (Mr. Moore) made an urgent plea for relief to be granted to the gold mines, but like an advocate he stated only one side of the case. I think the House can only judge the case if the other side is heard also. I am not prepared to-night to state the other side of the case, but I just want to tell him this, that the gold mines in other respects receive so much consideration that if they were to receive consideration in regard to direct taxation also they would definitely be one of the industries in the country which are very well treated. Now, I would like to know what the gold mines have which makes them deserve priority above all other undertakings. I will not discuss gold-mining taxation further, because I want to deal with the argument of the hon. member for Kensington (Mr. Moore), in which he delivered a lengthy plea in regard to the ploughing back of profits and said that the poor shareholders really derived no benefit.

May I put this question to the hon. member. Does he want the Minister of Economic Affairs—because he directed his plea to him also—or the Minister of Finance also to serve on the board of directors of those companies and run their business for them? Surely it is the representatives of the shareholders who are the directors, and it is the shareholders themselves who decide whether they want to put certain undistributed profits into the reserve fund or pay it out. Are we now to go so far as to take over the management of all companies for the sake of those few people who want to derive an income?

*Mr. RAW:

That is what you wanted to do.


I do not understand the hon. member for Kensington. Now the hon. member for Kensington is an individualist and then again he is a socialist. At one moment he wants to have no State interference at all, and the next moment he pleads with the Government to ensure that a company does not plough back its profits but pays them out. It is within the discretion of every company to decide what it wants to do, whether it wants to pay out the profits or not, and it is for the shareholders to decide what they want and whether they are satisfied with the policy of their company. What is to be done with the profits is one of the matters decided at a general meeting. I cannot understand anyone with his experience and knowledge saying something like that here. Did he say it merely in order to say something, or is he really serious?

I have the feeling that the happenings of the past week affected him somewhat in the place where he does his thinking. I can understand our English-speaking friends feeling a little disconsolate, and I can even understand him saying that to him it is a case of war. It is however a terrible thing to say.

What has actually happened now? We still have the same international personality that we had before; we will have it after 31 May; the obligations we have in the international world will still continue. All the agreements we entered into with Britain will continue. Today there is an agreement between the kingdom of England and the kingdom of South Africa, and the same in regard to Canada and Australia and the other countries. When we change our form of government that is a constitutional change and not an international change; even if it is an international change it still does not affect our international obligations or rights. The hon. member for May-fair (Dr. Luttig) and Bellville (Mr. Haak) have already stated this, but it was not appreciated. Why say that there is a state of war because we are not in the Commonwealth? This whole affair is being used to inflame feelings.

If hon. members were to sit down and to try to make an inventory of what it really means, as far as our being in or out of the Commonwealth is concerned—I do not want to belittle the friendship—they will find that the only advantage of membership is that one can talk to one’s neighbouring state more easily. We have had assurances all along the line that the people we esteem still want our friendship. Does that mean nothing to the hon. member for Kensington, or is he somebody who has so little confidence that he is always afraid that there may be a wolf around the corner, simply because somebody told him there was one? Then other hon. members are concerned about the voting at UN. Is that unexpected? Ever since 1946 we have had to face adversity at UN because the people there do not view matters as we do in South Africa. Political parties do not matter. The United Party was not persona grata at UN either. They have always voted against us. The hon. member for Salt River (Mr. Lawrence) also ran into trouble there.


But I never had a Murray sfield.


We have always had some kind of unrest in this country, like the Bon-delswart and Bulhoek revolts. We just did not have the advertisement, because we had a more responsible Opposition which did not call in outside assistance to put us in our place.

*Mr. RAW:

Like in the war.


The hon. member for Durban (Point) (Mr. Raw) must not interrupt me. When he does so, I am reminded of the English adage that one cannot make a silk purse out of a sow’s ear. I leave the hon. member for Kensington there because he is an old man without faith, and at the end of his life he is standing naked before those whom he regards as his enemies, whereas they without his realizing it, are actually his friends.


