as Chairman, presented the Tenth Report of the Standing Select Committee on Justice, dated 19 August 1986, as follows:

Bill to be read a second time.

Mr Chairman, I move:

I hope hon members will be patient with me as this is a very complex and long measure which has been the subject of long deliberation and discussion and I must get it on the official record. I regard it as a great privilege to deal with this important legislation which is aimed at reshaping the building society movement so as to enable it to perform more adequately its basic function of providing housing finance and serving the property industry. Having spent my life in the property industry, and as a former director and regional chairman of a building society, it gives me singular pleasure.

One of the fundamental needs of man is shelter or housing. Most civilised countries recognise that they have a responsibility to accommodate the housing needs of their people. Approaches to what is often referred to as the housing problem, and the manner of dealing with it, differ from country to country and are determined by the circumstances peculiar to the country concerned.

Our own Government fully recognises its particular responsibility in this regard and one of its important social objectives is the creation and promotion of conditions conducive to the provision of housing for all South Africans with the ideal of extending home-ownership to the widest possible extent, thereby making possible a property-owning democracy.

It is important to realise that housing with its attendant problems has many facets. It is not a one-dimensional challenge. Among the more obvious components of the problem are the income levels of the population and the disparity on the levels of various groups of the population, their aspirations and expectations with regard to housing and the legislative framework, all of which have a direct or indirect impact on the provision of housing.

All of this the Government understands and in the recent past has taken a number of significant steps in pursuing its policy objectives regarding housing. Legislation has been introduced to make possible sectional title ownership and time-sharing. New subdivisional norms have been introduced to allow attached and semidetached houses to be held under separate title. Ownership on a share-block basis has become possible. Half a million State-owned housing units are being sold off to private owners on a freehold and on a leasehold basis. Starter housing which can be adapted to the changing needs and financial resources of the family unit is being encouraged. We have seen the advent of the cluster and group-housing concepts on a large scale. Indeed, a quiet revolution in the expansion of home-ownership has taken place in South Africa over past years, extending it on a vast scale.

However, at the heart of the housing problem lies the problem of financing. We as a country have land in abundance, sufficient skills and the capability of producing in sufficient quantity and quality all the building materials needed to erect any number of houses that may be required. The one prerequisite often lacking is adequate financing. As far as private home-ownership is concerned this function has traditionally been performed by the building societies, but the environment in which building societies today have to perform their primary function is a far cry from what it was many years ago at the inception of building societies as mutual thrift institutions. I do not wish to dwell on the changes that have taken place—suffice it to say that building societies have, despite certain tax advantages and incentives, had only limited success in competing with other financial institutions for the savings of the nation in an increasingly volatile financial market. The result has been that they have not been in a position adequately to perform their function of providing housing finance within the scope and the scale required.

What I have said—and I wish to stress this point—is not a criticism of or is it intended to reflect unkindly on the building society movement for which I have the highest possible regard. Indeed, it has played a large and vital role in housing the nation. However, the situation we find ourselves in is partly, I would say, attributable to the fact that the development of the legislative framework for building societies has unfortunately not kept pace with developments, legislative and otherwise, in the rest of the financial sector. Furthermore, as I have said, as home-ownership and the structure of the property industry have been radically modernised, the legislative framework under which building societies operate has not allowed them to adapt and keep pace with the changing environment in which they must work. South Africa is not unique in this. A similar situation has developed in other countries—the most notable example being that of Great Britain to which I shall briefly refer later.

Two commissions, the Commission of Inquiry into the Monetary System and Monetary Policy in South Africa under the chairmanship of Dr G P C de Kock, and the Commission of Inquiry into Certain Matters Relating to Building Societies in South Africa under the chairmanship of Dr J C du Plessis, were appointed to inquire into aspects of the building society movement. These commissions reported among other things on the role of building societies in providing housing finance and their ability to perform this function within the framework of existing legislation. In the light of developments on the financial markets in South Africa and the influence of these developments on the traditional functioning of the building societies, the De Kock Commission gave special attention to the increasing monetary significance of the building societies and to the resultant desirability of subjecting their activities to monetary control while nonetheless allowing them to specialise in the provision of mortgage loans for urban housing and to compete more effectively with other deposit-taking institutions for funds.

After considering these reports and comments received from the societies themselves and from other interested parties, the Government accepted three broad guidelines in its approach to the further development of the building society movement. These guidelines were announced by the then Minister of Finance in his Budget Speech on 30 March 1983. In the first place it was accepted that building societies had undergone an evolutionary change away from the traditional concept of mutual savings institutions and were increasingly entering the field of modern deposit banking. It was therefore desirable that building societies be subject to monetary control, and as they evolved further, disciplines similar to those applicable to banks were to be increasingly applied to them.

In the second place it was accepted that in competition with banks and other financial institutions building societies should be allowed and indeed encouraged to offer more market-related borrowing and lending rates.

In the third place the Government accepted the principle of giving assistance in the form of interest subsidies on the lending rates of building societies to certain categories of home-owners where warranted. The intention behind the current system whereby building societies and building society investors enjoy certain tax concessions was to reduce the cost of building society funding and hence the mortgage rate. But the benefits clearly fall on all borrowers and not only on those borrowers in need of relief or assistance. The system of direct interest subsidy payable to certain classes of borrowers should rectify this. We have scarce resources and these should be directed at those identifiably in need of assistance.

The Government’s view was that at the current stage of their evolutionary development building societies still justified special treatment in terms of their own Act. The Government therefore decided that the current Building Societies Act of 1965 be revised and redrafted to give recognition to the growing bank-related characteristics of these institutions. This task was entrusted to the Technical Committee on Banking and Building Society Legislation. A draft Bill was formulated and published for general information and comment in the Government Gazette of 10 August 1984. Comment was received from the Association of Building Societies of South Africa, individual building societies and other interested parties. The final recommendations of the technical committee were accepted by the Government in March 1985.

In framing the legislation, which will enable building societies to continue to develop along an evolutionary path and to perform their specialised function in the changing environment, a number of fundamental principles were taken as a point of departure. These are: (a) Building societies would be given the choice of either retaining their existing structure as mutual organisations or changing to public companies; (b) building societies would be given more freedom in providing the public with a greater diversity of financial services relating to their main activity; (c) building societies would be able to remain specialised institutions providing home financing and serving as a safe repository for savings; and (d) building societies would be subject to monetary control and thus have to comply with the same financial requirements applicable to banks, except in respect of capital where a somewhat less stringent requirement applies in view of the security of the predominant assets—fixed property—of building societies.

The proposed building society reform comprises two Bills, firstly, the Building Societies Bill, 1986, which will be applicable to building societies that convert to public companies and which we are discussing now; and secondly, the Mutual Building Societies Amendment Bill, 1986, which relates and will be applicable to building societies which retain their current mutual structure and with which I will be dealing later on.

Existing building societies have a free choice of whether to retain their mutual status or to convert to a public company. The decision to convert to a public company must be taken by the members (shareholders) of the building society. The motion to that effect can be carried only if 75% of the shareholders present at the meeting, or represented by proxy, are in favour thereof.

The procedure for conversion is prescribed whereby—among other matters—holders of building society shares will have the choice of converting shares either into shares in the public company or fixed deposits with the society after its conversion. The manner in which the conversion takes place is prescribed. The basis of and the value relating to the exchange of shares are subject to the approval of the Registrar, who may appoint an independent expert to advise him on these matters.

I would like to mention that approximately 25 years ago the Insurance Act was amended. Prospective insurers were given a similar choice, ie to make use of a corporate body in either a company or mutual format when applying to be registered as an insurer. History has shown that the public has benefited enormously from the many new insurance products that resulted from the new innovation and competition.

*Mr Chairman, no single shareholder together with his associates may acquire more than 10% of the issued share capital of a building society company, with the exception of a building society control company that controls the building society company. The 10% requirement relating to maximum shareholding of building societies is also applicable to the building society control company. The purpose of the creation of a control company is to effect a structural separation between the traditional building society activity of deposit-receiving and home financing on the one hand and, on the other hand, the further activities the building society may wish to undertake by way of diversification. This arrangement is, however, optional and building societies not opting for a control company structure are permitted to establish subsidiaries to accommodate their diversification activities.

This aspect of a 10% limit on shareholding was debated at length on the standing committee, especially in view of the fact that in terms of the Banks Act, a shareholding of up to 30% may be approved in certain circumstances. At the time when the Banks Act was amended in respect of limits on shareholding, however, we were faced with an existing situation which had to be taken into account, whilst in the case of building societies we are starting with a clean slate.

The standing committee decided that the limit should be restricted to 10%. The Government concurs with this view, since it will allow the building societies to continue operating as independent financial intermediaries.

A public company, with the exception of a bank or a bank controlling company registered as such in terms of the Banks Act, 1965, is eligible for registration as a building society control company. The reason for the exclusion of banks or bank controlling companies is that the establishment of building societies by banks and bank controlling companies runs counter to current developments whereby building societies are evolving in the direction of becoming “specialist banks”—in granting home mortgages—and being, together with banks, subject to a single Act relating to deposit-taking institutions.

Building societies and mutual building societies are permitted to diversify by establishing subsidiaries for providing services related to their main activity of home financing. Such services must be offered through a separate legal entity that must be a subsidiary of either the building society control company or the building society itself, depending on the particular case. In the case of a building society control company the related business subsidiaries will be fellow subsidiaries of the building society, with the condition that at least 60% of the share capital and reserves of the control company must be invested in the building society subsidiary.

In the absence of a control company, the related business subsidiaries will be controlled by the building society itself, on condition that any investment in the shares of a banking subsidiary by a building society company will be considered an impairment of the capital base of the building society. The reason for this arrangement is to ensure that in the event of a banking subsidiary experiencing liquidity or solvency problems, the capital base of the building society will not be affected. This is merely a precautionary measure.

The conditions regarding the acquisition by building societies of a bank subsidiary warrant special mention. A building society which is a public company will be able to obtain an interest in or establish a subsidiary doing banking business, while a mutual building society is not permitted to obtain such an interest or to establish such a subsidiary. This prohibition is based on prudential considerations. Any registered bank is required to maintain, on a continuous basis, capital to provide financial protection for its depositors, which may include private individuals who can ill afford to lose their savings. In the event of this capital being insufficient, the bank will be required to increase its capital base by issuing further shares. In such an event and where the shares of the bank are held, partially or in total, by a mutual building society, it is unlikely that the society will be able in the short term to take up any new shares in the bank, since the building society, being a mutual organisation, is unable to expand its own capital base by way of a rights issue. This prohibition of a mutual building society obtaining an interest in a banking subsidiary is therefore aimed at protecting the savings of the public.

The investment by a building society in an insurance company is limited to 30% of the issued share capital of the insurance company. A building society that, before the enactment of this proposed legislation, held an investment exceeding this limit de facto four societies have five wholly-owned subsidiaries will not be required to reduce its holding to the said limit. However, as long as the holding exceeds the 30% limit, the restrictions on the type of insurance business that such an insurance subsidiary may conduct, as laid down in the present Building Societies Act, will remain in force. However, it has also been provided that if a building society should decide to reduce its holding to a share interest of 30% within a period of 5 years, such a society will not be subject to the provisions concerning the type of insurance business that a building society may conduct and will therefore be able to apply in terms of the Insurance Act, 1943, for registration to conduct other insurance business also. However, if the shareholding is not reduced to 30% within 5 years, the registration of an insurer in respect of such other insurance business shall lapse. The intention is that such shareholding be gradually reduced over the 5 year period.

Building societies are to remain specialised institutions supplying home finance and serving as a safe repository for the public’s savings. Thus, the proposed legislation requires a building society control company to invest at all times at least 60% of its capital resources in its building society subsidiary. In the alternative to the control company arrangement the investment of a building society itself in shares of a banking subsidiary is taken as an impairment of the building society’s capital. Furthermore, investments in the shares of subsidiaries, as well as advances to subsidiaries, are subject to certain conditions. These requirements act as a brake on the extent to which it can diversify into activities other than pure building society business.

Moreover, both a company building society and a mutual building society will be required to employ their operating capital, ie the capital less funds that have to be maintained for purposes of reserve balances, liquid assets and some other prescribed provisions, in the following manner:

1. (a) At least 80% should be utilised for housing advances or held available for this purpose;
2. (b) an amount not exceeding 20% should be utilised for business advances subject to any amounts advanced for the purpose dealt with in paragraph (c); and
3. (c) an amount not exceeding 8% should be utilised for general advances.

In line with the changed and changing role of building societies in the financial system and the recommendations of the De Kock Commission, monetary controls similar to those applicable to banks are to be applied to building societies. Building societies will thus have to maintain a reserve balance of 8% and 4% of short and medium-term liabilities respectively, as well as a liquid asset requirement of 20%, 15% and 5% of short, medium and long-term liabilities respectively. The reserve balance that building societies must maintain forms an integral part of the latter ratios. These reserve balances can be adjusted and are currently fixed at 5% and 2% of short and medium-term liabilities, respectively, for banks and would mutatis mutandis apply to building societies when these Acts are promulgated. These requirements will be phased in after consultation with the building societies.

As far as financial requirements are concerned, a capital requirement of 4% of liabilities which must be held as share capital and unimpaired reserves is to be imposed in the case of a building society company.

Although the Government has already indicated that the present tax benefits attaching to building society share investments will be phased out, this is a matter that cannot be addressed now. It has been decided to defer a decision in this regard until the report of the Commission of Inquiry into the Tax Structure in the Republic of South Africa, the so-called Margo Commission, has been received. In the meantime, it has been provided in the Building Societies Act, 1986, that any right which an investor continues to enjoy in this regard after the conversion of building society shares into a deposit will be retained for a period of ten years provided it is not phased out earlier by amendment to the Income Tax Act.

Furthermore, an amendment to the Income Tax Act will be introduced to provide for similar tax benefits in respect of some new deposits with a building society company during the interim period after conversion and until the matter can be reviewed in the light of the findings of the Margo Commission.

Mr Chairman, I would like to refer briefly to certain of the more important proposals made by the Standing Committee on Finance. A number of amendments were proposed which will improve the administration and implementation of the Acts, and are thus worth mentioning.

Firstly, the conditions on which the Registrar may grant registration to a building society or building society control company have been refined. Furthermore, the Registrar must be satisfied that the directors and officers of the institutions are “fit and proper persons” and that the officers of the company have sufficient knowledge to manage the institutions.

Secondly, if a building society furnishes information in connection with its application for registration which is in a material respect untrue or if it fails to comply with the conditions of its provisional registration, the Registrar no longer has authority to cancel such registration himself but will have to apply to the court for an order cancelling such registration.

Thirdly, any notice issued by the Minister of Finance in consultation with the Minister of Trade and Industry, causing a provision of the Companies Act not to be applicable to building societies or to be applicable with qualifications, must be tabled in Parliament but is of no force if the Houses do not approve them.

Fourthly, the provisions of the current Building Societies Act, 1965, which provide for the objects of a mutual building society, are being made applicable to building societies as well.

Fifthly, a prohibition has been inserted to the effect that a building society may not invest in the shares of another building society.

Sixthly, when converting a mutual building society to a company, only those equity shares which are not taken up by members of the former building society may be offered to the general public.

In the seventh place, tax-free investments with a mutual building society which converts to a company shall retain their tax advantage for a period of 10 years after conversion provided it is not amended before that period by an amendment to the Income Tax Act.

Furthermore, no building society shall require a fixed minimum amount to be deposited in a transmission account when opening such account or to be maintained in the account, but this provision shall not prevent a building society from closing a transmission account when there are no funds in the account.

Finally, the Minister may prescribe that a fair percentage of a building society’s total housing advances must consist of advances under a specific amount to persons in certain income groups.

As regards the latter two amendments, which are also applicable to building societies which remain mutual, there is a degree of conflict with the objectives of the legislation, namely that building societies should be allowed to enter the free market to a larger extent to compete with other financial institutions. The relevant proposals will restrict such competition. They were, however, accepted by the standing committee, and the building society movement has agreed to the proposals.

These were amongst the many useful amendments proposed by the Standing Committee on Finance, and I wish to pay tribute to the chairman and the members of the standing committee today for the enormous amount of work they did on this legislation and for the good judgment they showed in discussing the legislation.

