I find that certain provisions in the Stamp Duties Amendment Bill go beyond the resolutions of the Committee of Ways and Means adopted on the 20th April. These provisions are contained in Clause 1 and Clause 3, paragraphs (a) and (b), in which it is proposed to tax a substituted debtor in respect of a bond; and in Clause 6 in which it is proposed to tax an insurance policy on the basis of the number of persons insured instead of on the policy itself and to extend “policy of insurance” to include “certificates”. Unless these provisions are covered by further resolutions of the Committee of Ways and Means they cannot be put in Committee of the Whole House on the Bill.

First Order read : Second reading, Stamp Duties Amendment Bill.

I move—

Mr. Speaker, as a result of the ruling which you have just given it appears that Clauses 1, 3 (a) and (b) and 6 of the Bill will have to be dropped, and the necessary steps will be taken to have them deleted during the Committee Stage. The provisions contained in those clauses are desirable but they cannot be regarded as really urgently necessary. They may possibly yield an increase of revenue, but not really a very important one, and for that reason I feel that I should not take up the time of the House by asking for it to go back into Committee of Ways and Means. I therefore propose to delete these clauses in Committee and again introduce the provisions at a later stage. Clauses 2, 3 (c), 4, 5 and of course 7, therefore remain. Numbers 4 and 5 are the most important clauses in the Bill and they give effect to the resolutions adopted in Committee of Ways and Means. Clauses 2 and 3 (c) will both effect a reduction of taxation and that was why it was not necessary to have them considered by the Committee of Ways and Means. In both instances although they will involve a reduction of taxation, the effect on the Exchequer will not be very important. But these concessions are proposed here because it is fair to make them. So far as these clauses are concerned we are dealing with affidavits and other declarations which have to be made to comply with the Government’s requirements under statutory provisions. Such statements, sometimes have to be made by people who have no personal interest in them. In certain instances the particular Statute makes it clear that no stamp duties are payable on such declarations, but in other instances these people have to pay the ordinary stamp duties under the special provisions of the Act. This is considered unfair, and in these clauses we therefore propose to grant exemption from the payment of stamp duties to people having to make this and other kinds of declarations. Then we have the provision under 3 (c), which, I think, should remain in the Bill. This deals with the concession made to companies registered under clause 21 of the Companies Act. These are public utility companies in respect of which there are no dividends on profits. Such companies under the Income Tax Act are exempt from income tax and what we are suggesting here is that those companies shall also be exempt from stamp duties on bonds. I think the House will be willing to accept both proposals as a reasonable concession. Then we have clauses 4 and 5 left which give effect to the resolution passed by this House in Committee. The wording in the Bill is practically identical to that of the resolution and all I have to do is to remove a possible misapprehension on one point. I said that the increased stamp duties on brokers’ notes were only intended in connection with shares and not in connection with the sale of other movable property. In the resolution adopted I confined these increased stamp duties to trade bills. Well, the rate of the stamp duties on other movable property therefore remains unchanged, and as we are substituting the whole of Clause 10 of the existing schedule by the new Clause 10 we have to make provision for this. Paragraph 1 will deal with other kinds of movable property and paragraph 2 gives effect to the resolution in connection with the increased stamp duty on brokers’ notes for commercial bills. There is, therefore, really nothing new in Clauses 4 and 5 of the Bill—there is nothing which has not already been approved of by the House in Committee. It is therefore unnecessary for me to repeat what I said on previous occasions. I should perhaps emphasise just one other point. During the previous consideration of the proposal, criticism was levelled especially because we did not really tax the profits on share speculation. I just want to repeat what I said very clearly in my Budget speech. I said that I had given considerable attention to the question of the levy of a special tax on profits on the Stock Exchange, but that obstacles in the way were very substantial. And, in my reply to the Budget debate I referred in greater detail to those difficulties and I added this—

This is in connection with a tax on the profits on share speculation—

I still stand by that. The fact that this Bill is passed, as I expect it to be, will not change my attitude in regard to profits on speculation. I am still very anxious, if possible, to tax such profits. I shall continue to give my attention to the possibility of doing so and I shall be glad to receive concrete suggestions which I can go into.

For the very first time we on this side of the House are opposed to this kind of Bill, not because we do not want this taxation—we welcome the taxation—but because we are not satisfied as the tax does not go far enough. I think that in that respect the great majority of the public are agreeable. There is one thing which the public cannot understand, and we shall be very glad if the Minister of Finance will explain it to us. If an individual in South Africa tries to be a good citizen, if he tries to work and to produce and to build up, if he tries to create new assets in the country, if he tries to assist us in increasing the country’s national income, he finds no mercy under the Government’s war taxation system. Year after year this class of citizen is taxed up to the hilt, and if he complains, and if we complain on his behalf the reproach is cast at us and we are jeered at and told that we don’t know that there is a war on. Wars cost money. But there is one class of the population which apparently is exempt from any obligation in connection with the war, and I think that that is the class of citizen for whom we have least time of all; that is the gambler, the man who is too lazy to work, who has never done any work in his life, the man who perhaps has become rich as a result of inheritances, and who is now gambling in shares. He produces nothing; he contributes nothing to the country’s ability to produce—he is nothing but a parasite, and that parasite gets off scot free.

Where is he?

We have been at war now for more than four and a half years and the Minister has to find more money every year. Every year he looks for new taxes. Every year he has imposed new taxes to an amount of about £9,000,000, and during the past five years he has taxed the best classes of the population more and more. The man who works and produces is taxed. The poor man is taxed. The wage earner is taxed. The farmer is taxed. The industrialist is taxed, and the Minister has taxed the trader—he has taxed all these classes so that they cannot stand any more. Since the 28th February, 1940, the Minister has imposed more and more taxes. He has done so year after year. He has selected those classes to tax them heavily, but in all those taxes we look in vain for a tax on the gamblers. I have before me a list of all the taxes, showing how much they have yielded, which the Minister has levied since that date, and we look in vain for any tax on the gambler.

Who are the gamblers?

The man who gambles on the races and on the stock exchange.

He also pays taxes.

This has been going on for five years, and the Minister has at last woken up, and he has discovered that the gamblers in South Africa are exempt from all these taxes, that they are exempt from any contribution to the costs of the war. But under pressure of public opinion the Minister has now at last come along, and he is at last going to cast his net in such a manner that he may also catch the gamblers in South Africa. We have at last got this result after five years’ struggling, that after the gamblers have been exempt for five years and have made no contribution, the Minister makes this proposal.

They were there before the war, too.

Yes, the other good citizens were there as well, and our objection is that while during the past five years heavier taxes have been imposed regularly on the other sections of the population— on those sections which produce things and which work, not a single tax has been imposed on the gamblers in this country. The Minister at last realised that that was unfair, and we have the result of his conclusions in this Bill. We can only say that the mountain was in labour and that all it has produced is a very small little mouse.

Is every man who invests money in shares a gambler?

The people who speculate in shares are nothing but gamblers, but I shall deal with that aspect afterwards.

But the man who invests money?

No, but the people who are now speculating on the share market—they are the gamblers. Just as we have had people in the past five years speculating in land, so we have had people who have speculated on the share market. Now let us see what the Minister is doing about these people in this Bill. After five years, the tax which the Minister has now placed before us, is what he is going to impose on these gamblers. In actual fact it amounts to this, that the Minister places a tax on share transactions which has been increased by 1s. 6d. on £100. It is less than one penny per £. Here we are dealing with stone rich people who have made fortunes on the share market, and they are now going to contribute the colossal amount of £400,000 to the war funds; they have been getting off scot-free for five years, and now the Minsiter has suddenly woken up. He realises that these people should also be taxed, but the tax he levies is less than 1d. per £. That is the tax he imposes on the “idle rich,” on the “playboys.”

Where are they?

I can show them to you here in Cape Town—those “playboys from Cape Town” who have been gambling the last five years and who have made fortunes on the share market—that whole class right throughout South Africa now has to contribute the colossal amount of £400,000 to war funds. And because the Nationalist Party regards this tax as farcical under prevailing conditions, I want to move the following amendment—

That is to say, all we ask is that no distinction is made between people speculating on the share market and people speculating in immovable property. Ï can really say that there is no speculation going on in fixed property today. It does not pay to speculate in fixed property.

I am very glad to hear it.

There are still people who buy and sell land, but it is not a matter of speculation. They do so because they have to buy or sell. The Minister has imposed heavy taxes as far as fixed property is concerned, and I explained to him the other day that those taxes had helped to force up the price of fixed property, and in that way inflation of land values was promoted. Where speculation is still taking place, it is in shares, and we ask the Minister to put a tax on transactions in shares equivalent to the transfer duties payable on transactions in property. I have the temerity to move this amendment because we on this side of the House fail to see why the Minister is making this distinction. The Minister is increasing the transfer duties on transactions up to £1,000 to two per cent., on transactions between £1,000 and £2,000 to three per cent. and on transactions exceeding £2,000 to four per cent. Those transfer duties are not payable only on profits. They are payable on those transactions. We are continually told that we cannot impose a tax on profits on share speculations. Transfer duties are not a tax on profits. They are a tax on transactions, and all I can tell the Minister is this, that if the property market can stand that tax, if it is not too heavy a tax on property transactions, then the share market can also stand it. My amendment will amount to this, that where the Minister is now proposing raising the stamp duties to the extent of a maximum of a half-penny in the £ we propose to bring it up to the same level as the transfer duties, which will mean that on share transactions up to £1,000 it will be 5d. in the £, between £1,000 and £2,000 it will be 7d. in the £, and on anything exceeding £2,000 it will work out at 9½d. in the £. The attitude which this side of the House takes up is this—that if the property market can stand that tax—and that is not the only tax which the property market has to carry—we know that profits on transactions since February, 1942, are taxable at the rate of 13s. 4d. in the £; and even that is not the only tax on property transactions, because there is the excess profits tax as well— we say that if the property market can stand this tax the share market can also stand it. The Minister says that it is a difficult thing to tax profits on share speculations. We say very well, then impose a tax on transactions in shares and impose a tax which is equivalent to the transfer duties on property transactions. We have proposed this amendment to give expression to the strong feeling of dissatisfaction and alarm which has made itself felt throughout the country in respect of this trivial tax which the Minister has proposed. There is a feeling of indignation in the country because of this tax being so trivial. If the Minister reads his own press he will see it, and I can tell him that I nave received numerous letters testifying to this dissatisfaction and indignation. I have a letter here, for instance, in which the writer says this—

The hon. member cannot quote a letter which comments on a debate in this House during the same session.

This is not comment on the debate, but on the tax itself. The letter goes on—

But how do you want to do it?

I am coming to that. Another man writes to me as follows. He points out that individuals are making fortunes on the stock exchange at the moment, and he says this—

Then he points out that a very trivial levy is imposed on the fortunes made on the share market—

There are other letters, too, sent to me personally, and which have appeared in the press. The public are dissatisfied with the scale of taxation which the Minister is imposing on share transactions. The Minister has asked us to make a suggestion. Now let me, this morning, submit something to the House—I want to Submit a scheme which was worked out by a man who can talk with authority, and if the Minister can tell me where that suggestion falls short I shall be very glad if he will do so in his reply—

That briefly is the suggestion, and then he goes on—

1. (a) to induce a likely speculator to pause and deliberate before plunging into a quick speculation. It will encourage long-term investments in the better-class shares rather than the more speculative ones and so will make for greater market stability.

That is a good argument. And then he goes on in working out such a scheme—

1. (b) to eliminate the practice of small brokers halving their commissions so as to attract the trade of “tickey-snatchers
2. (c) to make undesirable the time bargain business;
3. (d) to remove from circulation a considerable amount of idle money, the employment of which in speculation tends to increase inflation;
4. (e) to produce revenue from a source, previously untapped, without to any extent upsetting any other revenue while meeting the criticisms so often levelled at the department for not taxing market speculation;
5. (f) to safeguard stamp duties in respect of brokers’ notes. An appreciable amount of evasion is suspected.

He levelled the charge that there is a large-scale evasion of stamp duties. The Minister may say, “But how are we going to collect this tax?” The man speaks with authority on the subject, and this is what he says—

Now this is a man who is conversant with these matters, and he can speak with authority. It is self-evident that it is not advisable to mention his name in the House, and he goes on—

Then he proceeds to quote the commission charged by the brokers on share transactions. The commission varies according to the price of the shares, and the tariff on the Johannesburg share market is as follows:

Is that applicable to all shares?

It is applicable to shares which are sold on the share market.

Not to the others?

That is what he is coming to—

But what happens if the shares are not sold by a broker?