He is the man who gave South Africa the rand.


We will erect a monument to him for that.

I want to begin by dealing with the speech of the hon. member for Constantia (Mr. Waterson). I could not quite understand why he made such a soapbox speech in regard to this Budget. Only two points emerged from his speech to which one need reply. The one is that he is concerned about the fact that because we are no longer a member of the Commonwealth that will adversely affect our credit-worthiness if we are not able to pay our debts. But I want to ask him this. Was it our membership of the Commonwealth which enabled us to pay our debts? Or was it our own activities and initiative and our own realization of our moral duties which have always made us pay our debts? And then even better than any other member of the Commonwealth? We are the only country whose debts have never been written off, not because we were a member of the Commonwealth but because as the result of our diligence and our initiative and the fact that we took risks, we had the means to pay our debts. When I say “ we ”, I include both the English- and Afrikaans-speaking sections. Then he makes this remark, in passing, just to sow suspicion, and asks: What will happen to our shares on the London Stock Exchange when they can no longer be purchased by trustees?

The House must forgive me if I go into the history of the matter a little. Our shares stood on the list in London of securities which could be bought by trustees. As we all know, England is the land of the trust. There one is born with a trust, one grows up with it, one gets married with a trust and one dies with it. If one goes to a political meeting, a trust gives one accommodation, and if one is an advocate one is housed by a trust. That is the country of trusts, and the trustees can invest money in what they call colonial stocks. The British Treasury had the right, whenever a colony passed an Act which affected the shares of that colony adversely, to recommend that the Act be vetoed. That was done in terms of the powers of reservation of the Governor-General. They could tell the British Minister of Colonial Affairs to instruct the Governor-General of the Colony to reserve that Act for approval by the King; then that Act could be vetoed. That was done to safeguard the trustees who had invested funds in colonial shares. In 1929 when we had the conference to cut out the dead wood from the constitutional rights of the dominions, it was recommended that this reservation should remain, but the Union was not satisfied to do so. As far as we were concerned we did not want to give that power to the British Treasury, and consequently it was agreed that the Union would take certain steps so that its shares would nevertheless remain on the list of shares which could be bought by the British trustees as an investment for their trust funds, and those arrangements were made by Mr. Havenga. If one looks at the old constitution, one will see that Section 65 was not repealed on the date when the Status Act was passed, on 23 June 1934, but in November 1934. The hon. member for Salt River was I think, a member of the Cabinet which issued that proclamation, and he ought to know what the arrangement really was. I do not know the details of it, but the effect was that the trustees in England could invest their funds in Union shares. The measures which were taken satisfied them. The arrangement still stands. Our being a member of the Commonwealth had nothing to do with it.

The tactics adopted by the hon. member for Constantia are now simply to make a wild statement and then to attempt to sow suspicion and distrust. Is he proud, as a South African, to arouse a lack of confidence in South Africa in this way? Does he want foreign investors and trustees in Britain who have invested money in the Union to lose sleep and to feel that they should sell these shares? I cannot understand it. There are many things about the United Party which I cannot understand, but that he should have this hatred for South Africa, I just cannot understand. Neither could Mr. Menzies understand it. He said that one does not expel a Government from the Commonwealth, but a country and a nation, and there is a big difference between the State and the Government. Why does he seek to create a lack of confidence in our credit-worthiness? [Interjections.] The hon. member for Salt River knows very well that what I say here is true, because he knows what the arrangement was in 1934. I hope the hon. the Minister of Finance will tell us what it was. I do not know the details. I just know that that constitutional change was made.