Mr Chairman, I may mention that according to a speech that was made by Mr Nigel Lawson, the Chancellor of the Exchequer of the United Kingdom—as reported in Banking World of August 1984—the proposed legislation concerning the building society movement in the United Kingdom shows a remarkable similarity to the proposals contained in the legislation under consideration. I wish to quote the following from this report:

1. (i) The traditional role of building societies as safe homes for the savings of small depositors, and reliable providers of loans for house purchase by owner occupiers will be upheld;
2. (ii) Building societies will be allowed to provide limited banking services;
3. (iii) It will be open to building societies to convert to company status;
4. (iv) It is not proposed that building societies should turn into banks… [or] that they should be the providers of funds to commerce and industry,… [or] … be large providers of general consumer credit.

Mr Chairman, the preparation and drafting of this legislation, as hon members will appreciate, was a monumental task involving not only conceptual design but also the need to attend to a myriad of detailed technical matters. I should therefore like to take opportunity of expressing my sincere gratitude to all those involved in bringing this draft legislation to fruition.

In this regard I am happy to single out the Technical Committee on Banking and Building Society Legislation, and in particular Mr Naas van Staden, immediate past Registrar of Building Societies, who prepared the original draft of the Bill; the officials of the Registrar’s office that have lived with these Bills since their inception; advocate G Grové, Deputy Chief State Law Adviser, who did much more than is expected in the normal course of certifying draft bills, for which I thank him; the building society movement, including both the Association of Building Societies and individual societies, which spent many hours in studying, commenting on and discussing drafts of the Bills. To them I owe a special word of thanks, not only for the time they spent, but also for their constructive and informed contributions and the positive spirit in which consultations took place.

Last but certainly not least, Mr Chairman, I wish to thank the chairman, vice-chairman and members of the Standing Committee on Finance. They certainly warrant special mention. This committee proposed a number of useful amendments, as mentioned earlier, and we have derived great benefit from their knowledge and experience.

†Sir, as I mentioned in my introduction, there exists a multitude of needs to achieve the appropriate housing for the people of the Republic. But those needs cannot be met without modernising the financial instruments that must serve many of those requirements. I believe further that there is a need for new products and financial packages to promote and expand home-ownership. One has only to look at the various permutations of financial packages for home-ownership that are available in the United States and elsewhere for the financing of home-ownership to realise what can be achieved by innovation in this regard.

I trust that this legislation will assist the building society movement to create an environment of competition and innovation that will serve the needs and the requirements of the public in home-ownership and related matters.

Home-ownership is the central building block of a free property-owning democracy. The Bills before us today will assist us in promoting, expanding and establishing such a society.

Mr Chairman, I am very pleased the hon the Deputy Minister of Finance is handling this Bill and not the hon the Minister of Communications, and I am happy that he is in the House. I think we will sail in fairly tranquil waters during this debate and I should like to start off by expressing thanks to various individuals in regard to this measure.

Allow me to begin by referring to the chairman of the standing committee and my colleagues on that standing committee who, I believe, have all done an excellent job in relation to this Bill. The chairman, as always, showed a very high degree of patience in respect of a highly technical measure. This is indeed a measure which has involved a vast variety of different vested interests, as well as considerable differences of opinion. I believe it is actually a remarkable achievement that the measure is able to come before Parliament, after being before the committee for a very long time, with no fewer than 89 amendments. There is only really one amendment of substance, even though it comprises three separate amendments, which was not unanimously agreed to by the committee. I believe that is a remarkable achievement for a standing committee. I believe it redounds to the credit of the chairman and, in a large measure, also to the members of the standing committee, that so difficult a measure was capable of being passed by that committee.

In respect of the other people who were involved, I should like to point out that the office of the Registrar of Financial Institutions—he personally, as well as Mr Badenhorst and other people in that office—did an excellent job. They were at all times co-operative, courteous and helpful, and assisted the members of the standing committee in technical matters with which many of them were unacquainted until that time. I believe one is really indebted to them.

I should also like to mention by name Dr Jacobs of the SA Reserve Bank who has played, I believe, an extremely prominent and important role in this matter. He and I do not always agree on everything. In many ways, however, he is a sort of old-fashioned Adam Smythe, if one may refer to him in this manner. He will, with time, mature in respect of the newly developing, more socially conscious South Africa. I must tell you, however, Sir, that he is a dedicated official. He is an able official and a man who knows his job extremely well. I should therefore like to pay tribute to him, also by pointing out that this legislation bears his hallmark in many respects.

Mr Chairman, on a point of order: I have great difficulty hearing the hon member for Yeoville owing to the noise made by hon members on all sides of the House.

Order! Hon members must please lower their voices. They are talking too loudly.

Well, Sir, this measure is perhaps not very interesting to all but it is nevertheless important to the community in South Africa.

I should also like to express my thanks to the people who took the trouble to submit evidence to the committee—also to those who gave oral evidence. I am not only referring to the Association of Building Societies but also to individual members of building societies, of other financial institutions and also to a large number of individuals who took the trouble to assist us in producing what is, I believe, a good piece of legislation. It is not a perfect piece of legislation and will perhaps have to be amended from time to time. I do believe, however, it is a piece of legislation of which this House and the financial institutions of this country can be rightly proud.

I may add that the same sort of thing that has been done by way of this piece of legislation in relation to building societies here has—and that is well known—been done in Great Britain. It is remarkable, however, that as we sit here today, we are probably ahead of Great Britain in regard to this matter. I believe our legislation is better than that of Great Britain, and we are actually going to be executing it before they will be executing theirs. I believe they are going to be able to learn a lot from us in relation to the building society movement.

Another fact which I should like to mention is that I believe the Standing Committee on Finance fulfils some interesting functions. One of the functions, for instance, which it fulfils in relation to this building society measure is that it did not deal only with the verba ipsissima of the Bill. Let us take a simple example by way of illustration. During that period we had the situation that the building societies simply decided that they were going to charge for the retention of title deeds an amount of R12 per year. Because the people were in our presence we could immediately confront them with that letter they had sent out stating that they were imposing a charge which was entirely unwarranted; and miraculously, Sir, within minutes after the issue had been raised in the committee, we were told that another letter was going to be written in order to withdraw this particular charge. So even if we did nothing else—I say this to the hon member for Smithfield in particular—we at least saved every single bondholder R12 per year. So even if no other work had been done, that action in itself would have paid for the activities we carried on there. It is interesting to see how this committee can fulfil the function of a watchdog—in fact, it does so very well—over the interests of the ordinary bondholders of South Africa.

We have spent months and months deliberating upon this Bill. About 89 amendments were agreed to and I do not intend to analyse the Bill in detail. There are, however, some things which we need to say, which we need to discuss, and which we need to debate.

There is no doubt that the purpose of the legislation is to mobilise the public’s savings in order to make them available for housing. This means that the public’s own efforts are utilised to provide housing, as opposed the use of State funds and thus taxpayers’ money. In this way the public’s savings can be used without undue interference from the authorities. The State’s role, as we see it, is to create the machinery for the establishment of the building society movement, to include the mechanisms for safeguarding both the savings and the borrowers, and also to ensure that no abuse takes place in regard to the activities of a building society.

When, however, we look at the origins of the whole building society movement, we see that it is founded on the frustrations of working people without capital who decided in days gone by to put their savings together so as to allow them to obtain housing—the order of priority depended on their particular needs—which would then be owned by them. In other words, they pooled their savings and then one at a time they managed to buy a house from those savings. That is the origin of the building society movement. That very principle is one that we in South Africa should perhaps try to instil into our people once more. People without means should be able to get together, pool their resources and in that way create a financial institution which benefits themselves. While those people in the past had the concept of ensuring their own homes, and had it from a purely personal point of view, there is no doubt that the whole question of trying to promote the increased ownership of private homes is in itself a major stabilising factor in any country and could in fact be a major stabilising factor in South Africa.

I have said before in this House and I say again that I have never heard of anybody setting fire to his own home except if he was seeking to be fraudulent in order to claim insurance. People do not set fire to their own homes. They do not set fire to their friends’ homes. People do not set fire to homes which they own. This is a stabilising factor which helps a community to regulate itself and to have pride in itself. We need to do this in an increasing measure in South Africa in the future.

Housing as a whole has become a major issue in South Africa and there are now many alternative solutions being offered as to how to solve the housing problem of South Africa. Today is, however, not the time or the place to discuss those but whatever those solutions are, there is no doubt that the building society movement can and will play a major role in the provision of housing for South Africa as the years go by. However, one of the things that needs to be said is that the building society movement has in the past been mainly concerned with the provision of housing for Whites in South Africa. The savings have mainly come from the White community even though in regard to savings accounts, as opposed to fixed deposits and shares, there has been a large number of savers who have not been White. However, the bulk of the money has come from Whites and from White-controlled institutions. The image that the building society movement has therefore had until now is that it is part of the White community. What the movement needs is for building societies to be part of the South African financial community as a whole and of the South African community as a whole. The institutions therefore need not only to be institutions which cater for all races but they also need to be perceived to be part of the whole South African scene. One hopes that the legislation before us will help to bring about that situation.

The Government has appointed two commissions of inquiry to investigate this matter and they, interestingly enough, produced completely different recommendations even though people of standing were involved in both of them. However, the recommendations which came from them were divergent in very important respects. The Government decided to draw three principles from this.

Firstly, it was to apply monetary controls, if not identical then at least similar to those applicable to the banking sector. The second principle was that there should be competition not only among the building societies but also between the societies and other financial institutions. The third principle was to give interest subsidies to deserving borrowers as opposed to giving tax advantages to certain people investing in the societies. Those were the three principles upon which these two Bills were based.

When these Bills came before the standing committee there were a number of issues which arose which had to be decided and which became highly contentious.

The first issue was whether there should be corporate societies at all or whether we should not just stick to mutual societies, and should there be a choice between corporate and mutual. The standing committee decided that the equitable way to deal with this was that there should be a free choice as to whether one was going to be corporate or mutual. There should therefore be no compulsion on anyone to take a particular course.

The second issue which arose was the question of whether building societies should go beyond providing housing funds and whether they should provide other financial services. Here again I think the decision that was made was the correct one, and that is that other services can be provided but there is no doubt that the main function of a building society is to provide money for housing.

The third issue was that we accepted that the monetary controls should in fact be imposed upon building societies so that they would form part of the whole financial structure of South Africa and be subject to those controls.

There are, of course, other matters which did not perhaps, to my mind, receive adequate attention in the initial legislation. The hon the Minister listed a number of amendments, but he listed only a few of those that were effected. I think the standing committee took the view that the legislation had actually to adapt itself to the changing South Africa in which we live. In other words, it was not a static society; it was a society that was changing, and the committee tried to effect a number of amendments to give effect to this. I am not certain that we have fully achieved that. I want to be quite frank. I think that it may well be necessary within a short time to review this legislation and to make other changes, but the reality is that because events in South Africa move so fast in the political field whereas the financial institutions and the legislation relating to them tend to be more on the conservative side, perhaps we lag a little behind the whole movement of change which exists in South Africa. However, what needs to be accepted by all of us, is that the change which is taking place in South Africa and which is going to take place in the future is not going to be restricted to constitutional structures and the exercise of the franchise. So this House is absolutely dominated by debates about constitutions, about the franchise and about the exercise of political power. It is dominated by them. However, the reality is that change in South Africa is going to be even more meaningful and even more difficult for some people to accept in the socioeconomic field and may well require the revision of what are generally accepted philosophies and principles.

It is one of the faults of our own debating in this Chamber that we appear to concentrate almost entirely upon the political, constitutional and franchise side without paying enough attention to the socioeconomic situation and in particular to the conflicting economic philosophies which exist in South Africa. Some of these I will have to deal with a little later.

I want to draw attention again to the image of the building society movement. This image has been White oriented but the future looks completely different. We will have to make greater use of financial institutions as opposed to the State in order to provide for the Black, Indian and Coloured people of South Africa. At the moment the approach is that everything that concerns housing for instance is a State obligation. Likewise, everything concerning a whole series of services is a State obligation. We are almost getting a dichotomy in South Africa where the private sector will provide for the Whites and the State will provide for the Blacks, Coloureds and Indians. That is a wrong philosophy. The reality is that the private sector should provide as much as possible for all the races of South Africa; it should be available to all the people.

There is no doubt that there will be greater demands made upon the private sector to help solve some of the economic problems of South Africa. We must get away from the concept that it is purely the State for certain groups in South Africa and the private sector for another group in the community. There must be interchange with regard to all the groups.

The other factor which we have to bear in mind—specifically in the case of housing—is that there is likely to be a very big difference between the aspirations and expectations of some sectors of our community in respect of housing and their financial ability to provide that housing for themselves. People expect more than they are able to provide for themselves. With regard to housing in particular and the building society movement we will have to take a completely new look at the whole concept of financing housing for those people through the private sector in order to deal with their aspirations and to satisfy them to a reasonable extent. In other words, Sir, one may find the situation where a man may have earnings to pay for housing, but he may not have capital; and if he does not have capital, we have to be able to allow him to get a certain standard of living based upon his earnings, so that he does not become frustrated and decide to condemn the whole system. One of the difficulties is that as soon as one earns, one feels entitled to go onto another level of society, but one does not have the capital to meet that. I think, Sir, we will have to take a very hard, long look at this whole situation and consider it as a stabilising factor. The building societies could play a major role in this.

In a period of political instability combined with a period of economic depression, financial institutions cannot be regarded as being immune to normal business risks. The supervisory role that is exercised by the Registrar and is now intended to be centralised in regard to banks and building societies under the Reserve Bank, is a move that we not only approve of but we have also suggested it periodically in the past. That supervisory role and also the role of the Reserve Bank as the lender of last resort may have to be bigger than it was in the past, but it may not be adequate in these times of financial instability and economic depression. There is no doubt that we are not going to head for periods that could be regarded as substantial boom periods or periods of political stability; on the contrary, Sir, we have to prepare ourselves for more difficult times in both those directions.

The other fact is that the conflict between the economic philosophies which have substantial support in the White community and those in the Black community, cannot be ignored. One would imagine that at a time when these issues have to be faced they would be dealt with. The tragedy, however, is that most White South Africans who are convinced that their own views are correct tend to ignore the alternatives which deprived people find attractive. Deprived people tend to find alternatives attractive without fully appreciating the shortfalls of those alternatives. One of the things that need to be done is to enable people who are deprived, and who find alternative economic systems attractive, to understand that those systems are not necessarily better merely because the existing system does not offer them immediate prospects of improvement.

There is a great need in South Africa for an understanding of the different economic systems that are available, and for a debate to take place. One of the tragedies, if I may put it like that, is that even in this House one cannot conduct a reasonable debate on economic alternatives without its degenerating into a kind of labelling, slanging match.

What we have to do in South Africa is to examine the alternative economic systems that are available, show which work and actually produce jobs and possibilities of advancement and show where other systems which may seem to be attractive cannot, in fact, produce these results.

I think that is one of the factors which arose in an indirect fashion in the discussions about this measure. There was a considerable debate in the committee on whether the function of the building societies was to be purely a business function, in other words whether we were creating another business in which profit was the only motive, or whether there was also a social objective to be achieved. I think the committee tried to find a happy medium between the two, by which one recognised the business aspect on the one hand—the incentive, free-enterprise aspect—but also recognised on the other hand the need to see the changing South Africa and its present and future social requirements.

Accordingly this Bill contains, for example, the right to register new mutual building societies—a right, Sir, because in emergent societies this desire for self-help and getting together should be encouraged, however difficult it may be under the existing circumstances to establish mutual societies. However, mutual societies were, in fact, if I may say so—and the hon member for Sunnyside knows this even better than I do—one of the bases upon which the Afrikaner people uplifted themselves—the use of mutual societies. They helped themselves in order to deal with what was a capitalist situation in which they did not have a share. So we have to encourage that mutual concept. [Interjections.]

Secondly, Sir, we included in this Bill a power to the hon the Minister—strangely enough a power which the authorities did not want but we made them take it—and that was that if it was felt that a fair proportion of the loans did not go to people in the lower income groups and for the smaller bonds, then the hon the Minister had the power to make them do it. In other words, we wanted to deal with the situation where, obviously from a business point of view, it is more attractive to lend to people who are a better risk and to lend larger sums of money to people who are wealthier. We wanted to get away from that to recognise that part of the social responsibility of a building society is to provide housing for the ordinary people of South Africa. Therefore, if a building society does not do that—and one expects that they will do that and we hope that they will do that—then the Minister has been given the power to take some action in this regard.

