House of Assembly: Vol113 - WEDNESDAY 28 MARCH 1984
Mr Speaker, I move:
Since I introduced last year’s Budget the economic situation in South Africa has been adversely affected by a number of largely unforeseen extraneous developments, over which we have no control. These developments have come to pose quite exceptional challenges to the authorities and have made the drawing up of this my tenth Budget exceedingly difficult and its contents crucially important. To meet the challenges confronting us, disciplined action is required. Today’s Budget constitutes a vital part of the required policy response.
The first extraneous development that affected the South African economy adversely was the marked decline in the gold price. After reaching a peak of over $511 per ounce on 15 February 1983, the gold price averaged only $424 per ounce during 1983 as a whole and a mere $384 thus far in 1984.
A second unfavourable development was the sluggish recovery in world demand for those commodities which constitute South Africa’s main exports other than gold. Our non-gold exports accordingly remained relatively low during most of 1983 and only began to show a rising tendency towards the close of the year and during the early months of 1984.
A third adverse development was the worsening of the drought. The welcome rains in many parts of the country during the fourth quarter of 1983 brought temporary relief, but subsequently the situation deteriorated again and assumed crisis proportions in several areas.
The combination of a declining gold price, sluggish non-gold exports and unfavourable weather conditions naturally had adverse effects on the real growth rate of the economy, the balance of payments and government revenue. In these circumstances the South African economy performed remarkably well. It is true that, comparing 1983 as a whole with 1982, real gross domestic product declined by about 3% and real gross domestic expenditure by about 4½%. But it is now clear that the cyclical downswing which had commenced in September 1981 came to an end during the second quarter of 1983, and that the economy subsequently displayed a modest but meaningful recovery. This is borne out by the behaviour of real gross domestic expenditure, real gross domestic product, employment, imports and many other key indicators of economic activity, which all increased during the second half of 1983.
Welcome as this new upward tendency in the economy was, it did represent a deviation from the traditional pattern of the South African business cycle, and in a manner which called for careful policy adjustment. The upswing started out in much the usual fashion as an export-led recovery—in this case caused by the rise in the gold price between the middle of 1982 and February 1983, with all its concomitant expansionary monetary and other income-generating effects. But when the upward tendency of the gold price was sharply reversed after the middle of February 1983, the recovery in the economy was sustained by increases in government spending and private consumption. In the circumstances prevailing this meant that it was perhaps less solidly based and more likely to run into new balance of payments and other constraints. The changed nature of the upswing also had implications for fiscal and monetary policy, as I shall point out presently.
It follows that we shall have to wait for a marked improvement in the gold price and/or in the value of non-gold exports before the modest recovery to which I have referred can be expected to gain much further momentum. Although the gold price improved fitfully on occasion during the past month, it still remains relatively low. On the other hand, the economic recovery in the United States and, to a lesser extent, in Western Europe and Japan has during recent months begun to exert an expansionary effect on our non-gold exports. Present indications are that real gross domestic product will resume an upward tendency and achieve a positive rate of growth in the course of this year.
In saying this I realize, of course, the risks involved in economic forecasting. Laurence Peter said:
Convincing progress has also been made during the past year in the battle against inflation. The twelve month increase in the consumer price index was brought down from the 16,5% recorded as recently as May 1982, to 10% in February 1984. This was largely the result of the reduced rate of increase of aggregate spending and a lower rate of increase in import prices, reflecting both lower overseas inflation rates and the lagged effects of the appreciation of the rand between July 1982 and February 1983. Fiscal and monetary policy were important determinants of this significant decline in the inflation rate.
But for the fact that indirect taxes, and notably in this context GST, are included in the calculation of the consumer price index, the present inflation rate of 10% would undoubtedly be a single figure. There appears to be a good case for reviewing the components of the index in order to exclude taxes, as many countries do.
The remarkable improvement in the balance of payments after the middle of 1982 was consolidated during the first three quarters of 1983. Despite the decline in the gold price and the unfavourable impact of the drought on our trade balance, the current account showed a surplus of R275 million for 1983, compared with a deficit of R3 210 million for 1982. During the fourth quarter of 1983, as the gold price declined further and imports rose, the current account registered an annualized deficit of R1 900 million. For 1984 a moderate surplus is anticipated.
On capital account, net purchases by South African residents from foreigners of securities quoted on the Johannesburg Stock Exchange resulted in an outflow of just over R1 000 million during 1983, but this was largely neutralized by inflows of loan capital, so that the total net outflow of capital not related to reserves amounted to only R300 million over the year. The net foreign reserves accordingly showed little change.
The rand held up well in the foreign exchange market during 1983, depreciating against the exceptionally strong United States dollar by 11,6%, but by only 4,3% in terms of a weighted “basket” of foreign currencies—including the dollar. Indeed, over this period the rand depreciated against sterling and the Swiss franc by only 1,5% and 3,7% respectively, and actually appreciated against the German mark and the French franc by 1% and 9% respectively.
From the point of view of curbing inflation, any depreciation of the rand in terms of other currencies is, of course, problematical. But from the point of view of counteracting a decline in domestic economic activity and maintaining equilibrium in the balance of payments, the flexibility of the exchange rate has served the country well. It has, for example, prevented the rand price of gold from declining as much as the dollar price, thereby to a large extent insulating the gold mining industry from the sharp fall in the dollar price of its product. In addition, it has preserved the dividend payment potential of the industry not only in rand terms but also in terms of such important currencies as sterling, the German mark and the Swiss franc.
When I introduced last year’s Budget I rejected any policy of deliberate reflation or stimulation of the economy. Instead, I underlined the need for a co-ordinated fiscal and monetary strategy to reduce the rate of inflation and to maintain a strong balance of payments. I stressed that the achievement of these two objectives was an essential precondition for rapid and sustainable economic growth in the medium and long term.
The March 1983 Budget was designed to fit into this strategy in three ways. Firstly, it provided for an increase in total expenditure of only R1 971 million or 10,3% above the revised estimate for 1982-83, that is, for little if any increase in real terms. Secondly, the “deficit before borrowing” was estimated at the low magnitude of R2 082 million, or 2,4% of gross domestic product. Thirdly, provision was made to finance this expected deficit without net recourse to new money creation.
That this was the appropriate stance to adopt, has been clearly shown by subsequent events. However, our policy intentions were overtaken by the adverse extraneous developments I have outlined today and, as I shall show presently, both Government spending and the “deficit before borrowing” came to exceed the original Budget estimates. This outcome was mainly the result of increases in expenditure on drought relief, defence, food subsidies, salaries and wages and interest on the public debt.
That these spending increases were essential and for the most part unavoidable in the national interest, is indisputable. But it must be recognized that they transformed a Budget that was meant, on balance, to be disinflationary into a moderately expansionary one.
In different circumstances there would have been much to be said for such a Budget “outturn”, because of its contracyclical effect of stimulating demand and output at a time of relatively low economic activity. In the circumstances that actually prevailed, and particularly in view of the constraints imposed on the economy by the decline in the dollar price of gold and by the drought, the moderately expansionary effects of the Budget heightened the need for the Treasury and the Reserve Bank to control the money supply, to maintain a sound balance of payments and to reduce the rate of inflation. In the end, the authorities succeeded in making considerable progress towards their ultimate objectives. But the fact that the Budget “outturn” represented a deviation, in the sense explained above, from the strategy laid down in March 1983 clearly has implications for fiscal policy in the year ahead—a point to which I shall return.
It was in recognition of these changed circumstances that I increased the general sales tax from 6% to 7% with effect from 1 February 1984. This step has already served to reduce the budgetary deficit before borrowing and therefore also the need for the Treasury to approach the capital market for additional funds. But that is not the only salutary effect this fiscal measure has had. If the level of Government spending is taken as given, any increase in either direct or indirect taxation that has the effect of reducing the deficit before borrowing and the rate of increase of the money supply is in essence disinflationary in its effect on the economy.
During the first half of 1983, monetary policy was more expansionary than had been intended, and the broad money supply (M2) increased at an annualised rate of 27%. This was fundamentally the result of, firstly, the rapid rise in the net gold and other foreign reserves between the middle of 1982 and February 1983 and, secondly, net central bank credit creation for the Government sector for a brief period during the second quarter of 1983. These developments brought about a decline in most interest rates from the relatively high levels of mid-1982 to a low point in February 1983, followed by only a moderate rise until the middle of June. The prime overdraft rate of the commercial banks, for example, which had declined from 20% in October 1982 to 16% in February 1983, decreased further to 14% in March and remained at that level until the middle of June. At the same time bank credit to the private sector expanded substantially.
Although this easing of monetary conditions and policy helped to bring about the measure of recovery in the domestic economy to which I referred earlier, it also contributed to the depreciation of the rand and a speculative boom in real estate and stock exchange transactions, and therefore complicated the task of curbing inflation and inflationary expectations.
During the second half of 1983, however, the monetary authorities succeeded in slowing down the annualised rate of increase of M2 to less than 8%. The result was that, over 1983 as a whole, M2 increased by 16,5% compared with 17,4% in 1982, 25,1% in 1981 and 27,4% in 1980. Moreover, conditions in the financial markets tightened noticeably after the middle of June and most interest rates hardened quite substantially. The prime overdraft rate, for example, increased from 14% in June to 20% in December, and to 21% last week. The latest increase came after market forces had brought about a substantial further rise in the banks’ average cost of funds, which mainly reflected the impact on the money market of the drought and the lower average gold price.
The acceptance by the Treasury and the Reserve Bank of higher and more realistic interest rates contributed greatly to their success, from the middle of June onwards, in financing the larger than anticipated Budget deficit before borrowing by means of tender and tap issues of Government stock. Indeed, these operations were so extensive that the figures for the fiscal year 1983-84 will probably show that over this period as a whole the deficit was financed without any net new money creation—a most gratifying outcome.
In assessing the recent increasing effectiveness of monetary policy, it is not enough to look at the behaviour of the money supply itself. Account must also be taken of the welcome decline in the “income velocity of circulation” of money since the abolition of credit ceilings and deposit rate controls in 1980. From its peak of 4,7 per year in the first quarter of 1980, velocity declined to 3,8 per year in the second quarter of 1981 and to 3,4 per year in the third quarter of 1983. The combined result of the reduced rate of increase of M2 and the decline in velocity was that actual spending slowed down substantially. In fact, real gross domestic expenditure—investment plus consumption—de dined for five consecutive quarters between the second quarter of 1982 and the middle of 1983, before recovering moderately during the second half of 1983. The slowing down of actual spending was, of course, the basic objective of fiscal and monetary policy, and largely explains the improvement in the balance of payments and the reduction in the rate of inflation.
In this regard it is important to note that real private consumption expenditure showed an actual decline during the second half of 1982 and the first quarter of 1983, and only increased moderately during the subsequent three quarters. After rising by 9% in 1980 and 6,5% in 1981, real private consumption increased by only 2,4% in 1982 and about 1% in 1983. Present indications are that it will rise by only about 1% again in 1984. Since the population is growing at between 2% and 3% per year, private consumption per capita has therefore declined in recent years. The view sometimes expressed that monetary policy has had little if any effect on consumption, is therefore incorrect. It is true that consumers have resisted the need to reduce their spending by saving less and borrowing more. But this does not alter the fact that the rate of increase of real private consumption has been considerably reduced and that monetary policy has contributed to this outcome, partly via the secondary or “multiplier” contractionary effects of a decline in fixed and inventory investment.
What this means is that the combination of fiscal and monetary policy as a whole proved effective during the past year in enabling the South African economy to deal with the combined consequences of the sluggish performance of the world economy, the decline in the gold price and the drought. More specifically, it has contributed to a rapid and smooth balance of payments adjustment, to a sound external debt situation, to South Africa’s high overseas credit rating and to a substantial reduction in the rate of inflation.
In essence, this was also the conclusion arrived at by a mission of the International Monetary Fund which visited South Africa earlier this month for consultations. The mission also found that we had met all the so-called “performance criteria” contained in our loan agreement with the IMF of November 1982, and once again gave us an encouraging report on our financial policies and practices.
Where most developing countries today are struggling to extricate themselves from the massive foreign indebtedness which is threatening to overwhelm them, I am profoundly grateful that I can inform the House that South Africa has no foreign debt problem. South Africa’s debt service ratio, that is, the ratio which interest payments on the debt bear to export proceeds, is about 6%, which in all conscience is very low according to international standards.
If further proof of the country’s high credit rating were needed, it was provided by the loans we have successfully raised in recent months in four major and prestigious foreign markets, the Euro-dollar market, the ECU market, the German mark market and the Swiss franc market. Moreover, the first three of these loans were in the form of public bond issues; that is, they were raised in the full glare of international publicity. To avoid any semblance of over-borrowing, the amounts per loan have been kept to modest proportions, but they have served to maintain South Africa’s presence in the capital markets of the world and to prove our creditworthiness where it matters. Our credit rating abroad has been enhanced in recent years not only by our conservative approach to monetary and fiscal management but also by the positive reaction to the new constitutional dispensation and the visionary peace initiatives of the hon the Prime Minister.
I turn now to the implications of the present economic situation for fiscal and monetary policy in the year ahead.
Despite the favourable results of our policies during the past two years, we have to face up to certain harsh realities. The dollar price of gold has declined further since the third quarter of 1983 and remains relatively low; the present drought is the worst in living memory in South Africa; the recovery of our non-gold exports has begun but, for the time being, remains sluggish. Inevitably, therefore, we have had to accept a temporary pause in the process of economic expansion. As most other countries have found in the recent past, there is no escape from this.
What, then, has been South Africa’s policy response to this situation and what should it be in the period ahead?
Basically, three broad policy options were open to us. The first was that of old-style deflation of the kind practised under the gold standard and, to a lesser extent, under the post-war gold-based Bretton Woods system of stable but adjustable exchange rates. This would have involved drastic cuts in Government spending, substantial tax increases, tight control over the money supply and very high real rates of interest, resulting in declining output, high levels of unemployment and general economic stagnation.
The second option, at the other end of the spectrum, was that of contra-cyclically stimulating the domestic economy by means of substantial increases in Government spending, tax reductions, lower interest rates and accelerated money creation through expansion of bank credit. This would initially have kept demand and output more buoyant, but would almost certainly have resulted in a marked deterioration of the balance of payments and a vicious circle of currency depreciation and inflation, as well as damage to South Africa’s overseas credit rating. Eventually, domestic economic activity and growth would also have been adversely affected.
The third basic option was to steer a middle course between these two extremes by, on the one hand, permitting the exchange rate to depreciate moderately while, on the other, applying a conservative “mix” of fiscal and monetary policy, including high interest rates, with a view to curbing aggregate demand and total expenditure.
Of these three options, we chose the third one, that is the middle course, and I have already set out the results this strategy has achieved to date.
In the period ahead we shall continue to follow a conservative policy designed to maintain a sound balance of payments and to reduce the rate of inflation. We continue to attach great importance to the objectives of optimal and stable economic growth and a high and stable level of employment. But we remain convinced that the best, if not the only way to “go for growth” in the longer term is to give priority at this stage to maintaining balance of payments strength and curbing inflation.
To this end, we deem it important constantly to endeavour to improve the “mix” of fiscal and monetary policy. As I have pointed out, the deficit before borrowing in the Budget has risen above the level at which I should have liked it to be. It is true that over the 1983-84 fiscal year as a whole, this deficit has been financed without new money creation. That is extremely important but, as I shall indicate, there are limits to a financing policy of this kind.
To avoid an unduly large Budget deficit in present circumstances, there are only two courses of action that can be followed, either separately or jointly: The increase in government spending must be reduced and/or rates of taxation must be increased.
Oscar Wilde defined a pessimist as a man who when faced with a choice between two evils, chooses both. But here there is no such clear-cut choice.
Curbing the increase in expenditure obviously has important economic advantages over substantial increases in taxation, and redoubled efforts have therefore been made to restrain Government spending as much as possible. For reasons which I shall set out more fully later, however, provision has nevertheless had to be made for an increase in aggregate expenditure in the year ahead. This has left us with no option but to increase certain tax rates. Failure to do so would result in undertaxing and overborrowing and would represent downright bad budgeting.
As every responsible person knows, there is a time to cut tax rates and a time to increase them. On this occasion the interests of the country demand an increase in tax revenue. Given the expected increase in Government spending for such essential purposes, among others, as education, defence, security, housing, food and transport subsidies, and drought relief, an increase in tax rates is necessary in order to prevent too great a reliance on borrowing.
In present circumstances the consequences of an unduly large deficit, that is, unduly large borrowing, would be damaging to the economy.
To begin with, it might mean that the Government was financing current expenditure by borrowing, that is, from capital, and that is something which ought to be avoided wherever possible.
Secondly, if the deficit is financed to any significant extent by new money creation, it would not only be highly inflationary but also put new downward pressure on the external value of the rand and lead to new balance of payments problems.
Thirdly, even if an unduly large deficit were to be financed through increased government stock issues on the capital market, it would raise interest rates and “crowd out” other deserving borrowers in both the public and the private sectors. This would exacerbate the plight of drought-stricken farmers, create problems for housing finance and retard the expected recovery in the economy.
To avoid making appropriate and, as it happens, relatively moderate tax adjustments now would therefore be asking for trouble. We would simply be storing up problems for next year. In the end, the adjustments required would have to be much more drastic, disruptive and painful. We either have a policy of curbing inflation and maintaining a strong balance of payments, or we do not. I believe today’s Budget will demonstrate that the Government has both the will and the ability to deal effectively with the problems currently confronting the country and thus ensure, on a longer run view, the prosperity of what is basically a remarkably strong, versatile and resilient economy.
Before turning to an examination of the Government’s accounts, I propose to deal with various policy issues I deem to be relevant and important in the context of the Budget.
Control of Government expenditure
Disbursements from the Exchequer show marked seasonal fluctuations, which can destabilize the financial markets. These movements reach a peak in March/April and to a lesser extent in October/November, with a pronounced decline in February of each year. This phenomenon arises mainly from payments that are contractually or otherwise linked to specific dates—such as interest payments on the public debt and payments in terms of the Customs Union Agreement— and from the fact that departments often curtail their drawings on the Exchequer during February/March in order to remain within the approved allocations until either their appropriations are increased in the Additional Appropriation or they receive fresh funds in the next financial year. This is obviously an unacceptable state of affairs if we are indeed serious—as I certainly am—on the score of fiscal discipline.
The Department of Finance is at present investigating the rescheduling of these bunched payments with a view to spreading them more evenly over the whole financial year. A number of changes have already been agreed upon. The most important is to peg the monthly issues to departments and institutions at roughly one-twelfth of the amount allocated for the financial year, with a small margin for the sake of flexibility. Advance Treasury approval will henceforth have to be obtained if this monthly limit appears likely to be exceeded. This will enable us to take timely action to ensure that the Additional Estimates are kept to a minimum.
This action represents a further phase in tightening up our policy of financial discipline, and the Treasury will seek scrupulous compliance with these measures in co-operation with all spending departments.
The Treasury has no more difficult or painstaking task each year than the cutting back of the Budget to manageable proportions. For the coming financial year the aggregate of the considered claims made on the Exchequer by all departments exceeded R30 000 million. After herculean efforts spread over many months, the Treasury finally brought this total down to just under R25 000 million.
Priorities in State expenditure
I feel it essential to inform the House as to how we propose to deal with the vexed question of priorities in State expenditure in a democracy whose base is now on the point of acquiring wider dimensions.
It takes no great prescience to realize that the ever-rising expectations of our growing population cannot be fulfilled within a reasonable time scale without our diverting ever larger slices of the available resources to problem areas. As long as we do not kill the goose that lays the golden egg—the productive sector—we can still afford this. The problem is to find a sustainable balance.
Hence, more than ever before, a system of priorities in the determination of expenditure must be devised to ensure—
- (i) that no more than a certain quantum of resources be diverted from the private sector for public sector and transfer payment purposes, and
- (ii) that expenditures be rationally apportioned among the various layers of government and, within each tier, among the functions for which each is responsible.
Failing this, South Africa will eventually be saddled with a cost-plus expenditure system leading to runaway inflation, unemployment, the throttling of private sector development and a dismal growth performance.
With the assistance of the Central Economic Advisory Service, my Department is engaged in an exercise to set up a logical long-term framework within which to set and judge expenditure requests, whether of a capital or of a current nature. The proposed framework will shortly be discussed by the Cabinet and, if approved, will form the basis of allocations to all departments and agencies funded from the Exchequer.
Marginal gold mines
Following upon a report of a special committee appointed to investigate the question, I proposed last year that several changes be made in the scheme for the subsidization of marginal gold mines.
The amendments to the scheme have since been applied for the purpose of interim payments to the qualifying mining companies and are now applicable to all mines participating in the scheme.
However, following upon further representations from the gold mining industry we have decided to postpone the intended 1 January 1984 six months’ notice to the mines concerned, which would have brought the scheme to an end. The purpose is to give a joint working committee composed of departmental and industry representatives more time to study the mechanics of running down the existing unsatisfactory scheme in order that it may be replaced by a practicable and less costly alternative.
Local authorities
Last year I announced that the Croeser Working Group on the financing of local authorities was to be succeeded by the Permanent Finance Liaison Committee. This committee subsequently submitted proposals to Government regarding new sources of finance for local authorities, which have been accepted. Since these proposals also have implications for the structural organization of local government, they have been referred to the National Co-ordinating Council. As soon as the Government has taken a decision in principle on the structural organization referred to, my Department will proceed with consultations on the details of the financing with all interested parties.
Privatization
In my Budget Speech last year I referred to the problem of realistic pricing of public utility goods and services. Much attention has been devoted to this problem over the past year, not only as far as utilities are concerned, but in respect of all Government enterprises and corporations. Government has taken the initiative wherever possible to prevent tariff increases from exceeding the level of the inflation rate. In this it has succeeded in the short term; but any undue restrictions, if continued for too long, will obviously lead to distortions in rate structures and to inappropriate and costly financing techniques, making the last state possibly worse than the first.
I am of the opinion that this problem should rather be tackled at its source, that is, by the further curbing of inflationary pressures, a problem that I am attempting to address fully in this Budget. I welcome the in-depth investigations that are now being conducted into the financing and cost structures of SATS, Escom and Iscor’s iron-ore export programme, for it is in these fields that much can be done to contain cost escalations precisely at a time when we can least afford them. I am convinced we can gain much by edging our business undertakings and public corporations, even though they may not all be candidates for full privatization, much closer to private sector disciplines, and I propose to take this matter further with interested parties as far as my Department is concerned.
Building societies
I referred last year to the reports of the Du Plessis and De Kock Commissions. As proposed by the latter, building societies will be given the option of continuing as mutual bodies or converting to an equity capital base. The societies and the Technical Committee on Banking and Building Society Legislation, which is preparing legislation to alter the Building Societies Act in line with these proposals, are still engaged in discussions on the subject, but I expect that a draft Bill will be circulated for comment soon and submitted to Parliament at the earliest opportunity thereafter.
Public Investment Commissioners and the Corporation for Public Deposits
Hon members will recall that legislation to give effect to the restructuring of the Public Debt Commission and the National Finance Corporation has just been passed by Parliament. Both of these bodies are being replaced by new organizations with somewhat different functions each. The Public Debt Commission will be replaced by the Public Investment Commission and will concentrate on long-term investment of Government funds while the National Finance Corporation will be replaced by the Corporation for Public Deposits which will look after the management of short-term investments on behalf of the public sector as a whole.
I should like to take this opportunity to thank all those concerned at these two bodies for the valuable services they have rendered. I trust a way will be found to continue the very useful confidential exchange of views between the monetary authorities and private sector financial institutions, which was so happy a feature of the NFC.
Standing Commission on Taxation
The Tax Commission has again been hard at work during the past year and has submitted a number of recommendations on a variety of matters, several of which have since been incorporated in legislation or otherwise implemented. Others are now being introduced or will be put into effect at a later stage. I am grateful to the commission for keeping so watchful an eye over our tax structure and the anomalies that inevitably spring from it.
The commission is at present engaged in a major exercise to reassess the advisability or otherwise of the separate taxation of married persons, and I hope to receive a report early next year. It is a complex matter—contrary to popular belief—and demands renewed study. In the meantime I must warn against any premature expectations that the fact of such an enquiry necessarily means a change in the present system. The matter will be dealt with entirely on its merits.
The commission is also considering several other matters. There is an hiatus in our tax structure relating to the taxation of capital transfers and of so-called “unearned” income, such as capital profits on real estate and share transactions. I have asked the commission to investigate the desirability and the practicability of taxing the gains made on such transactions, and to report to me as soon as they conveniently can.
According to Solon, that great lawgiver of antiquity, laws are like spiders’ webs: If some poor weak creature comes up against them it is caught, but a bigger one can break through and get away.
I think hon members will be with me in wishing to ensure that this cannot be said of our tax structure.
General sales tax
It may come as a relief to the House to know that I do not intend to propose any further increase in the 7% General Sales Tax as this tax was increased only recently. What I do propose, however, is to request the Standing Commission to advise me on two matters affecting this tax source:
- (a) The extent to which it may be desirable and practicable for a limited number of basic food items or, alternatively, all foods to be excluded from GST or be taxed at a lower rate, and also to advise on the resultant loss of revenue as well as the administrative problems that would arise; and
- (b) The extent to which this tax should be extended to services presently untaxed, such as professional services.
I now wish to turn to the Government’s Accounts for the financial years 1983-84 and 1984-85 but, before doing so, just a note about the Budget once the new Constitution takes effect.
It is clear that, when that happens, the traditional unitary Budget will give place to four separate Budgets—one relating to General Affairs and presented to the full Parliament, and the others concerning Own Affairs and presented to the respective Houses. The Parliamentary procedures involving financial arrangements will clearly undergo far-reaching changes. This is a matter which has received and continues to receive the urgent attention of the Cabinet and the Treasury.
I can assure the House that the new procedures will be introduced as smoothly as possible and, of course, without loss or weakening of fiscal control. What needs to be clearly understood is that, whatever the system, the fundamental principles of public finance demand that there can be only one Treasury and only one Minister of Finance.
In this area we need constantly to bear in mind the inspiring words of Abraham Lincoln:
I am not suggesting that the present is stormy. These are his words:
Aggregate revenue for the 1983-84 financial year is now estimated at R19 048 million, which is marginally lower than the printed estimate of R19 107 million. Inland Revenue sources contributed R17 155 million of this amount and exceeded the original estimate by R118 million or less than 1%. Collections by Customs and Excise at R1 893 million are 8,1% lower than budgeted.
