House of Assembly: Vol2 - TUESDAY 12 FEBRUARY 1985
laid upon the Table:
To be referred to the appropriate Standing Committee, unless the House decides otherwise within three sitting days.
as Chairman, presented the Sixth Report of the Standing Select committee on Trade and Industry, relative to the Liquor Amendment Bill [No 27—85 (GA)], as follows:
J H HEYNS,
7 February 1985.
Bill to be read a second time.
as Chairman, presented the Seventh Report of the Standing Select Committee on Trade and Industry, relative to the Companies Amendment Bill [No 38— 85 (GA)], as follows:
J H HEYNS,
7 February 1985.
Bill to be read a second time.
as Chairman, presented the First Report of the Standing Select Committee on Co-operation, Development and Education, relative to the University Staff (Education and Training) Amendment Bill [No 34—85 (GA)], as follows:
H J TEMPEL,
12 February 1985.
Bill to be read a second time.
as Chairman, presented the First Report of the Standing Select Committee on Transport Affairs, relative to the Merchant Shipping Amendment Bill [No 29—85 (GA)], as follows:
D M STREICHER,
12 February 1985.
Bill to be read a second time.
Mr Speaker, I move:
Before I come to the formal part of my Second Reading speech, I should first like to avail myself of this opportunity to express a few words of thanks, and these go in the first place to my predecessor for the many positive things which I was able to inherit from him in a portfolio as sensitive and as comprehensive as this one. What I greatly appreciate from him is the spirit in which he and I have been able to discuss matters with one another, and in particular, too, the quality of the personnel he left behind in that department and its associated bodies. It is a wonderful privilege to deal with a person of the calibre of Dr Gerhard de Kock, a person who is regarded with the utmost respect in the corridors of the International Monetary Fund and the World Bank, as well as those of the central banking institutions of the Western World. It is moreover, a joy to listen to Dr De Kock when he is discussing his field of expertise, because he knows it inside out, and because he is a fine, humble person who can discuss his subject in such a way that everyone who listens to him properly can understand it. I have the greatest appreciation for him as President of the Reserve Bank, and for the contribution the personnel at his side have made to the formulation of the monetary and fiscal policy, and for the role they are playing in the functioning of this Ministry.
I want to deal more specifically now with the proceedings of this House, and I should like to say how grateful I am that I was able to get people of the calibre of the Director General, Dr Joop de Loor, and those who assist him on the various levels of administration. Everywhere I go in the business world in South Africa there is one person who is involved in the financial policy whose name is always mentioned, and that is Dr Joop de Loor. The high esteem in which he is held in the business world is certainly well-deserved, and I find it very reassuring to listen to his advice when we are dealing with delicate and very complex matters.
I can say, furthermore, that without exception each one of the other members of the top management of the Ministry and Department of Finance is of the same calibre. I am grateful to my predecessor for the insight he displayed in identifying these people and appointing them to these specific positions.
Secondly, in connection with this Part Appropriation Bill, I want to say that we are of the opinion that this is not really the occasion to anticipate in great detail the Budget Speech which is going to be delivered on 18 March 1985. As we promised last year, we have no major tax announcements to make. For this reason we are dealing here with a few matters which we consider to be extremely important and which are at the moment exerting a direct and indirect influence on the policy.
Hon members are aware of the fact that every year the Appropriation Act is only promulgated by about the middle of July. Between the beginning of the new financial year, 1 April 1985, and the date of promulgation of the Appropriation Act, however, departmental spending on existing services has of necessity to continue, and this spending has in the interim to be legalized by means of a Part Appropriation Bill. That is the object of the Bill I am now submitting to you.
According to estimates, an amount of R7 000 million will be sufficient to enable the Exchequer to meet its obligations for the aforesaid period. The requested appropriation represents an increase of only 7,7% over the amount appropriated in the Part Appropriation Act, 1984. This increase cannot be used to make deductions about the coming Main Budget. There are several reasons for this: One of these is the fact that amounts accruing to the accounts for the continuation of services by the respective administrations of the House of Assembly, the House of Representatives and the House of Delegates, in terms of the Revenue Accounts Financing Act, 1984, are statutory transfers which need not be appropriated. Each of the three Houses will have to pass a Part Appropriation Act, similar to this measure, in regard to their own affairs.
I do not think it is necessary for me to point out to hon members that we are at present passing through an exceptionally difficult fiscal year. In addition it is already clear that the coming financial year will not be any easier. I do wish to give the assurance, however, that the Government, insofar as it is within its means, will do everything to steer the ship of state through the troubled waters as effectively and quickly as possible.
In my speech during the no-confidence debate I referred to the four stages of our strategy and said that they were in essence aimed at curbing total spending by means of a restrictive fiscal and monetary strategy, but one which was reconcilable with the declared policy of promoting private enterprise and effective competition. I went on to point out the success that had already been achieved with the implementation of this policy.
Throughout the past few months one problem has constantly been thrusting itself into prominence, a factor whose influence I do not think is emphasized strongly enough, and that is the role which expectations play in the market. The continuing dollar appreciation and gold price decline which occurred in December and January, caused a general expectation to develop that this trend would continue and that the rand would weaken further. This in turn gave rise to the retardation of the transfer to South Africa of export and other foreign earnings and the advancement of import and other current payments abroad—the so-called “leads and lags”. I have previously indicated that during December a so-called “loss” in foreign currency arose by means of a shortterm capital outflow of more than R1 000 million. The fact that this “deficit” was caused by leads and lags—and not by either a current balance of payments deficit or a withdrawal of long-term capital—was proof that we were no longer at that stage dealing with a serious underlying balance of payments problem.
The latest data indicate that the amount involved in leads and lags was not merely R1 100 million, but was in fact as high as R1 700 million! Leads and lags are a troublesome phenomenon, but are by definition merely a temporary problem of limited extent. After all, the advancement of import or other foreign payments means that fewer payments have subsequently to be made. The retardation of export receipts simply means that the receipts are brought in later instead of sooner. As soon as it begins to appear likely that the dollar and other earned currencies are not going to rise any further, the game is over and not only does the one way movement cease, but the funds concerned start flowing back. The foreign reserves then increase and the rand appreciates again, for there was always a sound underlying surplus on current account. All that is necessary is that our basic fiscal and monetary policy should be applied strictly enough.
It was clear to us that the rand was undervalued as a result of the expectations in the market and the consequent phenomenon of leads and lags in payments. Consequently, to ensure that this process did not artificially depress the rand further, and in order to hasten recovery to more tenable levels, it was recently necessary to make a number of adjustments to our existing policy package. The success of these measures is already part of history now with the rapid recovery of the rand from a dollar rate of 42 cents to the present value of over 50 cents—percentagewise a strengthening of more than 20%.
In any game, and in fact any market, there must be rules that have to be followed and the authorities as the referee are in duty bound, while the game continues as undisturbedly as possible, to blow the whistle for blatant off-side play and in the interests of the country and all its people, to constantly keep a sharp and critical eye on the functioning of the market mechanisms and on compliance with the basic game rules, codes and regulations involved.
During the no-confidence debate I referred very briefly to the second leg of our policy, ie fiscal policy. I shall use the opportunity now to expand somewhat on this important matter while still saving the main course for the Budget on 18 March.
A sound fiscal policy is indispensable for the accomplishment of the balanced policy mix that is necessary to deal effectively with the present economic and financial problems in South Africa. In public statements during September last year I pointed out that any further effective fiscal contribution to strengthening the monetary actions taken during August and September could only be made this year with the submission of the Main Budget for 1985-86. I also stated at that time that a reassessment of the 1984-85 fiscal position had shown that despite serious efforts to restrain expenditure—which actually effected the curtailment of some R600 million at that time destined for spending— government expenditure was still increasing at a much higher rate than that provided for in the March 1984 Budget. Indeed, it was clear that total government expenditure would rise from the originally proposed figure of just under R25 billion to some R27.2 billion, excluding the discount on the issue of new stock.
Now, nearly five months later, it is gratifying to note that we are still basically on course with that revised figure. Although the economic milieu expected for 1985-86 will be dealt with fully in the Main Budget on 18 March, I can already emphasise that no effort will be spared to make an effective fiscal contribution to the monetary policy now in operation. Every attempt will also be made to adhere to predetermined guidelines.
Before I spell out the guidelines, I wish to emphasise that at the moment, the South African economy has to function under very difficult circumstances. We must bear in mind that while traditionally gold has provided approximately half of South Africa’s export earnings, our economy is now adapting to a yield which is less than half of the average for 1984. It also has had to cope with the effects of the worst drought in South Africa’s memory. Meanwhile it is still expected that the economy support a substantial security effort, and accept the responsibility for and commitment to meet the many and varied demands of South Africa’s developing communities and underdeveloped areas. To crown it all we must operate, in fact survive, in a world economy where we are denied normal access to a variety of markets, facilities, arrangements and platforms.
The basic guidelines to be applied, represent both sound economic principles and that which is an imperative in the prevailing circumstances. They are quite obvious but nevertheless demand the following three points:
- 1. No increase or as small an increase in real terms in total Government expenditure for 1985-86 as possible, compared with total expenditure in 1984-85.
- 2. The elimination, or at least restricting to the absolute minimum, of the use of loan finance for current expenditure, an undesirable practice which has had to be resorted to during the past two years.
- 3. Limiting the deficit before borrowing for the new financial year to a level of approximately 3% of gross domestic product for the ensuing year.
Obviously, unforeseen circumstances could arise that would make it difficult, if not impossible, to attain these goals. In this regard the following factors will be crucial:
- 1. Will we have a reasonably successful agricultural year? The outlook seems to change virtually daily.
- 2. Will the gold price stabilize at its present dollar levels?
- 3. Will the American dollar cease to appreciate further? This is a very unpredictable factor, as has been illustrated very clearly in the past year or so; and also in the past few days. It is absolutely astonishing to think that the German economy is viewed in terms of its currency in such a way that it requires DM3,25 to buy one dollar. That is for a country with an inflation rate of 2% and no balance of payment problems at all. It is mindboggling.
- 4. Will any other extraordinary or unpredictable factors influence our economy?
We can only trust that all these factors will turn out positively.
There can be no doubt that since the seventies, virtually all levels of society in South Africa have been subjected to rapid changes which have also affected the nature and extent of economic activity. Obviously these changes also have implications for the tax structure in the sense that taxes and tax rates which at one stage satisfied certain needs, over time become distorted or obsolete. This makes it essential to give constant attention to the tax structure.
In this regard, two approaches are at present followed in South Africa, namely ad hoc investigations by commissions appointed from time to time, and ongoing investigations by the Standing Commission on Taxation Policy. Since the reports at the end of the sixties and early seventies of the Franzsen Commission of Inquiry into Fiscal and Monetary Policy in South Africa, the Standing Commission on Taxation Policy has also conducted a number of important tax investigations.
These reports and investigations have resulted in a shift of emphasis away from direct taxes (especially personal income tax, where the maximum marginal rate was reduced from 72% to 50%) to indirect taxation, mainly by the introduction of general sales tax; a greater degree of neutrality between various types of taxes (the narrowing of the gap between the maximum personal and the company tax rate); the introduction of the socalled final deduction system; the phasing-in of a more uniform system of taxation for all population groups; and soon, the phasing-in to full value of the taxation of fringe benefits, to which I shall return shortly.
During the past year, it has once again become apparent that the present tax structure does not meet the requirements of our time and the Government has deemed it appropriate to once again institute a comprehensive investigation into all aspects of the South African tax structure. The appointment of the Commission of Inquiry into the Tax Structure of the RSA under the chairmanship of the Hon Mr Justice C S Margo was consequently announced on 9 November 1984.
The terms of reference of the commission were purposely widely formulated in order to permit the commission to express itself on any tax or related aspect and to make recommendations accordingly. In particular, the commission was requested to take cognizance of the special development needs of this country, as well as the evolutionary constitutional dispensation and its accompanying structure. Apart from this, the commission should also take into account the financial implications of the constitutional dispensation and the greater devolution of power to local government, as well as the impact of taxation on the promotion of regional development, economic co-operation in Southern Africa, international trade and foreign investment in the RSA.
As pointed out in the Press release of 9 November 1984, it is clear from the terms of reference that the Government expects a report and recommendations on taxation viewed from the widest possible financial and economic perspective within the shortest period possible. A wide range of expertise and experience was therefore combined within the commission’s composition. I once again wish to express the Government’s sincere appreciation to all the members of this commission for in this way having expressed willingness to make their services available to the country and to contribute constructively towards the development of a tax structure that will meet the requirements of the future.
The terms of reference of the commission also make provision for the commission to submit from time to time interim reports at request or on its own initiative. I deemed it appropriate to refer three tax matters to the commission, due to the special interest they evoke and their urgency. I am referring to the taxation of fringe benefits, the taxation of working couples and estate duty. I shall subsequently refer briefly to each of these.
Since certain proposals were first put forward by the Franzsen Commission in November 1970, the taxation of fringe benefits was subsequently investigated in depth by the Commissioner for Inland Revenue and the Standing Commission on Taxation Policy, after which it was decided that the Standing Commission’s proposals would form the basis of a further evaluation by a parliamentary commission. The recommendations contained in the Report of the Parliamentary Commission of Inquiry in regard to the Valuation of Fringe Benefits under the chairmanship of the hon Deputy Minister G J Kotzé were accepted by the Government and consequently a seventh schedule was added to the Income Tax Act during the 1984 session of Parliament. This schedule was promulgated on 22 August 1984 and will come into force on 1 March 1985. It contains rules for the determination of the value of benefits flowing from the rendering of services in a form other than cash remuneration.
In a Press release on 6 December 1984, I pointed out that increases in interest rates had resulted in certain valuation rules recommended by the Kotzé Commission, especially those relating to certain housing benefits and the use of motor vehicles, no longer being reasonably related to the actual cost or value of such benefits. It is also an accepted fact that certain employers were utilizing the difference between the values mentioned in the seventh schedule and the actual values, to substitute fringe benefits for a part of the present cash remuneration. According to calculations in September 1984, the non-implementation of taxation of fringe benefits on 1 March 1985 would, as a direct result of these practices, have caused a loss of tax revenue for the State in excess of R500 million in 1985-86. The position has since worsened, seen from the point of view of the fiscus, since substantial income conversion into fringe benefits has taken place. In addition, the principles of equity and neutrality on which the Income Tax Act is based would have been seriously impaired unless such schemes were in fact countered.
From this it is clear that it was totally out of the question to comply with the requests of various organizations to postpone the implementation of the provisions of the fringe benefits tax until such time as the Margo Commission had been able to complete their whole task.
In these circumstances it became necessary to announce the following proposed amendments to the Seventh Schedule, namely, the scale of values for the private use of a motor vehicle as contained in paragraph 7 (4) of the Seventh Schedule would be increased to reflect the present actual annual cost of motor vehicle ownership; and the so-called “official rate of interest” to be applied in the determination of the value of an interest-free or low interest loan would be raised from 12% to 18%. This rate applied to housing loans as well as other loans.
The above amendments can be effected merely by notice in the Gazette. A further amendment will be proposed by means of a Bill in terms of which cash subsidies in respect of housing will become fully taxable and no longer partially tax free if the rate of interest on the loan exceeds the “official rate of interest”.
In an attempt to ameliorate the tax burden and the potential effect of these measures on wage demands and therefore on inflation, I announced that as a quid pro quo an increase from R40 000 to R60 000 would be proposed in the level at which the maximum marginal rate would apply. This means that the entire tax curve will be shifted in order to afford a measure of tax relief to virtually all taxpayers who are on register. In order to recoup most of the loss of revenue against the additional revenue arising from the taxation of fringe benefits, a surcharge of 5% would have to be added to the calculated income tax. This naturally means that the maximum marginal rate increases to 52,5%, albeit at a much higher level of income than the present 50% at a lower level of taxable income. The purpose of the exercise was indeed not to generate additional income but to spread the tax burden on a more equitable basis. The proposed rates of tax are temporarily being utilized for employee taxation purposes and, in fact, the Commissioner for Inland Revenue has already determined and published new PAYE tables. The actual rates of tax, with or without changes, will naturally have to be prescribed by Parliament.
The Margo Commission was, however, requested to give urgent attention to the refinement of the details relating to the implementation of the taxation of fringe benefits, including the proposed amendments and the entry of new members to approved housing schemes. A few days ago I received their interim report in this regard. The commission makes certain proposals which I intend submitting to Cabinet on Wednesday for a final decision. I therefore hope to be in a position to make a final announcement during my reply to this debate.
However, I wish to emphasize that the commission, despite representations submitted to it, unanimously supported the principle of the taxation of fringe benefits and did not recommend the deferral of the implementation date of 1 March 1985. As was confirmed during the no-confidence debate, the Government will proceed with the implementation of the tax on 1 March 1985.
As a result of administrative problems which employers may experience with the calculation of the relevant amounts, I would like to give the assurance that the Commissioner for Inland Revenue will grant employers an extension of time to implement the necessary changes and commence PAYE deductions in respect of fringe benefits. The tax however takes effect on 1 March 1985 as announced.
Recent legislation on the position of women in society has indisputably demonstrated the Government’s positive intentions, and any possible developments in regard to the taxing of working married couples must take this recent legislation into account.
Precisely because this matter must be examined very earnestly and in depth, the chairman of the Margo Commission has notified me that it is not possible for him at this juncture, a few months after his appointment, to make any meaningful and practical recommendation, not even a provisional recommendation. The taxing of working married couples is related to the entire tax structure, something which, as indicated earlier, is central to the terms of reference of the commission.