Mr Chairman, the other fact which I referred to in respect of mutual societies, and I want to come back to that for a moment, is that the whole concept of creating new forms of friendly financial societies is one that has to be encouraged. Therefore I, for one, am pleased, and I think my colleagues on the committee are pleased as well, that the authorities are, in fact, giving attention to draft legislation to try to introduce a new type of informal friendly society which will enable people to help themselves. The only way to help oneself, Sir, is if one has the means to do it. There is a very old saying—if you will permit me to quote it, Sir—which comes from a learned authority who belongs to my religion and it says: “If I am not for myself, who will be? But if I am for myself alone, who am I?” We would require that principle in the application of this concept so that you help yourself, but you must also help others. The concept of a friendly society is part of this and it can be built up in any community which consists of people who feel themselves deprived and who feel that they do not have a fair share of the economy.

Another aspect which is to my mind a vital one is the need to produce a balance between the security which the saver requires on the one hand, and the desirability to lend money for social as opposed to business objectives as I have just said on the other. That is an issue which I think we are going to have to deal with in some considerable respects.

Thirdly, there is the right which everyone should enjoy—irrespective of the ability to make substantial deposits—to have access to the building society movement for the purpose of opening an account, and this in itself should make the building society movement a more attractive movement as such. We provided that everyone would be entitled to open a building society account irrespective of how small the amount was that he wanted to deposit.

In his Second Reading Speech the hon the Minister referred to these amendments to the Bill and described them as being contrary to the objectives of the legislation, “namely,” he said, … that building societies should be allowed to enter the free market to compete with other financial institutions.” To my mind they are not contrary to this concept. They are a recognition of a changing South Africa and the need to recognise that competition which is desirable also needs to be tempered by a social conscience and a caring for other people in our country.

The free market—and I say this to the hon the Deputy Minister with due respect—is not a sacred cow. The free market is not in any way a sacred cow. Social objectives have to be borne in mind, particularly if they have to be applied without encroaching upon free enterprise principles, particularly those of an incentive to work, to invest and to create jobs.

I want to come back, Sir, to the problem of securing savings. The issue here to my mind is: When one deposits money in a building society, the one thing one wants is to get it back when one wants it. At the same time, the building society will lend it out, and it has to make a judgment in respect of the security on which it lends it out. That is where the question of supervision of control, of monetary control comes in; the question of the Reserve Bank as lender of last resort.

In our history as well as in the history of Western countries we have had failures of financial institutions which are too numerous to mention. We can mention them in the United States, in Canada, and here at home. We can talk about the building society which not so long ago had to be taken over by another building society in order to make sure that it, as well as its savers, were all right. We can mention how banks in the past have been in similar difficulties.

The issue arises of how to reconcile the question of depositing money in an institution, when in fact some of that money goes towards a social purpose which may not be as safe as it would otherwise be. As much as one wishes to supervise and control, the reality is that things do go wrong. We have the example where one can do one of two things: Where questionable loans are going to be made, for a social purpose, then the institution can be guaranteed by the authorities in respect of that loan. Alternatively, the deposit can be guaranteed.

I want to take this opportunity to make an appeal for deposit insurance, say up to an amount of R100 000, in respect of deposits in financial institutions to act as a safeguard. The mere fact that the ordinary saver knows that that guarantee exists will give him a far greater feeling of security than otherwise. If the institution is sound there is no risk, but if the institution is not sound, the need for the guarantee is there if the institution is to be allowed to continue. We have examples of that throughout the world. Today there are hundreds of thousands of Americans whose savings have been safeguarded because there was deposit insurance. That does not mean that every institution gets deposit insurance. Before an institution gets deposit insurance, it should be an approved institution. The institution should comply with the Reserve Bank requirements. It should be regularly inspected. However, the mere fact that it is an approved institution means that the people who invest in it will feel safer in regard to their savings.

In all humility I make an appeal to the hon the Minister. In the times we are entering now the need for confidence in the financial institutions of South Africa has never been greater. The need for confidence in existing structures in our society which are sought to be demolished at every turn has never been greater. Therefore I make the appeal that we look into this situation and that we investigate and eventually introduce a deposit insurance scheme for the small people in South Africa who invest their money in financial institutions in order that they may have that feeling of confidence.

The other question that was debated at some length—and obviously I cannot deal with all the questions in the time available—is the question of whether the shareholding in a building society should be limited to 10% or whether it could be increased to 30% with the Minister’s approval. I see some smiles around me when I raise this subject. The argument is that there should be no concentration of economic or financial power and, by limiting the shareholding of these building societies, one will actually prevent further concentration of economic power. The tragedy is, however, that by limiting the shareholding to 10% one is actually not limiting the concentration of economic power. What one is doing, is that one is allowing people to control financial institutions without having the responsibility and the worry of having substantial shareholdings in them. I can give many examples. There is in the evidence that was led a classic case of one building society which bears the name of a bank that has not got a single share in the building society, not one. Evidence was given that one associated institution had a shareholding for a particular purpose in it while in fact it did not have any shares in it, but it controls it. So one of the things that is happening in South Africa and has happened in the building society movement is that the boards of directors are self-perpetuating oligarchies who perpetuate themselves by co-option. So they do not control the building society, they do not have any say in the shareholding but they control the whole show. What is happening now—if we take 10% of a large building society which is a vast sum of money—is that with 10% they will control it. But if something goes wrong they cannot take more than 10%. Now let us take the classic example that has just taken place. We have just had a rights issue for a bank. The rights issue was underwritten by an insurance company. The public did not want to take up the rights. The insurance company was allowed to take up the rights and the insurance company now owns more than 50% of the shares of that bank. I want to ask what would happen if the same situation arose with regard to a building society. What has happened is that the Minister and the majority of the committee by not accepting this amendment have deprived themselves of the power—in appropriate circumstances where there is a difficulty—to allow that to take place. I must tell you that I am not for the concentration of economic power. I am not for monopolies, but if we look at the scene in South Africa and see how companies are controlled with small shareholdings, how companies are controlled because of the indifference of people in going to meetings, how companies are controlled through interlocking shareholdings, how companies are controlled through the use of pension funds, how companies are controlled because people cannot be bothered to come to meetings, then we have to say to ourselves: Should we not really look at the security of the company? Should one not give the Minister the power—although everyone here knows that I do not want to give this hon Minister any power if I can help it—so that under appropriate circumstances he will be able to give his consent to a larger shareholding? I venture to forecast that eventually, as with most suggestions one makes in this House, they will come along some five years later and amend the Act when they find themselves in difficulty because something has gone wrong.

An example that has been quoted is that in Canada banking legislation stipulates that one is limited to 10%. Let me tell hon members something. In Canada three banks have gone into liquidation in the past six months. Two of them went in the same state, Alberta, and one went in British Columbia. Moreover, there were others that had to be saved by the state. Do hon members know what happened? There was no one who had more than 10%. There was no one who could save them; no institution could help them, and the two Alberta banks have simply gone down the drain together with people’s savings in them and everything else. I am therefore making the statement quite clearly that one can in fact retain the 10%, but I think there needs to be a safeguard in case things do go wrong. Unfortunately, there is no guarantee that things will not go wrong but there is a history of things that do go wrong. I must tell hon members that I hope that I am wrong and that things will not go wrong. I hope I am wrong, but I know that unfortunately they will go wrong. That is not how things are in real life. Things in real life are not always perfect.

There are some other matters which I should like to touch on briefly. I want to deal, if I may, with the question of the tax concessions. It is said that the tax concessions are to be phased out over a period of 10 years. However, I know this hon Minister and I know his department, and they can easily frustrate this whole thing by prescribing the dividend rates on these shares, in which case tax-free investments would become meaningless. If that is so, then that phasing-in period is of no consequence whatsoever. I should like an assurance from the hon the Minister or his deputy that the dividend rates for the tax-free shares will not be manipulated which would make them unattractive, so that they will disappear in any case and destroy those vested interests. To my mind, that would be a breach of faith if it were done. I hope that somebody will give us that assurance.

We should look at the whole question of tax free investments. I hope that that will be dealt with once the report of the Margo Commission is available and that we shall be able to debate it at length. I do not want to follow in the hon the Minister’s footsteps by jumping ahead of the Margo Commission and making announcements about what is going to happen. Of course, I cannot make announcements about what is going to happen; I can only debate an issue.

That is ridiculous.

It is not ridiculous; it is a fact. I can quote the hon the Minister if he wants me to.

You were not at the congress.

I did not see the hon the Minister correct his own speech as reported in every newspaper in the country. I was not at the congress, I am pleased that I was not at the congress, and I have no intention of ever going to any of your congresses!

Hear, hear!

You should have stayed away too. [Interjections.]

I am not sure why a congress took place. But that is another matter.

It was a non-event.

Sir, may I talk about tax-free investments without being distracted by the hon the Minister? I believe that one has a situation in South Africa where insurance companies, pension funds, building societies and the State are involved in this tax concession business. I think that one has to look at it realistically and see what, in fact, should be done. One thing cannot happen, and that is that the State should have the monopoly of providing tax-free investments. That is what now seems to be the tendency that is developing. I want to make an appeal that we in South Africa should look at tax-free investments, particularly from the point of view of the aged. We should have a tax-free investment which is an indexed investment to protect it against inflation and which would serve as a safeguard against abuse. It should also be available to the older people of South Africa, in order to provide for them when they are not so skilled in looking for sophisticated investments which would protect them against inflation. To my mind, this concept of a tax-free indexed bond is the one that needs to be looked at. In fact, we need to look at it in the very near future because of the way in which the South African economy is going.

Let us now look at the Bill, not at the details contained in it but rather at the future. First of all, I support the centralisation of the supervisory functions under the Reserve Bank. I think it is a sound idea, and we look forward to that legislation later this year.

Secondly, I believe that we can see a situation developing where the building societies will actually fall under the Banks Act and where the building society will merely be a form of bank which we will have in South Africa which will specialise in a particular kind of finance.

Thirdly, I should like to see this as a cooperative effort on the part of people who have got together to encourage the growth of their own financial institutions in South Africa.

Fourthly, I should like to see that savings in South Africa are encouraged as a whole because there has never been a greater need for capital formation in South Africa than there is today. The Government should give encouragement to savings in this regard.

Fifthly, I should like to see that there is a complete feeling of safety in regard to savings in financial institutions, not only through greater supervision or the bank and, as the lender of last resort, the Reserve Bank, but through an insurance scheme.

Sixthly, I should like to see that these institutions recognise that there are socially desirable purposes, particularly in the field of housing, to which they should apply themselves.

Therefore, I say, with respect, that I think this is a measure which we can support. I think we can support it with a degree of confidence for the future, knowing that perhaps there will be some changes which will have to be made but also at least that it provides a base from which the building society can move into a new era. I therefore have much pleasure in supporting the Second Reading of this measure.

Mr Chairman, the Standing Committee on Finance received memorandums from, amongst others, all the building societies, the majority of banks, the Chamber of Industries and all the respective chambers of commerce. Representatives of all these bodies appeared before the committee and the committee held fourteen meetings. Ample time was allotted to all concerned for the discussion of the memorandums and the Bills. After weeks of deliberations the committee approved the Bill with a further 89 amendments, as the hon member for Yeoville has mentioned. Only one amendment was negatived. The hon member for Yeoville has just elaborated, in quite some detail, on the one amendment which, in his opinion, should have been passed, but was in fact negatived.

I want to thank the hon member for his kind words about me. I also want to express my thanks and appreciation to the members of the committee and, in particular, to Dr Burton, Dr Jacobs and their staff. I do, however, also want to extend a special word of thanks to the hon member for Yeoville for his outstanding efforts, for his hard work and the particular contribution he furnished. It was of the same standard as the fine speech he made here this afternoon, with the exception of the brief interlude in which he crossed swords with the hon the Minister. [Interjections.] It was indeed a gigantic and difficult task they have completed. I should also like to extend a special word of thanks and appreciation to Mr Ferreira for the excellent secretarial service he furnished.

The role of building societies has traditionally been that of an institution in which the man in the street could deposit his savings and that of an institution providing home loans for the average man at reasonable interest rates, chiefly to the lower and middle income groups.

South Africa does not have a fully developed homegeneous economy, as the hon member for Yeoville has rightly remarked in his speech. At present a large section of the population is, for the first time, reaching an income level where they can and must save and also invest in housing. There must be bodies to meet the loan and savings needs of our rapidly expanding urban population. In a developing economy the build-up of capital is vital and everyone must be exposed to the routine of saving.

In our circumstances it is therefore essential to have institutions which will specifically meet the savings and home-loan needs of our rapidly growing urban population. According to projection figures, within the next fifteen years the country’s urban population will have doubled, and all these people need housing. It is estimated that more than half a million home-owners owe R10 000 million to building societies, whilst building societies owe approximately R18 000 million to members of the public who are saving, and the net value of the assets of building societies is probably as high as 1,5% billion.

Although building societies traditionally provided funds to all population groups in accordance with their ability to pay, in the light of the various alternative channels for investment, the flow of personal savings to building societies was not sufficient to enable building societies to fulfil their function adequately, notwithstanding the available tax concessions. Consequently it is essential, during a period of generally increasing rates, to compete for funds with other financial institutions on the financial markets, a necessity that has compelled building societies to increase their lending rates considerably.

In the light of these complications, separate commissions were appointed, i.e. the Commission of Inquiry into the Monetary System and Monetary Policy in South Africa under the chairmanship of Dr De Kock and, secondly, the Commission of Inquiry into Certain Matters relating to Building Societies in South Africa under the chairmanship of Dr Du Plessis.

As a result of the problems in the financial markets in South Africa and the influence of these problems on the traditional functions of building societies, the De Kock Commission devoted special attention, for example, to the following: Firstly the increasing monetary significance of building societies; secondly the concomitant desirability of subjecting their activities to monetary control; thirdly whether they should be allowed to continue to specialise in the provision of mortgage loans on houses in urban areas; and fourthly, enabling them to compete more efficiently for funds with other deposit-receiving institutions.

Firstly, it is accepted that building societies have undergone revolutionary changes moving away from the traditional approach of mutual savings institutions and, to an increasing extent, entering the field of modern deposit-banking. It is therefore essential for building societies to be subject to monetary control and, as they develop further, to be increasingly subject to requirements similar to those applicable to banks.

Secondly, we must accept that building societies should be allowed, in competition with banks and other financial institutions, to quote more market-orientated loan and deposit rates. The first Bill, however, drafted by the technical committee, made conversion into liquidity companies mandatory. As a result of strong opposition to this, building societies now retain the option of remaining mutual societies instead of becoming liquidity companies. It is therefore essential, too, that mutual associations be allowed to exist on an equal footing with liquidity companies. Therefore hon members will find the two Bills to be similar.

In order to allow building societies to fulfil their specialised functions in a changed market situation, some of their fundamental principles are focused upon. Firstly, building societies are being granted an opportunity to choose one of two options, i.e. that of retaining the present structure of a mutual organisation or of converting into a public company. Secondly, building societies continue to be specialised institutions catering for home-loan financing and serve as safe repositories for people’s savings. Thirdly, building societies are being granted greater freedom in providing the public with a larger variety of financial services relating to their main functions. Fourthly, building societies are being subject to monetary control and will be subject to the same financial requirements as banks, except for capital requirements. Fifthly, building societies are required to employ their operating capital in the following way: At least 80% of the operating capital must be employed for the financing of housing or being kept on tap for this purpose, whilst an amount of not more than 20% of the operating capital must be available for advances to business undertakings. Included in this, there is an amount of not more than 5% for general advances. In the sixth place building societies must maintain cash reserves of 8% and 2% of their shortterm and medium-term liabilities, respectively, with the Reserve Bank and have liquid assets covering respectively 20% and 15% of their short-term and medium-term liabilities and 5% of their longterm liabilities.

These somewhat more stringent capital requirements for building societies are being instituted owing to the greater security this would afford depositors and investors. They are also being introduced to protect the interests of the public. Passing these two Bills would enable building societies to fulfil their important function, in a changed market situation, to the benefit of the lower and middle income groups, in particular. That is why we have great pleasure in supporting the measure under discussion.

Mr Chairman, this afternoon we have a Bill before us which took up not only hours, days, weeks or months, but even years before ultimately being introduced here. I believe the Registrar of Financial Institutions, Dr Jacobs, and his personnel will probably sleep very, very peacefully tonight in the knowledge that this entire matter is behind them.

