With your leave, Mr. Speaker, I should like to inform the House of the business for next week. On Monday the House will deal with the Vote of the Minister of the Interior, and thereafter it will proceed to deal with the legislation as it appears on the Order Paper. On Wednesday the Bill mentioned in Notice of Motion No. 1 will be dealt with, and for the rest of the week the House will consider the legislation as it appears on the Order Paper.

I have nothing to add to what I said on the subject of this Bill yesterday, except to say that I wish again to record my objection to the passing of this Bill.

Motion put and agreed to (Mrs. H. Suzman dissenting).

Bill read a Third Time.

Mr. Speaker, I move—

Bill read a Third Time.

Mr. Speaker, I move—

I rise to say briefly that we on this side will accept the third reading of this Bill. We do so because in principle we support the establishment of a communal council of the nature, if not the detail, which is basic to the Bill before us. We believe it is a council in which the Coloureds will be given an opportunity to accept responsibility for the administration of matters that are of particular concern to them. This we believe is a sound principle and, in so far as the Bill before us to-day amends the existing Council, we welcome in particular two improvements, if I may put it that way. The one is the enlargement in so far as the total membership is concerned, the increase from the existing 36 to 60 members. The second important improvement is the fact that this Council will now hold its sittings and its deliberations in public. Those are improvements of considerable value. From our amendments, and might I say also from our attempted amendments, I think we on this side of the House have made clear the further improvements which we believe can better the functioning of this Council. I will deal with them shortly.

The first is an adjustment in the ratio between the nominated and the elected members. During the Committee Stage we were able to discuss this matter in some detail. It appears that the hon. the Minister also intends that this ratio of nominated to elected members should be reduced as time goes on. We hope that that improvement will be forthcoming quite soon.

The second matter in regard to which we still have some concern is the absence of a literacy test when there is to be compulsory general registration of voters.

You, therefore, want to discriminate!

We believe that with compulsory general registration the absence of a literacy test is going to present a considerable number of practical difficulties. Further, we do not ourselves accept that when there is so large a percentage, unfortunately, of the coloured people of this country who are illiterate, one should apply the principle of one man, one vote, throughout the whole of the coloured population.

The third point upon which we still have hopes of improvements being made is the question of the freedom of discussion so far as this Council and its executive are concerned. At present the executive committee of this Council, the chairman and the members of the executive, will only be able to deliberate in private and to discuss their affairs completely on their own when the hon. the Minister or the Secretary or the Deputy choose at their discretion not to attend the executive committee meeting. It seems to me if one is going to pass this responsibility on to the Coloureds, one must indicate the confidence that they can have their deliberations in private if they so wish at executive level.

The fourth matter which arises, and still remains with us, is the practical application of the legislative powers now being given to this Council in general terms. One appreciates, and the hon. the Minister has indicated, that there will be teething troubles in regard to the exercise of these powers, and particularly in regard to finance and local government, where the possibilities of overlapping with other authorities are real, and one will look with interest to see how this Council is guided in dealing with this aspect.

The fifth matter which still remains open, even with the passing of this Bill, is the form of liaison which this Parliament will have with the Coloured Representative Council. There again, we assume that we will have in the near future an indication from the hon. the Minister whether that Council welcomes, as we hope it will, the recommendation that there should be liaison through a standing Select Committee of this House.

I want to conclude by expressing this thought. I do not believe that this legislation is anywhere near the end of the road as far as concerns the political rights of the Coloureds in South Africa. I am confident that the Coloureds will accept the responsibilities being given to them and will discharge those responsibilities. But the problem of having a say in the national sovereign Parliament of their country, and what form that say should be, will still remain with us. Whatever the form of that say is, the problem will remain with this House, and it will remain with the coloured people, and it is a problem which will remain with the South African nation, which has still to be solved in a manner satisfactory to all people in this country.

Mr. Speaker, unlike the hon. member for Green Point, who was speaking on behalf of the United Party, I am not going to vote for the Third Reading of this Bill. I am going to oppose it, as I opposed the Second Reading of the Bill. I took no part in the Committee Stage deliberations on this Bill. In so doing, I followed the line of action which I took when the Transkei Legislative Assembly Bill was passed in this House, and when the first Coloured Council Bill was introduced in 1964. I am against the establishment of those bodies in principle, not so much for what they are, but for what they represent, i.e. a deprivation of rights. I, therefore, was not interested in whether the Council consisted of 40 or 50 members, or 39 elected and one nominated member. As far as I was concerned, one cannot consider this Bill as a separate entity. It has to be considered in relation to the other two Bills which the House has considered. The three together represent, as far as I am concerned, and, as far as my party is concerned, a deprivation of rights of the coloured people. The hon. member for Durban (North), who is not here to-day, made what he thought was a great point. In fact, it seemed to me that it was the only point he tried to make. He certainly did not attempt to destroy any of the real arguments which I put up. The only point he made was that certain members of my party had suggested that the coloured people should use the council, once it came into existence. I am not prepared to give advice to the coloured people one way or the other, and what individual members of my party do is also entirely their own concern. But certainly, if one does say to the coloured people: “Use this council”—and I have no objection in principle to saying that, because it is a decision which they are going to have to make themselves anyway—it is, surely, exactly the same as telling coloured people that they should use the University College of the Western Cape, even though one opposes the establishment of separate universities as such, and even though one apposes the principle. [Interjections.] Of course it is exactly the same thing.

There is no alternative.

There is no alternative for the coloured people attending university either. If they want to go to university, and if the faculties are provided, they have to attend the University College of the Western Cape. The same thing applies here. That does not, however, mean that one gave the Bill setting up separate university education one’s blessing in Parliament, any more than one gave—at least I did not, although the official Opposition may have—one’s blessing to the setting up of separate amenities. One thereafter does not advise the coloured people not to use the amenities set aside for their entertainment, or sporting facilities. But that is a minor point, and I do not want to develop it any further.

The hon. the Minister said that the Bill represented a “new deal” for the coloured people. I think it is a bad deal for the coloured people. I would have considered a “new deal” for the coloured people to have been a deal which removed discrimination from their lives, and gave them equal opportunities.

Order! The hon. member is going too far. She is going beyond the scope of this Bill.

Sir, may I not reply to the hon. the Minister’s statement that this Bill represented a great new vista? “The sky is the limit for the coloured people”, he said. I only want to say that the sky could only be the limit if the coloured people were given equal opportunities, compulsory education and if discriminatory practices such as job reservation and group areas were removed from their lives. The Coloured Council has no right at all to deal with these issues. It may not touch on any of these vital issues. The sky is therefore a very low sky indeed. I would say that visibility is very limited indeed, as far as that sky is concerned.

The hon. the Minister also talked about universal franchise for the coloured people as being such a magnificent new deal for the coloured people. I pointed out that when the coloured people had some say on the common roll, however attenuated, and when the coloured people had some say in this House through separate representation, universal franchise was not considered for them. It was only when their real influence was removed from the politics and power structure of South Africa that the Government considered that they should have this great new deal of universal franchise. I say again, as I have said before, that this is cynicism, because, to give universal franchise for a council with little meaning is poor compensation for the deprivation of a right, however restricted, to have a say in the law-making body of South Africa. I was interested to hear the hon. the Minister reach practically lyrical heights about these new opportunities for the coloured people. He told us that it would be grossly unfair for people over the ages of 50 and 60—I think the age group he mentioned were the 50 to 60, and the over 60 age groups —to be excluded from participating in the council because they were illiterate. I must say that I could almost have thought that the hon. the Minister was a member of the Liberal Party when he was talking in that way. All of a sudden he was extolling the virtues of universal franchise, irrespective of qualifications and irrespective of literacy. I must say that this was something extraordinary. [Interjection.] It came also from the hon. member there, who says; “You want to discriminate”. The only sort of discrimination my party recognizes is discrimination as far as the actual ability to qualify is concerned, on the basis of the exercising of responsibility, by an educated and integrated industrialized electorate. If one couples qualifications for a vote with compulsory education, as my party does, then of course it is not discriminatory at all, because everybody ultimately will be able to qualify. I want to say that any of the faults of the separate roll system could have been remedied by increasing the number of seats, and in fact this Parliament originally made provision for such an increase. Any of the shortcomings of the common roll could easily have been removed by extending the franchise to coloured women and by extending it to coloured people outside the Cape Province and Natal.

Order! That is not under discussion now.

Very well, Sir, I shall leave that point, but I cannot tolerate any longer the arguments that this quid pro quo really means something for the coloured people. I am trying to give the House my reasons for this. Finally I want to say that the hon. the Minister said that the Government has never hesitated to cope with racial problems. He certainly said a mouthful there. He is quite right. The Government never has hesitated, not to cope, but to interfere. It has been guilty of interference in the whole 20 years of its regime in the political, social, educational sphere and every facet of life of the other racial groups. When it did not find any problems to cope with, it rapidly created such problems. The hon. the Minister was optimistic enough—perhaps I should say naïve enough— to say that this will be the last time that this Parliament will ever argue about coloured affairs and that in future this House will at least only discuss coloured affairs objectively. I have heard that before. It was an argument which was used in 1936 when the African people were removed from the common roll. We were told then that they would no longer be a political football and that the white Parliament of South Africa would be able to discuss native affairs, at it was then known, objectively. The point was emphasized over and over again in the Promotion of Bantu Self-Development Bill, which of course took the three Native Representatives out of this House. Lyrical heights were reached by National Party members who told this House that in future native affairs would be discussed on the most objective basis possible. Now we hear the same argument in relation to the coloured people. I am prepared to bet anybody in this House that, not only will we discuss coloured affairs in anything but an objective fashion, but, just as we have done in the case of African matters, African education, African employment, conditions in the reserves and conditions in the urban areas, we shall devote as much of our time as we have ever devoted to discussing in the most heated fashion and in the most contentions fashion and in the most argumentative fashion the position of the coloured people of South Africa. We will do so for one reason, because the four-stream policy does not mean anything. It cannot mean anything as long as the four streams ultimately merge into the one pool of the economic development of South Africa in this multiracial country. Therefore, for all these reasons, I shall vote against the Third Reading of this Bill.

Mr. Speaker, I regret that I once again have to differ from my friend, the hon. member for Houghton. Unlike her, I rise to record my support of this measure. I would like to say that I regret very much indeed that the hon. member should have sought this opportunity of again making some political capital out of a measure which I think—and sincerely think—is in the present circumstances in the interests of the coloured people. I think that the coloured people have long enough been made a political football in this country and that they do not deserve to be dragged further into the political mire, as the hon. member for Houghton attempted to do this morning.

What are the coloured people to do in present circumstances? We have had a whole series of debates in this House on the pattern which the Government has for them in regard to their political rights. They will no longer have any political representation in this House. The Government has decided that. At any rate, for the forseeable future, I cannot see them having any political representation in the sovereign Parliament of their own country. They have been deprived of that. In its stead the Government seeks to introduce by way of an experiment, because it can only be by way of an experiment, a representative council of coloured people themselves, giving them limited powers, it is true, but nevertheless powers, to deal with some of their own affairs. But, surely, the coloured people should be encouraged in that regard. Surely, this may be the first step that is being taken, a logical step, to give them some sort of compensation for what they have lost in the way of representation in this House. I do not for a single moment suggest that the council that has been established now will compensate the coloured people for the loss that they have suffered, but it is a step in the right direction, and, what is more—I am obliged to say so—this is something that the coloured people themselves have asked for. We have sat for many months in a commission which examined the political rights of the coloured people. Whilst the vast majority of the coloured people have asked for a continuance of representation in this House, not a single voice was raised by any of the coloured people opposing the enlargement of this council, and the idea that is adumbrated in this Bill. On the contrary, they supported it.

They never saw the Bill.

They never saw the Bill, but they knew the basic principles of this Bill, and every one of the basic principles in this Bill was supported by every one of the coloured leaders who appeared before us. I would rather take the advice of those coloured leaders than the advice of the hon. member for Houghton.

But I want to go a little further, and I would say that I would much rather take the advice of the Chairman of the local council of the Progressive Party than the advice of the hon. member for Houghton, because this is what Mr. Hamilton Russell, the chairman of the party, said in relation to this very issue, giving his advice to the coloured people. This is what Mr. Hamilton Russell, as chairman, said, and I would rather follow his advice than hers.

[Inaudible.]

Order!

But, I must rub it in, for obviously it makes no impression on the hon. member. “His reluctant advice to the coloured people now that they have no alternative,” said Mr. Hamilton Russell, and I want to emphasize it that they have no alternative, “is take what little you are given in the way of inferior political institutions, and use that insecure platform as a means for starting from the beginning to gain for yourselves restitution for political rights. Apprentice yourself to learn something of the trade of politics and administration in an inferior workshop. Try in this way to learn a trade you may be able to practice in some future generation.” I am prepared to accept this advice in preference to the advice given to the coloureds by the hon. member for Houghton. Whilst I feel that this by no means measures up to the loss that the coloured people have suffered, this Bill is a step in the right direction. If the Government will give effect to the promises made by the hon. the Prime Minister, the hon. the Minister of Coloured Affairs and by other leading spokesmen on the Government side to build up this council into something really worthwhile, I think that one will find that there will be a great response from the coloured people to follow the advice given by Mr. Hamilton Russell to enter into this apprenticeship and build themselves up to take care of their own public affairs. As far as I am concerned, I have no hesitation whatsoever in supporting this measure.

Mr. Speaker, where we have now reached the final stages of this measure, there is one outstanding aspect which strikes one, and that is the difference in heat and emotion evoked in this House and outside by the discussion of this measure, together with the two preceding measures which go hand in hand with this one and which were introduced by my colleague the Minister of the Interior, as compared with the heat and emotion generated four years ago. This strikes one, and one cannot but come to the conclusion that a very big crystallization has set in amongst our entire population in South Africa in respect of parallel development. Among both supporters and critics clarity, acceptance and understanding have developed in regard to this measure over these four years. The hon. member for Houghton did everything in her power outside this House to start an agitation against this measure and this political development. She failed hopelessly. No support could be obtained for that, simply because, as the hon. member for Peninsula rightly said, the Coloured leaders accept this matter. Only this morning I received a letter from one of the leading figures in the Coloured community, one of the leaders of the Conservative Party of South Africa, in which he promised his wholehearted support to this new Coloured Council and in the development being planned here to-day, and he did so in words such as the following—

That is the point of departure. I am not going to quote any further from the letter, but in it he also accords his full support to the appointment of members during the transitional stage and testifies to it that the Coloureds look forward to the development lying ahead. It is true that in this development the Whites are displaying a very great deal of confidence in the Coloureds. I said this on a previous occasion. In this matter we are also placing a great responsibility on them, and the question in future is in fact going to be: What are the Coloureds themselves going to make of this council? That will be the question. We heard disparaging remarks from the hon. member for Houghton in this House. The hon. member for Karoo referred to this Council as an “advisory committee, a council which has no meaning”. We heard disparaging remarks of this nature. But this is not the first time that institutions of this nature have been greeted in this way. Do you remember, Mr. Speaker, how the university college which, because of the standard attained by it, is going to become a full-fledged university in the near future, was called a “bush college”, a “tribal college”? No one still dares to call it a “bush college” to-day. That is why I want to say, without being prophetic, that this council will in future command the same great respect as the university college, but that does not alter the fact that what we are going to think of this council is going to depend on those Coloured leaders in the council themselves. Nobody wants to make a “village council” of it, least of all this Government, but the measure of respect commanded by this council in the future is going to depend on those Coloured leaders. I do not share the fear that they are going to come forward with unreasonable, agitatory demands. I know the Coloureds too well for that. They are reasonable, understanding people, but they will nevertheless have this responsibility. For our part, our officials will do what has to be done to keep the standard of that administration high. Our officials, who do not have to take a back seat to any other group of officials as far as their capability and devotion are concerned, will devote their energies to that end. But again it is going to depend on the Coloureds to what extent they are going to inspire their sons and daughters to join the Public Service and to take over this work. In this they will also have to be inspired by their own idealism, and in this we wish them everything of the best.

Finally, I just want to say this, and this is another important field which lies before this Coloured Council, namely the question of leadership. One of the problems of development among the Coloureds, as indeed among all young developing nations in the world, is that there will be problems of leadership and envy. If someone is appointed as a leader to-day, then he is run down to-morrow. Even the nation to whom I belong, did this in its distant past. This is nothing strange for any nation. It is not disparaging at all if I say it to-day in regard to the Coloured people. They are to-day at the stage where they lack respect for their appointed leaders. They may perhaps have the advantage of living together with the Whites in this country—they can draw upon our experience and follow our example. But I think the demands made upon them and the speed at which they have to develop are such that one can only hope that they will quickly pass through this difficult stage of developing a personality so that they may regard their leaders with respect, because they cannot expect that we as Whites should respect them and their Council if they do not respect one another. The Coloureds will have to be responsible and will have to see to it that the people they have chosen, and are still going to choose, are accorded the necessary respect so that that body can be a respected institution.

I want to conclude by saying that in taking this step we have great confidence in them, we do so with great expectations of them; and I also do so in the greatest expectation that it will bring out the best in them and so increase the strength and the happiness of South Africa.

Motion put and a division demanded.

Fewer than four members (viz. Mrs. H. Suzman) having supported the demand for a division, motion declared agreed to.

Bill read a Third Time.

Mr. Speaker, various hon. members, including the hon. members for Orange Grove, Pinetown, Harrismith and Pietermaritzburg (District), have referred to the uneconomic services which have to be rendered by the Post Office. Of course these uneconomic services are fundamentally affected by the fact that the Post Office is now going to be run along business lines, and obviously the position will have to be reconsidered. I want to refer to what I said in my introductory speech, namely—

I now want to state that business principles are to-day regarded by the Railways as the nucleus of the statutory provisions in regard to the way in which the Railways has to be managed. The development and the promotion of the national economy is additional to that and not conditional. That means that where there is a conflict between business principles and the promotion of the national economy, the former will be the decisive factor. I think it is necessary to state on this occasion that the aims and the endeavours of the Post Office on this new business basis ought to be the same as those of the Railways and Harbours. I also think that this is the soundest basis. The business principle must be the decisive principle. It ought to be and to remain the aim and endeavour throughout. But having said that, I want to add at once that there will obviously be departures within this framework and from these endeavours, departures which already exist within the structure of the Post Office as an undertaking, departures which it will not be in the national interest simply to omit.

Firstly, I want to refer here to Post Office agency offices and smaller post offices in the country, particularly post offices which have to serve the public in remote areas. The obligation of the post office to provide services in these remote areas imposes a reasonably heavy economic burden on the Department. No recent economic study has been made, and precise cost calculations are therefore not available. It is therefore not possible to furnish the amount which has to be forfeited as a result of the above-mentioned uneconomic services, but it can be accepted that the joint amount of these services will be a considerable one.

There is a second service, the service in regard to farm telephones, which is also being run on an uneconomic basis. I may just mention that the loss in revenue during the 1966-’67 financial year amounted to approximately R2,047,000.

Is that on farm telephones only.

Yes. I think that in respect of these two services, post office operation in the rural areas, particularly in remote areas, and farm telephone services, it will be in the national interests to adhere to the principle that each of these services need not necessarily be a paying proposition on its own. Obviously we shall have to be careful in regard to the expansion of services of this kind. Nevertheless I am afraid that we will never be able to escape entirely from in fact allowing expansions of this nature in deserving cases. I want to express the hope that since the Post Office is now being placed on this purely business basis, this assurance will be satisfactory, particularly to members from rural constituencies.

I want to refer now to a service which I think should no longer be supplied by the Post Office on an uneconomic basis. Daily and other newspapers are being sent through the post in large numbers at the uneconomic tariff of a half cent per four ounces. The underlying reason for this is to be found in the fact that when the service was originally introduced the attitude was adopted that these publications served an educational purpose, particularly for people in remote areas. Although this argument cannot be valid to the same degree today, the newspaper tariff has remained unchanged for many years. However, if the Government should feel that this service—and I feel that it is one of the services which can no longer be borne by the Post Office on an uneconomic basis—should be continued at the inexpensive tariff although I think that the loss on this service can no longer be borne by the Post Office, then the Post Office should be recompensed for it by the Treasury.

Is there any possibility that the Treasury will pay such compensation?

This matter has not yet been considered; it can only be considered when this measure is adopted. In addition I think that the business principle on which the Post Office is now being placed requires that if Government policy entails that new services have to be undertaken by the Post Office in order to implement it, and that this has to be done at an uneconomic tariff by the Post Office, then the Central Government should compensate the Post Office for that. In other words, the loss to the Post Office for the service in question should be borne by the Treasury. This is in fact the policy which has been followed for many years in regard to the Railways and Harbours, and I accept that the same principle will be followed in regard to the Post Office as is being followed in regard to the other business undertakings of the State. In any case, clause 5 of this Bill provides that specific uneconomic services be subsidized by the Treasury where it is not in the public interest to make the tariffs for those services high enough to compensate for the cost of the service.