That is for the Minister and his department to work out, but the same sort of thing is already happening today. The Minister’s proposal also leaves that door open. He says that there are many people who do not sell their shares through the brokers. He admits it. Those people the Minister is not going to catch either. The Minister should go further into the suggestion. We on this side of the House are concerned at the fact that the gamblers have been getting off scot free in South Africa for five years. Those gamblers should no longer be allowed to get off scot free. The Minister himself has admitted that he is anxious to tax profits on share speculations, but he says there are difficulties connected with it. He said that he wanted this proposal to be regarded as a first step. He said: “This is not my final word,” and he added that he had to go carefully because he did not know what harm he might do if he were to impose a bigger tax of this kind. This is the first time we have heard the Minister say that he is afraid to do harm by imposing a tax. This is the first time we hear him say that he is going to do irreparable harm to the economic structure of South Africa if he should by any chance harm the share market. If there is one tax where that argument cannot count, it is this one. Does the Minister want to tell us that the whole economic structure of South Africa will collapse if the share market in South Africa is kept under restraint? The Minister should not tell us a thing like that. When he imposed the excess profits tax in 1940 and took 10 per cent. of all war profits—was he afraid then of doing harm to the industrial life in South Africa? No, he is not concerned today when Dr. Van der Bijl says that by his taxation system he is damaging the industrial development of South Arfica. Why then is the Minister so concerned about the share market, while he is not worrying about the harm he is doing to our industrial development? When Dr. Van der Bijl says that the industrial development is being damaged, the Minister shrugs his shoulders. When the Minister in 1940 took 6s. 8d. and 13s. 4d. on the profits on transactions in fixed property—was he worried at all about the harm he was doing? No, the Minister should rather not use that argument. He should show a little more ingenuity if he wants to convince us with his arguments, if he wants to convince us that that is the furthest he can go. Our amendment is that no distinction must be drawn between transactions on the share market and on the property market. It is not in the interests of South Africa for gambling to be protected. I therefore move my amendment.

I second the amendment. On this occasion I would again stress what I stressed on a previous occasion, viz., that when we are dealing with revenue from the sale and purchase of shares, we should always bear in mind that the people who invest their money in shares can be divided into two classes. There is one class who actually buys shares with a view to starting industries and businesses and to develop them. It is an investment. They invest money to create something tangible whether it is a gold mine or a factory or some economic enterprise. Then you have the other class who simply buy and sell shares for the purpose of speculation. The last-mentioned class contribute nothing at all to industrial or other economic development. As the hon. member for George (Mr. Werth) has said, it is nothing but gambling; they are parasites. These people do not accumulate wealth by their labours, by anything they have created or as a result of national sources of wealth which they create or exploit. No, they accumulate wealth merely and only through parasitic action. They make their money out of other people. It is this class of person who under the existing financial system as far as taxation is concerned, has up to now always robbed others and contributed nothing to the revenue of the State. It becomes a matter of great importance especially when one takes into account that all the big capitalists in South Africa— those people who have accumulated millions in South Africa— we call them usually Hoggenheimers— you can start with Rhodes, Sir Abe Bailev, Sir Lionel Philips, Mr. John Martin, the Robinsons, you can name a whole row of them, they became millionaires and accumulated riches not as a result of the labours they performed nor even as a result of profits they gained from investments in companies, but they accumulated the largest share of their millions as a result of the profits they made on the stock exchange. They sell shares, by means of manipulation, they cause the market to rise and then they sell; they cause the market to drop by manipulating it and then buy again to sell later again when the market rises. So the game continues and they make their millions and these millions have in all these years never been taxed. While the ordinary man, the man who invests his money to develop and exploit something and to create something tangible, was being taxed on every bean he was making, those millions have been dodging taxation. It is of the greatest importance therefore, that every endeavour be made to put a stop to this state of affairs. The Minister admits that he is considering the whole question, but he does not seem to be getting any further. When you discuss this matter personally with the Minister you do so across the floor of the House or when you talk to the departmental chiefs, they simply shrug their shoulders and say it cannot be done. I am convinced that no real attempt has ever been made to find a solution of the so-called obstacles. The only obstacle I can think of is that the influence of the Chamber of Mines on our economic life in South Africa is too great. The Chamber of Mines, “Corner House”, who collects millions out of this form of gambling, has too much influence. May I again, in view of the Minister’s taxation proposals, draw attention to the fact that he is anticipating increased revenue to the extent of £1,100,000 from transfer duties. In other words, he is expecting that as far as land is concerned, there will be sales to an amount of something like £55,000,000 during the taxation year. On those transactions of £55,000,000 he expects £1,100,000. Due however to the additional stamp duties, with which we are now faced, he only expects £200,000. If you assume that the average increase in stamp duty will be 2s. per £100—that is 6d. and 1s. and 2s. 6d. or on an average approximately 2s.— it means that he is expecting shares to the value of £200,000,000 to be sold during the taxation year. As far as shares are concerned, therefore he only takes £200,000 on share transactions amounting to £200,000,000, but on fixed property sales of £55,000,000 he levies £1,100,000. It amounts to this, on every £2,000 realised on the sale of land an extra £80 must be paid in lieu of taxation, but on every £2,000 for which shares are sold you have the ridiculous £2 extra in respect of stamp duties. This difference in taxation on fixed property on the one hand and shares on the other is so immense that I repeat that the State, the Minister and all its officials should make every possible effort to see whether a scheme cannot be devised to levy a higher tax on the speculative transactions, the purchase and sale of shares, because gambling in shares is not to the benefit of the country. It contributes nothing whatever to the good of the country, it only contributes to the benefit of a small group of parasites and exploiters who make their living in this way. May I reiterate that with few exceptions the people who buy land do not buy land for speculative purposes. In times of war there is a certain amount of speculation, but the majority of people who invest money in fixed property do it either to start farming or to purchase a house to live in, or to purchase a house or houses for letting purposes as an investment. The proportion who invest money in land for speculative purposes, must necessarily be small and it will comprise a small proportion of the £55,000,000 the Minister expects to be invested in land during the taxation year. When we were in Committee of Ways and Means the other day and this matter was raised by the hon. member for George, the Minister was asked if he would consider a change in the method of selling and transferring of shares. He did not answer and I hope he will answer today. I hope the Minister will say where my suggestion is lacking. The Minister’s excuse for not wanting to increase the stamp duties on the sale and purchase of shares, is that he has not got control over the sale and purchase of shares because on the one hand a large proportion of the shares are not sold on the stock exchange and on the other hand no record is kept of every transaction of sale or purchase of shares. In other words, it is easy under the existing system when someone sells a share certificate not to have it registered in the books of a company; not to have it registered in the name of the purchaser. It is easy to let shares pass through the hands of 10 or 15 or 20 persons before shares which are sold are registered. It is done by a blank transfer form of a share certificate being signed. The blank transfer form is signed and then simply attached to the share certificate and in the meanwhile 10 or 15 persons can purchase and sell the shares and the shares can be speculated in and gambled with without being registered in the names of the purchasers. The names of the purchasers in between are not mentioned. Now I suggest that holders of shares should be liable to punishment if they sign a blank transfer form: and not only should they be liable but the buyer of the shares who signs a blank transfer form should also be liable. I suggest that when a transaction takes place the seller should be obliged to complete the transfer form correctly and the purchaser should also be obliged to sign the form. The form must be completed carefully as regards the shares to be sold; the date of sale should be given and non-observance of these conditions should be a punishable offence. When the purchaser disposes of them again the same steps must be taken. All the in-between transactions must be signed. If that is done, if it is laid down that transfers are illegal unless properly signed and recorded, you will gain control over the whole business. Very few transactions or no transactions at all, will then take place without the tax being paid. In the case of transfer duties, the seller as well as the purchaser have to sign a statement. Let us also lay down in connection with shares that the seller as well as the purchaser must sign the transfer form. The Minister’s difficulties will disappear if such steps are taken.

What about “bearer”-shares?

There should be no such thing. Everything should take place under a properly organised method as I suggest. Just like a cheque, transfer of shares should also be to a definite person, not to “bearer”. In this way you will eliminate speculation. Speculation in shares contributes nothing to the wealth and welfare of the country. It is merely parasitism. No one has any objection to the purchasing or selling of shares if it is a sound business transaction and not merely speculation. By means of the method I suggest you can curtail the selling and purchasing of shares so that you ultimately reach a state where you will only be concerned with bona fide investment transactions. You will then give South Africa’s economic life a tremendous impetus. Just one more point. The Minister says that if he now unduly increases the stamp duties, he will get very little because in any case a large number of people do not sell their shares on the stock exchange. As far as sales through the bank are concerned, easy control is possible just as easy as far as brokers’ transactions are concerned. The only instances where the Minister will experience difficulty is when mutual sales take place not through the bank or through a broker. But is it reasonable simply because a number of persons will escape the tax under the present system, not to levy the tax? Take people who speculate in movable property, cattle, sheep, goats, etc. A large proportion of them do not sell their goods at auction, just like a proportion do not sell their shares on the stock exchange. You can compare auction sales with the stock exchange. Those persons who sell their livestock at public auction must pay the tax. Has the Minister ever taken up the standpoint that he cannot impose a tax on auctions because there are large numbers of persons who do not sell their livestock at auctions and in that manner evade paying taxation? The Minister has never said so. Yet because there are people who do not sell their shares on the stock exchange, the Minister says that he cannot increase the tax on transactions in shares. There is another argument: it is said that you cannot tax profits on shares because you then also have to allow for losses.

It is reasonable, is it not?

That also applies to people who speculate in movable property. There are thousands who speculate in movable property and who have to pay on their profits without their losses being taken into consideration. Why should shares escape—the speculators in shares? A large portion, not the major part of the wealth of the capitalists was gained by the fact that the value of the shares in which they originally invested their money had gone up. A share company is established, sometimes 5s. shares are issued, and in some cases of gold mines the shares are standing at £5 today. The man who originally invested his money has in the meanwhile increased his capital twenty times over as a result of the rise in the shares. He sells today and makes an enormous profit and there is absolutely no tax on the profit. Is it financially sound that that section of your economic life which provides individuals with tremendous wealth should be exempt from taxation, as has been the case up to now? No, I strongly want to urge the Minister to make a thorough investigation into the suggestion of the hon. member for George, and I would ask with all due deference to investigate my suggestions. What the hon. member for George has put before the House, is, I understand, suggested by people who can speak with authority and who are connected with these matters. As far as my suggestion is concerned I think it presents the Minister with a way put of his difficulties.

I am afraid there is a good deal in what the hon. member for George (Mr. Werth) said, but I do not think he quite understands the working of the stock exchange. What I would like to hear from him is this. He advocated a tax on the profits made on the stock exchange. I would like to know this from the Minister. Will he tell us from the Government’s point of view what the use of the stock exchange is, particularly at the present time. I do not think it is any good to the gold mines. It is certainly no good to Johannesburg. I want to warn the Minister as one who lives in the centre of that Golden City that we are going to have an unholy smash before long if the gambling on the stock exchange continues to go on at this rate. I entirely agree with the last speaker. They are all parasites. Of course the hon. member is not right when he says that everyone who gambles on the stock exchange makes profits. I can think of many more people who lose their money on the stock exchange. I would like to ask the Minister whether he would be prepared to accept an amendment of this kind. Of course, I cannot move an amendment of this kind because I am one of the Government’s faithful followers. Under the Party system I cannot vote against the Minister, that would be one of the most awful things. But I would like to move this— “That on registration of the share the whole of the profit be taken by the Government if the share is sold within a year, 75 per cent. if sold within the second year, 50 per cent. if sold within the third year, 25 per cent. if sold within the fourth year and nothing thereafter.” I think I am right in saying that they have done that in the United States.

No.

The hon. Minister says “No.” Well, in that case they should have done so. Perhaps we can tell the United States what to do. I am not going to speak at great length because I could speak in the same way as hon. members of the Opposition have done. There are many people in Johannesburg today who are still paying off shares of Black Friday, and we are going to have another Black Friday if we go on like this. What does the Government get out of the stock exchange? A little stamp tax; practically nothing. And how does it help the gold mines? It does not help them in any way. Today there are many industrial shares which are also going on the stock exchange. The shares of industrial companies are being driven up; they are also speculating on the stock exchange. The Minister has allowed them to increase their share capital. I think we should do all we can to stop gambling on the stock exchange. This House was run at one time by gamblers on the stock exchange who were sitting on the front benches of this House. They were British Knights and British Baronets, born in South Africa, but we stopped that by a motion, and we do not see them here today. Most of them have died. We do not see these gamblers here today or at any rate no big gamblers. But why should the Minister who is known in South Africa as a man who is against gambling, not come forward and close the stock exchange in Johannesburg? They talk about horse racing and dog racing. Well, that is a mere joke in comparison with the stock exchange. Everyone in Johannesburg talks about the stock exchange. They know nothing about it. They just go in and buy shares, and many a home has been ruined in Johannesburg because of gambling on the stock exchange. I know because I too gamble on the stock exchange. Whether you know anything about it or not you buy shares because there is nothing else to do. If it is stopped not only Johannesburg but the whole country will be much better off. One of these days the Government will see one of the biggest blitz booms they have ever seen. It will certainly come, and I think it will come in the near future, and what will the result be? What will the Government have got out of it? What will the country have got out of it? What will the people have got out of it? What will the gold mines have got out of it? I cannot see that the stock exchange assist either the Government or the gold mines and I would like to ask the Minister whether he is prepared to accept this amendment. It is only a tiny one. Will he accept it?

No.

The hon. Minister says he will not accept it, he will never accept anything that is good— and it comes from a good friend of his too. This is a much better amendment than the one moved by the Opposition. Their amendment is full of loopholes. If I want to buy so many shares tomorrow, I can buy those shares from a friend of mine next door, and in that way we can escape the tax. The stock exchange will simply circumvent his amendment. There is only one thing which they cannot circumvent, and that is the income tax collectors. The latter have managed to get a lot of black money. If the Minister will not accept this amendment, well, then the blood is on his own head. I am warning the Minister. The majority of people in Johannesburg who are not speculators are against the stock exchange. They look upon it as a curse. They know that it is of no use to them and their wives and family and I plead with the Minister to think out some scheme whereby he can close the stock exchange even if it is only for the duration of the war.