Like all my esteemed predecessors, I regularly receive representations for the abolition or the fundamental alteration of the estate duty system. Hon members will understand that I am unable to consider such representations and in that way anticipate the findings and recommendations of the commission in this regard by adopting certain resolutions or standpoints at this stage, or recommending them to the Cabinet. I am convinced that the commission would not be pleased if the Government were to compromise the commission with any resolutions in this connection. It is important, however, that thorough and exhaustive attention be given to this matter.
The last tax matter to which I wish to give attention is the position of the Standing Committee on Tax Policy.
This Commission, comprising members from the private and public sectors, has over the years made a valuable contribution to the development of the South African tax structure. In spite of this the Government saw fit to request the Margo Commission to put forward proposals on the optimum institutional framework within which continuous attention can in future be given to taxes and a taxation policy as an integrated component of overall economic policy. In view of this directive it was decided that the activities of the Standing Commission on Taxation Policy should provisionally mark time until a recommendation is made by the Margo Commission. As a practical measure, however, the subcommittees of the Standing Commission on Taxation Policy have in the meantime been incorporated into the Margo Commission, and further attention will therefore be given to the various enquiries under the auspices of the Margo Commission.
In the discussion of his Vote in Parliament during May last year my hon predecessor made certain announcements on the creation of additional sources of revenue for local authorities. Since it has been decided, in pursuance of various fruitful talks with the parties concerned in the private and public sectors and also with the local government bodies of all the population groups, to effect certain adjustments to these proposed sources of revenue, I think it is essential that Parliament be briefly informed on this matter.
As recently announced by my colleague, the Minister of Constitutional Development and Planning, the Government has decided to introduce a slightly amended two-component source of income for local authorities as expeditiously as possible.
These two components will consist, firstly, of a regional services levy based on the total salary and wage schedule of all employers, including those in the public sector; and secondly, a regional establishment levy which in the case of vendors registered as sellers under the General Sales Tax Act will be based on their sales of goods which are subject to general sales tax, while vendors who are not at all or not primarily liable to GST will be taxed on the basis of the floor area they occupy. I should just like to emphasize that both these levies—including those based on GST—will be paid by the entrepeneur/ employer and may not be directly recovered from the consumer and employees by way of an extra charge or lower salaries and wages.
The revenue from this new source will be levied by the envisaged regional services councils in those areas in which regional services councils are in fact to be established. This revenue will primarily be applied, firstly, for the creation and improvement of infrastructure up to agreed minimum standards within the region concerned; secondly, for metropolitan transportation projects, including bus and commuter services; and thirdly, as a further source of revenue for local authorities in order to alleviate the burden of property rates.
The draft Bill in which these proposals are incorporated has already been discussed with organized commerce and industry. It is at present being scrutinized by the Government Law Advisers and will be introduced in Parliament during the course of the present parliamentary session.
I should like to mention briefly, and inform Parliament of, the progress that has been made with certain legislation pertaining to financial institutions.
Hon members will recall that during his 1983 Budget speech my hon predecessor announced the Government’s reaction to the reports of the J C du Plessis and De Kock Commissions—both dealing with building society matters—as well as the Government’s acceptance of the three general guidelines in regard to building societies. One of these guidelines is based on the recognition of the fact that building societies have undergone an evolutionary change and are at present increasingly active in the sphere of modern banking. This makes it essential—in the interests of the application of effective monetary policy and the efficacious apportionment of financial means—to make the same kind of disciplines which are applicable to banks applicable to building societies as well, yet still within the framework of a separate Building Societies Act. The task of drafting such a new Act, which had to be brought into greater conformity with the format of the Banks Act, was entrusted to the Technical Committee on Bank and Building Society Legislation.
The first draft of the Building Society Bill was published for general cognizance and comment in the Gazette during August 1984. Comment on the Bill was received from the Association of Building Societies of South Africa, individual building societies, the representative bodies of the clearing banks and of general as well as individual banks, the accountants’ profession and individuals. This comment was considered by the Technical Committee and the Bill was adapted in close consultation with the building society movement—both the Association as well as individual building societies.
The recommendations of the Technical Committee as contained in the Building Societies Bill have subsequently been submitted to me. Owing to the importance of this matter, the Cabinet Committee for Economic Matters recommended to the Cabinet that the comment and views of the Standing Committee on Finance on the bill be obtained, and the formalities of bringing the Bill before the Standing Committee are at present being finalized.
A tendency over the past two decades or so, particularly in Europe and the USA, has been the “internationalization” of banking, in which process banks establish branches or subsidiaries in foreign countries. With the passage of time this tendency has gained momentum, and some South African banks have also expanded their activities to other countries by establishing a presence there. The authorities have encouraged this spreading of their wings to other countries.
The internationalization of banking has in time made new demands on the bank supervisory authorities. The EEC countries, under the protection of the Bank for International Clearances, appointed a committee in 1975 to formulate certain fundamental principles in regard to the supervision of the foreign activities of banks. These principles were embodied in the so-called “Concordat” of 1975, which was subsequently revised in 1983. The financial problems which certain foreign banks experienced during the past year or two in regard to major foreign exposure have once again emphasized the need for greater international co-operation in order to ensure that no foreign activities of banks escape supervision, and that the supervision is effective.
Although South Africa is not a signatory to the “Concordat” we have accepted the principles of the co-operative agreement, owing to the degrees of internationalism which our banks have already achieved, and we are already co-operating with the supervisory authorities of foreign countries in the implementation of the agreement.
The provisions of the Banks Act, 1965, as they read at present, cannot be applied to the foreign branches and subsidiaries of local banks. Amendments to the Banks Act in order to confer the necessary powers to do so upon the bank supervisory authorities, and amendments pertaining to other matters affecting the banking industry, were proposed in draft form by the Technical Committee on Bank and Building Society Legislation. Owing to the highly technical nature of this matter the Cabinet Committee concerned requested that the proposed amendments to the Banks Act also be referred to the Standing Committee on Finance for consideration. As in the case of the Building Societies Bill, I am at present giving attention to the procedure for referring the matter to the standing committee.
In recent times the question has occasionally been raised whether there is still justification, within the Government’s striving for a more market orientated economy, for legislation controlling maximum interest rates, or whether the determination of these rates cannot be regulated more effectively by the market forces of supply and demand.
In the first place representations by interested parties from the industry submitted representations to the effect that the present mechanism for adjusting the maximum finance charge rates were too rigid and that as a result they were not adjusted timeously enough to the fluctuations of other market rates.
In the second place it must be borne in mind that the present Limitation and Disclosure of Finance Charges Act of 1968 was placed on the Statute Book in the place of the Usury Act of 1926. Apart from the provisions of the present Act, which also seek to achieve full disclosure of the particulars of money lending, credit and leasing transactions in the interests of both parties, South African governments have always felt that the less sophisticated sector of the population in particular should be protected by means of the laying down of maximum interest rates in the former Usury Act and in the present Limitation and Disclosure of Finance Charges Act. The Government endorses the principle that this protection is still justified but that—as in the present Act—it should be market-orientated.
As regards the timeous adjustment of maximum rates to the market, as well as other improvements to the existing Act, I can mention that certain amendments have been proposed in this connection and are at present receiving further attention. I trust that it will be possible to introduce proposals for consideration by Parliament during the course of the present session.
Second Reading resumed
Mr Chairman, I want to start by moving the following amendment to the motion of the hon Minister, viz:
- (1) restore confidence in the management of the economy;
- (2) combat inflation;
- (3) revise its job creation programmes;
- (4) alleviate the hardship of the unemployed and the aged;
- (5) protect the individual against crime; and
- (6) ensure stability in the community.”.
This is actually the third appearance in the House of the hon the Minister in his new capacity. He replied to the debate in the latter part of last year when we had the snap debate on the state of the economy and he addressed us during the no-confidence debate, but this is his first actual motion as Minister of Finance. I should therefore like to convey to him my formal congratulations and also my personal good wishes in respect of the job he holds. I should also like to say to him that I think that South Africa as a whole wishes him well because, if he is well, there is a chance that we may all be well. If he is not well, however, then I am not sure that any of us are going to be well. So my good wishes go to him.
The second point is, of course, that this is the first Bill to come before us under the new constitution involving the appropriation of funds. It should result in an interesting debate. The debate would, however, have been far more interesting if we could have held it in a joint sitting. It is quite remarkable that, while it appears to be appropriate for the hon the Minister to speak to members of the other Houses together with us, it appears to be inappropriate for members of the Opposition to speak when members of other Houses are here or for members of other Houses to speak in our presence. It is an utterly illogical situation. It is one which I think should not be allowed to continue and I hope that the powers that be, who have control over the Standing Orders of this House, will see their way clear to enabling financial debates, and all debates for that matter, to be conducted in a joint sitting so that we can hear what people from other Houses have to say in exactly the same way as they can hear what we have to say. With great respect, Sir, I think that that is a matter which urgently requires attention. It is utterly illogical that yesterday we had to sit through the hon the Minister’s speech and today we have to debate the issues involved separately in this chamber. It really does not make sense.
The other matter to which one should of course draw attention is the amount of R7 billion referred to in this particular measure. Very little indication is given of what is actually going to be spent in the forthcoming year. In fact, the Part Appropriation has become virtually an administrative act of minimal policy importance from the point of view of the hon the Minister. That is something about which we are unhappy. It becomes even more of an administrative act if we bear in mind that the provisions of the Revenue Account Financing Act of 1984 have already taken away some of the traditional powers of appropriation of Parliament. The amount of R7 billion and the so-called increase of 7,7% over 1984 are actually quite meaningless figures, because in terms of section 2(1) of Act 120 of 1984 provision is made for the automatic appropriation against the State Revenue Account for the 1986 year, the one we are dealing with now, of an amount equivalent to that appropriated for in the year 1985 year for own affairs. The figure of R7 billion is therefore utterly irrelevant in regard to the expenditure. It could have been any amount as long as it was enough to keep general affairs going until the Budget is passed. So the Bill itself has relatively little significance if the debate is not taken to a different level. We believe that the debate on the Part Appropriation should provide the economic setting for the Budget which is to be presented on 18 March. The hon the Minister has heeded this only to a very limited extent. There are still very many missing pieces of the fiscal jigsaw puzzle and those pieces need to be put into place before the true picture emerges. The speech of the hon the Minister and the previous statements by him and his advisors deal with measures which in our view deal with short-term problems. In respect of the long-term needs of South Africa, however, no solutions are yet apparent from the statements of the hon the Minister or his advisors; nor have policies been announced through which one would hope to find solutions.
I shall pose some of those problems specifically to the hon the Minister. For example, how in terms of his policy does he see the increasing population of South Africa being fed, clothed and housed in the decades that lie ahead? The ad hoc measures which we see certainly do not provide a clue, a policy or a plan as to how those requirements are going to be met. Secondly, how will the jobs be created which are going to be needed in order to satisfy this burgeoning population? How will the money be generated for the investments which are needed in order to create the means of production which South Africa needs for the future? How, in fact, is the growth going to be generated which this economy needs if it is to satisfy these requirements? How will the standards and the values of this country be maintained and how will the value of our currency be maintained in the years that lie ahead?
Referring to the criticism of all the statements the hon the Minister has made, I want to say that there is nothing new in the guidelines he announced yesterday, because he used the identical words while addressing an investment conference only a week or so ago. The identical words have also appeared in financial publications. So one did not have to come and listen to his speech yesterday, because everything he said one could actually have read before in financial magazines, with the exception of a couple of the announcements he made on other matters. I regret to say that on financial policy, on the question of the rand, on the question of fiscal and monetary policy, the hon the Minister did not say anything new when he addressed us yesterday. Nothing was said that was in fact new, nothing was said to put the pieces of the jigsaw into place.
As far as we are concerned, we therefore propose to conduct this debate in a different form. We propose to treat this as the occasion on which to indicate to the Government the kind of Budget we would like to see for the 1985-86 year, and as an occasion on which to debate with him—and we hope that his colleagues and he himself will respond—the principles which we think should be applied. Last year’s Budget was a debacle and no one in the House will get up and say the contrary. The figures of last year’s Budget, as the hon the Minister himself must admit, have been shown to be entirely and utterly inaccurate. Even though we have not seen the Additional Estimates and the accounts, it is quite clear from last year’s Budget, if we take what the hon the Minister has said as a guide, that expenditure will amount to no less than R2,25 billion more than we were told it would be when the Budget was initially presented to this House.
Look at the magnitude of this. The Budget that we were asked to approve, was inaccurate by more than R2 000 million. That is the credibility that one can apply to that Budget. Furthermore, what is even more remarkable is that when the attacks were made on the credibility of that Budget, hon members opposite all got up and said in a chorus: How dare you do such a thing! What an outrageous thing to do! However, it only took a matter of weeks before it became apparent that in fact, their defence of the Budget, their defence of the indefensible, was a lot of nonsense, and that is the credibility that one can attach to the kind of defence that takes place in the ranks of the governing party in regard to that kind of Budget. In the result, 1984 became a year lacking in economic certainty, a year lacking in financial credibility. As a further consequence, there was a major loss of confidence in South Africa, not just a loss of confidence in the hon the Minister’s predecessor, not just a loss of confidence in the Nationalist Government, but tragically, a loss of confidence in the South African economy.
One of the things which we believe must be one of the major qualities of the 1985 Budget, is that that Budget needs to have credibility and it needs to set about restoring confidence in the economy of South Africa. If, therefore, the hon the Minister achieves nothing else except those two things, he will have done a service to the country.
Government expenditure as such has become a major talking point and, in anticipation of the Budget, the hon the Minister has in the speeches he made before yesterday placed certain issues in the public arena and into public debate. He said yesterday, as he has said before, that he intends to limit expenditure and that there would be no increase, or virtually no increase, in nominal terms beyond that to cover anticipated inflation.
In real terms.
The hon the Minister is going to cover inflation by increasing in nominal terms so that in real terms there will be no increases. In nominal terms there will be an increase to cover inflation, in accordance with what the hon the Minister has indicated. To obtain, however, from the hon the Minister and his adviser an anticipated inflation rate for the year, is an extremely difficult task. I want, therefore, to ask him again now what he anticipates will be the inflation rate for the year?
I will tell you later.
The hon the Minister will tell me later, but what he forgets is that I have a fairly good memory. Not only have I a good memory but I have documents to substantiate my memory. The hon the Minister set himself an inflation target of 10% for this year. He said so in so many words. Bearing in mind what the Government has done in respect of recent increases, particularly in regard to Government-controlled prices, this is an utterly unattainable target. It is not even in the talking field anymore.
When the hon the Minister’s major adviser, the Governor of the Reserve Bank, appeared on television and was asked what he thought would be the inflation rate, whether it would be 20%, he said he did not know whether the turning point would be at 16%, at 17% or at 18%. Now what does the hon the Minister think in this regard? When does he think the turning point will be?
You tell us.
It is remarkable. The NP are running the country, or so it is alleged, yet those hon members are asking us to tell them when the turning point will be.
The simple issue is that the hon the Minister must nail his colours to the mast in regard to the inflation rate because he has to deal with this matter in regard to the Budget. If his statement that we are not going to have any increase in State expenditure in real terms is to have any credibility, then it is going to be an elementary exercise in arithmetic to work out the inflation rate when he presents his figures on 18 March. He therefore has to nail his colours to the mast. He has to make an estimate; he cannot get away from that. Let me make it quite clear that an increase in Government expenditure—and I am talking about the increased expenditure to cover the inflation rate of 16%, 17% or 18%—over the unacceptably high levels of the 1984-85 levels is utterly unacceptable. This is a high figure despite the hon the Minister’s recent cutbacks. That figure is still abnormally high and still at an unacceptable level.
It may be popular, and the hon the Minister may think that he may achieve something in presenting a Budget which seems to include major cutbacks but which compels him to rely upon a supplementary Budget or additional estimates at a later stage in order to deal with overspending. However, if the hon the Minister does that he is again going to destroy credibility in the economic situation of South Africa. So we say to him that whatever he does, he should not play games with the budget. Let him put the figures before us as they are; “Tell it as it is”, as they say. He must not play a game of presenting figures which he knows will have to be increased later because, as I have said, this new Budget needs to instil confidence.
Another factor which will help to restore confidence will be a Budget which presents a Minister and a Government in control, a Minister and a Government who know what they are, who convey what they intend to do and who make it clear what they want to do so that we can understand what they intend to do. Even if we do not agree with the policies which the hon the Minister may announce, let us at least hear them and let us test them, let us know where we stand. Let us know what the hon the Minister’s objectives are. I believe the public want to know that the Government does have a fiscal plan; they want to know what that fiscal plan is and they want to know how that fiscal plan is going to be carried out.
There is a need for an image of good management and of greater efficiency. If the leadership is to project an image of being uncertain, how then can one expect business and the public to have confidence and not have that uncertainty conveyed to them? If the plans which the Minister has are not conveyed to the public how can they co-operate in regard to something about which they know nothing? What I am saying to the hon the Minister is that the major aspect of a Budget must be that he takes the public of South Africa into his confidence, that he portrays an image that there is some credibility attached to his Budget, and that he shows us that he has plans for the future which we can debate with him whether they are right or wrong. Let us at least see that he has some plans because the reality until now has been that there are no plans. It is all ad hoc reaction. [Interjections.] A typical trait of this Government is that it is a reactive Government. It is not a Government which projects what it intends to do in the economic field.