The hon. member put a question to me in regard to the free service being rendered to the meteorological office. Under its present dispensation the Post Office renders various services to other Departments without receiving any cash payments for those services. All that is being done at the moment is that ledger entries are being made for the purpose of the Postmaster-General’s profit-and-loss account in order to indicate the value of the service. The meteorological service is one of these. Because the Post Office is now being placed on a business basis, the Post Office Fund will have to be compensated for these services, as the hon. member apparently realizes himself because he subsequently referred to the relevant clause in the measure. The hon. member for Pinetown asked that the Post Office should lease buildings instead of erecting them with its own capital. The hon. member made a very good point, i.e. that the Post Office should rather rent buildings on an economic basis than use capital, which is required for apparatus, for the erection of buildings. I just want to mention that for many years it has been the policy to rent buildings where it was in the interests of the State to do so. Since the Post Office itself is responsible for renting its buildings, i.e. ever since 1963 when this function was taken over from the Department of Public Works, this policy has been expanded further. For the sake of interest I may just mention that of a total of approximately 2,151 buildings which are controlled to-day by the Post Office itself, no fewer than 1,350 are rented buildings. It is particularly the smaller buildings that are being rented, and it is not always possible to rent large buildings on an economic basis everywhere. These have to be specially erected in order to meet the special requirements of the Post Office. In the case of normal office accommodation in the cities, it is in fact possible to rent spacious accommodation in business premises.

The hon. member stated that capital should be spent on equipment rather than on buildings. Automatic telephone exchanges consist of apparatus which has to remain in service for many years, and there must be the assurance that the buildings in which this equipment is accommodated will be at the disposal of the Post Office for an unspecified time. I think the hon. member for Pinetown understands the position quite well. The apparatus is very expensive and the costs of the building in which it is being accommodated is only approximately 15 per cent of the costs of such an automatic exchange. In such cases it is therefore not practical to make use of rented buildings. I gladly give the hon. member the assurance that the Post Office will continue to consider renting more buildings where it is a practical, and the most economic arrangement.

In addition the hon. member asked the Minister to give the Post Office Savings Bank a “new look” and to consider to what degree the existing system has become obsolete. He referred to the position overseas where the Post Office bank is the bank of the ordinary citizen, where the ordinary citizen opens a post office savings account into which his employer pays his salary and from which the savings bank pays the employee’s accounts. Of course, this is all done electronically, as the hon. member said. I want to point out that Britain only recently introduced automation in certain of its post office activities. The South African Post Office sent a group of experts overseas to institute an investigation into electronic apparatus for use in various of our post office activities, including the savings bank. When the activities of the Post Office Savings Bank have been automated, it would be possible to do the work more rapidly, and on a more streamlined basis. Then, too, consideration will be given to making stop order and transfer facilities, which are now only available to the Government sector, available to the private sector. The arrangement to which the hon. member referred, whereby a person’s employer can pay his wage into a post office account and by which means the accounts of the employee, can, upon his instructions, be paid by the Post Office Savings Bank, is the so-called giro service or postal cheque system which exists in various European countries. In some countries the savings bank and giro service is part of the same system. Considerable investigation has gone into the possible advantages of such a service in South Africa. Such a service can only be introduced after very careful consideration, and at the right time, if it does in fact become apparent that it will be of benefit to us.

I come now to the most important objection on the part of the Opposition to this Bill, and that is the question of the Staff Board and the powers which are being granted to the Staff Board. By way of clarification I just want to reiterate what the actual position is at present. In regard to this objection I want to point out that the Staff Board, which was introduced in 1963, was not an autonomous body. All that happened was that the Public Service Commission delegated some of its powers and activities in respect of the staff of the Post Office to the Post Office Staff Board. What is more, that Staff Board could only exercise these delegated powers if they were unanimous. If they were not unanimous, the matter had to be referred back to the Public Service Commission. The power to make recommendations in regard to salaries and conditions of service was of course not delegated to the Post Office Staff Board. As far as the Bill is concerned, the Staff Board as now acquiring in respect of the Post Office staff all the powers of the Public Service Commission over the Post Office staff, with only one exception. We must understand very clearly that there is a very important difference between the Staff Board which was established in 1963, and the Staff Board which will now be established in terms of this Bill. Where the Post Office Staff Board in 1963 was not an autonomous body, this body will now be autonomous. We must not try to minimize the significance of this. The fact of the matter is that it is a very important step forward, as well as a step which can take us very far. We must be grateful for having, at this stage, already made such progress along this avenue and in this direction. The exception deals with one matter only, i.e. where the Public Service Commission still has a say, and that is in regard to the salaries and conditions of service of the Post Office staff. We must not try to complicate matters now or see all kinds of imagined dangers in regard to this matter; we must confine ourselves to this matter. It deals with the salaries and conditions of service of the staff.

Does that include the Post Office structure?

Of course that is included therein. Recommendations from the Staff Board as the hon. member quite rightly stated, cannot be carried out unless the Minister of the Interior and the Minister of Posts and Telegraphs are agreed on it. Obviously the recommendations of the Public Service Commission are also necessary in this matter. But what does it really mean when one Minister has to act in consultation with another Minister, or other Ministers? It means one thing only, and that is that the Cabinet must decide on the matter. We must see this matter in a very clear light. Even if the Staff Board of the Post Office becomes entirely independent of the Public Service Commission, the Minister’s powers are still limited to a certain extent. In fact, no Minister can act unilaterally. Although the Post Office is becoming a business undertaking, the Minister cannot act as a dictator. Nor is this the case in the Railways, although it is a business undertaking of the State, which is independent of the Public Service. It is nevertheless obvious that the Cabinet takes joint responsibility, and it is obvious that decisions in regard to salaries and conditions of service, which involve such important matters, have to be taken by the Cabinet. I do not know why the hon. member for Orange Grove stated that my powers are limited because the Post Office Staff Board will not have the only say in regard to the salaries and conditions of service of the Post Office staff. He said here yesterday—

Sir, you cannot take it amiss of me, but if one person knows the nature of another person as we know the nature of the hon. member for Orange Grove, then all he is doing now is to prepare the way for the day when I come forward with any amendment to this Bill and he can stick out his tongue at me and say, “I told you what was going to happen, did I not?” It is very easy for a man to say that a certain thing is going to happen, if he sees that developments are tending in that direction. It is not difficult to do that. I want to tell the hon. member that he will not convince me in regard to these matters. He is trying in vain. I stated this quite explicitly when I introduced the Bill, and I asked hon. members to take note of it, but apparently they have not done so, and for that reason I am going to read it to them again. I said—

So, the hon. member did not put forward a standpoint of his own in regard to this Bill. This was my standpoint originally—

Now I may just inform the hon. member that I have already given attention to the matter and that I am still doing so. But the hon. member must at least be fair towards me. Scarcely two months have passed since I took over this portfolio, and I have had to acquaint myself with all the affairs. I would be the last person to stand in the way and delay this Bill any further. Therefore hon. members need not, and the hon. member for Orange Grove least of all, be afraid that it is necessary to convince me in regard to this matter. But I want to state very emphatically, with reference, too, to what the hon. member for Simonstown said about the possible introduction of amendments in regard to this matter in the Committee Stage, that I think that it serves a good purpose that the Bill is being introduced in this way in order to afford us the opportunity to try out the matter in practice so that when amendments have to be made all points of friction can be eliminated at the same time.

The hon. member for Simonstown saw this matter very clearly. He said he regarded it as a transitional stage, and I think that we should also see and accept the matter in this way. If experience in practice indicates that the arrangement in regard to the Post Office Staff Board can be rationalized even further in order to meet the requirements of the Post Office as a business undertaking in a more advantageous way, we shall give careful consideration to any amendments which can promote this purpose and such amendments will be submitted to Parliament without any delay. But I will not allow the Opposition to force me, with the consideration of this Bill, to effect precipitate changes in regard to this matter before I have seen through practical experience how the entire system works.

The hon. member for Orange Grove also asked whether it would be possible to discuss the affairs of the S.A.B.C. in the Committee of Supply of the Post Office, after this legislation has been adopted. I now want to inform the hon. member that as the Minister responsible for the S.A.B.C. the Minister of Posts and Telegraphs will report to Parliament on those matters for which he is responsible in terms of the Broadcasting Act, and will do so in the discussion of the Committee of Supply.

One little matter remains to which I want to refer, as a timeous warning to the hon. member for Orange Grove. He has already made the statement in which he tried to imply that the Post Office is now going to make a profit running into many millions. I pointed out to him yesterday evening that he was quite wrong. In addition I want to point out to him that he must remember that R14 million of the annual revenue of the Post Office— that is the amount we think will be collected as a result of the tariff increases on local calls—has in any case—it is an obligation and an undertaking made to Parliament—to be used on capital expenditure in order to improve the services of the Post Office. But he immediately saw it as an opportunity for setting up a dummy to shy at here, and to foresee how many millions of rands the Post Office would make, and then the hon. member in advance, mind you, notified me in regard to what should be done. He said the services should be improved, the same sort of argument with which I have come to know so well over the years in debates on the Railway Budget. The request is continually being made that services should be improved. Apparently there is this doubt in the minds of the Opposition: How should the services be improved, with or without capital? They were never quite settled in their minds how the services should be improved. But nevertheless I accept that they will, if they give this matter some realistic thought, realize that services can only be improved by spending capital. The hon. member stated that salaries in the Post Office would of course have to be increased. That is a very popular cry the hon. member is raising. He also stated that tariffs for trade and industry should be decreased. If that is the attitude of the hon. member, then I do not know where the money is to come from to do all those things. But I now want to say this to the hon. member for Orange Grove. Let us begin on a better basis than the Railways, and let us not repeat these arguments year after year. Let us not, in the Post Office Estimates, have the same ridiculous things the hon. member for Yeoville comes forward with each year in the Railway debate. Let us not repeat this ad nauseam. The hon. member for Orange Grove knows that he will receive one drubbing after another, just as the hon. member for Yeoville receives a drubbing each year from the Minister of Transport. Let us refrain from adopting that ridiculous attitude.

You will hear about the shortage of telephones each year until the matter has been cleared up.

When there is a real problem in the Post Office I have no objection to hearing about it. The tariffs for the Post Office—I just want to say this in conclusion to the hon. member for Orange Grove —do not distinguish between utilizers, and that is why trade and industry will not pay more for Post Office Services than the man in the street. In the national interests all tariffs of the Post Office must always be kept as low as possible so that everyone in the country, from the poorest to the richest, can make use of these essential services.

Motion put and agreed to.

Bill read a Second Time.

Mr. Speaker, I move—

The object of the Bill now before this House is to repeal the Usury Act of 1926 and to make provision in its stead for the limitation and disclosure of finance charges levied in respect of money lending transactions and credit transactions and for matters incidental thereto.

As hon. members know the question of usury has been raised in this House on many previous occasions, and the Minister has been urged to have this matter thoroughly investigated and placed on a satisfactory basis. The hon. the Minister of Finance consequently appointed a committee in March, 1967, to inquire into possible improvements to the Usury Act, including the administration and scope of the Act, and to draft legislation in this connection. This committee submitted its report to the hon. the Minister in December last year, and, as you know, the report was tabled in this House at the beginning of March. The committee proposed a new Bill to replace the Usury Act of 1926 and the Bill before this House at the moment is in all material respects the same as the Bill proposed by the committee.

In outline the proposals contained in the proposed Bill amount to the laying down of maximum rates for finance charges for both money-lending transactions and credit transactions, and to the disclosure of these rates to the public under certain circumstances.

Mr. Speaker, I want to emphasize at an early stage that this Bill makes provision for maximum rates, in other words, a ceiling, and that these rates should not be considered to be those which will necessarily obtain in practice. The premise of this proposed legislation is that in practice healthy competition will determine the actual rates which will prevail under this ceiling.

In contrast to the Usury Act of 1926 in which the emphasis was placed on the concept “interest”, the concept “finance charges” is employed in this Bill. Although the Usury Act contains a comprehensive definition of the concept “interest”, it nevertheless happened in practice that more was charged for money loans than the maximum rates laid down in that Act mainly because charges were levied, for instance, for administration, documentation, membership fees, etc., in addition to interest charges. In this way the maximum rates laid down by the Usury Act were in fact rendered ineffective. In order to eliminate this evasion, it is being proposed now to work with the concept “finance charges”. This is defined to include, apart from interest, all charges which a money lender or credit grantor imposes in extending a loan or granting credit. Stamp duties and certain other items are, however, excluded from the concept “finance charges” but it is the approach of the proposed legislation that these items are included in the principal debt.

As I have already said, Mr. Speaker, this Bill is applicable to money-lending transactions as well as to credit transactions. The Usury Act of 1926 was applicable to money lending transactions only, but specifically excluded commercial transactions, with certain qualifications, from money-lending transactions. The scope of the proposed legislation has now been extended so as to include credit transactions as well, i.e. hire-purchase finance transactions in the main. For practical reasons it is obvious, however, that certain restrictions must be applicable in this connection and the Bill consequently provides that credit transactions entered into by individuals for the acquisition of moveable property intended mainly for personal, family, household or farming purposes, fall under the proposed legislation.

The minimum finance charge rates recommended in respect of money lending transactions are: For amounts up to R100, 18 per cent per annum; for amounts over R100 and up to R400, 15 per cent per annum; for amounts over R400, 12 per cent per annum.

For credit transactions the proposed maximum finance charge rates are: For amounts up to R100, 22 per cent per annum; for amounts over R100 and up to R400, 19 per cent per annum; for amounts over R400, 16 per cent per annum.

Firstly, as regards the money intervals in this scale, they are, for practical reasons, higher than the intervals laid down by the Usury Act. In view of the difference between the prevailing conditions and those which prevailed in 1926, the proposed adjustment is, in my opinion, a reasonable one. The proposed rates for money lending transactions on the one hand and credit transactions on the other hand, are based on the rates the committee found to be applicable in practice. The proposed rates in both cases very closely correspond to the average of the current rates. Obviously, therefore, the rates will in some cases be less than the rates charged in practice, but when the general objects of the legislation as well as the generally felt need for some curbs to be introduced in this respect are taken into consideration, I regard the proposed rates as being reasonable ones.

As regards money-lending transactions, the proposed Bill maintains the existing arrangement that the legislation is not applicable to commercial transactions. The meaning of “commercial transactions” has been laid down by the courts in decided cases and no trouble ought to be experienced in this connection.

The reasons for proposing higher rates for credit transactions are, firstly, that there is a great need for consumer credit among an impecunious class of person who may be such a poor risk that he will normally not be assisted by money-lending institutions and consequently has to fall back on the credit of the dealer. Extending credit to this class of buyer obviously entails a big risk. Secondly, although specific security exists in the case of credit transactions in the form of the article which forms the subject of the transaction, this security is for obvious reasons very vulnerable. The money lender whose security, in cases when he deems security necessary, can come to no harm in his safe, is in a much better position. As regards the dealer, his security is in the care of somebody else who may, in all probability, neglect it. For the rest we may accept it as an axiom that the proposed rates for credit transactions are lower than the fixed rates for credit transactions prevailing in those overseas countries in respect of which we have gone into the position.

Mr. Speaker, the fear has been expressed that if restrictions were to be imposed on credit transaction rates, this might have the effect of causing prices to increase. This is a matter which has been looked into very thoroughly and no great danger was seen that the control over credit transaction rates might have this effect. In the first place the fact should be borne in mind that the public is price conscious whereas it is not finance charge conscious. I want to emphasize this point. In the second place we must not underestimate the importance of competition amongst dealers. Although there may therefore be a slight tendency for prices to rise under the circumstances, we are of the opinion that conditions prevailing in practice will ensure the maintenance of satisfactory price levels, and at the same time the public will be protected in what is a more vulnerable field.

In connection with the proposed rates, I should also like to explain that the Bill deals with nominal rates. Nominal rates are founded on an actuarial basis, which provides a satisfactory basis for purposes of comparison. For all practical purposes, these are the same, but less involved than effective rates because they do not include the so-called interest-on-interest factor. For practical purposes this factor is so slight that it may be ignored.

The proposed legislation makes provision for the compulsory disclosure of rates by money lenders and credit grantors who make a business of providing credit. In the first place they have to disclose in advance the rates charged by them to a prospective borrower or credit receiver if they are requested to do so. In the second place they also have to embody the rates as well as certain other information laid down by the Bill in every instrument of debt concluded between them and such a prospective borrower or credit receiver. The main object of having rates disclosed is to enable credit receivers to compare the costs of the different forms of credit on a uniform basis. Therefore this is a provision which fits in quite naturally with the basic idea underlying this Bill which is to afford protection for the public. As this is justified in particular cases, it is proposed to exclude certain instruments of debt from the provisions relating to compulsory disclosure and of these the most important are bills of exchange discounted by banking institution’s mortgage bonds over immovable property, and overdrawn banking accounts. In order to facilitate the disclosure of finance cost rates, it is the intention that tables be made available by the State by way of regulation. These tables will be of such a nature that it will be possible for a person, with any set of particulars, to read off the nominal rates. Consequently it is not envisaged that any problems will arise in this regard.

I may mention in passing that the Usury Act of 1926 contains a provision which lays down a maximum compensation of 5 per cent for any guarantee furnished. In the Usury Act there is, however, a certain shortcoming in that a higher compensation than 5 per cent for any guarantee furnished may be obtained under certain circumstances. This shortcoming is now being eliminated in that the present Bill provides that the maximum compensation is applicable to the amount for which the guarantor may be held liable on account of the guarantee.

The Bill also contains provisions in connection with default or deferment of payment, advanced payment, refinancing and consolidation of debt. These provisions are all of a regulatory nature and are essential for achieving the main objects of the proposed legislation. In addition the Bill provides for powers of inspection which may be exercised by the Office for Financial Institutions. The general approach of the legislation is that it provides protection for the public which any member of the public may enforce in the courts of the country. It is not so much that the proposed legislation will require continuous administration but that it has nevertheless been felt that inspections may be necessary in exceptional cases in order to determine whether the provisions of the Act are being complied with. As the Office for Financial Institutions has at its disposal an inspectorate consisting of trained accountants it is fitting that the powers of inspection be exercised by that office.

In conclusion I want to say that I am convinced that this proposed legislation is a practical approach to the problem of the limitation and disclosure of finance charge rates. It goes without saying, however, that in a dynamic economy such as ours the legislature will have to reconsider legislation of this nature from time to time. This is definitely a thorny subject, and in the belief that we shall be able to smooth out difficulties in the future as we come across them, I have no hesitation in recommending this proposed legislation for the consideration of this House.

It can be understood that important principles are involved in this Bill. The most important of these is the fact that credit transactions are included, whereas they were not included in the Usury Act before. After having read the report of the committee, and after the first reading of the Bill, I realize that there are in fact thorny matters which must be taken into consideration. I came to this conclusion as a result of various memoranda which had been submitted as well as different representations which had been made to me by people and bodies requesting interviews in connection with the details of this Bill. In the light of these circumstances, I came to the conclusion that it would be a good thing if the principles of this Bill could be discussed here. I want to say that I trust that hon. members will avail themselves of this opportunity to discuss the principles of the Bill thoroughly. They need not necessarily discuss the details, because I intend moving, after the second reading of this Bill, that it be referred to a Select Committee. The Select Committee can then go into the details of the Bill, because I am aware of the fact that the Bill affects many people outside. I think that through this attempt we shall find a more satisfactory solution to this problem.

Mr. Speaker, we on this side of the House support the Second Reading of this Bill. We are obliged to the hon. the Minister for having accepted the representations made by us to him to have this Bill referred to a Select Committee after the Second Reading. We do not propose to ask, when we discuss this Bill in the Select Committee, that the whole of the subject matter should be traversed again. We have the benefit, as the hon. the Minister has said, of the report of the Committee of Inquiry, which has covered a lot of ground. Some 43 written memoranda were submitted, and some 12 bodies gave evidence to the Committee. Since the Committee has attached to its report the proposed Bill, there has been considerable reaction to that Bill.

The Minister knows that Mr. Havenga appointed a Select Committee to go into the Income Tax Bill. Although he tabled the Committee’s report, this was subsequently referred to a Select Committee after agreement with both sides of the House. That Committee considered the Bill with senior members of the hon. the Minister’s staff, and one or two members of the original Committee. They did not go into all the evidence again, but, by dealing with the matters of detail, they were able to save this House a considerable time. I submit that this is a sensible way to deal with a Bill of this nature, because it is some considerable time since the legislation was last altered. The Usury Act was introduced in 1926, and that Act is now repealed by this Bill. The Usury Act of 1926 was altered in 1933. Since then there has been no amendment to that Act, and yet I think that both sides of the House will agree that over the last 30 or 40 years there has been a considerable diversification in the methods of paying for the hiring of money. The original Bill was for the amendment of the Usury Act, contemplating the fees paid for the use of money.