Relatively large variations are discernible between the latest and the original estimates of the various sources of income. The volatility of the gold price and its relatively high level in rand terms during the first half of the 1983-84 financial year are clearly reflected in the tax and lease payments received from gold mines, currently estimated at R2 237 million or 23,6% above the original estimate.
The 8,7% increase in personal income tax to R5 750 million is mainly the result of increased remuneration coupled with fiscal drag. Furthermore, the exceptional buoyancy in the real estate market is manifested in an increase of no less than 72,2% in the revised estimate for transfer duties, now calculated to have netted some R310 million.
In spite of the increase of 1% in general sales tax during February 1984, the present estimate for 1983-84 from that source is R3 850 million, or 2,7% shy of the original estimate. This clearly reflects the contractionary phase of the South African economy. Company tax, for example, amounted to only R3 225 million or 21,3% less than the original estimate. Certain malpractices, to which I shall return, contributed to this outcome.
The decrease in customs and excise receipts is attributable partly to the phasing out of the surcharge on imports by December 1983. Payments in respect of the Customs Union, plus South West Africa, which are shown as a so-called drawback of revenue, are estimated at R1 157 million or 15,7% higher than the original estimate, and are perhaps the major contributory factor in the net decrease in revenue from this source. The increase in imports during the latter half of the financial year is reflected in the latest estimate for customs duties which amounts to R1 051 million or 10,1% more than the original figure.
The main Estimates of Expenditure for 1983-84 amounted to R21 176 million, the amount appropriated being R17 987 million and statutory provisions comprising R3 189 million.
This total was supplemented towards the end of the year by additional estimates of expenditure of R1 145 million, R180 million of which is expected to be offset by savings. To this expenditure should be added R662 million in respect of statutory outlays—mainly public debt costs. The revised expenditure total for 1983-84 is therefore estimated at R22 803 million.
An important element in the present fiscal and monetary strategy is the increasing use being made of Government stock as a monetary, demand management and stabilization instrument, among others as an anti-inflationary device. Not only has this raised the cost of servicing the public debt, but in order to increase their marketability and generally make them more acceptable, certain stocks have been offered at a substantial discount during the past year. The total discount was some R475 million. The present accounting practice, as prescribed by the Exchequer and Audit Act, is to include discounts as costs of loans for the year in which they are raised. This results in a nominal increase in expenditure, even though no actual additional expenditures are incurred, and to this extent it distorts the total expenditure picture.
A more acceptable way—economically speaking—of dealing with the discounts is to regard them as an interest cost to be redeemed over the full term of the loan involved. Certain technical problems, however, need to be solved before this improved method can be implemented. I should like to point out that this problem has not arisen before, since this is only the second year that gilts have been offered at a substantial discount and the first in which a significant amount is involved.
If the effect of this discount is eliminated, as it should be, the increase in Government expenditure for 1983-84, on a comparable basis, amounts to 16%; and the deficit before borrowing shrinks to R3 280 million or some 3,5% of the gross domestic product.
Redemption of debt during 1983-84 totalled R2 367 million, the most significant variations from the budgeted figures being an increase in foreign debt redemptions from R302 million to R567 million, and R280 million in redemptions of Treasury Bills not budgeted for.
The net result of these developments was that the total financing requirement for 1983-84 amounted to R6 122 million, a figure more than 50% higher than that originally envisaged. Fortunately, due to an extremely successful funding programme and also to concerted efforts to curb monetary expansion, especially in the latter half of 1983, a total amount of R6 125 million will have been raised over the year now drawing to a close, leaving the Exchequer with a small surplus of R3 million at the year end. I intend to utilise this amount in 1984-85.
The increased financing was chiefly obtained by way of R900 million in larger contributions by the Public Debt Commissioners—due to increased pension fund contributions, interest received and proceeds from sales of short-term paper—R863 million from additional sales of long-term Government stock, and, in line with the increased redemption of foreign loan, an extra R395 million raised abroad. I also deemed it appropriate to utilise the amount of R68 million available in the Tax Reserve Account as a source of financing.
On the current basis of taxation, revenue for the 1984-85 financial year is estimated at R20 761 million, an increase of 9% on the revised estimate for 1983-84. Of this amount Inland Revenue will contribute some 92% or R19 125 million, which is 11,5% more than this year. The downward trend in respect of Customs and Excise will continue; we expect a 13,6% decline on the 1983-84 estimate, to a net amount of R1 636 million.
Of Inland Revenue sources, only personal income tax and general sales tax are expected to show meaningful improvements: To a net R7 265 million for personal income tax and to a net R5 010 million for general sales tax, which are increases of 26,3% and 30,1% respectively on the revised 1983-84 figures.
Company tax revenue will again mirror the unfavourable economic milieu. The estimate of R2 900 million is 10,1% down on the revised 1983-84 figure. The lower gold price lies behind an anticipated 20,2% decline in revenue from gold mines, to R1 786 million.
Although customs duties are expected to increase by 7% to R1 125 million and excise duties by 4,4% to R1 770 million, this is more than offset by the loss of income from the import surcharge. Moreover, disbursements in respect of the Customs Union and South West Africa are expected to rise again next year, the estimated R1 339 million representing an increase of 15,7% on the revised 1983-84 figure.
The printed Estimate of Expenditure tabled today provides for expenditure of R24 863 million. I intend to propose net additional or supplementary expenditure of R82 million, bringing the aggregate to R24 945 million or some 9,4% more than the revised total for this year. If allowance is made for the discount on gilts in 1983-84, as already explained, total budgeted expenditure next year will be about 11,7% higher than for the 1983-84 year.
I should like to draw the attention of the House to certain votes and services that seem to merit special mention.
Education
When viewed in the context of the continuing attempts to limit expenditure to an absolute minimum, the provision for this service emphasizes our resolve to accord a very high priority to education. The sum of R4 200 million is provided, an increase of more than 23% on the budgeted total for 1983-84. Over the past five years no less than R16 136 million has been spent on education; or, put differently, expenditure has increased by an average of 18,3% per year. These figures are eloquent testimony both to the need in this sphere and to the Government’s determination to meet it.
As to tertiary education, the Government has decided to place all universities on the same basis for subsidy purposes, though the new subsidy formula cannot be fully implemented in 1984-85. The allocations in the Estimate of Expenditure give effect to this new basis. The subsidy formula involves a shift in emphasis away from the number of students to the quality of work done.
Manpower
The provision of R92,3 million for 1984-85 results in an increase of nearly 30% over 1983-84. This substantial rise testifies once more to the high priority the Government accords this service. We must ensure that the ever-increasing demand for more highly-skilled manpower is met in the longer run. In particular, provision must be made for the training and proper utilization of manpower.
While on this subject I should like to say something on the abuse of the training allowance granted in terms of section 11sept of the Income Tax Act. This allowance was meant to assist employers in raising their employees’ productivity; and its effect is that for every rand an employer spends on training he may deduct two rand from his taxable income. At the current company tax rate his liability is thereby reduced by 92,4 cents for each rand spent on training.
Most employers have made use of this allowance in the proper manner but I am sorry to say that there is also evidence of its gross abuse. “Opportunity”, Francis Bacon tells us, “makes a thief". I am not suggesting that we are dealing with thieves but, I am suggesting, with some very serious abuse and the Standing Commission on Taxation Policy has thus recommended that this concession eventually be replaced by a cash allowance on a selective basis. The commission also recommends, as an interim measure, that in respect of training expenses incurred on or after 1 September 1984—
- (a) the existing allowance be reduced from 100% to 50% of those expenses; and
- (b) the allowance apply only to expenses incurred in respect of employees whose gross remuneration does not exceed R15 000 per annum.
I wish to propose that these recommendations be accepted. If so, this will save R6 million in 1984-85.
There has been no lessening of the Government’s resolve to stand alongside the private sector in the mammoth task of raising the productivity of the whole population as quickly as possible, but I need hardly say that abuse of these concessions will not be condoned.
Housing
In my Budget Speech last year I pointed out that, on account of a structural change in the provision for housing, only R6 million was being appropriated as a direct contribution to the capital of the National Housing Fund. As this structure has been retained, an amount of only R8 million is earmarked in the Budget for the 1984-85 financial year. The fund will, however, once again approach the capital market for an estimated R200 million. Including interest earned and redemptions of capital, it will be able to spend about R398 million on new housing and infrastructure for all population groups next year.
The House will be aware that the State subsidises the interest on these capital market loans down to the lower lending rates of the fund. In the printed Estimates R112 million is included for this purpose, an increase of 35% on 1983-84. These facts once again underline that the Government is in earnest in its commitment to housing.
The recommendations of the Steyn Committee of Inquiry into the financing of housing matters are already being implemented, and the cash flow from the sale of State-owned houses will be applied to the construction Of new dwellings. The rate at which sales are taking place is improving, and this will be the deciding factor in the process. I am confident that most of the occupiers involved will not let this opportunity slip to secure their own homes.
Defence
The peace initiatives of the hon the Prime Minister may raise premature hopes that expenditure on defence will immediately fall. Such a view, of course, hardly accords with the obvious need in the modern world for means of effective national defence. But, if—as we all fervently trust—the initiatives prove to be enduring, a downward trend in real and proportional defence expenditure may certainly be expected in due course.
I have proposed R3 755 million for Defence. This is 21,4% over the amount voted in 1983-84, but hon members should note that, in the light of Defence’s particular cost escalation problems as well as of the carry-through effect of the recent adjustments in staff salaries, this increase will barely maintain the existing levels of expenditure in real terms. As a segment of the total Estimate of Expenditure, defence’s share was 15% in 1983-84 and remains substantially at that level next year.
Agriculture
The searing drought which for a number of years now has gripped large areas of the Southern Hemisphere, has severely affected agricultural output. It is now the third year of drought in our highly productive crop areas, and many farmers have depleted their financial resources to the extent of being unable to finance production inputs any longer. Furthermore, most co-operatives have reached their upper lending limits and are unable to grant further credit unless financial guarantees or other forms of assistance are forthcoming from the State.
The prospects for next season’s maize crop are no better than those for 1983. The latest crop estimate is 4,1 million tons compared with our normal national consumption of some 7 million tons. Maize prices abroad plus high import costs point to an import bill of over R750 million in foreign exchange for maize and other feed grain imports; in normal years we should have earned approximately this amount in foreign exchange via food exports.
The South African Agricultural Union recently commissioned a survey of the drought’s impact on the financial position of farmers in the summer rainfall areas. The recommendations of the SAAU were submitted to Government and were immediately referred to the Jacobs Committee for study and report. The committee’s report has only just been received and will immediately be studied by the Treasury. What is at once clear is that the continuation of the serious drought is going to require more funds in the form of drought relief over and above the substantial amounts so far provided.
My colleague the hon the Minister of Agriculture will make an important announcement to the farming community in this regard within the next day or two. For my part, I am able to announce today that the interest subsidy on carry-over debt of farmers with their agricultural co-operatives will be increased for the 1984-85 season. Furthermore a reduction will be effected in the rate of interest payable on production credit extended to farmers by the Agricultural Credit Board.
Subsidies
While on the matter of assistance I should like to spend a moment on the general question of State subsidies.
In 1983-84 the direct subsidies by the Departments of Agriculture, Transport, Finance, Mineral and Energy Affairs, Industries and Commerce, and Community Development reached over R1 300 million, while indirect subsidies, especially by way of tax concessions—or so-called tax expenditures—were well over R1 000 million. I suspect that ever-increasing subsidies have come to be accepted as a way of life, with the result that their raison d’être is not regularly reviewed. I shall deal with some of these tax expenditures at a later stage.
I have serious misgivings about the problem of ever-rising subsidies, and this will be evident from the action I took last year on the initial and investment allowances, from my recent announcement on malpractices involving tax concessions on machinery and equipment, and from the investigation now proceeding into the bread price.
The Cabinet recently decided that an in-depth study be made of housing subsidies, their magnitude, distribution, and impact on the property market. I feel this study could be supplemented by an investigation into all other unsatisfactory aspects of the present system of subsidies and hidden benefits.
Conditions of service
It was decided that there should be a 12% general increase of salaries in the Public Service with effect from 1 January 1984. This was the first general increase in 21 months. In the meantime the adjustments for occupational pay differentiation continued, which have meant significant improvements in the conditions of service of the professional categories of staff involved.
The aim has been competitive or near-competitive remuneration packages in the Public Service vis-à-vis the private sector. This aim has been substantially achieved. Further attention is being given to the position of fully qualified teachers and an announcement in this regard may be expected in due course.
If South Africa’s finances are to be kept on an even keel in the extremely tight financial conditions expected to prevail in the year ahead, it is imperative that everyone, in both the public and the private sectors, practises a due and proper restraint and sense of responsibility in pay demands.
I now wish to turn to a number of supplementary expenditure proposals.
Social, military and civil pensions
The Government is acutely aware of the difficult financial circumstances in which senior citizens, and in particular social pensioners, find themselves. I therefore have pleasure in announcing the following improvements in pensions and allowances. Full particulars are set out in a document I shall table today.
- (a) Social pensions and allowances
- (b) Military pensions
- (c) Civil pensions
Small Business Development Corporation
I referred in my Budget Speech last year to the sterling work being done by the Small Business Development Corporation—a partnership between Government and the private sector—in assisting the small industrialist and trader to establish himself. Many candidates are first entrants to the entrepreneurial corps, graduating over time from the informal to the semi-formal, and eventually to the formal sector.
The State contributed R5 million to the corporation last year and this was used to fund a new account styled the Special Pioneer Projects Fund. The corporation uses this money for the financing of property development projects in the independent and self-governing national states, for its mini loans programme to the informal sector, and for pioneering projects of an experimental nature. I am happy to propose that a further R5 million be allocated for this purpose. We should do all we can to help the corporation in this field.
The cost to the Exchequer of all these supplementary proposals is R112 million.
South West Africa
Hon members will note from the printed Estimate of Expenditure that R348 million has been earmarked as budgetary aid to South West Africa. In order to reduce the pressure on the South African Exchequer it has been decided, after careful consideration, to reduce this grant by R30 million. This will be done administratively.
Total expenditures for 1984-85 are budgeted at R24 945 million without any allowance for unforeseen extras, while revenue is estimated at R20 761 million, a deficit thus of R4 184 million. This figure is unacceptably high and I wish to propose certain tax and other measures that will reduce the deficit to less than 3% of the gross domestic product, a level which I feel is reasonable considering what we can afford on the one hand and what we need to fund on the other. But this, of course, presupposes that any overruns of expenditure will have to be covered by increased revenues or extra taxation. I shall return to this aspect.
It has been said that a Minister of Finance “is entrusted with a certain amount of misery which it is his duty to distribute as fairly as he can”; and with that in mind we may now turn to my various proposals in respect of taxation, starting with customs and excise.
Beer
Beer remains a growth industry even in today’s difficult times and I feel that the product can bear an increased tax. I therefore propose that the duty on all malt beers, excluding sorghum beers, both imported and local, be increased by 2,4 cents per litre or about 0,9 cents per container of 375 millilitres—or per pint according to Imperial measures. The retail price of beer should not rise by more than one cent per container of 375 millilitres and I shall expect the trade to give due consideration to the interests of the consumer. The estimated additional revenue amounts to approximately R29 million next year.
Wine industry
Sections of the wine industry in the Western Cape have been experiencing financial problems for some time and I therefore do not feel it equitable to impose or raise excise duties on wines and spirits at this time. The Board of Trade and Industries is at present investigating the position of brandy with a view to assisting the industry, possibly by increasing the rebate on blended brandy to the full GATT binding. No decision on the matter can be taken until their report has been submitted and studied, among others by the Commissioner for Customs and Excise.
Petroleum products
At present four cents of the customs or excise duty on a litre of petrol, distillate fuel— ie diesel—or residual fuel oil is paid into the State Oil Fund, and this has been utilized mainly for the financing of Sasol II and Sasol III. As the need for further financing is now diminishing the Government has decided that, at least for 1984-85, only two cents of this amount should be paid over to the State Oil Fund. The remaining two cents will accrue to the Exchequer.
It has further been decided that an additional amount of one cent of the customs or excise duty in respect of certain diesel or residual fuel oil at present paying the middle tariff and which has to be deposited in the State Oil Fund will also go the Exchequer.
The revenue thus obtained amounts to R163 million and will assist in financing the deficit but of course will have no price effect as it is simply a diversion of revenue from the State Oil Fund to the Exchequer.
Cigarettes and cigarette tobacco
Although the tobacco industry is not in a growth phase at present, I feel that due to pressing financing needs a contribution should be made by smokers too. I therefore propose that the customs and excise duties on cigarettes be increased by one cent per 10 cigarettes and on cigarette tobacco by one cent per 50 grammes. The duties on pipe tobacco and cigars will not change. The additional revenue for 1984-85 is estimated at R33 million.
Ad Valoren excise duties and ad valorem customs duties
In the present circumstances it is furthermore fair to expect a tax contribution from buyers of non-essential goods and I therefore propose that the existing ad valorem customs and excise duties on imported and locally manufactured goods of the same class or kind be increased by 5%, that is 25% ad valorem duties become 30% and 30% ad valorem duties become 35%.
Although the nominal rates of duty seem high, the effective rates are much lower as these duties are assessed at the point of importation or manufacture on so-called neutral values, which are much lower than the actual selling prices. For example, a 35% duty on a television set retailing at about R900 but with a neutral value of R360 is equivalent to only 14% of the retail price. This means that the 5% increase now proposed should not add more than about 2% to the retail price.
The revenue from this source during 1984-85 is estimated at R41 million.
Motor vehicles
While ad valorem duties are under consideration it is also appropriate to review the contribution to the Exchequer by the motor industry. Notwithstanding recessionary conditions in the economy, the turnover in the motor industry has been satisfactory and I feel that buyers of new vehicles can afford to make a larger contribution to the State’s coffers.
I therefore propose that ad valorem excise duties and ad valorem customs duties of 1% or 2%, as the case may be, be imposed on motor vehicles as set out in the taxation proposals. Basically this means that motor cars below a neutral value of R11 500— which corresponds with a retail value of approximately R15 000—as well as heavy vehicles, combi’s and mini buses, will be taxed an additional 1% on their neutral value; the remainder, that is higher priced motor cars, will bear a 2% ad valorem duty. Because neutral value is considerably below retail value, retail prices should rise by less than 1% and 2%, respectively. Agricultural tractors are exempted.
The revenue for 1984-85 from this source is estimated at R37 million.
All the increases in customs and excise duties take effect immediately and apply to all goods that have not yet been cleared for home consumption, that is, goods not yet removed from the storage warehouses and premises of manufacturers licensed with the Commissioner for Customs and Excise. In terms of section 58(1) of the Customs and Excise Act, No 91 of 1964, I now lay upon the Table for consideration by the House the formal taxation proposals with regard to customs and excise duties. Since all the increased duties are levied at the point of import or manufacture, there is no justification for merchants to increase the prices of goods inventoried at the old rates of duty. I therefore rely on such merchants to adjust their prices only when new stocks are sold. Consumers should expect and insist that the retail prices of all goods affected by these proposals should not be raised by more than the increased duties and that no exploitation takes place. I am counting on the co-operation of the trade.
The increased customs and excise duties proposed should in total yield R303 million in 1984-85, but to this must be added a further R10 million to be collected in the form of consequential general sales tax on all items carrying the higher duties.
I now wish to deal with Inland Revenue matters.
Company tax
Income tax collections from comapnies have shown a steady downward tendency. Analyses of published company reports indicate that there are many profitable companies paying very little tax or even no tax at all. These comparisons are not always valid inasmuch as the Income Tax Act provides for the taxation of taxable income, which is not necessarily the same as profit. Various incentive allowances, which do not figure in a company’s balance sheet, have contributed to this state of affairs.
This is not in itself a cause for criticism, as the allowances are legitimately claimed. However, periodic appropriate measures are essential to arrest any increasing erosion of the tax base and a review of the company rate has thus become imperative.
My proposals in this regard are the following:
- (a) Companies other than gold and diamond mining companies
- (b) Gold and diamond mining companies
The new rates will apply in respect of years of assessment ending between 1 April 1984 and 31 March 1985.
Small private companies
The taxation of the income of small closely-held companies and of their shareholders is receiving the attention of my Department. I am asking the Standing Commission on Taxation Policy to look into this matter urgently, insofar as there should ideally be neutrality of treatment as between different forms of enterprise. It will be appreciated that the administration of any scheme to achieve this should be as simple as possible. I hope that the necessary legislative provisions can be included in this year’s Income Tax Bill.
Matters affecting taxable income
There are a few additional proposals affecting the determination of taxable income with which I should like to deal at this point. These refer to incentive allowances, wear and tear allowances, valuation of trading stock and the payment of provisional tax.
I need hardly state that unrestricted tax expenditures of this kind have a distorting effect and militate against any efforts to spread the tax burden more evenly.
On 14 March 1984 I announced that losses in respect of agreements of lease concluded on or after 15 March 1984 would no longer be allowed for set-off against income derived otherwise than from the leasing of movables. The allowances in respect of machinery and plant leased in terms of agreements concluded before 15 March 1984 are not affected by the announcement.
The difficult position of the Exchequer this coming year obliges me to propose a further adjustment. Normally the investment and initial allowances in respect of machinery and plant would be granted in full in the year in which the machinery and plant is brought into use. The impact on State revenue collections of allowances granted in this way over the next 15 months would be abnormally high and would have a serious effect on the Treasury.
I therefore propose that, in the case of industrial machinery or plant, whether leased or purchased, which is brought into use between 1 April 1984 and 30 June 1985—that is the date on which the investment allowance expires—the investment and initial allowances be spread over two years, with two-thirds being allowed in the first year and the remaining third in the second year. The quantum of the allowances in such cases will not be diminished. In fact, by reason of the increased rate of company tax, the tax value of the allowances will even be enhanced. Although extra taxation revenue will be received in the first year, this should by reason of the relief in the second year not be seen as being other than an advance payment of tax.
The value of the allowances has increased whenever the rate of tax has been increased, and one could reason that there is justification for reducing the rates of allowances to ensure that the State’s contribution via the tax sacrifice should not rise, but I do not wish to propose any such adjustment at this stage. The quantum of the initial allowance in respect of machinery or plant brought into use on or after 1 July 1985 will, nevertheless, have to be reviewed in the light of our revenue needs and the change in company tax rates.
The expected increase in revenue during the 1984-85 financial year in consequence of these changes is estimated at R285 million.
(b) Wear and tear allowance
The value of an asset on which the wear and tear allowance may be claimed under the Income Tax Act can in certain cases, particularly where the asset is acquired under a hire purchase transaction, include finance charges. This practice is based on an old decision of the Income Tax Special Court. It has become apparent, however, that the values of such assets are being inflated in an undesirable manner by the addition of finance charges not yet incurred. I accordingly announced in my Press release of 14 March 1984 that the wear and tear allowance in respect of machinery or plant acquired on or after 15 March 1984 would be calculated on the cash cost only. Provision will be made for a separate deduction of the finance charges when they are paid.
(c)Valuation of trading stock
In 1976 the Income Tax Act was amended so as to allow traders to adopt the LIFO—ie last-in first-out—method of valuing trading stock. Under this method the last item of trading stock of any class acquired by a trader is deemed to be the first item of such stock disposed of by him subsequently.
In practice the change to the LIFO method results in a considerable reduction of tax in the year of changeover, and in a lesser reduction in subsequent years. Traders are thereby tempted to make the change primarily or solely for taxation reasons.
I am not convinced of the advantages of LIFO over the conventional method of valuation. The loss of revenue caused is excessive, and I propose to introduce an amendment to the Income Tax Act withdrawing the concession with effect from years of assessment ending on or after 1 April 1984. The withdrawal of the concession will however be effected in such a manner as not to result in the immediate cancellation of the advantages enjoyed by taxpayers using this method.
(d) Provisional tax
At present a provisional taxpayer is entitled to estimate his taxable income at an amount equal to the lesser of 90% of his actual taxable income for the year of assessment or the amount of his taxable income for the latest preceding year for which he has received a tax assessment. This is advantageous to the taxpayer whose taxable income for the preceding year was low, as he may thereby postpone payment of a portion of his current year’s tax until he is assessed.
The necessity for this rule is apparent in the case of individual taxpayers. However, I consider that companies should be able to make more accurate final estimates of current taxable income and I propose accordingly to introduce an amendment to the Income Tax Act to eliminate, so far as the final provisional tax payments of companies are concerned, the reference to the taxable income for a preceding year.
The net additional revenue expected from adjustments to wear and tear allowances, from valuation of trading stock and from provisional tax payments is R30 million for 1984-85.
I should like to add a closing remark with regard to these various tax incentives. As Langenhoven puts it in his homely way:
I am sure however, that our cup of coffee, although now somewhat diluted, will still be very welcome to the thirsty!
It is now time to turn to a further proposal and one affecting the company and the individual alike.
During the past few years credit cards have increasingly replaced cheques as a method of payment for individuals, and I feel the time has arrived to adjust to these structural developments in the settlement of accounts and transfers of money. I therefore wish to propose that the present stamp duty of 5 cents per cheque be abolished and be replaced by a stamp duty on debit banking entries—including credit card transactions and automatic teller operations—relating to payments for goods and services, transfers of money to third parties and cash withdrawals. The charge will be 5 cents per debit. Savings accounts with banks, building societies and the Post Office will not be subject to the charge.
To enable the banks to make the necessary administrative arrangements it is proposed that the new charge will not come into operation until 1 July 1984.
The additional revenue from this source for 1984-85 is estimated at R15 million.
I now wish to deal briefly with individual taxpayers.
Uniform tax system
I am grateful to all concerned for the smooth way in which employers and employees alike have switched over from the old system of taxation to the new uniform system where all people working side by side in the development of our country, including citizens of the six National States, are to be taxed in terms of the same Act. This is probably due to the realization that the majority of taxpayers affected will now be paying less tax than before, but much credit is also due to employers, to organized commerce and industry, and to employee organizations for explaining the implications of the new system to all concerned. Furthermore, I believe the information and assistance provided by Inland Revenue officials over a long period were crucial in ensuring the success of this exercise. I should like to convey the Government’s sincere appreciation to all concerned.
Taxation of fringe benefits
St Augustine tells us that as a young man he used to pray for chastity—“but not just yet”! This rather puts me in mind of the taxation of fringe benefits, the principle of which has been widely accepted in this country for many years but the uniform practical application of which has run into considerable difficulties.