The issue of Government expenditure cannot be seen in absolute quantitative terms alone. More important is that it should be seen in relation to the nature and content of such expenditure. Across the board cuts in expenditure in all departments are unscientific and create more problems than they solve. I want to deal with one example. The recently leaked rather than announced directives in regard to savings in respect of personnel expenditure were, I think, generally welcomed. One of the things which is not understood, of course, is what the 8% saving actually is which the hon the Minister has in mind, because the document that was leaked and the story that was given to one of the newspapers dealt with an 8% cut but did not tell us where. Is it on last year’s expenditure? The concept of increased productivity, quality and effectiveness of the work force will in my opinion receive general support. However, unless this cutback is based on an assessment of the necessity for a particular service to the State, a determination of whether that service needs to be rendered at all and, if such need exists, whether the private sector cannot render it more effectively, the real issue of Government expenditure will be avoided. That we do not want to see. To be more productive, more efficient and more dedicated in rendering a particular service which the State can in fact do without, solves nothing. That is really what is at issue. It is not just a question of productivity or efficiency or dedication to a service; it is an assessment as to whether the State needs that service at all. To cut back on some personnel services which to my mind the State needs to increase would I believe be seriously counter-productive. I should like to mention just two examples in this regard, namely health and education. To issue a circular asking for cutbacks in respect of health and education to my mind makes no sense at all.
I should like at this stage to deal with a matter which gives me cause for great concern. Part of the remuneration of public servants is a thirteenth cheque. It is not a bonus in the true sense of the word although it is referred to as a service bonus. It is part of their remuneration and it is paid to the employee in the month in which his birthday falls. What has happened here is that in respect of the months of January, February and March of 1986, in order to be able to play around with the Budget, the employees whose birthdays fall in those months will not be paid their service bonuses in their birthday month. What one does is that one waits until the end of the financial year and then one projects that money into the following financial year. I can see the hon the Minister is frowning. He probably likes this no more than I do. However, in this concern a circular has been issued which I should like to quote to the House. It reads as follows:
The effect of this circular will be to push over into the 1986-87 financial year expenditure that should have been incurred in the 1985-86 year. So what is being done here? We are already starting to juggle with the Budget. What is even worse, is that people make arrangements on the basis of the fact that they know that they are going to receive their service bonus in a certain month, which is part of the remuneration to which they are entitled, and now they are not going to receive it. I think that this game of pushing over expenditure from one year into the next is a stupid one because it is fruitless and it merely gets one into trouble. If one were to do this in business, one would soon be bankrupt. I must tell you, Sir, that I find this an utterly objectionable practice.
I want to deal now with capital expenditure. The tendency to cut back on capital expenditure as an easy mechanism rather than current expenditure can, if done across the board, create serious problems in the future, particularly when such cutbacks are in respect of essential infrastructural capital expenditure as opposed to services which the community can safely do without or postpone. It should also be borne in mind that cutbacks can have the short-term effect of worsening the recessionary conditions in the economy as the private sector depends upon Government spending to a degree in respect of its own activities as far as this infrastructural expenditure is concerned. We believe that Government expenditure needs to be cut by improving efficiency, by privatization where more effective, and by removing entire sections of State activity which are unnecessary. However, we do not believe in cutting back on State services which are necessary for stability, and this means not only services which maintain and secure the safety of the individual but also socio-economic services which ensure such stability and make the task more difficult of those who seek to exploit deprivation for violent objectives.
There is one socio-economic matter that I should like to deal with which arises from the speech of the hon the Minister. I am referring to the new form of taxation for local government that is going to take place. We have heard from the hon the Minister of Transport Affairs that there has been a cutback in respect of the subsidy for socio-economic transport services. However, what we are ding, is to create a new tax which is going to subsidize the same services. What is happening, is that the taxpayer is paying tax in another form. If that is what we are going to be doing, are we really cutting back on Government expenditure when we present the central Government Budget which shows one picture, and then we have another set of figures which present a different picture although we actually are incurring the same form of expenditure?
I must point out, with great respect, that this is not an acceptable way of dealing with the problem. One of my colleagues will deal with this aspect of taxation in greater detail. However, I do not think one can cut back on Government expenditure in one respect and then let somebody else pay for it. The taxpayer pays for it in a new form of taxation.
I want to touch on a couple of specific things which the hon the Minister dealt with in his speech. The first of these is the question of the taxation of fringe benefits. There is no question that there is a need for certainty in regard to the taxation of fringe benefits as soon as possible. By telling us that he is going to announce certain measures in regard to the taxation of fringe benefits in his reply, the hon the Minister is preventing us from debating it. He should have done it in his introductory speech, so that we could hear what he had to say and could discuss it. Surely the decision could have been made by the Cabinet last week.
It was impossible.
I do not know why a government cannot take such a decision a week earlier. It is unbelievable. [Interjections.] The hon member says the third reading. Do you know, Sir, how much time the whole of my party has in the third reading debate? Thirteen minutes. Then they say we must debate it at the third reading. We can deal with it in that debate if the hon Whip gives us more time. I hope that he will do so.
If there is going to be consensus about these things—in the past we have tried to be helpful in regard to this matter, as the hon the Minister knows—then they should be submitted to Parliament for debate and discussion.
The second point I wish to raise is that there is a new form of discrimination, namely against the single person. I do not know whether the hon the Minister has seen the new tax tables. I hope his department has drawn his attention to it because I drew their attention to it. I think it is utterly unfair to take the single people of South Africa and increase the level at which they pay marginal tax from 52,5% by 10% to R32 000, while in the case of married people there has been an increase of 50% to R60 000. I hope the hon the Minister is going to do something about that because this form of discrimination against single people is something we cannot allow.
While we are talking about this kind of taxation, pending the Margo Commission’s report on the taxation of married women, we need to adjust the allowance in the forthcoming Income Tax Bill. One cannot say that, pending the outcome of the Margo Commission, we will not do anything. I think one has to do something about it.
I also want to touch on the Ladofca question, that is, the Usury Act. Protection against usury must remain in South Africa. It is craziness to say that the whole of the South African economy must be linked to market related rates. The reality is that South Africa has two economies: It has a sophisticated First World one and a Third World one. We talk about that all the time, and the hon the Minister talks about market related rates to people who are earning R200 and R300 per month. To me that is nonsense, and they are the ones who are subject to exploitation. That has to stop.
Before my time runs out, may I deal with what is perhaps one of the most important things of all, and that is GST. I could say a lot about GST if I had more time. However, if the hon the Minister increases GST— which is an easy way out for him—he will be doing a disservice to South Africa in the Budget. The price increases which have taken place have been enormous as far as the consumer is concerned. To increase GST now, is utterly undesirable, and I make an appeal to him not to do so. In fact, Sir, I tell him now that within the limits of what he can do if he has two choices, bearing in mind he has again nailed his colours to the mast of a deficit before borrowing of 3% of the GDP. He can cut back on expenditure rather than increase taxation. We cannot afford increases in taxation now. It is unacceptable and moreover I do not believe that is the solution. We do not believe this should be a budget of tax increases. That is not acceptable to us. We believe that there are other alternatives.
In conclusion I should like to direct one last word to the hon the Minister. We need financial control in South Africa, and one thing that is beyond our control are the parastatals. They borrow. They borrow in foreign currency and there are tremendous foreign-currency liabilities. There is also the question of forward cover and of what that costs the Reserve Bank. Then there is the whole question of the control of these parastatals. We do indeed need to bring the parastatals back under parliamentary control. We need to bring them back under the control of Parliament so that there can be proper financial control in South Africa.
Mr Chairman, the hon member for Yeoville commenced his speech by asserting that the hon the Minister had said nothing new in his Second Reading speech; that everything he said about him in that speech had already appeared in the Press and the other media. All I can say is: “Look who’s talking!” [Interjections]
The fact is that on my looking at the amendment proposed by the hon member for Yeoville, it is clear that there is nothing new in that either. Those were his exact words as they appeared last year in the Sunday Times just before the previous Minister of Finance made his Budget Speech here in the House. It contains nothing new whatsoever. [Interjections.]
The hon member for Yeoville naturally has yet another way of setting about things. Not only does he take up the time of this House by making speeches, but prior to that he also holds extensive discussions with the Press; and he trumpets out his prospective speech in its entirety in the Press, the object being, of course, to reach a much wider public.
That is merely another of the many ways in which we are trying to help you. We always try to help you in every possible way. [Interjections.]
All I can say to that bearded hon gentleman from Bryanston is that we welcome what the hon member for Yeoville is doing. The hon member for Yeoville’s habit is a good and valued one.
In the Sunday Times of 20 January 1985, for example the hon member makes the following statements, and I quote him:
The hon member is hereby attempting to imply that although the low gold price and the drought are partially responsible for our country’s financial problems, we actually find ourselves in our present difficult financial position as a result of ideological and other considerations.
I wish to refer the hon member for Yeoville and other hon members of this House to an article, financial editor of the Rand Daily Mail, published on 9 March 1982; that was at a stage when the gold price was $330-50 per fine ounce. I quote from that article:
†In other words, an increase from R446 million to R3 633 million represents a total increase of 814,5% over three years. The author of that article writes further as follows. I quote again:
He concludes with a clear message:
That was the position in March 1982, with a $330,5 gold price. One must compare this price with the present day price of 300 dollar, or even less.
*When we look at the prospects held out for 1985 by the Bureau of Economic Research of the University of Stellenbosch it is noteworthy that the three economists responsible for this were unable to give only one forecast for 1985. In fact they based their predictions on three different scenarios: Firstly on the gold price, as at 11 October 1984—that was the date of publication—secondly on an average gold price of 420 dollars in 1985; thirdly on an average gold price of 300 dollars in 1985.
Hon members would do well to look this up to see how prospects may change if based on various assumptions regarding this single factor, namely the gold price. What the hon member for Yeoville therefore accomplishes with these foolish statements of his is once again clear proof of the cheap political games he plays, which have been so characteristic of him over the years. The hon member made a further remark in the interview published in the Sunday Times. I quote again:
I do not know what the hon member’s motive was in saying this, but there is no doubting the truth of it. The devastating drought and water shortages experienced by city dwellers have provided them—and probably also the hon member—with a measure of insight into the importance of adequate rain and water.
The drought conditions of the past few years do not have adverse effects on agriculture alone; they affect each citizen of this country to a greater or lesser degree. It is true that the adverse effect on agriculture is more obvious and also more easily calculable. Lands are parched, animals are dying, 1982 saw an average drop of 8% in agricultural production, there was a further decline of 34% in 1983 and yet another in 1984. Agricultural debt is also mounting and increasing numbers of farmers are being forced to throw in the towel. There is consequently an accelerated tempo of depopulation of rural areas. The facts I have just mentioned are a few of the directly discernible consequences of the drought conditions.
According to the Abstract of Agricultural Statistics, 1984 the total RSA farming debt increased as follows, and I shall mention only 1970 and 1982: Debts to the Land Bank amounted to R278 million in 1970 as against R988 million in 1982. That is an increase of 256%. Debts to commercial banks amounted to R281 million in 1970 as against R1 581 million in 1982; an increase of 485%. Agricultural co-operatives were owed R113 million in 1970 compared with R1 367 million in 1982; an astronomical increase of 1 106%. Agricultural Credit carried debts of R136 million as against a figure of R237 million; an increase of 82%. The increase in farming debt from 1982 to 1983—in other words merely a single year—amounted to the following:
Since 1982 the Government has spent R491 million on direct drought aid. Since March 1983—not even a year ago—Land Bank aid in consequence of the drought amounted to R559 million. The South African Agricultural Union estimates that the total farming debt will amount to between R9 billion and R10 billion this year.
What city dwellers, including the hon member for Yeoville, do not always understand is that drought conditions such as we have experienced affect everyone. This applies to the hon member for Lichtenburg too who also made some insane remarks here. When agricultural conditions are poor, farmers not only pay less tax, but the authorities have do, of necessity, also have to vote appreciable amounts for emergency aid, as I have already indicated, and the amounts voted have to be financed by the taxpayer in one way or another.
The poor agricultural conditions also result in diminished spending power of farmers, and that again means fewer sales by commerce and industry, something which contributes to lower profits and fewer job opportunities.
Furthermore one should bear in mind that the export of certain agricultural products had to be reduced or even suspended. On this basis maize even had to be imported last year, and this may possibly have to be repeated to a certain extent this year.
In this way the drought had an adverse effect running into about R1 500 million on the current account of the balance of payments in 1983. Figures for 1984 are not yet available. This adverse effect was a consequence of the loss of agricultural exports and the increased import of food.
It so happens that at present criticism is raining down on economic policy-makers from many quarters. Sound criticism serves its purpose and is also to be welcomed. Two matters strike me, however. Firstly that exceptionally stringent criticism is emanating from certain quarters and from certain people who until recently had nothing but praise for economic and financial steps taken by the authorities. I also find sharp criticism regarding fiscal management. Secondly, in most cases only criticism is expressed, without providing any guidelines on what steps to be taken. We have already had an example of that this afternoon.
Although the country is experiencing difficult times economically, there is no cause for undue pessimism. Overreaction can only aggravate matters still further for everyone in South Africa. One is reminded involuntarily of the years 1976-77 when a sombre business climate contributed appreciably to retarding the economic recovery for an unnecessarily long period.
I wish to contend that there are various plus factors which are completely overshadowed by this pessimism concerning the economy. The current process of adjustment in the economy need not be regarded only as a negative aspect. It does hurt but it is necessary to put South Africa back on the road to financial discipline and effectiveness. The price now being exacted is aimed at strengthening the basis for future economic growth, and in this respect it is a good investment.
There are indeed differences of opinion on the composition of the package of restrictive economic measures, but the objectives of making the country live within its means are honest and significant ones, however, and it is in the interests of all of us to effect a sound balance between production and expenditure, accompanied by greater price stability. From the nature of the case this point of view applies to both the private and public sectors.
It is against this background that the steps taken by the hon the Minister of Finance to control Government expenditure should be judged. His hand can and should be strengthened, not only by the co-operation of the various Government departments in their respective budgetary proposals for the coming financial year, but also by the private sector, and all of us should co-operate in our calls upon the Exchequer as well. The fact of the matter is that the greater the calls on the Exchequer, the greater the ultimate price to be paid in the form of higher taxes, weakened economic growth and greater unemployment.
The deceleration in domestic expenditure has already caused the value of imported goods to show a decline. In contrast exports are showing a steady improvement, with exporters experiencing a boom at present. Preliminary figures of the Minerals Bureau give us the following: The export tonnage of chrome rose by 106% during 1983. This means an increase of 127,4% in foreign currency at the lower rand value. The export of coal increased by 27,7% in tonnage, and by 42,7% in terms of the rand, and our earnings from manganese rose by 88.5%. I can go on in this way enumerating the various minerals. Iscor, for example, expects international markets to take 2,4 million tons of steel, in other words almost half its total production.
As in mining, other export-product undertakings such as the manufacturing industry are doing good business at present. These sectors are benefiting further from the weak external value of the rand. The wool and deciduous fruit industries expect the gross value of their exports to rise by approximately R300 million.
If we have a good year for agriculture— climatic conditions look promising at the moment—the decline in interest rates may be accelerated in the second half of 1985 as the balance of payments benefits from lower imports and higher exports of agricultural products.
I saw in the Business Times of Sunday, 20 January 1985, the following comment by the New York Citi Bank:
If we take everything into account, economic prospects do not look as black as some pessimists have indicated. I believe that we may look to the future with far greater optimism.
Mr Chairman, this is the first Bill to be introduced by the hon the Minister and I wish to congratulate him formally that it fell to his lot to do so today. I shall return to the hon the Minister later. It all depends, not on how I see him as a Minister, but on how the country as a whole sees him.
I move as a further amendment:
- (1) to take effective steps to curb the alarming increase in cost of living, interest rates, inflation and unemployment;
- (2) to grant more positive assistance to the farmers in order to help them to recover from their precarious position; and
- (3) to give a clear indication of the way in which it intends to allow Blacks outside the national states to participate in the decision-making processes that affect them.”.
[Interjections.] I wish to ask the hon member for Yeoville whether he thinks the economy of the country will flourish if we all sit here higgledy-piggledy and raise Cain. Does he think the country will prosper in such a case? As a result of the new dispensation, by means of which the NP has made a total onslaught on the soul and spirit of the Whites in this country, the economy has already collapsed. As a result we can forget about this country prospering. [Interjections.] It will go from bad to worse. If the hon member thinks the economy is sound, he is making a mistake. That is not what I say; it is what the rest of South Africa is saying. [Interjections.]
What does Jaap say?
Jaap says this man has betrayed his people.
Rapport of 29 July 1984 states the following about our hon Minister:
I think that what people are saying there is certainly not to be sneezed at.
What did you say?
I said what the world at large is saying. [Interjections.] The SA Foundation News is a publication which makes South Africa known throughout the world and provides good propaganda. Where is the hon the Minister of Constitutional Development and Planning now? He is so worried about quotations and always wants exact details of their source, but I want to assure him that he can get them all from me. I wish to quote the following statement of the SA Foundation News of August 1984:
That is why the Minister has landed in such a situation. It is as a result of political pressure and economic prudence. I quote further:
That is what the SA Foundation News says, and the hon the Minister will concede that what this organization says cannot be dismissed lightly.
Let us look at what the man in the street says. I want to quote from the Sunday Express of 20 January 1985. In it a certain Mr D Mills writes as follows:
That is what the man in the street is saying. The mess in which the Republic of South Africa finds itself can be attributed to the incompetent Cabinet which does not know what to do. If this Cabinet had had to lead the Israelites out of Egypt, they would at this moment still be wandering around somewhere in the North African desert.
I wish to say something to the credit of the hon the Minister. In Rapport of 7 October 1984 the hon the Minister acknowledged that South Africa was poorer now than it was three years ago. He said it in an article with the caption “Du Plessis kap vir Horwood”. He went on to say:
Now it is not only the balance of payments that is in a mess, but the entire economy. In that article the hon the Minister also said:
That is not true.