Perhaps I might digress for a moment from stock exchange profits to deal with a matter of immediate concern to the Minister’s own department. I have always found the Minister giving unremitted attention to the details of administration affecting his own department and the public. I want to put to him the effect of allowing the innumerable controllers to impose stamp duty upon whatever declaration they may see fit to demand from a long-suffering public. I want the Minister to consider what this entails. In some cases the farmer has to travel 30 miles or more to the magistracy to make a declaration before a Justice of the Peace and to hand it over to the controller who demands it. He has to travel another 30 miles back again, and instead of these things ameliorating the position of the farmer they make it very much worse. At the end of all this, whatever advantage he may get from having been granted—be it a supplementary allowance of petrol or something else—he finds that he is very little better off. These constant exactions are unnecessary. I was recently in conversation with a distinguished civil servant who administered in the Central Provinces of India the post of food controller in the Great War which entailed the supply of food—not the hindrance of the supply of food—to 15,000,000 people; and he assured me that he was able to do that with a smaller staff than the staff of the food controller in one town of this country. And he said that his whole policy was to enable people to get food, not to prevent them from getting it—not to place hindrances in their way, and not to give them pinpricks in connection with their reasonable desires. He said: “I never required a single sworn declaration to be made by anyone.” The people came and said what their needs were and their needs were satisfied by the issue of permits. There was no complicated declaration system there. Our controllers seem obsessed by one or two things. First, by the need for a sworn declaration and, secondly, a permit, and the difficulties of getting a permit are made very great in certain instances. The farmers’ requirements are fenced about and made difficult by a variety of controllers and they have reached the stage where the position has become intolerable. I hope the Minister when dealing with these exemptions from stamp duty will at least exempt the public from the necessity of stamping these declarations if they are still insisted upon. Let them be simplified, so that they can be completed without answering innumerable questions, and providing revenue stamps. If our complex is such that we must have declarations, let them be simplified and let them be made before some ordinary witness and not necessarily before an attesting officer. Then you have these frequent journeys to and from a place which are so unnecessary—they can be either done away with or diminished, and if that is done the controller system will be rendered less intolerable than it is.

The main point in the speech of the hon. member for George (Mr. Werth) was that the Minister of Finance had at last realised that there were gamblers in South Africa who could be taxed. Well, the hon. member took even longer to realise that because in the past he never made a suggestion in that direction. But now that the Minister of Finance has come forward with this suggestion he wants to go further. Apparently my hon. friend only thinks of the gamblers on the stock exchange. I take it that he does not want us to step in in the case of those gamblers where the provinces have full right to pass legislation. I take it that he is only thinking of the gamblers with which we as a Union Parliament have to deal.

But you increased the transfer duties.

Yes, but the question of transfer duty is something else. There the Union Parliament, by means of legislation, reserved special power for the Union Parliament to adopt legislation in connection with transfer duties. The position is simply that the proceeds of that tax are paid over to the provinces. But in the case of dag racing and horse racing the whole matter has been handed over to the provinces, with full right to adopt legislation in connection therewith. I therefore assume that the hon. member had in mind only the gamblers on the Stock Exchange. However, the persons who purchase shares are not all gamblers. I assume that my hon. friend, as I have also done on occasions has bought Union Loan Certificates. The person who buys Union Loan Certificates is not a gambler.

You also exempt it from this tax.

I am only mentioning this point to show my hon. friend that persons who purchase shares are not all gamblers. It not only applies to the purchase of Union Loan Certificates but shares are often purchased merely as an investment. What is the position going to be if we abolish the stock exchange as the hon. member for Hospital (Mr. Barlow) wants? I wonder whether it has ever struck him that the stock exchange is not only there for speculation. It is quite correct that it offers the opportunity for speculation in shares, but it also holds an important position in our financial system. There are apparently several hon. members like the member for Hospital who think that we can get along without the stock exchange. But I know of no developed country which manages without a stock exchange, and we will definitely have to be careful before we go as far as the hon. member for Hospital wants us to go. When we come to the question of a tax on the transactions on the stock exchange, I take it that we take into account the fact that the stock exchange is in existence and will continue to exist. We then come to the question of taxation. There are two aspects of the case. It is possible to levy a tax on profits as such. In the second place it is possible to levy a tax on transactions as such. As far as the first is concerned, I have repeatedly made my attitude clear and I did so again this morning. I would very much like to tax those profits as such. But I was faced with certain difficulties. I said here that if anybody could advance a concrete suggestion whereby it would be feasible to tax profits as such, I would gladly investigate such a suggestion. If I understood the hon. member for George correctly, he appreciates that it is difficult to tax profits as such. He did say that the letter of the correspondent which he quoted here had been sent to him in reply to my request for suggestions. But that suggestion of his correspondent is not for a tax on profits as such, it is for a tax on transactions as such. My hon. friend will therefore admit that that letter is not a reply to my request for assistance in connection with this question of a tax on profits as such. We are always faced with these difficulties which are connected with a tax on profits. The hon. member for Hospital apparently wants us to tax profits as such. I again say what I have already said in his absence, that I am prepared to levy such a tax but there are great difficulties attached to it. I asked for suggestions to overcome those difficulties but they have not yet reached me.

I gave you one.

No, his suggestion was in regard to the basis on which the profits tax should be levied. That is easy. We can all do that. But how are we going to determine the profits? Is my hon. friend in favour of registering all transactions?

Yes, certainly.

That is one of the first practical difficulties we have to face. As far as the hon. member for George is concerned, it is clear that difficulties do exist in connection with a tax on profits as such. I therefore pass on to the other possibility, i.e. the question of a tax on transactions as such. In this Bill we already have an increased tax on transactions. My hon. friend practically made two alternative suggestions. The one was that of his correspondent and the other was his own which is included in the amendment. The proposal of his correspondent is not so drastic as his own suggestion. His correspondent apparently does not go as far as my hon. friend does in his amendment. It is somewhat difficult for me to discover why the hon. member submitted the suggestion of his correspondent, because his correspondent in the first instance proposes that the tax or levy which he advocates should only be levied on brokers’ notes. Apparently his correspondent is not in favour of registering all transactions and thus making them liable to taxation. In the second place my hon. friend’s correspondent proposes a tax which is equal to the fees of the stockbroker and which at the moment go up to ½ per cent. It was not clear from what my hon. friend read whether the levy would be payable by both the purchaser and the seller. Can he tell me that? Let us leave it an open question. Apparently his correspondent did not make it clear. If there is only one levy then it actually means that that suggestion that my hon. friend submitted amounts to the same as the proposal in the Bill with only this difference that the rate is twice as high. If it means that the purchaser and the seller have to pay the levy, then the rate is four times as high as mine. But I cannot see any significant difference between my proposal and that of his correspondent.

Except for results.

We come to that now. That proposal will only apply to transactions which are now taking place through the brokers, and the higher we make the rate the more inducement there is to let transactions take place outside and in that way to escape the stamp duties. It is for that reason that I have acted cautiously in this Bill, because without registration it is easy for any person to transact outside the brokers and to evade the stamp duites. If we increase a tax suddenly and too quickly, we always run that risk. It is for that reason that I, as far as brokers’ notes are concerned, set about it in a conservative way and did not immediately make the increase a big one. It is not necessarily my last word in connection with this matter. When I raised the tax on cigarettes in the first instance it was not my last word. I wanted to see what was going to happen. In view of the fact that the taxpayer who can, as far as these stamp duties are concerned, evade the tax today, we were forced to be careful in imposing this increased tax. Then there is this suggestion in my hon. friend’s own amendment. It amounts to this, if I understand him correctly, that a tax will be imposed on all transactions, which would be equal to the transfer duties. I can only take it that it is not his intention to make only those transactions which are entered into through brokers liable to this tax. In other words, I infer from that that he wants to make all transactions registerable. The hon. member for Waterberg (Mr. J. G. Strydom) and the hon. member for Hospital also advocated that all transactions shold be registerable, and that on such transactions a tax of 2 per cent. should be levied, rising to 4 per cent. as in the case of the transfer duty. This question of registration is one which I thoroughly investigated and I did so in view of the fact that if I wanted to tax profits, then share transactions in shares must be made registerable. I therefore thoroughly investigated the possibility of making all transactions in shares registerable, but I found that considerable objection was raised, also on the part of the banks and other financial institutions, to the registration of all transactions in shares.

But that you surely expected.

Not necessarily from the banks and financial institutions. It was also alleged that I could not exercise control, that if we were to do that, the activities on the stock exchange would be reduced by half. The hon. member might say that that would be all to the good. In so far as it will eliminate speculation it will be good, but if we accept that the stock exchange is not only there for speculation, but that it plays a part in connection with investments and the general financial institutions of the country, then I think we have to be careful how we act. I said in my reply on the Budget debate that there are difficulties in connection with compulsory registration of all transactions in shares, but I do not say that that difficulty is necessarily insurmountable. We cannot, however, get away from the fact that the difficulties do exist and if we retain the present system, we have to take those difficulties into account in connection with the compulsory registration of transactions in shares. Before we can proceed to do anything of that kind. I think we must have much more clarity. I certainly want more clarity than I have at the present moment in connection with the manner in which the stock exchange is utilised and especially in connection with the part the stock exchange is playing in regard to the general financial and economic life of the country. It is in a large degree a technical matter and it is my idea—on which I decided some considerable time ago—to have special investigation made. I am having an investigation made into the part the stock exchange plays in our economic life and the way in which it operates.

Who is doing it?

I have not appointed anyone. I am taking steps in that direction. We must be cautious in our actions in connection with institutions which play a part in our financial life and which we find in all developed countries. I am not disposed to take any of the steps that are advocated here before we have gone further into the various aspects of the case. I am not disposed to say at this stage that we should make all transactions registerable. In the light of that, it is not desirable, in my opinion, to go further at this stage than is suggested in the Bill.

†The hon. member for Pinetown (Mr. Marwick) has raised the question of the operations of controllers. I am of course concerned from the point of view of stamp duties, and I shall give consideration to the point my hon. friend raised, but of course he raised the wider question in regard to the way control is operated. And I suggest he should raise the whole matter when the Minister of Commerce and Industries is dealing with his vote.

Question put: That all the words after “That”, proposed to be omitted, stand part of the motion. Upon which the House divided :

Ayes—68 :

Abbott, C. B. M.

Acutt, F. H.

Alexander, M.

Barlow, A. G.

Bawden, W.

Bekker, H. J.

Bell, R. E.

Bodenstein, H. A. S.

Bosman, J. C.

Bosman, L. P.

Bowker, T. B.

Burnside, D. C.

Butters, W. R.

Carinus, J. G.

Christie, J.

Cilliers, S. A.

Conradie, J. M.

Davis, A.

Derbyshire, J. G.

De Wet, H. C.

Dolley, G.

Du Toit, R. J.

Eksteen, H. O.

Faure, J. C.

Fourie, J. P.

Friedman, B.

Goldberg, A.

Gray, T. P.

Hare, W. D.

Hayward, G. N.

Hemming G. K.

Hofmeyr, J. H.

Hopf, F.

Howarth, F. T.

Jackson, D.

Johnson, H. A.

Kentridge, M.

McLean, J.

Maré, F. J.

Morris, J. W. H.

Mushet, J. W.

Payne, A. C.

Pieterse, E. P.

Pocock, P. V.

Russell, J. H.

Shearer, O. L.

Solomon, B.

Solomon, V. G. F.

Sonnenberg, M.

Steenkamp, L. S.

Steyn, C. F.

Sullivan, J. R.

Sutter, G. J.

Trollip, A. E.

Ueckermann, K.

Van den Berg, M. J.

Van der Byl, P.

Van der Merwe, H.

Van Niekerk. H. J. L.

Van Onselen, W. S.

Wanless, A. T.

Waring, F. W.

Warren, C. M.

Waterson, S. F.

Williams, H. J.

Wolmarans, J. B.

Tellers: J. W. Higgerty and W. B. Humphries.

Noes—32:

Bekker, G. F. H.

Booysen, W. A.

Bremer, K.

Çonradie, J. H.

Döhne, J. L. B.

Erasmus, F. C.

Erasmus, H. S.

Fouché, J. J.

Grobler, D. C. S.

Kemp, J. C. G.

Klopper, H. J.

Le Roux, J. N.

Louw, E. H.

Ludick, A. I.

Luttig, P. J. H.

Malan, D. F.

Mentz, F. E.

Olivier, P. J.

Serfontein, J. J.

Stals, A. J.

Steyn, G. P.

Strauss, E. R.

Strydom, G. H. F.

Strydom, J. G.

Van Nierop, P. J.

Vosloo, L. J.

Warren, S. E.

Werth, A. J.

Wessels, C. J. O.

Wilkens, J.

Tellers: J. F. T. Naudé and P. O. Sauer.

Question accordingly affirmed and the amendment dropped.

Original motion put and agreed to.

Bill read a second time; House to go into Committee on the Bill now.

HOUSE IN COMMITTEE :

In accordance with the ruling given by Mr. Speaker this morning clause 1, clause 3, paragraphs (a) and (b), and clause 6 will not be put to the Committee.