I announced earlier this year that the Government had accepted the recommendations contained in the Report of the Parliamentary Commission of Inquiry in regard to the Valuation of Fringe Benefits, which I am tabling today. This was done subject to further attention being given to the details arising therefrom and the practical implementation thereof. The commission has emphasized that the value of such benefits has always been subject to tax and that the main purpose of its inquiry was to establish uniform rules for the determination of such values as well as to ensure equal treatment for all regardless of status, standing, or the nature of their offices or employment.
The commission has also accepted that the cost to the employer should be the basis for the valuation of benefits in kind and that, with a view to cost-effectiveness, no value should be placed on certain less cost-effective benefits.
Legislation to implement the commission’s recomendations with effect from 1 September 1984 will be incorporated in the Income Tax Bill, which is to be considered later during this Session. As promised, organized commerce, industry and labour will be afforded the opportunity to comment on the practical application of the draft provisions, before the Bill is finally drafted.
As the provisions will come into effect half-way through the 1984-85 tax year, it will be necessary to modify the proposal of the commission with regard to the phasing in of the taxation on certain benefits.
It is expected that the introduction of the tax on fringe benefits as here referred to will yield an additional R50 million for 1984-85.
Personal income tax and company tax
In drawing up the Budget for the impending financial year I set out to avoid, if at all possible, the need to raise the general sales tax and personal income tax rates. I am glad I have succeeded in both these objectives.
I am glad also that I have been able to equalize the maximum marginal personal income tax rate and the company tax rate at 50%, thus eliminating several anomalies and bringing us a step closer to tax neutrality between these major forms of taxation.
Final deduction system
A substantial concession has been made to many individuals through the final deduction system.
The Income Tax Act, 1983, contains a provision extending the income limit under the final deduction system from R7 000 to R8 000. The basic rate of tax was increased from 10% to 12% and a further rebate of R140 was allowed. The effect of these provisions was to increase the thresholds at which tax liability commences, for example, for an unmarried taxpayer to R3 575, for a married taxpayer with no children to R4 384, and for a married taxpayer with three children to R6 883.
The estimated loss of revenue during 1984-85 as a result of this concession is R26 million. This amount has already been allowed for in the printed Estimate of Revenue tabled today.
I should like to announce a measure of further tax relief, this time to the disabled, our senior citizens and those who build up retirement benefits. These concessions will come into force in the new—1984-85—tax year.
Physically disabled persons: I propose that the limit of R2 400 on the deduction of expenditure necessarily incurred by a taxpayer in respect of a physical disability suffered by himself, his wife or his child or stepchild be increased to R3 000.
Medical expenses: I propose that the present ceiling of R2 000 on the deduction of medical expenses incurred by a married person over 60 be increased to R3 000 and that the corresponding limitation of R1 500 in the case of an unmarried person over that age be increased to R2 250. Furthermore, there should be no ceiling in respect of the deduction of such expenses where the taxpayer is over 70 years of age.
Pension fund contributions in respect of backdated pensionable service: I propose that the present ceiling of R1 500 on the deduction of such contributions be increased to R1 800.
Contributions to a retirement annuity fund in respect of reinstatement of membership where the member had previously discontinued his contributions at present qualify for deduction from income, the annual deduction being limited to R1 500. I propose that this be increased to R1 800.
An annuity payable by a taxpayer to a dependent of a former partner or employee of the taxpayer is deductible by the employer from his income up to an amount of R2 000 per annum. I propose that this be raised to R2 500.
The sacrifice of revenue entailed by these concessions is estimated at R4 million for 1984-85. Taking into account the concession of R26 million in respect of the Final Deduction System referred to earlier and already allowed for, the value of the tax concessions in the Budget amounts to R30 million.
In conclusion, let us look at the financing of the deficit.
I referred earlier to the fact that a deficit before borrowing of R4 184 million was unacceptably high by any standard.
My taxation proposals should reduce this amount by R303 million in respect of additional customs and excise duties and by another R654 million net in respect of additional direct tax revenues, leaving me with a deficit of R3 227 million.
However, hon members may recall that the sale of a part of the State’s shares in Sasol II at the end of last year realized an amount of R887 million. Of this total, R259 million constitutes a recovery of the initial Exchequer investment and a proportional share of the profits from the rights issue of Sasol shares.
In view of the strained position in which the Exchequer will find itself in 1984-85 and the fact that the State’s contribution to the financing of Sasol II was in fact provided by funds voted by Parliament for this purpose, I propose that the R259 million be utilized as revenue to help defray expenditures in 1984-85.
On this basis, the deficit before borrowing will be reduced to R2 968 million, which is less than 3% of the gross domestic product.
To this amount must be added R2 175 million for redemptions, which leaves me with R5 143 million to be financed. I consider it realistic, without creating upward pressures on the financial markets, to raise this amount as follows:
Rm |
|
Surplus from 1983-84 |
3 |
Public Investment Commissioners |
2 400 |
Re-investment of maturing stock |
1 155 |
New stock issues |
915 |
Non-marketable securities (Treasury Bonds, Bonus Bonds, National Defence Bonds) |
355 |
Foreign loans |
425 |
Loan levy (arrear payments) |
15 |
TOTAL |
R5 268 |
I have deliberately, in the interest of financial prudence in the uncertain conditions prevailing, budgeted for a small surplus of R125 million. This amount will be utilized for drought aid.
There has been a good deal of speculation to the effect that I could fund the financial requirements of the State in the coming year without recourse to higher taxes. In the circumstances prevailing, and on the facts, that is impossible—however understandable it is that the experts may differ on these matters. After all, as a wag once said:
Equally clear is it that to resort to heavier borrowing at this stage would be highly undesirable and unsound. Unduly large loan financing would have a three-fold disadvantage: it would put still further pressure on the already extremely high prevailing interest rates; it would increase the burden of servicing the public debt; and it would place constraints on the domestic capital market for all other deserving borrowers, of whom there are many.
What this amounts to is that sustained efforts must be made to contain and curtail Government spending. Should the Budget’s carefully compiled estimates of expenditure turn out to be too conservative and the equally carefully compiled estimates of revenue less buoyant than expected, I can see no way of avoiding further tax increases in the year ahead. That, in itself, is something worth striving to avoid.
As is customary, a summary of the Government’s accounts is subjoined in the printed version of the Budget Speech.
COMPARATIVE STATEMENT OF THE STATE REVENUE ACCOUNT
Revised figure 1983-84 |
Budget figure 1984-85 |
Percentage Change |
||
Rm |
Rm |
Rm |
% |
|
Expenditure: |
||||
Printed Estimate (RP 2—84: First Print): |
24 863 |
|||
Plus: Supplementary appropriations in respect of: |
||||
Social pensions |
102,3 |
|||
Military pensions |
3,0 |
|||
Civil pensions |
1,7 |
|||
Small Business Development Corporation |
5,0 |
112 |
||
Less: Saving in respect of transfer to South West Africa |
30,0 |
– 30 |
||
Total Expenditure |
22 803 |
24 945 |
9,4 |
|
For purposes of comparison: Less discount on stock issues |
– 475 |
|||
Comparative total expenditure |
22 328 |
24 945 |
11,7 |
|
Revenue: |
||||
Printed Estimate (RP 3—84: First Print): |
||||
Customs and Excise at existing rates: Plus: Taxation proposal in respect of: |
1 636 |
|||
Beer |
29,0 |
|||
Petrol |
163,0 |
|||
Cigarettes |
33,0 |
|||
Ad valorem duties |
41,0 |
|||
Motor vehicles |
37,0 |
303 |
||
Total for Customs and Excise |
1 893 |
1 939 |
2,4 |
|
Inland Revenue at existing rates |
19 125 |
|||
Less: Rebate for disabled |
||||
Medical costs for aged |
||||
Purchase of backdated pensions |
||||
Retirement annuities |
||||
Other annuities |
||||
4,0 |
– 4 |
|||
19 121 |
||||
Plus: Taxation proposals in respect of: |
||||
Training allowance |
6,0 |
|||
Company tax |
203,0 |
|||
Surcharge on gold and diamond mines |
59,0 |
|||
Initial and investment allowances |
285,0 |
|||
Wear and tear allowances, LIFO and provisional payments |
30,0 |
|||
Stamp duty on debit transactions |
15,0 |
|||
Tax on fringe benefits |
50,0 |
|||
Consequential general sales tax |
10,0 |
658 |
||
Total for Inland Revenue |
17 155 |
19 779 |
15,3 |
|
Return on capital invested in Sasol II |
259 |
— |
||
Total Revenue |
19 048 |
21 977 |
15,4 |
|
Deficit: (before borrowing) |
Rm |
Rm 3 755 |
Rm 2 968 |
%-21,0 |
For purposes of comparison: |
||||
Less discount on stock issues |
– 475 |
|||
Adjusted comparative deficit |
3 280 |
2 968 |
– 9,5 |
|
Loan Redemptions: |
||||
Domestic loans: |
||||
Stocks |
933 |
1 155 |
||
Bonds |
296 |
295 |
||
Foreign loans |
567 |
258 |
||
Loan levy |
285 |
457 |
||
Treasury Bills |
280 |
— |
||
Other loan expenditures |
6 |
10 |
||
2 367 |
2 175 |
– 8,1 |
||
Financing Requirement: |
6122 |
5 143 |
–16,0 |
|
Financing: |
||||
Domestic loans: |
||||
Public Investment Commissioners |
2 400 |
2 400 |
||
Re-investment of maturing stock |
2 726 |
1 155 |
||
New stock issues |
915 |
|||
Bonds: |
||||
Treasury Bonds |
190,0 |
|||
Bonus Bonds |
120,0 |
|||
National Defence Bonds |
45,0 |
45,0 |
264 |
355 |
Foreign loans |
645 |
425 |
||
Loan levy |
22 |
15 |
||
Transfer from Tax Reserve Account |
68 |
— |
||
Surplus transferred from 1983-84 |
— |
3 |
||
Total Financing |
6 125 |
5 268 |
–14,0 |
|
Surplus: |
3 |
125 |
Every Budget has two sides: a revenue side and an expenditure side. To assess the likely economic impact of today’s Budget, it is therefore necessary to consider not only the tax increases I have announced but also the planned expenditures, the deficit before borrowing, and the way in which they are to be financed. If this is done, the salient macro-economic features of, the Budget can be summarised as follows:
Firstly, provision is made for an increase in total expenditure of 11,7% above the revised estimate for 1983-84, after deduction of the discount on new issues of government stock.
Secondly, including the 1% rise in general sales tax announced last month, provision is made for additional taxation in excess of R1 600 million.
Thirdly, the deficit before borrowing is estimated at R2 968 million or just less than 3% of gross domestic product. If the proposed utilization of R259 million of the proceeds from the sale of Sasol shares is excluded, the deficit represents just over 3% of gross domestic product.
Fourthly, the anticipated deficit is to be financed in a manner that will ensure that no net use of bank credit is made by the government sector as a whole, including all the extra-budgetary funds. That is a very important part of our overall financial strategy. To this end, public debt management, Reserve Bank open-market operations and rediscount policy will be used to the full extent necessary to ensure appropriate funding and effective control over the money supply and aggregate demand. It goes without saying that this policy implies the acceptance of realistic interest rates.
Judged by these features taken together, the Budget should prove consistent with the present overall financial strategy of maintaining a sound balance of payments and curbing inflation, as a prelude to the resumption of rapid and sustainable growth in the medium and long term.
The success of the financial strategy I have outlined today will, of course, also depend in large measure on the extent to which the increase in Government spending is kept within the limits set in the Budget. I believe that the strenuous efforts being made to contain Government expenditure will prove successful. But if they do not, I shall have no alternative but to bring about the necessary further tax adjustments.
In thus emphasising the importance of maintaining financial discipline, I am encouraged by the favourable results that our policies have already helped to bring about under what has probably been the most difficult set of economic conditions in South Africa since the Great Depression of the early ’thirties. These results include
- — the transformation of a large deficit on the current account of the balance of payments in 1982 into a surplus in 1983;
- — the reduction in the twelve month inflation rate from 16,5% in May 1982 to 10% in February 1984, or 9,2% if the statistical effect of the recent increase in general sales tax is excluded;
- — the marked reduction in the rate of increase of the broad money supply and in its velocity of circulation;
- — South Africa’s compliance with all the “performance criteria” set by the International Monetary Fund when granting a standby credit in November 1982;
- — the avoidance in a debt-ridden world of any foreign debt problem;
- — the sustained improvement in South Africa’s overseas credit rating as evidenced by recent successful Treasury loans in four prestigious and major foreign markets; and
- — the modest but meaningful cyclical recovery in the South African economy since the second quarter of 1983.
Impressive as these results are, they do not signify that we are out of the woods yet. There are still challenges to be faced and sacrifices to be made. But I believe that today’s Budget will contribute to a further improvement in the state of the economy in the period ahead.
It is a pleasure to convey my sincere thanks and appreciation to everyone in the Finance establishment for another demanding year of willing, able and dedicated work.
The final word today is not mine, but Abraham Lincoln’s; yet mine nonetheless:
Mr Speaker, I now lay upon the Table:
- (1) Estimate of Expenditure to be defrayed from State Revenue Account during the financial year ending 31 March 1985 [RP 2—84];
- (2) Estimate of Revenue for the financial year ending 31 March 1985 [RP 3— 84];
- (3) Statistical/Economic Review [WP B—84];
- (4) Comparative figures of Revenue for 1983-84 and 1984-85;
- (5) Taxation proposals [A 1—84];
- (6) Proposals for improved social pensions, military pensions and civil pensions;
- (7) Report of the Commission of Inquiry in regard to the determination, for income tax purposes, of the value of benefits (including allowances) arising from employment or the holding of an office and to related matters [RP 64—83].
REVENUE 1983–84 (R1 000) |
||||
Head of revenue |
Printed Estimate 1983-84 |
Revised Estimate 1983-84 |
Increase |
Decrease |
Inland Revenue: |
||||
Tax on income: |
||||
Normal tax: |
||||
Gold mines |
1 430 000 |
1 725 000 |
295 000 |
|
Diamond mines |
3 000 |
2 500 |
500 |
|
Other mines |
210 000 |
145 000 |
65 000 |
|
Persons/Individuals |
5 289 100 |
5 750 000 |
460 900 |
|
Companies (other than tax on mining) |
4 100 000 |
3 225 000 |
875 000 |
|
Interest on overdue tax |
12 000 |
15 500 |
3 500 |
|
11 044 100 |
10 863 000 |
759 400 |
940 500 |
|
Loan levy |
10 000 |
22 000 |
12 000 |
|
General Sales Tax |
3 955 000 |
3 850 000 |
105 000 |
|
Other taxes: |
||||
Non-resident shareholders’ tax |
200 000 |
260 000 |
60 000 |
|
Non-residents’ tax on interest etc |
15 000 |
20 000 |
5 000 |
|
Undistributed profits |
2 000 |
2 000 |
||
Donations tax |
1 900 |
3 000 |
1 100 |
|
Estate duty |
75 000 |
85 000 |
10 000 |
|
Marketable securities tax |
40 000 |
45 000 |
5 000 |
|
Stamp duties and fees |
170 000 |
200 000 |
30 000 |
|
Transfer duties |
180 000 |
310 000 |
130 000 |
|
Miscellaneous |
5 |
5 |
||
683 905 |
925 005 |
241 100 |
||
Mining leases and ownership: |
||||
Gold mines |
380 000 |
512 000 |
132 000 |
|
Diamond mines |
1 000 |
1 500 |
500 |
|
Other mines etc |
9 000 |
7 500 |
1 500 |
|
390 000 |
521 000 |
132 500 |
1 500 |
|
Interest and dividends: |
||||
Interest: |
||||
Border area development |
4 000 |
3 750 |
250 |
|
Import and export promotion |
4400 |
4 130 |
270 |
|
Pedagogy |
9 000 |
10 600 |
1600 |
|
Broadcasting |
1 100 |
1 100 |
||
Petrochemical industry |
2 000 |
2 000 |
||
Shipbuilding industry |
2 500 |
2 840 |
340 |
|
Farming industry |
7 000 |
3 350 |
3 650 |
|
State land |
1000 |
1000 |
||
Transportation |
487 000 |
443 000 |
44 000 |
|
Communications |
23 000 |
23 000 |
||
Local loans |
9000 |
9 000 |
||
Other |
7 000 |
9 600 |
2 600 |
|
Dividends: |
||||
Broadcasting |
3000 |
2 280 |
720 |
|
560 000 |
515 650 |
4 540 |
48 890 |
|
Levies: |
||||
Diamond export duties |
27 000 |
37 000 |
10 000 |
|
Mining lease rights and licences |
3 000 |
2 450 |
550 |
|
Licences |
3000 |
3000 |
||
33 000 |
42 450 |
10 000 |
550 |
|
Recovery of loans and advances: |
||||
Farming industry |
3 000 |
2 600 |
400 |
|
State land: |
||||
Settlements |
50 |
50 |
||
Other state land |
35 |
35 |
||
Shipbuilding industry |
3 750 |
4 420 |
670 |
|
Communications |
8 000 |
8000 |
||
Housing |
450 |
450 |
||
Sinking funds |
14 000 |
14 000 |
||
Other |
11 250 |
73 130 |
61 880 |
|
40 000 |
102 685 |
63 085 |
400 |
|
Departmental activities: |
||||
Sale of products: Vaccine |
250 |
120 |
130 |
|
Timber and timber products |
40 000 |
48 500 |
8 500 |
|
Coin sales |
25 000 |
25 000 |
||
Other |
6 300 |
7 600 |
1 300 |
|
Sale of capital equipment |
1 500 |
10 |
1 490 |
|
State property rights: |
||||
Leasing and property rights moneys |
26 000 |
29 400 |
3 400 |
|
Moneys prescribed by law: |
||||
Registration and inspection fees |
7 300 |
8 900 |
1 600 |
|
Fines and forfeitures |
18 000 |
26 000 |
8 000 |
|
Witness fees |
11 |
20 |
9 |
|
Pension contributions |
700 |
1 700 |
1 000 |
|
Other |
34 100 |
31 800 |
2 300 |
|
Moneys not prescribed by law: |
||||
Leasing |
800 |
700 |
100 |
|
Domestic services |
2 800 |
2 900 |
100 |
|
Profit on trading accounts |
734 |
29 600 |
28 866 |
|
Reserve Bank profits |
18 200 |
20 400 |
2 200 |
|
State Trust Board |
30 |
30 |
||
Sale of state land |
1 000 |
7 650 |
6 650 |
|
Commissions |
1 300 |
1 400 |
100 |
|
Other |
8 300 |
8 100 |
200 |
|
Miscellaneous income: |
||||
Recoveries |
18 200 |
20 400 |
2 200 |
|
Other |
118 205 |
110 680 |
7 525 |
|
331 000 |
335 510 |
61 755 |
57 245 |
|
Total for Inland Revenue |
17 047 005 |
17 177 300 |
1 284 380 |
1 154 085 |
Customs and excise duties: |
||||
Customs duty |
955 000 |
1 051 000 |
96 000 |
|
Surcharge |
365 000 |
229 000 |
136 000 |
|
Excise duty |
1 675 000 |
1 695 000 |
20 000 |
|
Miscellaneous |
65 050 |
75 000 |
9 950 |
|
Gross total for customs and excise duties |
3 060 050 |
3 050 000 |
125 950 |
136 000 |
Less: |
||||
Amount to the credit of Central Revenue Fund (sec 22(1)(d) of Act 25 of 1969) |
250 000 |
250 000 |
||
Payments in terms of Customs Union Agreements (sec 51 (2) of Act 91 of 1964) |
750 000 |
907 000 |
157 000 |
|
Total for customs and excise duties |
2 060 050 |
1 893 000 |
125 950 |
293 000 |
Grand Total |
19 107 055 |
19 070 300 |
1 410 330 |
1 447 085 |
Net decrease: R36 755 000
REVENUE 1984-85 (On existing basis of taxation) (R1 000) |
||||
Head of Revenue |
Printed Estimate 1984-85 |
Revised Estimate 1983-84 |
Increase |
Decrease |
Inland Revenue: |
||||
Tax on income: |
||||
Normal tax: |
||||
Gold mines |
1 400 000 |
1 725 000 |
325 000 |
|
Diamond mines |
3 000 |
2 500 |
500 |
|
Other mines |
200 000 |
145 000 |
55 000 |
|
Persons/Individuals |
7 650 000 |
5 750 000 |
1 900 000 |
|
Companies (other than tax on mining) |
2 900 000 |
3 225 000 |
325 000 |
|
Interest on overdue tax |
17 000 |
15 500 |
1 500 |
|
12 170 000 |
10 863 000 |
1 957 000 |
650 000 |
|
Loan levy |
22 000 |
22 000 |
||
General Sales Tax |
5 025 000 |
3 850 000 |
1 175 000 |
|
Other taxes: |
||||
Non-resident shareholders’ tax |
260 000 |
260 000 |
||
Non-residents’ tax on interest |
20 000 |
20 000 |
||
Undistributed profits |
2 000 |
2 000 |
||
Donations tax |
3000 |
3 000 |
||
Estate duty |
90 000 |
85 000 |
5000 |
|
Marketable securities tax |
50 000 |
45 000 |
5000 |
|
Stamp duties and fees |
220 000 |
200 000 |
20 000 |
|
Transfer duties |
340 000 |
310 000 |
30 000 |
|
Miscellaneous |
5 |
5 |
||
985 005 |
925 005 |
60 000 |
||
Mining leases and ownership: |
||||
Gold mines |
385 500 |
512 000 |
126 500 |
|
Diamond mines |
1 500 |
1 500 |
||
Other mines |
9 000 |
7 500 |
1 500 |
|
396 000 |
521 000 |
1 500 |
126 500 |
|
Interest and dividends: |
||||
Interest: |
||||
Border area development |
4 100 |
3 750 |
350 |
|
Import and export promotion |
3 600 |
4 130 |
530 |
|
Pedagogy |
10 600 |
10 600 |
||
Broadcasting |
1 100 |
1 100 |
||
Petrochemical industry |
2 000 |
2 000 |
||
Shipbuilding industry |
1 900 |
2 840 |
940 |
|
Farming industry |
3 350 |
3 350 |
||
State land |
1 000 |
1 000 |
||
Transportation |
443 000 |
443 000 |
||
Communications |
21 700 |
23 000 |
1 300 |
|
Local loans |
150 |
9 000 |
8 850 |
|
Other |
8 600 |
9 600 |
1 000 |
|
Dividends: |
||||
Broadcasting |
2 300 |
2 280 |
20 |
|
503 400 |
515 650 |
370 |
12 620 |
|
Levies: |
||||
Diamond export duties |
37 000 |
37 000 |
||
Mining lease rights and licenses |
2 190 |
2 450 |
260 |
|
Licences |
3 000 |
3 000 |
||
42 190 |
42 450 |
260 |
||
Recovery of loans and advances: |
||||
Farming industry |
2 600 |
2 600 |
||
State land: |
||||
Settlements |
50 |
50 |
||
Other state land |
35 |
35 |
||
Shipbuilding industry |
4 420 |
4 420 |
||
Communications |
8 800 |
8 000 |
800 |
|
Housing |
450 |
450 |
||
Sinking funds |
14 000 |
14 000 |
||
Other |
14 850 |
73 130 |
58 280 |
|
45 205 |
102 685 |
800 |
58 280 |
|
Departmental activities: |
||||
Sale of products: |
||||
Vaccine |
150 |
120 |
30 |
|
Timber and timber products |
48 500 |
48 500 |
||
Other |
7 800 |
7 600 |
200 |
|
Sale of capital equipment |
10 |
10 |
||
State property rights: |
||||
Leasing and property rights moneys |
30 400 |
29 400 |
1 000 |
|
Moneys prescribed by law: |
||||
Registration and inspection fees |
9 400 |
8 900 |
500 |
|
Fines and forfeitures |
27 000 |
26 000 |
1 000 |
|
Witness fees |
20 |
20 |
||
Pension contributions |
1 900 |
1 700 |
200 |
|
Other |
34 300 |
31 800 |
2 500 |
|
Moneys not prescribed by law: |
||||
Leasing |
700 |
700 |
||
Domestic services |
3 000 |
2 900 |
100 |
|
Profit on trading accounts |
41 000 |
29 600 |
11 400 |
|
State Trust Board |
20 |
30 |
10 |
|
Sale of state land |
6 600 |
7 650 |
1 050 |
|
Commissions |
1 400 |
1 400 |
||
Other |
8 200 |
8 100 |
100 |
|
Miscellaneous income: |
||||
Recoveries |
22 700 |
20 400 |
2 300 |
|
Other |
115 100 |
110 680 |
4 420 |
|
358 200 |
335 510 |
23 750 |
1 060 |
|
Gross total for Inland Revenue |
19 525 000 |
17 177 300 |
3 218 420 |
870 720 |
Less: |
||||
Amounts payable to self-governing national states (Act 21 of 1971): |
||||
Persons/Individuals (sec 6(2)(a) (iA)) |
250 000 |
250 000 |
||
Companies (other than tax on mining (sec 6(2)(a) (ii) ) |
250 |
250 |
||
General Sales Tax (sec 6(2)(a)(iv)) |
15 000 |
15 000 |
||
Amounts payable to independent Black states (Acts 106 of 1976, 93 of 1977, 105 of 1979 and 118 of 1981) |
135 000 |
135 000 |
||
Total for Inland Revenue |
19 124 750 |
17 177 300 |
3 218 420 |
1 270 970 |
Customs and excise duties: |
||||
Customs duty |
1 125 000 |
1 051 000 |
74 000 |
|
Surcharge |
229 000 |
229 000 |
||
Excise duty |
1770 000 |
1 695 000 |
75 000 |
|
Miscellaneous |
80 000 |
75 000 |
5 000 |
|
Gross total for customs and excise duties |
2 975 000 |
3 050 000 |
154 000 |
229 000 |
Less: |
||||
Amount to the credit of Central Revenue Fund (sec 22(1)(d) of Act 25 of 1969) |
250 000 |
250 000 |
||
Payments in terms of Customs Union Agreements (sec 51(2) of Act 91 of 1964) |
1 089 000 |
907 000 |
182 000 |
|
Total for customs and excise duties |
1 636 000 |
1 893 000 |
154 000 |
411 000 |
Grand Total |
20 760 750 |
19 070 300 |
3 372 420 |
1 681 970 |
Net increase: R1 690 450 000
Mr Speaker, I have no pretensions in regard to being one of the angels to whom the hon the Minister of Finance referred, either to commend or to condemn in that context.