The hon. member for Johannesburg (North) (Mr. Plewman) is not here and I regret it because I want to discuss what he said. He is also one of those who created the impression that our international agreements come to an end when we leave the Commonwealth. The remarks I have addressed to the hon. members for Constantia and Kensington apply to him also. It is inconceivable that an agreement made by one régime lapses under a different régime. We have examples of that in our own history. South West and the Union were responsible for certain debts Germany incurred in regard to South West. He himself knows that we went out of our Way at the time of Union to draw no distinction between the debts of the Union and those of the various colonies. In the draft constitution which was laid before us we were at pains to say that the republic would take over the debts of the Union. Hon. members know that, but he is the one who does not understand that. Either he is ignorant or he is being malicious. I leave it to the House to decide whether it is simply ignorance or malice.

Then I want to get back to the hon. member for Johannesburg (North) in respect of his criticism of the methods of financing adopted by the Minister of Finance. He does not like it at all because he says we borrow short and spend long. I asked him what the difference was and he asked me whether I had an overdraft. In regard to the latter I say that is none of his business but in regard to the former matter it is quite clear that short borrowing is a recognized financial practice throughout the world, and it is a cheap way of financing. The hon. member for Musgrave (Mr. Williams) does not want to believe that.




Oh, he admits it, and therefore I need not tell him that this last year we borrowed short at under 4 per cent …


You need not explain the obvious to us.


Very well, I am glad hon. members know it. I am just sorry the hon. member for Johannesburg (North) is not here, because evidently he does not know it as well as the hon. members for Musgrave (Mr. Williams) and Salt River (Mr. Lawrence).

That is the first thing. One does it because it is cheap and because it suits one at the moment, and because it does not suit one at that moment to have long-term credit.


You are not answering his argument now.


His argument is that perhaps all these people at a given moment will demand to be repaid these short-term loans, and if the Government cannot repay them it will lead to great inconvenience and be to our discredit and constitute a great shock in the financial world. That is his argument, and even though he did not say it I surmise it, because an intelligent man merely needs a hint. But, Mr. Speaker, if we now compare the internal short-term debt with the long-term debt it is as little as 7 per cent. That is the first point. It is just a small fraction of our income. Experience teaches us that when one borrows money on short-term, such as e.g. from banks, and your liquid assets amount to 25 per cent, you have quite enough to cope with even the biggest run on a bank. Moreover, the Minister judges the situation; he asks himself “ What is going to happen this year?” And if he thinks in any way that he will not be able to repay the short-term loans, payment of which might be demanded, then he does not commit himself to repaying such short-term loans. If the hon. member for Johannesburg (North) has any objection to it then he should say that he doubts the accuracy of the judgment of the Minister in this regard, and then he should adduce facts to show why he thinks it is wrong to go in for that sort of financing.

I am glad that hon. members of the Opposition have not again this year treated us to this other old argument that we should not use current revenue to finance capital works.


We have stopped doing that.


They have stopped doing that, Sir. I am very glad that we have convinced them that it is not a matter of principle but a question of practicability. The Opposition has learnt something. Its thinking in this respect is no longer as backward as it was in the past.


Even though their grey matter is still the same.


Yes, even though it is still the same.

This Budget is a good one, but there is always room for improvement. I now want to play the role of the Opposition and bring to the notice of the Minister the only respect in which improvements can be made. I do not want to criticize the Minister, but I would like to suggest something which I do not see in the Budget and which I think should really have been there. The first is that whilst his Budget is aimed at encouraging savings I think that it should have been possible to change the Companies Act. At the moment it is 30 per cent, or 30 cents in the 100. The Minister has granted a reduction of 3 cents, and that is not 3 per cent; it is 10 per cent on the tax.


No, not three cents.


Well, it does not really matter, but the fact is that there is a reduction. I want to make this suggestion in all humility. If the Minister, e.g., had suggested that on this 30 per cent, or 6s. in the £, say only 4s. should be paid in taxation, if the company ploughs back its profits, if the company keeps it in its own internal finances this year it ought to get the benefit of the 2s. And if it pays it out before the time, it ought to receive a corresponding advantage. The reason why I ask this is because we want to encourage savings, as the hon. the Minister himself has said, and on this point I suggest to him because the private sector, the companies, i.e. private and public, is the section which can make the greatest contribution to that saving.