That is what it says in this article. A later article appeared under the heading: “Ekskuus, dokters, sè mnr Barend”. Should the doctors who work only three days a week treat healthy people as well merely to be able to work? I sometimes think that NP MP’s all need doctors to treat them. The hon the Minister also spoke about accountants who assisted rich people in evading tax. Does the hon the Minister have information on accountants who are helping large companies to evade tax in an illegal or underhand manner?
I shall answer you.
Does the hon the Minister know of companies in which this is happening? Have the heads of the various offices of the Receiver of Revenue informed the hon the Minister about this? Has the hon the Minister given instructions for this to be investigated and for the guilty parties to be prosecuted? I want a “yes” or a “no” from the hon the Minister, because I shall return to this matter. The hon the Minister will have to tell this House and South Africa the truth today. [Interjections.]
According to Rapport of 30 December 1984 the hon the Minister was competing with Dr Piet Koornhof and Mr Fanie Botha for first place in the South African Nincompoop-of-the-Year Competition. They said that the winner of this competition would be announced on 13 January. I wish to congratulate the hon the Minister on being one of the three; that was an achievement. The results have not yet been announced. [Interjections.]
What do you say, Oom Jan?
The biggest nincompoop in the House is sitting right over there because he does not make speeches. He merely talks.
I wish to refer to an article in the Sunday Express in which certain information about the Minister was made public. The Sunday Express said that the hon the Minister had been the financial director of Boupen. The hon the Minister denied this. There had been three directors, inter alia Mr H J Botha, who had dismissed the other two directors. After he had dismissed them, the other Mr Botha appointed the hon the Minister as a member of his Cabinet. If the hon the Minister made such a mess of the finances of a small company, I have no confidence in the hon the Minister’s ever being able to save South Africa’s economy. [Interjections.]
It is also very interesting that that company was placed under judicial management after the hon the Minister resigned. Mr Lesley Cohen then appointed the hon the Minister to assist him in unravelling the affairs of that company.
He apologized to me in the paper, Oom Jan. Did your reading get you as far as that chapter? [Interjections.]
Yes, I am getting to that. [Interjections.] Did the hon the Minister help that company to unravel its affairs?
I came nowhere near it, Oom Jan.
The hon the Minister was therefore not prepared to help. He knew it was in such a mess that it was useless. [Interjections.] It also appears that this company, while under judicial management, had three contracts with the South African Railways. Was the hon the Minister, while serving on the board, merely a director or was he a canvasser like the hon the Minister of Foreign Affairs in the case of McPhail?
I had nothing to do with the company.
Nothing? They subsequently apologized to the hon the Minister. I think he would have been better advised to keep quiet about the fact that he had been dismissed. [Interjections.]
I shall now refer to the hon members who say that the country’s affairs are sound. What do people in South Africa say about this? The Citizen says: “Bond Shock— Home-owners.” There is one great shock upon another. The comment of Sake-Rapport of 2 September on the so-called sound conditions in South Africa is: “Nog ’n skok oor Staatsbesteding.” [Interjections.] The authorities are financing current expenditure with money acquired through loans. Is that a healthy state of affairs? It is the first time since 1947 that provision has had to be made for wages and salaries in this way. I can go on giving one example after the other. The Sunday Times of 16 September says: “Government up to the ears in debt.” There is also the following comment: “Before the recent splurge, the only time in the past 50 years that short-term spending exceeded income, was in 1947, and then the figure was only £1 million.” During 1980 current Government expenditure amounted to 18,8% of the gross domestic product and in 1984 it was 28,8% according to my estimates. This shows one where the Government is heading with all its spending.
In Die Volksblad of September one reads:
Then the hon member for Smithfield says commerce is sound. Honestly, the hon member is living is a dream world. He is one of those making such an onslaught on the spirit of the Whites, specifically the Afrikaner, that he completely loses sight of the economy. In Rapport of 3 February one finds: “So ’n klein foutjie met Evkom.” Minister Fanie Botha also wrote a letter to his Prime Minister in which he said: “Ag, ek is jammer, maar ek het nou ’n klein foutjie gemaak.” What more is there? In Sake-Rapport of the same date we read: “Evkom skuld oorsee R4 000 miljoen.” [Interjections.] The hon the Minister is most probably again going to do a bit of crawling for consensus. On the same page of Sake-Rapport one reads:
That is not just talk. It is fact. I have been speaking about last year, but what is the present position? In Rapport…
Your own people are laughing at you, Oom Jan.
When hon members see that hon Deputy Minister they simply laugh because he is a joke. I see here in Rapport:
We can go on in this vein. [Interjections.] On 5 February came the shock of the new fares. I do not want to go into this, but bus fares rose by 12,5% and train fares by 20%, 25% and 30%. Is that not wildly irresponsible in the eyes of the public?
Out of the blue the price of fuel was increased by 27 cents per litre. Just before the referendum, however, the price of fuel was decreased. Just before the Primrose election interest rates were lowered. The NP is a party suffering from election mania. What is the position today? “Donker vooruitsigte vir die ekonomie.” Did the hon members not see this? If they cannot read it, I shall tell them about it. [Interjections.]
Sir, my time is almost up. [Interjections.] In the Barclays Bank Business Brief one reads:
Seventy-nine per cent of them found that their turnover had dropped; 80% said their profits had decreased. There will be no further investment.
Now this Government comes with taxation. Apart from the taxes that are to come, the hon the Minister of Constitutional Development and Planning is going to introduce taxation for the third tier of government. This Government is wasting money. What is this new dispensation costing us? R35 million is being spent on a census which is to be held only in 1990. A whole lot of visiting cards have arrived on my desk. What is their purpose? They are surely a waste of money.
What course does the CP suggest? We should not throw a sound financial principle overboard because of political pressure being exerted from without by big business, some financial institutions and Dr Crocker. The total onslaught on the heart and soul of the Whites of the country must stop. The material welfare of the entire population must be promoted. Lastly, we should be proud to be Whites and not apologize for the fact.
Mr Chairman, the hon member for Sunnyside made a difficult speech in the sense that he was very personal. I did not want to comment on it and, without commenting further or making references, I just want to say that he snapped at an hon member that he was the biggest nincompoop in the House. I just want to tell the hon member that in the old days there was a saying in Stellenbosch: “Op Stellenbosch is daar twee en die een ou is albei”.
No one is even laughing.
They cannot, because it is sad, it is serious, it is a catastrophe that we had to listen to such a speech here with the kind of personal attacks it contained. As the Chief Whip the hon member for Kuruman should instruct the members of his party not to make this kind of speech. The hon members should show better taste than that.
But let us get back to the argument. The hon member for Sunnyside made three allegations in his amendment, namely that the Government had failed—
- (1) to take effective steps to curb the alarming increase in the cost of living;
- (2) to grant more positive assistance to the farmers; and
- (3) to give a clear indication of the way in which it intended to allow Blacks outside the national states to participate in the government of the country.
Unfortunately the hon member did not mention these points in his speech because the newspaper cuttings he quoted from did not give any coverage to them. The hon member for Smithfield said that we expected hon members of the Opposition at least to put forward alternatives, but up to now there has been no suggestion of alternatives. Consequently, I must reject the hon member’s amendment and support the second reading.
But in my opinion we have reached a very sad period in our politics if this is the way debates are going to be conducted here.
When I talk to the children I shall get around to that hon member.
When we had reached an analogous stage in our country’s history in 1961; at a period just after the events at Sharpeville, when everyone was selling shares, the economy had reached a low point, and money was pouring out of the country, a man in Cape Town, Mr Ted Mauerberger, made an interesting statement to me. I am specifically mentioning his name because he was a positive factor in South African history at that stage. I said to him: “Sir, you are buying shares while most other people are selling.” His reply was: “If all is lost, you and I will be equal; if matters improve, Ted Mauerberger will be two or three steps ahead of you and you will never catch up with me.” This is also the advice I want to give to the people outside.
What struck me—and what I actually deplore—is the statement by the hon member for Smithfield, namely that it is probably the easiest thing in the world to criticize. In the new dispensation we are striving to reach concensus among all sectors of the community, and in the new era we are now entering, we ask ourselves, what contribution can the Opposition in Parliament make? Is it simply a question of purely negative criticism, as we got today from the hon member for Sunny-side? Then there is also the hon member for Yeoville, who unfortunately can put a poor case better. Then one wonders why these hon members cannot make a positive contribution.
The hon member for Yeoville, in particular, frequently says that he does not get enough time to make contributions to debates, or to discuss matters, but I sat and waited for a few positive contributions from him.
I waited for the hon member for Yeoville and the hon member for Sunnyside to stand up and say that they reject the idea of disinvestment which is gaining momentum root in the USA; they reject this idea of disinvestment which is being propagated in our own country. I thought the hon member for Yeoville would stand up and say: “I strongly object to the controversial new report on how one can get a second passport from Martin Spring.” This is the kind of behaviour I expected from the Opposition. I expected them to make contributions of this kind, without sacrificing any of their principles or foregoing any criticism they wanted to voice. In my opinion they should devote at least 5% of their time to supporting the positive aspects at a time when South Africa desperately needs it.
This brings me to the matter of disinvestment. I feel this is something happening at international level which we shall have to take cognizance of in South Africa, because at the international level, and particularly in the USA, the matter of disinvestment is now being politicized, and Parliament will have to take cognizance of this. In this connection I should like to refer to the report of the first session of the 99th Congress of the USA:
During the same session of Congress the following resolution was moved under Order S147:
Then we come to the House of Representatives, where the following was moved:
There are two further resolutions of a similar nature. What this amounts to is that South Africa is being politicized in American politics. Reference is made, for example, to “gold coins” and to “the enforcement of penalties”. While we are discussing “penalties”, we would do well to take a look at this matter, because when sentences are passed for offences here, it is so easily said that South African criminal law is too strict and too “harsh”. But how does it compare with the American system? On page 15 of S147 we read the following:
- (i) if other than an individual, a fine of not more than 1 million dollars, or
- (ii) if an individual, a fine of not more than 50 000 dollars.
But that is not all. There is still the possibility of 12 months imprisonment as well. This year five similar resolutions were discussed in the American Congress and the House of Representatives and all of them were aimed at South Africa. Consequently, whether we like it or not, we shall have to take cognizance of this, and we shall have to steer South Africa through these stormy waters.
The hon member for Sunnyside asked inter alia how this Government could ever have led the Israelites out of Egypt, but I want to point out to him that our inflation rate does not compare unfavourably with that of Israel. At present our inflation rate is 11% or 12%, whereas Israel’s rate already exceeds 100%. In my opinion this Government is consequently not faring at all badly as far as the Israelites are concerned. [Interjections.]
But on the positive side I should like to thank the hon the Minister. As has been mentioned in other debates, there are people like Mr C W du Toit and others, who say that the Government, and in particular the hon the Minister, are taking the right steps. I agree, although I admit that, as the hon member for Sunnyside said, the steps which are being taken are harsh measures. They undoubtedly have negative factors and consequently some of the weaker people in the economy cannot keep up. [Interjections.] But let us be honest and admit that this is the only medicine that can in any way put matters right in the present economic climate. We must also admit that it is our own fault that we are now in this position because we undoubtedly overspent.
In his speech the hon the Minister referred to a few aspects, inter alia, the matter of an enquiry for tax purposes in connection with working couples and estate duty. In this regard the hon the Minister certainly has an opportunity to make a name for himself, because we have been asking for such an enquiry for years now. If we can give attention to the tax question in connection with working couples and estate duty, a positive decision in this connection would stimulate productivity in South Africa. At my age I cannot be considered a favourite among the women, but I would like to at least be considered a “favourite uncle”.
I could always act as your agent.
I shall first have to consider that offer.
As far as the tax policy is concerned, I should just like to say the following: For the first time we now have an opportunity to work out a good synchronization programme. The hon the Minister is investigating this matter; as a matter of fact, he has already ordered an investigation. On the other hand, the Minister of Trade and Industry intends, I hope, to publish a White Paper with reference to the Kleu report which will serve as a blueprint of the Government’s policy for trade and industry. Consequently, for the first time in our history, we now have the opportunity to synchronize the two factors which can influence this country most. I wonder whether it is not possible to do this.
Mr Chairman, I rather suspect that the hon the Minister of Finance, having presented his first mini-budget, must feel like the fellow who breaks the ice to go in for a swim. The water is still very, very cold and the swimming might well be difficult but at least he has got over the initial shock of the plunge.
We in these benches wish him well and, naturally, we hope that he will make a success of his job, because if he does it will obviously be for the good of South Africa; if he does not, it will be ill for South Africa. As far as we are concerned, anybody who tries to obstruct the hon the Minister for purely political reasons is not a very good South African. So I start off with this friendly approach, because I believe this is justified and I certainly believe that a new Minister of Finance must be given some encouragement especially in view of what he has had to take over.
To do a good job I believe the hon the Minister will have to administer some very unpleasant medicine indeed. As a politician, I must admit that it is going to be very difficult for me and for other politicians on the Opposition benches to avoid making political capital out of that type of situation. However, I propose at any rate to try to avoid using political decisions for political gain, if I can, because I feel that we need this medicine and we will have to take it. Very often the most effective medicine is the most tasteless or at least the most unpalatable.
As I read the financial situation of this country at the moment, we have allowed ourselves to get into a position of pretty deep depression. Certainly, it is far more than a minor recession, and I believe we have allowed this to happen as a consequence of forgetting the verities which in my opinion apply equally to the family, to the business and to a country. These verities, which I would like to refer to, are hard work, careful spending and thrifty saving for future capital needs, development and the rainy days and misfortunes which are bound to strike us from time to time. Quite frankly, I believe that we in South Africa, particularly the more affluent White group, have allowed ourselves to become somewhat indolent and rather greedy and are spending more than we generally earn whilst making little or no effort to protect ourselves from the vicissitudes of the future. We certainly do a great deal of planning for the future. In fact, I would imagine that at every government level, at the municipal, the provincial and the central government level, there are plans for almost every possible contingency on the shelves, plans which have been very costly to produce, but I am afraid we do not have the wherewithal to put them into effect.
I believe hon members will appreciate that this is also my first attempt as spokesman for my party on matters of finance. Our previous finance spokesman is sitting on the Government benches and I suppose he will be somewhat critical of what I have to say, but nonetheless, I shall do what I can. [Interjections.] I admit quite freely, right at the outset, that I know very little about high finance and I certainly know very little about international finance. I do, however, know something about business and I do know a little about public economics, having been chairman of a major local authority, having been largely involved in the economics of a province, and in general having studied the subject at those levels. I believe that that is the level at which we are in trouble, and I hope to be able to make some contribution in spite of my ignorance in certain fields.
I would now like to address myself to the mini-budget itself, and I have a few comments to make. The hon the Minister stated that he intended to allow little or no increase in Government expenditure this year in real terms over the expenditure of 1984-85. I think I understood him correctly. From what I could gather from his speech and from what I have read, it seems that it means that the baseline is going to be the 1984-85 budget plus the overexpenditure which has been incurred. I understand that he intends that there will be no increase in this regard in real terms. By that again I adduce that he means that he will in fact take inflation into account. That is quite important.
When a financier talks to me about this, it means that in money terms, as opposed to real terms, we are likely to be faced with a very substantial increase. Insofar as the man in the street is concerned, it means that he is going to dip his hand into his pocket and pay more in the way of money. I do not believe that the business sector in particular, and to a minor degree even the Government sector, has paid increases in salaries and wages this year to compensate totally for inflation. As a consequence I feel that the public are going to be faced with some increase in monetary expenditure.
The Minister’s announcement concerning the perks tax was rather disappointing. Having virtually retired from practical business, I have no personal problem. As members of Parliament, I believe that we all have some sort of problem with the perks Act but that does not worry me too much either. However, commerce and industry are already reeling under a succession of blows of one sort or another. They are going to be hit with this perks tax at what is probably one of the worst times imaginable. Added to this, the hon the Minister indicated that, instead of the interest rate being assessed at 12%, it is now going to be increased to 18% on motor cars and housing. The current valuation of motor cars is also to be taken into account. I am not quite sure what that means, because I felt that it was a question of what the car cost that had to be borne in mind. Perhaps the hon the Minister could answer that particular question in due course. However, the increase from 12% to 18% as a perk, is very definitely an increase in the amount upon which the recipient is going to have to pay tax. Commerce and industry have already indicated that they cannot quarrel with the fairness of the concept of paying tax on perks, but as it has come as a somewhat sudden shock, they want to know whether it could not be phased in more conveniently and with less impact at one time, particularly so under the very, very difficult circumstances that businesses are experiencing at present. Business did indeed ask for a more painless transition. I know of course the hon the Minister has indicated that absolute finality has not yet been reached up on the application of this tax. I believe he has indicated that he is having further discussions with the Cabinet on Wednesday, after which finality in this connection will be reached. However, I do hope most sincerely that this is borne in mind because I submit it is a very, very bad time indeed for business to be faced with this particular problem. At a stage such as this the real producers—generally speaking the ones who get the bigger perks—are going either to demand more money from employers who can possibly not afford it in these hard times, or will have to be satisfied with a reduction in real terms of the money they earn. They are the people we really want to keep most satisfied at the present moment.
The next point I should like to raise is that of married couples not being taxed separately. This, I believe, is rather unfortunate. I had hoped that the hon the Minister, being a young and modern type of man who appreciates the equality of the sexes, and who …
He is just like you.