I want to start by congratulating the hon the Minister personally on this occasion as it is the tenth anniversary of the hon the Minister’s presentation of a budget. However, while congratulating him in this regard I hope he will permit me not to congratulate him on the Budget which I do not regard as one that is in the interests of South Africa.
The hon the Minister made a number of quotations during the course of his Budget Speech. I want to say that the hon the Minister reminds me of Will Rogers who said: “When everyone has got money, they cut the taxes, but when we are broke, they raise the taxes”. This is a time when the ordinary man in South Africa is suffering, when disposable incomes are under pressure and when the economy is in difficulty. This is the time the hon the Minister of Finance has chosen in which to raise taxes. Hon members will permit me to tell them that if they look at what they do in their lives they see that, whether they work they pay taxes, whether they eat they pay taxes, whether they drink they pay taxes, whether they buy anything they pay taxes and whether they drive a motorcar they pay taxes. When the hon the Minister was dealing with the use of credit cards, I was wondering whether oncoming age was not giving me some grounds for concern as to further matters which would be subject to taxation at the hands of the hon the Minister. There is hardly anything which he leaves alone. Not a thing in South Africa is being left alone.
I want to make a couple of points very briefly. Firstly, I believe this is not a Budget which deals with the long-term planning of South Africa or with the real problems which confront South Africa. It is an ad hoc Budget, and nothing more. Secondly, the explanations which the hon the Minister gave in respect of the handling of the economy last year are utterly unacceptable. His own quotations can be used against him, as Churchill did when he said:
The only difference is that this hon Minister does not tell one that it went wrong. He actually creates the mirage that all is well and that nothing really has gone wrong. The conduct of the economy last year is something for which he will have to be brought to account in this particular debate.
When one comes to the question of inflation, it is all very well to take pride in a 10% inflation rate, which is a year-on-year rate. However, the reality is that the projection for inflation is that it will be far higher in the years and months that lie ahead owing to the consequences which flow from this very situation.
I want to touch on pensions for social pensioners. Everybody is glad when social pensioners receive more. However, if one works it out, social pensioners receive a 8,4% increase, which is less than even the lowest year-on-year inflation rate which we have had and will certainly be less than the coming inflation rate, and less than the 10% which the civil pensioners will receive.
Coming to the tax on beer, I have said before that I do not drink beer. Beer is not a rich man’s drink, and I would have thought that if one was to tax anything, something would have been done in respect of the competition between whisky and brandy. But that did not happen.
The other thing which I find remarkable, although I am sure the hon member for Hill-brow welcomes it, is the taxation of cigarettes. Again, I do not smoke cigarettes or cigars. Cigars are not taxed, and who smokes cigars? I know who on that side of the House smoke cigars [Interjections.] The hon the Minister must explain to me why beer is taxed and not whisky and why cigarettes and not cigars are taxed. [Interjections.]
There are other matters in this Budget which require our attention and there are many matters for which we will call the hon the Minister to account. One thing has to be said, and that is that one is terribly concerned about the financial plight of the small company in South Africa, the business which everybody pretends they want to foster. With the high interest rates, with a prime rate of 21%, with the company tax being increased to 50% and with an economy where there is reduced demand, what is happening to the small business and to the ordinary people in South Africa? It is they who are bearing the brunt of this Budget, and we will call the hon the Minister to account for this and many other things.
Mr Speaker, I now wish to move:
That the debate be now adjourned.
Agreed to.
The following Bills were read a First Time:
Mr Speaker, I move:
That the Bill be now read a Second Time.
As you will have observed, quite a number of the provisions deal with terminological innovations. I am therefore going to confine myself to the few provisions which effect material amendments to the present Medical Schemes Act, 1967.
In section 20(1)(d) of the Act provision is being made for pensioners and persons whose employment has been terminated by their employers on account of ill-health, age or other disability, to continue their membership of schemes.
In the case where such a person begins working again for an employer whose conditions of employment require employees to belong to a medical scheme established by that employer, that person then forfeits his continued membership of the old scheme and becomes a member of the new scheme. It also happens that before such a person qualifies for continued membership of the new scheme, he leaves the service of that employer which then leaves him without any medical cover at all. The relevant amendment is being proposed in order to solve this problem.
In terms of section 21(3)(a) of the Act the Reigstrar may request a scheme to amend any rule if that rule is being applied in a manner inconsistent with a provision of the Act. The provisions of the Act should apply at all times and that is why the amendment is being effected that the Registrar may order such a scheme to amend such a rule.
Provision has been made in the Act for the establishment of the Representative Association of medical schemes. The constitution of the association is also defined and is based on the membership of medical schemes belonging to the respective organizations. If a scheme therefore belongs to more than one medical scheme organization, this may influence its membership of the representative association, and that is why the relevant amendment is being proposed.
As you know, the matter of determining tariffs for the rendering of services to members of medical schemes has given rise to problems since the Act was passed. Initially the tariffs were determined by means of an agreement between medical schemes and the suppliers of services. This system failed, and recourse was had to a remuneration commission consisting of a judge as chairman and a person with a knowledge of medical schemes and a person representing the suppliers of services. Subsequently an economist was added as a member of the commission. However, this system also failed. Then recourse was had to the system of tariff determination by the SA Medical and Dental Council with regard to the professions and another system in terms of the Medical Schemes Act with regard to private hospitals. Both these systems are no longer acceptable and serious criticism has been levelled at them.
As far as the tariffs with regard to the professions are concerned, medical schemes are of the opinion that the inputs they make are ignored. On the other hand the professions as such are of the opinion that the Minister, who has to approve the tariffs, is the fly in the ointment and is delaying the implementation of the decisions of the council unnecessarily, and in this way prejudicing the professions. As far as the Minister is concerned, he is discharging a specific obligation entrusted to him by law. This entails that he has to satisfy himself that the recommendations of the council were justified. Consequently he is not merely a rubber stamp of the council. This places the Minister in an unenviable position, because he has to assess recommendations of the council which are frequently based on conflicting evidence given to the council by economists.
As far as private hospitals are concerned, a committee of the central council has to determine the tariffs if medical schemes and private hospitals cannot agree on a tariff. In this case the Minister also has to approve the tariff. Private hospitals are voicing the criticism that they are suffering losses as a result of long delays in adjustments. The system is clumsy.
In the entire process the Minister needs the wisdom of Solomon to satisfy everyone. Unfortunately there was only one Solomon and at present no one is capable of satisfying everyone. As a result the entire system has been revised and based as far as possible on the free market mechanism. The proposed system is based on the following principles:
- (a) Any profession or supplier of a service determines its own tariffs. The fees of professions are subject to control by the respective statutory professional control bodies.
- (b) The Representative Association of Medical Schemes determines, after consultation with an organization representing such suppliers of services, a scale of fees according to which the benefits a member of a medical scheme is entitled for a service are calculated. The items on the scale of benefits shall have proportionally the same relative value as the items appearing in a national guideline tariff determined by an organization representing such suppliers of services.
- (c) If a supplier of services were to charge fees equal to or less than the fees indicated on the scale of benefits, the medical scheme shall pay the supplier of the service directly if the rules of the scheme make provision for a benefit in respect of such a service.
- (d) The provisions are silent on the payment of accounts if fees are charged which are higher than the fees indicated in the scale of benefits. In such a case the only obligation resting on a medical scheme is the obligation to pay the member the benefits he is entitled to. However, this leaves medical schemes and suppliers of services free to come to an agreement as regards the payment of such accounts.
When this system is introduced, it will eliminate all the red tape and friction associated with the so-called contracting in and contracting out of suppliers of services. This has the added advantage that suppliers of services and medical schemes have to negotiate with one another, but if no agreement is reached, each is able to act independently. In my opinion, the market mechanism will compel the respective parties to act in a realistic way.
In this connection members of medical schemes and suppliers of services play an important role. Members of medical schemes pay by way of subscriptions for the benefits which a medical scheme offers, and these two aspects are in direct relationship with each other. If members want more benefits, the direct result is that they have to pay more. That is why the annual meetings of members of the medical schemes are so important, because this is the time when members can have their say and adopt resolutions on matters of this kind. The determining of subscriptions and the benefits members receive, therefore, depend exclusively on the members themselves. On the other hand, the supplier of the service has to make a living, but he also has to realize that the ability of the patient to pay is limited and that the fact that a patient is a member of a medical scheme does not give him an unlimited ability to pay.
I have discussed the changes which are being made thoroughly with, inter alia, the Medical Association of South Africa, the Dental Association of South Africa, the Representative Association of Medical Schemes and the Representative Association of Private Hospitals. The desirablility of introducing an arbitrator to determine tariffs was mentioned. The former remuneration committee was nothing but an arbitration body, and that system was not satisfactory. There is therefore no reason to believe that a body which is constituted in a different way will be more satisfactory. In any event, I find it strange that there should be constant squabbling about this matter, for medical schemes are established solely to assist members to cover their medical expenses and not to ensure suppliers of services of an income. In the same way that the supplier of a service attaches a specific value to his services, the funds of medical schemes belong to the members of those schemes and it is surely their prerogative to decide what benefits they want to receive from their mutual insurance. It is certainly not the task of an outside body to determine what the nature of the benefits should be for which they have to pay.
The principles on which the provisions of this legislation are based are in accordance with the recommendations of the relevant committee of the Commission of Inquiry into Health Matters. The only aspect not included in the legislation is the constitution of the Central Council for Medical Schemes. This matter was also raised by various interested parties. However, this aspect will, if necessary, receive attention on a subsequent occasion.
As I indicated at the outset, various possibilities for finding a solution to the matter of fees in the three-way relationship between members of medical schemes, medical schemes and the suppliers of services have been tried out. The system now being proposed is one of the last remaining alternatives. If it does not succeed, I foresee serious problems in future. We all have to guard against being compelled to move away from the free market system. I want to say very earnestly and with all the responsibility at my disposal that our country cannot afford to place an additional burden on the State by adding to its existing responsibilities, in regard to medical care.
Mr Speaker, earlier today we heard the Minister of Finance’s Budget speech in which he discussed, in depth, our country’s financial state of health. We are now dealing with a Bill that is concerned with the health of our country’s people, and I do not think this is of any lesser importance than the discussion earlier this afternoon.
To start off with, I first want to make a few general statements. Firstly, I am still actively engaged in the medical profession. I practise, see patients and am paid by medical schemes. In my speech I shall try not to speak too much as a doctor, because there are also quite a few other matters at issue in this Bill. There are, for example, medical schemes, which play a very important role. Secondly, I work in a private hospital. During a previous discussion it was suggested that I probably had shares in a private hospital or derived some benefit from that. I want to give the House the assurance that I have no shares or financial interest in any private hospital. And I cannot, nor do I want to, speak on their behalf. I just wanted to make that aspect clear.
In discussing this Bill, we are not merely involved with those granting financial assistance, ie the medical schemes. It is not a question of the medical practitioners or those furnishing medical services. In our discussion of this Bill we must concern ourselves with what is best for the patient, and we must therefore bear in mind that whatever we decide will, in the long run, affect the patient. For this reason I am today appealing to the hon the Minister and hon members not to drag petty politics into the discussion. We all belong to a medical scheme, and at some or other stage each and every one of us is going to get ill. Let us therefore not drag personalities and politics into this debate, but rather confine our discussion to what is basically the right and proper thing for the patient. I have been in the medical profession for 33 years now, and it has always been my principle to make the patient’s well-being my first priority. I therefore trust that we shall be discussing this Bill in a calm atmosphere today.
I agree with the hon the Minister when he says:
This Bill, however, is concerned with people who do not approach the Government for assistance, ie people who look after their own health, and everything possible must therefore be done to help them. I listened attentively to the hon the Minister’s speech, and it is clear that his department has investigated this problem thoroughly. They have discussed it with representatives of all interested organizations and associations and have also studied the interim report of the Brown Commission. They then drew up this Bill. Unfortunately I cannot agree with the hon the Minister on all the aspects of the Bill, and I would therefore like to move as an amendment.
In saying this, I do not mean that the hon the Minister and his department acted incorrectly. I merely want to indicate that in my opinion we in this House do not know enough about the matter to decide finally on what the position of medical schemes and those furnishing medical services should be.
It is interesting to have learned from the hon the Minister why he wants to deprive the Minister of the final say in this matter, and then to have found out what the then Minister of Health and the hon members for Brits, Rustenburg and Randfontein said when the same subject was discussed in 1980. On that occasion an attempt was made to pass legislation which would obviate chaos, and in the amendment Bill discussed at the time, the Minister obtained the final say. Today another attempt is being made to obviate chaos, but this time by taking away the Minister’s say and that of the tariff committee. In my view these two approaches are not compatible. In the debate about this matter in 1980 the then Minister of Health said the following (Hansard, Vol 86, col 3822):
In other words, this amending Bill is now going to create chaos, judging by what a former Minister said about this aspect:
So what has now gone wrong? Why is it no longer necessary for the Minister to have the power? I am not saying that on the previous occasion the right decision was taken, but I am just putting the question. I should also like to quote what the hon member for Brits said:
Those are very strong words the hon member used. So one can read through the entire debate and see that the argument then advanced to grant the Minister certain powers, is now the argument being advanced for his not having the powers. It bothers me, because I think that the overall problem is still the same. I am therefore moving the amendment in all humility, and in the course of my speech I want to put forward reasons why I am doing so.
The hon the Minister dealt with the historical background to the matter. I find it astonishing—and I think the hon the Minister will agree with me—that people who, in my opinion, have a reasonably high level of education and competence, and associations and groups playing an important role in this connection, cannot agree about facilitating the rendering of these important services. I feel as if somewhere there are too many people wanting to milk the same cow, and in my opinion they do not have the right to do so. As far as I am concerned, there are no “good boys” or “bad boys”. All the organizations share in the blame. If the hon the Minister is going to allow them to go ahead on their own, as is being proposed in the Bill, we are going to have even more problems. As the previous Minister said, there will be chaos. That is what I think is going to happen, and that is how I see the matter. The hon the Minister has investigated all the circumstances and come to this conclusion. I do not have as many particulars at my disposal as the hon the Minister does, but my feeling is that this will merely give rise to new problems. The history of this issue goes back to the beginning of this century. Even at that time certain companies began to help pay the medical expenses of their officials who were less well off. The first medical schemes were established during the depression years—earlier today there was talk of depression, and perhaps it is a good thing to refer to that—and it covered people’s medical costs in proportion to their incomes. The medical costs of the low-paid workers were covered, and they comprised approximately 30% of the population. The Medical Schemes Act was placed on the Statute Book in 1967, the same year in which the first heart transplant was done. Since then successive Ministers have fiddled around with this. This was done because no solution has ever been found for running this matter in an orderly fashion. Every two or three years, after the commencement of this Act, amending legislation was introduced. The principal Act made provision for tariff committees to try to fix tariffs, but hardly ever could unanimity be reached as far as that was concerned. In 1979 South Africa got very worked up because doctors’ fees increased overnight by approximately 52%. The Minister then said: “Look, things are running a bit wild in this country of ours. Things are becoming too expensive. Now I must act. I am going to take it upon myself to have the final say.”
What are we speaking about here? We are speaking about 224 registered medical schemes and 24 non-registered ones. How many members do they have? How many people pay to belong to these schemes? About a year ago approximately 5 million people were covered by these schemes. Approximately 80% of the White population of South Africa belong to a medical scheme, and also a rapidly growing number of non-Whites. The latest figure I have is that 4% of the Blacks belong to medical schemes. By now there are probably even more. As things develop, increasingly more non-Whites will belong to these schemes. What is the total amount of money made available by medical schemes for medical services in South Africa? It is the unbelievable amount of R900 million per year, of which approximately R850 million is paid out to hospitals and doctors in private practice. That is the overall group we are speaking about. Private practitioners firstly render a service to individuals who call them in and pay them for their services and, secondly, to people who belong to medical schemes. We must remember that the medical schemes also allow their members to go to provincial hospitals— in fact, they are very glad if they do so— where the members can also receive medical treatment under certain circumstances. So that is the group we are talking about. In South Africa there are 14 000 doctors, of whom 6 000 have private practices, with more than half of them contracted in.
Now I want to devote a few words to problems that arise. Clauses 10, 11 and 12 form the core of this amending Bill. They are the three clauses around which everything else revolves. They are the clauses about which the Representative Association of Suppliers of Services and the RAMS beat a well-trodden path to the Minister’s office door. What it relates to is an amount of R850 million. The minister has said there are problems. The hon the Minister’s motivation, however, is not quite clear to me. He must tell us what is wrong with the present state of affairs. The Minister will probably say that he has to play the role of Solomon. I do think, however, that in this connection he has a responsibility. That is the problem involved.
Clause 10 substitutes section 29 of the principal Act. Here it is a matter of determining tariffs amongst the various associations. Section 30 concerns the tariff committee, and section 32 relates to how payments are to be made and the Minister’s powers in that regard. What happens at present if a tariff increase is asked for? I just want to add that in discussing this amending Bill, we must also bear in mind clauses 8 and 9 of the following amending Bill on the Order Paper, ie the Medical, Dental and Supplementary Health Service Professions Amendment Bill, because it is directly related to this amending Bill. How are medical tariffs determined at the moment? The Minister referred to that. The various associations and the Representative Association of Medical Schemes, the RAMS, is being asked by the SA Medical and Dental Council to submit tariffs to the tariff committee.
The next step is for the tariff committee of the council to decide whether the new tariff is acceptable or not. As soon as the tariff has been approved there, it is submitted to the Minister, who has three months to decide and either to approve or reject it. If the Minister is not satisfied, the matter can be referred back within a period of three months, whereupon the entire process starts all over again. When a tariff is eventually decided on again, it is again submitted to the Minister, who must again decide whether to approve or reject it. In practice this consequently means that from 9 to 10 months can elapse before increased tariffs for doctors and dentists can come into force.
In the course of this whole process there are quite a few very important principles involved. In the first place we are dealing with the overall principle of contracting in or contracting out. This is a very important principle. The present situation is such that if a doctor or dentist is contracted in, allowing his patient to pay the statutory tariff—this does, of course, also apply to hospitals—he is paid directly by the medical funds concerned. For a doctor or dentist to contract out is, of course, a very simple matter. One merely has to send a letter to the RAMS notifying it of such a decision. When a medical practitioner is contracted out and does not charge the statutory tariff the patient must, of course, send his account statement to the medical aid fund, whereupon he is paid directly. There are consequently important differences in the method of payment of medical costs for doctors who are contracted in and doctors who are contracted out.
The further important principle is, of course, that of the tariff committee, which can more or less be regarded as the arbitration committee that conducts the negotiation process with a view to determining those tariffs with which everyone will be satisfied. Last but not least, there is the Minister as the final authority. That is what the overall present situation is like.
What, however, is now going to be happening in terms of the proposed legislation? The final authority of the Minister disappears, as does the tariff committee. So in future the negotiation process is to be conducted between the associations of the separate interest groups. In future the Association of Private Hospitals of the Medical Association of South Africa will therefore have to negotiate directly with the Representative Association of Medical Schemes. The whole principle of contracting in and contracting out therefore lapses. As does the principle of arbitration, and of course the principle of the Minister having the final authority. The relevant two groups will therefore, in future, have to try to reach consensus on the question of tariffs. When they agree with each other, all good and well. The proposed tariff will then apply. When they disagree with each other, however, what happens then? As one would say: “Everybody goes his own sweet way.” That is specifically where the problem lies.
Medical aid schemes will then determine their own tariffs, and will also directly pay medical practitioners and hospitals imposing those specific tariffs. Those who do not, however, impose the fixed tariff will not be paid. That is what will happen. The Minister will then no longer have the final say. There will no longer be any tariff commitee, and the principle of contracting in and contracting out will no longer apply either. All that will therefore remain of the existing legislation in this connection will be, in the first place, the principle that each association can determine its own tariffs and, secondly, that medical practitioners and hospitals levying the fixed medical aid association tariffs will promptly be paid out. In future, of course, every medical account will have to be sent directly to the medical aid fund concerned. In terms of previous amendment to the legislation it was no longer necessary for doctors and dentists to send accounts for patients they treated directly to the relevant medical aid associations. Subsequently the provision was amended and such accounts again had to be sent to the medical aid associations by the medical practitioners concerned. Private hospitals, however, still have the right to send accounts directly to medical aid associations. This right, however, is now also being done away with.
So what is going to be effect of this new measure? Who asked for this? The hon the Minister alleges that everyone wants it to be done this way. I am really not convinced that this is quite correct. The Medical Association of South Africa is not happy about this amendment. That association is still in favour of the existing system of payment, and also the system of contracting in and contracting out. It also advocates an arbitration committee to take the final decision when the relevant parties cannot agree in the negotiating process. The private hospitals are very unhappy about this. They say it is nonsense and do not want it. They are experiencing great problems in this connection, and I am sure the hon the Minister and his officials have also noticed those problems. I want to give an example. A doctor’s patient gets a heart attack in the middle of the night and is admitted to the intensive care unit of a private hospital. The next morning the patient wakes up in those strange surroundings, with the owner of that private hospital standing in front of him asking for his deposit. He is not paid by a medical scheme because his fees differ. He will not be paid directly. One might as well go to a chain store, buy something there and then tell the manager one is waiting for someone who is not going to pay him. Private hospitals have heavy expenses and want to be assured of getting their money.
Now what is the position when it comes to private hospitals and patients? The private hospitals and private medical services will not be able to keep going—if I have understood the hon the Minister correctly—if we smother them in this way. A private hospital cannot keep furnishing services unless it is paid for those services. If that patient cannot pay his deposit, what will happen? He will send somebody to his employer to ask for the money. The employer will probably say that he will send the money, but since he is already paying part of the member’s monthly contribution to a medical scheme, he will probably want to know what is going on.
What happens to the account of a private doctor or hospital? The account is sent to the patient and he sends it to the medical scheme, but the fees are higher than those recognized by the medical scheme. The medical scheme, in turn, sends a cheque to the patient, perhaps for an amount of up to a few thousand rand—and I have experience of this—money that could be spent in the nearest liquor store, or be used to buy a new refrigerator. Certain people are not used to receiving such large sums of money. That is what the former Minister was referring to when he said that if there were no control, there would be chaos. Doctors find themselves in the same position.
I have studied this matter very carefully and feel that if, in regard to this new Bill, one were to award points to the medical schemes, the private hospitals and the Medical Association, the medical schemes would get nine points out of ten. In the final analysis they are in the strongest position, because they are the people who must pay out the amount of R850 million. The medical schemes are perhaps happy about the Bill, but the Medical Association, and in particular private hospitals, are experiencing great problems. A private hospital that is contracted in could do its bookkeeping and send its accounts to the medical schemes, but from now on it must send its accounts to individual patients. This would mean a great increase in its bookkeeping costs. If the hospital is not paid directly, thereby losing money, it is going to increase its fees, because otherwise it would have to suspend its services. [Interjections.] No, there is no such thing any more. That is a thing of the past. In terms of this amending Bill there is no longer any contracting in or contracting out. I am quite prepared to answer questions, because I think that is the way we must discuss this legislation. I also think we must discuss it in a very calm atmosphere.
Mr Speaker, I want to ask the hon member, since he mentioned the amounts paid directly to patients and said that this created the possibility of the patient spending that money on something other than the payment of his accounts, whether he is aware of medical funds that are prepared to make payments directly to patients without the patients furnishing proof of their having paid their doctor’s bill?
Sir, unfortunately that is the position, and that is increasingly going to happen, because at the moment the medical schemes are compelled to pay the statutory tariffs. If a doctor charges the statutory tariff, the medical scheme must send the amount owing to the doctor. That is the position in terms of the Act. If the Bill is passed, there will no longer be a statutory tariff. Each doctor will have his own tariff. If the hon Chief Whip were to consult me, I could have him pay in accordance with medical scheme tariffs, but if the hon the Minister were to consult me—that would be a good thing, because I am a good doctor—I could have him pay according to my own tariffs. What we have here is a “free-market system”.
The medical schemes want it to be a free market. They would then determine the tariffs as and when they received the accounts. They would say, for example, that 80% of the tariff for removing tonsils is approximately R15, and therefore that would be the tariff in future.
I appreciate the hon the Minister’s problem. I also appreciate the attempts that is being made to deal with this very difficult matter in such a way as to satisfy everyone. My problem is that I do not believe that what the hon the Minister is now doing is the correct solution. I really do hope that the hon the Minister will accept my amendment, because it is aimed at involving the hon members of the House in this. I think that many of the hon members who have been listening to me today have heard something abouth this matter that they had not considered to be true.
It is important for the medical services of South Africa to be regulated in an orderly fashion. The words “chaos” was used in a previous debate, and if the Bill is placed unchanged on the Statute Book, I foresee dangers, tremendous dangers. I foresee the various medical associations not being able to agree with one another on a tariff. The medical associations would be faced with the legislation, but there is something that is not embodied in the legislation either. I am referring to what is provided in section 32 of the principal Act. This is specifically where the medical schemes have to come into their own. The way in which accounts have to be submitted and fees have to be paid, is determined by means of regulation. The word “regulations” appears in clause 12 at every turn. Who makes these regulations? [Interjections.] The hon the Minister makes the regulations on the recommendation of the Registrar of the Central Council for Medical Schemes. In terms of the principal Act there are, as of now, 40 to 50 regulations supplementing the legislation. There are also numerous rules.
Would this regulation, if it were placed on the Statute Book, not virtually be giving the medical schemes the right to do what they want to? If that were to happen, the entire private medical service would collapse in ruins, of that I am certain.
There are still many other points I could discuss if the hon the Minister were not to agree to the Bill being referred to a select committee. I think that the request for the Bill to be referred to a select committee is a very reasonable one. We have repeatedly had amending Bills about this before this House, but we have never been able to obtain any finality. I think it is a very reasonable request that the department and the hon the Minister help us to understand this so that we can try to bring something into being that satisfies everyone. In terms of this Bill there cannot, in future, be any prevailing peace if there is not some form of arbitration. I cannot see how that would be possible. I cannot believe that the principle to which the previous hon Minister referred, ie that there was no longer any reason for contracting in or contracting out, now lapses. Contracting in and contracting out are a good thing as far as certain aspects of medical services are concerned, but not as far as other aspects are concerned. Dentists do not have that much of a problem. We as doctors can also still live with it, but private hospitals cannot exist without the system of contracting in and contracting out. If a patient gets a certain sum of money from the medical scheme, there is a great temptations to use it for some other purpose. Secondly, the private hospitals could not carry the financial burden of such a loss.