This Bill was originally published for comment as early as 14 August 1984. The ball has been rolling since then and even in November last year portions had already been submitted to the standing committee. The Standing Committee on Finance did not proceed continuously in dealing with this measure, however, and only shortly before we dispersed in June this year did we finally put the finishing touches to it.

I obviously have to point out that we now have two very similar Bills before us. There is the Mutual Building Societies Amendment Bill in addition to this one. Time will tell whether this was a very wise step. To me it already seems like a piece of bicameral legislation. Who knows, one of these days we may also have a tricameral building society Bill before us. [Interjections.]

In the course of my speech I shall refer in passing to certain aspects concerning the Bill; I do not wish to read quotations aloud. The hon member for Smithfield provided certain details regarding various obligations to be fulfilled so I shall not refer to them any further.

Of course, the hon member for Yeoville mentioned a few aspects to which I should also like to revert. He said building societies played an enormous part in society and the life of a people. Building societies arose for the purpose of attracting savings from public ranks, which in turn were made available to the same public in the form of home loans. The hon member for Yeoville said with complete justification that there was altogether too much discussion of politics in this House and too little of economic affairs. I have to say, however, that the economy of the country is in such a mess and in such sad case in consequence of this Government’s action that one can no longer even discuss it. [Interjections.] The hon member for Yeoville said inter alia that a person would never set fire to his own house or his own building but this does not necessarily apply only to a man’s own house. I put it to the hon member that people do not set fire to their own schools and universities which provide them with education and training either. When people actually do this, what next? People doing something like this are just as capable of setting fire to their own homes.

They regard them as symbols of imperialism—that is why they set fire to them! [Interjections.]

Mr Chairman, if they are so anxious to set fire to symbols of imperialism, they should burn everything they possess—their houses, clothes, the lot.

When the UP was in power, we did not bum down our schools and houses. We went to school and studied! [Interjections.]

How on earth can those things be a symbol of imperialism? All those schools and universities were built and handed to them. It may well be put forward that the standard of education in the schools is not totally acceptable. Nevertheless it is quite another matter at universities. Why do those institutions all have to be destroyed now? [Interjections.] I believe we shall really have to rethink these matters. Ownership of one’s own home should exercise a stabilising influence on people. It should prevent people’s indiscriminately setting fire to everything.

The hon member referred to me and said pertinently that I should know better—better than anyone else—that Afrikaners co-operated with one another in establishing mutual building societies. That is quite correct; that is actually what happened. We should examine their history a little, however. How did they originate?

The Afrikaner had to launch them long ago shortly after the Anglo-Boer War. The entire Transvaal and the whole of the Orange Free State had been destroyed; everything had been razed to the ground. At the time there was nothing such as we have at present. In those years it was not the Republic as such which could enjoy progress; no, it was still a case of “Buy British” then.

When we think of how we struggled in the twenties in this Parliament…

Order! There are hon members behind the hon member for Sunnyside who are conversing very enthusiastically with one another. If they wish to talk, perhaps they could do so outside. The hon member for Sunnyside may proceed.

How we struggled in this House merely for the recognition of the Afrikaans language! Night sittings were also held here, for instance, to pilot the Iscor Act through Parliament to enable the Republic to manufacture its own steel. At the time it was said that Iscor was not to exist and we had to import steel from England.

Today the case is different so I think the hon member was actually referring to the non-Whites, the Blacks, the Coloureds and the Indians.

I was referring to self-help.

Today different conditions prevail. The hon member for Pietermaritzburg North implies that the Whites of this country are imperialists, but hon members should spare a thought for the contributions the Whites of this land make. I mentioned it the other day: Whereas the Blacks, for instance, pay R320 million in direct taxation, they receive almost R6 000 million. How does that compare with what the Americans received for the direct taxation they paid in the past? It is exactly the opposite. When this hon member speaks of imperialists, he is obviously referring to the Whites of this country. I wish to tell him, however, that no equal can and will be found anywhere in the world to what the Whites in this country do for the upliftment of the non-Whites. This can never be equalled. There is no other country in the world in which so few do as much as the Whites in South Africa and this includes the hon members of the Official Opposition.

Jan, I was talking about self-help.

Yes, that is so, but the point is…

I think you agree with me.

The hon member made a few other points too, but I merely want to spell out these matters to the hon member.

I thought you agreed with me on self-help.

Yes, I agree that the Afrikaners did everything themselves at that time; they had to do it themselves in the face of British and other forces to get where we are today. [Interjections.] We are grateful for this. We can only thank our Creator that we have made such progress; we are not angry about it.

The hon member also mentioned security attached to loans. Loans are granted at some point and that building then lodged as security. I am concerned about this security for the future because it is true that there are certain attendant risks and, because houses are so readily burnt down now, the bulk has to go for Black housing. It is true that I want people to obtain houses; we should not shy away from that. If it is a sign of imperialism, however, that they can just burn the houses down, where will our building societies ultimately find themselves? [Interjections.]

The hon member for Yeoville also put a very important point and I wish to support him on it. One can only obtain capital and create capital if there are savings. That is the only way—save and one will grow and in this way capital will be accumulated.

In connection with the Building Societies Bill, I wish to refer to the same commission referred to by the hon members for Smith-field and Yeoville, that is the Commission of Inquiry into the Monetary System and Monetary Policy in South Africa under the chairmanship of Dr G P C de Kock of the Reserve Bank. The object of this commission was chiefly to impose monetary control on building societies. This was not the only object but one of the chief aims. Now that building societies have been brought into this system, interest rates on the acquisition and lending of money become market-related, as we have heard. We shall have to see in future whether this will work properly. We should give it a good opportunity to develop but I am not so sure about the building societies and I think they will make heavy weather against other financial institutions if they are not permitted to spread their wings in order to acquire more savings and other monies.

The other commission was the Commission of Inquiry into Certain Matters relating to Building Societies in South Africa under the chairmanship of Dr J C du Plessis. This commission also sat and I think we should express our thanks to both commissions on behalf of the House for the work they did.

As I have said, the principal function of building societies was to attract savings but, in consequence of the enormously high inflation rate at present, building societies are in such a state that they no longer obtain most of their money from individuals and ordinary people. They are dependent on corporate investments. Large companies or whatever parties invest in building societies will invest where they obtain the best interest; I cannot blame them for that. Commercial banks, for instance, are now paying interest on credit balances on their cheque accounts and this makes the case of building societies very, very difficult. In this way banks are now attracting money to the current accounts of individuals who will not dispose of it as readily or draw it from their current accounts. They now receive interest on it and it is very easy for anyone to operate only his current account because he knows he continues to receive interest on his credit balance.

What is the solution, Jannie? We know what the problems are but we want to hear the answers. [Interjections.]

The hon member has asked me to provide a solution. Does he want me to say that banks should be forbidden to pay interest? That is a reality. Hon NP members talk about realities daily. This is certainly a reality or has the hon member never heard of it? This will create a problem for building societies. If we approve a Bill without examining those facts and without facing up to the realities, I think we are naive, irresponsible and shortsighted.

Banks also offer one-stop services and this in itself will make matters difficult for building societies. It is a fact that any person, any individual—especially that hon member; they say I should help him out of his difficulties; I should give him a little guidance—is very keen to conclude all his affairs in one spot. That is why people go to large chain stores where they may purchase anything they want under one roof. Consequently they will also want to conclude all their business at that one bank whether it is related to insurance, savings or whatever.

Because existing building society legislation does not empower building societies to offer many services, their share of the market has shrunk appreciably and the money they have received over the years in the form of savings has decreased considerably. From 1971 to 1974 the market share of building societies declined by 6,9% so that it stands at only 16,1% now. Against this, the market share of commercial banks has appreciated to 31,2%. That is a reality; we have to examine this. The market share of building societies is declining and that of banks appreciating.

That is part of the problem. What is the solution?

That hon member and the NP hold all the solutions for the country—politically and otherwise. They have consensus to be able to do everything.

Let us look at long-term insurers. Their share has increased to 22,5%; these three hold 69,8%, almost 70%, together.

Next the Post Office comes up with excellent incentives to obtain more of the money. All right, it is a fact that the Post Office should obtain its share; there are also many other institutions which have to receive their share. Nevertheless building societies experience problems in obtaining those savings and what does this mean? It means less money for housing.

The object of this new Bill is inter alia to empower building societies to compete more effectively for more money which will then be applied for housing. This is one of the objects of the Bill. We have yet to see whether it will serve that purpose.

Interest rates will move nearer to market-related rates and this in turn will be neutralised by Government policy of subsidising housing for lower-income groups instead of there being cheaper money for all as is currently the case. The more affluent part of the population may now obtain loans at lower interest rates from banks, insurance companies and so on. This in itself will cause decreased savings to go to building societies because, if a man is able to obtain his home loan from an insurance company or a bank, he will not necessarily invest his money with a building society. This is a problem we shall have to investigate too.

If we are not prepared to examine problems, visualise situations and make certain projections, we shall land in a sad fix. It is preferable to examine these points at this early date so that one may see what one can do to obviate great problems later.

The question I put to myself is how profitable building societies are. It is estimated that all building societies maintained reserves totalling R165 million in 1985. Against this one should realise that from now on building societies also have to maintain cash balances at the Reserve Bank on which they do not earn interest. It is estimated that this amount could total approximately R70 million. Of the R165 million in reserves the building societies held last year, R70 million will actually be lost in future. One can therefore see the extent of the hole this makes in their income. If that amount did not have to be lodged with the Reserve Bank, it could perhaps have earned interest in some other manner. These are all aspects we should examine.

As regards taxes, we have to wait for the Margo Commission. One does not know what the commission will say and one hears so many rumours about it. The Margo Report was to have been submitted but was then postponed and delayed by two weeks. We hope to receive the Margo Report shortly and give it our attention.

The man in the street is very concerned about a matter, something we shall have to look at. This is that tax-free shares are to be phased out over ten years, perhaps earlier or later or whatever. It was precisely the tax-free interest on these that formed one of the great attractions causing people to invest their money in building societies. This is something we shall have to investigate carefully as soon as the Margo Report is released and when the hon the Minister of Finance envisages taxation legislation or else we are going to run into great problems.

I do not wish to enlarge on this matter much further; as I have already said, we have our reservations on this matter. In addition, we will have to see how it works but our party will vote for this Bill as it is. When we get to that mutual company, we shall discuss it too.

In conclusion, I want to ask the hon member for Smithfield whether, when we have corporate and mutual building societies, two sisters or brothers side by side, this will enable us to obtain more money for building societies. Will this provide the country with more money? Will building societies be more prosperous? You know, we currently have between 13 and 14 building societies in South Africa. This is the same as a farmer with too many cattle whose farm is over-grazed. Is this not also a case of overgrazing as regards building societies? This is a matter one should examine. I want to say that there are not too few. Some of these building societies are very sound. I agree with the hon member for Yeoville; I do not want a monopoly either. I shall discuss these monopolies in South Africa at a later occasion because it is certainly unsound for one company to control 53% of all shares on the Stock Exchange or four companies 80%. I do not want one or two building societies to control the entire world. Let that suffice, Sir, and I say we vote for the Bill.

Mr Chairman, many people have been thanked here today but I should like to start by referring to someone who has not been thanked yet, namely the hon the Deputy Minister of Finance who took the lead regarding this Bill. We are aware of his negotiations conducted so quietly.

If we examine this Bill, we should not do it in isolation or institutionally. We should view it as a broader whole because we are dealing here firstly with monetary policy, secondly with deregulation and thirdly with the provision of housing for all our people.

Our building society movement may be regarded as one of the most successful in the Western world. We are aware of savings accumulated here by the small man and of the assistance to the young man and newly marrieds by means of building loans. The first savings book I ever received was a Saambou savings book.

No advertising!

Do you still have it?

Yes, I still have it.

Circumstances have changed greatly since 1981. I wish to put it that under the current Act it will no longer be possible for the building society movement to assist the poor man in future. I even want to put it that under the current system it is not even always possible for the building society movement to invest in rural areas at present.

Why has this happened? Since 1981 we have experienced a change in our entire economic structure. We have started experiencing great fluctuations on the deposit side of building societies.

What are the most important reasons behind this? The first I can call to mind is inflation and its effect on the prices of properties. This led to speculation which gave building societies a type of pseudo-security. I do not wish to imply that building societies did not apply their control adequately but they were reasonably sure that they would not suffer great losses as they would be able to sell their properties at a greater profit.

The second interesting development is our policy of controlled floating interest rates or—let me put it like this—there is a movement throughout the Western world toward a more market-orientated type of capital market. This has now caused interest on deposits to start fluctuating. We ourselves know that since approximately 1981-83 building societies have not known what to do with the money. They advanced money on squash courts and whatever one desired. From 1983 interest rates escalated sharply which obliged building societies to increase interest rates on loans as well. This created a political reaction. The Du Plessis Inquiry arose from this because it was said that the changes building societies had made to the interest rates on their loans were injuring the poor man.

At the same time, however, one found the monetary authorities starting to seek a solution on how to apply better control to the economy, how to exercise better control over our money supply. The two greatest problems of the Reserve Bank were related to this. The first was obviously its control over building society money. We also had tax concessions in this regard. The second problem was related to the Land Bank. It was also impossible for the Reserve Bank to obtain total control over the money supply and the De Kock Report arose from this.

A further interesting change which started to take place was competition between banks and building societies. Banks started moving in and supplying the home-owner with loans. Hon members should know that a bank does not pay interest on a portion of the deposits it receives. There is a certain degree of stability attached to a deposit and it offers security. At certain junctures this enabled the banks to offer interest rates which could indirectly be lower than those of building societies. All right, they were not permitted to offer lower interest rates but they manipulated it in another manner. Let us make no mistake about that.

Banks and building societies also started competing with one another for funds. From 1983 one found our building societies starting to move away from the small man’s savings and paying more attention to institutional savings. This brought about an important unstable element in their deposit structure because those funds were suddenly withdrawn again at a given moment and they were large sums.

If one views these aspects in combination, one also finds that the margin between the average interest rate paid by building societies on their deposits and the average interest rates earned by them on their loans began narrowing. We should remember that building societies have a very limited investment portfolio compared with that of banks which may also finance hire purchases and to which various other avenues are open.

There has also been reference here to building society benefits as regards tax concessions but, as we know, these are being withdrawn over 10 years. I wish to be honest and say I wonder whether this is the best method of assistance. There I want to differ with the hon member for Sunnyside because rich and poor all benefited from these tax concessions. I shall revert to the hon member for Yeoville later on the question of our lower-income groups.

So what is the purpose of this Bill? In the first place I shall repeat that we want an effective monetary policy. In addition, it is Government policy to promote competition; that is why deregulation is involved here.

We also want to promote housing for lower-income groups. The ideal is to place all our deposit-taking enterprises under the same act—for instance one banking Act—later. That is the ideal. The problem preventing us from implementing this now is the conflict between an economic profit objective and assistance to lower-income groups.

I should like to discuss this point of lower-income groups because there is provision in this Bill empowering the Minister of Finance to act if building societies do not spend enough of that 80% of their funds on lower-income groups.

I am concerned that this will not happen easily because we are dealing with a change in our capital and money market here. We are dealing with fluctuating interest rates, with inflation which causes perpetual escalation of building costs. It is not so easy to say that a building society should take 20% or 30% of its funds at this point to spend on lower-income groups because building costs are continually increasing and money rates vary in the capital market.

In a study recently conducted in the USA, it was pointed out that loan and savings banks were able to furnish diminishing assistance to lower-income groups. It was found that lower-income groups were no longer able to pay their deposits. If our situation is analysed today, we find that if it is not the Government assisting public servants, it is dad who has to help with the payment of that deposit. It is becoming increasingly difficult for our young people and the lower-income groups.

There is a further aspect of this Bill regarding assistance to the poor which we should bear in mind. This is that normal market forces do not function as effectively as one expects in the housing market in respect of lower-income groups. It was always said that if rent control were abolished we would find developers and builders providing sufficient houses. Today rent control has been abolished in most Western countries but those houses have not yet appeared.

It is very clear that in this Bill we cannot make total provision to solve the problem of the lower-income group although a clause related to this problem is contained in the Bill. The Government is attempting to solve this problem; it is to spend millions of rands on housing. I think the direction which should be taken is to assist young people and persons with an income below a certain level to pay the deposits on their houses. Housing in country districts should also receive assistance.

I want to repeat the aspect that tax benefits are the same to rich and poor. According to building societies, this benefit enabled them to strengthen their reserves. Of course, there is a further aspect which is perhaps not totally relevant here now, namely the competition between the Post Office and building societies as regards the question of tax benefits.