The next thing I would have liked to see in the Budget, seeing that it is intended to remedy this chronic disease from which we suffer, viz. the balance of payments, and to bring it to such a level that we are not in danger, is that we should have done something to encourage export. Certain benefits are granted in respect of royalties, but I would have liked to have seen that where a manufacturer increases the volume of his exports a concession should be granted to him. Supposing he exported 100 units and in the current year he exported another 20 or 15 or an extra 100 units, some concession ought to be made to him within the framework of the Budget. I still think it is not too late to do so.

The third point I wish to make is this. I refer to the concessions granted in respect of mines producing base metals. In the case of base metals there is a certain rebate on capital investments and depreciation when they themselves process these base metals. I want to direct the attention of the House to the fact that most of these base metal companies are small ones. They do not belong to the group of large gold mines with large capital. Therefore, to give them a concession does not amount to so much because in any case they do not have the money to erect these installations. With all respect I think that it is furthermore uneconomic to expect a large number of these mines all to start processing these metals. I do not know whether I understood the Minister correctly—I did not have a copy of his Budget speech—but it seemed to me that he gave this concession only to mines and not to industries which do this work.

These industries should be given this concession because it is they who really do the processing. These are the people who make the alloys, and they are usually not mine-owners except in the case of copper. To deprive them of this privilege is, I think, really a false step. I say that with due appreciation for what the hon. the Minister has done. This is not criticism, and I still think it is not too late. For the rest, it is such a good Budget …


Thank the Minister.


I will not thank the Minister; the Minister knows we are grateful for it. But this is such a good Budget that the Opposition really cannot criticize it and now they are trying to debate a subject which has nothing to do with the Budget.


The hon. member for Standerton (Dr. Coertze) gave the House a rather long and legal lecture on trustee stock. The whole purpose of his speech was to attack the hon. member for Constantia (Mr. Water-son) on the old story that we hear so often namely that if we criticize in any way any action of the Nationalist Party Government we are undermining confidence in South Africa. The hon. member for Standerton made out that this question of trustee stock was a constitutional question and a question which could apparently very easily be attended to and which has been attended to, as far as I could gather from his speech.


It has been attended to.


I am pleased the hon. member for Standerton thinks this is such a simple matter. I have here the Economist of 18 March and I want to read to the House what this journal says. This article was written long before the hon. member for Constantia made his speech and long before the hon. member for Standerton made his speech. The Economist says this—

One question that is still puzzling the experts is that of trustee status.

What is quite simple to the hon. member for Standerton is apparently still puzzling the experts in England. They go on to say—

It seems that any new issue by South Africa would not qualify under the existing Trustee Acts once South Africa has left the Commonwealth.

The very opposite from what the hon. member for Standerton says—he says the question has been settled already. This very authoritative journal says that it seems that any new issues by South Africa would not qualify under existing Trustee Acts once South Africa has left the Commonwealth. The article goes on—

Under the Bill which is now going through Parliament, such issues will quite clearly be excluded.

So the British experts come to a different conclusion from our expert here. They go on—

There is no clear precedent since neither Ireland nor Burma had any trustee stocks in London when they left the Commonwealth. The best guess at the moment seems to be that Trustees will not be able to make new purchases of former South African Trustee stocks but will not be forced to get rid of their existing holdings.

So much, Sir, for the expert knowledge of the hon. member for Standerton on which he hung his whole attack on the hon. member for Constantia, suggesting that he is trying to undermine confidence in South Africa. It would appear that there is far more substance in what the hon. member for Constantia said than in what the hon. member for Standerton advanced.