Although I hope it will not be necessary, at a later stage I want to refer in detail to clauses 10, 11 and 12. The hon member for Pietersburg has an amendment, in regard to the arbitration committee, which he wants to move. I am not, however, altogether happy about that. I do not think we must decide how this committee is to be constituted. The arbitration committee that he proposes actually belongs under the next Bill, because it is concerned with the Medical Council, medical schemes and any association. The Medical Council is the most important factor here. I therefore do not think that in this respect the hon member is altogether correct.
I want to conclude by summing up my standpoint. One must firstly decide what is best for the patient. If this legislation is passed, we must be convinced that it will be best for the patient. The hon the Minister and his department have the advantage of being in touch with the various organizations and associations and therefore knowing what it is all about. We do not have all that information. In my opinion this legislation does not benefit the patient, and I think a conflict situation will arise.
The hon the Minister and his party believe in consensus politics. Here, however, consensus politics is being thrown overboard and nothing remains of it. If it has not been possible, since 1967, to reach agreement about a tariff, I cannot see how agreement is going to be reached now. So before we decide about this legislation, we must answer the question of what is best for the patient. That we must be very sure about.
Mr Speaker, the hon member for Parktown started off very responsibly by referring to the importance of the health facet in our national life, and I agree with him on that score. When one looks at the amounts allocated to health services in the latest Budget and compare them, for example, with those spent on defence, then what is spent on health services is amazing. The hon member is quite right as far as that is concerned. It almost seemed to me as if he has learned a lesson in the last two or three years during which he has been in this House. The hon member has been beaten many times in his life. Previous Ministers of Health have taught him good lessons. As I say, he started off in a very responsible manner and at one stage I thought that I should have to congratulate him on his speech and hoped that he would carry on in that vein when we discussed the Vote at a later stage. But then he moved his amendment; he asked what went wrong and he made all sorts of allegations, but at the same time he did say that he appreciated the hon the Minister’s problem. Does the hon member want the unedifying debate on tariff increases which takes place practically every year, to continue year after year?
Definitely not.
Of course he does not want it. What, then, is the reason for this debate becoming so unpleasant? Later in my speech I shall refer to reporting on this aspect. Doctors and dentists were very unhappy because the Minister had to intervene and lend his approval to the verdict of those who had to decide on tariffs. What we want to do now is put this unpleasant debate aside. We believe that the matter has been debated ad nauseam and that it is not necessary for a select committee to be appointed. The ones who are most satisfied are the very people whom the hon member wishes to protect, viz the doctors. The Medical Association, as the representative body of the doctors, is happy with it. I do not believe we should be so naïve as to assume that they would be happy with every aspect of the legislation. Naturally there will be some aspects with which people might be unhappy. For the most part, however, the Medical Association and the doctors are happy with this amendment.
As is the case with many pieces of legislation which come before the House, this legislation has come a long and arduous way. As we have heard, this legislation is no exception. In spite of the ideas of the hon member for Parktown, it will become apparent that the decision to come up with this amendment now was the right one. The time is ripe for it now. [Interjections.] It can happen that the time can become ripe for a particular matter, but the hon member does not know anything about that. [Interjections.] The road was not only long and arduous, it was thorny as well. It was soon apparent, as has been spelt out earlier on, that after the principal Act had been passed by Parliament in 1974, the medical and dental people were not happy, because they interpreted it to mean …
Mr Speaker, may I ask the hon member a question?
No. The hon member can make further statements at a later stage. The medical and dental people interpreted it as interference in their so-called domestic affairs. We have had ample proof of that over the years. Nobody has ever been opposed to the principle that the State ought to make a contribution, as is indeed the case, to the provision of medical services in our country. What the professions affected by this legislation do not want is that the State should interfere unnecessarily in the way a doctor or dentist—a supplier of services, as he is called in the legislation— manages his practice. One aspect of managing a practice is also to negotiate and decide, through the lawfully elected representative bodies, on, inter alia, the fees payable in respect of services rendered by the various professions. It is clear, therefore, that the professions which are affected, were unhappy with this situation. By coming forward with this amending Bill today—a Bill which, inter alia, does away with the system in terms of which payment for certain medical services will be, in accordance with a tariff of fees determined with the approval of the Minister of Health and Welfare—we are saying to the suppliers of services and to the medical schemes that we have confidence in their discretion to undertake themselves to carry out in a responsible way this important task of determining tariffs for services rendered. By so doing, the legislator proves that he wants to create greater harmony and a more peaceful climate in which it will be possible for negotiations between the parties involved to achieve greater success.
That a crisis of confidence has developed is true. I do not want to go into the causes and the reasons, however. The fact is that at the moment we are grateful to be able to say that there is a better relationship between the suppliers of service and the State, and in this regard I should like to place on record that the pragmatic and conciliatory role which the hon the Minister plays is appreciated. [Interjections.] That alone deserves a “Decoration for Meritorious Service.”
All the parties involved in medical care in this country are ad idem on a few cardinal matters, and I just want to highlight two of them. In the first place, adequate medical care has become too expensive in South Africa. We have reached a point where the man in the street is hardly able to afford medical care. The second matter on which there is no difference of opinion is that no one wants to see our medical service in this country becoming caught up in the stream of total socialization. I believe that these two important matters have played not merely a contributory role, but, indeed, a determining role in the fact that interested parties feel obliged, as it were, to get together in order to work out an acceptable dispensation. Let me reiterate that the hon the Minister has played a significant role in this regard.
What, then, are our objectives? First of all, our endeavour is to have a health service which the ordinary man will be able to afford. A great deal has been said about this, a great deal has been written about it and a great deal more is going to be said and written, and it will certainly be discussed again under the Vote later on. At this juncture I shall leave it at that. Secondly, we are striving to achieve optimal security cover by medical schemes to save their members from a financial catastrophe in times of serious or lengthy illness, or when there are special circumstances requiring specialized attention.
As the hon member for Parktown pointed out, the total number of beneficiaries covered by all the medical schemes numbered almost five million in 1982. This is a figure which, particularly as a result of the economic upliftment of people of colour, is still growing every year. The hon member also mentioned the benefits paid out to hon members which amounted to R815 million in 1982. These figures show us the enormous extent of the involvement of medical schemes in the supply of health services in this country.
That medical schemes should exist and function is of great importance. How many times has a doctor heard a patient say: “Doctor, fortunately I belong to a medical fund”. The other side of the coin is equally true, because the doctor can also say: “I am glad this man belongs to a medical fund”, because that, after all, affords both parties security.
In the third instance, we are in earnest in seeking to create and maintain in the interests of medical care, the best possible doctor/patient relationship. This depends to a large extent on a positive effort being made by the doctor and the patient himself to create and cultivate a situation of trust. There are indeed other factors which can cultivate or destroy this relationship, and in this regard I want to refer briefly to the role of the media. For many years reporting in respect of medical services, the determination of fees, tariff adjustments etc has been given considerable publicity and banner headlines. This happens year after year, and the dispute is pursued in the newspapers. I have no fault to find with the fact that any imaginable newsworthy event is reported in the media, but I do want to suggest that reporting on the matters which I have mentioned here often does not provide the correct perspective, and that the already weakening relationship between the doctor and the patient is often further clouded and bedevilled. I appeal to the media to show understanding for this extremely sensitive matter. At the same time I should like to refer to an article which appeared in one of our afternoon papers on the 22 March 1984 written by one Idalette Strydom and entitled “Nuwe bedeling kom vir artse”. I should like to meet this young lady to thank her personally, because I consider her an outstanding reporter. I am happy with this article, not merely because it presents this Bill in a good light, but because the reporter presented the facts and wrote in simple language, language which anyone can understand. After reading the report, one does not have to look for any other explanation. The people who read the report need not worry about what they have read because they can understand what they have read. I believe the hon member for Parktown should also read that kind of report.
I contend that the amendment of section 32 of the principal Act, which provides for the direct payment of accounts for medical services in respect of which the fees do not exceed those prescribed in the scale of benefits, will also contribute towards healing this ailing doctor/patient relationship. It will result, inter alia, in the often contentious sentence “this partnership is contracted out” disappearing from the bottom of a doctor’s account. What a glad day that will be!
I see this Bill, in the fourth place, as an instrument or an attempt to keep us from the socialization of our health services. Naturally, as in the past, the State will in future make an increasing contribution to health care. We cannot get away from that. However, we want to do everything in our power to enable the patient to call in the supplier of services of his choice and to pay directly or indirectly for services rendered. I believe, too, that by means of the Bill we are offering—and, indeed, giving the actual interested parties, viz the representatives of the medical schemes and the professional associations, a golden opportunity to negotiate and decide for themselves on a sensitive matter such as remuneration. Responsible people take responsible decisions and therefore those whose interests it actually concerns—I agree with the hon member for Parktown that it concerns the interests of the patient—may with confidence leave the negotiating process in the hands of those bodies I have just mentioned.
I also want to point out the important role which the Medical Association and other professional associations will be playing in the future negotiating process. I want to ask doctors and others to make use of their rights, including the right to vote for the professional association which must take care of their interests. Surely it cannot have a good effect if less than 20% of doctors cast their vote when they have the opportunity to elect their representatives in a body such as the Medical Association. In such cases there can surely be no question of the doctor voicing his opinion by means of his professional association.
I intend to move an amendment to clause 1 in the Committee Stage, viz that the word “surgical” on page 5 in line 11 be deleted. In the definition of the word “service”, reference is made to the terms “medical, psychological, para-medical, nursing, surgical or dental treatment”. The word “surgical” is redundant there because it has already been defined by the word “medical”. Therefore I shall move that in the Committee Stage. With these few words I am glad to support the amending Bill.
Mr Speaker, the hon member for Parktown correctly pointed out that we were dealing here with a very complicated problem, a very complex problem. We know that the hon member for Parktown is still engaged in active practice. What I did not know, though, was that I had been in practice longer than he had. He has been practising for 35 years, and I for 36 years. I thought he was older than I was. The hon member for Parktown examined the Bill from the particular viewpoint of the private hospital. This is a very important aspect of which he has had a great deal of experience. I, who am in general practice—I was practising only this morning and I know that the hon member was engaged in surgery only yesterday—will perhaps examine the problem more from the viewpoint of the practitioner.
The hon member for Rustenburg said at the beginning of his speech that the hon member for Parktown wanted this unsavoury debate on tariffs to continue. I want to tell him that it sounds as though …
You were not listening very carefully.
In his contribution the hon member for Rustenburg tried to imply that we had now come to the end of the problem and that we could put the matter behind us. [Interjections.] He said that the Medical Association and the doctors were happy with this. As a medical practitioner I want to ask him what proof he has for that statement. I want to say that most of the medical practitioners in South Africa will only this afternoon take cognizance of what is happening here. The hon member said that medical practitioners really had bargaining power as far as this situation was concerned. I want to ask the hon member, however, where in the Bill the medical practitioners are being given any bargaining power. There is no question of that at all.
The Representative Association of Medical Schemes can listen to what the professional association has to say, but the decision on the tariffs is taken unilaterally by the Representative Association of Medical Schemes. The hon member also said that the medical schemes now bore the responsibility. That is correct. There is no bargaining power on the part of the medical practitioners, and since the Representative Association of Medical Schemes is a statutory body, I am more inclined to think that we are dealing in this legislation with a movement in the direction of the socialization of medical services in South Africa.
I want to point out the most important, the crucial amendments, for which this Bill makes provision. The first is the so-called scale of benefits which will be promulgated in the Gazette by the Representative Association of Medical Schemes. The second is the direct payment of accounts by medical schemes to the suppliers of services. During the Committee Stage we on this side will move that the expression “scale of remuneration” be substituted for the expression “scale of benefits”. In our opinion, this is not only more descriptive, but also eliminates any room for misunderstanding. For example, I want to refer to clause 13, which amends section 41 of the principal Act. The benefits referred to there are the benefits offered by a medical scheme, for example hospital benefits and benefits for dependants, while we are dealing here with a remuneration due to the supplier of the service, whether the medical practitioner, the private hospital or the dentist. In terms of this Act the supplier of the service can only lay claim to remuneration, and not to benefits. That is why we shall move an amendment to that effect.
The hon member for Parktown, quite correctly, also pointed to the long history of this legislation in the parliamentary history of South Africa. If I may also be allowed to delve into the past a little, I should like to indicate that the principal Act was originally passed in this House in 1967. Since then this legislation represents a long process of dissatisfaction, of frustration on the part of medical practitioners and medical schemes and of involvement by the State through a succession of Ministers. That also explains why we are now dealing here with the sixth process of amendment by the fifth successive Minister in this portfolio. Initially it was the late Dr Albert Hertzog, followed by Dr Carel de Wet. After that the legislation was amended twice by Dr Schalk van der Merwe, once by the present hon the Minister of Posts and Telecommunications, and now this sixth amendment process is being proposed here today by the present hon Minister of Health and Welfare.
And that is the end of it.
Yes, now everything will suddenly be fine. I maintain that precisely the opposite is going to happen, for there were misgivings on the part of the organized medical profession from the very start, which feared that this was systematically going to lead us to a fully State-controlled medical service, as it exists today in Great Britain, the Netherlands and elsewhere. This has always been totally unacceptable to the medical profession in South Africa, particularly when seen from the viewpoint of the medical practitioner, and also, of course, from the viewpoint of the patient.
If we were to accept such a system completely, we would sacrifice quality and initiative. It would also cost the taxpayer more. That was why the medical profession objected vehemently, right from the outset, against being deprived of its right to contract out. In fact, any self-respecting professional group would have reacted in this way. As is the case in any other profession, members of the medical profession at least wish to constitute a participating party in the determination of their remuneration. Surely that is clear. In fact, every profession has the right to do the same thing. Why cannot this apply to medical practitioners as well?
In the long history of this matter we also recall very clearly the fiasco of the remuneration commissions. The former preferential tariff which, as the hon member for Park-town indicated, was in reality a reduced tariff, and by means of which medical practitioners themselves rendered assistance to the underprivileged, was accepted by the then Erasmus Commission as a basis for determining a statutory tariff. However, dissatisfaction arose from this, too. That preferential tariff was determined at the time by the medical practitioners themselves in order to accommodate the underprivileged. That preferential tariff was considerably lower than the tariff which normally applied as a general guideline.
Furthermore, it was an absolute minority of the population which belonged to medical aid schemes at the time, whereas today, I think, probably 90% of the White population …
5 000 000.
… as the hon member for Parktown says, 5 000 000 people are members of medical aid schemes. The average medical practitioner is not a money grabber. Even today medical practitioners do a great deal of their work pro deo. This is something of which hon members of this House ought to be thoroughly aware.
If it is the case that the income of medical practitioners is higher than average, this is simply the case because they work very long hours, and because they have to do much of their work after hours. Another finding which also caused much frustration at the time—a finding of a remuneration commission—boiled down to this: Medical practitioners ought to be better trained so that they could treat their patients faster and in that way enhance their income. What it amounted to, therefore, was that as soon as a medical practitioner was better trained, he could move his patients through his consulting rooms like sausages through a sausage machine. Surely that was an absolutely ridiculous finding. It was findings of this nature that one could expect from people outside the profession, naturally because they did not possess the necessary knowledge.
In the legislation under discussion the previous method of determining tariffs, ie by a tariffs committee of the SA Medical and Dental Council, with approval by the Minister, was once again thrown overboard, and today the hon the Minister is proposing here that section 29 of the principal Act be amended so that a statutory body, ie the Representative Association of Medical Schemes, which is a statutory body, representative only of the medical schemes, may publish tariffs in the Gazette, and only after it has consulted with the professional association concerned and not in consultation with the professional association. Consequently this is a unilateral provision as far as the scale of remuneration is concerned, and it can be promulgated unilaterally by the association.
In addition it is also being provided that the association need only do so when it deems necessary or when requested to do so by the Central Council for Medical Schemes. When tariffs are being considered, therefore, they are not laid down; they are left exclusively to the judgment of this Representative Association of Medical Schemes. I would like to see what medical practitioners would be satisfied with that. Consequently the bargaining power of the organized profession is being completely eliminated by this legislation. This is in conflict with the standpoint that has been adopted over the years by the organized medical professional association. In my opinion this amendment represents one of the biggest steps forward towards an ultimate fully State-controlled health service. This is not merely an assumption we are making. It was recently envisaged is so many words by the hon the Minister himself, and he did so again this afternoon in his introductory speech. If this thing does not work, we must consider such a possibility. In Die Vaderland of 9 March the following report appeared under the headline “Nuwe stelsel bepleit vir mediese sorg”. It read inter alia as follows:
If we move towards socialization then health services alone are going to cost more than this amount by the end of the century, to say nothing of pensions.
Who said anything about socialization?
I am quoting from the report in which the hon the Minister himself was quoted.
I said it would lead to that if nothing else was possible.
That is precisely what I said.
I never said that I was in favour of socialization. The hon member is talking nonsense.
If the hon the Minister would listen to the next paragraph he may be more satisfied. The report quoted the hon the Minister again as follows:
We have appreciation for the Government not being in favour of a socialistic system of medical care. That is its standpoint today, but we all know that this Government changes its standpoint very quickly. We have many examples of that. I maintain that this report indicates that if this system does not succeed, the socialization of services will have to come.
With this amendment conditions are being created which do serious damage to the three-way relationship between medical or other providers of medical services, medical schemes and patients. It could cause the entire present system to collapse, with the in-avertible introduction of a socialistic system. The tenor of and caption to this report gives one the impression that the hon the Minister is really beginning to make preparations for such a step.
You are talking nonsense.
I want to remind the hon the Minister of what he himself said on 5 May 1967 when the principal Act was being piloted through this Parliament, and when he was a member of this House. I am quoting here from Hansard, column 5476 of 5 May 1967. At the time the hon the Minister said inter alia the following:
The hon the Minister then quoted the following paragraph from the findings of the then Snyman commission, as follows:
My view of the legislation is that the domain of the private practitioner is being encroached upon by giving a statutory body a sole right, without any bargaining on the part of the medical profession. What the Snyman Commission envisaged here has in many respects come true, and is in many respects going to come true in this amending legislation now before us because we are so totally caught up in a situation with medical schemes today that it will be difficult to change it.
As the hon member for Parktown said, five million people are members of medical schemes. According to the 1982 statistics of the hon the Minister himself a total income of R883 million per annum is involved as far as medical schemes are concerned. Consequently this is a powerful financial institution and organization we are dealing with here. That is why we should preferably work on a more balanced method of determining a scale of remuneration in which everyone involved has a measure of say, otherwise it is not a step forward, but the very opposite, as I think this Bill in reality is. Since this is the most important change in principle in this Bill, the CP will vote against the Second Reading and move amendments during the Committee Stage.
One of the most important principles on which medical schemes are based is the provision of medical services to members and their dependants at a reduced tariff, and on the other hand, compensation to the suppliers of services by means of guaranteed payment of their accounts. The hon member for Parktown has already pointed out the special problem of private hospitals, and this is indeed a problem which is not solved by the Bill.
Up to now the medical practitioners have had the choice of contracting in or contracting out, but this is something which now falls away completely. At present, according to the annual report, there are still approximately 2 924 medical practitioners who have in fact contracted out, but this arrangement now falls away completely and the medical schemes pay all providers of services according to a fixed scale of remuneration. The real danger now arises that the professions will no longer have any bargaining power, that the scale of remuneration promulgated in the Gazette by the Representative Association of Medical Schemes and the general guideline earnings determined by the organized professional association itself, could drift further and further apart. This would impose an ever increasing burden on the patient himself which, in due course, he will just not be able to afford any more.
Since the State itself is a supplier of services in the case of hospitals, we recently heard the shocking news, for example, that the State had increased its hospital tariffs tremendously. In the Citizen of 22 March one read:
The report continued:
The reporter continued:
One wonders where all this is going to end if even the State, which is also a supplier of services in this case, increases these prices so drastically. This whole problem lies within the scope of inquiry of the Browne Commission, which had been engaged in an inquiry since 1980. It began four years ago, and I want to ask the hon the Minister this afternoon when the report of the commission will be available. The field covered by the commission forms part of the problem under discussion.
In my opinion Prof Niklaas Louw, president of the Medical Association correctly assessed the responsibility of the medical practitioner in respect of financial assistance with medical schemes when he said the following in his presidential address last year in July:
This is indeed the case. Schedule 45 indicates that the proceeds of general practitioners from medical schemes amounted to R110 million and that medical expenditure amounted to almost R160 million. Consequently this statement is very true. The professor went on to say:
Professor Louw also said:
It is very clear that the Medical Association of South Africa wishes, on its part, to apply discipline. This legislation governs a very important component of medical costs in South Africa.
In clause 6 section 20 of the principal Act is being amended by providing for continued membership of the patient after retirement owing to ill-health or other disability. This is a good provision, and we have no fault to find with it.
In clause 12 section 32 of the principal Act is being amended and provision is made for the direct presentation of an amount to the scheme under certain circumstances, as well as the direct payment of such account by the scheme to the provider of services, under certain circumstances. I should like to know from the hon the Minister what the various periods are.
A report appeared in Die Transvaler which alleged that a certain practitioner in Pretoria had ceased to practise. On 5 March this newspaper reported that 16 general practitioners simply could not continue to practise owing to various reasons, for example overhead costs. One of the main reasons why doctors are leaving the profession is that they have to wait up to five months for payment. I want to ask the hon the Minister whether he would not consider this: When a medical practitioner sends a patient an account after a consultation has taken place, he also sends an account to the medical scheme at the same time as he sends an account to the patient. As soon as the medical scheme then receives an endorsement from the patient, the medical practitioner can be remunerated and thus there will be no long delays. In any event, this remains a very serious problem.
It is interesting to note that on the same page on which this report in Die Transvaler appeared, in which it was alleged that medical practitioners had problems with the R8,80 consultation tariff, it was reported that a medical practitioner from Durban had written in the latest edition of the Medical Journal that a Zulu witchdoctor had paid him a visit.
When he had finished examining her, he asked her by the way what she charged her patients, and the reply was R100 for the first consultation and R20 for a follow-up consultation. I think there is quite a disparity here, to which the hon the Minister could possibly give his attention.
I cannot see the amendment to section 29 in particular contributing in any way to engendering greater satisfaction on the part of the medical practitioner as well as the patient. In the long run he is the one who will have to pay the difference between the guideline tariff and the statutory tariff. This is not in the interests of the provision of private medical services in South Africa, and for that reason we shall oppose the Second Reading of this legislation.
Mr Speaker, the hon member for Pietersburg has made certain remarks to which I shall come back in the course of my speech. I want to refer at this stage to some of the matters which he raised. He referred to RAMS, the Representative Association of Medical Schemes, as being a statutory body. Surely this is not the case at all. [Interjections.]
Mr Speaker, can the hon member prove that that association is not a statutory body?
The Medical Association is not a statutory body. The Central Council for Medical Schemes … [Interjections.]
Mr Speaker, can the hon member tell us whether he is aware of any other body which is not a statutory body which makes promulgations in the Government Gazette? [Interjections.]
It is a statutory association.
I shall come back to this matter in the course of my speech. I think the hon member is confusing certain councils and associations.
The hon member also referred to the possibility of introducing a system similar to the English one, a kind of socialising process. I want to point out to the hon member that when the principal Act was introduced in 1967, Dr Albert Hertzog said, with reference to the National Health Service in Britain, that this was a system which we could never implement in South Africa. Those were the words of Dr Albert Hertzog when the legislation was introduced. Since then, every Minister of Health, including the present hon Minister, has consistently adopted this attitude. There has never been any question, since the days of Dr Albert Hertzog in 1967, of any Minister of Health being a proponent of a socializing process based on the National Health Scheme of Great Britain. Nor do I believe there is any question of it now. What the hon the Minister was referring to was a factual situation which he had tried to prevent.
The hon member also said that we were suggesting that if these amendments were made to the Act, all our problems would be solved overnight. No one has said that. No one has suggested that all our problems will be solved overnight. I want to predict that problems will still be experienced. With reference to what the hon member for Park-town said, I want to say: “You cannot eat your cake and have it.” The Medical Association and the doctors say that they are in favour of the free market mechanism. I am having discussions with the hon the Minister at the moment about certain problems regarding private hospitals, where private hospitals are asking for the introduction of private initiative. Now the hon the Minister has introduced legislation which will further this very aim, and surely one cannot say now that we no longer want it. You cannot eat your cake and have it. We cannot have the best of both worlds.
Let me come now to my actual speech. I want to make one remark about today’s Budget. The hon the Minister of Finance referred to a possible tax on fringe benefits. We have just received the commission’s report on the matter. Unfortunately, I have not yet been able to examine it. However, I want to request the hon the Minister to make sure that medical benefits are not affected by that kind of taxation. The benefits which medical funds offer to their members should not be taxable.
When one looks at the preamble to the Bill, one sees that there are nine objectives which the Bill is intended to achieve. The first one deals with the composition of the Central Council for Medical Schemes; it is followed by a few others, and then we come to three objectives that are really very important, namely to do away with the system in terms of which payment for certain medical services takes place according to a tariff of fees determined with the approval of the Minister of Health and Welfare, and to provide for the determination of a scale of benefits by the Representative Association of Medical Schemes, and for the direct payment of accounts under certain circumstances. Some hon members have already referred to this, while other hon members have also referred briefly to the history of this legislation.
I am an active member of the Medical Association, and as a practising family doctor I have come a very long way with this legislation. I still remember how years ago, in 1965, when the draft Bill was published, Prof Julius Bremer and I discussed the legislation. One of the problems we saw in that draft Bill was this very question of the determination of tariffs. After the first draft Bill had been published in 1965, it was referred to a select committee, which was later converted into a commission of inquiry. The Medical Schemes Act of 1967 was subsequently passed—a very good Act, but one which created certain problems. Since then, the legislation has frequently been amended, as hon members have said, in an attempt to improve it. Every time these amendments were effected, we discussed these questions, the reason why the Act had to be amended, and we came to the conclusion that it was not working satisfactorily.
The main point at issue—the bone of contention; and it was an elephant bone—was in fact the method according to which the tariffs should be determined. I hope you will allow me, Mr Speaker, to make-a few more historical remarks in order to develop my argument. The question of medical practitioners bargaining for remuneration is not a new one. Dr Jan van Riebeeck came ashore at the Cape in 1652, and we find a very interesting piece of historical information in a book called The History of Medicine in South Africa up to the end of the 19th Century by Edmund H Burrows. The author says, among other things, that the first private practitioner began to practise in South Africa as early as 1657. At that stage, the system of the “opper chirurgijn” was still in force. On page 36 of the abovementioned book we read the following:
So he was the first general practitioner to practise independently. This same Jan Vetteman also demanded certain benefits from Jan van Riebeeck, and in this connection the author says:
I must admit that a medical practitioner can still buy a bottle store today. There is nothing wrong with it, but I see that when he sells a few pills these days, it is regarded as unethical. The author goes on to say:
According to the book, the Council of Policy actually met most of the demands made by Vetteman. They gave him a piece of land, he was able to keep an inn, and so on, but they did tell him this:
In other words, the question of bargaining by medical practitioners goes back to the days of Dr Jan van Riebeeck.