In addition, building societies are now being permitted to extend their investments to include, for instance, consumer credit and insurance. We shall see very interesting developments here. Firstly, more capital can be attracted to building societies which will provide them with more flexibility in their investments. These activities can lead to their being able to pay higher interest on certain deposits but that they will also be able to make greater profits. There is a chance that the greater profit made in this way can be used indirectly to assist with housing but it can also have the opposite effect.

It will also be interesting to note what becomes of the personnel of building societies once this legislation has been accepted. I do not wish to imply that many of the people in top structures of our building societies are rigid but I do not think they have always been accustomed to the normal movements in the market. Especially as immigration has stopped or declined, as we are not receiving as many people who want houses and the hon the Minister of Finance may perhaps succeed in a reasonable lowering of the inflation rate next year, it may happen that building society managements may also be landed with a question of no speculatory profit.

As regards the 10% shareholding, the hon member for Yeoville dealt with the point that no shareholder or his associate was permitted to hold more than 10% in a building society. Under the Banks Act a single shareholder is permitted a 30% shareholding.

With reference to Dr Jacobs’s reply, the fear of conglomerates obviously exists, the fear of excessive concentration, but something else remains which interests me and that is what one finds in the USA at present. I do not think our friends of the PFP will like this much and it is that the entire question of one-share-one-vote is no longer altogether the soundest aspect. This creates an enormous takeover struggle in America and the question is put forward increasingly whether one should not load the voting rights of certain shares; a type of qualified vote.

It is interesting when talking to various leaders in the world of building societies to hear that there is a type of underlying fear at present that, if this Bill with its provisions regarding a 10% shareholding is passed, it will perhaps be easy to kick current management out. The question is also whether this is a good or a bad thing but it is something we shall have to examine in any case.

Something of great importance and concerning which we should guard against criticism or possible criticism is control over the conversion from the mutual building society to the corporate form. This has to be handled properly because it is posing considerable problems to the British at present and we have also had considerable evidence that unnecessary profit should not be created for certain groups. Of course, this makes good control more essential. The more we deregulate, the more difficult the control; we should remember this. It is a fact and that is why I am pleased that the Reserve Bank is to participate more actively in this.

In conclusion, I also wish to say something on the entire question of deposit insurance. It is interesting that the hon member for Yeoville is a great proponent of this. One now sees, however, that in the USA, which has a developed system of deposit insurance, they have found bank managers taking far more chances. They just sit back and their argument is that, if something goes wrong, deposits are secured so there is no problem. They are able to think of speculation in shares and oil—an entire series of speculation led to insolvencies in the USA recently. A further interesting point is that it actually works out to be relatively expensive for small banking groups and assists larger banks.

I agree with the hon member for Yeoville that the depositor should be protected but I think the best way of doing this is by a sound monetary policy and control by the Reserve Bank. I think this will be more effective and also exercise less direct control over the activities of our financial institutions.

I support this Bill over which much time has been taken and which, I believe, has resulted in a very successful measure.

Mr Chairman, first of all I should like to congratulate the chairman, the hon member for Smithfield, for having had the patience to take this Bill through its gestation period of nine months. The first meeting of the standing committee that sat in respect of this Bill was in the middle of November last year and it being the middle of August now, it amounts, as I say, to roughly nine months. I can assure you, Mr Chairman, that there were occasions on which he was required to exercise patience, because not all of the amendments were carried through without there being a few sharp words from time to time. Nonetheless, I believe that the Bill that has come forward, is generally speaking, a very good Bill. I should also like to thank the officials, because having served on that committee and not being terribly knowledgeable on financial matters, they had to exercise a little patience with me and try to explain to me what various things were all about. Taking that into account, I believe they merit some praise for their patience.

The main purpose of this Bill, as was explained by previous speakers, is to enable building societies to register as public companies in terms of the Companies Act. The reason for that is that the building societies feel that they would have better opportunities of competing on the market with other financial institutions if they have permanent share capital, and will also be able to perform their functions more adequately. I do not wish to go through the speech I have prepared, because the hon member for Yeoville and other hon members have taken every one of the major points. However, there are a number of points that he made that I should like to raise again. I believe they are points worthy of further discussion.

In my opinion the main point is that this Bill is intended to make building societies more fluid with regard to capital so that they can, in fact, better perform the function for which they are in existence, namely to provide housing. As has quite rightly been said… [Interjections.] Yes, money for housing. Over the years the position has been that the building societies have been providing funds for White housing to a large degree, and very, very little indeed for housing for the other communities. That housing has largely been provided by the State. I have sat on other committees before where the percent-ages mentioned were quite phenomenal. In the White housing sector about 94% was founded on the building societies and private development, and for non-White housing almost the reverse proportions prevailed.

It is quite clear to me, within the changing political and social circumstances in South Africa, that housing is going to be of vital importance, because one will never have a satisfied and settled community unless one has housing. It is again quite obvious, following from that, that the amount of money which is required can never be found from Government sources alone. This is why I believe it is important to look very, very closely at the contribution which building societies can and should be making, and at the thought which must be given to the question as to how one taxes those building societies and how one taxes the investors in building societies in order to make it possible for them to collect that money and use it for that particular purpose.

I think we have reached a situation in South Africa where, if the private sector does not provide the homes, the Government is going to have to do it, if purely for the sake of peace and for safety reasons. I think it is important to do a bit of an exercise to see whether it is a better proposition financially for the country as a whole to ease the taxation for people who invest in propositions for home building, or to tax people into the ground so that the Government can do it. I believe there is no doubt as to which is the better answer to these two questions. I believe the tax structures must be geared in such a way that the building societies will be in a position to do a better job in providing homes for the non-Whites.

The hon member made the point that the aspirations of many of our communities are far beyond their abilities to pay. He also made the point that the capital collation by many of the less affluent members of the community, but people who nonetheless still earn a good income, is such that we have to consider how we can overcome their lack of deposit capital. This is a very important point. Many people could pay their bond instalments, if they had bonds, but they cannot raise the capital to get started. I believe this is an aspect which can well be looked at, particularly in respect to the funds being made available for this purpose, to underwrite this particular contribution; in other words, the capital required to get started on home-owning, and getting it back by means of a small contribution at a later stage.

The point which has been made regarding the capital value of the individual being related to his earning capacity is also a good point. I must admit I have not heard it expressed in that way before but I believe it is something very well worth looking at. I should certainly like to see that followed up.

The question of self-help, both in financial and in home building, is another aspect but, of course, building societies do not usually get too deeply involved in self-help schemes in home building. Therefore, from the building society point of view, I do not think we can carry that very much further.

The suggestion has been made that in the past there has been a certain amount of interference with these financial institutions. There are certain people who believe that there is too much interference in the financial institutions. However, I feel that where one has a situation where a great deal of the investment is from the lower income groups and from pensioners, one must have control over these institutions, and many of the aspects of this Bill do provide the control which is very necessary.

The point raised about the building societies becoming equity companies, not having any more than 10% by any one investor, is a moot point. I believe in general the principle is fair enough, but as has already been indicated by other hon members, the emergency situation can arise when that should be overlooked. I wonder if it is not possible to find a way around that. While I concur with the idea or the concept of not too much power being in the hands of too few people—and I am of course referring to financial power—I do believe there are circumstances when exceptions can and should be made, particularly in the situation where a company is going under. I cannot help but feel that top financial houses will find ways around it anyway if they really want to gain control of some financial institutions; in other words, the cross-directorates will probably resolve that problem at some stage or another.

Pension funds as well.

Yes.

As I said a few moments ago, the question of the control is very important because pensioners and elderly people really do have great trouble when these financial institutions do fold and they get caught out. There have been one or two instances that I have known in my time where people have suffered the consequences.

I think the deposit insurance scheme for building societies is pretty good, because here again the same people who have supplements to their pensions from their investments in building societies definitely will suffer great hardships.

Recently during a visit to the United States I was also brought into the picture in so far as the investment insurance schemes they have over there were concerned. People feel so much more secure, but then of course maybe American banks are a little less stable than banks are over here. I feel nonetheless it is something that should be looked at.

With everybody having said everything that is worthwhile saying on this Bill I feel that we in these benches will be very happy to support it.

Mr Chairman, the hon member for Umbilo, when he sat down, said that everything that can be said has been said on this Bill. I want to agree with him, but it is my pleasure to wind up this debate which has lasted a very long time and on a subject which has been very competently dealt with, I believe, by all hon members in the House this afternoon, by the standing committee and by the particular departments of State, public finance, the Reserve Bank and also the Association of Building Societies and everybody else that was involved with it.

I want to join with the hon member for Yeoville in extending my thanks to everybody but, of course, he omitted a very important person, namely himself. He obviously could not thank himself and I would like to thank him formally on behalf of this side of the House. He played a very important role in the standing committee. Many of the amendments to which he alluded he had the good grace not to say were in fact his ideas. They were in fact and we are grateful not only for his capacity for work but also his application which he demonstrated also in dealing with this legislation.

The hon member for Yeoville mentioned a few things and he has a few hobbyhorses which he alluded to such as deposit insurance, which the hon member for Umbilo also mentioned, or fidelity insurance or stop-loss insurance—it is called various things in various places. The fact of the matter is that we have discussed this with the banks from time to time, also when the hon member for Yeoville raised it in the standing committee. The technical committee on banks also looked at it. On balance we do not like the idea at the moment because, first of all, it causes costs to increase. Secondly, it is quite expensive. Someone has to pay for it. Furthermore, of course, the big banks do not need it.

[Inaudible.]

Well, Sir, the hon member for Yeoville always has this thing about Big Brother. He always insists on there being a Big Brother. He simply must have a Big Brother. I should tell the hon member something. I do not want to quote any examples because he should know well what examples one could refer to. Sometimes Big Brother is nowhere to be found. Sometimes when Big Brother is needed he is not there. The hon member for Yeoville will know that. Sometimes it is Little Brother who helps people. What always helps people, however, is the fact that the SA Reserve Bank has very often, when necessary, had to act as Big Brother. I am afraid that will have to continue too.

I believe the important point to remember is—the hon member for Sunnyside rightly mentioned it—that there is too much concentration in our economy. We understand that. One of the great benefits of this legislation is that—almost like a time capsule—we have had huge concentrations of cash building up in our society, and now we are allowing those funds to be really mobilised imaginatively, primarily in order to house the people of South Africa. That then is our primary objective. That will create a new dynamism. New focuses for growth, new growth potentials are being developed, as well as greater competition, greater innovation, and lots of other things we have already talked about here.

The hon member for Waterkloof also made a very interesting speech, as he usually does. Many of the problems we have mentioned in our references to problems of housing are not housing problems as such. Very often these amount to two fundamental problems. The first of these is the legislative problem in the form of legislative obstructions, and secondly there is the financing problem. As the hon member will know, in South Africa we have land for Africa. We have more building materials than we really need. We have all the skills and all the labour in the world in order to build houses for our growing community. The legislative problems and the problems in relation to innovative financing, however, often hamper our efforts in this regard. Insofar as this Bill is concerned, however, I believe it will unleash new forces, much more innovative forces geared to the housing market as such. This, I believe, will be a good thing for our country. We need only to look back to find precedents for this development. The hon member for Sunnyside says he does not know whether this is a good thing or a bad thing.

*The hon member for Sunnyside finds it difficult to decide whether this is going to be a good or a bad thing. He is going to let the future decide that. We all know what happened in the case of the insurance companies. Twenty-five years ago we went through this whole process with regard to the insurance companies. The hon member would do well to go and read the speeches made in this House at the time; read what the people said at the time about the dangers involved and how they, too, found it difficult to decide whether it would be a good or a bad thing. However, the hon member should know that this resulted in tremendous innovation. South Africa has since become a world leader in the insurance business. We developed packages and a degree of refinement in our insurance business that few other countries possess. We made the choice, and we walked that road. Now we must make that choice again.

I must, in passing, point out that during the past 25 years no new mutual insurance companies have been established in South Africa. Each new insurance company that was established followed the company route. Therefore, I believe that precisely the same will happen in this case.

†What we will see here is innovative growth which will be to the benefit of our country as a whole.

I think I have replied adequately to everything the hon member for Yeoville has said. I do not know what else I should react to.

What about our tax situation?

All right. I will answer the hon member in relation to that matter. I do not want to say too much about taxes before the Margo Commission has completed its findings. I should put it to the hon member, however, that the hon the Minister of Finance also refrained from doing so the other day. The hon member for Yeoville accused the hon the Minister of pre-empting the findings of the Margo Commission. I agree with the hon member that if the hon the Minister had done so it would be quite wrong. I happen, however, to have been a witness of what happened the other day. I sat next to the hon the Minister and I listened to his whole speech. As a matter of fact, before the hon the Minister began his speech he said to me he supposed he would have to mention the state of play in relation to the Margo Commission. He added, however, that he was not going to say really much about it, and he did not. What he did say—as a matter of fact, I said it as well—was that the problem with our tax system is that it has too many exclusions. There were resolutions from the floor for more exclusions, and we had to respond to these resolutions. Our response was then that these exclusions were not the right exclusions and that in principle our tax system was being looked at by the Margo Commission. This is, inter alia, one of the fundamental problems with our tax system, namely that it provides for too many exclusions and the rates are too high for some people and too low for others. We should rather have a system whereby everybody is taxed at lower rates across the board. The hon the Minister then went on to say that there were ways and means of achieving this. That was all the hon the Minister said. He never made any categoric statements or any explicit suggestions as to what the tax system should be. Neither did he prescribe…

So the Press, when they put his words between quotation marks, were actually being quite dishonest?

Well, I do not know to which particular report the hon member is referring, but it is so easy for political journalists not to understand one when one is talking on highly technical matters such as the hon the Minister was talking on then, and that hon member knows that very well.

He could have phoned me and I would have told him the truth.

I do not phone you any longer, you know that.

I was a witness to this incident; I can give the hon member for Yeoville that assurance.

What I would say, however, is that…

The hon the Minister might just offer me a job! [Interjections.]

That’s confidence for you! [Interjections.]

That is why I will not phone you. [Interjections.]

The hon member asked about tax. We will be amending the Income Tax Act later on during this session in order to make tax-free investment possible for deposits in companies that convert. These tax-free shares will be available on the conditions we mentioned before, namely, that they will hold good for 10 years unless they are phased out earlier on the recommendations of the Margo Commission.

I cannot put forward any better argument than that advanced by the hon member for Waterkloof. The hon member had it exactly right. I do not want to pre-empt the Margo Commission on this issue either, but I should like to say this to the hon member for Yeoville.

Mr Chairman, may I ask the hon the Deputy Minister whether it is not correct that undertakings have actually been given in regard to these tax-free shares, in which case this issue is not relevant to the recommendations of the Margo Commission since the undertakings to those people have to be honoured? One must not manipulate the interest rates therefore, otherwise this will just be a farce.

That is correct. An undertaking has been given that there will be parity between both forms of building society for 10 years if and when the Margo Commission reports in favour thereof. I can tell the hon member what the suggestions might be. Due notice will be given. If, however, they were to suggest that we should move away from tax-free shares or deposits, we will consider the suggestion. However, I want to say to that hon member that this is not new. He can go and read what Mr Horwood said in 1983. He expressed himself very clearly on the subject. Therefore there is nothing new about it and everybody understands the position very well.

I think the hon member for Waterkloof explained it best when he said the problem with tax-free shares is that one is spreading the benefit so thinly, including people who do not need the benefits, that one is unable to help those people one genuinely needs to help. That is a problem, because our State has limited resources and we must concentrate and focus those limited resources in those areas where there is genuine need. That is what we will attempt to do in housing in future.

The hon member for Smithfield, who presided over the standing committee and whose calming influence and insistence on consulting as widely as possible has led to this good legislation we have here before us, mentioned it there. The fact of the matter is, however, that we know that the private sector has not played as large a role in lower cost housing as it might have in the past. We know that there is that need, and the State President himself, the Minister of Finance, and representatives of the private sector had discussions on this subject very recently. Hon members will know that the Government is in fact at the moment locked in discussions with the private sector in order to see how the private sector can play a role in housing in the future, including housing for the disadvantaged elements of our population.