Clause 2, paragraph (c) of clause 3, clauses 4, 5 and 7 and the title of the Bill, put and agreed to.

HOUSE RESUMED:

The CHAIRMAN reported the Bill without amendment; third reading on 25th April.

I should like to move—

I do so to meet the convenience of my hon. friends opposite, who find some difficulty in continuing the debate on the Reserve Bank Bill at this moment.

I move—

Mr. Speaker, this Bill is an essential part of the Government’s programme for the reabsorption of ex-soldiers into civil life. In this Bill the role of the State as the employer comes into the picture. This Bill deals with the relations between the State as employer and the ex-soldier as employee. The Bill affects quite a number of departments, it affects the Department of Demobilisation and Welfare, it affects the Department of the Interior, it affects the Department of Transport, so far as the Railways and Harbours are concerned, it affects the Pensions Department of the Treasury, and it affects the Treasury generally in so far as it involves acceptance of certain financial obligations in relation to salaries. It is because of the fact that the Bill is of a fairly comprehensive nature that I am taking charge of it. After the last war a Public Servants (Military Service) Act, No. 25 of 1919, was passed, and this Bill is designed to serve a similar purpose to that which was served by the Act of 1919, but in two main respects, this Bill goes further than the Act which was passed after the last war. In the first place, this Bill, unlike the 1919 Act, also covers what may be described as employees in the serivce, and in the second place, this Bill deals not only with the re-employment of Government servants who left the service to go on military service, but it also deals with the admission into Government employ of ex-soldiers who were not in the Government service before they became soldiers. Now broadly, Mr. Speaker, we may say that this Bill has a three-fold aim; its first aim is to condone breaks in the service of Government servants who resigned or deserted their posts—technically deserted their posts—in order to enlist in the forces. Their reinstatement implies the recognition of their period of military service for the purpose of fixing their pay on re-entry and on safeguarding their pension rights. The second aim of the Bill is to provide for the appointment and equitable adjustment of the emoluments and pension rights of those who have rendered military service and thereafter entered Government employ for the first time. Then thirdly, the Bill has a general aim of insuring, as far as is reasonable and practical that on the resumption or assumption of civil duty by ex-soldiers they will not be disadvantaged by having served the country by proceeding on military service. These are the three broad aims of the Bill. Now let me deal with it in more detail. Perhaps in order to meet a question which will already have suggested itself to the minds of hon. members, I should first say that this Bill does not deal with public servants who were given permission to enlist, with the rention of their full public service privileges. There is no need for us to pass special legislation to deal with such public servants, because they are dealt with under the existing law. We are dealing here in this Bill with those who have not yet been in the Public Service on the one side and in the second place, with those who were in the Public Service but went on service without retaining their full public service privileges in doing so.

What about resignations?

I think that will be made, clear later. You have the public servant who was not allowed to enlist, but who resigned his post and thereby gave up all his privileges. That is the case we are contemplating. We propose to reinstate officers and employees, not just officers, who resigned from the Public Service in order to proceed on military service on a scale of pay and allowances not lower than that of the post from which they resigned. That will be done in this Bill by Clause 2, as far as the Public Service is concerned, and by Clause 7 as far as the Railways and Harbours servants are concerned. Hon. members will have noticed that we have a separate chapter in this Bill dealing with Railway servants. That is necessary because there are, of course, various differences in the conditions of service as between the Public Service and the Railway Service.

Why was that done?

It is much more convenient to deal in one Bill with the position of all Government employees who have been on military service; that is why it was done in this Bill. There are certain provisions which are of a general nature which are applicable to both. At this stage I should like it made clear that in terms of the definition of “resignation” in Section 1, “resignation” includes what is technically desertion; it includes the case of the man who has vacated his post without permission in order to enlist. We cover then these cases as well. It is, of course, laid down that applications for reinstatement must be made within six months, but in terms of Section 14, which applies both to public servants and Railway servants, that period may be extended. Then it is laid down that military service will be recognised as service for increases of salary and wages; that is laid down in Clause 5, which is in the section dealing only with public servants. It would seem that technically it is not necessary to make a similar provision as far as Railway servants are concerned, because of the different nature of the Railway Act, but in order to avoid creating the impression that by mentioning the one we exclude the other, I propose at the Committee stage, as a safeguarding measure, to transfer this particular section to Part 3 of the Bill, which will make it clear that it is applicable to all whom it may concern. Then the next point which is dealt with in Clause 2 as far as the Public Service is concerned, and in Clauce 7 as far as the Railway Service is concerned, provides for the restoration in such cases of reinstatement of full pension and provident fund rights. Then there are certain cases where people in order to enlist, purchase their discharge. That would happen as far as the police and pension services of the Central Government are concerned. It could have happened also as far as the Railway Police Service is concerned; there are people as I say, who purchased their discharge in order to be able to go on military service, and we propose that where such people are reinstated in the service, the amount which they paid out for the purpose of their discharge should be refunded to them. That is done in Clause 12. Then the second main subject dealt with in this Bill is the position of those who have been on military service and who want to be appointed to the Public Service for the first time. That is dealt with, in Clause 4 as far as the Public Service is concerned, and Clause 8 as far as the Railway Service is concerned. There are two things laid down here. In the first place we say that the returned soldier who is asking for appointment and who applies within the specified period, which is six months normally but is extensible by that same provision to which I have already referred, and who then receives an appointment, will have his military service recognised for increment and, if so desired, for pension purposes. Their own contribution to the pension or provident fund will be the liability of the individual, but the Government will bear interest on the arrears. Secondly, in regard to these cases we propose that the statutory requirements—and this is also to be found in Clause 7—the statutory requirements may be relaxed in regard to age, health and educational qualifications, as far as each is concerned. It is obvious that we must have flexibility. There are many people who, because of their military service, are now past the age laid down for admission to the Public Service. As far as health is concerned we propose that it should be possible to relax the statutory requirements where the physical disability has been sustained as the result of military service, in such cases as the disability is unlikely seriously to impair the efficiency of the party concerned. The State owes it to the ex-soldier not to impose too rigid a standard of medical fitness. Then there is also the question of flexibility in regard to educational qualifications. In this regard also it is reasonable that it should be possible to apply a certain amount of flexibility provided it is clear that the returned soldier is, in fact, capable of performing efficiently the duties of the post to which he is appointed. We shall certainly not be doing our duty to ex-soldiers if we are not prepared to allow a certain amount of elasticity in this regard. Finally, I come to certain general points in connection with this Bill. First of all, where an officer has been granted leave without pay to go on military service—and that has happened in relation to certain employees of the Public Service—in certain cases they were allowed to go on military service, but on leave without pay—we propose that such leave should be recognised for pension purposes. Then we propose further in Section 6 that officers who were released to go on military service whilst on probation should be required to contribute provisionally to the pension fund as from the date on which their probation would normally have lapsed. In that way we avoid unnecessary accumulation of arrears. Then we propose in Section 11, that where new and reinstated public servants have to meet payments due to the pensions or provident fund, the State may make to them recoverable advances to help them in doing that. In Section 13 there are other provisions in regard to apprentices including provision for the recognition of military service to a defined extent as part of the contract of apprenticeship. The underlying principle of Section 13 is to ensure, as far as practicable, that on the resumption of civil duty to the ex-soldier will be no worse off, that is the ex-soldier apprentice will be no worse off than he would have been had he not proceeded on active service. Then we provide in Section 18 for the retrospective application of benefits to those who have already been readmitted or appointed to the Public Service, having performed military service, provided they are still in the service of the State. Finally, Section 19 lays it down that the Act will expire five years after the date of the cessation of the war. Such date will have to be proclaimed, but it is also enacted that Parliament may, by resolution if it is proved to be necessary, extend the Act for a further period. Well, Sir, I think that explains to hon. members the main purpose and provisions of this Bill. I think, Sir, it will be accepted that we are approaching this matter in a reasonable way, and in that spirit I commend this Bill to the consideration of the House.

As the hon. Minister said this Bill is very comprehensive, and in certain respects it goes further than the Act of 1919. I want to say frankly that as far as this side of the House is concerned, as far as this Bill deals with members of the civil service who left the service with a view to enlisting for military service, and in so far as this Bill wants to protect those persons, as far as their pension rights are concerned, there is no objection on this side of the House. But I do think it is necessary to sound a note of warning in this connection. Although the report of the Select Committee on Public Accounts has not yet been published, I think I may be permitted to point out that it came out in evidence given before the Select Committee that the main reason why the accounts of the Department of Defence, for example, got into such a serious state was that there was a lack of suitably qualified persons in the service to undertake this work. To regard this matter for a moment from the point of view of members of the other side of the House who wholeheartedly support the war effort, I think they will admit that when one prosecutes a war it is necessary to have people with experience in the Government offices to do this work. It is because so many persons were allowed to leave the service in order to enlist, that such a serious position arose in the Department of Defence as far as its accounts were concerned. It will be noted that the word “desertion,” which is a stronger word, is used in the English translation for the word “diensverlating.” From the point of view of prosecuting the war the Minister wants desertion to be overlooked in these circumstances, and to make provision for these people when they return. But it is necessary on this occasion to point out the serious consequences which may follow when too many persons are allowed to leave the service without permission. One then gets the serious position which arose in the accounts of the Department of Defence, the very department which has to prosecute the war. Generally speaking, as far as officials who were previously in the service are concerned, we have no objection to this Bill. It is possible that we may move amendments in Committee in connection with certain provisions in Clause 2, but we are not against the general principle. I want to refer, however, to one point in Clause 2, and that is that as it reads at the moment any person who within six months after he is discharged from military service or after his rejection for military service applies to the head of the department where he was employed, may be re-admitted to the service. It seems to me that in the circumstances a period of six months is too long. It is admitted that a man who returns usually wants a month or two to put his personal affairs in order, but we feel that in the circumstances a period of six months is too long. But now I come to the new principle which appears in Clause 4 of this Bill, and which was not contained in the old Act of 1919, namely, in respect of persons who are now appointed to the civil service for the first time. Here we are dealing with a new principle, and an important principle, because it undoubtedly affects the position of those persons who are already in the service. The persons who are in the civil service today can be divided more or less into two classes as far as enlistment for military service is concerned. In the first place there are those who objected in principle to enlistment. We are living in South Africa where there is a serious difference of opinion in regard to the question of the war. We need not go further into that. That difference does exist. There are people who say that there ought to be no difference. That is a matter of opinion, but that difference does exist, and we take it that many members of the Public Service, for reasons of principle, were not prepared to enlist. The position in this respect is not the same as in a country like England. But I want to regard this matter from the point of view of the other class. There are undoubtedly very many members of the Civil Service who wholeheartedly support the war policy of the Government, but who realised that it was not possible for all of them to enlist, and who therefore preferred to do their duty in South Africa. I am regarding this matter from the point of view of hon. members on the other side. There are, from their point of view, certain duties to be performed in time of war not only on the battlefield but also in this country itself.

And here in the House.

I do not know why the hon. member made that remark. He is the last member to say anything of that kind. He was quite young enough to do his duty. He could have resigned as a member of this House. For the type of man like that hon. member I have nothing but a feeling of deep contempt.

I enlisted.

Yes, on the home front, in order to draw a double salary. I am speaking of members of the Civil Service who felt that they had to do their duty in this country, in the Department of Defence, for example. They are the people who are engaged in keeping the State machinery in South Africa going, which is absolutely necessary for the war which this Government is prosecuting Although therefore, from the point of view of the Government, provision must be made for the people who enlisted, the Government must not lose sight of the interests of those civil servants who did not enlist either because they had conscientious objections, or the other class who support the Government’s policy, but who did their duty in keeping the State machinery in South Africa going. We must therefore be careful that nothing is done in this Bill to prejudice those officials who remained here and did their duty here. Now I want to mention a few cases which may arise under Clause 4 of this Bill. In Section 4 (1) the period of six months is again laid down, a period which in my opinion is too long, but it is also laid down that if a person—

What does that mean? It means that a person who has never been in the service, a young man … I shall be glad if the hon. member for Hospital (Mr. Barlow) will postpone his conversation with the Minister; I should like to have the Minister’s attention. Here we are dealing with young men who joined up, and many of whom, at the time of their enlistment for military service, did not have the slightest intention of joining the Civil Service. In terms of the provisions of this clause they are allowed to join after their return from the war and on the recommendation of the commission, a commencing salary may be paid to them which is higher than the minimum of the scale of salary or wages attaching to the office, post or employment in question. And then further on, in another clause, they are also granted pension privileges. What is the effect of it? The effect is this, that such a person now enters the service and he is in a much better position than the man who entered the service two years ago, for example.

Entered the service?

Yes,

He may have had four years’ military service.