I also found a few very interesting accounts in this book. The first proper account it has been possible to trace was that of a certain Doctor Paul le Febure of Fransch Hoek. On 12 May 1968, he visited a widow by the name of Geel and gave her some medicine. He charged six rix-dollars for his services and treatment. This was the equivalent of about nine shillings. On 15, 20 and 21 May, he visited her again and gave her a heart stimulant, which once again cost six rix-dollars. The account is dated: Stellenbosch, 20 September 1698. It is interesting that there is no evidence that the account was ever paid. The first account the author could find that had been paid was that of one Dr Hasing, who visited the wife of a certain clergyman in 1766. He specified his account as follows:
He charged four shillings and sixpence for his treatment. It is very interesting to see the following words written at the bottom of this account: “Paid with thanks”. This is the first paid account in our medical history.
In order to complete this historical background, I may mention briefly that the first medical scheme was established in Kimberley at De Beers Consolidated Mines in 1889. It is interesting to note that Dr Jameson was involved. He does not have a very good reputation in South Africa and he was also involved in the smallpox scandal at that time. However, that has nothing to do with this measure. By 1938, there were 38 medical schemes in existence, and by 1967, when the principal Act was placed on the Statute Book, there were 256 medical schemes—far too many, of course. One of the objects of the legislation was, in fact, to rationalize medical schemes. In 1983, 16 years later, a certain degree of rationalization had taken place, and there were 224 registered medical schemes, of which 200 were medical aid schemes and 24 were medical benefit funds The hon members for Pietersburg, Rustenburg and Parktown have already referred to the importance of these medical schemes and have quoted from Schedule 45 of the annual report of the Department of Health and Welfare. I do not want to quote too many figures, but I just want to point out that the total membership of the different kinds of medical schemes is approximately 1 894 000, while the total number of dependants is approximately 2 966 000, adding up to a total of almost 5 million. Total expenditure amounts to more than R815 million. I want to endorse the remarks made by the hon member for Pietersburg, who said that as far as this expenditure was concerned, it was very clear that general practitioners, excluding dentists, received the smallest share of this expenditure, The amount paid out by medical aid schemes to various persons and bodies were as follows, for example: General practitioners—R110 million; medical specialists—R143 million; hospitals—R120 million; and medicine—R159 million. I do not wish to quote all the figures; I just want to make the point that general practitioners do not receive a large share of this expenditure. I have misgivings about this. I shall discuss the importance and the role of general practitioners on another occasion, but I want to say at this stage that general practitioners form and have to form the backbone of medical services. We do not need many Chris Barnards; a dozen or so are enough. However, we need thousands of general practitioners. I prefer to use the term “family doctor”. In everything we do with this legislation and other legislation which we shall deal with in future, we have to bear in mind the importance of the family doctor.
In order to understand this legislation better, I may just ask why this kind of legislation works. Why do medical schemes work? While an amount of money is received every month from, say, 1 000 men, women, children and elderly persons, those people will not all be taken ill at the same time. Some of them may not be taken ill at all, and others only occasionally. If the supplier is guaranteed his money, therefore, he is able to offer his services at a lower tariff. Those are the two principles according to which the medical schemes operate, and one must naturally avoid disturbing that mechanism. Let me put if differently. It has been said that a funeral policy is a question of pay now and see your grave later. Medical schemes are a question of pay now and see your grave much later. What is important, however, is that one’s bank account does not see its grave at all, as far as medical expenses are concerned.
This brings me back to the central theme, the point at issue, the elephant’s bone of contention, namely the method according to which the preferential tariff is determined. Now, for the first time, the hon the Minister of Health and Welfare has proposed the solution which the medical practitioners and the businessmen in this country have been advocating for years, namely that the free market system should be allowed to operate freely. In my speech in this House on 1 June 1977, I talked about the same subject and about the relationship between doctors and patients being disturbed. I said on that occasion (Hansard, 1 June 1977, col 8911):
A little further on in the same speech I said (col 8912):
Other hon members, as well as the hon the Minister, have already referred to the fact that when the Act was passed in 1967, the Medical Association and other groups on the one hand and the medical schemes on the other hand tried to determine their tariffs and were unable to do so, and the matter was referred for arbitration to a body consisting of one member of each group plus an arbiter whom they had jointly appointed. It did not work. Subsequently there was the remuneration commission consisting of a judge and two assessors, and that did not work, not even after an economist had been added. Later on it was decided that the Medical Council, which was a body of high standing, should determine the tariffs. The Medical Council did so, and there was talk of chaos in this connection. I want to say, with all due respect, that I personally believe that the hon the Minister overreacted a little at the time. He said that he would negotiate with the Medical Council, and if they did not do as he said, he would change the Act, which he then did. [Interjections.] Then the Minister got the final say. This did not work well either. Now one might ask why it did not work. The reason is that the suppliers of the service were placed on one side and the schemes that had to pay were placed on the other. This resulted in a confrontation. There was a continuous battle between them. The hon member for Parktown referred to the fact that nine months may elapse at the moment. I want to say that that period of nine months is a very significant one, because those nine months bring forth a lot of problems and a lot of trouble. Hon members have referred to the publicity which is given to such an emotional matter. In my speech in 1977, to which I have already referred, I quoted the following from a newspaper report, with regard to medical costs and the determination of tariffs:
Hon members will understand what the result will be if this is the kind of publicity which is given to the matter for nine months. The hon member for Pietersburg spoke about the shocking increase in hospital tariffs and quoted from a report about “shock, anger at new Transvaal hospital tariffs”.
Business suspended at 18h30 and resumed at 20h00.
Evening Sitting
Mr Speaker, just before business was suspended, I was indicating why the previous methods of determining tariffs had not succeeded. Among the reasons were bad publicity, the long period of time that was required for this purpose, as well as the fact that no one was really satisfied with the whole dispensation.
In the short time I have left, I just want to say, among other things, that earlier today, I made an accusation, at it were, against the hon member for Pietersburg and the hon member for Parktown, saying that they had confused their terminology as far as RAMS was concerned, and that it was not a statutory body. In my haste, however, I confused my own terminology, so I have to concede the point to these hon members, which I am quite willing to do. The fact is that I was wrong. I think it will be very seldom in my life that I shall have to confess to those two hon members that I have made a mistake. Nevertheless, I shall contribute R1 to the funeral expenses of the late Die Patriot. [Interjections.] However, I was wrong about this, so I concede the point to the two hon members.
I actually wanted to advance an argument with regard to the Central Council for Medical Schemes, the other statutory body, precisely in order to prove that there is good cooperation at present. However, I shall come back to that later. That very argument led me to confuse my terminology.
There are only three aspects which I still want to refer to before concluding my speech. In the first place, I want to ask what the implications are of the motion which is before the House. In this respect, I want to begin by referring to clause 10, which is to amend section 29 of the principal Act. Section 29 dealt with the tariff of fees of people registered in terms of the Medical, Dental and Supplementary Health Service Provisions Act. In essence, the amended section 29 means—if we read it with another Bill which may come before the House later this evening—that RAMS, in consultation with the SA Medical Association, will determine the specific tariff for which the medical aid schemes will then accept responsibility, and in terms of which direct payment will be made to doctors under certain circumstances. In their turn, the doctors themselves will determine their tariff, which may be the same, but does not necessarily have to be. This is the result of very intensive discussions—other hon members have already referred to this—between the SA Medical Association and RAMS. The Federal Council of the SA Medical Association, which is the highest body of the association, has passed certain resolutions in this connection. It is known as the so-called nine-point resolution. This nine-point resolution was discussed by the representatives of the Federal Council at meetings with RAMS. Time does not allow me to explain it in detail here. However, agreement has to a large extent been reached with regard to some of the nine points concerned.
With regard to the question of the determination of tariffs, for example, the following resolution was passed. At a meeting held on 1 September last year, the SA Medical Association, in co-operation with RAMS, decided that a scale of benefits which would not be lower than the statutory tariff which was in force at the time of the introduction of the new dispensation would be determined by RAMS in consultation with the MASA. That is precisely what the legislation provides for.
Furthermore, they say that if negotiations failed, RAMS would be independently responsible for the determination of the tariff. This includes the question of arbitration, of course, which may provide a solution at a later stage. However, I do not believe that we can make use of it now. The resolution goes on to say that payment for services rendered by medical practitioners will be guaranteed at the tariff contained in the relevant scale. This is the resolution passed by the SA Medical Association, in conjunction with the other parties concerned. In the same way, I could refer to many other joint decisions that have already been taken. Surely this is an example of the consensus politics which everyone is talking about.
I believe that the spirit of co-operation shown by the SA Medical Association and the Medical Aid Societies is best demonstrated in relation to the composition of the Central Council for Medical Schemes, to which I have already referred.
Mr Speaker, may I ask the hon member a question?
No, Mr Speaker, I first want to complete my argument before replying to any questions. Unfortuantely my time is very limited.
One of the nine resolutions passed by the SA Medical Association was that the composition of the Central Council for Medical Schemes should be amended. They came up with a certain proposal. Thereupon the SA Medical Association and RAMS jointly passed the following resolution. They said:
That is the point I want to make.
†After discussions during the meeting to which I have referred, the meeting between the Medical Association and RAMS on 1 September 1983, the resolution which I have just read, was adopted. The point which I would like to make is that if ever a motion of full confidence in the hon the Minister of Health and Welfare was adopted by everybody concerned, it was the decision that a problem of this vast magnitude and one which they could not solve should be left to the discretion of the hon the Minister.
*I think this is a motion of full confidence in the hon the Minister. The other day the hon the Minister received the Decoration for Meritorious Service, something which we as medical practitioners are very proud of. I think the medical profession as well as the para-medical profession is very proud of this. I want to say that this important and courageous decision which the hon the Minister has taken, namely that the preferential tariff should be determined in this way, perhaps entitles him to another DMS, which would stand for “Decoration for Medical Sense”.
I conclude by saying that we wanted a free market sytem, and now we are getting it. Now we must use it in a responsible way. There is something else I want to say before I resume my seat. I actually want to ask the hon the Minister a question. In studying the legislation—I am referring to the Bill as well as the principal Act—I have not found any provision in it for the medical schemes to remunerate a registered nurse or sister directly for services rendered. If the legislation does not provide for this, I suggest that we should give very serious consideration to amending it so that it will in fact provide for this.
Mr Speaker, I want to ask the hon member whether he believes that the Representative Association of Medical Schemes and the Association of Private Hospitals have also come to such an agreement.
I am fully informed of the views of the Medical Association, of which I am a member, and I have their literature and documentation with me. As far as the private hospitals are concerned, I am not aware of any such consultations, but I have just made the point in this connection that the private hospitals cannot say that they want private initiative to operate freely and that the Minister should not interfere, in the sense of socializing, and then suddenly adopt the standpoint, when it comes to payment, that the Minister should now intervene and socialize and give quarantees. I do not think that would be logical.
Mr Speaker, with regard to the hon member for Parktown I should like to say I like him much better when he debates in such a nice and quiet tone because then he is a much nicer chap. I have a lot of sympathy with the points he has raised, but bearing in mind what took place in the debat of 1980, they are today very consistent. I realize what the hon member is driving at. We seem to be embarking on to a stage of uncertainty, but I think with that uncertainty there also appears to be on this side a lack of confidence in whether or not the persons or parties involved can reach consensus. I think that is without doubt the biggest problem he has. While I have sympathy with him, I do not think that at this stage we can support his amendment.
I now come to the hon member for Pietersburg. I should like to tell him that we got hold of a legal adviser of the Medical Association who advised us that the Medical Association was 99% ad idem with the principles embodied in the Bill. They were prepared to argue about some of the details but they were quite happy about the principle of the Bill. [Interjections.] We can only go on the advice of the legal adviser. I just wanted to get that into perspective. [Interjections.] Well, we took the trouble to contact these people to advise us.
I also want to refer to what was said by the hon member Dr Vilonel. He referred to funeral insurances and I should just like to tell him that the sales gimmick is: Pay now, go later. [Interjections.] That is the idea.
As far as we are concerned, we are prepared to support this Bill and primarily for two reasons. In the first instance we believe that in this Bill the hon the Minister is putting into effect the principle of the free market system. This is a system in which a supplier renders a service and the recipient of such a service comes to an agreement by negotiation and not by ministerial decree. We support it in the second instance because when we look back to the occasion on which the principal Act was previously amended, we see that we advocated this particular point of view although the then Minister would not accept it. In this regard I want to quote from Hansard of Friday, 28 March 1980, col 3781, where the hon member for Durban North had this to say:
We are being consistent in our attitude in this regard.
The mechanism that has been used up to now, that is, to determine tariffs, has created serious problems. It has created the situation where some doctors, because of the tariffs, have opted to contract out, even at the risk of not having their payments guaranteed. This has been a very sore point for all the parties involved, and some serious criticism has arisen because of it. There is no doubt about this at all. Illness is a serious and an emotional matter, and I feel that there is nothing more degrading to any profession al than to be continually haggling over tariffs and price structures. After all, the medical profession as a whole is held in fairly high regard and esteem by the majority of South Africans and, as such, I believe they should be in a position and have the responsibility to assess their own tariffs without an authoritarian approach on the part of the government of the day. Without doubt, we have one of the finest medical services in the world and I venture to suggest that, had the present position prevailed, we would have continued to lose more members of the medical profession to overseas countries— more than we can afford to lose. When one considers that it costs an amount in excess of R30 000 of taxpayers’ money to train a single doctor in this country then I believe that we should do as much as we possibly can to keep them in the Republic.
This amending Bill is going to relieve the hon the Minister of having to make decisions where parties cannot come to an agreement. In this regard, whatever decision the hon the Minister made, he was always wrong. One could almost say that he was like the ham in a sandwich. However, I think I have a better analogy. Just in passing, I want to say that I have a copy of a monthly magazine which will form a better analogy in this regard as far as the hon the Minister is concerned. It is stated here:
There is a lovely picture of a gentleman carrying a case with a piece of “wors” hanging from it. I think the hon the Minister has found himself the “worsie” in the hot dog. That is some “worsie”!
This has been the major problem. We believe that this legislation will make the schemes and the medical profession more responsible to one another and, if this happens, it will be to the ultimate benefit of John Citizen. The schemes will now need to become more cost effective to their members with the determination of a scale of benefits. Equally so, the medical profession will need to be more responsible for their tariff structure. If the tariffs are too high …‘
Do you suggest that they were in the past?
No. If the tariffs are too high, schemes will obviously pay only part of the account, and one will then have a situation between doctor and patient in which the doctor will be accused of charging too high a tariff and will run the risk not only of losing the patient but also of being seen through the public eye as exploiting an emotional issue.
As far as the schemes are concerned, they should look at the scales of benefits again. Some people, because they belong to a medical scheme, go to a doctor on the slightest excuse, be it a minor cough or a headache. What is more, they make it their business to tell the doctor that they belong to a medical scheme, and then the sky is the limit as far as medicines are concerned.
I want to refer to the question of vitamin pills. Should vitamin pills be included in a scale of benefits? I do not believe they should. One can buy vitamin pills across the counter at say R3,50 a bottle. In order to get it on one’s medical aid, one first consults one’s doctor who writes a prescription which is then taken to the pharmacist who then gives one the pills. What does this cost the medical aid? It involves a consulting fee of R9, pills worth R3,50 and a dispensing charge of R1,50, which makes a total of R14 for pills worth R3,50. I do not think this is good enough. [Interjections.] The hon member for Parktown had a nice easy passage during his speech so I wonder why he does not allow the same to everybody else. [Interjections.]
Order! I should appreciate it if the hon member for Parktown would afford the hon member for South Coast the opportunity to complete his speech.
I thank you for your protection, Sir.
In this respect, some medical practitioners are not altogether blameless. The only way some doctors end their consultations is by writing a prescription, and patients have in fact become conditioned to expect one. In most cases, before the pen is lifted, the question is asked whether the patient is on a medical aid. Whether one wants to admit or not, this has increased costs. People who being to medical aid schemes should realize that they have a responsibility. It may well be that because of that lack of responsibility schemes will have to enforce a part payment for every consultation to bring home the fact that belonging to a scheme does not mean having a plastic credit card in one’s possession with no financial limit. For too long certain members of schemes have abused their membership with the net result that costs have been forced upwards. The more responsible members are subsidizing the more irresponsible members.
This legislation should see the schemes becoming more innovative and creating greater competition among themselves to attract more members. Such an innovation could be a no claim bonus or reduced contributions to the members for the underutilization of benefits available. There are many permutations one could discuss to make scheme members more responsible thus creating a climate where costs could be held if not brought down.
For too long the role of the medical scheme has been severely restricted by legislation. I believe there are new challenges and responsibilities on the part of both of medical scheme and the medical profession as a whole. I am confident that they will rise to these challenges in everybody’s interest.
Clause 6 amends section 20 of the principal Act. It is long overdue and will certainly make life medically secure for many more people, especially in the latter part of their lives. However, I have two queries of which one is a major one. The first one is in respect of the hon the Minister’s amendment to clause 10, which seems contrary to the whole spirit of the Bill. I respectfully ask the hon the Minister in his reply to elaborate on the proposed amendment.
Our next major problem is the question of what the position is going to be if consensus is not reached. We were hoping that the status quo would remain if consensus was not reached between the medical schemes and the doctors. I accept that this is a problem. What has us more worried now is what the hon the Minister has said in his Second Reading speech. He said:
That is a major problem which we have. We would suggest—we may well move an amendment in this regard—that it should be embodied in the Bill that the status quo is maintained if consensus is not reached. In other words, if a tariff is agreed to, that tariff should remain in force until the contracting parties agree to a new tariff. If there is no agreement, then the tariffs and structures should remain as they are. We believe this will be a breaking mechanism as well as an incentive for the contracting parties to come to terms with one another. [Interjections.] We are trying to offer a solution. The time may come when the amount that the medical scheme pays for a particular benefit and the price asked for by the medical fraternity differ to such an extent that the member may have to pay more than what the scheme pays. We are trying to get over that situation. We believe that if arbitration has been tried and has failed some other mechanism must be brought in. We are looking forward to hear the hon the Minister’s comment on whether or not he would consider a clause being inserted in the Bill whereby the status quo is maintained until consensus is reached. Interjections.] We believe that would be in the greatest interest of everyone, because then there would be some kind of breaking mechanism. I see the points raised by the hon member for Parktown and by the hon member for Pietersburg, but what they are suggesting has been tried before and has failed. We are now embarking on a new scheme and I believe new ideas must be put into effect. I think this is a very interesting concept for the hon the Minister to consider.
In closing I should just like to say that as the smallest party in this House we get very little credit for much of what is being written into present day legislation, but one thing that cannot be taken away from us is the satisfaction of seeing more and more NRP political philosophies being adopted by the Government. [Interjections.]
Mr Speaker, it is a pleasure for me to speak after the hon member for South Coast has spoken. As usual, he has acquitted himself well. He gave a reasonably objective exposition of the matter. I share his high regard for the medical profession, but where I disagree with him is in his view—like that of other hon speakers before him—that from the very start there is going to be no agreement whatsoever between the Medical Association and the Representative Association of Medical Schemes. I do not think one should proceed from the standpoint that from the very start there is going to be an unbridgeable difference of opinion.
We say that just in case.
One cannot make provision for every eventuality under the sun.
Only this afternoon the hon member for Parktown said that he was going to debate this Bill as a doctor. I think the hon member for Rustenburg and the hon member for Pietersburg also debated it as doctors. I, however, like the hon member for South Coast, want to debate it as a patient who greatly appreciates the fact that medical schemes do exist. I want to say quite frankly that if it were not for medical schemes, my own budget would hardly balance. Not that it does always balance, but then it would never balance.
I appreciate, in particular, clause 6 of this amending Bill. It makes provision for continued membership of a medical fund. Too often in practice it happens, understandably, that someone who retires no longer pays his membership fees of the scheme and can no longer share in the benefits of medical services. In the long run he must then have recourse to the State for medical aid.
This whole problem of payment for medical services rendered is as old as man himself. It is an old problem, so old that there is even mention of it in the Bible. Let me quote from Mark 5:25:
I think that medical schemes specifically saw the light in an attempt to prevent a person losing all his possessions in the process of paying for medical services. It is unfortunately the case, however, that the present system of payment for medical services has many shortcomings and gives rise to a great deal of dissatisfaction. I therefore see this amending Bill specifically as an attempt to eliminate some of the shortcomings.
I support the amending Bill chiefly for three reasons. My interpretation of the Bill differs from that of the hon member for Park-town and that of the hon member for Pietersburg. In accordance with my interpretation, the medical profession is, in fact, being placed in a position—and I even want to go as far as using the word “sovereign”—to determine its own medical tariffs, without interference by the State. In other words, in my opinion the medical profession is not being left to the mercies of the Representative Association of Medical Schemes. As I understand this legislation, the medical profession determines its own tariffs, and thereafter the Representative Association of Medical Schemes determines what benefits it is going to pay. It is therefore not the case that medical practitioners will have no say in the fixing of tariffs.
Although the hon member Dr Vilonel dealt with this aspect, I do at least want to point out, in passing, that this Bill did not see the light without the Medical Association’s knowledge. That was, by implication, what the hon member for Pietersburg was insinuating. The Minister continually consulted the executive of the Medical Association. As far as this aspect is concerned, I think that in future tariffs are going to be fixed by way of negotiation between all the parties concerned, and I foresee this working better in practice than some hon members here allege.
My second reason for supporting the Bill is because of the fact that here State control is being eliminated. The fact that the Minister will not have the final say when it comes to the determination of the tariffs, is an effort to move away from State control and hence the socialization of the medical profession. That is specifically an aspect about which medical practitioners felt aggrieved, and I can understand it. This legislation is moving away from socialization and State interference, and I think we are all agreed that we cannot permit increased socialization of the medical profession in South Africa. That is the very thing the hon the Minister wants to prevent. What he is saying is that if we continue the present pattern in South Africa, we are going to experience problems in future. I therefore do not agree with the hon member for Pietersburg’s interpretation of the report on the remark made by the hon the Minister.
There is a further reason why I support this Bill, and here I again disagree with the hon member for Pietersburg. I see the Bill as an attempt to ensure a greater measure of cash-flow to the medical practitioner on a regular basis, something that does not happen under present circumstances. The hon member mentioned the case of 14 out of 16 general practitioners at a meeting in Pretoria who no longer saw their way clear to being active members of the profession. I think that if one could shorten the period to be determined by regulation, this would specifically result in a faster cash-flow to medical practitioners.
In conclusion, I want to make one more remark. Perhaps I have also been guilty of this in the past. We are quick to say that the fees charged by medical practitioners for the medical services furnished are too high, but I do not think this accords with the facts. If one looks at the total amount paid on medical services and calculates this as a percentage of the gross domestic product, one sees that in 1979 it was 1,5%, whilst the expenditure on alcohol was 5%, and that on tobacco 2,5%. It is therefore not too high a percentage, and that is why it is untrue simply to say that doctors charge too much. This weekend a locksmith, who had to come and open the door of my room because I thought I lost the key, charged me R25. A medical practitioner who comes to one’s home and treats one does not charge that amount. I therefore want to make it clear that I do not think that the tariffs of medical practitioners are unreasonably high.
I have great pleasure in supporting the Bill.
Mr Speaker, the hon member for Randfontein says he supports the Bill, particularly because he thinks it will work. We do not think it will work for the reasons I will expand on shortly. He says that he supports the Bill because, secondly, it will bring autonomy for the medical profession, with the minimum of interference from the Minister in the profession itself. The same argument was also advanced by the hon member for Rustenburg, who also supported the idea of autonomy. With respect, I find this a little strange, because when this subject was debated in the House in 1980, the hon member for Rustenburg had this to say on 28 March (Hansard, Volume 86, col 3820):
It seems that the hon member is able to argue the one side of the argument one day and the other side of the argument the next day. We are dealing with a very important matter here, namely the health of a good portion of the population of South Africa. We are dealing with that portion of the nation, numbering about five million people, who belong to medical schemes. We are also dealing with one of the most respected professions in South Africa, and if I may say so, with one of the most highly skilled professions in South Africa. The Medical Schemes Act came into being in 1967 and brought together medical schemes which were registered before 1967 and those which were created after that date. The Act created a counsel for them. It created a registrar for them. It created registration, discipline, tariffs, etc. It brought all of these under proper control under the statute itself.
For various reasons, one of the most controversial points was the question of the fixing of medical tariffs. There one had to find a balance between the autonomy of the medical profession—one does not want to interfere with any profession—and the interests of John Citizen. We have today heard lots of speeches by members of the medical profession, some of whom are better acquainted with the Medical Association of South Africa, or private hospitals, or other aspects of the medical profession and associated paramedical professions. However, we must also listen to, and protect the interests of, the individual members of the medical schemes, John Citizen himself. We must consider to what extent his interests are being protected. The hon member for Park-town quite rightly posed the question: What is in the best interests of the patient? I agree that that is where we must focus our attention today. It is in the best interests of the patients to see that they get a square deal and pay tariffs that are reasonable. If the tariffs are increased, the contributions of the patients to their medical schemes will of course be increased accordingly. In passing, let me say that I would like to see a situation come about where practically everybody in South Africa belongs to a medical aid scheme and can receive medical aid.
The Act of 1967 was amended many times. It was amended by Act 72, of 1967, Act 95 of 1969, Act 49 of 1972, Act 43 of 1975, Act 51 of 1978, Act 42 of 1980, and Act 72 of 1981. Now we are dealing with the Amendment Bill 56 of 1984. The hon member for Parktown has moved that the Bill be referred to a Select Committee before Second Reading. The reasons for that are very clear. The first reason is that the Bill we are discussing at the moment is premature as is the debate itself because a committee under Mr Browne, who has enormous experience and whose findings on the finances of local authorities were supported, has been given a mandate and instructed to go into the very question of medical schemes. Before he has even presented his findings and report, we are proceeding with a new phase and amendments to the Act concerned with the control of medical schemes. I ask: Is it right and proper that the findings of that body are pre-empted? Or can the hon the Minister tell us that he knows, and has a copy of, the findings and that the measures in this Bill are in line with those findings? In that case I shall have to take back my words. At this stage, however, there has been no intimation on the part of any speaker of the NP that he has seen the findings of the Browne Committee and that these measures are in line with them. That is the first point.