I just want to say something on the question of people of colour. The hon member for Yeoville mentioned that building societies do to some extent have the image of being White institutions and that they should gain a more general South African flavour. I do not think anybody will argue about that, least of all the building societies themselves. As a matter of fact, many building societies have attempted to influence the legal framework where it was an obstruction in order to allow themselves to invest. Some of the building societies even invested in some schemes in which they normally might not have—they stretched their norms in order to be able to do so. Where private property rights have been allowed some building societies have for years given bonds on a large scale to Coloured people in the Cape in particular. However, there is no question about it and the hon member is right when he says these building societies must serve the South African nation as a whole. The great challenge and the great opportunity for South Africa is the fact that we have these burgeoning urbanising populations. That is not a threat although it is of course a challenge and a problem. In it also lies locked up one of the great economic growth opportunities for South Africa if correctly handled. There is no question that the building societies should also play a role in that.

I want to refer to the hon member for Sunnyside in a lighter vein.

*He always refers to what some or other group of people did. He said the Afrikaners have achieved certain things, alone against the world. I do not begrudge him that and all of us, as South Africans, are proud of what the various population groups in our country have achieved. What the Afrikaners have achieved, is wonderful.

†However, he must remember one thing about his colonial forebears. They say that there is only one thing worse than being colonised and that is not having been colonised. I think that if he looks at Lesotho and some of the countries in East and Central Africa that have not also had the benevolent impact of a colonial infrastructure and what went with it, he will understand what I am saying. I do not want to get locked into that debate with him, I just want to say one thing.

We need not be a Third World country.

He asked whether there was not going to be overgrazing among the building societies. I do not think so, although, of course, competition will arise. There are a number of them and most of them are strong. Perhaps one will disappear here and there, I do not know; others may come into existence. Time will tell. However, one thing is certain, and that is that this competition will result in a better service to the public. The innovation this will involve, will be an asset to the country, also for the reasons I have sketched previously.

The hon member for Waterkloof made a fine speech.

†Mr Chairman, I think that winds up all the questions that were raised. I might just say in closing that what does remain, of course, is the amendment of the Income Tax Act that will be effected later this session and to which I have already alluded. Then, of course, there are the regulations themselves. They are 99,9% finished. They are being typeset at the moment, so that when the legislation is promulgated—and we hope this will be soon—the regulations can be published soon afterwards.

I should like to conclude with a quotation from the valedictory address of Dr Frans Cronjé when he retired as chairman of the SA Perm recently. I think it is interesting that these words were spoken by the chairman of the SA Perm. He said, and I quote:

Question agreed to.

Bill read a second time.

Mr Chairman, I move:

I would like to refer the hon members to my speech dealing with the Building Societies’ Bill of 1986 in which the proposed reform and legislation on building societies was dealt with in detail.

The purpose of reshaping building societies is to ensure that parity exists between the two structural forms in which building societies can operate in future. One important matter which perhaps warrants special attention, relates to the capital structure. While the 4% capital requirements of a company building society—as mentioned in my previous speech—consists of equity shares of unimpaired reserves, a mutual building society must maintain this requirement in the form unimpaired reserves alone.

These societies will, however, be allowed a maximum period of 10 years for compliance with the new requirement. Furthermore, in the case of a mutual building society it is a requirement that 5% of such a society’s liabilities shall be in the form of indefinite period paid-up shares. This requirement of 5% in respect of indefinite period paid-up shares is, however, not a capital requirement, but endeavours to ensure that at least a small number of shareholders will attend annual general meetings to appoint and supervise the directorate and management of a mutual society; and this also includes the appointment of the auditors of such a society.

Arising out of what I have mentioned in my previous speech, I would like to mention two important proposals put forward by the Standing Committee on Finance. Firstly, it is suggested that provision be made for new building societies to be registered in a mutual structure. It is not considered appropriate to do away with the mutual concept which has—in this form—served the country well in the past.

*Mr Chairman, although the Companies Act regulates the winding up of mutual building societies, there was a second proposal to the effect that a further provision be inserted providing that any surplus remaining after all claims had been met should be distributed to the holders of various types of shares in the mutual society concerned.

I want to express my thanks to the members of the Standing Committee on Finance who made a valuable contribution towards having the Bill submitted to us in this form. Once more I want to extend my personal thanks to everybody concerned with this legislation, including the members of my department who have assisted me personally over the past weeks and months.

Mr Chairman, it is not my intention to have another full-scale debate because most of what is contained in this Bill is also in the other Bill. The amendments which were effected here are to a large extent the same measures which were effected in the corporate Bill.

There are, however, a few points that I would like to make. The first is that the issue of new mutual building societies being permitted is now enshrined in this legislation. I would like to see that we try to make it easier for new mutual building societies to be formed. I am not merely referring to the friendly society that I spoke of in the previous debate, but to the fact that we actually try to make it easier. We should encourage the formation of mutual building societies, particularly among the sections of the population that are underprivileged at this time.

This brings me back to the issue of self-help which I think was misunderstood by some hon members of this House. There is nothing better than people uplifting themselves. It is better for them, it makes them stronger, it makes them feel prouder and it helps them to establish themselves in the community as such. I would like to quote again the ancient philosopher Maimonades who said that there are eight degrees of charity and the greatest of these is the charity that one performs to enable a man to look after himself—it is much better than any other charity that one may perform. The way I see it, the mutual concept enables one to have dignity in helping oneself and building oneself up.

Something else I would like to touch on is that to my mind there are actually some disadvantages which the mutual society now has, in contrast with the corporate society. They will have to be looked at again. They arise from the new clause 30 read with clause 30 and there is, to a certain extent, an advantage, as the corporate society has the capital, as opposed to merely having reserves and having to rely on a portion of the indefinite share capital, which is not really capital in the true sense of the word in the mutual building society. To some extent that will result in the mutual building society having a limitation on its growth. I am not suggesting a change at the moment. We need to look at this, however, because the situation is unfair vis-a-vis the mutual building society. The unimpaired reserves must be 4% of the liabilities and, when one considers what must be deducted, one sees that, inter alia, it provides in subsection (3) of the new clause 30, that there shall be deducted from the amount of the liabilities:

And when we look at section 30B it says:

I think, Sir, that this is a disadvantage to the mutual society in regard to its ability to grow, and I think we need to look at this again in fairness to them.

I would like to return now to the question of deposit insurance, and I want to make one very simple point. I think the hon the Deputy Minister misunderstood me. He said that the big banks did not want it because they did not need it. In an interjection I said that big banks did need it sometimes. Big banks have needed it recently.

The question arises as to whether it is better that the Reserve Bank should bail people out, that there should be another form of security or that there should be some means whereby one arranges to spend from the capital either through a Big Brother or by some other means. I do not want there to be confusion between the concept of a so-called Big Brother who may not help one out and that of one that may.

He will help you down the drain!

No, Sir. A brother, whether he is big or little, is normally supposed to help one. Brothers who do that are not real brothers. There is a difference between the Big Brother who helps one out when one is in trouble, and deposit insurance which creates a feeling of security. I do not want to confuse those two concepts. They are completely different and I think we need to keep them separate.

The other thing which has to be understood is that I have not said, and the amendment did not say, that 30% should be allowed. It said that if the Minister agrees and with good reason it should be allowed to go to 30%. What has happened now is that the hon the Minister has closed the door to acquiring that power. That is all that he has done. I find it remarkable that a door was opened so that the hon the Minister could use it if he needed and wanted to, but then he closed it and said that he did not want there to be any possibility of his going through it. That does not make sense.

I regret to say that, because of the turbulent times, we will find in the years that lie ahead that we will come along to the House with hurried legislation to allow the 10% to be exceeded, and we will then have to rush it through in order to do something about it. I do not think that is desirable and the mechanism should be there so that it can be done in the proper form and manner.

Lastly, Sir, in regard to the question of tax-free shares I want to say that I am a little surprised at the hon the Deputy Minister’s answer because … I would like him to listen to me if he does not mind. If the hon the Minister is finished, I will carry on.

Say what you want to say.

Sir, I understood, and it is very clear, that undertakings were given in regard to the 10-year period that these shares would be allowed. Whatever the Margo Commission reports, if one is going to do away with it, that will be going back on one’s word. That is why I said that the Margo Commission is not relevant to this issue because of what one can do, and do very simply. It is very easy. One manipulates the interest rates on the tax-free shares until nobody wants to have them, and then people will redeem them. That is the obvious mechanism that will be used, and if that is the case, Sir, that will be dishonest. Therefore, if one has given an undertaking that one will keep the shares and one gave it gratuitously without anybody asking one to, then one cannot say: Oh, circumstances may change and my word does not count for anything any more. That is not the way in which to treat the financial community.

Mr Chairman, we support the Bill as a whole and I do not intend to protract the debate.

Mr Chairman, I should like to thank the hon member for Yeoville for his support for this legislation. I must say it was probably one of the shortest speeches the hon member has ever made in this House.

His throat is sore!

In view of the previous debate one finds that very easy to understand and it does not detract from the very important contribution which the hon member made to bringing this legislation into existence.

There were many expressions of thanks during the previous debate, and I do not want to repeat them, but I do want to say this: If there was ever a demonstration in this House of the advantages of the tricameral system, it is this building society legislation—both the legislation on company building societies as well as on mutual building societies. If one thinks back to what would have happened under the old dispensation, in which an important piece of legislation such as this would have been submitted, and to a certain extent would have been glossed over, and one considers what attention has been given to this legislation during the past nine months by the standing committee, with the assistance of the respective parties, that is to my mind the best demonstration that this tricameral system works extremely successfully.

You are right, Kobus.

In the second place, I want to thank the Department of Finance and all the bodies involved very sincerely for having been prepared, during the past three or four years, to listen to representations which came from various quarters.

When the first draft legislation was submitted four years ago, what it amounted to in fact was that all building societies were to have been converted into companies. I think it is a compliment to the keen perception of the department and the hon the Minister and his deputy that it was ultimately agreed to leave the choice of the direction in which building societies wish to go to the industry itself. It worried me that at one stage one almost got the impression that the building society industry expected the State to compel building societies to go in a certain direction. I repeat that I think that good sense prevailed in this connection. The choice was left to the industry itself, and I think it is quite correct that the hon the Minister or the Department of Finance could not be expected to compel a building society to do certain things. A building society itself has the choice of deciding in which direction it wants to go.

I want to make a third point. Under the circumstances in which we are living in South Africa today, with the problems of threatening sanctions and boycotts all around us, it is to my mind imperative that every possible rand in South Africa be saved and utilised for the necessary infrastructure. Housing for the masses in South Africa is one of the most important aspects of this infrastructure. After having spoken to various financial institutions in the USA during the past few weeks, I got the impression that tremendous financial pressure was being placed on these people. Tremendous political pressure is being exerted on them by their depositors and shareholders to grant no further finances to South Africa. To us that is nothing new.

The fact of the matter is that those financial institutions in general are particularly sympathetic towards South Africa. They realise the complexity of South Africa’s problems, and the heterogeneity of our population structure. They know that we shall not find solutions in South Africa overnight, no matter how badly we want to. The political pressure is so heavy on those people that we cannot expect any financial assistance from those sources.

There is other pressure besides political pressure on those people. There is also the pressure of pure investment risks. What is interesting is that those financial institutions state candidly that they should like to see apartheid disappear in South Africa. And we agree with them. [Interjections.] However, they are very worried about what will come in its place. They are well aware that if anarchy or Marxism or what-have-you comes in the place of the present situation… [Interjections.] … it will in any event make the investment risk in South Africa far too great, and that it will not then be possible to make any new investments in South Africa.

There is a fourth reason why it is so important to normalise this legislation and make it as easy as possible for people to obtain money to acquire housing. This has already been mentioned here today by the hon member for Yeoville, and by other hon members. In South Africa we must go out of our way to encourage people to own their own homes. We must make it as easy as possible for them to possess something, particularly in the form of housing, and to have a job.

One of the most interesting interviews I conducted in New York two weeks ago was with an anti-apartheid group called “The Episcopal Church People for Anti-Apartheid”. It was very interesting to talk to these people. The standpoint of the person concerned was that communism constituted no danger to the world. He said: “It is a dying ideology.” He said it was a myth, which we need not be afraid of. That was the standpoint of this anti-apartheid group in the USA.

When I asked this person how he would feel if all the banks, all the business undertakings and industries, as well as all housing—that is the point I wanted to arrive at—in New York and the USA were to be nationalised, his standpoint was: “It is long overdue. It should have happened long ago”.

To my mind this re-emphasised that the real danger to South Africa lay with the people who wish to establish a situation of socialism in South Africa, which will eventually lead to communism or who wish to establish communism itself.

That is the choice our people in this country have today. The person who today owns nothing under a capitalistic system, who has no job and no home, is an easy prey to Marxism. It is so easy for a person to tell that man that they offer him something different, which can in fact mean a heaven on earth for him. For that very reason we must take trouble to make it possible for people to own their own homes and to have a decent job so that they will realise that the present situation, with faults and all, is better than anything else they could hope for. [Interjections.]

In this process the building society movement plays a tremendously important part.

It has already been mentioned today that the building society movement—but I should like to place this on record during this debate—is a massive industry in South Africa, with assets in excess of R23 billion. Today they are extending loans totalling R500 billion per month to home-owners—R20 million per day, and those finances have been built up by the small contributions of the individual over more than 100 years over the length and breadth of South Africa. After 100 years, however, I think it has now become necessary for this legislation, which in the past was to a very large extent too restrictive, to be extended, as we are doing here today, while still based on the principle that it will in the first place be the savings of the man in the street, and that it will be used in the first place for housing.

This legislation, specifically the legislation on mutual building societies, amends the 1965 Act, and is the result of years of negotiation between the technical committee of the department, the building society movement, the Reserve Bank, the Registrar of Banks and the department and its Ministers. I think one is really grateful for the results achieved here.

Now it so happens that there are certain aspects of the legislation that cause unhappiness, and it will not surprise me if, in years to come, we have to consider these aspects and effect a possible amendment. For example it is argued that the indefinite share capital of a mutual building society—and that is what we are dealing with now—is in fact risk capital, that is to say, risk capital in so far as the claims of these shareholders are subordinate to those of all creditors and of all depositors of the society in terms of the present and the new legislation. Furthermore it is being argued that for that reason it should have been totally excluded for the purposes of determining the reserves and liquid asset requirements. However, the legislation now provides that only the minimum requirement of the unspecified share capital—that is, equivalent to 5% of the obligation to the public—is being eliminated. I think this is an aspect that will have to be considered in future as this legislation is given an opportunity to function in practice.

I do not think it is necessary for us to go into all the amendments that are being effected here. I just want to single out one or two points. In terms of the new legislation building societies will be able to grant a bond to the value of 90% of the value of a dwelling. First it was 80%; it is now becoming 90%. I want to warn our building societies, however, that they must be very careful with their valuations.

A few years ago there was a tremendous upsurge in the property market. People paid through their necks for houses, and of course valuations also soared accordingly. With the drop in property prices, particularly if up to 90% of the valuation is going to be granted in the form of a loan, people are going to find themselves in trouble if the value of properties declines. Therefore I wanted to issue this warning to our building societies to be very careful when granting 90% loans.

Another amendment which can be affected is that building societies may in future also invest 8% of their total assets in diversified loans. This is an arrangement consonant with the one in respect of the Building Society Act and the Mutual Building Societies Act, and I think it is a very good development. Here, too, I want to warn building societies, however, not to be tempted in future into adopting too risky a procedure in this respect.

Another concession that is now being made is that fixed deposits may also be accepted for less than one year, but up to a maximum of 5% of its total obligations.

A final point I just want to single out is that building societies may now act as estate agents, and also as agents for banks.

I want to conclude by expressing thanks for the fact that this channel of the mutual building societies will still be there in future, and I trust that both the company building societies and the mutual building societies will occupy their rightful position in this country.

Mr Chairman, the hon member for Paarl said this was proof that this tricameral system works well. I merely want to tell the hon member that when one of the Chambers did not want to agree to certain sections of this Bill, the department’s officials had to rewrite the whole Bill. This very same Bill served before us and because they did not agree about one little thing, the whole Bill had to be rewritten. The National Party’s members all dropped down dead and capitulated for the sake of consensus.

If we want to prove that this thing is a success, why are the Press and the public kept from those discussions? Why do we have to connive (knoei) in secret? Let the Press be present, let us lay our cards on the table, let the light of South Africa shine on that committee, Sir. [Interjections.] Sir, it is a law of the land. If the National Party goes into committee and caucuses about it, it is their private affair. When, however, this Parliament makes a law concerning the whole of South Africa, and this takes place behind closed doors, which are kept closed… [Interjections.]