This man who has had four years’ military service and who has no experience of the Civil Service, returns to this country and the man who remained here and who may be a strong supporter of the war effort and who did his duty here, is placed in a disadvantageous position as against the man who had four years’ military service, and to whom a higher salary and pension rights are granted. The man who was in the Public Service for two years is therefore seriously prejudiced. Then we come to what we regard as a most serious provision, and that is the provision in sub-clause (3) in which it is laid down that the commission—

And then there follows a proviso—

Here there is a departure from what has always been regarded as the basis of our Civil Service, namely, that before anyone can be appointed to the Civil Service of South Africa, he must comply with certain requirements’ as far as age, health, and more specifically educational qualifications are concerned. We have the provision, for example, that even a man who has his B.A. degree still has to write an admission examination before he can be employed in the service. Even his B.A. certificate is not enough; he must still write an admission examination. But in their anxiety to benefit these young men who were never in the service, the Public Service Commission is given the right in this Bill to depart from the requirements which in the past have always been regarded as indispensable before a young man can be appointed in the Public Service of this country. I say that in the opinion of this side of the House, however great the desire of the Government to provide for the employment of soldiers—a praiseworthy ideal to which we do not object—that must not be done at the expense of certain principles which have always been regarded as indispensable in the service. Here the door is being opened in this clause to persons who do not comply with the requirements which have always been demanded in the past. Then, in sub-clause (5) a further concession is granted, namely—

Here again we have the position which I have already mentioned, where a man who has never been in the service is placed in a more favourable position than the man who is in the service and who has loyally discharged his duties. Then there is the provision to which the hon. Minister has already referred in connection with the question of apprentices. In Clause 13 it is laid down—

I have no objection to the apprenticeship again coming into operation when the person returns from the war, but it goes further, and sub-section (2) reads as follows—

You notice, therefore, that here again a concession is being granted which is not fair in the circumstances, and which is not in the interests of the work to be performed by that man. As has already been indicated by the Minister, this Bill is applicable not only to the civil service, but it also applies to the Railway Department. The same arguments which I have advanced in connection with the Civil Service are also applicable to that huge department, the Department of Railways and Harbours. We do not want to place any obstacles in the way of the reemployment of any official who was previously in the service, whether he was granted permission to enlist or whether he enlisted without permission. We have no objection to that. But we feel that where this Bill departs from the Act of 1919 in connection with new appointments it is going too far, and while we do not want to oppose the second reading of this Bill, we will introduce amendments with reference to that aspect of the Bill when we reach the Committee stage.

We welcome this Bill of the hon. Minister but there are a few matters which I brought to the notice of the Minister on a previous occasion and which I want to raise again today. I listened carefully to the speech of the Minister, but it is not clear to me whether the two matters which I want to discuss are dealt with in the Bill. The Minister will remember that some time ago I asked that where a man was on military service, not only the time which he spent on military service should be recognised on his return, but that he should jump one grade. If he is not allowed to do that he receives no recognition which is of any practical value to him, because the point is this. We must not forget that while that man was on active service his friend who remained on the home front progressed in the meantime, not only as far as his service is concerned, but he may have progressed from one grade to the other. If, therefore, you only recognise his military service and you do not allow him to jump a grade, it will be of no practical value to him.

Do you mean one salary notch?

Yes. If we do not do that it is of no value to the man. Then there is another point which I brought to the notice of the Minister on that occasion, and it is this. A young man who left university or college or school to enlist and who rendered military service for a few years should also receive recognition in respect of that service when he returns. As far as I know no provision is made in this Bill for such cases. When such a person enlists he receives a form to fill in in which he has to say what he proposes to do when the war is over. I did not hear the Minister say that such a person would receive recognition. Assuming that such a person would in normal circumstances have joined the civil service when leaving college or university, what will his position be when he returns?

Clause 4 makes provision for such cases.

Does Clause 4 make provision for him even though he did not join up?

Do you mean even if he did not join the service?

Yes. Assuming he did not join the service but that he would have joined the service under normal circumstances on completing his studies. Does he receive any recognition?

Yes.

I am glad to hear that he will receive recognition. Then I shall be glad if the Minister will give his attention to the first point I raised. I want to repeat that if the man is not allowed to jump one grade, the recognition of his military service will be of no practical value to him. His colleague who did not enlist has received promotion in the meantime, and he may have progressed more than one grade, so that the person who was in military service will be in an unfavourable position if he is not allowed to jump at least one grade. Then I just want to make this point in connection with apprentices. I was glad to hear that apprentices would receive recognition in respect of military service performed by them, but may I draw the hon. Minister’s attention to this fact. I know of apprentices who rendered military service for a considerable time and who were even up North. Today they are experiencing great difficulty in having the time which they were absent recognised by their employers. I hope that that position will be clarified. The employer must be given to understand clearly what recognition should be given to the apprentice if, for example, he served his apprenticeship for one or two years and then enlisted. There must be no doubt where the man stands. The Bill must clearly lay it down so that any person who is interested can know definitely what his position is, and so that it will also be clear to the employer what recognition he should grant. That is all I have to say in connection with this Bill, and I hope that it will receive the support of all sides of the House.

Not one of us would want to do anything which will hamper the Government in its effort to make provision for fit young people who return from military service. Everyone realises that that is one of the problems which is the responsibility of the Government, and although fundamentally we differ from the Government’s policy, we are nevertheless of opinion that these youths are entitled to proper treatment when they return from the war. There are, however, a few aspects which deserve very serious consideration. I want to associate myself with the remarks of the hon. member for Beaufort West (Mr. Louw) that we have no objection to the re-employment of officials who enlisted from the service. But as far as the new appointments are concerned, we are faced with a few serious aspects as far as our Civil Service is concerned. Unfortunately I did not have the time to study this Bill in detail. But that still does not allow me to accept it without a statement on the part of the Minister. We notice in Sub-clause (3) of Clause 4 that the Public Service Commission will practically be given a free hand to admit returned soldiers to the service, that they will practically have the right to enforce their own interpretation, as far as the health, the age, the educational qualifications of the persons are concerned. They have the discretion to suspend or to relax the requirements in order to make the appointment of such a person possible. South Africa is justifiably proud of the Public Service which we have had up to the present. But the Public Service was built up on a fixed basis. There is also this attitutde, that the commencing educational standard must be such that anyone who is admitted will be able to develop in the Civil Service; it must be such that he can comply with the demands of the service and that he can give of his best to the State. But in order to be able to undergo that development, to be able to give of his best to the State, he must have certain minimum qualifications. He must have qualifications which will enable him to carry out the duties of the post. That is not only a principle in the Civil Service, but in every profession where it is necessary to have certain entrance qualifications. As far as that provision in sub-section (3) is concerned, it seems to me that an impossible discretion is being given to the Public Service Commission. I feel that not only are we doing an injustice to the service as such, of which we are proud, and in regard to which we are concerned lest a “dilution” should take place, but at the same time we are doing an injustice towards the officials who are in the service. We discussed this matter the other day; I do not want to go into it now, but I just want to say that we must be particularly careful that we do not discriminate against the personnel in the Civil Service, of whom we get a great deal and of whom we still expect a great deal. We must not discriminate against them by admitting newcomers without qualifications and without restrictions to the civil service under conditions which may give rise to grievances on the part of the workers already in the service. Is the discretion of the Public Service Commission completely unlimited? Will they be free to appoint any person, irrespective of his age, irrespective of his qualifications or health? Must there not be a limit somewhere to the limits of the Commission’s discretion? We do not want to throw any doubt on the bona fides of the Public Service Commission, but it seems to me to be far-reaching to give them a free hand in this manner. Then I want to comment on the preference which is given in connection with the provision in sub-clause (2), namely, that military service may be taken into account in fixing the commencing salary. Even there we feel that favouritism is being shown which can undoubtedly lead to friction, because there is discrimination here in favour of people merely because they rendered military service. Let us be very clear that the service which is expected is determined by the capabilities of the person. I think we are taking a serious step if we impose no restrictions as far as service is concerned, as far as qualifications are concerned or as far as health is concerned, or even if we show a measure of favouritism in appointing newcomers to the service.

I think that a few words on this Bill should be said on this side of the House, because it is part of the Government’s plan to re-establish those persons who have gone on active service. This is one portion; we have the other Bill of the war-workers and another measure coming forward is the measure proposed by the Minister of Demobilisation and Welfare. I think this Bill is an earnest of the Government’s intention to carry out the pledges which they have made in connection with this matter There is one point I would like to sure about in this Bill, and that is the position of students who interrupted their studies to enlist, and who may possibly have had to go one or two more years in certain courses to qualify them for professional or other positions in the service, and who have still got to take their final examinations, or it may be two further examinations. This Bill provides that any person who has rendered military service and who desires to be appointed to the Public Service shall lodge his application for such appointment within six months after the date of commencement of this act or the date of the applicant’s discharge from military service, whichever is the later. I am just wondering to what extent this will apply to cases of this nature. There are many cases where young men, before completing their courses, joined up. They have rendered three or four years’ military service; their whole life has been upset, and it is going to take some little time for them to get back to the position in which they were when they joined up. I am wondering whether the period of six months provided for will cover these cases.

We have the power to extend it.

One knows perfectly well that it may take some little time for these young men to make up their minds as to what course they are going to take up after the war. It is very satisfactory indeed to find that the Government is introducing this measure at this early stage with a view to giving effect to the promises which have been made to these young men, and I am sure that this measure will give general satisfaction.

I just want to draw attention to the fact that this Bill also covers railway officials. In the railway service we have the position that there are many technical people in the service of the railways who are responsible not only for the safety of the line but also for the traffic on the Railways. Many of the people who enlisted for military service have received promotion since their enlistment, so that today they are in an advanced position for which they have not yet qualified. When they return from military service they are to be given a period within which to qualify. We have station masters, guards and station foremen, people who have to pass out in technical subjects before they can be appointed to those positions; but owing to the fact that they enlisted they were allowed to receive promotion to those positions without having passed the necessary examinations, and when they return they will be given time in which to qualify. We have no objection to that, but I just want to emphasise that we must see to it that those technical positions are not overloaded, because then we would be jeopardising the safety of traffic and the safety of the track. That is a point to which I would like to draw serious attention. There are numbers of officials whose duties are exclusively technical duties, who are already in advanced positions for which they have not yet qualified, and in taking new people into the service we must see to it that we do not have too many people in the railway service who are unqualified for the positions which they have to fill. In a clerical position one might still have an unqualified man. It takes him a year or perhaps two years to learn the work. He can make a mistake and it can be rectified. But when a station foreman makes a mistake it may cost the lives of a few people. In a clerical position, therefore, it is not of very great importance. But it is extremely necessary in the case of technical appointments that the person should be qualified. Then we have artisans who are responsible for the passenger coaches and locomotives. As far as we can judge their period of military service will account for apprenticeship purposes. They will return as artisans, although they have not yet had an opportunity of completing their apprenticeship. The railway service was just as necessary as the military service for the prosecution of the war effort. I just want to emphasise that point. It was impossible to release all the people who wanted to enlist.

Business suspended at 1.0 p.m. and resumed at 2.20 p.m.

When business was suspended we were dealing with the question of the employment of technical personnel. I would now like to deal with the position of those who left or resigned the service in order to enlist for military service. It will be realised and admitted that there were essential services on the Railways which had to be performed, and although one respects the enthusiasm and zeal of a person who leaves the service in order to enlist for military service, we realise, however, if we all did that, if all the drivers, firemen, guards etc. left the service in order to join up for military service, what would then have become of the war effort? We would therefore like this matter to be strictly interpreted in dealing with their position. We cannot merely because these persons enlisted for military service, after leaving the service or resigning from it, give them preference over men who remained to perform these services. Those people also carried out essential duties during the war. I am speaking more particularly of drivers, firemen, conductors, station foremen, shunters, station masters, operators etc. They were as essential to the war effort as the man who enlisted, and I would not like to see any injustice done to those people. We appreciate it and we respect a man who had the courage of his convictions to resign or even to desert from the service in order to enlist. But we must also respect the feelings of the man who was sensible enough to realise his duty, and who remained there to perform those duties, and in that way to benefit the war effort and perform this national service. We would not like to see any injustice of any nature done to those people. Then there is a third point—I am speaking more particularly of the Railways—namely, that the greater part of the Railway service demands people who are physically fit. They must be physically strong and healthy. We had this experience in the previous war that people who were physically unfit were appointed to certain positions. They were at a dead end, and not only that, not only can they make no headway in the service, but they stand in the way of all those who are junior to them in the service, preventing them from making headway in the service. We ask that in this respect, too, there must be a certain amount of sound judgment so that people will not be appointed to the service under conditions where they will be at a dead end all their lives, and consequently stand in the way of the advancement of others. We are not against this legislation. In many respects we welcome it. All we ask is that there must be no injustice to those who remained at home in order to do their duty here. We would like to see the provisions of this Bill carried out as efficiently as possible, especially in relation to those who remained on the home front to do their duty here.

I want to avail myself of this opportunity to thank the hon. Minister heartily for the sensible legislation he has introduced. I just want to say this, as one of the liaison officers of Defence, that we always get a letter as soon as the man resigns or is discharged from the army. This letter more or less reads as follows— [Re-translation]—

As a liaison officer, I cannot do other than express my deep appreciation to the Minister in that he met us by leaving this opening for the people who did their duty towards their country and nation. I am also very grateful to the hon. member for Beaufort West (Mr. Louw) and the hon. member for Ceres (Dr. Stals) in that they fully endorse that we should do for these people whatever we can. It is encouraging to think that both sides of the House feel that we owe a duty towards those people who were prepared to sacrifice their lives for freedom.

That is with regard to those who were in the service.