The second point is that it is common cause that what this amending Bill attempts to settle is the controversy as to how the tariffs are going to be determined and whether that is going to be done on such a basis that it will be representative of all the associations that are involved. We see in clause 1 an amendment to the definition of “service”— and “services” are what the tariffs are related to. The definition of “service” now embraces “any medical, psychological, paramedical, nursing, surgical or dental treatment”, and, in addition thereto, “optical requirements or appliances, or … accommodation in a hospital or maternity or nursing home.” All these aspects are therefore brought into the ambit of medical schemes which will pay for them according to the tariffs.
The most pertinent clauses are clauses 10 and 11. Clause 10 substitutes a new section for section 29 which concerns the controversial contracting in and contracting out. We have no objection to the removal of the choice between contracting in and contracting out. I believe it has had a deleterious effect on the medical profession itself. I believe there has also been a measure of abuse in this regard. I believe too that there have been occasions upon which tariffs have been laid down in respect of those who have contracted in, and that those tariffs are being charged irrespective of whether they are justified or not. As far as the balance is concerned, those practitioners who have wishes to do so have contracted out. They can only collect from the medical scheme, the amount allowed in terms of the tariff laid down. Any charges in excess of that prescribed tariff they have to collect from the patients themselves. Those practitioners who have contracted in will also experience the problems of delays in payment of anything up to 10 months. Those are the problems that will have to be solved.
What is the actual aim of this amending Bill? This Bill is aimed at accomplishing the following, and I think we must look very carefully at the principle involved here. In terms of this measure the Representative Association of Medical Schemes will in future be charged with the fixing of what is now called the scale of benefits. They no longer refer to tariffs but to a scale of benefits. This has to be done in respect of every service rendered by any practitioner who is a member of the medical profession. There will be different scales of benefits in respect of the various categories of practitioners in the profession. Clause 10 of the Bill is aimed at substituting section 29 of the principal Act. The proposed new section 29(1)(c) states as follows:
I believe this stipulation can be interpreted in two ways. In terms of one of these two interpretations the representatives of the Association of Medical Schemes are to be given the entire right of determining tariffs. We must remember that we have to interpret what “consult” means in this instance. There are numerous interpretations of this word. We have argued this matter across the floor of this House on numerous occasions in the past. Does “consult” mean that they will have to get the agreement of the association or does it mean that the association will decide and that they will subsequently inform the various medical schemes about their decision before publication in the Government Gazette?
Do not allow the attorneys to influence you, because they bedevil everything.
I am sorry, but I believe that this legislation should be open to inspection by the attorneys as well. They, too, must be able to make a living.
†Both these interpretations I have just referred to, will undoubtedly give rise to great problems. If we should determine that “consult” really means to inform them, I submit, the associations in question will be very unhappy indeed about merely being told what the tariffs are going to be. We must then remember that they will not have been represented in the actual deliberations preceding the fixing of tariffs. If, on the other hand, we should decide that “consult” means obtaining the agreement of the various associations that are affected by any tariffs that are laid down, I ask the hon the Minister what will happen if no agreement can ultimately be reached. I want to know this from the hon the Minister because not one hon member on the Government side who has spoken so far in this debate has answered this very pertinent question. What will happen if there is no agreement between the two? Who is then going to solve the problem if no agreement can be reached between the two? That is the question that has so far not been answered. In respect of this issue we have been left totally in the dark. This amending Bill provides no solution to that very vexing problem. I suggest to the hon the Minister that this is going to cause him a real dilemma.
When we discussed this very issue before in 1980 it was upon the occasion of the debate in relation to a previous amending Bill to the principal Act. In terms of that Bill the Minister was given the power virtually to act as arbiter in the case of any dispute in connection with this issue. On that occasion we based our opinion on the question of whether it was the autonomy of the medical profession that was most directly in need of protection or whether it was the citizens of South Africa who had to receive the utmost protection. We came to the conclusion that it would be better to side with the citizens of South Africa. To this end we placed our faith in the hon the Minister and sided with the agreement giving the hon the Minister the power to settle any difference where the tariff committee to be appointed in terms of the next Bill with which we have to deal makes a decision and, in the event of a dispute, the hon the Minister must make a final decision.
I think that if we have to go to arbitration—and my hon colleagues on my left have a formula in regard to arbitration—then that arbitration must include all the associations. All the associations must be represented if a solution is to be found. If this is not done, then it might even be better to revert to the situation where the hon the Minister is the final arbiter in the event of a difference of opinion. It is not that I specifically want the matter to be referred to the hon the Minister. This should only be done if it is necessary to do so. However, the very fact that the bodies concerned and the Representative Association of Medical Schemes (RAMS) know that if no agreement can be reached the matter will have to be referred to the Minister, and that this may even cause a delay, will force consultation among the parties and even force an agreement among the parties. This is a very important aspect that is worthy of consideration.
However, it is not my function at this particular stage to provide a final solution in this connection. I believe that any final solution in this respect must be arrived at by means of consultation among all the associations involved in this matter of tariffs.
It means doing everything by trial and error anyway.
That is also true. I feel that the only way to approach this matter is to accept the amendment moved by the hon member for Parktown which we support wholeheartedly. We should let the select committee deal with all the various bodies involved so agreement can be reached among all those represented and so that all representative bodies will have a say in the final arbitration in regard to what the tariffs should be. I feel that this is the most important aspect in this Bill.
Clause 12 also gives enormous power to RAMS.
May I please ask a question? Does the hon member also suggest that the same procedure should be adopted for attorneys? Should all interested parties be brought together to decide?
Fortunately, Sir, I want to tell the hon the Minister that we have no problem in this respect in the legal profession. We have a special tariff committee that has been working well. In the legal profession we have no private hospitals. We have no private buildings in which lawyers are housed. We do not have various organizations involved. This is a sui generis matter. One cannot compare apples with pears.
As far as clause 12 is concerned, I want to ask whether unnecessary powers are not being given to RAMS without consultation. What is happening here? In terms of the existing legislation accounts have to rendered within 30 days and payment has to be made within the stipulated period, whereas now it is being provided that the account has to be forwarded within a prescribed period and in a prescribed manner. We are therefore allowing this association to lay down the prescribed time and the prescribed manner. The clause goes even further to provide the manner in which the amount due has to be paid within the prescribed period. What will happen if RAMS stipulate that the payment has to be made within six months? RAMS is developing into an enormous organization. It has vast numbers of members and it may perhaps not be able to process its accounts all that quickly. Perhaps it will stipulate that accounts have to be paid within six months and the associations involved will have no say in the matter. Why give this specific power to RAMS not only to lay down the tariffs but also to determine when and how the accounts have to be paid? These are the difficulties. We are not here to create obstacles for medical aid schemes, but we are here to try to help to bring the conflicting interests, if I may say so, of all the bodies which are involved in the principle Act and the Bill, into harmony by means of consultation. We are of the opinion that such consultations will result in reasonable people finding a reasonable solution to this problem. The only way to achieve this is, with great respect, to refer the Bill to a Select Committee.
Mr Speaker, I want to thank hon members for what was, as far as I was concerned, a pleasant discussion. I think that, after having listened to them, one realized what the real problems in regard to this whole situation were. Everyone has his own solution, and of all of those I heard this evening, not one will work. None of them will work.
In any case, the hon member for Hillbrow read the legislation incorrectly. Sir, I would not even consult him as an attorney; forget about consulting him on medical schemes.
His bedside manners are preferable under any circumstances.
What, his? Where are his bedside manners?
The fact of the matter is that the hon member for Parktown said we should discuss the legislation in a good spirit, and I accept that from him. Consequently I should like to do so. The hon member moved that we refer the Bill to a select committee. Is it the practice in this House that one can refer something to a select committee which is at present, as the hon member for Hillbrow said, still being investigated by a commission of inquiry? [Interjections.] It does not matter how long it is still going to take; I am simply asking whether it is a logical recommendation. Surely one does not do that kind of thing. Surely this kind of action is nonsensical. [Interjections.]
What procedure did we adopt with this legislation? For almost two years there were repeated negotiations with the Medical Association, the Dental Association and the Association of Private Hospitals. We negotiated repeatedly until, at one stage, we had come as close as possible to an agreement. The hon member for Pietersburg said that the doctors did not know about this Bill; they will know about it after this evening. I would say that 75% of them will still not know about it tomorrow. However, one negotiates with the governing body of the association, and with them we negotiated many times, and the last time was last Monday.
I must tell the hon member for Parktown this interesting fact. Does he know what the Medical Association asked me last Monday? They pleaded: Please help us with the private hospitals; they are killing us!
It does not surprise me.
The hon member almost agreed with this.
If one examines the Bill, there are a few things one has to decide for oneself. To whom do the moneys in the medical funds belong? I think that that should be one’s point of departure. It can belong to no one else but the people who have paid in that money, in other words, the members of those schemes. It is their money. A medical scheme is nothing but a kind of insurance policy which one takes out against illness. If one pays more, one receives more benefits. That is why we have a scale of benefits here, and not a scale of remuneration for the medical funds.
One should consider the way in which a medical fund is controlled. Members of the House of Assembly belong to Parmed, and hold an annual meeting every year. A governing body is elected, which is told, for example, that the scheme should pay 100% for hospitalization of members and 75% for their medication. The executive committee may agree to this provided the members pay more membership fees. This is the way in which a medical fund works and is controlled.
In addition there were complaints about RAMS, which is a statutory body and which determines the tariffs by publication in the Gazette. If it does not have the right to determine those tariffs in the Gazette, they have no control whatsoever over any of the medical funds which can then send an account ot any medical practitioner and insist on payment. If they do not have that power, they do not have the power to instruct any medical fund to pay a medical practitioner’s account. For that reason they must have the statutory power, and I therefore cannot see how hon members can have any problems with this.
Hon members may now say that the Medical Association has no statutory powers. However, I did offer them such powers. Last Monday I asked them whether they wanted statutory powers to tell a doctor what his tariffs should be. But they did not want such powers. Once a person has decided for oneself whose money it is, it becomes quite clear that it is a scale of benefits and not a scale of remuneration. These are benefits which the medical funds are prepared to provide. One should get away from the idea that some suppliers say: “If you do not agree to that fee, the patient will have to pay more”. If you raise the fees, the patient will have to pay more in any case. Whether he pays it in subscriptions or whether he pays it in addition to his benefits, he will have to pay more. There is no way of getting away from it.
The next point is whether an arbitration body should be established. That was the one point on which the Medical Association and I differed. However, they also differed on this point among themselves. Some were glad when I did not want to accept it. Why did I not want to accept it? We have tried it in the past, and it did not work. First there was a committee and subsequently a judge. The suppliers stated their case to the judge and the schemes stated their case to the judge. The judge then had to decide. If the suppliers and the schemes reached an agreement with one another, there was of course no problem. As I have said, the judge then had to decide. But that system was not acceptable and they then tried something else. The Medical Council was then appointed as arbiter, but that did not work either. The Medical Council wishes to avoid that at all costs. They do not want to determine tariffs. Subsequently the Minister was brought into it, and he then had to take the final decision. I am again being asked to establish an artibration body. Even if it is a different one, how can it work? I differ with the hon member for Hillbrow who says: “There must be somebody to fix the tariff because that will force people to agree”. But that forces them into confrontation. That has been the case up to now.
What is the greatest problem the medical profession has experienced up to now? Their greatest problem has been that someone else from outside the profession has fixed their tariffs. They considered that to be an insult. Every time that happened, the Press climbed in with everything they had and censured them. For that reason I agree with the hon member for Randfontein when he says that this is an honourable profession and the issue should not always be one of more money. The issue is also the right to regulate one’s own affairs oneself.
I want to indicate at this stage already that I intend moving an amendment to clause 10(2) so that the provision is not as one-sided as it is at present. The present wording does not satisfy me, and I shall consequently move an amendment to improve it. I shall furnish the hon members with the wording of the amendment in advance.
That is basically as we see the whole situation. The hon member for Parktown also made the point that one of the problems being experienced was the fact that people took so long to pay their accounts. I admit this is a problem, but we have to iron it out. For that reason the section which the hon member for Hillbrow quoted a moment ago on the regulations—not RAMS’ regulations, but regulations made by the Minister—was inserted. This was retained in the legislation because so far we have not yet been able to decide the best way of ensuring that an account is paid as soon as possible. Because we may find it necessary to adjust the regulations to make them more acceptable to everyone, this was written into the legislation. It is the only power which the Minister retains for himself.
†As far as the amendment which I have on the Order Paper is concerned, I will deal with that in the Committee Stage and indicate then why it is necessary. There is no other way of doing it. The reason is that the fees of dental technicians are fixed under a quite different Act, the Dental Technicians Act. It cannot be effected here and that is why it has to be worded in that way: otherwise one will be unable to manage. I do not think the agreement with the dentists is the correct thing, and I have told them so. In the meantime, however, there is no other way of doing it. I do not like the Minister’s decision under that legislation myself.
Mr Speaker, the hon the Minister indicated that he would consider amending clause 10(2). According to the proposed new section 29(1)(c) the Minister shall “consult” the Representative Association of Medical Schemes. Did the organized medical profession not ask for that to take place “in consultation” with that association?
They did not ask for “in consultation”. Let me be frank now—I do not think they understand what “in consultation with” or “after consultation with” really means. This is something we argue about in this House. They are satisfied with the clause as it reads at present. Since the hon member has referred to this, why cannot there be consultation? The fact of the matter is that if one says “in consultation with”, it means that the parties shall agree with one another, and when they do not agree with one another, problems arise.
Then the status quo remains.
Very well, I accept that the status quo then remains.
†As I have indicated, I am prepared to examine the situation as suggested by the hon member for South Coast. We can return to this in the Committee Stage.
*What are the facts of the matter now? The suppliers—and this applies to everyone—have the right to fix their own tariff, and the legislation prohibits the schemes from changing that tariff structure. In other words, all they can do is to say what they are prepared to offer as remuneration at that tariff structure. They would not like to be bound to a percentage. It must be market-oriented, and one cannot fault that. The people showed me how the system works. All the particulars have been fed into a computer, and they determine accordingly that in respect of a specific medical scheme since September last year, say, there have been 850 000 visits and payments to general practitioners. Some medical practitioners have contracted out while others have accepted the medical scheme tariffs, and the average payment per case, out of these 850 000, is R8,76, which is slightly less than the fixed medical tariff. According to the medical schemes this is the market tariff, and how can I argue with them about that. Surely that is the case. Furthermore, they say that 80% of the medical practitioners are satisfied with the tariff, and therefore that is the market tariff. In this way everything is decided with the help of a computer these days. Therefore tariffs are not fixed in a haphazard way, but on the basis of a factual situation.
If there is goodwill—and I think there is goodwill at present—the parties are going to agree by means of negotiation. There will of course be a difference between the tariff structure fixed by the provider of services, in this case the medical practitioner, and the scale of benefits determined by the schemes. The latter will be lower. The medical practitioner who is prepared to accept the lower scale of benefits, will have no bad debts because he is paid in full. Therefore this system has advantages for him as well, inter alia less bookkeeping work, and he is also certain that he will be paid for his services. For that reason he will be able to work at a reduced tariff. But this is all the medical schemes can offer. If they cannot offer the medical practitioners payment at a slightly reduced or market-orientated tariff—I do want to call it a discount—they have no bargaining power. Then all one has is an altercation, and one gets nowhere. However, one cannot advance an argument such as the one which some suppliers of services have come to me with. They begin at the top and say that a dentist ought to earn R45 000, that he can treat a certain number of patients per day and that his tariffs should therefore be on a certain level. Surely one cannot argue in that way. These people are rendering a service, after all.
I have already replied to the hon member for Pietersburg, but I should like to say one more thing. I am prepared to have the entire speech which I made in 1967 recorded as it stands in Hansard, because to this day I still do not believe in socialized medicine. I agree with the hon member for Randfontein that if the people themselves are given an opportunity to decide, and the State is not involved, the hon member cannot accuse me of socialism. The tendency is in the opposite direction. I have already stated repeatedly, and I shall do so again tonight, that the providers of all these services must realize that the State cannot close its doors to the patient who needs help and who cannot afford those services. No one can expect that of me. I agree with Prof Louw that it is in the doctor’s hands. However, it is not in his hands only.
†I think it was the hon member for South Coast who said that incentives should be built into medical schemes. I fully agree with the hon member, but I want to point out that there is nothing in this Bill which prevents that from happening. Medical schemes are controlled by the patients and they will act through the governing bodies of these schemes if they are not satisfied with the agreements entered into with suppliers.
*As far as suppliers are concerned, nothing new is happening. The system is merely being simplified now in that only one term is used, namely “suppliers of services”, which will now include all these professions. I want to thank the hon member for Rustenburg for his good wishes. I agree with him that in the past all the professions had a fundamental aversion to any interference in their professions. I think that all the professions will welcome the new measures. This Bill is therefore a considerable improvement.
He also referred to the role of the media. I feel sorry for the media, because if this new dispensation works, they will not be able to write as much about the situation as they used to. This subject has been abused on a large scale by the media. Two Sundays ago an article on the price of medicine appeard in Rapport. In the article it was stated inter alia, that certain information had been obtained from me. I want to say, however, that I did not say a single word to Rapport about the price of medicine. Consequently what was written in that report the newspaper did not get from me.
I am pleased that the hon member Dr Vilonel rectified his own error. It would not have been pleasant for me to have to repudiate the hon member and say that he had been wrong. He rectified his own mistake. I repeat that his ideas were basically in line with those of the hon member for Rustenburg, namely that one of the greatest problems in connection with the schemes up to now has been the fixing of tariffs. It was a “bone of contention” as he put it. It marred relations. It marred the relations between patients and suppliers of services and between the supplies of services and medical schemes.
The hon member also asked whether provision was being made for nurses to be remunerated as well. I cannot have any objection to that. As I have already said, however, the members of a medical scheme themselves decide the benefits offered by that scheme. All that the Council for Medical Schemes says is that it will not register a scheme if it does not comply with the minimum requirements. To my mind it is not an unfair request that provision should also be made on this basis for nurses, including nurses in private practice.
†As regards the hon member for South Coast, I have replied to most of the points he made. I hate to admit it, Sir, but I accepted nearly all of them. I will look into the other suggestions he made.
*I have already referred to the hon member for Randfontein. Basically he made the point that we should get away from State control. As he also said to the hon member for Pietersburg, one cannot see how it would be conducive to socialization in the medical sphere if we reduced State control.
†As far as I am concerned, I have also to a large extent replied to the hon member for Hillbrow. I just want to re-emphasize that he was not correct in saying that the regulations are made by the Representative Association of Medical Schemes. Those regulations are being made by the Minister.
On the recommendation of the council.
Well, I can accept or reject those recommendations. I explained to him why that is the position.
*I think that I have now replied to all the questions. I want to say that I am fully confident that this proposal can work if there is goodwill. It is also a privilege for me to be able to say that I think there is indeed goodwill at this stage. There was a stage when medical funds and the suppliers of services were not talking to one another. They are now talking to one another again. They realize that they need one another.
Question put: That all the words after “That” stand part of the Question,
Upon which the House divided:
Ayes—84: Alant, T G; Aronson, T; Badenhorst, P J; Ballot, G C; Bartlett, G S; Blanché, J P I; Botha, C J v R; Breytenbach, W N; Coetzer, H S; Conradie, F D; Cronjé, P; Cunningham, J H; Cuyler, W J; De Jager, A M v A; Delport, W H; De Pontes, P; De Villiers, D J; Du Plessis, B J; Durr, K D S; Fick, L H; Fouché, A F; Geldenhuys, B L; Golden, S G A; Hefer, W J; Heine, W J; Hugo, P B B; Jordaan, A L; Kotzé, G J; Kotzé, S F; Landman, W J; Lemmer, W A; Le Roux, D E T; Ligthelm, N W; Lloyd, J J; Louw, M H; Malherbe, G J; Marais, P G; Maré, P L; Maree, M D; Meiring, J W H; Mentz, J H W; Meyer, R P; Meyer, W D; Miller, R B; Odendaal, W A; Page, B W B; Pieterse, J E; Poggenpoel, D J; Pretorius, N J; Pretorius, P H; Rabie, J; Raw, W V; Rencken, C R E; Rogers, P R C; Schoeman, H; Schutte, DPA; Swanepoel, K D; Terblanche, A J W P S; Terblanche, G P D; Thompson, A G; Van Breda, A; Van den Berg, J C; Van der Linde, G J; Van der Merwe, C J; Van der Merwe, C V; Van Eeden, D S; Van Niekerk, A I; Van Vuuren, L M J; Van Wyk, J A; Van Zyl, J G; Veldman, M H; Vermeulen, J A J; Vilonel, J J; Vlok, A J; Volker, V A; Welgemoed, P J; Wessels, L; Wright, A P.
Tellers: S J de Beer, W T Kritzinger, C J Ligthelm, J J Niemann, L van der Watt and H M J van Rensburg (Mossel Bay).
Noes—31: Andrew, K M; Barnard, M S; Barnard, S P; Borafne, A L; Burrows, R M; Cronjé, P C; Dalling, D J; Gastrow, PHP; Goodall, B B; Hulley, R R; Le Roux, F J; Malcomess, D J N; Savage, A; Schoeman, J C B; Scholtz, E M; Sive, R; Snyman, W J; Soal, P G; Suzman, H; Swart, RAF; Tarr, M A; Theunissen, L M; Treurnicht, A P; Van der Merwe, S S; Van der Merwe, W L; Van Heerden, R F; Van Staden, F A H; Van Zyl, J J B; Visagie, J H.
Tellers: P A Myburgh and A B Widman.
Question affirmed and amendment dropped.
Bill read a Second Time.
Mr Speaker, I move:
That the Bill be now read a Second Time.
With the exception of consequential amendments to the Medical, Dental and Supplementary Health Service Professions Act, 1974, as a result of the proposed amendments to the Medical Schemes Act, 1967, the Bill deals mainly with three aspects.
The South African Medical and Dental Council has made representations for the extension of the number of members of the executive committee of the council in order to enable the council to designate an additional dentist as a member of the committee. Such provision is embodied in clause 3. In terms of the present provisions of the Act, the council is dependent on a cumbrous and time-consuming method to obtain evidence in regard to any complaints, and also finds it very difficult to obtain such evidence.
This has also resulted in adverse criticism against the council. The obvious solution is to empower officers of the council or other persons, with the approval of the council, to investigate such complaints and to report to the council. At the request of the council provisions is therefore being made for the appointment of investigating officers and also for powers of such officers.
In terms of the present provisions a medical practitioner or dentist is entitled to compound or dispense medicine under certain conditions. As you know, Sir, this has led to conflict about so-called trading doctors between the medical and pharmaceutical professions. The pharmacists have no complaints against practitioners who keep emergency stock only. The matter was extensively discussed between the two professions. The Medical Association has recommended that such practitioners must inform the council of their activities and the council must be empowered to rescind or suspend the right of such practitioners to dispense medicine. In order to regulate the matter on a sound basis, provision is made for the registration of such practitioners and also for the exemption from such registration, for example, in the case where a practitioner keeps emergency stock only.
Mr Speaker, the hon the Minister has given his reasons for introducing the Bill. The Bill contains 10 clauses and we in these benches do not like two of them. Since those clauses were discussed in great detail during the Second Reading debate on the Medical Schemes Amendment Bill, we do not intend opposing the Bill, but we shall certainly not support those two clauses.
There are two principles which are embodied in the Bill. The principle concerning investigation of the medical profession is a principle which we support and the same applies to the clause dealing with the dispensing of medicine. This then is broadly our view of the Bill.
When similar legislation was introduced during 1980, the Medical, Dental and Supplementary Health Services Professions Amendment Bill was discussed first and the Medical Schemes Amendment Bill was discussed second. Most of the Principles contained in the Medical Schemes Amendment Bill were discussed when the Medical Dental and Supplementary Health Services Professions Amendment Bill was considered. I now refer to clauses 8 and 9 of the Bill. These clauses repeal section 53A and section 61(2A) of the principlal Act.
I think we have discussed basically most of the problems we on this side of the House have in so far as the Bill seeks the abolishment of tariff committees and the removal of the powers of the Minister. I want to draw the attention of the hon member for Pietersburg to the fact that while I discussed the question of private hospitals when we debated the previous Bill, this Bill gives us the opportunity to discuss section 29 of the Medical Schemes Act since the Bill under discussion does not really deal with private hospitals.
I want to repeat the point I have made. If one looks at the health of a nation and the treatment of the patients, one can not look only at what is good for doctors, dentists, pharmacists or nurses, but one must look athe health care in its entirety and one must include all aspects concerning health care. Therefore, when the previous Bill was under consideration, I tried to deal with my problems.
What about the other problems?
Not one of the speakers on the side of the Government referred to the problems which I had regarding the previous Bill and those problems are basically the problems which I now have with clauses 8 and 9. Not one of the speakers on that side of the House referred to the problems which I had in regard to contracting in and contracting out. My problems are related to the procedure which has to be followed when my patient is admitted to a hospital and the next day he has to face a hospital owner. Nobody answered my question?
The discussions in 1980 centred around the doctor and the patient. The patient does not only require a doctor. I as a doctor need the pharmacists, the nurse and the hospital in order to carry out my practice. If anything upsets this relationship, the patient will suffer. Therefore I want to say that clauses 8 and 9, as was the case with the previous Bill, refer to the suppliers of the medical service; in other words, doctors, dentists and so on.
I want to refer once more to the discussions which we had in 1980. The then hon Minister, the hon member for Brits and other hon members motivated why the Minister should have the final power, but now that final power is being taken away. The hon the Minister, however, uses the same argument why the Minister’s power should be removed as was then advanced why he should have it. The same argument was then advanced that they had ample discussion with the different associations. They reached agreement and they all praised the Minister. Today the position is completely different. In fact, we are now back to the status quo. It did not work then; how is it going to work now? Our problem, as hon members and as responsible people, is not only to see whether something is going to work. One cannot legislate goodwill onto the statute books. Goodwill should be created. It cannot be legislated into this Bill, and that is where I think the hon the Minister has failed. A doctor’s patient needs the support and knowledge that his medical scheme will pay for his expenses. By removing the tariff committee, the hon the Minister cannot give him that guarantee when he becomes ill. As the Act is now, the tariff is statutory and the hon the Minister had the final say.