Order!

Mr Chairman, on a point of order: Is the hon member entitled to say there is conniving in a parliamentary institution? [Interjections.]

Order! A point of order has been put. I have problems with the question put by the hon member for Sunnyside, viz why conniving (knoei) has to take place behind closed doors. [Interjections.] It is not clear to me whether the hon member was implying that hon members of this House were conniving behind closed doors. Can the hon member reassure me as far as this is concerned?

Mr Chairman, I did not mean it in a negative way, and the hon members concede that. You know, in my day we simply used the word “conniving”… [Interjections.]

Order! I should be pleased if the hon member for Sunnyside would dispense with the idea that hon members of this House were involved in a process of conniving.

I withdraw the word “conniving”, Sir. [Interjections.]

Order! Thank you, the hon member may proceed.

Mr Chairman, on a point of order: May the hon member for Johannesburg West refer to the hon member for Sunnyside as a political conniver (knoeier), or use words to that effect? [Interjections.]

Order! Did the hon member for Johannesburg West say the hon member for Sunnyside was a political conniver (knoeier)? [Interjections.]

Yes, and I withdraw it, Sir. [Interjections.]

Order! The hon member for Johannesburg West has withdrawn those words. The hon member for Sunnyside may proceed. [Interjections.]

Sir, I think this is a very good opportunity for us—for the NP and for everyone—to work in the direction of those discussions taking place in public, just as the debates take place in this House and as was the case with our committee stages in the past, since the man on the street, members of the public, are interested in this legislation. They always want to know what is going on behind those doors, what we are saying and doing. [Interjections.] Let us be frank about that legislation!

We are dealing with these mutual building societies which have now been changed. The hon members for Yeoville and Paarl both said these mutual building societies which are being created are a fine thing. The hon member for Yeoville said people in a certain community could co-operate and unite to establish an own building society. Let us take a specific population group as an example. Let us take the Coloureds, the Indians or any of the Black population groups in their own national states. Why can each of them not establish its own building society in terms of the Companies Act? [Interjections.] Why can those people not have their own building societies? Why do hon members all possess their own homes? [Interjections.] The directives are almost the same, whether they concern a mutual society or a company. In addition, discipline has to be maintained and there must be overall supervision, because one cannot allow things to slide if there is nothing in it. It can just as well be done in terms of the Companies Act.

In such a case there is, of course, the objection of the SA Permanent Building Society. It appeared in the newspapers, and therefore I do not want to elaborate on it. They said those assets, reserves, etcetera belonged to the people and not to the shareholders. Correspondence on the subject was published, but the SA Permanent Building Society is the only building society that has a multiracial board of directors.

Is there anything wrong with that, Jan?

They should appoint the hon member for Innesdal to the board of directors too. [Interjections.]

This building society has a golden opportunity today. It is very commendable that it supplies a great deal of money for Black housing. I have no criticism against the building society, but I do want to ask it today to dedicate itself completely to Black, Coloured or Indian housing in South Africa. Do hon members have any objection to that? Do hon members object to my asking the SA Permanent Building Society to show the world what it can do as a building society, so that the hon member for Pietermaritzburg North cannot say once again that their property is going to bum down because it represents Afrikaner imperialism.

I was talking about the universities.

The same building society can finance the universities by means of loans or whatever. They can grant assistance to the schools and extend it by financing only non-Whites, and no more Whites. In that case the argument of the hon member for Pietermaritzburg North will fall away overnight, because then there will no longer be any such thing as Afrikaner imperialism. [Interjections.] Then we can show the world how well we co-operate with one another.

Earlier on the hon member for Welkom wanted to know what solution I suggested in this case. As far as housing is concerned, we have reached the situation in South Africa in which, for example, inspectors can no longer go into the Black residential areas to collect rent there. In the same way it will become impossible for other payments in those same areas to be collected. I therefore believe it would be a good thing if the building societies appointed the hon member for Welkom to go and collect those payments in Black areas.

[Inaudible.] [Interjections.]

Otherwise, Sir, we have no objection to the legislation under discussion. We accept this measure as being mainly an adjustment of the existing Act, and will vote in favour of it.

Mr Chairman, I feel it is a pity that the hon member for Sunny-side had to react to the hon member for Paarl’s comments on how well the standing committee had done its work in connection with these two Bills. I say this because I think it reveals a problem which the hon members of the Conservative Party have, and, as a result of that, a problem which South Africa also has. That is namely that the hon member for Sunnyside and his party take every opportunity of creating discord and confrontation among the various population groups in South Africa, rather than to do what is needed in South Africa today which is to take every opportunity of building bridges and of bringing people of different colours together in a positive and objective manner in order to solve our problems.

For the hon member for Sunnyside to say that the standing committee meetings are secret meetings I believe gives a very wrong impression of the truth of the situation. You see, Mr Chairman, hon members of Parliament, even on that side of the House, often criticise the false image which is repeatedly projected of South Africa by those people who are enemies of this country. Yet, Sir, that hon member, in stating what he did state, projects a wrong image of the standing committee system. He is doing exactly what the enemies of South Africa do. He is falling right into that very same camp. He is using the same strategy and the same tactics the enemies of South Africa use. As such, Sir, I believe he does a disservice to this country. Certainly, Sir, the standing committees do meet in committee. On those committees, however, are representatives of all political parties in all three Chambers of this Parliament. There is nothing secret going on there as far as the Government is concerned. The hon member for Sunnyside who represents the right wing of this Parliament is also there to contribute towards the deliberations of certain of those standing committees.

What about the public?

The public, Sir? You see, Mr Chairman, that is the other aspect in which that party is interested. They want to play to the gallery. That is what they want to do. [Interjections.] Instead of working positively, they want to take opportunities of playing to the gallery. Let me say, Sir, that in the deliberations of the standing committees hon members of all three Chambers take part. They look at the problems facing South Africa. I must say that the hon member for Sunnyside, at times and through the pure logic of debate, has made objective and constructive contributions to those deliberations. When he becomes involved in debate with his colleagues of whatever party, he has from time to time made very constructive contributions to the debates in the standing committees, and that is of course what the whole system is designed to accomplish. It is designed in order to enable the representatives of the various parties in these three Chambers to sit around in committee, to thrash things out and to come up with solutions which are in the best interests of South Africa. That, Sir, is perhaps why we do not open those meetings to the public and to the so-called gallery because, if we did, the hon member for Sunnyside would no longer be objective in those committee meetings. He would just begin to play party politics, and probably in most cases that would be to the detriment of South Africa.

I believe he has really exposed the attitude of that political party towards trying to solve the real problems of South Africa. Instead of doing that they are merely trying to frustrate the finding of solutions to the problems of this country. I regret that he made a statement to that effect because he can make a very positive contribution to this Parliament as well as during the deliberations of the various standing committees of this Parliament. Instead he simply plays party politics, and that is not in the best interests of South Africa! [Interjections.]

I should like to come back to this Bill. Actually, it is merely a redrafting of the 1965 Act. It is just that, in the light of the equity building societies Bill that has now been passed by this House certain amendments had to be made. I do not intend going into those amendments; other hon members have already done so, and the hon the Minister certainly did so during the course of his Second Reading Speech. All I should like to say is that the financial requirements of a mutual building society are going to remain just as strict as they have been in the past.

A number of hon members have raised issues that were discussed during the standing committee meetings. I should like to say once again to hon members that nothing prevents any member of a standing committee from getting up in his respective House and putting across his point of view or exposing any “secrets” which might have been discussed by the committee. Every hon member has the opportunity to state his case before the Press and the public in each House.

During the course of the standing committee’s deliberations, however, various points of view were adopted as to the various merits of these two types of building societies, namely the equity building societies and the mutual building societies. This revealed two distinct schools of thought about this. I must say that while the majority of building societies are going to opt for status as equity building societies, one of the building societies—the hon member for Sunnyside referred to this—namely, the SA Perm, said they would rather retain the mutual system.

The building societies gave various reasons for their choices. Those that wanted to go the equity route said that because the banking institutions had now entered the housing moneylending market, the building societies were facing stiff competition from the banks and so they wanted to be free to compete with the banks. That was one of the main reasons why they wanted to go the equity route. On the other hand the SA Perm said that one of the main reasons for wanting to go the equity route was to open the vasts reserves of the building societies to the equity market and that these building societies that wanted to do that were more interested in the profits rather than in the objective of building homes for people. The question was discussed as to whether the equity building societies would in fact lend their money to people wanting to buy or build lower cost, or average-sized homes or whether perhaps because they were more profit-oriented, they would rather use their available funds for more profitable investments such as the building of swimming pools and luxury holiday houses. The argument was that this would be detrimental to the real needs of South Africa today and that is to build more houses of a lower price for our lower income groups. I just refer to these discussions because I think it is very important that we should understand the feelings of those opposed to the equity route and those who prefer the mutual building society system which is now being discussed by the House.

There are two matters that came out as being very, very fundamental and they have already been discussed here today. The first is that money should be made available for the purchase or building of houses. I do not think any hon member here is unaware of the great need that exists in South Africa today for the construction of houses. It is one of the major problems facing South Africa. It follows that if we want to build houses we have to have the money. That was the other fundamental matter as far as the building societies are concerned. A building society must be a medium for saving for the ordinary person in South Africa. The hon member for Paarl actually referred to the great need today, especially in the light of the pressures that are being placed on South Africa, to encourage our people to save. I think the history of the building society movement in South Africa is a very good one in encouraging our people to do exactly that. Someone—I think it was the hon member for Waterkloof—said earlier today that his first method of saving was by having a building society account.

As was said in the evidence given to the standing committee the building societies of South Africa have to date been called “the friendly face of capitalism”. This is because of the way in which they assist the ordinary man and open doors for him so that he can save and own his own home.

The feeling was expressed that as the building societies follow the equity route where they may be more profit-oriented there may be a closing of doors for the lower income groups to start saving their money. As an example it was said that some of the banks will not open a savings account unless there is a minimum deposit of R200. They said that this would close the door to many lower income groups especially among the Coloured, Black and Indian groups who are now starting to want to save. They said that the minimum amount of R200 to open a savings account would discourage savings, and I believe that we must watch this carefully.

This was fully discussed by members in the standing committee and we told the building societies that we felt that these limits should not be placed on savings accounts. I sincerely hope that they will take notice of it.

I want to come back to the motives. When evidence was given one reason expressed to us as to why we should retain the mutual building society system was that their motive in the past was to set the objective of building houses. They said that everybody should have the opportunity within his means to own a home. On the other hand the equity building societies rather wanted to go the equity route because they wanted to maximise their profits.

We, or certainly I, had great difficulty in deciding whether this point of view was correct, and perhaps only time will tell. We did, however, agree after some discussion on this, especially by hon members of the other Chambers, that the mutual route should be retained because other groups in South Africa might perhaps want to club together in some way, although there was a school of thought that this could only happen with some difficulty in the present financial times. The mutual route should exist so that, should emerging groups want to form a mutual building society in their own interests, they should be able to do this. I think that this was one of the strong points in favour of retaining the mutual building society concept in South Africa.

With those words I would like to add my support to this particular Bill.

Mr Chairman, I do not particularly want to get involved in the argument that took place during the early part of the speech of the hon member for Amanzimtoti between a new Nationalist and an old Nationalist, because they have their own little rows to hoe. I would, however, like to make a comment in respect of standing committees. [Interjections.] I firmly believe that they should be as they are, that is, in committee. I cannot see any advantage in opening them because, apart from anything else, one thing against opening them is the fact that the Americans do that. As far as I am concerned, anything the Americans do is wrong. [Interjections.]

That is logic!

I was just being mildly humorous.

The other point is that, if the standing committee is meeting in committee, people can be open and frank. When one is speaking in public, one is prone to playing a little to the gallery.

This Bill is very simple and follows upon the previous one. One of its main objectives is to achieve parity for trading purposes, or as near thereto as possible, between the mutual and the equity companies. One of the main methods adopted to do that, is to ensure that the reserves situation between the two is brought more or less into line in that the equity companies require 4% and the mutual societies have to build theirs up to the same amount over a period of 10 years. Now it has been suggested that this may be difficult for the mutual companies, and I suspect it may well be, particularly if they have substantial calls. However, I do not think it is impossible, because if they have 10 years in which to do it, a 1% increase per annum should not be that difficult, although I realise that they are dealing with very large sums of money.

Another aspect—and I think it is a good one—is to extend the activities of the mutual societies to enable them to undertake the business of estate agencies. I think this can be very helpful. To a degree they have been involved in the creation of estate, but I believe this can be extended further.

Now the position is that one does have a bit of a problem regarding the sort of things we are asking of building societies. One has a situation where, in trying to insist on cost-loss savings accounts with no tax-free concessions—by cost loss I mean being compelled to take any account, no matter how small—the accountancy expenses involved in some of these small accounts are far higher than those accounts can earn in interest. As I say, there are no tax-free concessions, and if they are going to do business they have to give a decent return on the investment made with them. Furthermore, they are expected to provide low interest loans for low income housing. [Interjections.] No, when I say low interest, obviously the lower the interest the better opportunity people with a low income will have to get housing. This is the point I am trying to make. So, in my opinion these building societies are trying to be all things to all men without having the wherewithal to do it.

I believe that, because the profit motivation is not as sharp in a mutual company as it would be in an equity company where they have shareholders to whom they must specifically pay the best possible interest, the mutual societies may stand a better chance of being able to square this particular and peculiar circle. So as far as I can see, there is a great deal of benefit in the idea of having these mutual building societies and, as the hon member for Yeoville said, of expanding the activities of the mutual building societies and trying to obtain the services of more people in this particular endeavour. I think they are very useful organisations.

With those few words we in these benches will support the Bill.

Mr Chairman, the hon member for Umbilo mentioned the kind of problems that the equity building societies might have in the future in terms of competing adequately with the mutual building societies. I do not want to enter upon a debate on that. Time will tell which forms of organisation are going to do better. All one can say is, firstly, that in the experience of the insurance industry it was shown that there was room for both forms of organisation and that the public benefited by the existence of both forms of organisations. Secondly, one of the big problems in this country, which is why we have been dealing with this legislation before the House, is that the building society legislation at the moment is very prescriptive and old-fashioned. The reality is that if there is one thing which is changing in our country it is the expansion of private property rights across the board for all of the people of this country.

One need only look at what has happened in the property industry over the past few years. We have had the introduction of sectional title and the abolition of rent control. We have had new subdivisional norms for detached and semidetached houses. We have had the advent of group or cluster housing, time-sharing, 99-year leasehold later also to be converted to freehold. We have had the mammoth sale by the Government of 500 000—that is half a million—units of its housing stock to people of colour.

It has not sold them all yet.

Well, they are for sale. I am talking about the great movement in our society. [Interjections.] There is a whole new culture of private property rights. Never before has there been an expansion of private property rights to all classes of people in our country at a greater pace than now. Therefore, clearly the financing instrument that must finance that housing should also adapt itself to the new circumstances it finds itself in, as well as to the changing environment. That is what we have done today. Therefore, I thank the hon member for his support. I also thank the hon member for Amanzimtoti for his interesting contribution.

As far as the hon member for Sunnyside is concerned, I just want to ask him one thing.

*I merely want to tell him one thing. I really do not think it is fair for us to abuse the interests of private companies across the floor of this House. I think that hon member will regret what he has done here this afternoon. He spoke about individual companies. Those companies cannot answer back. I think he can definitely talk about the principle. It is his right to do so, but I do not think mentioning the name of a private company here in the way in which the hon member did so, is what is expected of us. I hope the hon member will consider this and not do the same thing in future. The board of directors of those companies reflect their shareholding in their activities, as they see matters. Whether or not the hon member wants to argue the principle of participation or non-participation by other groups is his right, but I do not believe we should talk about specific companies across the floor of the House.

The hon member for Paarl made an interesting speech about his visit to and his impressions of the financial community in America. We thank him for that. He said we might have to look at changes in the legislation. I think that is true. One can come to this House with a simple Bill, and in a year or two we will be dealing with another amendment. When one effects such a fundamental change as far as the financing of housing in South Africa is concerned, there is one thing of which we can be very sure. We shall be dealing with this legislation again next year and the year after. All kinds of things which we could not have foreseen—also concerning the changeover of these companies—are going to happen in practice, no matter how good the legislation may be. In respect of the necessary changes that will have to be introduced, we shall have to be led by what happens in practice. I hope the hon member was not correct about some of the statements he made. Nevertheless we shall have to see how things work out in future.