Over the years there have been various devices by financial concerns and individuals to try and mask the interest, to get around the interest charges, by applying other fees, other agreements, other charges so as to get what they wanted, and at the same time mislead the public. The object of this Bill is to try to protect the public. We want to see the public protected. On the other hand, you cannot protect the public against its own follies. Even when this Bill has been passed, there will still be people who will enter into transactions which they cannot afford. If the hon. the Minister doubts this, he can go to any house hold in the lower income groups, and he will find that they will have a better radiogram than he has got. They cannot afford it. He will find that the lower income groups enter into transactions that they cannot afford. Even though this legislation may be passed it will not prevent them doing so. There is no way to prevent them from undertaking obligations which are beyond their means. In that respect this Bill lacks something for which I do not know the answer. I do not know how the hon. the Minister can prevent people buying something they cannot afford. They will always find some way of getting to-day what they should wait for till to-morrow.

One knows that 40 years ago the average citizen even looked askance at a mortgage bond. Since then the private individual was educated in the ways of building societies, the way of mortgage bonds, and the way it would help him to get his house. Long-term credit for the necessities of life, such as furniture, sewing machines, and so on, was not considered the correct thing—these items were not regarded as goods which could be bought on credit. It was felt that one should save and pay cash for items of that kind. It was regarded as the honourable thing to do. But times have changed and people have got new ideas. People are to-day prepared to make sacrifices by paying to-day for to-morrow’s enjoyments in order to have them to-day—they are prepared to pay a fee for that. The hon. the Minister is endeavouring in this legislation to protect them by ensuring as far as possible that the money they will pay for borrowing money shall be limited to a certain extent.

Broadly speaking this measure covers various types of credit, namely personal loans, hire-purchase credit, over the counter credit, and leasing. These matters are dealt with in detail in the report. Personal loans particularly are covered. But the Minister will know it is very difficult indeed to cover personal loans unless there is some agreement in writing. I know that as Deputy Minister of Police the hon. the Deputy Minister will know that many of the altercations in the locations and the non-European housing estates are basically due to disputes concerning personal loans, loans not being paid or the agreed raising fees not being paid, and things of that sort. That sort of thing is rather prevalent in our non-European townships and it is causing concern among social welfare workers and the police. That sort of thing is almost like a disease. Yet no documents concerning the alleged transactions are available. Personal loans are dealt with in the report where it deals with so-called business transactions of bills of exchange. We find the following on page 15 of the report under paragraph 138—

As the Minister knows, this type of document is known as an accommodation bill. The report goes on to state—

We then find the following under paragraph 139—

Might I suggest for the Minister’s enlightenment if he wants information as to how accommodation bills are used he only has to go to a place known as Grey Street, Durban, and the Indians there will be able to give him a tremendous amount of evidence regarding what is done there. It is almost standard practice to run business loans and personal loans on the basis of accommodation bills. The one who can get to the roots of the accommodation bill problem among the Indian community in Durban will be a genius. I think they have forgotten more about accommodation bill manipulation than most people in this House ever learnt about it.

It is very difficult to get to the end of the string and find out about the hire charges or the charges made for the accommodation and ascertain with any degree of exactitude what is the position of the poor debtor involved in the transaction. While we see it is necessary for the Minister to introduce legislation to control illegal deals of that kind, on the other end of the scale there is the big businessman who sometimes needs accommodation loans to get options. That aspect is not covered in paragraph 136. No reference is made to it. Paragraph 136 says this—

At the one end of the scale we have these accommodation bills and on the other end of the scale we have the big businessman who wants to get an option and is prepared to pay up to 30 or 40 per cent for an accommodation of two or three days. I am quite sure if the Minister was able to get to the bottom of some of the transactions overseas recently in connection with the purchase of gold in anticipation of a rise in the price of gold, he would find that some people were no doubt paying a very high premium indeed for accommodation to buy gold in anticipation of the rise in price. In transactions of that kind I wonder if people should not be allowed to burn their fingers and learn the lesson the hard way, instead of having protection. These are matters which can be discussed in detail in the Committee Stage, or rather before the Select Committee. It will be seen that though the transactions are more or less of the same nature both transactions concerning the lending of money for a particular purpose for a fee and not lending money for the ordinary purchase of goods, the two extremes do demonstrate that there are certain matters which should be investigated by the Select Committee.

There is also the question of hire-purchase credit. As I said earlier, hire-purchase credit is the fee or charges which people pay in order to have goods to-day which they otherwise might have to wait for for two or three years before they can enjoy the goods in question. But they are prepared to pay the fee. Here again I do not see how one prevents the ignorant purchaser being “caught” by exorbitant charges. There is nothing to prevent the cash deposit on the signing of the agreement. The agreement may be perfectly clear.

One finds a non-European going into a shop in one of our principal cities, and this sort of thing generally happens in one of the back-streets, and an agreement is put before him laying down the various conditions, viz. the deposit, the charges, the monthly instalment, and so forth. When he comes in to sign the agreement, a witness is taken into the office with him and then he is told, “This is the office charge”, and he has to put down R5 or R10 cash as the signing fee. That is being done in more cases than the Minister may realize. The fee is paid, no receipt is given, there is no record of it, there is no reference to it in the agreement. The buyer is mulcted with this additional “charge”. I do not know how the Minister will overcome this matter. I do not think he can get around it. On the other hand, I think that this is an opportunity for pointing out to the Minister that, however watertight he may think his legislation to be, the unscrupulous man or shopkeeper will find a way of getting round it. I am not suggesting that all shopkeepers are unscrupulous. I am not suggesting that that is the general practice but it is well known that that is the practice, just as it is well known that there are some people who spend all their lives paying instalments under hire-purchase agreements. I know a man who for 27 years has been paying R40 a month. When he first got married he paid R40 for furniture, and then later on it was R40 per month for a car and now he is paying R40 a month for the furniture of his children which he gave them as a wedding present. He says: “I have always been used to paying R40 per month; why should I not do it?”

He does not want to be without it.

In fact, he would be lost if he did not have to pay his regular R40 per month instalments. There are many people who live like that. There are many people who keep their houses furnished up-to-date by means of hire-purchase agreements. As soon as the one agreement comes to an end they look around for new furniture or something else and they live with the perpetual imposition of instalments and they are quite happy to do so. The Minister is not trying to stop that kind of transaction, although it adds to his worries when he deals with the question of inflation because the more consumer credit there is the more difficult it is for the Minister to solve this problem. But that is another matter.

Then we have the leasing agreements. When the hire-purchase agreement becomes an inconvenience or embarrassment, particularly in business circles, we have the leasing agreement, where the suggestion is made that the article is under lease. We know that in fact the whole basis of the transaction is that at the end of the leasing period some arrangement will be made whereby the person who leased the article will purchase it. Whether it is part of the agreement or whether it is a private arrangement made afterwards is another matter. That type of agreement is also contemplated in this measure, but I wonder whether the matter is as tightly controlled as it might be. These matters of detail can be gone into in the Committee Stage but in general principle I would say that we are agreed that this is a measure which has as its objective the control of financial charges and the disciplining of financial charges in order as far as possible to protect the public. To that extent we will support the Minister.

As the hon. member for Pinetown informed this House that the Opposition supported this Bill, which we naturally welcome a great deal, I do not intend making any remarks on any of the aspects of his speech. Before I say a few words about this Bill, I should like to put it on record on this occasion that the hon. member for Pretoria (Central) persevered for many years in his pleas for the amendment and the extension of the scope of the Usury Act. In the report of the committee of inquiry reference is made to the pleas made in regard to this matter from time to time by him as well as other hon. members—and here I am thinking specifically of a speech made by the hon. member for Durban (Central), which I recall very well.

Our Usery Act is 42 years old. The first thing which strikes one about this is that the financial and economic conditions in South Africa have changed beyond recognition during this time. The needs and circumstances of 1926 were restricted and simple. The person who had money lent money to other persons mostly on the strength of an ordinary receipt, which he then locked up in his safe for safekeeping. Some were even prepared to lend money without any receipt whatever, as I still have to lend money to-day to my colleagues in front of me and behind me and next to me. The interest on such a money debt was usually calculated at the simple nominal rates which were calculated and paid in the normal way. I think it would also be correct to say that the ones who borrowed money in those years were chiefly white persons. In addition it probably is true that a money debt in most cases arose from the actual borrowing of a sum of money for personal and other purposes. The approach of people to debt, also commercial debt, was different from what it is to-day. Smaller goods were purchased for cash or were paid for as soon as possible after those goods had been purchased. When a person wanted to incur higher debts or wanted to purchase more durable goods, he borrowed money and used that money for purchasing what he needed.

Mr. Speaker, I have given a very simple explanation of the position, and I do not pretend that this is a scientific approach, but I have done so because I want to indicate to what extent conditions subsequently changed. Therefore money debts chiefly arose from a money loan, and the Usury Act of 1926 only dealt with money lenders’ credit and not with sellers’ credit. Its object was to afford protection to the debtor after he had borrowed money. Since 1926 the position has changed radically. We have experienced an exceptional extension of credit in our country. Money lending has indeed become big business. This may be illustrated by pointing out the increase in personal loans between 1956 and 1966. In the first-mentioned year it amounted to R140 million whereas it amounted to R448 million in 1966, an increase of more than 300 per cent within one decade. This is one aspect of the matter. Another is that the 1926 Act did not lay down how interest was to be calculated, and this gave rise to, inter alia, the practice of calculating interest in advance for the full period of a loan and on the full amount of a loan, and to arrange repayments accordingly, which, naturally, differ completely from the old method of calculating interest on the balance due from time to time. In addition, as the hon. the Minister indicated, it has become the practice to charge, in addition to interest, certain levies which in fact represent interest, and which the borrower has to pay in addition to interest and capital payments. Such additional charges were made for commission, administration, documentation, inquiries and other services. The result of this was that the provisions of the Usury Act in respect of interest could be evaded and that the money lender could in fact obtain higher compensation for his money than that allowed under the Usury Act. From this, Mr. Speaker, it is quite obvious that in respect of money loans a need arose for another concept than “interest” when one thinks in terms of the protection of the public, and the concept “finance charges”, which include interest as well as all these additional charges, presented itself, and the object of this Bill is to lay down maximum rates in respect of these finance charges for the protection of the public. The object is to express the total amount of finance charges as an actual annual rate and to show that clearly in the contract, so that borrowers and consumers may know what credit actually costs them, and to lay down maximum rates for such charges.

Whereas I have now indicated the development and the change in the whole pattern of money loans, I want to indicate another development which has taken place, i.e. the exceptional development of consumer credit which, unlike personal loans, the Usury Act of 1926 does not cover. The enormous increase in sellers’ credit, like the increase in money loans, is bound up with the industrial development and the urbanization which accompanied such development in our country. South Africa changed over from a rural economy to an industrial economy and this brought new circumstances, new possibilities and new demands, also in the field of consumer credit and the financing of such credit. In this process there was a marked increase in the importance of durable consumer goods. Goods of this kind were produced on a large scale and by means of clever advertising and sales methods the public was convinced that it could not do without them. The urbanization of a large section of our people had the effect that these goods became virtually indispensable to householders. I have in mind such obvious things as refrigerators and electric stoves. Furthermore, more and more married women took jobs and the shortage of domestic servants increased. An aspect which is important in this connection, is the exceptional real increase in the national per capita income of the population. During the period after the last war—one may as well say during the 20 years of National Party Government— it increased by 50 per cent. In other words, the standard of living of the average South African, from all population groups, rose by 50 per cent. This higher income enabled him to spend more on durable consumer goods which was fully justified. I am thinking of how necessary it is for most people to own a car to-day. The result of these things was a large increase in consumer or rather sellers’ credit. Hire-purchase credit increased from R84 million in 1956 to R281 million in 1966 and open account credit increased from R136 million to R270 million. The question investigated by the committee was whether the Act and the idea of an all-inclusive finance cost concept should be extended to debts of this kind and the committee decided that that should in fact be done, as the Bill before us in fact provides. The consideration is that it is illogical to protect a man who borrows money to buy something but to refuse to protect the man who buys the same thing on credit. A further consideration is that the possibility exists that a seller may mislead the public by quoting low prices and when the buyer makes a purchase on the strength of these low prices, a large amount in finance charges is levied whereby the profit margin on the article is raised excessively. Regard should be had in this respect to, inter alia, the Bantu people who are becoming buyers of durable consumer goods to an increasing extent. Here, as in the case of money loans, finance charges include interest, but in addition to that, as I have indicated, also various levies and charges. For this reason, although other statutory provisions do exist in respect of hire-purchases in particular, the committee decided—and the Bill makes provision for this—that the provisions should also be applicable to credit transactions entered into by individuals for the acquisition of movable property intended for household, personal and farming purposes. In this connection I want to add that the practical experience of the relative institutions and financial institutions over the years, confirms the fact, and this was also clearly revealed by the investigation of the committee, that a higher compensation is charged and obtained in practice in respect of smaller loans than in respect of larger loans, and secondly, that there are differences between the rates in respect of money loans and those in respect of credit transactions. The charges in respect of credit transactions are without exception higher than those in respect of money loans. I think the reasons for this are convincing ones. There are certain fixed costs, particularly administrative costs, which have to be incurred on a small loan and which do not differ from those which have to be incurred on a larger loan. Such costs would for instance include the time which an official has to spend on the matter. The same forms are used and completed in respect of both loans and the same letters or accounts have to be written and forwarded in respect of small and large debts. The inquiries about guarantors in the case of a small loan cost as much as those in the case of a large loan. As regards finance charges in respect of sellers’ credit. I think there are two aspects. Where this is financed with expensive bank money, for example by the individual car-dealer or businessman, the costs are higher than the costs of for instance a loan to a person by a financial institution which receives its money more cheaply from the public on deposit. I also think that it is a fact, as the hon. the Deputy Minister said, that credit sales in commerce, inter alia, also in respect of the sale of second-hand articles such as motor vehicles, involve a much wider group of consumers as borrowers of money and consequently involves a considerably greater risk. In my opinion, therefore, higher rates in respect of small loans and amounts, as against bigger loans and amounts, are justified, and the same applies in respect of sellers’ credit as against money lenders’ credit. What these rates are to be, will probably be one of the matters which the Select Committee will have to settle.

I do not think that I want to say much more about the Bill. I am convinced of two things. Unfortunately we cannot leave the financial world a free hand in providing the consumer finance services in our country on the basis of sound competition alone without any legal restrictions. Our public, and this has been proved in recent years as was emphasized by the hon. the Deputy Minister, is not as yet finance charge conscious, but they are reasonably price conscious. Apart from this, a large section of our population does not as yet understand the complexities of business, and amongst all the many white merinos amongst us, there may be a single black sheep who will exploit these uninformed people when he has the opportunity to do so.

In the second place, in addition to everything I have said, it should be remembered that the financial institutions have rendered a great service to our country. No modern state can exist and make progress without a well-ordered credit system, and in so far as these institutions are drawing the savings of our people and are making them available for sound consumer spending by means of loans and other finance methods, they are rendering a fine service. The rise in the standard of living of the people of South Africa over past years would not have been possible without the role played by them and without the different methods of financing consumer goods and consumer credit. Therefore it is not at all the intention to throw out the baby with the bathwater. The very object is to make it possible for them to play their role more effectively. In so far as we shall be able to succeed in providing fair protection to our consumer public as well, we shall be making a contribution to the sound and well-balanced growth and progress of South Africa.

The principle of legislating against usurious interest rates is one which will be acceptable, I think, to all members of this House. Unconscionable and exorbitant interest rates have always been abhorrent to us, and South Africa, like most other countries has from time to time, had to put legislation on the Statute Book to stop these practices. The problem has been that existing legislation to a large extent has been easily circumvented, and I have learned quite a lot from the hon. member for Pinetown this morning. He seems to have a very intimate knowledge of what goes on in certain sections of the financial world.

I think he is their adviser.

I think our duty as members of this House is certainly to see that as far as the small man is concerned, he should be protected from what I suppose the hon. member for Pinetown would call the “financial sharks”. But of course the effect of this Bill goes very much further, and as has rightly been said, there are two new principles introduced in this Bill, apart from the question of interest rates.

Firstly, there is the change in the Bill which makes it applicable to credit transactions entered into between individuals, and I think it is important that we should remember that it is by individuals and that it is only in regard to movable property for household, personal and farming purposes. This is now brought within the compass of the Bill. Secondly, we have now brought into the terms of the Bill the question of leasing. These two principles can have far-reaching effects. We know, but not in detail, that the Association of Chambers of Commerce have gone on record that they object to these two new types of transaction being included in the Bill. In Commercial Opinion of September, 1967, they say this—

I do not know that in principle I agree with the Association of Chambers of Commerce. On the evidence that we have before us at the moment, which is mainly contained in the report of the Commission of Inquiry, I would certainly say that these two new types of transaction should be included in the Bill, but this will no doubt become clearer when the evidence is submitted to the Select Committee.

At this stage I should like to make two remarks, firstly to congratulate the gentlemen who drew up this report. I find it very comprehensive and interesting, and I also want to tell the Deputy Minister that we appreciate the fact that this Bill is going to a Select Committee. I think that is the right place for it. We are agreed on the principle, but I think there is still much discussion that can take place on the detail.

There is another aspect which was very briefly touched on by the hon. member for Pinetown. According to the report of the Committee of Inquiry into the Usury Act, on which this Bill is based, the outstanding consumer credit at the end of 1966 amounted to a very considerable sum, and of this amount personal loans were R448 million, and hire purchase credit was R218 million, giving a total of over R700 million. At the end of 1966 the value of outstanding leasing contracts amounted to R45 million. This comes to just under R800 million. So in this Bill we are not only dealing with the question of interest rates, but we are dealing with a vast sum of money within our economy, and this is one of the aspects which I think requires some further investigation. It is not only people that we are dealing with. This always seems to be the aspect when you talk about usury and high interest rates. It is not only the individual persons this Bill is dealing with; it deals with our economy as a whole, and I think the effects that the provisions of this Bill may have on our economy, dealt with in part in the report, could well be further investigated.

There is another aspect of this Bill, and that is the socio-economic aspect of credit. It is dealt with in the report on page 5. It was dealt with by the hon. member for Queenstown in passing. Paragraph 41 on page 5 says this—

That is the figure the hon. member for Queenstown gave—

So we have a further problem, the socio-economic problem. How far do we want to come down on the sale of hire-purchase goods or of borrowings which enable people to purchase goods? Because we can disturb the entire pattern of the country. This has to be taken in conjunction with the rates of interest that you fix, because there is no doubt that if the rates of interest allowable are too low it will affect the situation. If they are too high, there is a probability that the individual may be hurt or hampered. Apart from the socioeconomic aspect, there is a direct economic aspect, as has already been mentioned. We have had a great deal to say in this House over the past two or three years on the question of inflation. When you take a sum of the order of some R800 million and consider that in relation to our overall economy, it is quite clear that the curbing of credit or the relaxing of credit, which can be controlled by fixing interest rates, can influence the economy one way or the other. The report dealt with this at page 7, where it says—

It goes on to say that credit extended during a boom period reinforces the boom. Later it has to be paid back from current earnings during a less favourable period, and this in turn will intensify the downswing. So you have the situation where the fixing of the interest rate and the charges allowable under hire-purchase agreements can affect the economy one way or the other. My first inclination, before I read this report, was that we should have a flexible rate; in other words, it should be possible for the Government from time to time to determine a rate. The Commission dealt with this and turned it down, and probably, after further thinking, it is perhaps a little dangerous to have a fluctuating interest rate, when nobody knows what the situation will be. The Government always has the right, of course, to change the rate by introducing legislation.

Now, when you come to the question of interest and interest rates, normal commercial transactions of lending are subject to the Act and will be subject to the Bill. I wonder how far we are travelling the right road in making interest rates so far as commerce is concerned controlled by the Act. I know there are a great many transactions which will not be controlled, but a direct loan by Mr. A to X Company falls within the ambit of the Act. I will deal with this a little later, because first of all I want to deal with interest rates themselves.

In the past it has not been clear what interest really meant, and I think it is correct that in this Bill we have now by definition shown quite clearly what interest means. But we must not forget that by changing the definition from “interest” to what we now call “financial charges”, you have automatically reduced the interest rate. This is an automatic process now, because in the past, as has been said, interest did not include raising fees and documentation and all the other things that have been mentioned; so that while the permissible rate of interest was only 12 per cent, you were in fact able legally to charge anything from 15 per cent to even 18 per cent. So by virtue of the change of the definition we have in many cases automatically reduced the rate of interest. I could find nothing in this report to show that that factor had been taken into account, and it may be a vital factor, indeed.

Let us take a person who was borrowing at the rate of 12 per cent. He was paying 12 per cent interest, but the outside charges might have been 5 per cent. That might have meant 17 per cent. Now, without changing the other provision of the Act and by merely changing the definition, that is from interest rates to finance charges, one automatically reduces the rate he can pay to 7 per cent. So, there has already been a big change. This may have repercussions. But one does not want to do harm by fixation in legislation. It is true that there is a certain sector of the community who has to be protected. But we do not want to introduce legislation that, by virtue of its very nature, is going to harm people.

My hon. friend, the hon. member for Pine-town, raised the question of people who had bought gold, and would be prepared to pay 10 per cent to 40 per cent on short-term loans. So, while we want to protect the borrower, we do not want to harm him, because there are occasions when the businessman is prepared to pay high rates of interest for the benefits he will receive. In many cases, if he is unable to pay high rates of interest, it can be very much to his detriment.