For the rest, he made an attack on the hon. member for Johannesburg (North) (Mr. Plewman). He said that he could not understand why we should not borrow short and spend long, I think he said. I think the hon. member for Johannesburg (North) said: borrow short and lend long. Then the hon. member for Standerton rather made an analogy with banks, but Mr. Speaker, banks have thousands of clients and hundreds of thousands in the case of bigger banks. Their position is not quite the same as that of the Government. For example, if the hon. the Minister of Railways borrows R100,000,000 on short-term in England and invests it in the South African Railways, when that stock matures in four years’ time—as is happening now—and he finds that he cannot repay that stock, he cannot very well do what banks do and sell that railway line in order to repay the loan overseas. Banks have ways and means of always getting hold of cash by going to the Reserve Bank in the last resort should they be unable to repay such loan. So, Sir, his second point to my mind is just as spurious as his first point.

I would like to return to the hon. Minister of Finance. The hon. Minister of Finance in my opinion was very negligent in his diagnosis of the South African economic body when he set himself up as a physician and made his diagnosis. All I can say, Sir, is that he made a very negligent examination. He missed some very important points in regard to this economic body of South Africa. I must say in his favour that unlike the hon. the Minister of Native Administration who when he looks at the economic body of South Africa sees two bodies, the Minister of Finance only sees one. When the Minister of Native Administration looks at the economic body of South Africa he sees a Black one and a White one, but the Minister of Finance, I must say to his credit, only sees one. But what the Minister of Finance missed was this that this body economic of South Africa is rather like a harlequin. It has one Black arm and one White arm; it has one Black leg and one White leg and the real ailment that ails this body economic is that it has a head, the Government, that suffers from an obsession to cut off the Black arm and the Black leg. Of course, it never gets so far because it is too painful, but the tourniques which it gives this body impedes the progress of this poor man, this poor body economic. That is one reason, I suggest to the hon. the Minister of Finance, why our vigorous body economic to which he himself has testified, does not make faster progress than it has. It is because of this obsession of self-mutilation.

I have shown, Sir, what an elementary and easy mistake the Minister himself has made. When introducing his Budget the hon. the Minister said that the way he had drawn it up would not really be affected by the fact whether we were inside or outside the Commonwealth. To support that supposition he quoted an economist with a famous name. Well, I have already shown him what mistakes economic doctors can make. I should also like to remind the Minister of Finance that 30 years ago his party, on a very simpler matter, the question of the gold standard, relied on the advice of not one famous economic doctor but ten. And what has the result been? All ten have proved to be wrong.


You are condemning yourself.


I was only a student in those days. I followed this controversy very closely and I was very impressed by the arguments of all those learned doctors and I thought they could not make a mistake. It was only when I matured with more experience that I realized that an economist can be terribly wrong sometimes, because they are apt to over-simplify things. I would like to tell the hon. the Minister of Finance what is wrong with this famous economist that he quotes as an authority. He starts on the premise that if we become a republic there will be no economic changes and therefore there will be no economic consequences. The trouble is that if he is correct that there will be no economic changes then of course there will be no economic consequences. Is this really correct that there will be no effect on our economic ties? I want to devote the rest of my speech on this question. To appreciate, Sir, what the economic consequences would be of our becoming a republic one should really look at the problem from two points of view. First of all we have what we can call formal official ties with the Commonwealth and with the United Kingdom in particular. By that I mean, Sir, that we have certain treaties to which the hon. member for Standerton has also referred which regulate our trade and which regulate other matters, such as matters of preference and trustee stock, etc. Those are what one can call official ties. I am afraid the Minister and his economist that he relies on, only looked at these official ties when they said that there would be no economic consequences. Just as important as these official ties are what one can call the unofficial ties. The unofficial ties are the thousands of private investors, private businessmen and capitalists in England who have investments in South Africa and who will invest money here in future if they have confidence in this country. Those ties of private enterprise between South Africa and England are just as important as the official ties and you will see, Sir, how our becoming a republic will affect not only the formal ties but also the informal ties.


Will the Netherlands Bank close as a result?