†I must say that if anybody is today left with the impression that somehow there is some kind of new risk involved, now that we are talking about this new legislation and the new way in which building societies are going to be organised—that may have begun as a result of the arguments raised by the hon member for Yeoville about deposit-insurance, fidelity and stop-loss insurance and that kind of thing—I think we must belay that at once because it is absolutely not so. I know the hon member for Yeoville was talking about the banks and deposit-taking institutions in general.

The fact is that if we properly control, apply and supervise all of the solvability and capital and liquidity requirements which we are enacting here today, there can be no difficulty at all. I think it would be wrong if we were to leave any impression at all in this debate today that somehow something has changed and that people are somehow going to be worse off or at some kind of risk which did not exist before. That would be absolutely a false impression to leave. One can assure the public that supervision will be improved from what it currently is in that it is in my opinion a better arrangement that the Reserve Bank will do the supervision.

With those few remarks we come now to the end of this marathon in which we have been involved for some years now, and I want to thank all hon members for their support of this measure. I think that we have indeed struck a blow for housing in South Africa in general, because we have made a contribution here this afternoon to the way in which we finance or seek to finance this enormous challenge and opportunity, and that is to meet the housing needs of the people of the Republic of South Africa.

Question agreed to.

Bill read a second time.

Mr Chairman, when the House adjourned last night I had been dealing with the matter of the prescription period and courts, and I think I can say that I have the support of hon members on all sides of the House in that matter.

I want to deal finally with two other aspects of this measure and the first is the consortium. I want to support what the hon member for Primrose had to say in this regard. I am totally opposed and I have always been opposed to monopolies and closed shops and to the limitation of opportunity to a small privileged group, clique or body or whatever one likes to call it. I have therefore always been opposed to the concept of the consortium, not only in this measure but in any other field, and I welcome the fact that specifically and with intent the Bill was changed to provide that other applicants—any applicant that has the qualifications laid down—will be entitled to be considered as a member of the consortium. [Interjections.] That is to be determined by the advisory committee.

This brings me to the last point I want to raise. It is probably not such a popular point, but I am nevertheless going to raise it. It is that other hon members and I took strong exception to what we considered to be treating the standing committee and Parliament as a rubber stamp on departmental actions. I have here, for instance, the memorandum of agreement with the consortium. It is a legal document, signed by a representative of the Motor Vehicle Insurance Fund as well as by the members of the consortium. It was signed on 14 March 1986. It is a legal document which was signed, representing a contract concluded and limited to a specific consortium. That contract was concluded before the Bill was published. It was concluded before the Bill had even been placed before the standing committee, let alone being placed before Parliament.

Disgraceful!

What is more, Sir, it was expected of us that the measure should be passed before 30 April. When the standing committee exercised its right to deal with the matter properly and in depth, it did so. We did so because that was our duty and our right. As already stated, the committee effected between 20 and 30 amendments to the Bill. The committee also took evidence. It had, however, been presented with this measure when the new system was due to come into force a little over two weeks later.

What were we expected to do? Were we expected to accept the measure blindly or to do what we subsequently did—bringing about amendments in order to improve the measure? As I have already said, the contract had been concluded before the standing committee even had the opportunity of dealing with the Bill, with the result that when the new system was due to come into force there was panic because the public in general—those people who were affected—did not know what to do. They were receiving discs through the post. I myself received discs through the post from three different companies. Motorists were being given discs at tables outside offices. Companies were competing with each other to give out these discs—and the fund paid for this, not the companies!

It was all cut and dried. Yet there was no law in terms of which the public were being given these discs. Then, when the public heard that the law had not yet been passed, they got into a panic; and the statements that were issued made things even more confusing because motorists were told by some that they had to display the discs while they were told by others that they did not have to display the discs.

Even at this moment, as we debate this Bill, no one can be prosecuted for not displaying a disc on his car because there is no law compelling him to do so. The old law is still in force, and in terms of this old law the motorist has to pay a premium; and of course, the motorist is not being compelled to pay this premium.

So, Sir, finally, I want to lodge my protest at what I believe was contemptuous treatment of Parliament and its standing committee. Parliament was treated like a rubber stamp. I do not know whose fault this was. Even though we were given full reasons in the standing committee, I still do not know whether it was the Minister and the Cabinet who delayed this process, or whether the process was delayed because this was a very complicated and involved matter. Whatever the reason for the delay, the Bill should not have been presented to the standing committee at the last moment. Moreover, it should not have been presented in a form which has resulted in a situation that, for nearly four months now, MVA has not been governed by any law since the law which is purportedly governing what is actually happening is not the law that is in force. I have heard—and I would like to ask the hon the Minister whether it is true—that some of the agents who signed this agreement are refusing to accept cases that are referred to them. If that is true it makes it even worse. We have a closed-shop consortium of signatories and it is said that some of the members of that consortium are not prepared to operate under the conditions on which they have signed. I would like the hon the Minister to clear that up so that we know exactly what the position is.

However, we support the measure, we believe it is a step forward and we would like to see other companies now admitted. We will vote for this measure in its amended form but we would like to receive an assurance that full and urgent attention will be given to the two matters that were discussed in the House last night.

Mr Chairman, first of all I would like to thank the hon member for Durban Point for his support. I think generally speaking most people will concur with him on the sentiments he has expressed about the way in which we were given the necessary documentation in the standing committee. However, I would also like to say that eventually we got it all sorted out and I think it was a very pleasant experience.

Most of the hon members speaking thus far have skirted around the issue of the special courts. The hon member for Bezuidenhout made reference to it yesterday. If I remember correctly I think he said he wondered whether they would come into being and how the committee was faring. The hon member had the opportunity to make sure that we had special courts because there was the opportunity for us to put it into the Bill, but he did not support that measure. [Interjections.]

I want to deal with this in particular. One has to look at the object of and the reason for the MVA scheme. It is a scheme primarily designed for the benefit of the public. Firstly, it ensures that motorcar accident victims will receive their full common-law damages in respect of injuries inflicted on them. Secondly, it ensures that the motorist will be protected against a potentially ruinous judgment consequent upon a moment of negligence. In short, it protects both the victim and the motorist.

In practice, what should be seen from the public’s point of view is that this scheme should be there to obtain for accident victims their fair common-law damages with as little delay as possible, as inexpensively as possible and without having to contend with a variety of technical hazards and traps. Having said that, it must also be accepted that there are major areas of complaint by the public against the MVA scheme. Some of them are as follows: The claim procedures are too slow and cumbersome and often run into years. Although statistics show that many claims are indeed settled within a reasonable time it is equally true that a disturbing number of claims are subjected to indefensible delays. It is alleged that MVA cases are one of the main causes of the congestion of the courts.

This allegation may well have merit if one reads the Hoexter Report and I refer to page 189 of the fifth and final report. As I read this particular page, the tentative view of the commission is that it acknowledges that the congestion of the courts is a disturbing fact and the commission was apparently of the view that the removal of MVA cases from the forum of the Supreme Court would be a salutary step towards the alleviation of the burden presently carried by Supreme Court judges and thus also towards a decongestion of the Supreme Court roll.

It is also said that the system involves very high litigation costs if one goes to court. When one looks at litigation costs the ordinary man in the street gets frightened out of his wits. Who can blame him? The attorney who does all the groundwork receives a mere R60 an hour when he appears in court whereas the advocate charges between R4 000 and R5 000 per day for an appearance. I heard recently that an advocate submitted an account for over R20 000 for one day’s court work. One must ask whether the man in the street can afford to go to court these days. It is becoming an impossible situation, especially for the man in the street.

Further criticisms are that the Act and its regulations and procedures are a minefield of technical defences and traps, and that innocent victims are subjected to painful and often personally insulting cross-examination which is regarded as degrading and humiliating.

I have touched on a few of the criticisms of the system which need to be ironed out as soon as possible. In my opinion, this can only be done by the establishment of a special MVA court. Such a court would serve the best interests of the public and would provide solutions to most of the already acknowledged problems and shortcomings.

The structure, rules and who should preside over the special court should not be all that difficult to work out if—I repeat, if—there is co-operation from all concerned. If we as legislators are looking for optimum efficacy, and if that can only be achieved at the expense of those who practise law, then so be it. Integrity and an objective approach demand that personal interests submit to the interests of the public at large.

I wish also to deal with the question of who should preside over such a special court. It must be accepted that presiding officers should have the highest degree of experience, expertise and specialist knowledge in the field of MVA matters. In this regard, I should like to quote as follows from the report of Mr J M Potgieter, a member of the Hoexter Commission:

He adds:

To sum up I submit that the proposed special court will undoubtedly serve the best interests of the public. It will remove all matters relating to this Act from the overcongested rolls of the Supreme Court and the magistrate’s court. The rules of the special court should be designed in such a manner as to ensure that accident victims will receive their compensation much sooner, as inexpensively as possible, and without having to contend with a variety of technical hazards and traps. The early conference procedure to be incorporated into the rules of the special court will oblige the parties to come together shortly after a claim has been lodged in a genuine endeavour to settle claims in whole or in part, thus sifting actions to be heard by the special court to an absolute minimum. The rules of such a court are also intended to make provision for any payment or interim partial payment of any such amount as may no longer be in dispute after the early conference.

It is envisaged that elements of the more informal inquisitorial system will be adopted for the special court in preference to the existing formal accusatory system currently in use in the Supreme Court and magistrate’s court. It is also envisaged that a properly designed claim form will stand as a summons, and the time-consuming exchange of voluminous court pleadings will be scrapped. The establishment of the special court will give effect to the suggestion by the Hoexter Commission that the removal of motor vehicle accident cases from the province of the Supreme Court and magistrate’s court will serve to relieve the pressure on judges and magistrates. It follows also that waiting periods in those courts will be greatly reduced for the benefit of the litigating public. The quicker, more streamlined and less formal system will greatly reduce litigation costs. Virtually all the weaknesses in an otherwise excellent system will be eradicated. The eradication of these weaknesses will not be possible if claims continue to be processed through the Supreme Court and magistrate’s court.

The establishment of special courts for specialist fields is nothing new. There are special income tax courts, patent courts, water courts, the Industrial Court and compensation courts.

In closing I want to say it will be very interesting to see what the result is going to be of the special committee which will be established by the hon the Minister of Justice to go into the costs and the delays of third party claims.

I have much pleasure in supporting the Bill before us.

Mr Chairman, I have no quarrel with what the hon member for South Coast says, but I do want to start off—and I will be very brief this afternoon—by stating that the Government is not beyond criticism with regard to the handling of this Bill. I think it is common cause that in terms of the existing MVA Act the third party insurance token expired on 30 April 1986. Today’s date is 19 August and we have not really clarified the law with regard to third party motor vehicle insurance. I do think the Government should have amended the existing Act before this Bill came into force. It has now created a hiatus with regard possibly to litigation, and certainly with regard to the tokens and the lack of clarity as to where people stand. Certainly, as far as the legal profession is concerned, it has created a tremendous amount of consternation as to the legality of the old Act as well as the new Bill which was being acted upon although it had not been passed. In fact, seminars were held with very expensive subscription fees to discuss legislation which had not been passed by Parliament as if it had been passed. I am afraid there might still be litigation over the hiatus that has been created.

The hon member for Bezuidenhout has dealt comprehensively and competently with the entire Bill before us. I do not want to go over that ground save to mention two points, one of which is in regard to special courts and the other in regard to prescription.

However, I want to take the hon member for De Kuilen to task, if I may. I believe he was a competent chairman and, if I may say so, I think the standing committee did a very good job in spite of what happened. In particular I think we all agree that the hon member for Bezuidenhout played an important role.

The hon member for De Kuilen said the other day with regard to the establishment of special courts that this would lead to fragmentation. Firstly, I cannot understand why he should say so and, secondly, I think he is letting his committee down. I was not a member of that committee but I have, for a period in the region of 38 years, been involved in litigation on behalf of clients, as indeed have many hon members of this House. For the hon member now to argue that this will lead to a fragmentation of the courts, is a non-argument. It is absolutely no argument at all.

The courts are already divided. There is a Supreme Court and magistrates’ courts. The Supreme Court has a civil jurisdiction as well as a criminal jurisdiction. Similarly, the magistrate’s court has a criminal jurisdiction and a civil jurisdiction. It is already specialised with regard to certain aspects. For example, in the magistrate’s court there is a maintenance court dealing with domestic issues with regard to the payment of maintenance and deserted wives and children, etcetera. There is a children’s court dealing with special Acts concerning children. There is a traffic court dealing with special traffic matters and there is an insolvency court dealing with insolvency matters. Then, as mentioned by the hon member for South Coast, there is an income tax court. There is an industrial court, a water court and there is a patent court. Therefore, no one can tell me that there is not already a fragmentation of the administration of justice.

What we have to do, is create a legal system in this country that will produce the best results for the litigant himself and which will enable him to have the most expert advice in those expert courts that can deal with the litigation as cheaply, if I may say so, and as expeditiously as possible.

What will happen if we do establish these special courts, is that the courts themselves will be specialised in dealing with motor vehicle claims, and there are only two aspects concerning claims, as hon members will know. There is the question of negligence which has to be established, and the question of quantum. Once those two elements have been dealt with and the courts are specialised, they can get on with the litigation and finalise it.

One will also find that both counsel and attorneys who specialise—there are a number of attorneys and practitioners who specialise only in MVA matters, just as counsel specialise in those matters—will not be deprived of their living. They will still be able to appear before the courts but the court must then be under a presiding officer, who may by all means be a judge, and be accessible to attorneys and advocates so that the cheapest form of litigation can take place.

I am amazed, speaking as a member of the profession, at the high cost of litigation and counsel fees today. Only very rich people can afford litigation today. Therefore, it is incumbent upon us as legislators to provide a system which will do away with the high cost of litigation.

I come now to the arguments which were put forward in this debate. The hon member for South Coast referred to the appendix which was before the standing committee, and I agree with every word he said. I hope the hon member for De Kuilen…

Mr Chairman, may I ask the hon member where he would like the courts to fall if we were to set up separate courts to deal with third party insurance? Is he thinking of the Department of Justice or the Department of Transport? [Interjections.]

Order! Certain hon members have ignored my ruling and have turned their backs on the Chair. I request them kindly to give the hon member the opportunity to complete his speech.

Sir, in answer to the hon member’s question, obviously it must be the Department of Justice. I have no problem with that at all. They are the people to deal with that. However, the beauty of a specialist court on MVA claims is that it can do away with the cumbersome procedure which involves Supreme Court and even magistrate’s court litigation. Let us have a short cut to procedure. There can, for example, be a special type of summons, a special type of form. The advocates have argued that one can finalise litigation within six months; in other words, 14 days for one’s pleadings, followed by further particulars and the answering of further particulars. I should like to ask any practitioner in this House: Who is able to complete Supreme Court litigation in six months? I am sorry, but it can never be done. Extensions are granted from time to time and it is impossible for this to happen.

One of the problems with regard to third party insurance is that it is based on a medicolegal report. With all due respect to the medical profession, I have been told the doctor wants R400 to R500 before issuing the medicolegal report and he wants cash on the dot because he does not know how many years he will have to wait until he gets paid for that report.

With great respect, it is not easy to finalise such a case within a short time. Some hon members in this House are doctors and they will also be able to confirm this. [Interjections.] For instance, a person suffers a severe injury as a result of an accident. He is then examined by the doctor and surgery has to take place. One cannot then give a final decision as to whether that surgery is going to be successful or whether it is going to lead to further surgery at a later stage. Therefore the matter cannot be finalised which causes a long time to elapse before that takes place.

That brings me to the question of prescription and I think it is quite unfair to have prescription after a period of only two years. It should be extended for a minimum of three years, for the reason, as I have said, that litigation takes a long time and pleadings take a long time.

Your own colleague is against you.

I can understand the argument that we want to get the claim settled as quickly as possible. However, at the same time, one has to be in a position to work out the quantum because of the injuries sustained, and it is not easy to obtain a quick decision on the quantum.

If therefore a special court is established it can obviate all these difficulties. The matter will then be dealt with expeditiously. There will be special rules dealing with the application, rules for a pretrial conference and rules with regard to the compensation that can be paid in an interim situation. [Interjections.]

I hope the hon the Minister will support fully the question of the special courts and give consideration at a later stage to prescription so that it will be easier for the courts to grant condonation, if necessary, and perhaps to put the prescription provision on the same basis as generally applied.