We are satisfied that we must come to the assistance of those who were in the service, and also those who would have been in the service if they had not enlisted. We are grateful that we are able to give them every opportunity. I think that we as parents feel, since these young men sacrificed their lives, or were prepared to sacrifice their lives, not only for their own freedom but for the freedom of the world, that we must do all in our power to rehabilitate those children in the future. Now we find that the Minister has given them an opening, not to prejudice the Civil Service but to give the people who had to go and fight for freedom an opportunity in the future. I especially appreciate what the hon. member for Ceres said with reference to the Public Service. He expressed his confidence in the Public Service for the work it has done in the past, and in those people who have to deal with the Civil Service in that they chose the right people. I endorse what they said, and I therefore have full confidence in the Civil Service and in the people on whom the duty rests of employing persons who will be a credit to us. I have full confidence in the Minister and in the Public Service Commission, which will see to it that they engage boys and girls who will be a credit to our country and not prejudice South Africa.

I am very glad that this Bill was received in such a friendly and generally favourable way. I am glad that there has been so much evidence— at any rate as far as the people who were in the Civil Service and who enlisted for military service are concerned—that there is so much unanimity that jutsice should be done to them. My hon. friend, however, raised certain points and certain objections, especially with regard to newcomers who were not previously in the Civil Service. He as well as hon. members on the other side stated that they would not vote against the second reading but that they would move certain amendments. Since they have been so friendly I want to ask them to place their amendments on the Order Paper. We are dealing here with technical legislation and it is desirable to see, in writing, any amendment which is introduced. I shall be glad, therefore, if my hon. friends will meet us in that way. The real point in connection with which a certain amount of objection was raised against this Bill was in regard to new appointments which are dealt with in Clause 4. The hon. member for Beaufort West (Mr. Louw) raised two points particularly. The one is that he is of opinion that a person who was not previously in the service but who served in the army for four years, and who is then appointed as a newcomer …

No, for the first time.

Thank you. Yes, for the first time. He pointed out that such a person might receive recognition in the Civil Service for four years’ service, and the beginner would therefore be in a more favourable position than the person who was not in the army, but who had two years’ service in the Civil Service. He also spoke of favouritism as far as pensions were concerned. I do not think it is really fair to call it favouritism in the case of pensions. We cannot really say that the second person is prejudiced where the first person has the benefit of including his full period of service, of having his military service taken into account in connection with pension rights. I cannot see that the second person has any grievance, and even as far as the determination of the salary of persons who had military service is concerned, I cannot see that the second person has any particular grievance. It is true that the first person who rendered military service only will become his senior in the service, but on the other hand it must not be overlooked that this person served his country, even though in another capacity. We take it that in the first instance he would have gone direct to the Civil Service. Perhaps that does not apply in all cases, but it does apply in many cases. But instead of entering the Civil Service, he served the country in a different sphere. I think it’s only fair towards him to recognise his period of military service.

But the one person may have worked at Iscor for the war effort, or in another department of the Civil Service.

It requires a good deal more sacrifice to render military service. But apart from that, may I point out to the hon. member that the principles of this legislation were approved by the Advisory Board of the Civil Service. That body is satisfied.

Which board is it?

It consists of representatives of various departments of the Civil Service.

Officials?

There are also certain official members who are nominated by the Government, but they have no vote.

Was the Public Servants’ Association consulted?

There is more than one officials’ association, but there are representatives of all branches of the Civil Service on the Advisory Board. It is true that the officials’ association is not directly represented on the Advisory Board, but frequently the persons who serve on the Advisory Board are also the persons who represent the officials on the Officials’ Association. The hon. member can therefore take it that the principles of this Bill meet with the approval of the Civil Service personnel.

Who appoints the Advisory Board?

As I have already said, certain official members are appointed by the Government, but they only take part in the deliberations, and they have no vote. For the rest the members are chosen by the various branches of the Civil Service; it is a duly elected body. Another point which the hon. member made is that sub-clause (3) of Clause 4, which gives the commission the right to suspend or to relax certain requirements in connection with the health of officials and their educational qualifications, departs from and makes an inroad on the basis of the Civil Service. Well, here again the question is how far we are and must be prepared to meet these people. Is it reasonable where a person who was twenty-one years of age four years ago, and who did not then enter the Civil Service but enlisted for military service, is it reasonable becauhe he is now twenty-five years of age, to exclude him? The Act lays down twenty-five years of age as the maximum age for employment in the Civil Service. I think it is only necessary to mention this case in order to indicate that there must be elasticity.

You are now taking the easiest case.

That is so; that is the strongest case. But take the case of a person whose health has been impaired by military service, but who is still sufficiently fit properly to discharge his duties in the Civil Service, although he cannot comply with the ordinary strict requirements. Ï think that there, too, it is reasonable to say that there must be a measure of elasticity.

I referred more particularly to the relaxation in the educational requirements.

Perhaps the person concerned enlisted before reaching matriculation. I have frequently said that the possession of a matriculation certificate is not the only proof that a man is an educated man. This man has now graduated in the school of life, one might almost say. Perhaps he possesses considerably more knowledge. Perhaps he received more general training in the army, in Egypt, than the man who remained at school. There, too, we must have a certain amount of elasticity.

Which minimum educational qualification do you envisage?

The Bill lays down that the commission will have the discretion, and—and that is the reply to the hon. member for Ceres—the commission must be convinced that “his general physical condition and educational standard, including his knowledge of both official languages, render him capable of performing efficiently the duties attaching to the office or post to which it is proposed to appoint him.” We give that discretion to the commission, but the commission must be convinced that the person can perform the work.

But there are many of the soldiers who remained in South Africa and who never learned to know overseas conditions.

Without having gone overseas, they might have received additional education.

But there is ä big principle involved in this case.

On the other hand, the principle is involved that here you are dealing with people who served their country on the battlefield. That, too, is a big principle. The hon. member for Krugersdorp (Mr. Van den Berg) raised two points. The first was in connection with apprentices. I do not know whether I understood him correctly, but apparently he referred to apprentices in general. This Bill only deals with apprentices who are in the employ of the Government. There is another Bill before the House which still has to be dealt with, and for which the Minister of Labour is responsible, namely, the Bill in connection with the employment of soldiers and war workers, and that will deal with apprentices who are not in the employ of the Government, but of other employers. This Bill deals with apprentices in the employ of the State. The other Bill deals with apprentices in the employ of private employers. Then the hon. member raised the question of persons who went on military service and returned and who, in his opinion, should then be allowed to jump a salary notch. There again I am not sure whether I fully understood what the hon. member means. I think this Bill contains that provision. The provision of this Bill is that anyone who returns will be put on the same notch as he would have reached if he had not enlisted for military service. The period of his absence is taken into account as far as his progress on the salary scale is concerned. Does the hon. member want more than that?

There are three grades of clerks. If, for example, a person was on the lowest grade, he should be allowed to jump to the third grade.

In the first place there are not three grade of clerks in the Civil Service. The point is that that person will find himself on the same slary notch on his return as he would have reached if he had not rendered military service. I do not know whether the hon. member is satisfied with that.

I am.

That is what the Bill contemplates. There is no further concession. The provisions of Clause 1 (3) of the Bill are also applicable to apprentices in the Railway Service. The hon. member for Vredefort (Mr. Klopper) raised certain points in connection with the Railway Service, and he referred to returned soldiers who may be employed in technical positions, although they are not qualified for those positions. I can give him the assurance that the policy of the Administration is that where such a person would have been appointed to a post for which he does not possess the necessary technical qualifications at the moment, he will first have to undergo an intensive course of training at the new college at Kaalfontein. I think, therefore, that there is sufficient guarantee that no one will be appointed unwisely to a post for which he does not possess the necessary technical capability.

Motion put and agreed to.

Bill read a second time; House to go into Committee on the Bill on 26th April.

When the House adjourned on Friday I was saying that as we now have a consolidating measure before us after 23 years, this gives us a special opportunity to weigh up the position—it gives us the opportunity of remedying the defects and the shortcomings while at the same time it gives us the opportunity of looking into the future and at the same time converting the basis of our Reserve Bank into something more in accordance with our future development as we see it. The reason is that 23 years ago when the Reserve Bank Bill was introduced for the first time, it caught us like a thief in the night. We did not have the opportunity of thoroughly investigating the position, and Dr. Arndt in his book, “Banking and Currency Development in South Africa” describes the position as follows—

And then he goes on to say—

The hurry with which this Bill was passed in those days naturally had its consequences. In 1923 an amending Bill had to be passed and in 1925 when the Kemmerer-Vissering Commission made investigations, certain amendments were recommended. Those amendments however were only passed into law in 1930. The fact however is that circumstances here were different from those usually considered necessary for the establishment of the orthodox central banking system. We did not have a multitude of banks here; we only had three big banks here, two of which were very big and one of them less so, and these two big banks to all intents and purposes had a monopoly. They controlled 95 persent of the banking business in this country. Consequently the conditions usually regarded as necessary for the establishment of a central bank did not exist here in 1930. There were all kinds of other factors which caused the urge for the establishment of such a bank. The times in which we lived, just after the end of the first Great World War, with the deflation following on the inflation of the war, and the way in which the commercial banks had handled the whole of the credit situation were all factors which forced the people towards a Central Reserve Bank; the position was described at the time by Mr. Brand Wessels, whose remarks are quoted in Dr. Arndt’s book. Those were the reasons why there was such a hurry from 1920 onwards for the establishment of the Reserve Bank. Mr. Brand Wessels summed up the position as follows—

That was the feeling prevailing in the country in those days and it was because the feeling was so strong that we set about things in such a hurry to establish the Reserve Bank, and consequently we did not have the thorough investigation which we should have had into a matter, of this kind. We did not make the necessary investigation into other systems which could perhaps have served as a model. There was, practically speaking, no similar Reserve Bank which could have served as a model. The other types of central banks in the world were on a different basis and they were intended for different conditions; but for the modern conception of central banks there was no proper model in 1920, a fact which the Minister has admitted, and we were compelled practically, without any guidance, to act off our own bat and to make an experiment. The other more modern central banks were only established afterwards—the New Zealand one, the Canadian one, the banks in Denmark and Sweden, all of which represent the modern ideas were established only after 1920 and we therefore could not have the benefit of using them as our model. We were forced practically to hazard on the slippery ice of central banking without being properly equipped for it and in the circumstances it is not to be wondered at that defects and shortcomings have arisen in that particular legislation. It is also interesting to note that other countries which established central banks after we had done so, have already felt the need to effect changes in spite of the fact that they only established their central banks after we had done so. We have, however, remained on the basis of 1920—we have adhered to that model all these years. Other countries in the world have felt the necessity of making changes, and we also have an opportunity now which we should not allow to pass. We should avail ourselves of this opportunity to make our legislation as effective as possible. This is a consolidating Bill, not just an amending Bill and we must put our legislation in order. There is another reason too why we should avail ourselves of this opportunity and it is this that we are now 23 years further ahead than we were in 1920 and we are in a better position today to look into the future. We can see the direction which has been followed in other parts of the world in connection with a matter such as this and in connection with allied matters. We see the course which is being followed, a course which leads towards a more planned economy, which no longer leaves the conduct of important matters to the laissezfaire of private enterprise, but which wants full control. Even if this does not necessarily mean control by means of a Department of State, it still means that it must fit in with the general economic development plan of the country. We must take that into account. Twenty-three years ago that was perhaps not so necessary. We see the direction, we see the course the world is following. The issue today is not so much whether there must be State control or private control but to what extent a degree of State control can be reconciled with the continuation of a degree of private initiative. Those are the facts, whether we want to recognise them or not, and we must take notice of those facts when we try to consolidate the 1920 Act. In other words we must not only look at the immediate position, but we must look to the future because an opportunity such as we now have does not present itself every day. Legislation on central banks is not the kind of thing one wants to amend every year. A tradition has to be built up, and it cannot be done unless one is guaranteed against continuous variations and their consequent uncertainty. That is why we are so emphatic in our request to the Minister not to be satisfied with changes which are technically essential, but to consider the whole problem and to have some vision in regard to the future so that we may put our legislation in order for many years to come. The hon. member for George drew attention to a few experiments which have been made in other countries. He drew attention for instance to the experiments made in New Zealand. He pointed out that there too a Reserve Bank had been established in 1934, more or less on the basis of our South African Reserve Bank. There too private shareholders could appoint the majority of the Directors. But he went further and he pointed out that the Government of New Zealand had come to the conclusion that that was not a sound position and in 1936 they bought out all the private shareholders and the directorate of the Central Bank today consists of the Governor and the Deputy-Governor and seven Directors all appointed by the Government. In Canada the same development has taken place. There they also made a start in 1935 by establishing a Central Bank, and private shareholders were also in the majority on the Directorate. But the first step to change the position was taken as early as 1936. The Government stepped in and appointed an additional group of Directors so that the State would have a majority on the Board of Directors, and could lay down the policy. In 1938 the Government of Canada went further and introduced a Bill as a result of which private shareholders were bought out at market value and the 11 directors are now appointed by the Government. It is interesting to note that New Zealand, Canada and South Africa all started alike, and one asks oneself why that was. The reasons are mentioned by Plumptre, in his book “Central Banking in the British Dominions.” He says that they all followed the same example because, as he calls it they followed the English advice. This is what he says—