It is a calculated risk.

Well, sometimes it is a calculated risk, and at other times it is a necessity. I know, for example, one of the biggest builders in this country who, in times of depression, was always prepared to borrow money at 15 per cent interest to put up buildings during that time, because he said: “I will reap my benefits in capital gain when the depression ends and the upturn takes place”. Now, he did three good turns. He did a good turn for himself, for the man from whom he was borrowing the money and he did a good turn to the economy, because in the period of depression he was expanding, he was building. This would not be permissible in terms of this legislation, because it is a straight financial loan.

Take what is happening to-day, Mr. Speaker. We know that the official rate for mortgage bonds—I say “official”, because that is a building society rate—is calculated at 8½ per cent. This rate has no relationship whatsoever to the rate that speculators are paying for money to build. I do not use the word “speculators” in a nasty context. These are people who are presently building houses for the community. They could not get money from the building societies in the normal way. What the position is at the moment, I do not know. But they wanted to continue building. So they, through a process of guarantees or deposits with the building societies, earmarked lendings and various other means, were and are paying up to 15 per cent or more to get money to build. Now, the 15 per cent they pay is for a limited period; it is not over the whole period of the bond. So in effect, over a 20-year mortgage the difference is—say they are paying an extra 4 per cent—negligible. It is a fraction of 1 per cent that the increase in the purchase price of the house must now include. But again these people are building houses for the people. So what we have to do, is try and find, what the late Minister of Finance used to call the “golden mean”, the balance between protection for the man who goes in with his eyes closed, although he is now given much more protection because he is to be told what the position is—nobody reads it, of course—and at the same time not to stifle development, because this development is as much in the interests of the small man as it is of the lender.

There is one other factor that might be taken into account. We have come to recognize our financial institutions in this country, after having cleaned up one or two by putting a few new statutes on the Statute Book, as so organized, that we are satisfied with their integrity and their service to the country. I wonder if somewhere along the line in this Bill the financial institutions might not be excluded from some provisions of the Act. What I am getting at, is this. I would like to see the financial institutions being the real lenders to the public, not the gentleman with the little office round the corner. I have forgotten which member it was who mentioned R5 and R10 notes, no doubt my friend the hon. member for Pinetown. We can well do away with these transactions, and the public will know they have a channel through which they can go and to whom they can go, where they know they are going to get a fair, reasonable and clean deal. As we have said in this House before, one can put statute after statute on the Statute Book; but one will never stop people who want to criminally get around the statutes. The honest man will say: “Ek is nou beperk”. He will act accordingly. If one wants to be dishonest, there is no law in the world that will stop you. The only thing that will stop one eventually is that one has a chance of being found out.

We welcome the Bill as far as the principles of the Bill are concerned. They are in the main acceptable to us. We are glad that the matter will go to a select committee, because there I think we will be able to iron out and deal with those points that have been and will be raised in this debate.

Mr. Speaker, the fact that the Opposition supports the principle of this Bill, as well as the quotations from the report, is very heartening, and it shows how necessary the amendments contained in this Bill have become.

The old saying goes, “There is no love lost in business,” and everybody always tries to negotiate for himself the best terms he can get. Well, in the first place, there will always be those who cannot hold their own against the sharp-witted businessman and who have to be protected. In addition there are those who may be financially embarrassed and who will find themselves in difficulties if they do not obtain assistance before a certain time. Those people usually do not mind what they pay for money. Those are the people who have to be protected. The legislation, and the amendments contained therein, now before this House, succeeds to some extent in achieving its object of affording protection to those people. The position simply is that everyone wants to make a profit in business; this, after all, is the principle. One does not engage in business for nothing. But that profit has to be limited. The old Romans had a very fine principle, i.e. the laesio enormis, according to which they tried to restrict excessive profit-seeking. In terms of the old Act of 1926 certain rates were laid down which could be charged in respect of money loans. For several years now that Act has not been changed. But times have changed and it has become necessary to amend that Act. But not only that; what is more, if we can adhere to financial control, we shall be able to combat inflation effectively. The hon. member for Park-town pointed out what amounts of money were involved in money loans and hire-purchase transactions. If one has regard to the fact that according to the report an amount of R501.9 million was outstanding at the end of 1966 in respect of hire-purchase transactions, and that an amount of R302.1 million was outstanding on open accounts, and if one has regard to the amount of money this involves, it has really become necessary to give attention to this Act. This should not be regarded as an Act which relates to a small number of people only, and which affects a small number of those concerned in finance only. On the contrary, it affects a very large number of those concerned in finance. The present Act merely made provision for money-lending transactions. But if one has regard to the fact that in respect of credit purchases there always are outstanding amounts and that interest is charged on those amounts, it is no more than fair that an attempt should be made to protect also those people who buy goods on hire purchase in order that they will not have to pay unnecessarily high rates of interest.

Arguments have been advanced that the provisions of the Hire Purchase Act will now be evaded and that the prices of articles will be loaded. But, Mr. Speaker, you can think for yourself: When our people want to buy any article from a shop, they do not go to the first shop and buy that article. One goes to a few shops, one compares prices, and in the end one buys where one can get that article at the best price. The truth of the matter is that the public does not know much about money matters. The public in general is not fully conversant with money matters; they do not know where to obtain money most cheaply and for this reason as well the public has to be protected as regards hire-purchase transactions and finance charges. Initially the object of hire-purchase contracts was, on the one hand, to make it easier for the buyer to buy the article and, on the other hand, to afford the seller some protection. The Hire Purchase Act gives the seller that protection, because the seller remains the owner of the article until the full price has been paid by the buyer. The practice of buying on hire purchase gained ground very rapidly. It has really become too easy to enter into a hire-purchase agreement and this has had the result that private spending by the public has assumed such proportions that something has to be done about it. One of the very fine principles of this Bill is the fact that private spending will be curbed to some extent as a result of this legislation having been revized. An article recently appeared in the Rand Daily Mail in which Dr. Franzen issued a warning and, inter alia, said—

This measure should not be interpreted in a way which would seem to indicate that it wanted to attract people to the banks or that the banks were to be benefited in that people would now have to go to the banks to obtain money. The intention here is not to harm or benefit some institution or other. As I see it, one of the broad principles of the measure is to place finance on a sound basis and to protect people who borrow money and buy on credit.

The question now arises, who are the people who borrow money and buy on credit more than others do? In this regard I should like to mention three classes of people in particular. In the first place we have the farming community. They probably are the people who buy more on hire purchase than others do. When one has regard to the tractors, vehicles and implements of the farmer and to the enormous amount he has to pay in interest and finance charges, one can understand why the farmer is pleading for production costs to be decreased. One of their big complaints relates to high rates of interest, high finance charges. They are one group of people who have to he protected against the high price of money. In the second place we have the Railway worker, the official, the labourer, people who would also like to raise their standard of living, but who do not always have the cash readily available for buying things. In order to acquire goods they buy on hire purchase. They too have to be protected against exploitation. One should like them to raise their standard of living and for that reason they should have the opportunity of acquiring those articles although they do not have the full purchase price. But they too have to be protected against people whom one can almost call “financial sharks”, as one of the previous speakers put it. The third group of people who really need protection is our non-Whites. They are a very strong buying force and they are fond of buying things. Every day one sees a non-white carrying a switched-on portable radio under his arm. They are anxious to have those articles and they do not mind what they pay to acquire those articles. The sellers know that they do not mind what they pay; consequently they often exploit them. They too should definitely be protected.

As regards the disclosure of finance charges, I should like to say the following. It has always been a shortcoming in the Act that no provision has been made for these charges to be disclosed. In future when a person sets out to buy something and sees what the finance charges are, he will possibly think twice before buying the article on hire purchase. If he badly wants the article, he will perhaps try to borrow the money from a friend or somebody else, or otherwise he will try to obtain the money for that article more cheaply. Under these circumstances the potential buyer may possibly argue with the seller to reduce the price or to obtain the article on easier terms. One of the fine aspects of this measure is that finance charges will now have to be disclosed.

The administrative costs in respect of money loans and credit transactions really differ to some extent. As regards money loans they also differ according to the amount borrowed. I think the hon. member for Queenstown also referred to these differences. Therefore it is necessary to differentiate between the rates of interest in respect of the different amounts borrowed, in the first place, and between the different types of transactions in the second place. It may be said that there are vast variations in the different rates of interest, but the committee which reported on this matter, made 394 random tests in respect of hire purchase loans and 297 random tests in respect of hire-purchase transactions. They drew up certain tables and if the general public could see these tables they would be astonished. In the case of certain hire-purchase transactions the rate goes as high as 55.5 per cent. It varies from 40 to 55 per cent in accordance with the sum of money involved in the transaction. Consequently it has become necessary to lay down definite rates for money-lending transactions in the first place and for credit transactions in the second place.

Certain bodies and persons complained that the risk was much bigger in respect of credit transactions. The report deals with this matter in detail. At the end of 1966 the percentage of civil court judgments in respect of hire-purchase transactions was 4.6 per cent of the total number of civil judgments. This represents a small fraction of the grand total. One may ask any attorney who recovers debts, and he will tell one that his most successful recoveries of debts are those in respect of hire-purchase transactions—much more successful than in respect of open account transactions. In cases involving hire-purchase transactions he recovers much more money. Consequently it cannot be argued that people who sell on hire purchase run a bigger risk. Out of a total number of 269,409 judgments 12,492 related to hire purchases. Therefore it can be argued, in spite of requests which have been received, that hire-purchase transactions should not carry higher rates of interest, but that the rates of interest, as laid down by the committee, for money loans as well as hire-purchase transactions correspond to a large extent to those prevailing in practice at present.

Business suspended at 12.45 p.m. and resumed at 2.20 p.m.

Afternoon Sitting

Mr. Speaker, I want to start by congratulating the hon. member for Potgietersrus on his speech. I know that it is somewhat unusual but he and I think alike, on this matter at least. As the older man I feel that I should give him credit for what he feels in his youth. I am not a financial expert, but I have had a great deal of experience in social work. I have spent my life on the whole among the under-privileged. This Bill, in its preamble at any rate, mentions something of what I said when I made an appeal for the ordinary man in 1967. I therefore feel that it gives me the right to criticize it because it is a Bill which tries to attain two objects. It tries to deal with usury and it tries to deal with hire purchase. I am not competent to discuss usury. I may have had a little experience of it at that time but I feel that I am competent to speak only on hire purchase. While this Bill may perhaps achieve its object in regard to usury it certainly does not reach in regard to hire purchase legislation the people whom I, at least, and whom I think the hon. member for Potgietersrus felt needed help in a Bill of this nature. I also think that the hon. the Minister of Finance intended this Bill to be of assistance to these people.

We should first look at the people who on the whole make use of hire-purchase in order to obtain credit. Of course there are many who can look after themselves, but there are many more who cannot look after themselves. It is the duty of the State to see that they are cared for, just as it is the duty of the Department of Health to care for the individual and to protect him from himself. If he wants to drink foul water and if he wants to live in insanitary conditions, the duty of the Department of Health is to pull him out by his neck and stop him from drinking that water and from living under unhealthy conditions. The Department knocks down the slums and thus stops him from living there. The same spirit, outlook and intention should have activated the members of this inter-departmental committee in regard to hire purchase. That is the spirit which I had hoped would have entered into their work. I am sorry to say that as far as that is concerned, and it is that alone that I am criticizing, they have failed. They have failed to care for the man who cannot care for himself. I understand that this Bill will be referred to a Select Committee and I hope that at least some of the members of that committee will include men such as the hon. member for Potgietersrus.

There is, I think, one small aspect on which I can congratulate the members of the committee, namely the neat and successful way in which they have removed from all contracts that small paragraph printed in small print, smaller than any other, which leads to the deception of those who are myopic when it comes to considering financial transactions. In the first place the method which the Committee suggests is effective in showing the various charges. But it is effective to an educated man only, at any rate the man who is educated in financial transactions. That is not what is needed. What is needed is that financial transactions among the humble people should be clear to them. What is the average education of the Whites? It is perhaps only at the level of the primary schools. What is the education of the Blacks in financial matters? It is nonexistent. These are the people whom this committee should have had in mind. It takes us back to the days of the labour insurance in England when for a shilling a week people were insured for their funerals. If they stopped paying this shilling for one week, they lost the insurance entirely, as well as their previous payments. That is open to all kinds of abuse, as it is now, to me as an individual inexperienced in transactions of this nature.

The first aspect I want to criticize is the raising fee. Even building societies charge raising fees. I think that it is of doubtful morality, but nevertheless it exists. But when a man purchases a stove, a necessity, and he has to pay hire purchase because he cannot afford to pay cash or because he prefers to pay hire purchase, he is faced with various charges. They are known as finance charges. What does this term convey to the man in the street with a Std. V education? What does it convey to the Bantu living out in Kwa Mashu? It means nothing, but he will find out later. I believe that a raising fee should not be allowed. If a man sets up a business and he puts his stock in the window, people can come along to purchase it. If he is going to give credit, it should be part of his stock-in-trade; the money should be there. What right has he to charge somebody a fee for raising? This is not a big transaction by a bank trying to get a loan of R100,000 for the State or some other agency. Why must he have a raising fee? I think it is immoral. I think it is even immoral for the building societies to do it. They advertise loans at a certain rate, but when you borrow money from them you find that there is a raising fee added. Why? They have the money; they lend it out of their own stocks. They do not go out begging for it or borrowing it here or there. It is an immoral charge and it should not be allowed. I think if the consumer who buys on hire purchase is of the humble, uneducated class, he should be shown two things only; firstly, what it is going to cost him for cash and what it is ultimately going to cost, in total—stamp duty, raising charges, interest and other charges. The consumer need only know that the cost is RX and that the total cost will be RX plus RY. He will then know, in simple terms, before he buys, what is in this pocket and what is in that pocket; he will know in advance what it is going to cost him. If he has a certain amount of knowledge and you want to allow him to shop around, then tell him what the annual percentage rate will be in addition to the basic charge. The simplest thing in the case of the Bantu or the humble white or Coloured man will be to give him two figures; to say to him, “This is what it will cost you if you pay cash and this is what it will cost you if you pay by instalments, in total.” If the buyer has R15 and the cash price is R20, he will know that it is easier to go and borrow R5 from a friend and to pay the R20 straightaway. But under the present system he embarks on a course where over the years he has to keep on paying instalments without being able to make any progress in life. The present system makes rich men richer and keeps poor men poorer. The duty of the State is to hold the balance so that while the rich man has a Chance to do fair trade, the little man will not be exploited and led into a course of life from which perhaps he will never escape. My hon. friend, the hon. member for Pinetown, has told us to-day of a man he knew who started paying R40 per month the day he got married. He has now bought a wedding present for his son and he is paying R40 per month on that, and he will go on paying until he goes to his grave. I often wonder what happens at the end of a man’s life when he still owes R40. What happens to the retailer who sold the goods to him.

He takes the furniture back.

My hon. friend says that he will rob the widow of the furniture. Sir, I want to emphasize again that two figures and two figures alone are enough for the ignorant man.

Then I want to talk about another aspect and that is the revolving credit by which the retailer allows people to run up accounts up to a certain level, or even without a ceiling if they think that he can afford it, and then charge him 1 per cent or 2 per cent or 3 per cent per month, depending upon what he can get out of them. This system of revolving credit should be seriously tackled by the State. It would take a lot of talking to convince me that this revolving credit should not be declared illegal. If a man pays 1 per cent per month then he is paying 12 per cent per annum and it may be more. It accumulates behind the man’s back. He does not realize what he is letting himself in for until he is faced with the bill. He is allowed to go on buying at 1 per cent per month until he reaches a point where the retailer thinks, “this cow is running dry; I had better stop milking it.” Only then does the man realize what he is up against. The State has no control over this as far as I can see, and the State has no means of controlling it except by abolishing it. Sir, this wonderland of credit requires a new look. Just as the Department of Health takes care of the health of the man, so we should take care of the financial position of the man, in spite of himself. Sir, I am not accusing the retailer. I am merely saying that the duty of the State is to protect its citizens.

I should like to comment in brief on certain statements which were made here. I want to begin by commenting on the remark made here by the hon. member for Durban (Central). I find myself in the pleasant position to be able to say to the hon. member for Durban (Central) that we are trying in this legislation to eliminate all those things which he fears. At least, as far as this legislation is concerned, I do not believe that there is any reason for the hon. member to be so concerned. The statement I am making is substantiated by the fact that several members on the opposite side of this House expressed their delight about the Bill and expressed the opinion that it would eliminate previous shortcomings. If the hon. member for Durban (Central) looks at the definition of finance charges, he will see that all possible charges are included in that definition. The hon. member apparently is concerned about raising fees and other charges which may be added. If it is possible for him to suggest any improvement to the definition of “finance charges”, I should like to see his improvement. But if he reads the definition he will realize that we are at least trying to cover all fees which may possibly be brought in. I do not want to make the prediction here to-day that no shortcomings will be found in this legislation. Our experience has always been that people find loopholes in legislation. But in this Bill an honest attempt is being made to protect those people to whom the hon. member for Durban (Central) referred, in so far as it is at all possible to do so and in so far as they want to be protected.

I want to refer in brief to what the hon. member for Pinetown said. I agree with him that there are too many people who buy too easily on the hire purchase system. As a matter of fact, I think there is a general trend in the country for people to live beyond their means. High pressure sales and the attractive presentation of products to the public are not the only factors responsible for this. Easy financing is another factor which encourages people to buy articles which they in point of fact cannot afford. Consequently it has become the practice of many people to buy on hire purchase. They have become accustomed to paying instalments every month. I was told about a woman who once went to pay the final instalment on a pram. While paying the instalment she told the person to whom she handed the money, “This is the final instalment on the pram I bought here”. He said to her, “I am pleased about that. How is the baby?” Her reply was, “No, she is very well; she was married last Saturday”. This is the kind of thing one finds.

The hon. member for Pinetown as well as the hon. member for Parktown referred to ordinary leasing. I think the hon. member for Parktown should actually have qualified what he meant when he spoke of leasing. The legislation does no cover ordinary leasing. If hon. members look at paragraphs 49, 149 and 150 of this report, they will find a fine and concise description of the view the committee took of this measure and of what the circumstances ought to be in respect of leasing. What we are trying to get to and what we are trying to include in this legislation are only those leases which really amount to an evasion of the provisions. In the definition of “credit transaction” in paragraph (v) (b) hon. members will clearly see what is being attempted here, and that is that only leases which are an evasion of the spirit of the legislation, should be covered by the legislation.

The hon. member for Parktown spoke of the percentages given here. I fully agree with him that if one makes the percentages too high, the legislation will not succeed in achieving its objects, and if one makes them too low, it may be that one may affect our economy as a result, i.e. our established economy as it exists to-day. I am convinced that especially as far as credit transactions are concerned, this legislation will in fact affect certain institutions. I am convinced that the smaller finance institutions will be affected by it, because they have lately been following the practice of charging what they describe as “a flat rate”. This so-called “flat rate” is, say, 12 per cent on the amount of the loan. Suppose the amount of the loan is R100. Right at the outset when the agreement is being entered into, R12 is added to the amount of R100 and the amount of R112 is divided by 12 and one twelfth of that amount is repaid each month. In this case the actual interest which is paid on this amount is not 12 per cent, it is in the vicinity of 25 per cent.

This is what has been happening lately in the case of so many money-lenders. I am convinced that these smaller institutions in particular will be affected by this legislation. I agree with the hon. member that one has to lay down rates of interest or finance charges or percentages which, on the one hand, will not disturb the economy of the country but which, on the other hand, will at least succeed in achieving the desired object. The hon. member made interesting remarks about the percentages which had been laid down in this legislation, and asked whether it would not be possible to lay down a sliding scale. I have also been thinking in this direction. One has to take it into account that there was a time when the prevailing rate of interest on bonds was approximately 6 per cent or 6½ per cent. Well, 6 per cent or 6½ per cent is far removed from 12 per cent. Fourteen days ago I had the experience that one of my voters had to pay 10½ per cent interest on a large bond of R170,000, in spite of the fact that he was able to offer faultless security. Well, 10½ per cent is not so far removed from 12 per cent. It can therefore be argued that one should give consideration to the question whether there should not be a sliding scale as rates of interest move in one direction or in the other direction. There are, of course, certain objections which can be raised to that. One of these is that the large financial institutions would like their machinery to be geared for a certain percentage. Where the usury rate is reduced, it will cause a big upset in such an institution to change all its accounts. In the light of these circumstances, I think that it is the considered opinion, also of the people affected by this legislation, that a fixed percentage should rather be laid down and that that should remain from year to year until it is changed by legislation.

I do not think there is any need for me to go into more detail, especially not as far as percentages are concerned. I think we have conducted a very constructive discussion. The hon. member for Potgietersrus in particular gave us many practical examples and made a very practical speech. I should like to express my appreciation for the way in which this discussion has been conducted and for the fact, that no misgivings, so to speak, have been expressed in regard to this legislation. I still have a number of Bills with which I have to deal this afternoon and I trust things will go equally well as far as the others are concerned. In view of the fact that we are now going to appoint a Select Committee to deal with this matter, I just want to say that I trust that this committee will be able to complete its work as soon as possible so that we can still get this legislation on the Statute Book this year. I sincerely trust that this will happen.