As the hon. member for Constantia pointed out the Minister of Finance thought once upon a time that becoming a republic was a purely technical matter. Well I hope he has realized to-day how wrong even doctors at law can be sometimes. When it comes to human affairs and you have to take into consideration all the factors that are involved, you realize that the position is not as technical and abstract as you thought originally. The pure technical act of becoming a republic, inside or outside the Commonwealth, is not the end of the matter. In considering what the effects of our becoming a republic will be, you must also consider the circumstances in which you became a republic. We are always told that Ireland became a republic, Burma became a republic and that there were no consequences. What is forgotten is this that their becoming republics outside the Commonwealth was, what I would call, a purely technical act; they did not want to remain in the Commonwealth. Here the position has been rather the opposite. We desired to remain in the Commonwealth and circumstances have forced us out of the Commonwealth. It is against the background of those circumstances that we must consider what the results will be. What are the circumstances that forced us out of the Commonwealth or which will force us out if everything goes according to Nationalist plan? An attempt is rather being made to sell to the people the idea that it was only the viciousness of certain non-White dominions that has forced us out of the Commonwealth. If one looks at the matter more objectively, Sir, one finds that although these non-European republics were far more outspoken and far more critical in insisting upon the expulsion of South Africa, the significant fact is that not a single White dominion, including the United Kingdom approved of our policies either. It is against that background that we must view this matter. Every single White dominion, including the United Kingdom, condemns our policy. Even our greatest friend, Mr. Menzies, whilst saying that the reason why he opposed our expulsion was not because he approved of our policy but because he thought the question of becoming a republic should be divorced from internal policies—I think that is a fair summary of his attitude—went on to say this. Here Mr. Menzies is expressing his appreciation of Dr. Verwoerd’s attitude—

I speak with great reluctance, but I do not think it will. The more his policy succeeds, the more he raises the Bantu up, the more intolerant will they be to find that they are second-class citizens. The ultimate conflict will be bloody and devastating.

That was what Mr. Menzies, a friend of South Africa said. We must see our expulsion against this background that not only do the non-European members of the Commonwealth desire our expulsion but every single White dominion, including the United Kingdom, condemns our policy as well. For the purpose of this debate it is not even necessary to argue whether they are morally right or wrong. It is a fact that our policies are abhorred not only by the non-European states but by every White state in the Commonwealth too.


Do you agree with Ghana’s policy?


That is really quite irrelevant to what I am putting now. Of course I do not agree with their policy; the hon. the Minister of Finance is trying to draw a red herring across the floor of this House. He is trying to divert the attention of the House from the fact that our policies are abhorred by every White Government in the world. I have already said that we should leave out the question of whether they are morally right or wrong. I just want to make this point that it is against the background that every White state condemns our policy, that we must consider what the consequences of our becoming a republic and breaking with the Commonwealth will be. This has been the attitude of every Government. It is not only the attitude of every Government but it is the belief of every big businessman—I should not say the belief of every big businessman, because there are exceptions—but it is the belief of organized business and organized industry in the United Kingdom and in Western Europe generally. I go as far as to say that. It is against that background too that we must see what the consequences will be. I would like to quote from the Economist of 18 March by way of explaining what I mean. This is what the Economist writes in regard to South Africa leaving the Commonwealth—

It cannot be supposed that this week’s events have in any way “ solved ” the South African problem. On the contrary, the rising waves of opposition to Dr. Verwoerd’s Government are likely to rise the faster, both within the Union and wherever in the world outside its international position can be assailed by angry Africans and their supporters. And Britain’s representatives will not automatically be set free from the awkward postures they have so often found themselves in when at United Nations meetings and elsewhere they have had to stand up and be counted either among South Africa’s friends or among its antagonists— and have usually tried to count as neither, without noticeably inducing any sort of readiness in compromise on either side.

Mr. Speaker, I have read this to show you what the feeling is generally. Every big businessman in England reads the Economist, or a large percentage of them at least; people who have connections here, and that is what they think because the Economist not only reflects their opinion but it also conditions their opinion about South Africa to a large extent. And it is against that background that they see this retreat of ours from the Commonwealth as a weakening of our position and not as a strengthening of our position in every respect.