I do not know whether this latter part is so very true but the point is that the three dominions originally went in the same direction, followed the same course because they received advice from Britain and he points out that that was due to the fact that in Great Britain the idea had become rooted in people’s minds that as the Bank of England was a privately owned Bank, that form of banking was best. But he also points out how dangerous it is to apply that experiment to Dominions where conditions are different, to extend that idea holus-bolus to other Dominions which have not the long experience and the traditions of the Bank of England behind them. Those were the reasons why New Zealand and Canada departed from the original plan. We are still adhering to the original plan however, and I think that the policy which we on these benches have proposed and which the other Dominions are already following is a sensible one. Plumptre sums it up in the following words—

We are the only country which has held on to the old system. The only country where the system of private shareholders appointing the directors is still in force, is India which is not a Dominion. The Indian Reserve Bank is in the same position as our Reserve Bank. Countries like New Zealand, Canada and Australia have gone ahead of us, and countries like Denmark and Sweden which also introduced legislation in 1932, or thereabouts, in connection with banking, did not follow our example either, but their legislation is similar to that of the other Dominions. Even in England and the United States they follow the policy of greater control by the Treasury. In America, too, they have gone a long way in the direction of State control, in the direction of greater control by the Government over financial matters. That is the general background. The other countries which started off in the way we did have departed from that course and have declared themselves in favour of a different system under which more control is exercised by the Government. But apart from the weight which one has to attach to the example and the experience of those countries, there is another reason why we on this side of the House advocate a change in the constitution of the Reserve Bank. The reason is one of principle. Both logic and reason point to the undesirability and the impossibility of leaving the regulation of the country’s monetary and credit system in the hands of a private company. I must admit that it is a strange doctrine so far as I am concerned. In regard to other questions there may be reasons why the Government should not interfere, but when it comes to the control of the monetary and credit system of the country, both logic and reason show that these are questions which cannot be left to a private corporation. Plumptre in his book on Central Banking in the British Dominions further says this on page 191—

This is a question of common sense. One feels at once that a matter like this cannot be allowed to rest in the hands of a private corporation because the monetary and financial system of a country is the very artery of a nation’s economic life. It is the principal and at the same time the most difficult function of a central bank to control the monetary and financial system of the country. We are facing great changes in connection with our industries and our general economic development We cannot meet our future development unless we place these powers to make or break the country economically in the right hands. We cannot leave those powers in the hands of private banks; we cannot leave them in the hands of a private corporation controlled by private shareholders. These are not the right bodies to control the monetary and the credit policy of the country. I have studied the list of shareholders of the Reserve Bank. I find that there are a little more than a thousand shareholders, but 70 of the shareholders control £424,000 of the million pound shares and that indicates to us what the position is and what it is susceptible to. Our whole future so far as financial matters are concerned, our whole credit system, our whole monetary policy and credit policy can be left to those 70 individuals. That is practically what it amounts to and that is what will happen in future and surely it is not a sound policy. We feel that apart from the theoretical reasons the practical conditions of South Africa are such that we dare not allow a thing like that and now I want to bring a few of these practical conditions to the notice of the Minister and of this House. The first is the domination of foreign commercial banks in South Africa. 95 per cent. of South Africa’s banking business is done by two foreign banks. Their head offices are not here, and until recently they did not even have the assets here which they were supposed to have, to meet their commitments. That position has been improved considerably. But in view of the fact that we have these strong commercial banks here it is all the more necessary that we should have a central bank here in this country which if necessary can improse its financial policy on those commercial banks. One feels that one should not give a private corporation that right to impose its will on other private corporations in this country. The second practical reason is the limited number of shareholders in our Reserve Bank. In Canada there were 12,000 shareholders in the Central Bank. Here we have only about a thousand and 70 of them control practically half the shares. And not only do they control half the shares, but the position is even worse than that. The constitution of the Reserve Bank is such that 51 people each of whom control 10,000 shares—that is the maximum one individual can control— can control the Reserve Bank. And what is worst of all is that there is no provision in the Act making it necessary for those 51 shareholders to be Union citizens. The only qualification is that they must be domiciled in South Africa. Beyond that they can be 51 foreigners who need not even be naturalised here, so long as they are domiciled in South Africa. They can control the Reserve Bank and they can enforce their policy on the rest of South Africa unless we amend this Bill. There is a further practical consideration and it is this that we are one of the biggest gold producing countries in the world. We say it is the correct thing for the Reserve Bank to have the sole right to buy gold. If that is so then I ask this: Should we place those tremendous powers in the hands of a private corporation—should we give that corporation the sole right to buy the gold? The Government apparently realises it and that is why this provision is not made in the Bill. Provision is made for it at the moment in the Emergency Regulations. But I want to ask a further question in that connection. I have studied the original Act and I find that the Governor-General is given the right to make regulations. I find the following regulation among others—

I do not want to give any free advice but it does appear to me that it is somewhat difficult to say that under this Clause of the Act the Governor General is given the power to issue regulations to compel the gold producers to sell their gold to the Reserve Bank. Is that not perhaps the reason why these regulations were issued by the Government as Emergency Regulations? This is a sole right which should be held by a central bank and it should be laid down in the law of the land. It should not be subject to an uncertain regulation or to a regulation which is only applicable in war time. It should be laid down in the law. But my contention is that if it is laid down in the law, if the law provides that the sole right is given to the Reserve Bank, then it is a dangerous right to give a private corporation. It should not be given to a private corporation but to the Reserve Bank which is under State control. We want to propose that the Reserve Bank should be given the power in the law itself to hold the sole right to buy and sell gold. There is another practical reason why we advocate this new constitution for the Reserve Bank and that is that now that its powers are being increased under Clause 8 and the restrictions are reduced under Clause 9, the bank must be under State control and must not be a private corporation because we must see that we have guarantees that those powers are properly and correctly exercised and not to the detriment of the country. The whole direction in South Africa is towards a planned economy and while we now have the opportunity we should bring our banking and monetary system into harmony with the general direction and we cannot have control over our credit system if we make it possible for 51 private individuals to control it. The State dare not abrogate its powers in that way. It has not the right to do so. Its duty to the nation as a whole does not allow it to say that it surrenders those powers. If Government control is desirable in institutions such as Iscor, not to talk of the Railways and the Electricity Supply Commission, it is necessary, and not simply desirable, for a centtral bank, which occupies a unique position in our national life, and has the power to break the nation economically, also to be under State control. It is desirable for that central bank to be directly under the control of the State itself and not under private control. There is too much at stake for us to allow these great powers in the State to be in private hands. We cannot be satisfied with the guarantee of anything less than 100 per cent. that where we create this machinery it shall not be used by a small crowd of influential capitalists to curtail and hamper the development of the country. That is why we want to tell the Minister that if he is not prepared to take the full step which Canada has taken he must at least take the first step taken there, viz., to increase the number of directors on the Reserve Bank so that the Government directors will constitute the majority on the directorate. At the moment there are 11 directors; five of them are appointed by the Government; six are appointed by the shareholders and the Government has no say over them. If the Minister is not prepared to take the whole step suggested by us, he should at the very least appoint sufficient Government directors so that they will have a predominating vote. The hon. member for George (Mr. Werth) said that he would like the Minister to do what Canada has done, but if he is not prepared to go as far as that he must in any case see that the Government has a majority on the directorate. We want to follow Canada’s example with our Reserve Bank and we want private shareholders in future to be bought out, but if the Minister does not want to take that step now, let him at least agree to do what Canada did in 1936. In this Bill we are giving the Reserve Bank greater powers with which I am in full agreement. I am thinking for instance of the provisions in regard to Companies with interlocking directorates. This is a very sound provision. I notice on the list of shareholders that the Schlesinger group by means of inter locking directorates holds nearly 35,000 shares in the Reserve Bank. This provision therefore is a very sound one and I hope the Minister will insist on it. We are also in favour of the provision about the additional 10 per cent. which can be added to the Bank’s reserves. I should like to suggest that this 10 per cent. can be increased to 25 per cent. We want the Reserve Bank to have all the necessary powers. It must be a strong bank, not only with national prestige, but also with international prestige. We want to assist the Bank to achieve that position but we do not want to have anything to do with the establishment of machinery which may afterwards plunge us into misery. We want this Parliament to give very careful attention to the machinery which we are creating to render this important service to the country, viz. to take control over our monetary and credit systems.

I want at the outset to express appreciation to two hon. members of the House. I believe the country is grateful to them for their attitude towards the production and distribution of gold. I refer to the hon. member for Hospital (Mr. Barlow) who first drew the attention of this House and the country to the importance of gold movements and gold prices. I refer also to the Minister of Finance for his very sound and strong defence of Government control of our monetary policy, particularly in relation to the fixing of our gold prices by Government negotiation in connection with the control and sale of gold. In addition I think the House and the country owe a great deal to the Minister of Finance for the monetary framework which, during the past few years, he has created in this country. I refer to certain Bills which must be considered in connection with this Reserve Bank Bill, that is the Insurance Act, the Building Societies Act, the Banking Act and the Currency and Exchanges Act. In arranging for those measures to be part of the monetary framework of South Africa the Minister has rendered a great service to the country; and has indeed prepared the way for the formulating of a Reserve Bank Act which will fit, I think, more adequately into that framework than the present Bill. I want to say at the opening that this Bill is evidently designed to provide the pattern and instrument for our post-war monetary policy. It is a matter therefore of profound interest and importance to the people of South Africa. I think I am right in saying that the Bill is undoubtedly designed, undoubtedly will have the result, if it is passed into law, of providing for a return to a Gold Standard economy in this country. In other words, it will provide for a re-in-statement, with its full implications, of the Gold Bullion Standard which was established in 1925. My reasons for saying that are as follows: In terms of this Bill the Reserve Bank may buy gold; the purchase is optional; there is no obligation on it to buy all the gold produced in this country. In other words this means providing for a free gold market; and if hon. members have read that very important statement which appeared in our papers over the week-end in regard to the international monetary arrangement to be brought in after the war they will have noticed the implication that that arrangement is for a temporary period, and that when that temporary period is passed the arrangement will not exclude the sale of newly mined gold on any world market. Now, in providing for a free market we are courting certain dangers. I believe there will be an acute gold problem after the war. For example, we may be faced with a scarcity of gold. If when the war is over, we endeavour to set up all the European countries, now denuded of gold, on a Gold Standard basis, as is apparently the objective, then the re-distribution of the world’s gold, four-fifths of which is held by the United States, and three-fifths of which is produced by the British Commonwealth— then that distribution might mean a relative scarcity. I deliberately say “might mean.” On the other hand there might be a surplus. At present the United States, Canada and Australia are not producing gold. They have turned their machinery and their men over to war production instead. It is possible therefore, that when they come back to full production we might be faced with a surplus. I say “we might.” And then there is the possibility of stability of gold prices. It is not likely that the United States will devaluate its fabulous investment in gold; nor is it likely that Russia and the British Commonwealth will devaluate a product of which they are the chief producers. Now in regard to gold production and distribution we have always the underlying fact that both England and America have agreed to free the Exchanges after the war; and the documents dealing with that go even further than that in that gold movements will be undirected and uncontrolled. But the danger of the whole position comes in here. If the President of the United States decides arbitrarily to devaluate American gold as hurriedly as he appreciated it in 1933, then the whole position of our gold market might be placed in serious jeopardy. I mention this merely to indicate how important it is that this Bill should provide for an obligation on the part of the Reserve Bank to buy the gold output of this country and not leave the purchase as optional. My second reason for stating that I believe this Bill is a return to the Gold Standard is that the notes are rigidly tied to a fixed amount of gold, that is to say the coverage is to be 30 per cent. of gold. Now, it was that inelastic system which was the principal characteristic of the old Gold Standard. I know the Bill provides for power to be given to the Minister to suspend the Gold Standard provisions. Nevertheless, the principle is definitely laid down that the notes are to be convertible into gold on demand. Thirdly, the reason why I believe this Bill means a return to the Gold Standard, is that the conditions for the fixation of the Bank Rate are not prescribed in this Bill; and therefore the only conclusion we can draw is that the determinant of the Bank Rate is obviously going to be the amount of gold held by the Reserve Bank or the movements of gold into and out of the country. Now, what does this mean to this country? It means that if we have a free gold market; if we are going to tie the Bank Rate to gold movements, then we are definitely back to where we were in 1925. What will the result be? The cash or currency of this country which today is £50,000,000, and therefore the deposits which constitute the main part of the purchasing power of our people and which stand today at £200,000,000—in other words, the nation’s money—will be tied to a physical volume of gold. Secondly, it means international control over our internal money and credit. That was the danger which faced England in 1932 when there was a flight of gold following the flight of fugitive money from England. That caused the suspension of the Gold Standard in England and in other parts of the Commonwealth. Now I come to a point which I think we must consider very seriously in connection with this Bill. What was the lesson which England has given to the world in connection with her monetary policy after the Gold Standard was suspended in 1932? The British Government—I deliberately use the word “government” and not “Bank of England”—set up in co-operation with the Bank of England a managed currency system for England. That is to say, a certain index for the cost of living was aimed at; an index movement of trade activity was calculated; and as the trade movements were recorded by this index so on parallel lines with this index, the Bank of England, by controlling the flow of currency and deposits, was able to regulate the issue of money, i.e. the total volume of money, to that moving index, and keep the price level relatively stable. It is a significant fact that from 1932 to 1939 there was only a very slight increase in the English cost of living. The Gold Standard Managed Currency system adopted after 1932 had proved successful. Now I would like to see some arrangement on these lines brought into this Bill. I believe it is possible; and I invite the Minister of Finance to consider it. I am not against the Gold Standard. I believe it is a barbarous standard ….