Motion put and agreed to.

Bill read a Second Time.

Mr. Speaker, I move—

Agreed to.

I move—

As will be noticed from the long title, the Bill before the House relates to various matters.

The provisions in regard to the licensing of trades and occupations are pursuant to the recommendations made by the Commission of Inquiry into Trading Licensing and Related Matters.

This Commission has found that, owing to the diverse nature of the licensing powers and the procedures obtaining in the various provinces, there is a great deal of confusion in the minds of traders, public officers and even lawyers in regard to the precise meaning and scope of licensing legislation. In order to set this position right the Commission recommended that the provincial councils be invested by Parliament with full and effective powers to make ordinances in relation to the licensing of trades and occupations. What the Commission had in mind, was that under these powers the various provinces would adopt uniform ordinances on the lines recommended by the Commission so as to place the licensing of trades and occupations on a uniform and sound basis throughout the Republic.

Those provisions of the Bill which relate to trade licensing are now carrying into effect the first part of the Commission’s recommendation, i.e. that the provinces be invested with the necessary powers in regard to trade licensing.

At present the provincial councils have the power to make ordinances in relation to certain trades and occupations which, in their opinion, should be controlled, but in the proposed legislation these powers are now being set out in the simplest and most general terms. The reason for this broader definition of the powers of the provinces is that experience has shown that the more fully enabling provisions are defined, the greater the possibility of those provisions becoming so involved that it may become difficult to determine the extent thereof, whilst it also implies the danger of unintentional yet unnecessary restriction of the person authorized.

This statement can be verified from the numerous occasions on which the validity of measures taken in this regard by the local authorities have been disputed in court—and in those very cases where control may be regarded as absolutely essential.

Now I want to emphasize very strongly that what I have in mind is not in the least that the courts should be denied the power to inquire into and to decide on the validity or invalidity of subordinate legislation and, in particular, of administrative action. On the contrary, I believe that in this regard the courts have an important function to perform, a function which should rather be extended than curtailed.

It is not only being deemed necessary for the powers of the provincial councils in relation to trade licensing to be defined clearly, but also that one specific institution alone should issue in respect of each specific trade or occupation one licence only. The fact that before a person can start his business he has to obtain a licence from more than one institution, simply leads to confusion in practice.

However, that is not to say that institutions other than the licensing authority may not also have an interest when a specific licence is granted. On the contrary, the function of the licensing authority is in fact to ensure that all institutions or persons that object to a specific licence being granted, may raise their objections, provided that they are prepared to defend their point of view in public and the applicant is afforded the opportunity to reply.

I also want to emphasize that when a licence is granted a licensee does not only obtain rights, but is also under certain obligations. Although it is important that a licensee complies with the prescribed requirements when a licence is granted to him, it is just as important that he will continuously comply with the prescribed requirements of the licence as well. From this it follows that if licensing is to comply with the objectives of control, supervision over licensees is to be exercised continually.

Nor should one lose sight of the fact that side by side with the local authorities the Central Government, too, supervises certain matters which relate to the licensing of certain trades and occupations. That means that the Provincial Administrations will therefore have to maintain liaison with the Departments concerned so as to ensure that in the licensing system provision is made for the requirements laid down by those Departments. In fact, in the provincial legislation in regard to trade licensing, it may, if need be, be necessary to make provision for specific matters in which certain Departments have an interest. However, the necessary steps in this regard are already being taken, and I do not think that it will in practice present any insurmountable problems.

However, there are in addition specific trades and occupations over which the Central Government is exercising quite effective control, and therefore it is unnecessary and even undesirable for local authorities to exercise control in those spheres as well. Accordingly provision has been made in the proposed legislation for such trades and occupations to be exempted from the application of provincial legislation in relation to trade licensing. Furthermore, when it is contemplated to exercise continuous effective control over any trade or occupation on a national basis, the Minister of Economic Affairs will be able to exempt, by notice in the Gazette, such trade or occupation from the provisions of provincial legislation in regard to trade licensing.

The elimination of licensing by more than one body or person must necessarily have financial implications and it is inevitable that an arrangement will be made in this regard. This brings me to a very important principle embodied in the proposed legislation. The legislation plainly provides that a province may utilize for its own purposes any revenue resulting from the licensing of trades and occupations which fall within its jurisdiction.

In addition this legislation provides that a province may repeal or from time to time amend the provisions of the Licences Act, 1962, in so far as such provisions apply to it and relate to a trade licensed by it. The repeal or amendment of the Act in question will inevitably deprive the Central Government of certain revenue. However, this is an extraordinary arrangement necessitated by unavoidable circumstances, since the Act in question cannot be repealed before the new system of licensing has been put into operation in every province.

The various provinces will necessarily have to amend their respective ordinances relating to licensing, but the problem is that it will be very difficult to put all the ordinances concerned into operation on the same date. In order to overcome this problem, it is consequently deemed essential that a provincial council should have the power to repeal or from time to time to amend, by ordinance, the Licences Act, 1962, when the envisaged new system of trade licensing is introduced in its province.

As regards the amendment of section 18 bis of the principal Act, provision is now being made for the establishment of a primary school for white children in the Eastern Caprivi Zipfel.

Officials stationed in the Eastern Caprivi Zipfel are experiencing problems in regard to the schooling of their children, because of the fact that there are no facilities in that area. At present children have to be sent to boarding schools in the Republic, and owing to the inconvenience of the long distances that have to be travelled, these children can only spend the longer school holidays at home.

This territory is not easily accessible from the Republic, and the following means of transport exist to and from the place called Katima Mulilo (the headquarters)—

1. (i) by road via Botswana and Rhodesia, a journey of 800 to 900 miles;
2. (ii) by rail to the Victoria Falls, then by road to Kasane and from Kasane by river boat along the Zambesi. The road and boat service is irregular and uncertain and this method is very inconvenient;
3. (iii) by W.N.L.A. aeroplane from Francis-town. This is not a scheduled service and is being maintained for the conveyance of Bantu recruited for the mines;
4. (iv) occasional flights by the South African Air Force.

In view of the rapid development of the territory there has been an increase in the number of White inhabitants and there are already seven children who have to receive primary school education. This number is expected to double itself in the near future, and therefore there is justification for the establishment of a primary school at Katima Mulilo. I may add that I was there personally and that there is tremendous expansion. I was astonished to hear that there were only seven children of school-going age, but I am convinced that there will soon be many more.

The Department of Bantu Administration has indicated that accommodation for housing the school will be available. The S.A. Bantu Trust will be responsible for the maintenance of the building and for the provision of furniture and equipment, whilst the Transvaal Education Department will accept responsibility for the appointment of teachers, the provision of educational material and the necessary supervision and control.

The Eastern Caprivi Zipfel forms part of South West Africa, but because of its remoteness this territory is being administered from Pretoria by the Department of Bantu Administration and Development in terms of Proclamation No. 147 of 1939.

By Resolution No. 1995 of 29th August, 1967, the Administrator-in-Executive-Committee, Province of the Transvaal, has approved in principle the establishment of a primary school at Katima Mulilo, subject to the necessary legislation being adopted.

The last amendment to the principal Act which requires an explanation, is the one which relates to section 20.

In terms of section 20 of the principal Act “no ordinance the effect whereof is to increase the liability of a province in respect of any pension scheme shall be introduced without the consent of the Minister of Finance, unless an actuarial report has previously been obtained and has laid upon the Table of the provincial council concerned for a period of at least six months”. This section also provides that “every draft ordinance relating to any pension scheme administered or to be administered by a provincial administration shall at least two months before its introduction be submitted to the Treasury”. Control over provincial pension funds is a matter for the Department of Social Welfare and Pensions, but at the time an appropriate amendment to the Act was overlooked when that Department was taken over by the Minister of Social Welfare and Pensions from the Ministry of Finance. This amendment therefore seeks to remedy the position.

Mr. Speaker, this is an omnibus Bill covering a diverse number of subjects which the hon. the Deputy Minister has tried to explain in some detail. We are concerned here with additional powers being given to the provinces in regard to licensing, the establishment of school facilities in the Caprivi Strip, and the transfer of certain functions from the Minister of Finance to the Minister of Social Welfare and also the innovation of giving the provinces powers to amend legislation in this place. The Deputy Minister has given us the reason for so doing.

Now, having said that, I think the Deputy Minister has not answered the main question, and that is: Why are we having this piecemeal legislation with regard to financial relations of the provinces? We are being dished up bits and pieces. When are we going to get the Borckenhagen Commission report? What about the Schumann report, when are we getting that too? When are we going to get finality with regard to this vexed question of the financial relations? There is a very popular song in Scotland known as Kathleen. As the Deputy Minister knows her lover went away and said it may be for years or it may be for ever. We are getting that impression concerning the reports referred to—it may be for years, or it may be for ever before we get them. I think the Deputy Minister must indicate whether there are any prospects in the near future of having the question of the financial relations of the provinces brought up to date. Speaking for my own province, the ratio of non-Whites to Whites is the largest of any province in the country, yet general services are required by all people alike. This question of financial relations is a hardy annual. That side has been in office for 20 years but it has not resolved the question yet. I hope that now the Minister has come with a few more bits and pieces, we will be given more information about the matter. We appreciate the lengthy explanation he has given to the House for introducing this measure. Our main questions remain: Why do we not get the commissions’ reports, when does the Deputy Minister expect to have them, and when does he expect to have finality in regard to this vexed question of financial relations? It is the Government’s responsibility, it is their financial responsibility, and I think the Minister, if he knows, should give us an indication.

Mr. Speaker, apparently I have also succeeded in obtaining the support of the Opposition in regard to this matter, and there is nothing to which I must reply, except to tell the hon. member that earlier this year the hon. the Minister of Finance dealt fully with the question of making these reports available. The point of time he envisaged, has not yet come. For that reason I now move that this measure be read a Second Time.

Motion put and agreed to.

Bill read a Second Time.

Mr. Speaker, I move—

The object of this Bill before the House is to effect certain improvements to the Building Societies Act which are considered necessary in the prevailing circumstances. Generally, in regard to the position of building societies, I should like to say first of all that the Government is fully alive to their position. Their importance to the country as a whole in the provision of housing is well appreciated. Furthermore, the Government is fully conscious of the reputable and respected position which building societies have acquired in this country over the years, and the Government is anxious that this position should be retained in the future. It is well known that building societies have come through a somewhat difficult period as of late. Different proposals for the alleviation of the position of building societies have been considered. Thought was given to the possibility of borrowing money abroad, but I must say that apart from the impracticability of borrowing abroad at reasonable terms in current world conditions, the effects of such borrowing on our internal liquidity situation and the inflationary pressures arising from it should be borne in mind. Similarly a proposal that the building shortage should be financed by bank accommodation could also not in present circumstances be considered. We should avoid the temptation of attempting to assist a deserving industry by a method which might in the process endanger the relative stability attained in our country.

I should also like to mention that in our endeavours to find solutions to the problem of building societies, very serious consideration has been given to the possibility of widening the scope of the activities of societies, especially in the field of property development. If this field was opened to societies it could conceivably have the long-term effect of changing the present character of building societies. After the most careful consideration, the Government felt that, at this stage, it would not be justified in taking a step which might have such far-reaching effects. This naturally implies that the Government will have to see to it that building societies, while retaining their present structure, are enabled to perform their very important service to the country.

Certain relief measures for building societies have consequently been announced recently. I refer more specifically to the lump-sum payment to building societies in respect of the guarantees which the Government has furnished to them in respect of the 100 per cent housing loan schemes for civil servants and the other important concession which has been made, namely the issue of special shares, the dividends on which are tax-free to the amount of R400 per annum per taxpayer. In regard to the lump-sum payment I may say that the amount is R16,084,000. This particular relief is therefore considerably better than the R8½ million which was mentioned initially. We trust that the long-term effect of the tax-free shares will be such that building societies will surmount their difficulties. I may, however, assure the House that the Government will continue to keep a watchful eye on the position.

I shall now deal very briefly with the more important provisions of this Bill. In the first place, it provides for the appointment of executive directors for building societies. In order to improve the administration of building societies, the need for the appointment of such directors has been felt for some time. It is now proposed that not more than one-third of the total number of directors of a society may be executive officers of that society. Such executive directors will be able to serve on the board of a society for so long as they remain in the employ of the society. It is further proposed to extend the powers of building societies in various ways.

I mention only the more important of these provisions: The power to buy in and retain immovable property mortgaged to a society as security for debt; the power to act as agents of insurance companies in effecting insurances of all kinds; the power to grant loans of any kind to the employees of a society; and a limited extension of the power to effect insurances through an insurance company owned by a building society. The proposed extensions of the powers are all of a very moderate nature and are justified in the prevailing circumstances. Building societies are empowered in terms of this Bill to conduct business in territories approved of by the Minister, subject to the legislation which may apply in such territories. In this connection I may say that there is a need for societies to conduct business in neighbouring territories. It is however proposed that the Minister should have power to lay down the conditions which are considered necessary in every particular instance. In laying down such conditions it is obvious that the particular interests of the territory concerned will have to be weighed against the needs of the Republic.

We further propose that the present limit on fixed deposits which a society may accept be raised from R150,000 to R250,000. This limit will apply to the bigger societies. In respect of the smaller societies there is a scaling down of the limit, as is provided for in clause 6 of the Bill. It is necessary that the Act contain an automatic limit of this kind which facilitates the ordinary operation of a building society. I may, however, mention for the information of the House that the Registrar of Building Societies has power to permit societies to accept larger fixed deposits in cases where it is considered in order. The general raising of the limit for fixed deposits is fully justified in the present circumstances. It is known that a very large part of the deposits of building societies emanates from sources such as the consortium for third-party insurance and other interests which are in a position to make large deposits. Societies naturally protect themselves by normally accepting such deposits on a basis that repayment will be staggered in manageable sums for the particular society.

Another important provision of the Bill is contained in clause 10 which provides for the abolition of the statutory reserve which societies have had to maintain up to now. It is proposed that the amounts in the existing statutory reserves be transferred to general reserves. Hon. members will remember that, during the previous session, a provision was included in the Financial Institutions Amendment Act, 1967, which provided that the compulsory contributions to the statutory reserve could be suspended in respect of the current financial year. The motivation for that step was to enable building societies to maintain, without change, their lending rate to the public. A great deal of thought has been given to the necessity for a building society to maintain a compulsory statutory reserve on the present prescribed basis. It is the unanimous opinion of all interested parties, including the Registrar of Building Societies, that having regard to the high standard of security held by building societies for the investments, as well as the negligible loss experience of societies over the past 30 years, a reserve of this nature is not necessary. It is accordingly now proposed to treat building societies in this respect on the same basis as banks, namely that, without any legal compulsion, they are expected to maintain of their own accord such reserves as are necessary for the conduct of their business.

We propose further in this Bill that building societies will be free to convert reducable mortgages at any time into fixed-term mortgages, subject to the general requirements of the Act which apply to such mortgages and provided that a valuation of the property concerned is made at the time of such conversion. The converse, namely the conversion of fixed-term mortgages into reducible mortgages, on the same general basis, is also provided for in the Bill. In view of the conditions obtaining in the property market and the general experience of building societies over a long period, these changes in the law have now become fully justified. In view also of the present-day circumstances it is proposed that building societies will have the power to grant loans to a maximum extent of 82½ per cent of the valuation of the property concerned in respect of dwelling houses, and 80 per cent in other cases. There is no doubt that the present limitation of 75 per cent of the valuation of properties is overconservative.

It is considered that, in view of the general stability of our property market, this course can be safely followed. This proposal will materially assist prospective owners of houses who are not in a position to contribute initially such a high proportion as 25 per cent of the cost of a dwelling, or who find it difficult to meet the cost of furnishing collateral security in the higher amount which is necessary if the 75 per cent limitation were retained. In this connection we also propose that building societies will have the power to create an internal reserve from special payments from the borrowers concerned, on the strength of which they will be able to grant loans up to 90 per cent of the valuation of the property. It is considered that this proposed provision is fully justified in the light of practice and experience of building societies. In conclusion I want to say that this Bill has been drafted in close co-operation with the representatives of the building societies’ movement, and that all the provisions contained therein have the support of the movement. I therefore have pleasure in commending the Bill for the consideration of the House.

Mr. Speaker, we on this side of the House are not opposed to this Bill, and will allow the second reading to be taken. There are, however, one or two matters that we feel should be raised. It is quite true that the purpose of this Bill, which is introduced after extensive discussions with the building societies over a long period of time, is to assist the building societies as far as possible. In that objective the Government has our support. At the same time I do not think that we should lose sight of the position of the depositor and the shareholder. In other words, while agreeing to give the building societies greater latitude, we must at the same time ensure that the depositor and shareholder is fully protected. It is true that much has been done for the building societies lately. The lump sum payment of R16 million by the Government has been a major contribution. If one accepts what has been appearing in the Press regarding the sale of the new tax-free shares, it looks as if the building societies will have considerable funds available in the future. We are all very delighted that this should be the case.

Clause 3 of the Bill which amends section 18 of the principal Act, as the hon. the Deputy Minister has told us, now makes it possible for a manager, or a deputy manager, or an assistant manager, to be a director of a building society. This is provided that they do not constitute more than one-third of the members of the board. I wonder how wise a step this is. I understand that some of the building societies asked for this to be done. I also understand that some of them are not terribly happy about it. Building societies, as we know them at the moment, are almost absentee landlord controlled, if I can put it in this way. The major shareholders have really little say in the appointment of their boards. If one follows the British pattern whereby employees are appointed to the boards of many of the old companies in England, you find that there is no real material stake in a company. There is this absentee-landlordism and it is controlled purely by the employees of the company. I hope that this will not be the beginning of that kind of thing, namely, that the employee becomes the controller of the company. His advice and usefulness to the company is already there by virtue of his position as assistant manager, manager, or general manager. I do not really think, except from a point of view of status, that there is going to be very much change in that person’s position or in the position of the company. The hon. Minister in his reply, will no doubt confirm that this is the collective wish of the building societies and we will not oppose it if that is the case.

Clause 4 amends section 21 of the principal Act and enables the building societies to carry on business outside the Republic. In his second-reading speech the hon. the Minister told the House that this would be controlled by the Registrar. He would be able to determine where, when and how a building society could operate outside the Republic. I should be glad if the hon. the Minister would go a little further into this matter because the new clause 4, although there may be some other provision in this Bill, states clearly:

The words “within the Republic”, contained in the old section 21 of the principal Act, have been removed and this clause states simply “as it may determine”. I should be glad if the hon. the Minister would tell the House where the provisions are which give the Registrar of Building Societies the authority to allow a building society to extend its offices outside the Republic or not. If that authority is not there we may run into quite a lot of trouble. It is true that to-day the Government could control the right of a building society to operate outside the Republic in so far as South African funds are concerned. This can be done by means of exchange control. Exchange control would not allow it to transfer any funds outside the Republic. But if the time should come, and it looks as if it may come fairly soon, where exchange control will be relaxed or removed completely, then of course a building society will be quite free to do as it likes. I agree with the hon. the Minister that investments in some of the countries near us are necessary but when it comes to public moneys, as is the case with depositors and shareholders in a building society, we feel there should be a measure of control.

Clause 5 (a) amends section 22 of the principal Act and allows a building society now to retain property it has purchased. The previous provisions of the Act made it obligatory for a building society to sell a property within five years. Of course this could not always be done unless the building society was prepared to suffer a fairly substantial loss. This is therefore a necessary provision. The other provisions of this clause deal with the levy to which I shall return in a few moments, and the question of pension and the extension of the building society’s right to carry on insurance. We have no objection to these provisions.

Clause 6 which amends section 26 of the principal Act rightly, as the hon. Minister indicated, now provides for the doubling of the present maximum aggregate fixed deposits permissible. The amount of fixed deposits permissible has now been doubled. We think that this is a wise provision. One of the problems of the building societies has been that they have not been able to absorb all the funds that have been offered to them because they have been prevented from doing so by law. The same applies to fixed period shares.

The provisions of clause 9 which amend section 31 of the principal Act by adding subscription shares to the proviso of this section we also think is in the interests of the building societies.