Oh yes, very much like me. [Interjections.] All right! All right! Be that as it may, I had hoped he was one of these modern types who appreciated that we were moving away from discrimination and that it was quite wrong to insist on taxing married couples jointly. I believe that at the very least there could have been some sort of option open to those concerned. At first glance, I know, it would appear to reduce the funds coming into the Treasury. In the long term, however, I believe this would not be the case because it would mean that a lot more of these people, who are capable and willing to work, and to do a full day’s work and earn a full salary, would be prepared to go back to work. I know many, many professional people, people whose services we can ill afford to lose, people whose education was very, very expensive, who are either not working at all or who are merely working on a part-time basis because they have no incentive from a tax point of view to work at all.
There is also one other thing, which, I am sure, the hon the Minister’s attention should be drawn. I believe that he is a very moral person. I have known him for quite some time and I know him to be so. This particular system of joint taxation, however, breeds divorce and immorality. It also causes wastefulness in respect of those people we can least afford to lose. It breeds divorce and immorality in the sense that it causes people to live together without being married because they find that they are better off living that way. I happen to know of people who have actually divorced each other for this very reason. I may also add that they are still living together. They are merely using this method as a tax dodge as it were. Quite frankly this is quite wrong. People, and a government who consider themselves to be of a high moral standing should not encourage this sort of behaviour. Moreover, in a time of sexual equality, which we are going for these days, I believe, this legislation is something of an anachronism.
The next point I should like to raise from this mini budget concerns the statement made by the hon the Minister about the Croeser taxation, as I like to refer to it. This is another tax burden which is going to be imposed on commerce and industry. This is iniquitous. I am sorry but I believe it to be so. When the perks tax concept was brought forward it was used as a reason—and a sound reason at that—that there should be equality in taxation; that there should not be discrimination in taxation. This, I believe, is discrimination. This is gross discrimination against the business people that they are being taxed and that they are going to be taxed again on staff salaries and wages and also on turnover. I am sorry, but this is not fair. It is not good business and one cannot help but gain the impression that some people, particularly those who have never had to earn what I want to call an honest living in business, are inclined to think of business merely as a milch cow to produce funds. People feel—some bureaucrats in particular—that businesses are there merely to generate funds for the Government. Of course, that is not the real function of business. It never is, never was and never should be. The real function of business should be to create wealth and to create jobs for the population. It should also generate further capital to create further jobs for an enhanced population.
You always make a good speech.
It is very nice and kind of the hon member for Langlaagte to say so. He may say that again any time he likes. [Interjections.]
I believe that an enlightened Government should seriously have a look at what it is doing to business. The other day I read somewhere that at the present moment businesses are going bankrupt at the rate of 12 a day. I believe that this can only accelerate because, as one business goes broke, owing somebody else some money, it puts that other business in a more precarious position. Frankly, we cannot afford to have that kind of situation. As I say, the primary function of the business sector is to ensure that we have a well-paid working population. Its primary function is not to be the milch cow to feed a big, fat bureaucracy. The business sector, the mining sector and the farming sector are the people who produce the wealth of this country—not the bureaucrats who only spend the money. [Interjections.] All right, in fairness to the bureaucrats I admit that they do create something of the climate and infrastructure for business to operate. I concede that, but an excessive bureaucracy does not help at all.
To conclude my remarks in this particular part of my address, I would say that one gains the impression from this Part Appropriation Bill and the speech that the hon the Minister has made that the Government is desperate for money and is prepared, if necessary, to risk harm to the economy to get that money. I think this would be rather sad, and with a general election not even in sight, I suppose this is their calculated risk. I fear, however, that if the economy, commerce and industry are severely harmed it might well take longer than until the next election to put things right.
I should like to come back to the situation of the profligate spending of the general public. I think here we have a very big problem. The South African public have got to learn to live within their means. The issuing of this plastic money—plastic cards, “Buy now, pay later”, “Fly now, pay later” and all this sort of thing—is murderous to our economy. People are living far too heavily in debt. As a consequence the country is getting into a bad state, because if they cannot pay, as often is the case when for example they get out of work or something like that, it means that the other people are going to have to pay or else the banks or the building societies lose out. I wish this message could be put across to the public by somebody. I believe it is the function of the Government to do so, if nobody else will. I do not suppose the finance houses will do it, because they are the prime beneficiaries of all this borrowing.
It is important that the South African public learn to pay cash. They should learn to buy what they need and to pay cash for it. They should learn to save up in order to pay cash for what they need. If one buys a fridge for R400 on HP, by the time one has paid the HP charges that fridge will cost one anything from R560 to R600, but if one pays cash for it, one can probably get the fridge for R350. If one buys a R10 000 motor-car for cash in today’s circumstances, one can always chisel a bit off it and get it for less than R10 000. On the other hand, if one pays the usual HP charges, what does one pay? One pays about R25 000 or even R30 000 for that same motor-car.
This is one of the reasons why the rich get richer and the poor get poorer. I believe it is important for the Government to give some indication to the public and to encourage them to save money. One cannot, however, encourage people to save money when in the process of saving money, inflation is undercutting the value of that money. That is why it is so vitally important that one of the prime functions of this new hon Minister of Finance must be to try seriously to reduce inflation because, as inflation continues, it ruins the value of the money of people who have tried to save and who are supporting the overall economy of South Africa.
I should like to suggest to the hon the Minister another point, and here I come back to the question of plastic money. I do not believe that people should be able to use these plastic cards as credit cards; they should be convenience cards. As it is, one can buy one’s groceries today and pay off one-twelfth of the bill at the end of every month over the rest of the year. This is quite wrong because one is borrowing for current expenditure from what should be a capital fund. This, again, is quite wrong. “Fly now and pay later” is equally wrong.
I believe there are many points I could make but at this stage I want to say just one thing. South Africa is suffering primarily, as I see it, from a crisis of confidence. The need for productivity is there, the people are there and, so far as I am aware, they have not taken any money out of circulation. Therefore all the necessary ingredients are there; let us get confidence back. I ask the hon the Minister to get it back.
Mr Chairman, I should like to congratulate the hon member for Umbilo on his maiden financial speech. I think he made a very good speech. He faces a very difficult task in succeeding the hon member for Amanzimtoti as the chief financial spokesman for the NRP.
I should also like to avail myself of this opportunity to welcome the hon member for Amanzimtoti within our ranks.
When are you going to let him defend your financial policy?
The hon member for Umbilo referred to the fact that the hon the Minister had fallen into a pool of cold water. Let me tell him that I think this hon Minister is doing very well in his new post.
What about Owen?
We are talking about the new Minister of Finance now, and I think he has kicked off exceptionally well.
I agree with the hon member for Umbilo that from the nature of the case, and under the circumstances, the hon the Minister will have to introduce certain unpopular measures, but I believe that in the present situation the country will welcome them and accept them.
†The hon member referred to the pending introduction of perks tax. I am very worried that at present—we are due to hear the final details within a day or two—the public of South Africa is rather uncertain about the possible effects of the tax on perks which will shortly be introduced.
*I think that the South African public— and I say this without wanting to be prophetic—is not aware how lightly it is going to get off in comparison with the advantage it enjoys in the present situation. The fact is that fringe benefits are taxable at this moment. For the sake of convenience all of us, here and outside the House, have chosen to avoid the subject over the past few years. I am convinced that when these figures are made public people will be surprised and will have to think realistically about what that tax will ultimately amount to in comparison with actual benefits they will derive from it.
In this respect I just want to issue a warning on one subject, since the hon member has now referred to it. I am worried that employees are going to insist that their employers now give them the additional amounts that they are due to pay in tax. I think that would sabotage the entire effort.
I should very much like to say the following, and I direct this specifically at the hon members for Yeoville and Sunnyside: It is so easy merely to confront the Government with criticism of the economic situation without looking very consistently and realistically at the actual state of affairs. I really think we should be much more positive. Let us join hands and make a genuine attempt to put right the South African economy which has been placed in its present position by a variety of circumstances. The most important aspect of such an effort of recovery is that the onus cannot rest on the Government alone to save the situation. It will require a partnership between the public sector, the private sector and this is very important— the hon member for Umbilo put this very well—also the public. We have to apply a three-pronged approach to get the South African economy back onto the right road. In the process we require the economic patriotism of these three sectors as never before in this country.
I have to concede at once that it has to start with the public sector. The Government should set the example. It should maintain a balance in creating the infrastructure, the Government machinery. It must ensure that those reins are neither too taut nor too loose. The Government, as the first prong of that three-pronged approach, should create or re-establish the necessary confidence.
As members of Parliament we recently had the opportunity of attending a very comprehensive information session on our economy. From that alone one could deduce, if one were to draw up a balance sheet, that this Government was going out of its way to restore the confidence essential to the economy. In saying that the Government should ensure the stability in which the private sector and every member of the public may operate, I come to the responsibility not only of that first prong, the public sector, but also to that of the second and third prongs. There is no doubt that the private sector and the public will have to adapt or orientate themselves in some way or other when there is a shift in emphasis in the demands made on the economic resources of the country. The private sector and the public are so quick to ask for things. Is that not tantamount to undermining the stability of the country? Stability in the country is just as important for the survival of the private sector as for that of the country itself. The three elements in the three-pronged approach will therefore have to join forces in building up a better future for a new South Africa.
In his opening address the State President referred to the necessity for the public sector to retrench staff, limit salaries and so on. There is abundant proof that it is doing so already. If the public sector, as the first prong, can do it, I think it may justly claim that the private sector should follow suit. We have many thorny problems in this country. There is a heterogeneous population including a First-World and Third-World component. It is difficult enough in such circumstances to develop a cohesive, positive and sound economy. The private sector will therefore also have to make its contribution. It will have to search its heart and ensure that its motives are genuine. We had the recent example of the value of the rand falling so drastically and the private sector then making use of that situation quite legally. Was that really in the interests of the country as a whole, however?
Thirdly I come to the third prong of the three-pronged approach, the public. I fully agree with the hon member for Umbilo that an increasing responsibility will rest on every member of the public to ensure that he lives within his means and to know that he is not entitled to a greater portion of the country’s prosperity if he is unable to make a corresponding contribution. It is probably true that the country is poorer. I think we should rather say that we are “less well-off’. There are people in South Africa who are struggling, who are unemployed, but there are too many who have simply grown accustomed to having too much too easily. Most people in this country have a car, a house and a lifestyle that is too luxurious. In addition I think that today most people have become insensitive to prices. Our people will have to become accustomed to being satisfied with fewer luxuries. The worst thing of all is that when we began maintaining this standard of living, the average South African incurred enormous debts. I wish to associate myself with what the hon member for Umbilo said, namely that financial institutions in South Africa—there are exceptions—should bear a major portion of the responsibility in this respect. The hon member for Umbilo referred to credit cards or “plastic money”. I have said before that credit cards are manna to the irresponsible consumer. Sixty years ago ex-Senator Langenhoven made a remark which is especially apt in the present situation in which we have to do with so many liquidations, etc. He said: “Sal ’n man wat skuld maak omdat hy nie kan voorbly nie, reken dat hy met skuld beter sal kan voorbly as daarsonder?”
I wish to close by saying there will have to be a three-pronged attempt to get the South African economy back on the crest of the wave. These three prongs are the public sector, the private sector and every member of the public.
Mr Chairman, I do not intend to get into an argument with the hon member for Paarl. I merely want to point out to him that the state of the economy rests in the hands of the hon the Minister of Finance. He is responsible for the monetary and fiscal policy and has to guide the economy, and what happens to the private sector is the result of that guidance.
Forgive me if I wax sentimental for a moment. It is my intention to address the House today on second and third tier government and the implications of the recommendations of the Croeser Work Group on financial aspects relating to it. It is rather a quirk of fate that I talk on provincial government today, because exactly 10 years ago to this very day I had the pleasure of standing up in the Transvaal Provincial Council and making an announcement which directly affected the lives of eight of us sitting here today and eventually all of us sitting in this party. I am very pleased with what has happened in this regard over these 10 years.
Turning to provincial government, I want to point out that a lot of work has been done in regard to the future of these institutions. The Council for the Co-ordination of Local Government Affairs produced 6 voluminous reports, which I have here. It is a pity that this House has not yet had the opportunity to see these reports and to discuss them. Ten thousand manhours were spent by this council on these recommendations. What has the Government done about it? The Government has made certain recommendations which it is now going to implement. In order to ascertain precisely what the Government intends doing, one must read two very important statements made by the hon the Minister of Constitutional Development and Planning in his address to the Natal Provincial Council on 21 November 1984. We subsequently have to refer to the recommendations of the Croeser Work Group which appeared in a Press release of 18 December 1984.
It is absolutely clear to me—I can substantiate it and I think the Government will agree—that provincial councils will be phased out. The aspects that they are controlling will be removed from them and transferred to other bodies. It is clear from statements made that we shall eventually establish regional councils. In terms of legislation that was before us, and will come before us again, there will be eight metropolitan areas, four of which will come into operation fairly soon.
To substantiate the statements I have made, I want to refer to one or two comments made by the hon the Minister. I quote:
In his address in Durban in 1982, the Prime Minister said:
Therefore certain guidelines were laid down. It is clear that functions of provincial councils like local government will go to central government, as well as other matters dealing with own affairs which will be assigned to the three Houses that have been established and then to metropolitan and regional bodies as well.
To substantiate my argument further I wish to quote this statement made by the hon the Minister:
He even goes so far as to say that it is technically possible to extend the term of office of councillors for 18 months in terms of the relevant legislation. In those circumstances there will be a divestment of functions from provincial councils to other regional bodies. These will then be administered by metropolitan and regional areas, and there will no longer be provincial councillors. The provincial council as such may exist, but with an executive with some sort of administrative and executive authority that will be the sum total of what they will do.
Bearing this in mind on the one hand— and I do not think that anybody can gainsay it—I turn now to the financial implications. In this regard the Minister says:
Therefore it is clear that the recommendations made by Mr Croeser will have to be looked at in order to ascertain how the regional services councils will be financed, how those finances will be divided among the various regional services councils and how local authorities who have been waiting for many years will be provided with additional sources of revenue. In this regard we have gone through Borckenhagen, Driessen, Niemann, Browne and now Croeser.
Let us examine for a moment the Croeser recommendations. Firstly they talk about a regional service levy. That is a tax of possibly 1% on salaries paid by every organization in both the private and the public sector, which means that local authorities will pay 1% of their salary bill, the provinces will pay it, the Government will pay it and all businesses will have to pay it as well. Then we have a regional establishment levy which means possibly 1% of turnover in addition to the GST which has to be paid, and, in addition to that, for those who do not pay GST, on the floor space occupied by attorneys, doctors, factories, wholesalers and what have you to bring in that additional source of income. There can be no worse time in the economy of South Africa for these taxation measures to be imposed upon us. This will be the straw that finally breaks the camel’s back for the economy of South Africa. In this respect I need refer only to the press statements released last year by the CBD Organization of Johannesburg, who described the measurer as “punitive thrusts at local government”, and by the Association of Chambers of Commerce, who pointed out that this would reduce manpower requirements at a time when there was unemployment and would force other organizations to go into areas other than the regions where these measures applied. The Croeser recommendations do say that the taxation paid comes off income tax and will be applicable in the regional areas where they are situated. However, Sir, with the economy as bad as it is, we read that 350 companies in February are facing insolvency. The economy is furthermore being burdened by an increased petrol price and coal price and by increased transport costs. Furthermore, there are threats of another 2% being added to GST. How can the economy survive in these circumstances?
We also understand that a technical committee, a project committee, is being set up through the Croeser recommendations and the council for co-ordinating committees in order to establish finally how the regions will operate and also how the metropolitan areas will operate.
As regards taxation we have the Margo Commission. The hon the Minister has referred to it. Why, I ask, were these recommendations not referred to the Margo Commission? The investment part was, but not the entire recommendations. I want to submit that the recommendations of the Croeser Committee on the finances of local government are premature, firstly because local government has been extended to 1988. Provincial Councils are still operating but will be phased out either at the end of their term or, at the latest, 18 months thereafter. Now, if the Croeser recommendations are applied to the entire country, 1% will bring in R1 300 million, while if they are applied to the four regions, it will bring in R800 million. That is what the taxation is. In turn, the State itself, which has a wage bill of R400 million, has to pay R40 million on this 1%, a local authority like Cape Town will have to pay R1,5 million and Johannesburg will have to pay R2,7 million. It is a question of taking away on the one side and giving on another. I cannot understand it. It is clear that Provincial Councils are to be disestablished. They will no longer operate and members of Provincial Councils will no longer be there. Now, if one looks at the budget, one sees that the subsidies paid by the central Government to Provincial Councils—I can give details of each—amount to R4 500 million. Surely it is common cause that, when the Provincial Councils are not operating any more, it will no longer be necessary to pay the R4 500 million to keep those Provincial Councils going. If R800 million is required in order to finance local authorities, why then is it necessary to implement these taxation measures at this stage? Money will be saved when the Provincial Councils are disestablished and that money can be used to subsidize all local authorities.
I know that one question has been left over, namely the question of Black local authorities. With the granting of freehold title, Black local authorities have amortized the houses in their areas. They are 30 to 40 years old. The time has come for the people who lawfully occupy houses in those areas for a certain time to be able to purchase them. In respect of freehold title Black local authorities could provide finance at assessment rates. The Black owners will be only too happy to pay their share of the levy on assessment rates, knowing that they enjoy freehold title. Then, when the whole picture emerges of the final dispensation with regard to provincial and local government, we can come along with some form of taxation.