For the reasons that I have given here. I am not saying whether they are right or wrong but the fact is that that is what they believe in England. We have not solved any of our problems; we have simply weakened our position. [Interjections.] I can only express myself as clearly as I possibly can; I cannot give that hon. member the understanding to understand what I am saying. Mr. Speaker, it is not only the Economist. Many people say the Economist is a liberal journal. It is a liberal journal, I admit, but it has a very big influence on big business in England. But let me take another paper, the Financial Times. That paper, Sir, is by all tests a conservative paper; it is a paper that reflects thinking by industry, by commerce by banking, etc., in England. On Thursday, 16 March, the day after the hon. the Prime Minister withdrew from the Commonwealth, the Financial Times wrote this under the heading “A Lost Member ”—

The South African Government has for years been following racial policies which would not only, if pursued to the bitter end, probably prove disastrous for the people of all races in the Union, but which have also provoked the strongest condemnation in all other Commonwealth countries.

Mr. Speaker, there you have it again. A conservative paper like the Financial Times says these policies on which we are leaving the Commonwealth solve nothing; they can only lead to disaster for all peoples in South Africa.


What is your point?


Really, Mr. Speaker, the Minister has such a perceptive mind and if he cannot understand what the point is I am trying to make, I can only conclude that he does not want to understand it. Look at the conditions under which we are leaving the Commonwealth Sir. Whatever businessmen thought about us in England before we left the Commonwealth will now think less of us. That is my point, Mr. Speaker.


The policies were there all the time.


Can’t the Minister understand that I am trying to make the point that because we are leaving the Commonwealth, a paper like the Financial Times says that South Africa’s policies can only end in disaster for all the races in South Africa. Can the hon. Minister imagine what effect that must have on all the people who have money invested in South Africa or who may wish to invest capital here in future? This is a conservative paper, Sir, many people say well that has been our policy throughout the years and the fact that we are leaving the Commonwealth cannot make any difference to the fact that people overseas have always abhorred those policies of ours. But the fact that we are leaving the Commonwealth has crystallized opinion about South Africa like never before. A further point which both the Economist and the Financial Times make is that we solve none of our problems by leaving the Commonwealth, we are merely making them worse. That is the point, but of course the Minister dare not understand. That is the true position. If he understood it he would leave that side of the House and come and sit on this side. The hon. Minister does not want to understand and now he wants to make us believe that he cannot understand it.


If you were less confused I might be able to understand you.


Well, let me put it in another way. Perhaps the Minister will understand me then. [Interjections.] As an hon. member says, Sir, “ None so blind as those who will not see ”, or to adapt a quotation which the Minister himself used not so long ago: Those whom the gods wish to destroy, they first make them unable to understand.

In short, Sir, overseas opinion as a result of our leaving the Commonwealth boils down to this: We are leaving the Commonwealth because we do not want to change our policies and they believe that those policies can only lead to disaster for every race in South Africa. It is not the leftist Press that writes that, Sir, it is the conservative Press in England, the Press that is read by business people. It reflects the opinion of those people who wish to invest money here in South Africa, and it conditions their opinion as well.

I say it is against this background that we are leaving the Commonwealth, so to speak, under a cloud. We are not leaving it like Ireland for purely sentimental reasons. Ireland’s leaving the Commonwealth did not shake the British public. Our case is not like that of Burma who left it for sentimental reasons as well. We left it, Mr. Speaker, partly because of the attitude of non-European races all over the world, but we left it also with a feeling in the heart of every White dominion that was present in London that our present policies can only lead to disaster.

At 10.25 p.m. the business under consideration was interrupted by Mr. Speaker in accordance with Standing Order No. 26 (1), and the debate was adjourned until 23 March.

The House adjourned at 10.26 p.m.