I now come to clause 10 which amends section 36 of the principal Act. The requirements of the building societies at the moment regarding reserves are fairly stringent. They are at present required to use 10 per cent of their profits each year by transferring them to a statutory reserve. They have the right to reduce this amount by the ratio, expressed as a percentage, which the statutory reserve bears to the total capital and deposits. The hon. the Minister has correctly told the House that these provisions were suspended by Act 99 of 1967. That suspension was operative until the 31st March of this year. Can the hon. the Minister perhaps tell us what happens between the 1st April until the time that this Bill becomes an Act and becomes law? What is the position of the building societies in the interim period? I ask this because the suspension has not been extended since the 31st March. It is no longer operative. The building societies must, in terms of the law I presume, comply with this. Furthermore, these statutory funds have to be invested in terms of section 29 of the principal Act. What is happening now is this. The building societies are being given the right to create a general reserve. The amount standing to the credit of the Statutory Reserve must be transferred to that reserve. Then the building society, through its own determination, can transfer such amount out of its profits, as it may from time to time deem fit, to this general reserve. The Act requires the building society to annually review the adequacy of this reserve and “if deemed necessary, pay out of its profits further amounts into such reserve”. I do not believe that this annual review by a building society of the adequacy of its reserve has very much legal force and effect. It is being judge and jury at the same time. There are two questions which I should like to ask the hon. the Minister. I may just add that in terms of an amendment to this clause which the hon. the Minister has now put on the Order Paper, the building societies are now entitled to take out of their reserves and bring into their general funds whatever there reserves are. In other words, what the hon. the Deputy Minister is suggesting is that building societies be allowed to create reserves as and when they will and to withdraw from them as and when they will and that they do not need to have any reserves. I think that this is the cardinal point.

Yes.

The hon. the Deputy Minister agrees. And what about new building societies? What is the position when a new building society is established? In the same way it will not be required to have any reserves. Now, it is quite true, and we agree with the hon. the Minister entirely, that the building societies of South Africa have built up a most enviable reputation. They are solid and sound and they have contributed largely to the well-being of this country. We would all wish to see them expand. We are not objecting to this clause, but we think that the matter should be raised so that the House acknowledges the fact that as far as building societies are concerned the creation of reserves or not is now in their hands. When one considers the matter I think that one has to take two further factors into account. One is that they now have the right to increase the mortgages which they can grant. In other words, they have been increased from 75 per cent to 80 per cent in the case of non-residential buildings and 82½ per cent in the case of residential buildings. The security margin of their properties is therefore not going to be as great as it was in the past. 'I was rather disappointed to hear the hon. the Minister saying that by virtue of the state of the property market these new provisions were being made. He gave that as one of his reasons. It is true that over the past four or five years we have had a constantly rising property market.

You do not trust the position of the property market then?

I did not say that at all but I shall come to that matter in due course. We have had a rising property market. My guess, as that of the hon. the Deputy Minister, is that it is going to rise for a period of time, and perhaps for ever. Perhaps we are going to have inflation with us all our lives and perhaps an inflationary trend of 2 per cent to 3 per cent per annum will have to be accepted. But we are now not legislating for two, four or eight years ahead. We are putting a principle on the Statute Book and I do not think that that principle can ever be tied to the stability of the property market because this position is variable. We accept the other factors mentioned by the hon. the Deputy Minister, namely that building societies are well-run, that they are cautious and careful. That may be sufficient reason, but not the fact that there is stability in the property market. We welcome this increase from 75 per cent to 80 per cent in the one case and to 82½ per cent in the other case, and also the new provision whereby a building society can lend 90 per cent against the security of the levy pool. This is nothing new really. In the case of building societies this has been happening for a long time. People have been borrowing up to 90 per cent from building societies, but in terms of a Bill discussed earlier this afternoon they have been paying very dearly for it.

In terms of the Building Societies Act a building society can lend up to 90 per cent provided it has additional guarantees over and above the property which is mortgaged. What has been happening is that either a deposit has been made to the building society by way of security from individuals, organizations or associations, or they directly or through other channels have been furnishing guarantees to the building societies which have been acceptable to them. But I hope that the difference is going to be that the rate of interest will drop because the rate that is being charged by the people who have been providing the security or the guarantee to enable a borrower to borrow 90 per cent and not 75 per cent certainly would not be acceptable or legal in terms of the Usury Bill which we are going to pass, because the interest rate has been as high as 15 to 18 per cent. We have no indication at all as to what the method of determining this levy is going to be. Perhaps the hon. the Minister has some information in this regard. I think if I remember rightly the Registrar has to agree with each society as to how the levy will be determined, operated and what the charge will be. But all that will happen here is that a pool will be created to take care of any losses by the building society which will reap the additional benefit of the interest itself instead of in many cases exorbitant rates of interest having to be paid to outside persons who have been benefiting from this. Finally I should like to say that we support the Bill and wish it well.

Mr. Speaker, the hon. member who has just resumed his seat, has indicated that hon. members opposite are supporting this legislation. Except for a few details which the hon. member discussed in a very interesting way, there are no real objections on their part. In view of the fact that we are dealing here with a very traditional institution, i.e. a building society, it stands to reason that it is necessary to bear in mind the nature of our building society movement, as the hon. the Deputy Minister has in fact done. It is true that our building society movement in South Africa is very old. It has been in existence for almost a hundred years. We derived it from the English system which has been in existence for almost 200 years. Over the years the nature and the objectives of our building societies have always been borne in mind faithfully when we wanted to amend legislation dealing with building societies. As I see the matter, our building societies are, in the main, active in two spheres. I may perhaps mention them briefly. On the one hand it encourages thrift amongst our people and, on the other hand, it actually provides the chief source from which people may obtain loans, not only for building houses but also for purchasing them. It is a fact that over this lengthy period our building societies have built up a tremendously high standard as regards the stability and safety of investments. I think it is only right, as the hon. member for Park-town said, that in dealing with legislation relating to building societies one should at all times have regard to the interests of one’s investors and shareholders.

Within the scope of this matter I should just like to refer to the record building societies— not only in South Africa, but also abroad— have built up for themselves over the years. The first building society was established in Birmingham, England, in 1775. Subsequent to that we had temporary building societies for many years, until the permanent building societies eventually appeared on the scene. By 1963 this number had reached the 662 mark, with an investment of R8,662 million. In South Africa we have had the same position. In the initial years we had the temporary building societies; the permanent building societies came afterwards. Port Elizabeth, for instance, is very proud of the fact that the first permanent building society was established there in 1874 and, to prove and confirm what the hon. the Minister has said, that building society is still in existence to-day and is still doing very good work. In other words, over all these years our building society movement has laid down certain standards and built up a certain record. In view of the fact that in clause 10 we are now effecting a basic change which we have already put to the test in our previous Act of 1967—in other words, in view of the fact that we are now abolishing the statutory reserves and using it as a basis the general reserve which every well-ordered company or corporation, and in this case building societies as well, must establish—I think that we can argue logically that this building society movement has come such a long way, 200 years as regards England and almost 100 years as regards this country, that we may accept that the lessons they learnt in England and the lessons we learned in South Africa in the thirties, have made a lasting impression on the administrators of our building societies and have enabled them to continue with a policy of stability and great conservatism in respect of their investments and the taking of money. In this regard I should like to refer to the well-known Mr. Denham. He was the president of the big and well-known building society, the Halifax Building Society. Incidentally, he is a person who is frequently quoted by leading authors and experts on the building society movement. In 1951 he used these words—

I believe that this will probably be the course the building societies in South Africa will follow in respect of our reserves. The problems that were mentioned by the hon. member in respect of building societies which are about to be established. But we have had numerous building societies here; there used to be many more. At the moment we only have 20 permanent building societies, and roughly 12 temporary societies. In this whole structure there really is not much room for small, temporary or other building societies. Our major building societies have spread their wings widely and cover the entire sphere, and if a newer building society were to register, I think that the lessons which the existing and permanent building societies have learned over the years and the good example they have set, would be remembered, as was the case when the building society movement was introduced in South Africa. It is interesting to note that South Africa has at present the third biggest building society movement in the entire world. As it was phrased by another well-known expert on the building society movement, Professor Richards of the Witwatersrand University: this could only have happened because of the sound policy the movement has been pursuing and the high sense of duty the officials of the building societies have always displayed. For that reason I think that, in view of the fact that over the years we have had a high standard, a long tradition of conscientious officials and a sound system, it is our duty as legislators to see to it at this stage that restrictive as well as oppressive measures, which may hamper the necessary development in modern times, are eliminated. I think that the building societies have found this statutory reserve to be an oppressive obligation. I am quite certain that none of our existing building societies will, as far as their general reserves are concerned, ever neglect to maintain a sufficient reserve in accordance with their assets.

I should also like to refer to a few other aspects of this Bill. My hon. friend opposite expressed some concern about the fact that the executive officers could now be appointed to the directorates of building societies. But I do not consider a comparison between our executive officers and the ordinary employees in Great Britain to be parallel cases. I think it is common practice in South Africa and in other modern countries as well to permit the appointment of competent executive officers to directorates, and whereas we provide in the Bill that not more than one-third of the executive officers may be appointed to the directorate, I do not think that we shall experience any problems in this regard in the future. I think that an officer who holds an advanced executive position in a building society should at least have the right to be appointed to the directorate.

Then, as regards the establishment of agencies and branch offices outside the territory of the Republic of South Africa, I should say that this provision, too, is in line with our whole vision in this southern country. In view of the fact that over the years we have been fortunate enough to be able to establish and develop, with the aid of the lessons we have learnt from our predecessors abroad, a building society movement in this fine country of ours, it is only right that we should also spread our wings so as to include the developing states on our borders. You can imagine what a great service our building societies may also provide for those people in the years that lie ahead, we who believe that the building society is the best field of investment for rich and poor alike, for the entire citizenry of any well-ordered state. I myself welcome this provision in the Bill. Subject to the provisions set out here by the hon. the Deputy Minister, I think that on this level, too, our building society movement, which is probably one of the finest and proudest institutions in South Africa, can, with the aid of the lessons we have learnt, perform valuable work in our neighbouring states, work which will be of great value to everybody in this southern country.

Then I just want to say a few words about one or two other aspects. In terms of clause 6 the maximum investment is now being increased from R150,000 to R250,000, and we welcome this provision and I think that all building societies feel the same. Whereas in South Africa to-day our building societies are in a developing country, it is simply impossible for them to cope with all the requests for loans. Since we are now affording not only the ordinary citizenry, but also those institutions which have at their disposal large amounts of money and which want to invest them very safely, the opportunity to invest considerably larger amounts with the building societies, we are in turn simply creating a further possibility for larger amounts which may be loaned to the ordinary citizenry for the purpose of purchasing or building houses. Therefore this provision ought to have very good results in the future as far as the housing of our people is concerned.

Mr. Speaker, I should have liked to call attention to a few other aspects as well, but I do not think it necessary; everything has been set out very clearly in the Bill. In conclusion I just want to subscribe to what the hon. the Deputy Minister said, i.e. that our Government and we on this side—I think this also holds good for all hon. members on the other side of the House—have the highest appreciation for the great work performed by our building societies in South Africa over the years. I think that I am probably speaking on behalf of everybody who knows the building society movement when I say that, if one day the history of the housing of our people in South Africa were to be written, our building societies will occupy a very important chapter in those annals.

The hon. member who has just resumed his seat, has to a large extent replied to the misgivings—if one can call them that—expressed by the hon. member for Parktown, but I should like to add a few words. I think the hon. member for Parktown will agree with me that it has to a certain extent become the practice in all major companies, in South Africa as well, that at least a few of their executive officers should serve on their directorates. I can mention several examples. I think that it is a good thing to have on the directorate people who have an intimate knowledge of the operation of the organization. The hon. member would perhaps tell me that it would always be possible for them to attend directors’ meetings and to give the directorate the benefit of their experience and knowledge of that particular business, but they would nevertheless not have the say a full director of a company would otherwise have. In the light of prevailing circumstances I think that it is consistent with a policy which has already become established in many leading companies in South Africa, i.e. that executive officers may also serve on the directorate. With a view to the restrictive conditions we have laid down here, I do not think that we have any reason for being concerned about this position. The hon. member also referred to the activities of building societies outside South Africa. In looking at the Bill we see that the amendment to section 21 makes provision for the offices of building societies. An amendment to section 21 is being effected in clause 4 of the Bill. Section 29 of the Act makes provision for the investments of building societies, and in that regard an amendment is being effected in clause 8 of the Bill. May I just say at this stage that apparently the hon. member misunderstood me when he said that I had said that the Registrar would exercise control and lay down conditions. That is not what I said. I said, “The Minister.” The sentence in question reads as follows—

If the hon. member looks at clause 5 (g), he will see that the following words are being inserted there—

I think that that disposes of the concern the hon. member expressed about this matter.

As regards reserves, we have already exchanged ideas. The hon. member expressed his views on our property market. I readily agree with him that our property market need not necessarily show a continuous upward trend; there may also be a downward trend in our property market, but I think that all of us are agreed that immovable property in South Africa, in which building societies invest, probably affords the highest degree of security for the very reason that immovable property has such a fixed basic value in South Africa, and since we have in the past few years attached a very great deal of importance to that, there has always been an upward trend in the property market. I am not saying that there will always be an upward trend, but the fact remains that land is not becoming less. And attendant upon that, the experience and knowledge of building societies in this field of investment, the safest of all fields of investment, I think that it is right to link the two and to say that in the light of those circumstances we are of the opinion that building societies do to a large extent conduct safe business. For that reason one would be justified in exempting them, too, as is the case with other institutions, so that they themselves may decide on their own reserves.

The hon. member referred to the 90 per cent loans. At the moment I do not have at my disposal the necessary particulars to discuss this matter with him, but I do want to suggest that we should rather discuss it during the Committee Stage; in the meantime I shall obtain the necessary information. The hon. member also wanted to know what would happen in the meantime, i.e. from 31st March until this Bill comes into force. The financial year of all building societies ends on 31st March. In other words, consideration will only be given to reserves on 31st March, 1969, and by that time this legislation will already be in force, the result being that there is no need for some measure to remedy the position, as the hon. member thought there ought perhaps to have been. If the hon. member still has any doubts about this matter, we can discuss it again at a later stage, but that is the position. I do not see any problems in that regard. I think that this more or less covers everything, and I move.

Motion put and agreed to.

Bill read a Second Time.

I move—

As is evident from the long title of this Bill, all that is contemplated here is to amend the constitution of the Council of the South African Bureau of Standards. At present section 5 of the Standards Act provides that the council shall consist of a chairman, who shall be nominated and appointed by the Minister of Economic Affairs, and seven other members. Of these seven members two are chosen every time by the Minister out of five nominations made by the S.A. Akademie vir Wetenskap en Kuns, and two out of five nominations made by the Associated Societies. The remaining three members are appointed by the Minister, in consultation with the council of five members, as I outlined a moment ago. Hon. members will therefore appreciate that the present statutory provisions have a rather restrictive effect on the constitution of the council on a broader or more comprehensive basis in relation to the objects for which the Bureau was established. By this I do not mean at all that the present representatives of the Akademie or the Associated Societies, or any of the other three members who are serving on the council at present or who have served on it in the past, are or were not particularly competent or experienced persons. On the contrary, I can speak only with the highest praise of the outstanding services rendered by these persons.

In view of the fact that the Bureau was established to render a service to commerce and industry, a service which not only in this country, but also overseas has achieved particular impact and become of particular value, I believe hon. members will agree that it would be a good thing to constitute the council on a broader and more diversified basis than is the case at present.

The most important provision proposed in this measure in order to achieve this object is clause 2. Although this clause purely provides that the council shall consist of a chairman and seven other members, and that the Minister shall appoint them by reason of their knowledge or experience of matters relating to the objects of the Bureau, the conclusion should not necessarily be drawn that the Minister will not consult specific bodies or organizations for recommendations in connection with appointments to the council. In cases where he may in fact ask for and accept recommendations from bodies in this connection, it will, however, mean that the persons appointed by him in this manner will not be deemed to be representatives of such bodies.

The amended constitution now being proposed for the council of the S.A. Bureau of Standards corresponds fairly closely with the position which already applies to the C.S.I.R. For example, the C.S.I.R. Act provides in section 5 (1) that “the council shall consist of a president and 11 other members, who must be appointed by the State President and must all be persons who have obtained distinction in the fields of science or industry, or who have specific knowledge or experience with regard to some aspect of the council’s work”. Here there is therefore no question of any specific representation or compulsory prior consultation with any particular organization. Such a set-up seems to me to be the most suitable in the case of the S.A.B.S. as well.

The other provisions in the proposed Bill are of a merely consequential nature. In the new section 5 (2) of the Act, as contained in clause 2 of the Bill, specific provision is made for the continuation of the periods of office of the present chairman and members of the council until the dates on which their periods of office would have expired if the Act had not been amended. I move.

As the hon. the Deputy Minister has said, this Bill may not mean amendments of the conditions of appointment to the Council. The reasons given by the Minister widen the scope of his choice, and we have no objection to that. We support the second reading of the Bill.

I do not want to take up the time of the House unnecessarily, but I do want to point out that with the introduction of this Bill a very interesting piece of history is being rounded off to-day. The wheel of history has turned full circle. When the first Standards Act was introduced in 1945 by the hon. member for Constantia, who was then Minister of Economic Development, the objection raised by the then Opposition was precisely that this council was incorrectly constituted. The main speaker on the Opposition side at the time was the then member for the Ceres constituency. Now, 23 years later, it is again the hon. member for Ceres, the present Deputy Minister, who introduced this legislation a moment ago, who is putting into effect the objections the then Opposition had against the constitution of the council. This is a very interesting piece of political history. When a party such as the National Party has ever since the twenties, at that time under the leadership of General Hertzog, pursued a policy of industrial protection because it believes that every nation must be independent and develop its own industries, it is also the duty of such a Government to see to it that the public is not exploited through inferior products being foisted upon them. It is for this reason that the then Opposition, led by the late Dr. Stals, urged that the Government should establish a Government Bureau with members appointed by the Minister to see to it that proper control is exercised over the quality of those products. The main objection to the Bill introduced at that time consequently was that the Government was not doing its duty of itself appointing this council, and the late Dr. Stals put it very clearly. I read to you what he said in this connection in Hansard, Volume 51 of 1945, Col. 1302—

And little did he know that that day would come so soon—

With this short quotation from the Debates of this House, I just want to point out how wonderfully the wheel has turned and how absolutely consistent this party, which was in Opposition in 1945, has remained in its attitude all along, until it has to-day found an opportunity of rectifying this Act, through the agency of another member for Ceres.

Motion put and agreed to.

Bill read a Second Time.

I move—

Firstly the purpose of the amendment in this Bill is to make provision for the establishment of a new type of private company in which the directors can be held personally responsible for the debts and liabilities of the company, and secondly, to empower the Registrar of Companies to destroy, at his discretion, certain returns submitted by private companies after a period of two years has elapsed, in order to save storage space.

The first amendment I have referred to resulted from a recommendation made by the Commission of Inquiry into the Stock Exchange (the Broome Commission), and representations which were made to the Commission of Inquiry info the Companies Act.

On the basis of the recommendations of the Broome Commission it is being envisaged that the Stock Exchange Act be amended in order to provide that no corporate body may become a member of the Exchange, unless it has, inter alia, been registered as a private company in terms of the Companies Act, and its constitution provides that its directors or former directors are jointly and separately responsible for its liabilities and debts.

The Commission of Inquiry into the Companies Act received strong representations with a view to the inclusion of a provision in the Act which would make it possible for members of acknowledged professions practising in partnership to become incorporated as companies under the Companies Act. The principal consideration for this request was the inconvenience and expense, as well as the break in continuity which followed time and again with the accession, resignation or death of a partner when, according to law, the partnership has to be disbanded and reconstituted. At present, professional partnerships generally comprise a far greater number of partners than in the past, which entails that the members of partnerships are fluctuating to an increasing extent. Professional partnerships therefore find that the aforementioned disadvantages are entailing an increasing burden for them.

In the Companies Act provision is already being made in section 7 for the registration of so-called “unlimited” companies. However, there are deficiencies in regard to the provision of the responsibility of former and existing members of a company which has been incorporated in terms of this section, and this results in very few companies being registered in terms of this section. Although this section was already incorporated in the 1909 Companies Act, there are at present only 26 companies out of a total of 125,000 which have been registered in terms of that section. The section does not offer the desirable degree of protection to claimants in the case of liquidation of a company which has been incorporated in terms of that section. On the basis of the envisaged amendment to the Stock Exchange Act, and the representations received by the Commission of Inquiry into the Companies Act, it has thus become necessary to make provision in the Companies Act for the incorporation of a type of company, the directors of which will be continually responsible, both jointly and separately, for the debts and obligations of the company, but which will not have the disadvantages which are at present connected with registrations in terms of section 7 of the Act.

The creation of a company of this kind is not foreign to the Companies Act; in fact, the opinion exists that such a company, with the necessary addition to its constitution, may at present be incorporated under the Act, whereas the Companies Act of Britain also contains a similar provision in section 202. Nor will a provision of this kind clash with the fundamental concept of restricted responsibility in companies law, because the restricted responsibility applies in respect of the shareholders of the company and not in respect of the directors. In any case, the directors of private companies usually accept in practice the responsibility for the debts and liabilities of the company by way of a separate contractual undertaking.

The provision that the name of the new type of company should include the word “Incorporated” at the end, will distinguish this type of company from other undertakings with limited responsibility, so that the public, creditors, as well as acceding directors, may know with what type of company they are dealing.