I want to know what the Government is going to do with the R4 500 million presently being used to subsidize the four Provincial Councils in view of the fact that in accordance with the Croeser recommendations local authorities, the Government and the private sector are to be taxed. My plea, therefore, is that in respect of the whole issue we should apply a holding operation and that we should refer the matter to the Margo Commission to have the entire picture examined. The Government must then finalize the dispensation for the future as regards second and third tier government.
Mr Chairman, as a newcomer to this House I should like to take this opportunity to draw your attention for a moment to the high costs of welfare programmes and their efficiency. I should also very much like to take this opportunity to express a word of appreciation to the volunteers who maintain this service.
There is quite a bit of confusion regarding the function of a welfare organization. The objective of a welfare organization is to help people to help themselves. This implies that people must develop certain personality traits to be able to take their place in society in a meaningful way. I think all hon members are aware of the demands this makes on us. This means that the person who applies for assistance must be guided so as to be able to shoulder responsibilities. This means that such a person must be able to take his proper independent place in society. This also means that if he is independent, he must be able to differentiate between the choices he has, he must be able to take decisions and he must be able to implement those decisions. This also means that he must believe in himself and he must be able to develop a positive self-image. This also means that he must be able to function in relationships. That person must also be able to identify himself with the generally accepted values of the community. In this connection I am thinking of honesty, orderliness and neatness, for example.
To the welfare organization helping a person to help himself also implies that living conditions must be created within which a person can function. Here I am thinking of the dynamics in the family relationship, the marriage relationship or the work set-up. It also implies that facilities must be created to take care of dependent persons in the community. There must be amenities to take care of those persons who are permanently dependent. Here I am thinking of the handicapped, the mentally retarded and infirm aged persons.
From this very brief and superficial description of the objectives of a welfare organization it must be clear to hon members of this House that this is a very difficult assignment, and that we must understand that a welfare organization does not achieve very great success. One of the reasons for this is that a certain percentage of its persons in need of care have limited intellectual capabilities, and consequently it is not easy to persuade them to act in a responsible instead of irresponsible way. But I feel the time has come for us to look very realistically, with more realism and less idealism, at this function of the welfare organizations. I should like to mention the example of the Federale Vroueraad which raises an amount of R3,5 million annually. I believe welfare organizations are rapidly reaching a ceiling as regards the amount of funds they can raise from the general public and from the authorities. It is already a remarkable achievement to repeat this year after year, and I think hon members will agree with me that it would now seem to be virtually impossible to exceed a sum of this magnitude every year. I think we have arrived at a stage where we have reached the maximum. Consequently the time has come for us to introduce cost restrictions on assistance programmes. I believe it has become essential to assess the success rates of welfare programmes. According to these success rates we shall have to begin thinking of either altering the nature of welfare programmes or even of discontinuing them. I also believe that the time has come for our point of departure in the planning of welfare programmes not to be, as it is at present, individual applications, in other words, the person who approaches the welfare organization for assistance, but that community trends which have been scientifically researched should be used as a point of departure for the planning of these services.
This brings us to the next very important step and this that there must be a shift in emphasis away from expensive clinical therapeutic assistance programmes towards cheaper preventative development-orientated programmes. I think there are also other problems which should receive attention. There is the matter of the managerial skill of the person running welfare organizations. There is also the matter of the duplication of welfare programmes in the communities. In this connection I can just mention that a city like Pretoria must finance and maintain an infrastructure for three adoption services. I believe it has become necessary for attention to be given to these matters for the simple reason that we must bring about a more effective service. I also believe that this model which is at present being used in the White community, can be a frame of reference for the services now developing in Black and Coloured communities. In my opinion these matters consequently require urgent attention.
In conclusion I should like to express my appreciation to all the volunteers who maintain this service. These are people who accomplish unique achievements and I should like to mention the name of my predecessor, Dr Jannie Pieterse, first. He was not only my promoter and a highly esteemed colleague, but he also made a contribution in the welfare field as a volunteer, and I want to express my appreciation for that.
These women definitely have perserverance. The loyalty and enthusiasm with which they render their services, can serve as an example to us all. This afternoon I should also like to pay tribute to the unknown women who do not receive any recognition for their contributions, but who serve in the small communities. I have come across such women in all communities, including Coloured and Black women. Their only objective is to be of service to their fellow man and to promote the welfare of their children and communities. I am not being at all modest this afternoon when I say in this House that I should very much like to be counted among these women who in faith and confidence in the interests of our country and all its people turn words into deeds.
Mr Chairman, I take pleasure in congratulating the hon member Dr Venter on her exceptional speech. I believe that the House and South Africa as a whole have been aware of the work of this lady for many years now. It therefore gave me great pleasure today to hear someone take up the cudgels, especially on behalf of women. On our side of the House the hon member for Germiston District has done so on many occasions, and we are sure that we will be hearing a great deal from the hon member Dr Venter in future. Hon members of the House are most appreciative of the work done by the ladies, and as we now have someone of the hon member’s stature in the House, and in the light of her contribution today, I believe that those services will flourish. I wish her a long and prosperous term in the House.
As we are discussing the economy of the country today, I wish to refer to the early eighties when we had a sound growth rate. At that time the gold price was exceptionally high and our employment also on a sound level. In comparison the present economic conditions of our country are exactly the opposite. After four years the growth rate has plunged sharply, the economy is struggling with numerous problems and there are no prospects whatsoever of its revival. Conditions have deteriorated drastically over the past year. Manufacturers are feeling the effect of the sluggish demand for their products. The low utilization of production factors is also a cause for grave concern and is hampering our economic activities. Discouragement prevails in the commercial sphere and in many other sectors.
The hon the Minister has very recently taken over this portfolio and it is therefore not easy to lay the blame for these conditions at his door. I think it wrong to do so. We therefore wish to offer the hon the Minister an opportunity of at least showing that he intends doing what falls within his province to pull the economy together again. Our problem is that the deceleration in the tempo of production leads to underutilization of production capacity which causes costs to rise and leads to retrenchment. The Government has succeeded in shattering confidence and we shall have to see whether we can restore that confidence. The vacillating action of the Government—I will not say this of the hon the Minister of Finance at this stage— and certain statements that are made have inspired no confidence for the coming year. We are concerned about such rapidly escalating prices, accelerating unemployment and sluggish employment. Employees are hardly taken on any longer. Within one year the Transport Services retrenched 40 300 people …
That is not true.
Oh, do not go telling me that is not true. Sir, I think Professor Heese is right in saying that some of the hon members have such mixed blood that we should ask them whether they would not like to go to the other Houses. [Interjections.] I think they should go to the other Houses to join their soulmates. I wish to tell hon members that I will bet anyone in this House …
Mr Chairman, on a point of order: Is the hon member not casting aspersions on our colleagues in the other Houses by that remark?
Order! The hon member may proceed.
Mr Chairman, I shall answer him in a minute, but I first wish to give further attention to the economy. Forty thousand, three hundred people were retrenched and I challenge the little hon member for False Bay personally to ask the hon the Minister of Transport for the truth of the matter. They were retrenched.
Let us take something like interest. Interest rates have skyrocketed and the Government is too incompetent to curb this. Let us just look at the inflation rate. Let us look at the bond rates on houses. In 1980—one could say in the John Vorster era—one paid 9% to 12% on a home loan. Today the bond-raiser, subject to the same conditions, pays 22% to 25% for that loan without being able to do anything about it. A deposit made at 12% as an investment at a bank at that time is still earning 12% today—four years later. Why does the Government not see to it that when interest on loans rises, a corresponding increase on deposits and investments occurs bringing it to just 2% under the prime lending rate? Then we are being fair. Then we are controlling increases.
Looking at rentals we see that from 1980 up to approximately the present they have been increased by 70%. Older people find it very difficult to obtain accommodation and there is always, as Dr Venter said, those whom a nation should look after. There is always the 16% of a community which requires one’s care. We cannot change this and therefore we ask that we should examine it. I pity the hon the Minister of Finance. The economy is doing something this year that I have never in my life seen happening in any cycle. I have never seen simultaneous low employment, a high inflation rate, a high unemployment figure and a low production figure. It just does not work. It has never been like this before. Therefore we shall have to take note of it. This is a difficult time to say to somebody: “When is one going to emerge from that cycle?” There is no predictable time for this because we have never experienced such a cycle before.
I am concerned that we are so dependent on gold today. People refer to us as a singlecommodity exporter. We are just as interested in gold as the hon member for … I can never remember his constituency.
… Smithfield. The hon member for Smithfield spoke about the important role of gold. We cannot understand, however, why the Government pays the mines in dollars. Why does one pay the supplier of one’s country’s greatest export product in the currency of another country? Should we at this stage also request that the Deciduous Fruit Board be paid in sterling, or the coal mines in dollars or in German marks so that they may benefit from the difference in currency values? We should look into this problem. If someone tells me there is no difference, let me ask why the payment in dollars has been reduced to 50%, while the remaining 50% of the payment is made to the goldmines in rand? I put this question because you should remember that the mines pay their employees only in rand. They pay their taxes in rand. I do not wish to anticipate matters, but Americans are already calling South Africa the 51st state of America. I do not think that this is only as a result of American pressure on the country, but if we think so we should convert to the dollar instead of the rand as a means of payment.
Another cause for great concern is the fact that at this moment we owe R74 000 million, and that is without taking Government and semi-Government institutions into consideration. In terms of last year’s budget this means that we owe three times as much as our budget covers. We owe three times our budget. Do you realize that in ordinary terms a man owing more than he has budgeted for is bankrupt? Then we are bankrupt three times over.
Three times over?
Yes, we are in trouble three times over. Have you seen that Post Office deposits now have to go to the Reserve Bank to be stamped officially? That is a terrible thing to be happening in this country. I wish to tell the hon the Minister that I will not fight with him. He inherited a government no one wanted. [Interjections.] I wish to say one thing: The political situation in this country is unstable, and this has a great effect on the economy. There are people in the world who give South Africa only five years in the short term as a country from which to recover their money. This has never occurred before in our history. In the years following the Sharpeville incident we had a seven-year period. At present “you have a countdown for five years only”. The greatest problem today is that even abroad there is no confidence in our economy.
Concerning our exports, we find that the improved rand-dollar ratio has posed a problem for our non-gold exporters. Our production figures are not good enough for us to compete in European trade. We are experiencing one economic slump and setback after another. The great problem we have with our expenditure in South Africa is actually that the Government has created a political elephant which it is attempting to conceal in sheep’s clothing. Obviously it cannot succeed. [Interjections.] It is like a bikini. It only covers the most important parts, while the rest is exposed. [Interjections.] That is the case in our economy. The South African economy is going to the dogs. Once again, however, we seek refuge in emergency measures. We are now financing the country in terms of such emergency measures. Only the most essential aspects are provided for. What is happening today? How is the ordinary man in the street faring today? He simply cannot save any longer. There is no longer any chance of possibly building up capital by means of saving. This simply does not exist any longer. The man in the street no longer has enough money at his disposal to buy even the necessary food for his family.
Do hon members know that the State is already living off this country’s capital? That has been the case since P W Botha’s Government came to power. Do hon members know that the Government has also sold out Sasol? We built up Sasol’s capital over a period of 34 years; but that has already been frittered away by the Government. [Interjections.]
Yes, it is clear that the hon the Minister himself no longer knows how many shares the Government still has in Sasol.
No, surely that is a private company!
Yes, and the Government is living on the capital built up over years by this people. [Interjections.] I shall not take this subject any further at this point. I first wish to put a few questions to hon members on the Government side.
The first question I wish to put is the following: Do all hon members of this House agree …
… that the National Party is the best.
For goodness’ sake, keep quiet! Do hon members agree with the hon the Minister of Home Affairs in saying the Immorality Act and the Prohibition of Mixed Marriages Act should be abolished? [Interjections.]
Listen to that frivolous lot laughing!
Yes, but they should remember that there is an old saying that only the hyaena laughs when the lion feeds. [Interjections.] Only last night Prof Heese told us that some hon members on the other side had so much mixed blood in their veins that they had no right to claim that they were really White. Now I ask whether the time has not arrived for those hon members to be separated from those whose White blood is still pure. Has the time not come for those of impure blood to be sent to one of the other Houses? [Interjections.] Yes, hon members had better allow us to have this question out now. [Interjections.]
We have so many problems in this country with people who no longer wish to govern. We have so many problems with a Government which puts itself into power for a period of another eight years without acquiring a mandate from the people. [Interjections.] The Government has entrenched itself in its position of control for another eight years without the man in the streets having the right to tell it that it is governing by decree. The Government treats the population of South Africa with contempt. The Government treats the Whites with contempt. The Government scorns the people who put it into power here. [Interjections.] It is a disgrace. When the Main Appropriation is introduced in this House soon we shall move to have direct and indirect tax payable by Whites, as well as tax payable by companies controlled by Whites, administered exclusively by this House in future, while the Coloureds and the Indians similarly administer their own taxes in their own separate Chambers.
But that is self-determination.
Yes, that is self-determination. It is self-determination; those are own affairs. We are sick and tired of a Minister like the hon Minister Hendrickse saying he will freeze White pensions. Let me tell this hon Minister to keep his hands off White pensioners. Let him concern himself with his own affairs and levy taxes in his own House—not in this one! Let him keep his nose out of White politics. I warn him that I am not satisfied with his speeches and pronouncements outside the various Houses. I do not care if the SABC, week in and week out, bellows out what it is going to do for the Coloureds, the Indians and others, but I am telling these hon Ministers and this Government: Keep your hands off White pensioners! Keep your hands off the White children of this country. Keep your hands off the workers of South Africa, off the Whites who built up this country! We are tired of being milked by every group in this country and then being accused of discrimination. [Interjections.] Yes, I have regularly called the hon member for Turffontein over there a “grasboesman” (grass Bushman) and I call him that again today. That hon member, who lost his way in the politics of South Africa, is a leader in the NP today,
Mr Chairman, on a point of order: Is the hon member for Langlaagte permitted to call a member of this side of the House a “grasboesman”?
Was the hon member referring to another hon member of this House?
I did say so, Mr Chairman, but my time is up.
Order! Will the hon member for Langlaagte please stand and withdraw that.
I withdraw it. [Interjections.]
Mr Chairman, for the past few minutes we have been listening to a tirade. I am speaking as one who formerly hailed from the Boland. Reference was made to a certain percentage of our blood that is not always “right”. It is interesting that the hon member for Langlaagte analysed the forefathers of us on this side of the House so carefully, but I also happen to have a certain document here before me concerning the forefather of the Snymans, a certain Christoffel Snyman.
Leave me alone! [Interjections.]
Christoffel Snyman was the son of the free burgher Antonie van Bengale. I do not know which country this free burgher came from, but he was not White; I am sure of that. [Interjections.] If one begins paging through books, one often wonders how many of us would discover that our forefathers had odd names. I therefore think that we should perhaps be careful when we begin speaking about the percentage of Coloured blood in our veins. I think we all have a stroke of the tar brush.
How many do you have? [Interjections.]
I probably have about 12 strokes, but without tossing these stories about race back and forth across the floor of the House too much, I want to point out that unfortunately the figures the hon member for Langlaagte mentioned in his speech were not always correct. He spoke about the dreadful unemployment rate in South Africa. It is supposedly something dreadful; for example, the Railways has dismissed everyone. The latest report of the Reserve Bank indicates that as a reflection of the increasing levels of employment during December, the seasonally adjusted figure for registered unemployed Whites, Coloureds and Asians decreased from 40 000 in June 1983 to 29 000 in June 1984. [Interjections.] However, this figure then increased to 34 000 in October 1984.
This is not the only aspect in respect of which the hon member for Langlaagte has his facts wrong. He went on to say that we are totally bankrupt. I should like to refer once again to a table in the latest bulletin of the Reserve Bank which stipulates that South Africa’s total foreign liabilities amount to R45 billion, whilst the total revenue is R107 billion. [Interjections.] No, I shall come back to the CP again later.
The hon member for Yeoville invited the hon the Minister of Finance to make use of the Opposition parties as well as of the business sector. I am honest—talk is cheap, money buys the whisky—and I should therefore like to know how the hon the Minister of Finance can make use of the witticisms that came from those benches. I really do not know how he can make use of them.
Let us take a look at the facts for a moment. The hon member for Lichtenburg, the economist in the maize industry, says that the gold price does not matter. As far as the drought is concerned, he says that Australia is also experiencing a drought; it is not that bad. He has not done his homework. Calculated according to the average gold price between 1983 and 1984, we lost $1,4 billion. Prof Sadie says that if one uses the same method of calculating the price, we shall lose more than $6 billion on our gross domestic product in 1985. That is supposedly nothing.
The hon economist from Lichtenburg says that the drought is not that bad. If one really looks at the statistics, one finds that we lost R650 million on the exporting of agricultural products alone in 1984. Calculated on the econometric model, we lost R4,3 billion on our GDP in 1983 as a result of the drought, and the prospect for 1984 is R5,6 billion. We must see this in perspective against our total revenue of R104 billion. According to the hon member for Lichtenburg, all these things mean nothing.
Meanwhile, our real GDP increased by 6% up to the end of June, and by 4% up to the end of the year. Yet the hon members opposite say that is nothing; all of us in this country are dying of hunger! We are supposedly having such a hard time! The Opposition and some newspapers are conducting a campaign really to harm our country, but they do not base their arguments on facts. There are at least some industries in our country that are not having a hard time. Our export industries are doing well. There are certain sectors in agriculture that are also doing well.
Nor is the Government to blame for certain structural problems being experienced in the motor industry. We have too many models, and with these setbacks, there must be unemployment. It is not the Government’s fault. It is not the Government’s fault that many businessmen made short-term loans overseas without cover, with the purpose of escaping the Reserve Bank’s high interest rates. That is why many of our industrialists are having such a hard time, but it is not the Government’s fault.