What is the guaranteed fee on a daily tariff basis in a private hospital at present?
I do not know the daily tariffs of private hospitals, but I do know the tariffs of doctors. I have a book here …
Will the hon member accept my statement that the daily tariff is R56? Does that give the patient security?
With all respect to the hon the Minister, if the medical schemes and the private hospitals agreed to this tariff my answer would be yes and if they did not, my answer would be no. At present they do agree on this tariff. It therefore does give the patient a feeling of security. When a hospital admits a patient, it will know whether or not the patient belongs to a medical scheme. The hon member for South Coast said that the first thing many doctors ask patients is whether they belong to a medical scheme. According to law this must be done. Doctors are given practice numbers by the medical aid schemes. If a doctor does not fill in his practice number, the medical aid scheme will not pay him. A doctor therefore has to ask a patient whether he belongs to a medical aid scheme. There is no choice in the matter. It is therefore not totally fair to the medical profession. If I am contracted out, I do not ask the patient if he belongs to a medical scheme. The doctor who is contracted in must, according to law, ask his patient if he belongs to a medical scheme. He must not only ask the name of the medical scheme but also the medical aid number of the patient. One cannot therefore say that doctors are greedy because they do this.
I want to exclude that unfairness and you object to it.
No, the hon the Minister does not understand me. I do not say that I am correct but the hon the Minister may not be correct either. We should decide about it. The hon the Minister referred to the Browne Commission. We realize there is an investigation into this matter. This has been going on for four years now and we hear every year that we will receive the report but it does not materialize. Why does the hon the Minister introduce this amending legislation while we are still waiting for the report of the Browne Commission? What is the urgency? The Browne Commission cannot carry on with its investigations indefinitely and we should receive its report very soon. What is wrong—I have asked the hon the Minister before—with the present system? Although people complain, the patients are satisfied. I challenge the hon the Minister to tell me that the patients are not satisfied with the present legislation.
Nobody is satisfied.
No, that is not the question. Did the hon the Minister receive complaints from any patients?
The patients are not satisfied because of the steadily rising fees.
That is again not the question. I do not think that the hon the Minister and myself understand each other. My patients who belong to medical aid schemes are very satisfied. When I charge them medical aid rates and I am paid directly by the medical scheme, there are no problems with their bills. There must be something wrong with a patient if he is not satisfied with that. A patient visits a doctor. The account is sent to the patient who then sends it to the medical scheme and then pays the doctor in full. The hon the Minister is also a doctor, and I think he will agree that one could certify a patient who complained about that system. Although I listened very carefully to the hon the Minister, I still cannot agree with him. I am pleading for the patient. I have said so before. The hon the Minister has still not convinced me as to the reason why and for whose benefit this amending legislation has been brought before the House. That is what I am trying to find out from him. The hon member Dr Vilonel said that the Medical Association is satisfied with this Bill, but that is not completely true.
He has not spoken on this Bill yet.
Sir, I trust you will allow me to refer to the previous Bill, because the hon member in his discussion of the previous Bill referred to the Medical Association of South Africa, which is also included in this Bill. If the hon member does not believe me, he should read the Bill again. [Interjections] The hon member is right and wrong. The Medical Association agrees with many aspects of this Bill. It is not what they want, but what they agreed with in the end. They would like to see it differently, and the hon member knows that. As far as the very important principle of some form of arbitration is concerned, the hon member must admit that the Medical Association does not agree with the principle of no arbitration. If one does not agree with one of the most important principles then one does not agree with the Bill. That is the way I see it.
I have had discussions with all these associations. Contracting in and contracting out—I should like the hon the Minister to listen now if he feels I am talking sense—is suitable for some of the associations and unsuitable for others. It suits the pharmacist and the dentist because they really do not often have problems. It also suits most of the medical profession, but it does not suit the private hospitals. I intend to discuss many of these aspects at the Committee Stage.
We have now reached a situation where the scale of benefits will be determined by the Medical Association and the Representative Association of Medical Schemes. However, if no agreement can be reached then, according to this Bill, medical schemes can determine their own scale of benefits. I do not think the hon the Minister can deny that, That is what the hon member for Hillbrow said. That will mean the parting of the ways. In a previous debate in 1980 we heard why this was such a terrible thing. There must be order otherwise there will be chaos. The word “chaos” was used by the hon the Minister. What has changed so that there now no longer will be chaos? Now all of a sudden goodwill will fall from heaven onto these factions that for the past 20 years could not agree, and everything will be rosy. [Interjections.] I repeat: One cannot legislate for that. Therefore I as well as the Medical Association believe that there must be some form of mediation in the event of there not being agreement between the two associations. That is the crucial point. Mr Medical Scheme wields the big stick and says: “You either charge what I say you must charge or I will not pay you direct.” What will happen? I have said this before. The patient will get the cheque and he will use it in the nearest bottle store—it happens now in the case of contracted out doctors and dentists—to buy his monthly supply of liquor.
Is that what you think of your patients?
It is a fact; it does happen. Or the patient buys a refrigerator or goes on holiday. In my opinion, doctors must be protected against this in some way or other.
†When this happens, the doctor will have to try to make up the loss, and how will he do that? For instance, I practise as a private doctor and my bad debts constitute 3% of my earnings. If because of the new Bill it now becomes 20%, what am I to do about it? What can the association do about it? We will have to raise our tariffs by 17%. According to the Bill, the Medical Association generally decides what medical fees will be. Let us therefore not talk about these aspects when there is general accord, but let us discuss what happens when things go wrong. In my view some of the provisions of this Bill are unacceptable because they are not in the interests of the patient.
Mr Speaker, does the hon member agree that the medical profession has the right at present to stipulate its own fees and that it does not have to comply with the statutory tariff? This is therefore nothing new.
To be contracted out is nothing new, but the fact that a doctor cannot contract in, is new. [Interjections.] At present every doctor has the right to contract in or out. However, in terms of the new legislation there is no contracting in or out. The difference is that should the hon the Minister come to me and I am contracted in, I must charge him the statutory fee.
I do not want to belabour this point much longer, but I do want to quote a warning issued by the former Minister of Health:
*The hon members can put that in their pipe and smoke it, because that is what the former Minister said. The hon member for Rustenburg and the hon member for Brits congratulated the hon Minister, but what has changed since then?
There is a new Minister now.
Perhaps that is our problem, because I think this hon Minister is a modern Pontius Pilate as far as this legislation is concerned. [Interjections.] He washes his hands of the matter and says we can do whatever we like. Eventually this hon Minister will no longer be the Minister of Health and Welfare, and we shall have to discuss this question again in this House on a later occasion. For this reason I believe that it was foolish to have accepted the previous legislation. Let us rather discuss this matter in depth, and perhaps we may come up with the same proposals. The hon the Minister must not allowed himself to be swayed by the hon member for Rustenburg or the hon member for Brits, who know nothing about this Bill. They do not know what they are talking about, and they have not once referred to the Bill which is before us. [Interjections.]
†I want now to refer to clause 5 which deals with the manner in which certain investigations have to be instituted. Disciplinary action as far as the medical profession is concerned is very important to me.
Do you support the Bill?
For the hon the Minister’s information, I support the clause.
The discipline and the proper management of the medical profession is very important to me. I believe that because of the way we practise now, there is the opportunity for the medical profession to abuse its duty to care for a patient to the best of its ability. When disciplinary action is taken against a doctor, it is very difficult to find out whether he has worked according to accepted norms and standards …
Ethical standards.
Not only ethical standards. “Ethical” is a difficult word, because you can act ethically and still kill a patient. I am still practising and perform major surgery, but who knows exactly what I am doing?
I hope you do.
Is there any way in which my standards and results can be judged? [Interjections.] I think people who know very little about it, should be very careful. This is essential for the good name of the profession. One hears so many stories about doctors who are dispensing and who are making a lot of money and doctors who operate for no valid reason and who take out one appendix after the other.
*Another doctor is always removing tonsils, or a town is named after a doctor who goes in for hysterectomies. There is no way for exercising control over such doctors. I hope these amendments will make it possible to exercise a greater degree of control.
We have spoken about medical schemes, but one of the biggest problems of medical schemes is that they are milked. There are many reasons for this and one could discuss these later. A doctor may not be satisfied with the tariff according to which he is paid, so he makes sure that the patient comes to see him regularly, until doctors are able to pocket a large part of the R850 million. It has been said that there are problems with regard to private hospitals. I agree that this is so. There are no winners in this connection. There is only a loser, namely the patient. I gladly support this measure and I hope the hon the Minister and his department will take to heart what I am going to say now. A person’s most precious possession, his health, is entrusted to doctors. We cannot allow that situation to be exploited by a small number of individuals. I have a high regard for the profession, but there are some doctors, perhaps, who try to make as much money as possible. There are some doctors who like to operate. I once worked in another country, and there I came across a case where I was not sure why a certain doctor was going to operate. So I asked him: “Why are you operating on this patient?” His reply was: “He can lie down.” Some doctors have the urge to operate, therefore. There must be some way of putting a check on these things. I should like to discuss this matter with the hon the Minister and perhaps he will allow me to do so privately. We must rectify this situation. We must not only have the right to discipline the practitioner; we must also have a means of assessing his skill. A doctor may have been practising his profession for 35 years, but he does not attend any medical conferences and he does not read any medical journals. What can such a person keep up with developments in his profession? However, the patient consults that man because he has confidence in him. I want to suggest to the hon the Minister, therefore, that we should try to do something about this matter.
The last matter I want to deal with is in connection with dispensing doctors, who are causing major problems between pharmacists and the medical profession. There are people in the medical profession who dispense medicine to their patients, Now the pharmacists say that this forms part of the R850 million. However, the doctors say: “No, I am a doctor and I want to do it myself.” There is a great problem in this connection. Firstly, not all towns or regions have pharmacies. The Act provides for this situation. Secondly, pharmacies are not always open day and night or over weekends. There are regions where the patients are so far from a pharmacy that their doctor has to help them. In terms of this clause, there will now be a register for doctors who wish to dispense their own medicine and to supply medicine to their patients. The doctor has to send his name to the Registrar, who will then enter it in the register. The doctor must also advance a reason why he should be included in the register. He may say that it is in the interests of his patients. To me this is a wonderful concept. This will then give him the right, not only to prescribe medicine, but also to dispense it to his patients. There are always going to be problems. The Registrar now has the right to remove a doctor’s name from the list or to refuse to place him on the list.
With these words I should like to say that this Bill contains three principles, two of which we support, while we cannot agree with the third one.
Mr Speaker, the hon member for Parktown will pardon me if I do not react at this point to everything he said. The greater part of his speech was a repetition of what he said about the previous Bill. However, in the course of my speech I shall react to his few remarks about the Bill at issue at the moment.
The legislation at present before this House was debated for the first time on 7 February 1927. It is interesting to note that my predecessor on that occasion was a certain Mr A I E de Villiers. When this Act was placed on the Statute Book for the first time, he, to, participated in the debate. I listened this evening to the speeches by hon members from all the different parties in the House. When I quote from speeches made in 1927 in this House when the Medical, Dental and Pharmacy Act was placed on the Statute Book for the first time, hon members will realize that what we have this evening is a precise repetition of what happened then. I quote from column 114 of the Hansard of 7 February 1927:
This had to do with certain regulations and conditions set with regard to the training of people in the medical profession. I quote further:
That is exactly what we have had this evening. We had the doctors; with all due respect, the hon member for Randfontein is a former clergyman; and the hon member for Hillbrow is an attorney. Therefore this is a precise repetition of what took place in the House in 1927. The reason the country people opposed the Medical Council at the time and also objected to this was simply that only doctors would serve on that board, while the ordinary man would not have the opportunity to state his case there too and to represent his people there. We saw how those problems were gradually overcome. I now quote further from column 130 of the Hansard of 7 February 1927, as follows:
Mr Speaker, that is precisely the attitude we have had here again this evening from the official Opposition.
Since we have discussed the tariffs at such length this afternoon, I want to refer once again to the abovementioned debate in this House almost 60 years ago. The then member for Riversdale, one Mr Badenhorst, said on 9 February 1927 in a speech in this House (Hansard, column 186):
A little later in his speech the same Mr Badenhorst said:
One Dr De Jager reacted to this by way of an interjection as follows:
I should like to have you on the table.
This Dr De Jager was the hon member for Paarl at the time.
This evening the hon member for Park-town repeatedly pointed out that the aim of this legislation and the function of the SA Medical and Dental Council was primarily to look after the interests of the patient. However, if the hon member were to take the trouble to read the legislation, he would find that what he is advocating is already very clearly stressed in the legislation. The matter at issue is the SA Medical and Dental Council and its objectives. In terms of the existing Act the objective of the SA Medical and Dental Council is to assist in promoting the health of the population of the Republic of South Africa. That is the first function of the council. I do not wish to make further reference to the duties and responsibilities of that council.
I should like the hon the Minister to know that I am very pleased that the SA Medical and Dental Council, as well as the SA Medical Association, support this specific Bill. If we look at who can now, in fact, be members of the SA Medical and Dental Council after this measure has been passed, we see that the Director-General of Health and Welfare will serve on the board in his official capacity. In addition, 10 members will be appointed by the Minister, four of whom must be medical practitioners. One member must be a dentist, while one must be attached to a medical or dental faculty of a university. In addition, three members must be appointed who are not registered in terms of this legislation, as well as one member who is a director of hospital services and who is designated by the Administrator of the provinces and one who must be chairman of a professional board. Four members must also be medical practitioners representing medical faculties, whereas one dentist who represents a dental faculty must be appointed as member by a university. Ten medical practitioners and four dentists, who are separately elected by medical practitioners and dentists, as well as one member registered in terms of the relevant legislation on nursing and designated by the Nursing Council, will also serve on the council, plus one member registered in terms of the relevant legislation relating to pharmacists.
Mr Speaker, may I ask the hon member a question?
Mr Speaker, I first want to complete my speech. I did not interrupt the hon member for Parktown while he was speaking.
What I find important, and what I should therefore like to stress here, is who the members of that council will be and by whom they will be elected or designated. That is what is important to me. Then, too, there is the SA Medical Association which could, in fact, be termed the trade union of the medical profession. The members of this association, too, support the legislation at present before the House.
Moreover, I believe that it is also important that we should take cognizance of the fact that the total population of the Republic of South Africa at present comprises 26 124 000 people. That includes all population groups in the country. The people representing the medical profession number 36 095. Therefore we see that a major task and responsibility rests upon a small group of people. I have appreciation for everyone who renders service as a member of the medical profession.
Our aim is to protect the interests of the patient. The only way in which this ideal can be achieved is to ensure that anyone who practises the health profession should have at least the minimum standard of training and should practise that profession under the control of his equals. If any Government were to neglect to establish these basic precautionary measures, such a Government would be guilty of almost criminal negligence, because the life of the patient depends on the services rendered by the people in the medical profession.
A further provision in this measure is that the council can set conditions which doctors and dentists have to comply with with regard to dispensing medicine. As far as the two principles embodied in this legislation are concerned, one relates to the granting of a right to have an investigation take place and have certain books and documents seized. At present the Medical Council does not have that right. Therefore the first principle is that access to the premises of a medical practitioner is granted when an investigation is being carried out, but the particulars of this matter could, if necessary, be more appropriately discussed in the Committee Stage.
The second principle that I also find important is the principle that a medical practitioner may also provide medicine. I want to state very clearly that as far as I am concerned, I have a strong objection to this and I welcome this amendment in terms of which the Medical Council may set conditions on the basis of which medicine may be dispensed. I really think this is unfair. I understand the standpoint of the hon member for Parktown, and I could understand it in the case where a pharmacy was situated 10 to 20 kilometres away from a medical practitioner. However, the fact is that nowadays the majority of medical practitioners are nowadays together in one big building, and hardly any of those buildings in which many doctors have their rooms lacks a pharmacy. I think that this is unfair competition and I really think that the matter should be given attention. I also wish to consider the position briefly from the point of view of the patient, because this is the question with which one is confronted. We know that the doctor may not make any profit on medicine. The hon member for Parktown is smiling while I speak and I think that what he is thinking about, entered my mind as well. However, we shall leave it at that for the moment. What is the problem that one is confronted with? It is that when such a prescription is repeated, the patient comes back to ask one how it is possible that if the medicine cost a certain amount from the doctor, it should cost so much more from the pharmacist. I think that that is unfair, because that pharmacist has to render a 24-hour service. He has to be on duty to be able to provide that service to the public, and the medical practitioner is not available if that prescription has to be repeated. Therefore I say that I wholeheartedly support this provision.
There is one further matter that I should like to touch on here. It does not concern the content of the legislation as such, but the language in which our laws are drafted. In the Bill before us at present we see that in some of the clauses, reference is made to a “thing”. Here I refer, for example, to lines 55 and 56 on page 5 in which reference is made to “any book, document or thing”. I object to the word “thing”. I took the matter up with the hon the Minister and with the law advisers, because “thing” is not acceptable to me. I also looked it up in the dictionaries of definitions, and found it necessary to consult the Scriptures as well. In John 1, verse 3, I read:
One sees that in the Good News Bible the translators were still faced with the same problem:
I wish to elaborate further on my problem with the word “thing” in the legislation. I read the following in Die Afrikaanse Woordeboek:
I should like our legal draftsmen to look into this, even though it means rewriting a piece of legislation. I differed with them. One’s life is regulated by laws from the cradle to the grave. Let us draft our laws in good Afrikaans so that we can all understand them and remove from them all stereotyped expressions. I take pleasure in supporting the Bill before the House.
Mr Speaker, with all due respect I listened carefully to everything that the hon member for Witbank said. He discussed a few matters that had very little to do with the legislation. The hon member discussed the composition of the Medical Council, a matter that is not at all relevant here. In the course of discussing the 1927 legislation he quoted passages about the farmers who complained that there would be too many doctors in the Medical Council. I waited for the hon member to get to clause 6, to dispensing of medicine by doctors. I think that the hon member should rather have spoken about what happens when medicine no longer helps, because it is at that point that his profession becomes relevant. [Interjections.] I urge him, too, when next he launches an election campaign, to put on his posters: “I’ll be the last man to let you down.” [Interjections.]
The Bill only deals with two principles. The first concerns the investigation by investigating officers, who are not necessarily members of the council, of cases of improper or disgraceful conduct on the part of the people registered in terms of the Act. In the proposed section 41A which it is proposed should be inserted in the principal Act by clause 5, the way in which such an investigation may be carried out is specified in detail. The various circumstances, too, are described, and I refer in particular to the proposed section 41A(5)(c) in which reference is made to a charge, complaint or allegation of improper or disgraceful conduct by a registered person. It is on this basis that the provisions of the section come into effect. The powers of such an investigating officer are specified and the actions he may take are also indicated. The necessary penal provisions in this regard, too, are specified. It is also interesting to note that if anyone has no valid reason to lay such a charge, he will be partly or wholly responsible for costs. This will no doubt serve as a deterrent to prevent abuse of the amendment.
I now turn to clause 6, which is to replace section 52 of the principal Act. At first glance it seems as if the proposed section allows the medical practitioners and dentists to retain their right to dispense medicine as they have been legally entitled to do since 1928, on the understanding—there is only one restriction—that they will not keep an open shop or pharmacy. On closer investigation it becomes evident that this so-called umbrella service of medical practitioners, namely diagnosis, treatment and dispensing and application of medicine, may be restricted by the Medical Council. The hon member for Witbank pointed out that it was unfair to have a pharmacist in the same building as a medical practitioner, and for the medical practitioner also to be allowed to dispense medicines. Has the hon member no sympathy with the lesser privileged people who are unable to pay the cost of the prescription? It in the case of lesser privileged people and particularly Black people that medical practitioners want to retain their right to dispense medicine in order to give patients an overall service. Therefore he does not stop at diagnosis; the patient is then also in a position to obtain medicine at a reasonable cost. Strictly speaking, every medical practitioner will in terms of the proposed new section 52(2) have to register within three months after the date of inception of this legislation, because every practising doctor does keep certain types of medicine. The hon the Minister stated clearly in his speech:
However, there are many other medical practitioners who will now have to register because they are in practices where they have to dispense medicine.
Clause 6 contains a very cumbersome procedure that must be followed. An additional register must be kept by the Medical Council and fees must be collected from the practising doctor, and all this just to clamp down on a few individuals who abuse the so-called practice of trading in the medical profession.
Mr Speaker, I want to put a question to the hon member. The hon member is now objecting to the procedure that must be followed by a medical practitioner who dispenses medicines. Would a medical practitioner who now has to comply with the same requirements as a pharmacist still be prepared to give the patient that medicine at that price?
That is just the problem. There is a certain sector in our society that is unable to pay that additional cost. Later I shall refer to examples of cost structure in the medicine industry to indicate to the hon member why I want to retain this inalienable right of a doctor, the right to dispense medicine in certain cases. The medical practitioner may act in an improper way, but then there is a mechanism in this legislation whereby to call him to order, to institute a disciplinary action.
One cannot help calling to mind the thousands of practitioners who do keep a stock of medicine on a small scale and are able to provide it more cheaply in order to help the lesser privileged. In terms of this legislation these practitioners are now in danger of losing that right which the medical profession has regarded as an inalienable right over the years or of having it limited. Accordingly, on behalf of the medical practitioners and those patients who are unable to afford medicine and therefore enjoyed the benefit under the old dispensation wish to object in the strongest possible terms to this amendment. By doing so, I am not implying that abuses do not occur. Of course there are those who abuse this right to dispense medicine, and no one is denying that. The Pharmacy Board contends that about 828 medical practitioners trade in medicines. The number of doctors in South Africa totals 18 000, and therefore the doctors who trade number less than 4%. Those who trade improperly certainly number less than 1%. Subsection 5(c) affords every opportunity to have any suspicion of an offence in terms of section 52 investigated. Therefore this amendment can cause the cost of medicine for a certain category of people in our society to skyrocket.
During the discussion of the previous Bill the hon the Minister objected in advance and said that he did not say what I am now going to quote from Rapport of 26 February. I quote:
The hon the Minister earlier denied that he said that.
I did not even speak to them.
The hon the Minister had better clear the matter up with Rapport.
I have already done so. [Interjections.]
I now turn to the hon member for Witbank. A private person pays R20,30 to the pharmacy for a small box of pain-killing pills of a well-known brand, while the State pays the maker a mere R2,89 for the same quantity. The State’s tender price for a very well-known tablet used for a metabolic illness—I do not want to mention its name—and which many hon members in this House probably have to use, is 89 cents for a box of 30. The wholesaler charges the pharmacist R14,40, while the public pays R23 for the same box. Surely there is something radically wrong. I am addressing the hon member for Witbank in particular. The medical practitioner can obtain these 30 tablets at 89 cents, but the hon member wants the patient to buy the pills from the pharmacist, perhaps in the same building, for R23. I quote to quote further from that section of the article in Rapport which deals with the crux of the problem:
Surely if this is so then something is radically wrong. The article goes on:
These trading doctors are not the pharmacist’s problem. I agree wholeheartedly that if it is true that a medical practitioner can have a turnover of R100 000 per annum on medicine alone, he could be clamped down on in terms of the existing legislation. He can be charged with improper or disgraceful conduct. However, I believe that such instances represent less than 1% of all doctors. The real problem as regards expensive medicine lies in the fact that the State tenders, and large firms let the State have the medicine at low prices. Perhaps the Medical Council should rather lay down a guideline for medical practitioners in terms of which they will be able to make medicine they can aquire cheaply available to the patient on a cost-plus basis in certain categories. We are convinced that by way of this amendment unnecessary restrictions are being and will be imposed on medical practitioners. It is a great pity that my two professional colleagues in this House have not yet expressed their opinions in this regard, but I say that the doctor has an inalienable right to dispense medicine in the interests of the patient of South Africa. Accordingly, we shall not oppose the principle of the legislation, but we shall oppose this clause.
Mr Speaker, is the hon member aware that I personally submitted a proposal to the Federal Council of the Medical Association, a proposal that was unanimously accepted, that it be the inalienable right of a medical practitioner to dispense medicine at a profit?
That is exactly what I want to try and protect. However, does the hon member not realize that in terms of the envisaged restriction the Medical Council, the majority of whose members are not doctors, is now empowered to withdraw that registration, as a result of which the medical practitioner in question may no longer dispense medicine? I intend moving an amendment in this regard in the Committee Stage because I want section 52 to be retained; in other words, that it should continue to be the inalienable right of a medical practitioner to dispense medicine as long as he does not keep a shop or pharmacy in this regard. However, we shall discuss the matter further in the Committee Stage.
Mr Speaker, today I have been hearing so much about doctors and have listened to so many doctors that I almost feel as if I am in hospital and need a doctor. I thought I would be able to make use of the services of the hon member for Pietersburg, but he is now opposing this amending Bill, and now I do not want him as my doctor anymore either. I shall therefore ask the hon the Minister to look after me. [Interjections.]
There are few professions for which I have as much respect as for the medical profession and all that that entails. When doctors get hold of one, they really can hurt one, but on the other hand they also do a lot of good work and also greatly relieve pain. I speak from experience, because as far as medical practitioners are concered, I have been through the mill. I am still here, though, even if I can talk about ailments for hours at a stretch, like an old woman.
I am no doctor and I do not want to be one either, because doctors work too hard and have too much responsibility. In praising the profession, I do not want to imply that all medical practitioners are angels. They are just human beings, too, and there are some of them who botch things up and do a lot of harm, and they must be taken in hand. [Interjections.] Disciplinary investigations have thus far been complicated owing to a lack of evidence and facts. Here, however, the investigating officers is obtaining the right to gather facts and call witnesses, and this is essential, because when someone has botched things up, he is going to do his best to hide the fact, even if he is a doctor. The investigating officer has not merely been dragged in off the veld either, but is someone who is appointed by the registrar of the Medical Council. If it appears necessary for the officers to have to root around in files in order to gather facts, one must remember that he has been appointed by the medical practitioners and not by someone from outside. So here there is no question of a witch-hunt to expose medical practitioners. The public must be protected. On the other hand, the public has no better guarantee of our medical services being above suspicion, because now there can be no question of doctors hiding or burying facts, because the Medical Council can now reveal everything.
It is so often said that the public must be protected against doctors, but I also think that doctors must be protected against the public. There are few professions as open to criticism as specifically the medical profession, because from this side of the fence the grass always looks greener on the other side.
In accordance with Standing Order No 22, the House adjourned at