In regard to the second proposed amendment, I should like to explain that every company must, at the end of the financial year, submit to the Registrar of Companies a summary of the state of the company to date. The summary is known as Form C, and contains particulars of the date of the annual meeting, the registered address, the nominal and issued capital, details of the methods according to which shares have been issued, whether for cash or for services, etc., as well as details of the directors with their other directorships and the names of the auditors of the company. In the case of private companies, a certificate must also be furnished to the effect that the membership of the company does not exceed 50 and that the public have not been invited to take shares in the company. In the case of public companies, Form C must be accompanied with a copy of the balance sheet, the profit-and-loss account and directors’ and auditors’ reports.

Although the Registrar of Companies has to be informed of amendments in the constitution of the board of directors, and any change in the registered address or capital structure which took place during the year, Form C must nevertheless be submitted.

The storing of these returns which have to be submitted annually by companies are taking up more and more storage space each year. At present an average of more than 1,200 companies are being registered each month, whereas only approximately 200 per month are being removed from the register. It is clear therefore that the number of annual returns which have to be stored is also increasing rapidly. The Companies Office does not have sufficient storage space in which to store this increasing quantity of returns, and it is also impractical to obtain additional storage space away from the Companies Office, in which to store these returns, since this will increase the difficulties in regard to problems with reference work done by the public, as well as by the staff of the Companies Office. Apart from the shortage of storage space, the storage of large quantities of these returns also entail considerable expenditure for the State.

With a view to saving storage space, it has consequently been decided to empower the Registrar of Companies to destroy the returns submitted by private companies, at his own discretion, after two years have elapsed. The particulars submitted in respect of this type of company are normally not of fundamental interest to the public. But from the point of view of the Registrar of Companies, and for the purposes of the Act, the particulars which have to be supplied in respect of the directors of these companies are in fact of great importance. For example there may be a suspicion that a company which has omitted to submit the relevant form, is no longer in operation, and if the form has not been supplied for two years, the company can be removed from the Register of Companies. Seen from the point of view of the Registrar of Companies, the storage of the forms for an unlimited time is not essential however.

Apart from the requirement that companies should submit the form in question to the Registrar of Companies each year, each company must also keep a copy of the form at its registered office. Copies of the forms can therefore be obtained at any time while the company is in existence. The forms which are kept at the registered offices of companies are also available for public scrutiny. These requirements are not affected by the proposed amendments.

In conclusion I want to emphasize that the amendments only relate to the returns of private companies and not to those of public companies. The returns of the latter companies offer a valuable field for research, and may under no circumstances be destroyed.

Mr. Speaker, we support the second reading of this Bill, although it introduces a new innovation, a new type of company. As the hon. the Deputy Minister has indicated, very few people have availed themselves of the opportunity of adopting this type of constitution. It suggests it might be followed by professional men. I wonder if the Deputy Minister has thought of that possibility. Up to now professional men have not been allowed to band together in a limited company. But if the various professional bodies allowed their members so to do—for example, attorneys, doctors, consisting of four or five partners—they could perhaps reduce their liability for taxation. If the hon. the Deputy Minister of Economic Affairs would consult with the hon. the Deputy Minister of Finance, he would find out what advice the one would give to the other. It does suggest a new avenue which could be explored, and I am sure it will be explored by professional men who might wish to avail themselves of these facilities.

The Deputy Minister referred to the Broome Commission and said this was a recommendation of the Broome Commission. I presume he is referring to the Broome Commission inquiring into the stock exchange.

That is right.

I understand Mr. ex-Justice Broome is also dealing with the commission of inquiry into the Companies Act.

No; that is Mr. Justice Van Wyk de Vries.

That commission’s work is not yet complete. I wonder if the Minister can tell us when we can expect the report of the commission of inquiry into the Companies Act. Over the past year or two we have had several small bills dealing with amendments to the Companies Act. It is nearly 40 years since we last had major amendments to the Companies Act. The Companies Act of 1926 has been amended from time to time, and some few years ago there were certain major amendments. Recently the matter was submitted by the Government to a commission with a view to bringing the Act up to date and giving us a new Companies Act. Can the Minister tell us when this commission’s report is likely to be available, because after the report is available some time will have to be given to study the amending legislation. That, too, will no doubt go to a Select Committee which will call for papers and hear evidence. That means that only in three or four years’ time will we get a new Companies Bill, even if the report came through during the next session of Parliament. I suggest that the amendment to the principal Act provides us with an opportunity to ask the Minister whether he can give us any further information regarding any proposed amendments to the Companies Act following the recommendations of the commission. As I say, we on this side support the second reading of this Bill.

Mr. Speaker, the hon. member put a few questions in regard to the Commission of Inquiry which is instituting an investigation into the Companies Act, under the chairmanship of Judge Van Wyk de Vries. It is expected that he may possibly have completed his work towards the end of this year. I may inform the hon. member, since he has asked for details now, that Mr. Keeton, the ex-Registrar of Companies, is now, after his retirement and with all his experience and expert knowledge, assisting the Judge in the drawing up of a new draft Act, in which the proposed amendments will be contained. His assistance is of great value to the Judge in this regard.

I do not believe there is anything further I need say. These are more or less the replies to the questions asked by the hon. member, questions which did not really have much to do with this legislation, but which are, nevertheless, related to it. Since the hon. member does not have any objections to the Bill itself, it is not necessary for me to elaborate on this matter any further.

Motion put and agreed to.

Bill read a Second Time.

Mr. Speaker, I move—

The measure before the House contains minor but urgently necessary amendments, to four of the Acts administered by the Office for Financial Institutions, i.e. the Insurance Act, the Unit Trusts Control Act, the Pension Funds Act and the Friendly Societies Act.

The proposed amendments to the Insurance Act are intended to rectify three matters which give rise to difficulty in practice. Firstly, there is a deficiency in the requirements which are laid down for securities which qualify for the deposit which insurers and local Lloyds agents must make with the Treasury in certain circumstances. It is necessary that such securities must not only be payable in the currency of the Republic—as is required at present—but that they should also be freely transferable and negotiable, so that, in the event of the insolvency of the depositor, they can be freely applied for the payment of claims.

The other two cases relate to re-insurance. The first anomaly here is that the restrictions which the Act places on insurance outside the Republic effected through Lloyds brokers, but not placed on the Lloyds market, are also applicable to re-insurance, since “insurance” as defined in the Act includes re-insurance. However, it was never the intention for re-insurance, which must satisfy specific statutory requirements and inevitably takes place on an international basis, to be involved here. The proposed amendments will exempt re-insurance from the restriction so that it can be freely placed abroad.

The last adjustment deals with certain exemptions under the Act which are enjoyed by a domestic insurer who undertakes no other form of insurance than re-insurance. The proposed amendment will allow such an insurer to insure the death benefits directly which a pension fund offers to its members (the pension fund is in effect the direct insurer here), without relinquishing the exemptions which he enjoys as a re-insurer.

Secondly, the Bill amends the Unit Trusts Control Act, 1947. This Act authorizes the establishment of two kinds of unit trust schemes, i.e. schemes in ordinary quoted shares and schemes in property shares, that is to say, with fixed properties as underlying assets. I repeat, schemes in ordinary quoted shares and schemes in property shares, in other words, with fixed properties as their underlying assets. However, there are certain provisions, as well as deficiencies in the Act, which prevent the last mentioned type of scheme, i.e. the one in respect of fixed property, from being operated successfully. From enquiries recently received regarding the establishment of schemes in property shares, it would appear that a need exists for such schemes in the national economy. Such schemes would, inter alia, contribute towards broadening the investment field, particularly in the field of growth assets, for pension funds, for example. In order to make the operation of schemes of this type practicable, and at the same time to reinforce the protection afforded investors in units in these schemes, it is necessary that a number of amendments be made to the Act.

As proposed by the Minister of Finance in his Budget Speech, provision is now being made in this Bill for increasing the percentage of assets of unit trusts which must be invested in approved securities. Unit trusts will in future have to invest 15 per cent of the market value of each unit portfolio in approved securities, and at least 7½ per cent of that will have to be invested in Government securities.

At present the Act requires that a management company of a unit trust scheme in ordinary quoted shares must possess resources of its own, i.e. capital and reserves, to the value of at least R600,000, while only R100,000 is required in the case of a scheme in property shares. This considerable difference in requirements resulted from the amendment of the Act in 1962, because it was then made possible for schemes in ordinary quoted shares to expand and grow, while at that stage it was not yet envisaged that the same scope should be offered to schemes in property shares. While the bottlenecks are now being eliminated in order to make growing schemes of this nature possible, it is necessary to increase the capital requirement to an amount which is realistic considering the needs of such a scheme. The underlying securities of these types of schemes must be shares of a property company of which all the shares are taken up in the scheme. In order to have a satisfactory distribution of investments in each unit portfolio at its very inception, as required by the Act, a scheme in property shares therefore obviously requires considerably more capital than a scheme in ordinary quoted shares which purchases its underlying securities on the exchange in small parcels. The minimum capital requirement for schemes in property shares is therefore being fixed at R1 million now.

Furthermore it is necessary to safeguard the assets of the schemes. The real assets of a unit trust scheme in property shares are, of course, the fixed properties of the property companies of which shares are taken up in the scheme. The holders of units in such a scheme have no control or say in respect of the dealings of these property companies. As the Act reads at present, these companies can encumber their properties and squander the borrowed money and in so doing reduce the value of the assets of the scheme. In order to make it impossible to commit such malpractices, it is proposed that all the shares of a property company should be taken up in the scheme and that a prohibition should be placed on the encumbrance of the properties of the companies concerned in the scheme. This approach is accepted by the most important parties interested in the establishment of this kind of scheme. It is in accordance with the need which exists for the public to be able to invest its money in this kind of scheme, but there is no need for the schemes to be operated with borrowed money as well.

Lastly, it should be made possible to have an increase in the value of the fixed properties in a scheme accruing to the holders of units. The proposed amendments provide that the trust deed of a scheme must lay down a valuation basis for determination on any given date of the value of property shares in the scheme. In this manner it will be possible to take up the increases in value of the properties in the value of units and therefore to afford the latter the characteristics of a growth asset.

In addition, Mr. Speaker, there is the Pension Funds Act, 1956. Unlike in the case of the other kinds of financial institutions, this Act affords the Registrar no powers to refuse provisional registration on application by a fund for such registration or even to stipulate conditions, for example, in regard to the amendment of articles of association. As section 4 (3) of the Act reads at present, the Registrar is simply compelled to grant provisional registration upon receipt of an application accompanied by the documents prescribed by the Act. It is now being proposed that the Registrar will also in the case of pension funds have the power, having regard to the public interest, to refuse registration or to stipulate conditions which must be satisfied. The proposed powers of the Registrar are especially necessary in cases where entrepreneurs who are bent on making profit and often do not have the necessary means and integrity, want to establish retirement annuity funds with a view to recruiting professional and self-employed persons from the general public as members. In this way trust monies can easily fall into the hands of the wrong administrators in view of the fact that the recruitment of members for such funds is greatly facilitated by the considerable tax savings consequent upon contributions to such a fund in the case of persons in the higher income group.

Furthermore, this Act makes no provision for the extension of the period of provisional registration, as is indeed the case with friendly societies, banks and building societies. Because of this deficiency a fund which at the termination of the period of provisional registration laid down by the Act does not yet satisfy all the requirements of the Act for final registration, must cease to exist. This deficiency is now being rectified.

Lastly, the appointment of the auditor and actuary of a pension fund is not subject to the approval of the Registrar. The auditor and the valuator (actuary) of a financial institution are most important links in the organization for the supervision which the State maintains over these institutions for the protection of investors. The appointment of the auditors of banks, building societies and insurers, and of the valuators of insurers, is already subject to the Registrar’s approval, and practice has shown that such a requirement is essential. The proposed amendments are intended to rectify these deficiencies in the Act.

In conclusion, Mr. Speaker, we come to the Friendly Societies Act. Members of friendly societies, the benefits of which in fact amount to insurance on a small scale, do not, in respect of such benefits, enjoy protection against creditors similar to the protection which the Insurance Act offers to policy holders, except in the case of Natal. Section 14 of Act 38 of 1908 of Natal, which was excluded when that Act was repealed by the Insurance Act of 1923, offers such protection to members of friendly societies in that province. The insertion of a provision in the Friendly Societies Act, 1956, which will protect the said benefits of members of friendly societies in the whole of the Republic, is necessary on grounds of fairness, and then the remaining provisions of the old pre-Union Act can be repealed. The proposed amendments will rectify this matter.

Mr. Speaker, this Bill deals mainly with matters which are not of a contentious nature, except certain amendments to the Unit Trusts Control Act, but these amendments are supported by the main interested parties in this field. Under the circumstances I should like to recommend the proposed amendments for consideration (by the House.

Mr. Speaker, we support the Second Reading of this Bill, but as the Minister says, this deals with four different statutes; so I think this is a Bill which could be dealt with more effectively in the Committee Stage.

The Minister says the Bill deals with the Insurance Act, unit trusts, pension funds, and friendly societies. As far as insurance is concerned, the Minister rightly says it makes it possible to deal more flexibly with matters of reinsurance. On that we have no difference.

When we come to unit trusts, clause 4 of the Bill, I would just like to say that we will, during the Committee Stage, direct the Minister’s attention to the powers of the Registrar, and also the question of the requirement that the fixed property capital must own all the shares. That is a matter which we will take up in detail in the Committee Stage, because we have a query with regard to that.

Then again in clause 5 of the Bill the Minister proposes to increase the amount from 10 to 15 per cent. As the Minister knows, we objected at a previous occasion to the provision of 10 per cent being allowed, and we will object again to the increased 15 per cent. We do not see, in the case of unit trusts …

Not on merits, but on principle.

On principle, yes. In a matter of this kind, an association of people are investing in a unit trust. If half a dozen people together may, as a group, buy shares and there is no requirement by the State on them that they should invest a portion of their money, when they invest it, in Government securities, we see no reason why an organization like a unit trust should be required to invest a portion in State funds. The Minister of Finance has his way of getting State funds from the public by his capital levy, and by his compulsion through the taxing machine. We see no reason why in this case the amount should be increased to 15 per cent. We have made our objection in the earlier stage when the Bill was previously under consideration. We objected to the principle of 10 per cent. We shall continue to maintain our objection.

On clause 7 we shall invite the Minister during the Committee Stage to give us a further explanation as to what he means by “sufficient number of property companies”. The clause provides that shares of a sufficient number of property companies will be included in every unit portfolio so as to ensure a satisfactory spread of investments. We appreciate the objective which the Minister has, but we suggest that there should be more clarity on this matter, because what is meant by “sufficient”? There is no yardstick, and particularly having regard to the fact that the capital is being raised to R1 million, we suggest that this needs further clarification, having regard to the amount of capital which is now demanded for property companies which go into this type of business.

Under clause 8 of the Bill, on page 11, in line 33, it is provided—

1. 2. (b) In the case of such holder, every fixed property company of which shares are held in any unit portfolio in which such holder owns units on the first-mentioned date.
2. (3) Copies of the balance sheets, accounts and statements referred to in subsections (1) and (2) shall be kept available at the registered office … for inspection.

Referring to (3) every unit holder is entitled to a copy of every single balance sheet. One can imagine a unit company having a dozen or 15 companies. It means every unit holder must get a copy of every balance sheet.

I suggest that that can be a more convenient and practical way of solving the difficulty. The answer of the hon. the Minister will be that it is the way in which it was dealt with in the past. We suggest, as a new amendment to the Bill, that consideration be given to the requirements of the consolidated balance sheet, with supporting notes, which would give the unit holder all the information he needs without the cumbersome method of individual balance sheets which is the case. I think the hon. the Minister will appreciate this point. This is, briefly, the queries that we will raise in the Committee Stage, except for one or two others that we might raise. As I have said in my opening remarks, this is an administrative matter which can be conveniently dealt with during the Committee Stage. We therefore support the Second Reading of this Bill.

Mr. Speaker, it appears as if the peace and quiet of the 3rd of May is continuing.

I hope that the hon. member is not going to disrupt it.

Mr. Speaker, I shall do my best not to do so. The hon. member for Pinetown said they supported the principle of the Bill, but then expressed a whole series of objections about certain aspects which really are principles of this Bill. I shall attempt, in the course of my speech, to deal with all the objections which he wants to raise in the Committee Stage. In the first place the intention of this legislation, and the concessions being made, as well as the changes being brought about as regards this unit trust scheme, is to afford these unit trust schemes the opportunity to develop and to direct their activities in other directions than those in which such activities have been directed up to the present time. Since 1963, with the introduction of the open trust scheme, the growth funds of this scheme have increased tremendously. It has become a very important factor in our economic composition. As I have said, this ligislation contains the important principle that all shares of the property companies have to be taken up by new management companies to be established. This very point is one of the objections of the hon. member for Pinetown. The reason for this is clear, it is obvious. As these companies are now being taken over by the management companies, it is important that the management companies obtain absolute and full controlling rights over these companies the shares of which they are taking over. A position may develop, in a case where it takes up 75 per cent of the shares and a 25 per cent minority group remains, that this 25 per cent minority group may act in such a way that the management company will be hampered in the development of that project which that company has in mind. This may happen if the minority group, with the contributions of capital expected, is not capable of contributing. They may perhaps not want to do so, or they may perhaps not have the money to do so. In that case the development contemplated by the management company, in the eventual interests of the share-holder, cannot take place. This is the basic reason for the provision in the Bill that 100 per cent of the shares be taken over by the management company and that the management company have absolute and full controlling rights over its own investments. The Government has a very real duty to the investor, namely to ensure that he will be protected as far as possible. This concession also affords the growth funds the opportunity of diversifying their assets, in this respect that they can also give their clients the opportunity of channelizing their investments to property development, so that such investments will not continue to be restricted to the position which obtains at present, i.e. that growth funds and unit trust schemes are restricted to the share market. This development is also of great importance in the following respect; it will take investment funds in other directions, particularly in the direction of property development, housing, offices, building complexes, additional employment, and so on. It will give rise to and maintain a steady rate of economic growth in our country. I have already dealt with the question of full share-holding. I do not want to take this matter any further. I just want to mention that outside interests are totally excluded in this regard. The further development programme is important because these growth funds occupy such an important position in our economy. The other objection of the hon. member for Pinetown, namely that the investment, or the approved securities which they have to hold, is being increased to 15 per cent, is in complete agreement with what the hon. the Minister of Finance said in his Budget speech. I should like to quote what the hon. the Minister said, and this clearly is the reason why this is being done. Consequently I cannot see why the hon. member for Pinetown has objections to this. Investors who invest in these units, do so for reasons which differ completely from those advanced by the hon. member and with which I shall deal later. He cannot advance the argument that these persons would otherwise have invested in Government stock or shares. The hon. the Minister said the following in his Budget speech—

Therefore this development is completely in line with the attitude adopted by the hon. the Minister of Finance. The hon, member for Pinetown also objected to the increase of the capital reserves and capital from R100,000 to R1 million. I cannot see why he objects, because basically this merely is a minimum amount from which provision is being made. This is not sufficient reason for saying that it is too little. Any company may invest much more than that. I am of the opinion that there must be a minimum amount. It is realistic. I think that any company with a reserve capital or share capital amounting to R1 million, will be able to make more than enough investments for making a start, and to do so realistically.

There is another aspect which the hon. member for Pinetown did not mention, but which I consider an important one. That is that the management company will now be obliged to devote its exclusive, not merely its main, attention to the unit trust scheme. This is a provision which has been inserted to ensure that the investor will be protected as much as possible. Clause 7 of the Bill lays down, as the hon. member for Pinetown said, and to which he objected, what a “sufficient investment” is which the management company has to make. It is obvious that “sufficient” means that which is sufficient. It is something which will be left to the discretion of the Registrar. If such a management company invests in certain property companies, it may be that an investment in one company would be sufficient. But, it may also be that an investment in 20 companies would not be sufficient. It depends upon the type of investment. It is very difficult to lay that down by means of legislation. The idea is that the policy which will be laid down will be that there be as much diversification as possible as regards this investment, so that the idea of putting all one’s eggs in one basket will be eliminated. The idea is that there should be the safest possible investment for these companies. It is not possible to determine here how this is to be done. But I regard it as an essential safety factor, particularly now that companies are to move in the direction of property investment. This is in contrast to the present investments which basically are made on the share market. On the share market one can immediately evaluate one’s investments by means of the notations. This will not be possible now. Another important aspect of this Bill is the trust deed. The trust deed which has to be drawn up will determine what the formula is to be and which method will be applied for calculating the valuation of assets, which will be transferred to the unit portfolio. This will also be something which will rest with the management company. It is not something which can be laid down in legislation. Once a formula has been laid down, it will have to be adhered to.