Let us look at the Opposition, the PFP as well as the CP. The opposing views coming from those hon members would probably make every economist turn in his grave. The hon members do not want higher interest rates—no, that is very wrong—but nor do they want inflation. They do not want unemployment either. According to them, there is too much Government spending; there must be less Government spending. They must decide whether we are going to fight inflation—and the way in which it should be fought is by way of high interest rates. One cannot fight it in any other way.
The problem with the PFP is that its slip is showing. Its socialistic slip is showing. It is very interesting if one takes the speech of the hon the Leader of the Official Opposition and adds pieces from the speech of the hon member for Pinelands. One could also add bits from the speech of the hon member for Yeoville. When one has done that, the picture is complete, since the slip then shows considerably.
It is said that the Government “must end undisciplined spending”, but at the end of his speech the hon the Leader of the Official Opposition says “but we must have equal education”. What is that going to cost? Not nothing. If he wants to arrive at “equal education”, the same will happen here as in England. The State will not be spending only 27% of our GDP, but 42%. That is the position in England. According to those hon members, there is nothing wrong with the position in England. Then the hon member for Pinelands said that there should be more Government spending so as to reduce unemployment.
You want it separate but equal.
Then let me read to the hon the Leader of the Official Opposition from the booklet he wrote about his constitution. In his booklet on their constitution— they call it “The Constitutional Policy of the PFP”, he says:
This means that he is going to provide precisely the same services to Transkei and Ciskei—he does not recognize these independent states. We must start speaking frankly. The PFP must decide where it stands.
This brings us to the businessmen. I do not know quite where they stand. On the one hand, they attack the hon the Minister of Finance vehemently because they want him to pursue a completely market-orientated, free trade policy. The very next day, however, they say that there should be State intervention. There must be import and foreign exchange control. Then again they say that they like Dr de Kock’s philosophy of a free market system, but his problem is that he does not carry his policy through.
Now the hon the Minister of Finance must take that slip of the PFP, the economist from Lichtenburg and these opposing views of the business sector and solve our problems on the basis of these views.
When he became Minister of Finance of the USA, Mr Reagan did not have the problems our hon Minister of Finance has. The GDP of R104 billion for 1984 includes a negative element of R10 billion, but it has nevertheless grown, few are unemployed, and we are not that badly off. I do not deny that some of our people are struggling, since some of the industries are in fact being affected negatively. We must just be positive about the future. We will not always have a drought and lose R5,6 billion. Our exports will improve in the future. In these difficult times the Government and all of us support our hon Minister of Finance so that he can make a great success of his task.
Mr Chairman, I am glad the hon member for Waterkloof brought the debate back to economic matters, because I would very much like to tackle the hon the Minister of Finance on his recent pronouncements on the economy. I hope that hon member will receive answers to most of his questions in the course of my speech.
The hon the Minister of Finance, during his speech in the no-confidence debate and in his speech yesterday, spent a great deal of time blaming the falling rand exchange rate on factors beyond his control, for example, the drought, the lower gold price and the high value of the dollar. What he added as a sort of afterthought, was that the rand had also fallen against the currencies of our main trading partners because of our higher rate of inflation. What the hon the Minister omitted to say was that the one factor of those he mentioned which is directly under this Government’s control, is the inflation rate. It is for this factor that the Government has to take the blame. Inflation is under all governments’ control, but the difference between this Government’s handling of the matter and the governments of our main trading partners, is that those governments have brought their inflation figures down to respectable levels while this Government has neglected to do so.
Consider the factual background. For more than a decade, since 1974, when South Africa first reached a figure of 11,6%, we have been afflicted with double-digit inflation, and there is still no end in sight. During this period the USA—where inflation reached a figure of 13,5% in 1980— and this was their historic high—managed within two years to bring it down to a single figure. Today their figure is 4,2%. Similarly, the United Kingdom has brought its figure down to 4,7%, West Germany to 2,1% and Japan to 2,2%. Today socialist France, which has had six double-digit inflation rate years over the past 14 years, has an inflation rate of only 6,9%. These Governments have mustered the willpower to deal effectively with inflation and we have not.
When we talk about inflation, we are talking about a very real problem in the lives of South Africans. The elderly on fixed incomes simply cannot afford the ravages of inflation upon their hard-earned savings. Double-digit inflation has caused 100% distress among hundreds of thousands of poor White and Black South Africans. The question arises as to what can be done about it. What should we demand from this Government as its target rate for the rate of inflation in this country? How can it be achieved? After a lot of consideration of this problem—it exercises many minds—it is my sincere conviction—with one proviso which I will come to—that we in South Africa can and indeed should, target a maximum rate of inflation of no more than 5%, which would bring us into line with our main trading partners. I believe that this goal can be achieved within approximately two years if it is approached with determination and willpower. The following mechanisms are the ones which will have to be employed in order for us to arrive at this goal.
First and foremost, the money supply must be brought under control and it must be controlled according to a strictly managed programme of steady planned growth. The hon the Minister probably knows that an analysis of the money supply growth rate compared to the rate of inflation in this country and in those of our main trading partners shows an incontrovertibly strong positive relationship. The United States has a low inflation rate and a money supply growth of 9,5%. West Germany has a money growth of 1,0%, France a money growth of 5,6%. By comparison this country permitted the total money supply (Ml) to grow by 36,36% in 1984. That follows on the previous figure of 24,7%, the year before that of 24,0% and the year before that of 38,7%. No wonder we are in trouble. The Minister’s latest smokescreen about the velocity of the money supply does, of course, have some validity, but cannot hide the main fact that the growth of the total money supply in this country has been hopelessly uncontrolled by the Government in recent years.
Secondly, and this has been acknowledged, the Government and the authorities must convince the market of its ability and its determination actually to control the money supply. The level of inflation in the short term is heavily influenced by the market’s expectation of what the rate is going to be. It takes time to convince the market of this, especially if one has a track record like this Government has of making promises and setting targets and then hopelessly missing the targets that were set. However, it can be achieved within 12 to 18 months if quarterly targets are set and adhered to.
Thirdly, fiscal policy must be managed with total determination, which we do not detect from the hon the Minister. He announced that he was going to cut the overrun to 19%, but we now believe it is going to be back to where it was before his heralded big slashes. We will be watching for the figure when it comes out. If the Government were to set a goal of a maximum inflation rate of say 8% next year and 5% the year after, it would have to hold the main budget to that limit. It is not good enough for the Minister to say that he wants no real growth in budgeting terms. He has to come below the level of inflation. He cannot accept the level of inflation in advance and then say he is bringing inflation down. What we demand of him, is that the target is reduced below the present level of inflation, and not kept at the present level. This approach will have to be applied to all Government-controlled salary scales, regardless of pressures and complaints, from the top to the bottom, including our own salary scales. It must be set in advance at a figure which will be adhered to. If the whole bureaucracy knew in advance that its future salaries were going to be pegged to a preset level, this would have the effect of galvanising the massive State machine, including the gentlemen on the other side of the House, into playing their part in ensuring that those levels were adhered to, otherwise they would personally face the consequences.
Fourthly, administered prices, a massive lever in the hands of the Government, have to be subjected to those same limitations while they remain subject to price control. It is significant that the prices of administered commodities such as maize, bricks, eggs, bread, meat and dairy products have all risen faster than the rate of inflation, whereas those commodities which are subjected to competitive market forces such as vegetables, detergents and toiletries have all risen less swiftly than the rate of inflation. So the Government has itself fuelled inflation by allowing prices to rise.
In due course it will be better to do away with control boards and dismantle cartels. Such deregulation would make its contribution to lowering the inflation rate. However, while the Government controls those prices, let it control them at a low level of inflation.
I have no doubt that this kind of determined programme would be effective in reducing inflation, but one obviously has to make reference to the rate of unemployment which might go with this.
In this regard it is necessary to make 4 key points. Firstly, low inflation without unacceptably high unemployment has been achieved in South Africa during recent decades, and it can be achieved again. Secondly, inflation cannot stimulate real job creation except artificially in the very short term. Thirdly, real job creation can only occur when real economic growth occurs, but meaningful growth cannot be achieved in conditions of double-digit inflation. Fourthly, during the periods when the market’s confidence was being won over and was being established in the Government’s determination to fight inflation and really to control the money supply, there would be a temporary rise in unemployment until real growth began to take place. This pattern of a temporary rise in unemployment followed by steady job creation is evident in the patterns which have been observed in our main trading partners.
This leads me to the final point. We in this country lack a proper “safety-net” for the unemployed, and therefore it would be necessary, as part of a determined programme to fight inflation, to have a temporary safety-net for the unemployed. The creation of a safety-net of policies and make-work projects to avoid the negative consequences of rising unemployment, is possible and can be financed in a non-inflationary manner by diverting funds from ideological projects and utilizing the resources which could be released by a programme of deregulation of the economy and a pruning of what is a bloated bureaucracy.
We cannot underestimate the importance of this task. The economic mismanagement that this Government has perpetrated has had the effect of fanning the flames of Black revolt with things like rising township rentals, bus fares and basic foodstuff prices. We cannot add fuel to those fires. It is of the highest priority that this Government tackles inflation.
Mr Chairman, I think it is quite unique for someone to make his maiden speech in this House while his predecessor is still actively present in the same Parliament. I think it is equally unique for someone to pay tribute to his predecessor in his maiden speech here, while two former MPCs—I am referring of course to the hon member, Mr W T Kritzinger, and the hon the Minister of Constitutional Development and Planning—are also members of this House. There is an old colloquial saying: “A people that does not honour its leaders is not worthy to be called a people.” In George and Knysna we have a saying that an inhabitant of George and Knysna who does not honour our State President and his beloved wife, is not worthy of sharing that beautiful district with us. For 36 years this man has given of his best to this district and all its people. An unprecedented growth has taken place in George and its environs and I want to say today that he is largely responsible for it. Many landmarks—hon members who come from that area can confirm this— have been established in that region while he was the member of Parliament for George. There is the modern airport which bears his name. The most modern educational institutions are associated with the name P W Botha. But more than that, the way in which this man represented his electoral division served as an example to all of us. Over a period of 36 years, right up to the very last, no community was too small or too isolated to warrant a visit and to be addressed regularly; even if it was just to pay a visit and to shake a few hands. I should like to conclude this tribute. All I want to tell him this afternoon is that the fact that George and that region is one of the strongest growthpoints in our country today is a living monument to Mr P W Botha.
The Southern Cape is a region of many contrasts. The hon members who are regular visitors to that region will be able to affirm this. This does not only apply in regard to its scenic beauty. The Southern Cape is also a region of many contrasts in regard to its land utilization. The Southern Cape as a whole— I am speaking of the area between Mossel Bay and Knysna—comprises a total of 680 000 ha. Land utilization in that region can be analysed in round figures as follows: Fynbos veld and road reserves, 369 000 ha; agriculture, 181 000 ha; commercial timber plantations, 570 000 ha; indigenous forests, 51 000 ha; and town areas, 23 000 ha. Our watchword in that region must at all times be that we should make multiple land utilization our point of departure with a view to developing that picturesque region to its full potential. Much has been done over many years but much can still be done in years to come to ensure the optimum utilization of all the available land. This is an enormous challenge for which I do not have sufficient time available to enlarge on this afternoon.
In general this afternoon I want to single out one method of land utilization which, in my humble opinion, has the greatest potential to bring about development and also to stimulate other opportunities for development and to create the socio-economic climate allowing other methods of land utilization to develop to their full potential. I am referring to the development and the orderly management of commercial timber plantations. To my mind it is absolutely desirable that we should develop our timber plantations to their full potential. I should like to refer hon members to the Forestry Guide Plan of South Africa, dated April 1982. I would like to quote one of the main principles as accepted by the Permanent Planning Committee of the Forestry Council. This principle is, and I quote:
The Southern Cape is a traditional forestry area. The importance of forestry in this region can never be over-emphasized. The committee to which I have just referred has designated 28 preferential areas for afforestation in the country, of which the George area is one of the nine selected areas preferential areas in the country.
That region has a potential of 40 000 ha land available for afforestation. I am referring to land which is not suitable for agricultural purposes. We shall, however, have to bear in mind in our calculations that there is a limited market for the end-product in that area and that we shall have to create a market on which to dispose of these plantation products. At present a total of between 300 000 and 320 000 m3 of timber is being processed in the Southern Cape. I am now referring to sawtimber and poles. This, however, does not even get close to reducing the present stockpile in the timber industry. This leads to the absence of secondary industries which utilize wood fibre and chipwood. This in turn leads to the further under-utilization of the potential of these plantations. This is not only affecting private plantations but the State plantations as well.
Under private plantations we distinguish between major cultivators and minor cultivators. In regard to the major cultivators there are 5 800 ha of fellable trees waiting for a market; and in regard to the minor cultivators there are 1 035 ha of such trees waiting for a market. This represents approximately 1 500 000 m3 and 350 000 m3, respectively. It is easy for the major cultivators to get rid of their timber because the majority of them are also timber-processors. It is, however, the minor cultivators who are discouraged by this situation because their market is limited. At this stage almost the only market is for poles.
A survey made by the South African Timber Growers Association shows that 2 024 ha pine plantations in that area are owned by minor cultivators. If these plantations were to be managed on a sound, co-operative basis according to sylvicultural principles over a 27-year rotation basis, they would in due course be capable of producing a total of 69 000 m3, namely 42 000 m3 sawtimber, 12 000 m3 telephone and transmission poles and 14 000 m3 construction and fencing poles per year. To be able to do that, however, we would have to make a massive effort in regard to planning, extension and co-operative management. If we additionally take into account that according to the latest experiments, a 100% improvement in growth-rate can be achieved by means of phosphate applications, the hon members will realize that there is an enormous challenge in this field as well, during these difficult economic times.
Let me summarize: The timber potential in the Southern Cape is hopelessly underutilized as a result of the fact that there is no market for it. On the other hand, the bigger investors are reluctant to invest in the timber-growing industry because the present situation does not offer sufficient guarantee that they will be able to obtain the product required for their plants. As I see it the situation requires a working committee to plan and to programme the development of afforestation in the overall social context in the area.
Let me conclude.
†The forest first attracted man who established woodcutting posts at George and at Plettenberg Bay. The foresight of foresters over the past century, who initiated plantations on both State and private land, led to the forestry industry as it is today. Much of the industrial growth in the Southern Cape can be attributed to the forest industry. The tourist industry, for example, is an offshoot of the beautiful surroundings the foresters have maintained.
*I should very much like to see this precious treasure preserved for future generations. It would be as difficult to imagine George and Knysna without their beautiful forests, as it would be to imagine Johannesburg without its gold mines or Kimberley without its diamond mines. The forestry industry has a history of romance, of adventure and of pioneering work. Our early forestry pioneers prevented the completed destruction of our indigenous forests. I ask this Assembly’s co-operation this afternoon so that we can preserve these forests for our children.
Mr Chairman, I take great pleasure in speaking after the new hon member for George. I want to congratulate the hon member on his first speech in this House. We have known the hon member for many years in False Bay. There we came to know him as a particularly dedicated and hard-working person, and we know that he will also work very hard in his constituency of George and that he is going to be a very popular MP amongst his voters. We welcome him to this House. I should also like to support the hon member in his flattering remarks about the State President. I think other constituencies in this country can also attest to the State President’s benevolence and courtesy.
An half an hour or so ago the hon member for Langlaagte made a particularly unflattering remark about all the hon members on this side of the House. I sent the hon member a message in which I indicated that I was going to react to it, but I see that he is not here now. Perhaps one of his colleagues could go and look for him in a place where one usually finds him at this time of day.
The hon member for Langlaagte made a particularly erroneous statement when, in pursuance of his argument, he said that there was a lack of growth in the economy and in employment, that there was excessive Government spending, and he then referred to the SA Transport Services …
Mr Chairman, on a point of order: Can the hon member refer to another hon member of the House and say that he is probably where he usually is at this time of the afternoon? [Interjections.]
Order! The hon member may proceed.
Thank you, Mr Chairman. The hon member could be anywhere; perhaps he is even in his office.
However, the hon member for Langlaagte made certain statements with regard to the South African economy and he then said that the SA Transport Services had dismissed 43 000 employees over the past few years. However, no statement could be made in this House which is further from the truth or which could be more erroneous. The fact is that the little more than 40 000 posts in the SA Transport Services that have become vacant in recent years due to the resignation or retirement of employees simply were not filled again. That is the fact of the matter. If the hon member for Langlaagte knows of one person who was dismissed for reasons other than violating the code of conduct of his employer, I challenge to bring that employee here. I regret having to address the hon member for Langlaagte when he is not here, but that is not my fault. However, I think an hon member should make sure of his facts before rising to speak.
In the few moments still at my disposal I should like to discuss a few general matters, although it is not possible to develop an argument within the space of a few minutes. Firstly, I want to make the general statement that if one thing has become crystal clear during this debate it is the fact that the PFP and the CP are completely incapable of properly assessing the total economic situation in South Africa. A responsible Opposition does not simply attribute everything that it regards as being wrong to the Government. A responsible and honest Opposition would also afford recognition to those factors in the economy over which no person and no government has control. What is more, an honest and responsible Opposition would also say unpopular things in front of the voters, those things the voters sometimes ought to hear. A responsible Opposition would have predicted to the voters a year or perhaps more than a year ago that each of us—and that includes us in this House— would have to pay our share of the price for the lower gold price and the drought that is ravaging our country, even if it is proportional. Each of us receives a share of that bill. It is fitting that the Government should be criticized in areas where the Government deserves criticism. However, in the same breath, one must ask oneself why South Africa is being punished with an Opposition such as it has.
For a long time now the South African economy has not been a matter about which to philosophize. It has become imperative that we should see the total situation as it is, and this does not only apply to this House, but to each individual outside. It takes years to become accustomed to poverty, but it only takes a few months to become addicted to affluence. Today one can rightly say that South Africa has become addicted to affluence, and that too many of our people—too many of us in this House as well—ignore the basic truths in terms of which prosperity is earned. Until such time as every South African realizes that prosperity can only be achieved through dedicated labour and increased productivity at every level, our economy will continue to suffer from the shortcomings afflicting it. It is no use us bluffing ourselves and others around us that we work hard and that our productivity is in order. The economy does not allow itself to be deceived. In the economy one cannot reap where one has not sown. Eventually one’s bank statement ends up in the red and someone has to foot the bill. Unfortunately it is true that the bill has to be settled both by those who should really have received it and by those who really do not deserve it. It is therefore a pity that one has to generalize about a matter like this, but I do want to say that over the years we have made a few mistakes which we have to rectify.
We have become too dependent by far on our revenue from gold. We take our revenue from gold for granted and assume that it is a prerequisite for economic prosperity. If there is one message coming through to us clearly today it is that we must lessen our dependence on gold. We shall have to accept that every kilogram of gold and every ton of coal we export is a bonus and that every increase in price of those commodities is not necessarily of a permanent nature. We shall have to learn to accept that South Africa is a dry country and that we shall have to make increasing use of the stockpiling policy. We are too inclined to regard the good years as average years. We shall have to learn a new that wealth and prosperity have to be earned and cannot be demanded. We shall have to revive our national pride on a collective basis. This means that we shall have to be more attuned to extending our economy than to pursuing personal prosperity. I just want to mention one example. This also means that we shall have to refrain from driving fast and sitting back contentedly as long as we are not caught, and in the process, being collectively responsible for a few hundred million rands’ worth of additional oil having to be imported.
We shall have to re-evaluate drastically our requirements with regard to the standards we set for ourselves. Apart from that, we shall have to scale down our desire to enjoy prosperity and increase our ability to create and maintain it. We shall have to stop thinking that the only way out of our personal predicaments is the increase in prices or income. We shall have to stop regarding those factors that increase costs unnecessarily as cost inputs.
In conclusion, the leaders of Southern Africa will have to accept that one of the single greatest threats to economic stability on our subcontinent is irresponsible population growth. Our economic wagon simply cannot carry the load of unskilled labour; much less are we able to provide the necessary training for everyone who wishes to share in the prosperity timeously and promptly. That is probably one of the most serious issues we have to deal with on this subcontinent. It is a great pity that there is no way of excluding prevent those who are being undeservedly penalised, so that only those who act like parasites will then be punished.
If one looks at the stated objectives and actions of the hon the Minister and sees them in the correct perspective, it is clear that not only does he want to order our economy, but that he also wants to provide the incentives so as to fulfil the requirements I have just sketched.
Mr Chairman, I agree with the hon member for False Bay that gold as such, and in particular the rapid increases in the price of gold, should be treated as a bonus for this country and its economy. I think he will agree that that has been one of our main criticisms of this Government—that the gold bonanza has been squandered, and now we are in serious trouble. Equally, I would agree with him that particularly in times of economic difficulty, more work and higher productivity are to be encouraged wherever possible. However, I believe that the Government must set an example and cut out waste wherever possible.
We have pointed out that we wish to concentrate on the forthcoming budget in this debate. We want to talk about some of the things we believe the hon the Minister of Finance should be considering and the priorities he should be setting in that budget. Some of the priorities include instilling confidence in the economy, promoting growth, reducing inflation and increasing productivity. I particularly want to address myself to the subject of productivity this evening in the few minutes at my disposal.
To start with and to set the scene, I would like to quote from the most recent annual report for 1983-84 of the National Productivity Institute, in which, under the heading Productivity Perspective, they say the following among other things:
Further on, and referring now to South Africa, the article reads:
Changes in productivity can, of course, also have a considerable impact on the inflation rate. Compared with our major trading partners, South Africa’s productivity performance has been dismal.
Education and training are often put forward as a remedy. I believe that after decades of neglect, the need for providing more and better education has been acknowledged in more recent years. However, still more needs to be done, in formal, non-formal and informal education. I would appeal to the hon the Minister of Finance to ensure that education remains a top priority in the budget; and, insofar as Black education is concerned, that not only the grand total but also the real expenditure per pupil remain a priority and increase to more acceptable levels, that is, after allowing for inflation.
I would particularly like to address myself to the broader influences on productivity that I think need to be taken into account; in other words, not just the micro-elements such as skills training, work studies and in-house motivation, although all of these are certainly important in their own right. I wish to illustrate this by describing a day in the life of many Black workers in our country.
Many of these people are obliged to or do live a long way from where they work. They wake up at some time between four o’clock and five o’clock in the morning and prepare some meagre breakfast which they have before leaving home. In the dark they set off to work. The travel times are long, often involving changes in trains and buses, while travelling in uncomfortable, crowded conditions. In some places the conditions on the trains are extremely dangerous. They then hopefully do a full day’s work and return home late in the evening when it is already dark, sometimes under very dangerous conditions, not only necessarily because of the mode of transport, but also because walking through the streets back to their homes may be dangerous. In some cases they arrive home between 7 o’clock and 8 o’clock in the evening. They presumably then proceed to have their supper and whatever family conversation they are going to have and then go to sleep in a small four-roomed house shared by ten to 20 people. Once again that man wakes between four and five o’clock in the morning to restart the cycle.
This obviously does not apply to all the Black people in the country and I am not suggesting that. I hope, however, that the hon the Minister will know—he probably does—that this pattern of a working day applies to many, many people. I believe that the effects of this on a person’s quality of life and productivity can be devastating. Firstly, one has the problem of constant fatigue; secondly, of the destruction of family and social life—life merely becomes a working-sleeping cycle; thirdly, there is the problem of inadequate parental supervision, resulting in parent/child problems, as well as juvenile deliquency and high crime rates. These factors combine to contribute towards the abnormally high incidence of hypertension among Black people in this country.
I do not believe that we shall achieve satisfactory increases in productivity in South Africa until we improve the quality of life and the real life chances of the majority of our workers. I should like to draw a small comparison by referring to community medicine. Many doctors involved in this field, now and in the past, have often pointed out that one should not worry about the medication and injections, but that one should first see that there is enough food and clean water, because if nutrition and clean water are not adequate, money spent on many medical activities is wasted. I suggest that there is a parallel here, in the sense that if a man suffers as a result of these broader problems, productivity training on the job will have a relatively small impact on him.
A similar thing applies to Black education. Hundreds of millions are being spent on school education, but we should ask ourselves how much of this money is being wasted because the children are not in a position to benefit from it. For example, many children arrive at school hungry, sometimes in the freezing cold of winter or, depending on the conditions, sometimes in the stifling heat of summer. Furthermore they sit in rooms with poor lighting. Under those circumstances, is the child going to benefit from what the teacher says and from the facilities in which hundreds of millions are being invested? I believe that these matters must be looked at and that the money must be found where it is needed.
The point simply is that if a person, an adult or a child, is weary, worried, hungry or cold, he is not going to be able to perform to the best of his ability. Increased productivity is of the utmost importance. Therefore I appeal to the hon the Minister: When efforts are made to encourage greater productivity, remember that indirect factors may have a greater bearing thereon than all the training and work studies put together. Do not lose sight of the wood for the trees.
Mr Chairman, following on the hon member for Cape Town Gardens I must say that one cannot altogether disagree with the overall aspects which he mentioned in connection with productivity. However, the last aspect which he mentioned may be somewhat simplistic. He does not take into account the positive aspects of many of the Government’s actions in this field. For instance, it is a pity that the hon member did not acknowledge that the Government is aiming to spend at least 8% less on personnel accounts in the following year. If one looks at the performance of the hon the Minister of Transport Affairs in connection with the increased productivity of his staff, one must agree that it has been a formidable achievement. It is a pity that these aspects of positive productivity advancement are not always acknowledged on the other side of the House.
*This afternoon I should like to touch on a matter which has been a topic of discussion and the subject of representations both inside and outside this House on many occasions. It concerns the issue of the Exchequer revenue the State earns from the liquor industry in South Africa. In the past representatives of the agricultural industry both inside and outside this House have pre-eminently succeeded in ensuring that the exceptionally strong links between the liquor industry, the agricultural industry of the Western Cape and the Exchequer enjoyed the exceptionally strong emphasis they deserved on the basis of the close ties with agriculture.
It is right and fitting for the Government to take into account the relative importance of agricultural industries when regulatory measures are adopted in the market-place, and when the State imposes levies by way of taxation, etc, on some agricultural and agriculturally-orientated products.
In the light of this I would like to ask the hon the Minister once again to take note of the fact that the winter grain area of the Western Cape, the Overberg and the Southern Cape, forms the basis of the beer industry which earned the hon the Minister of Finance almost two thirds of the excise revenue in 1984.
As a result of overemphasis, one easily loses sight of the fact that the products used by the various shared markets of the liquor industry are fundamentally agricultural products. In the case of beer it is a natural product, with the winter grain area of the Cape producing the most important fundamental component, ie malt. The total amount of R589 million earned by the Exchequer from beer sales in 1984 represents approximately 63% of the total Exchequer revenue from the liquor industry. To provide the House with a little more of a perspective, let me mention that this amount of R589 million is more than the total amount allocated in our budget to that of the South West Administration, plus their benefits derived from the customs pool.
From 1975 to 1983 the beer industry guaranteed a total increase of 349% in Exchequer revenue. This means an average annual growth rate of 23,2%. The beer industry is, in fact, responsible for the only growth in Exchequer revenue from the liquor industry. The importance of the beer industry to Exchequer revenue can therefore hardly be over-emphasized.
In 1978, when the barley producers of the Overberg and the Southern Cape joined the beer industry, in starting an enterprize to stabilize the provision of malt to the beer industry and to increase self-sufficiency on the domestic market from 25% to a target of 75%, it took a calculated risk to which the Government at that time, through the hon Minister of Agriculture, pledged its co-operation and support. Today, six years later, this joint venture already has a self-sufficiency level of 60% with the winter grain producers having saved the country R120 million in foreign exchange.
In the process the barley producers have received R113 million for their product from 1978 until now. The after-tax profit of the beer industry was R390 million. I want to congratulate the hon Minister of Finance on his share of R1 900 million from this venture. [Interjections.]
A lion’s share.
A lion’s share. Let me not neglect to add that the barley producers are grateful and proud of this record. We are grateful and proud of the contribution the farmers of the Overberg and Southern Cape were able to make in partnership with the beer industry. Today, however, I must also point out to the Minister that a marked increase in the rate of excise duty on beer could be gravely prejudicial to all the partners, namely the State, the beer industry and winter grain producers in the Western Cape.
As a result of the growing demand for quality barley and the stimulating producer price policy that has been operative over the past few years, a small surplus of barley products, which has not yet become a problem for the industry, has accumulated. If, however, the demand for beer should continue to weaken as a result of price-making, the surplus could become a problem. It could have serious implications for stability in all the industries. The South African consumer is mainly an established beer and natural wine drinker, and this market is particularly sensitive to price fluctuations. Thus in 1983 a price increase of 10% resulted in the demand for beer increasing by only 3,2% and Exchequer revenue only by 3,5% in comparison to 24% for the previous year.
Consumer behaviour is therefore of crucial importance, and that is why heavy taxation will have a damping effect on the sale of beer. Consequently, Exchequer revenue cannot simply benefit from an increase in the tax rate. A drop in beer sales would not only have a negative effect on Exchequer revenue, but would also negatively affect barley sales to the industry. In view of this I earnestly appeal to the hon Minister, in the interests of his own pocket and the stability of barley farmers, not to overutilize the beer industry as a source of Exchequer revenue when he presents his budget later this year.
From investigations conducted over the past few years it would appear that consumer behaviour, the sensitivity to price fluctuations felt by the various market participants and the effect of substitutes which have appeared time and again necessitate a cautious excise policy to best serve the interests of the consumer, the industry and the Exchequer. The winter grain industry is one of the few agricultural industries experiencing a period of relative prosperity and stability. It would be disastrous if this stability were to be disrupted by a barley surplus for which the discriminating excise policy on beer could be responsible. In my opinion the various participants in the alcoholic beverages industry, complement each other, and it is understandable that regulating measures would have to be introduced from time to time. The argument I am putting to the hon Minister is just that none of the participants should be taxed so over-excessively that they are, in fact, subsidizing other participants.
Mr Chairman, in the first instance it is fitting that we congratulate the hon member for Caledon on a fine contribution in the interests of his constituency and the farmers in that area, and on the contribution they are making to a particular industry in our society.
The hon the Minister of Finance has a very difficult task: On the one hand, the population—the voters—are continually insisting on better services that have to be provided by the State. There is great pressure on the Treasury for assistance as well, as has been the case recently. There is also continuous insistence on subsidies for some deserving cause or another. On the other hand, he has been blamed for the Government overspending the State’s finances. On the one hand there is jubilation about the goal in our Constitution, viz to promote private initiative and effective competition, and on the other hand, there is pressure on the State to provide more and better services.
Recently it has become necessary to blame the reason for the financial predicament we find ourselves in—or the supposed financial predicament we find ourselves in—on the State, by accusing the State of overspending. This may or may not be the case. As a matter of interest, I took the budget for the present financial year, paged through it and made notes on subsidies. It is surprising what is subsidized by the State. Hon members would be surprised to see the amounts involved in the subsidization of goods and services provided in this country. It amounts to several hundreds of millions of rands.
Whilst arguing for the abolition of the subsidization of goods and services, I am not arguing in favour of their summarily being abolished, since there is justifiable subsidization of goods and services. The subsidization of these people, people who render a service to others is, in my opinion, justifiable subsidization. However, I maintain that there is a tremendous disadvantage built into subsidization. A subsidy is merely money being taken from one’s pocket in the form of tax, and which is given back in the price of the product one purchases—if one purchases that product. However, one does not get back the portion of the amount one pays out in tax and which is used for subsidization, since there are costs attached to the subsidization of goods and services. In this respect I agree with President Reagan of the USA whose standpoint, when he was Governor of California, was that it was better for the consumer if he himself spends his income than for the State to take that income, or a part of it, and spend it on behalf of the consumer. His argument was that the earner of the income can spend it better than the State can spend it on his behalf.
If we look at the disadvantages of subsidies, hon members would probably agree with me that I am justified in appealing to the hon the Minister to take another look at this whole question of subsidies. The cost of subsidies, as contained in the budget for the present financial year, amounts to millions of rands. That is just the cost of subsidization, not the subsidization itself. The cost of subsidization is also taxation that comes out of the taxpayer’s pocket. In total, the tax plus the cost of subsidization could have been better utilized by the consumer than his getting back a portion of his tax in the form of a subsidy.
Another disadvantage is that subsidies cause the distortion of the market. As a Pretorian, Mr Chairman, you know how the subsidization of interest on home loans has distorted the prices of houses in Pretoria. Those prices are completely disproportionate to those in the rest of the country, and are simply attributable to the subsidization of interest by the State. This leads to the distortion of the market. In addition, subsidies lead to ineffective methods of production. We are producing ineffectively, since we receive a portion of the price we get free from the State. Who pays for this? The taxpayer. However, we do not consider that it is the taxpayer who pays for it, we think it is the State that is paying for the inefficient way in which we provide goods and services.
Furthermore, it leads to the production of goods and services on marginal land which is not suitable for production at a profit. However, since the State sees to the profit, we produce on land that is not suitable for the production of that specific article.
What is more, I regret having to say this, but subsidies as such give rise to tremendous abuse. No, let me withdraw “tremendous”. They give rise, or could give rise, to abuse. It does happen. I appeal to the hon the Minister to scrutinize the subsidization of goods and services carefully and investigate how much of this subsidization can be eliminated. The money that is spent on this can then be given back to the taxpayer. I am sure that the taxpayer will be able to use that money better than the State would.
Services, for example, social services, are subsidized on a large scale in this country. There must be no misunderstanding, however. When I ask for the abolition of subsidies, there are subsidies of social services that cannot be abolished. It is not subsidization in the ordinary sense of the word; it is assistance to people—as the hon member Dr Venter indicated today—who render a service to others, to the indigent, whether it is the aged, the underprivileged or whoever.
In association with the speech made by the hon member Dr Venter, I want to bring it to the attention of the hon the Minister that there are services rendered by the community that are socialized by the State. I want to give two examples. Nursery schools and maternity homes were run very efficiently by the welfare organizations of our country. I want to take the nursery schools as an example. In the early ’seventies the State, by way of the provincial administrations, took the nursery schools away from the welfare organizations and began running them itself. What happened? The costs attached to that for the State, which had to purchase land and erect buildings, appoint and pay staff, had to come out of the taxpayer’s pocket. This is a service the State has taken upon itself at great cost, that it has taken out of the hands of the welfare organizations which dealt with it extremely efficiently. I appeal to the hon the Minister to look at which of these services the State renders can be given back to our welfare and other organizations. We can give them back to the community, and in conjunction with giving back that responsibility to the community, we can also give the tax that goes with it back to the taxpayers.
Message from the House of Representatives informing this House of the concurrence of the House of Representatives in the Resolution relative to the appointment of a Joint Committee to enquire into and report upon the desirability of repealing the Prohibition of Mixed Marriages Act, 1949, and section 16 of the Immorality Act, 1957.
In accordance with Standing Order No 19, the House adjourned at