Another objection of the hon. member for Pinetown related to the balance sheet and the information to be reflected. I am in full agreement with this Bill as regards the information to be reflected. We must realize that a new direction is being taken here. I said a moment ago that the direction was towards property where valuations would have to be made. I consider it important that the balance sheets, and accompanying statements, contain all the necessary details so that the investor will be in a position to judge accurately and to know what he is purchasing. There is one clause which I find very interesting. It is the clause which requires the fluctuation in the values of units to be indicated, the highest and the lowest. I regard this as very important in that the investor will then be able to ascertain exactly what has happened to the shares in the past. In this respect no new principle is being incorporated in the Bill. This merely is an extension to principles which already exist. As a matter of fact, the old principle of disclosure is merely being reconfirmed. I do not believe that the hon. member for Pinetown had any further objections. This development, and the development of the growth funds, are attributable to the new economic development which we have experienced in this country in recent years, namely the change-over to an industrial economy and the increase in salaries and wages. The salary and wage earners are now seeking investment fields of small units. He is seeking an investment field where he will not lose his investments through the erosion and depreciation of money, for example inflation. People have now turned to this growth funds as well, because they are of the opinion that the growth funds are the right direction. Consequently a great responsibility rests on the State to ensure that the persons investing in them will be placed in a position to be able to judge to the best of their ability. It has already been said that one cannot protect anyone against his own stupidity. I want to say that the investments of many persons can be saved by strict and timely action by the State. The State can make provisions which are so strict that they cannot be exploited by certain dishonest persons. We may rest assured that the Government is doing its duty in this respect. I believe that no investor can tell the Government that it has not done its duty, and has not made it possible for him to judge to the best of his ability prior to making an investment.

Mr. Speaker, I rise to deal only with two matters. Firstly, I believe that the hon. the Minister has lost an opportunity in amending this Act because I do not believe that he has amended it even nearly sufficiently. When this Act was originally passed in 1947 and amended in 1962, we were faced with a situation entirely different to the situation today. The provisions of the Act which deals with units in regard to fixed property dealt with closed-end trusts. No provision was made for the establishment of an open-end or mutual trust for a fixed property. In amending the Act, to try to bring it into line with some of the provisions which deal with open-end trusts for securities, too much of what belongs to the past has been left in the present Act, and has not been amended. I want to give only two examples. Firstly, the Act contains the provision that balance sheets and accounts must be dated not more than two months prior to the date on which they are furnished. I refer to clause 8 on page 9 of the Bill which states:

The securities section of the Act provides for a period of three months. I would have thought that this was an opportunity to bring the two into line because you are now dealing with the same kind of unit. I am sorry that the hon. the Deputy Minister did not do so. But far worse is the question of advertising contained in clause 9. Here the provisions of the Act have been left almost intact. If you look at clause 9 (a) (1), which deals with price lists, advertisements and brochures, and clause 9 (b) (2), which again deals with price lists, advertisements and brochures or similar documents, you will see that the old provisions of the Act remain. There has been no amendment. The idea of a fixed property trust will only be successful, as the security trusts have been successful, provided there is proper marketing. A marketing operation is involved. These sections which are left in the Act and which I unfortunately cannot discuss during the Committee Stage because they concern the principal Act and not the amending Bill, mean that we are now inheriting these provisions. If the hon. the Deputy Minister will read them he will see that no normal marketing of securities can take place under these conditions. In last night’s Argus there was an advertisement for the National Growth Fund. It was a half-page advertisement in black and gold, which was very attractive. But it made no mention of the particulars required in terms of this clause because they do not exist in the corresponding section that deals with securities. This inheritance of the old days is left in this clause now dealing with fixed property trusts. It is a great pity because I believe that it is going to be difficult, if not impossible, to further what obviously the hon. the Deputy Minister wants, otherwise he would not have introduced this Bill, the creation of fixed property trusts. He is killing the potential of the selling of the units. If you have to have an advertisement with all this information, you will not be able to do any advertising. You will merely have to give the facts.

The second matter concerns the 15 per cent that companies will have to invest with the Government. I want to joint issue immediately with the hon. member for Pietersburg. He seems to find justification for clause 5, where the 10 per cent that companies have to invest has been increased to 15 per cent, in what the hon. the Minister of Finance said in the Budget Debate. This is no justification. We have the greatest respect for the hon. the Minister of Finance, but we do not always agree with him. We told him so at the time of the Budget. We told him that we did not regard this increase from 10 to 15 per cent as being fair. We told him that we did not think that it should be applicable in the case of a unit trust. We told him that we believed that a securities unit trust was nothing more than a group of persons investing together, and that if he wanted to carry the situation to its logical conclusion, he would have to get every share investor to make his contribution of 15 per cent to the capital funds of the discus. That is why we object to this. I am sorry but the hon. member for Pietersburg has not impressed us, by telling us that this is exactly what the hon. the Minister of Finance said in his Budget Speech. We objected to it then, we object to it now and we will vote against it at the Committee Stage.

Mr. Speaker, it is as usual my prerogative to differ from the hon. member for Parktown. In particular I differ in respect of his last assertion, namely that he and his side of the House object to the arrangements embodied in this amending bill to increase the approved investments of unit trust companies from 10 to 15 per cent. I think that he, in his view of the situation, and the hon. member for Pinetown, are altogether leaving out of account the tremendous impact these unit trusts are making on the capital market of South Africa. I just want to point out to the hon. member that during the year February 1967 to February 1968, according to statistics published in the Reserve Bank quarterly of March this year, the total assets of unit trusts increased by 206 per cent, in one year’s time. In order to appreciate this tremendous development properly, we must again take into consideration the figures which appeared in that issue of the Reserve Bank quarterly. During that period the assets of building societies only increased by approximately 5 per cent. If one looks at the tremendous extent of the market value of these shares quoted on the Johannesburg Stock Exchange, one sees that according to the finding of the economic correspondent of the Netherlands Bank, it stands at R11,890 million at present. If, on that basis, one considers the effect the introduction of the trusts has had on the market prices of certain shares, one can realize why I think that that 15 per cent is, in point of fact, still too little, and that it should be more. I feel that these unit trusts should be controlled a little more strictly and that a greater percentage of that 15 per cent should perhaps have been invested in Government securities. If, in terms of the growth in the total assets of the unit trusts in recent months, one projects into the future, one sees that the graph of their continued growth rises almost vertically. Since it is our intention with this Bill to extend the activities of the unit trusts so that they may become property companies, the Government must be very careful because, as the Act provides in section 4 (a) and (b), the investments of the property companies will for the most part be in urban properties and in land approved by the Registrar. Since the determination, I almost want to say manipulation, of property prices in a restricted area, where supply and demand are not always reconciled owing to the extent of the cost of such properties, manipulation is not impossible. With reference to this amending Bill I think that it is one of the duties of the legislators to eliminate irregularities and to effect a decrease in manipulation to the highest degree possible.

The hon. members for Parktown and Pine-town also neglected to take into account another, to my mind, important characteristic of property companies. That is the fact that, but for a few exceptions, property companies are not quoted on the Exchange. This means that the holder of units does not have a daily barometer of the value of those investments. That is why it is important to provide in this amending Bill that the balance sheets, final accounts and other statements of each separate property company be made available to each holder of units. The hon. members who spoke before me, and particularly the hon. member for Parktown, are well aware of the fact that a consolidated balance sheet often conceals a great deal. It also reveals a great deal, but it can also conceal poor investments; that is not in the interests of holders of units.

We can discuss the other objections of the hon. members during the Committee Stage. Suffice it to say that the unit trust movement with all its attendant advantages, also opens the door to disadvantages; that is why the necessary measures must be taken in this amending Bill in order that they may be minimized.

Mr. Speaker, like other members on this side of the House I do not wish to anticipate the Committee Stage in this discussion. This seems to have developed into a discussion of the trust movement. The trust movement emanated from the U.S.A. at the time of the closure of the Second World War. At that time it was very popular in America. We in South Africa introduced a system of fixed trusts and anyone who was interested in investment was consulted about the advisability of investing money in fixed trusts. There were always two points in this regard. One was in favour of these trusts and one was against them. The point in favour of these trusts was this: It gave a spread over in investment. It gave the ordinary man who had only a few pounds to invest a spread over several investments. That was the point in its favour. The point that was not in its favour, and I regard it as a bad point, and I could not advise people to invest great amounts of money in those trusts, was negotiability. How would it be possible to sell your unit share of the fixed trust? Where was there a market? They were not listed on the Stock Exchange and there was no market available, unless one could go back to the originator of the trust and he could make an offer. In this new movement we have to-day most difficulties have been overcome. The difficulty of negotiability has been overcome because the Mutual Trusts which we have to-day, the open-end trusts, are listed on the Stock Exchange, and not only that, but the trusts themselves give information that was not available in the early stages of the trust movement. They say frankly how their funds are invested; they say what the value of the funds is and they also say, as they are required to do by law, on what condition they are prepared to sell and to buy. They have to give a buyer’s price and a seller’s price. I think that is an excellent provision in this bill we are considering.

Now we come to the point which the hon. the Minister of Finance raised in his Budget speech, namely that there should be a compulsory acceptance of a Government loan as part of the trust. Well, I have no objection to a Government loan being part of the trust, but it should not be compulsory. If the Government feels that Government loans should be part of a Mutual Trust investment, let them establish their own Trust. The Government can do it quite easily. Sir, the Government is in private enterprise to-day. We have just had the example of the Industrial Development Corporation floating off National Selections.

Order! Is the hon. member not going very far now with this subject?

With respect, Sir, I am speaking about the Government in financial investments similar to Trusts, because National Selections is similar to a Trust. I do not think it is fair for the Government to come along to a Mutual Trust and to say: “You may have a very good Trust; you may have a very good spread of investments but you must take ours.” That is not fair competition. I should think that when we come to the committee stage we shall have a lot more to say about this, with the permission of the Chairman.

I think we can discuss the provisions of this Bill to great advantage in the Committee stage. But I would like at this stage to thank the hon. member for Pinetown for the proper notice he has given me about the matters which hon. members wish to raise in the Committee stage. I think if we could do this more often it would assist in raising the standard of debate in this Chamber, if we know beforehand which matters are going to be raised.

There is only one matter on which I would like to comment. I refer to the remarks made by the hon. member for Pinetown and also by the hon. member for Parktown in connection with clause 5. This matter was also raised by the hon. member for Kensington. The hon. member for Parktown said that these mutual funds consisted of investors who had come together to invest. That is altogether wrong. These unit trusts do not simply represent a combination of investors. The unit trusts are established by law and it is by reason of the statutory provisions that they are so popular. To my mind that should be sufficient reason to require them to make a contribution also to the public sector. I do not think there is need to discuss this matter any further. When we decided upon the 10 per cent in 1966, these unit trusts were in their initial stages of development. They have now developed beyond all recognition; they have grown and they have become popular to a very great extent because the investors are protected by law, by the provisions under which the unit trusts were established, and I think it is only right therefore that they should make a contribution to the public sector. However, I think we can discuss this matter to very much greater advantage in the Committee stage, and I leave it at that for the time being.

Motion put and agreed to.

Bill read a Second Time.

I move—

Mr. Speaker, the object of this Bill is to consolidate and amend the laws providing for the establishment and administration of the Transvaal Society of Accountants and the Natal Society of Accountants. The Transvaal Society of Accountants was incorporated by section three of the Accountants Ordinance, 1904 (Ordinance No. III (Private)), of the Transvaal and the Natal Society of Accountants by section three of the Accountants Act, 1909 (Act No. 35 of 1909), of Natal. Following the decision of the Government to review and replace where necessary all pre-Union legislation, consideration was also given to the aforesaid Acts.

The two Societies co-operated in framing a Draft Bill and agreed that the replacement of the pre-Union legislation constituting them be embodied in a single Bill in terms of which both Societies would be constituted. The Bill before the House has been studied by the Councils of the two Societies and has their full approval.

In submitting this Bill the opportunity has also been taken as a result of the experience gained over the past 60 years to tidy up the provisions of the Ordinance and Act being hereby replaced. Only two changes of any consequence are included in the Bill. Firstly, the names of the Societies are changed to include the word “Chartered”, which was recognized as part of the designation of members of these Societies by the Chartered Accountants Designation (Private) Act of 1927. As the Transvaal Ordinance and the Natal Act were enacted prior to the Designation Act, that Ordinance and Act did not include the word “Chartered.” Secondly, it should be noted that this Bill applies only to the Transvaal and Natal Societies of Accountants. The reason for this is that the Cape Society of Chartered Accountants is incorporated under the Companies Act and the Society of Accountants and Auditors in the Orange Free State is a voluntary body established under Articles of Association. For many years past there has been an increasing degree of co-operation between the provincial societies through the National Council of Chartered Accountants. It is possible that at some future time, with the required majority of members, it might be considered desirable for the Transvaal and Natal Societies to amalgamate with other bodies of accountants to form a National Society of Accountants. Therefore provision is being made for such amalgamation.

Mr. Speaker, I think I should declare an interest in this matter, because I am a member of the Natal Society of Accountants. On my own behalf and on behalf of the hon. member for Parktown, who is a member of the Transvaal Society of Accountants, I can assure the hon. the Minister that we will support this Bill. This is an agreed measure between the Societies, and as the hon. the Minister has said, it may be a forerunner to the establishment at some future date of a National Society, but that is a matter which is not under discussion at the present moment. We will support the Bill.

Motion put and agreed to.

Bill read a Second Time.

I move—

This Bill is designed to eliminate certain administrative problems being experienced by the Department, and it is also intended to rectify certain aspects about which doubt exists. It is really a kind of omnibus Bill, and therefore I shall deal with it clause by clause.

Clause 1: In terms of the Second Schedule to the Bantu Administration Act of 1927 land in the Fingo and Hottentots Village in Grahamstown is granted subject to, inter alia, the condition that the present and future proprietors to whom land has been or is granted shall punctually pay to the Receiver of Revenue, Grahamstown, on the 1st January in each year, the sum of five shillings (50c) for educational purposes. As a matter of interest I just want to read that section in the 1927 Act to you. It reads as follows …

I think in the past 40 years the Receiver has never been there on the 1st of January to receive the money. It is also impossible to enforce this; it can only be enforced by means of civil proceedings, which are, of course, out of the question. Furthermore, Bantu education is now being financed out of other funds, and this measure is therefore obsolete and we propose that it be repealed.

Clause 2: Subsections (2) and (3) of section 3 of the Bantu (Urban Areas) Consolidation Act, 1945, both provide for the removal, curtailment or abolition of a location, Bantu village or Bantu hostel, and in terms of subsection (4) the removal, curtailment or abolition under subsection (3) is then published by notice in the Gazette, which notice is then prima facie proof of what has been done. However, there is no provision for such action if the removal, curtailment or abolition takes place under subsection (2). It is now proposed to make subsection (4) applicable in respect of action taken under subsection (2) as well.

Clause 3: The Government law advisers are in doubt as to whether land outside an urban area may in fact be included in a prescribed area in terms of the Bantu (Urban Areas) Act of 1945. Furthermore, there is some doubt as to whether a prescribed area may also be regarded as an urban area. In this connection it is repeatedly necessary to declare a periurban area, especially smallholdings, a prescribed area in order to control the influx of Bantu as in the case of an urban area. These peri-urban areas are commonly used as starting points from which to enter the neighbouring city or town. It is also necessary to control the residence of Bantu in these peri-urban areas or areas with an urban character, by means of a licence under section 9 of the Bantu (Urban Areas) Act, as in the case of a city or town. This will be possible if the prescribed area is also regarded as an urban area. The Camden power-station complex near Ermelo may be cited as an example. This complex has been declared a prescribed area, with the Town Council of Ermelo as the controlling authority. Now there is some doubt as to whether the Town Council may apply its regulations with regard to backyard occupation in the Camden area as well, something which is necessary if slum conditions are to be prevented. It is now proposed that section 9 bis be suitably amended, so as to place it beyond any doubt that such control may be exercised over such peri-urban areas.

Clause 4: The local authorities of Vereeniging, Vanderbijlpark, Meyerton, the Transvaal Board for the Department of Peri-Urban Areas, and the Department of Bantu Administration and Development, have entered into an agreement in terms of section 40 of the Bantu (Urban Areas) Act of 1945 to establish a regional Bantu residential area in the so-called Vaal Triangle where all the Bantu living in the areas of the parties concerned will be resettled eventually, and a management board, known as the Management Board, of Sebokeng, has been established under section 40bis of the said Act to administer the residential area.

According to a recent decision of the Appeal Court the designated area of Sebokeng is invalid because it includes the released area of Evaton, and as a result the legal validity of the Management Board has also become open to question. As a temporary expedient new regulations for the area were promulgated under section 25 of the Bantu Administration Act, 1927, but it is desirable for control under section 40bis of the Bantu (Urban Areas) Consolidation Act, 1945, under which the Management Board was established, to be maintained.

Since it is impossible to foresee which Acts conferring powers upon a local authority will be required by the Management Board at some stage or other, it is deemed expedient to make provision for relevant legislation, ordinances included, to be placed at the disposal of the Management Board by notice when necessary. The proposed amendment will make such control possible and place the legal validity of the Management Board beyond all possible doubt.

It is necessary to include Evaton since it is desirable that proper control should be exercised there to combat the overcrowding and the slum conditions existing there and to provide better services there. We are reconsidering the matter, and if we decide to introduce an amendment it will appear on the Order Paper by Monday or Tuesday.

Since the Management Board of Sebokeng has been functioning from the 1st day of April, 1965, and has already concluded several transactions, it is necessary to ensure that such acts be validated beyond all doubt. If this is not done, the Board may be seriously embarrassed and also suffer heavy financial losses.

As far as clause 5 is concerned, the position is as follows. Section 2 of the Bantu Authorities Act, 1951, was amended during 1964 to provide for community authorities, and at the same time the definition of “tribal authority” in section 1 of that Act was amplified in order to put it more clearly that such an authority actually is just the recognition of an existing form of tribal government. However, at present there are doubts whether tribal authorities that were established prior to the amendment made in 1964, have legally continued in existence after the amendment. Hon. members will understand that the tribal authorities established before that time have been continuing their activities in the meantime and have contracted certain obligations in the normal course of these activities. Therefore it is desirable to remove any doubt about the legality of their existence, and consequently of what they have done, and this is being contemplated in clause 5 (2).

Subclause (1) merely extends the existing subsection (3) of section 1 of the Bantu Authorities Act so as to provide that a Government notice concerning the establishment of an authority, the area for which it is established, or the amendment of such an area, is prima facie proof of the establishment, the area or the amendment of the area, as the case may be. I should just like to point out that it is only prima facie proof and not conclusive proof, and also that the principle is not foreign to our law, and we need only look at clause 2 of this Bill to find an example embodying the same principles.

Then we have clauses 6 and 7. I shall deal with them simultaneously, because they contain the same principle. Under the existing section 4 of the Promotion of Bantu Self-Government Act, 1959, inter alia a territorial authority, which included the then Transkeian Territorial Authority, may appoint a representative in an urban area, and section 5 of that Act determines the functions of such a representative. The Transkeian Territorial Authority, of course, has now been replaced by the Transkeian Government, and section 4 of the said Act is being amended to provide that the Government of a self-governing area, which will include the Transkeian Government, may appoint a representative, and furthermore the reference to the Transkeian Territorial Authority, which no longer exists, is being deleted. The amendment of section 5 of the Act, therefore, is simply consequential upon the addition of such a government.

Clause 8: Problems are being experienced in regard to the onus of proof where especially inhabitants of urban Bantu residential areas sell Bantu beer to others in conflict with the provisions of the Bantu Beer Act, 1962, because the buyers naturally are reluctant witnesses. It is therefore proposed to amend the Act so that the possession of any quantity of Bantu beer which is more than is reasonably required for domestic consumption or by an employer for supply free of charge to his employee shall, until the contrary is proved, be deemed to be proof of a contravention of the law relating to the manufacture, sale, delivery or supply of Bantu beer. This is not a new principle, and a similar presumption already exists in section 145 (d) of the Liquor Act of 1928.

Clause 9: Many of the smaller local authorities cannot afford to establish Bantu beer breweries, since the capital outlay for such a brewery is not economically justified in such cases. Many of them obtain beer from larger neighbouring local authorities. The proposed amendment will enable such local authorities, as well as any person permitted by law to sell or deliver Bantu beer, also, after a permit for that purpose has been obtained, on the conditions stated in the permit, to buy Bantu beer from a corporation, development corporation or investment corporation as defined in the Promotion of the Economic Development of Bantu Homelands Act, 1968.

Hon. members will notice that this provision only applies where the corporation concerned is authorized to brew Bantu beer in a neighbouring Bantu area; furthermore, that such a corporation itself is not authorized to become a distributor to the general public, and will therefore not be authorized for example to open beer halls in urban areas. The proposed amendment will only have the result that properly brewed Bantu beer will be available in a number of such small urban areas which cannot obtain beer easily in any other way. I move.

This Bill is not quite as innocent as the hon. the Deputy Minister’s speech would suggest. Like all Bantu Bills, it is complicated because of the reference to so many other Acts that are affected. There are only two clauses which can really be said to be contentious, clauses 3 and 4, and especially clause 4, and the Minister has now indicated in his speech that he is considering moving an amendment to clause 4, which he hopes will appear on the Order Paper on Monday or Tuesday. In view of that fact, I think we should hold over the discussion of this Bill until we see what the amendment is, because that is the most important clause in the Bill. I therefore move—

Agreed to.