A what standard?

I believe it is a barbarous standard, but after all this is a barbarous world. At any rate the Russians who have rather unorthodox ideas about credit and banking have definitely said that the Gold Standard system will be of advantage to the post-war world. But we want a Gold Standard which is more elastic. The old classical Gold Standard died in 1914. It had a painful resurrection in 1925; it led to the great depression. It led to the falling off of England’s exports, to the exit of gold, and to the subsequent economic collapse. We know that it was a factor in putting 25,000,000 men out of work; it created 6,000,000 unemployed Germans; and they gave to Hitler his happy hunting ground, and the impulse to his ideas of world conquest. It was not distrust of gold as such; but distrust of parities in terms of gold, which caused the difficulty; that is to say the exchange rates were not fixed in terms of purchasing power, before being finalised in gold values. The English pound and our pound were over-valued. Let us be warned that, by establishing a Gold Standard that follows too closely on tradition, we do not cause the same over-valuation of our South African pound. Now, I come to a somewhat technical but rather important aspect of this Bill. How can we introduce into this Bill a managed Gold Standard, a managed currency system, for this country? There are certain essential conditions which we shall have to observe. First we shall have to insist that in this Bill the Reserve Bank becomes the sole buyer and distributor of the gold output of this country. It should buy gold at prices to be determined by Government negotiation. I should like to see three-fifths of the value of that bought gold put to statutory reserve in the Reserve Bank. The other two-fifths might then, as is the case today, in terms of a war measure, be put into an extra reserve. We have that position today. In our extra reserve we have about £75,000,000 worth of gold. In our weekly bank statement this reserve is shown as “other assets.” We have a statutory reserve of £88,000,000. That system came into practice in England in 1932, and following on Engeland’s example it was legalised in South Africa by the passage of the Banking and Exchanges Act in 1933. A system like that, entailing the purchase of gold by the Government, can be a provision of this Bill. The second essential condition is that we should endeavour to introduce on the lines of the Bank of England—and I don’t think there has been a better monetary system devised than the monetary system run by the Bank of England from 1932 to the present time—we should introduce a Fiduciary note issue. That is to say we should have no percentage metallic reserve. The Government would, however, decide on the amount of notes to be uncovered by gold; that would be the figure beyond which, or beyond the issue of which, every note would have to be backed up to 100 per cent. by gold ; but the Fiduciary issue would be decided by Parliament, and the issue would have to be backed by Government securities. All the notes over and above the Fiduciary issue would be backed by gold. Thus we get to an elastic system, giving a great deal of control to Parliament and to the Minister, and a system which would work more easily in the adjustments required by the changes of trade. Then the third condition is that we want in this Bill, some specific arrangement for the fixing of the Bank Rate. That can well be left as a matter to the State, to the Minister and to his advisers. What we need is a manageable and adjustable rate, not an automatic rate over which we have very little control as would be the case if we tied it to a fixed volume of gold. Why is it necessary that we should aim in this country, not at a gold standard as visualised in this Bill, but at a managed currency system? Why is it necessary? In the first place the Reserve Bank is the governor of the whole economy of this country. It determines the cash reserves, i.e., the currency reserves of the country. In that way it determines the amount of deposits in this country; that is to say, the Reserve Bank ultimately controls the volume of purchasing power or the public demand for goods and services in South Africa. Secondly, by having powers to fix the bank rate, all interest rates in the country are determined, so that the investment policy for industry, trade, commerce, and public works— in other words the employment of our people— depend on the bank rate policy of the Reserve Bank. Thirdly, by its open market policy, that is to say, its power to buy and sell securities on the open market, it is able to exercise a determining voice in the circulation of the deposits of the commercial banks; and by controlling the deposits it controls about 90 per cent. of our purchasing power. In that way the Reserve Bank influences the cost of living, the general price level, for every family in this country from kraal to urban palace. It has the instruments to do this, for it has securities today to the value of £31,000,000; if this Bill becomes law it will be possible to buy securities to the value of £62,000,000, for the Bill empowers it to purchase securities equivalent to one-third of its liabilities to the public. In view of this authoritarian power which the central bank exercises over our economy, over our family welfare, over our national well-being, its administration— as the hon. member for Fauresmith (Dr. Dönges) quite correctly points out—is of supreme importance to the country. Yet to whom does this Bill designate control? Not to the people; not to the Government, because the Government does not own any stock at all in the Reserve Bank; it designates control to the stock holders; and these may be monopolistic institutions; they may be international financiers; they may be big commercial banks; and they may be private investors on a large scale. This is one of the many matters of supreme importance to our people in these days. For example, there is the control of the gold reserve of this country. There are the advisory powers of the Reserve Bank over our public finance. There is the matter of controlling the nation’s purchasing power. There is the ultimate authority over the cost of living in this country. These matters are of paramount national importance; and under this Bill we are delegating them to a private company or a private corporation. I want to appeal to the hon. Minister to consider amending this Bill by providing for a managed currency system instead of a gold bullion standard system; by providing for a managed currency system based on gold; and making provisions in this Bill for such a system somewhat on the lines I have suggested. I know he has very considerable powers under the Bill. For example, the Government guarantees the Bank, because the Bank can only be put into liquidation by a specific Act of Parliament. The Minister has the power to appoint the governor, the deputy governor and three of the directors, giving him through these nominees a representation of five out of the total of 11 directors—a minority representation. He has power to increase the capital of the bank; he has power to suspend the Gold Standard; and he has power under the Bill to claim a very large share of the profits of the bank. Last year the Government got £450,000 of the Bank’s profits, leaving to the shareholders £100,000. These powers are very considerable; but they are not enough. As the Bill stands the position of control exercised through the Minister of Finance is anomalous. For example, the supreme economic power in this country as exercised by the Reserve Bank is vested in private shareholders; the discretionary and the administrative powers reside in the Minister; but in the exercise of these powers he is advised by a Board on which his nominees are in the minority. Australia, Canada, New Zealand and the United States all tried the same system. Finally, they practically socialised their central banks, acting on the sound principle that the control of credit is as much a social service as the control of education and of health. I think the time has come in South Africa for us to take the same view; and now, while we are trying to blue-print a new South Africa, now is the time to create a monetary system which will be more elastic and which will be more closely connected with the Government and with this Parliament. I believe we can create a managed Gold Standard currency. A first step in that direction will be to change the Board of Directors, that is to say, to see, as in the case of the Federal Reserve Board of the United States, that all the directors are the nominees of the Government. A second step is to buy out the shareholders, or to give them Government stock in place of Reserve Bank stock. I am not suggesting that anything like that should be done in connection with the commercial banks. I believe that they can continue to carry out a necessary and valuable social function on the lines for which they are constituted today, provided that the power to control, not only their deposits, not only their relationship to the public, but also their financial relationships overseas, is vested in a powerful central bank. We shall have achieved something of momentous importance to South Africa if that power is vested in our own central bank. I am confident that the people of this country, that industry and trade will welcome such a monetary system as I visualise, as being the best insulation against monetary disturbances after the war. Finally, the future of our monetary policy is of supreme importance to every family in this country. The welfare and development of our country depend on it. The family security of our people is intimately affected by our monetary policy; and that lesson has been written deeply into human history by strikes and depressions and destructive wars; I believe that an enlightened monetary policy should therefore be an essential basis to a sound policy of reconstruction. I am confident that the Minister will welcome suggestions, even if he cannot adopt them all, so to amend this Bill as to protect our economic system from internal and foreign disruptive influences. This Bill can be made a powerful and decisive influence in determining the economic health, and the social welfare of our land and people. We must not miss this great opportunity to do this big thing for South Africa.

I wish more particularly to address myself to the amendment that has been proposed by the Opposition. To begin with I want to say that the remarks which were made by the hon. member for Fauresmith (Dr. Dönges) about the original Act in 1920, are, of course, common knowledge in this country. At that time we were faced with great financial difficulties in South Africa, and as one way out of those great difficulties we decided to set up a Reserve Bank and a central banking system. I was in the House when that Bill was passed and like most of the members, I felt that there were elements in this whole policy in regard to which I had grave doubts. We were not certain that things would pan out as Mr. Strakosch said they would. After 23 years’ experience we find, of course, that this Act has been better than we thought it would be. This Act in a quiet way revolutionised the credit and monetary systems of this country. The effect of the establishment of the central bank was almost instantaneous. It was very soon disclosed that in South Africa generally our credit system was exceedingly loose and open to the very gravest abuses. In that regard the Reserve Bank gave a lead to South Africa. That in itself would have justified this institution.

At the time this Bill was passed in the House, while we were very keen on having a sound banking policy for the country, we were always afraid that the Government which was empowered at that time or indeed any subsequent government might make a convenience of this bank for its own fiscal needs. That is an aspect that no one seems to have thought about.

Is that a crime?

It may be a crime. It depends in whose hands it is.

Why not follow Denmark’s example?

Even Governments come and go. An ideal Reserve Bank should be an institution that does not come and go, that has a policy that the whole world knows. I want to say that in South Africa we have attained a very great measure of success because our Reserve Bank stands very high in the opinion of the world, what is more, the financial prestige of South Africa stands very high indeed today, and generally speaking this Reserve Bank system we introduced in South Africa in 1920 has proved a very great success indeed. That Act, of course, has not remained static. During the years we have had to introduce amendment after amendment. As a matter of fact, I have here the original Act with all the deletions and cancellations which have taken place since the time of its introduction, and whole paragraphs, and whole pages appear to have been altered and changed. In other words the system itself is one that is like a growing organism and to meet the situation as it arises from time to time we legislated accordingly in this House. But hearing the Opposition one would think that the Reserve Bank has been a failure. To hear the Opposition, one would think it has been an absolute failure. That is the only impression one can get from the speeches on the other side. My learned friend, the hon. member for Fauresmith, comes here with books and quotations from authorities all along one line. His whole argument is up against the 23 years’ experience we have had in this country. I would rather have 23 years’ experience for my guide than quotations from 23 authorities quoted by the hon. member for Fauremith.

Don’t you want to learn from the experience of other countries?

The extraordinary thing about hon. members on the other side is that their policy is South Africa first, South Africa alone, but anything we have in South Africa is never good enough for them. Even if our system is the best in the world, they would still advise us to follow the example of, say, Australia or Denmark. Why not put it the other way around? Why not let those countries follow us for a change? The mentality of hon. members of the Opposition is an extraordinary mentality. Let us examine some of the criticisms of my hon. friends. First of all, they criticise the constitution of the Board. Why? I ask hon. members on the other side whether in the whole existence of this bank there has been any trouble over the direction given by the Board so far as our monetary system is concerned.

Is that any guarantee for the future?

It only goes to show that those hon. gentlemen do not really know what they are talking about.

Are you speaking for yourself?

The gold standard policy was not brought about by the Reserve Bank.

As a matter of fact they would not listen to the Reserve Bank.

It was not the bank that stayed on and went off the gold standard. It was the Government of this country that stayed on gold and went off gold. Hon. members on the other side talk about the profits that the shareholders make.

Who are the shareholders?

I should say mostly Nationalists,

When the Government decided to stay on gold they automatically made this bank of ours bankrupt.

Quite right.

At the time the Reserve Bank had something like £7,000,000 in London held there for its commitments. Automatically these funds were reduced in value by 20 per cent. The loss which the bank stood to suffer in one night was £1.400,000, and their capital was £1,000,000. That was what thev lost bv the action of the Government. That is the position. I think I have proved that the hon. member for Fauresmith spoke before he thought what he was talking about. In all the experience of 23 years can the Opposition give me one example where it was proved, in the first place, that the Government of this country has not been completely in charge of the monetary policy of this country?

Read the Act.

Which Act?

All the Acts; read them all.

That is too much for him.

I know I am asking a lot.

My hon. friend is a lawyer; but the proof of my statement is this that the Government throughout these years has proved that it has these powers in terms of the existing Acts.

Not in terms of the Act.

My hon. friend said that the Government has these powers under the war regulations. But without these regulations the Minister still has the power to buy gold. Here is my hon. friend, a lawyer, wearing the King’s silk and he seems not to know that at the beginning of this war, not under the war regulations, but under a power conferred upon him by an Act of Parliament, not only did the Minister take the gold of the mines, but he bought that gold from the mines at his own price. He bought gold at 150s. when the price in London was 168s.

If that is so, why have this emergency regulation?

The emergency regulations are more general. My hon. friend is the person who should go into that. He should not leave it to a layman like myself.

No, you would not understand it.

Let him deny in this House that the Minister got the gold in the circumstances I have described today.

I say he has no right in terms of the Act.

Does he deny it? He cannot deny it.

I do not deny it.

In other words, the Opposition, in this amendment, is asking for powers that we already have.

And we are doing it under war regulations!

In the first place they want a change in the Board of Directors, and yet they come to this House and they do not give us one fact; they do not quote one occasion where that Board did not in every respect carry out its policy in the interests of this country. They cannot come here with a charge against that Board.

No charge is being made against the Board.

They cannot come here and say that the Board at any time nullified the Government’s power over our credit or monetary policy. They have got nothing against them at all. They come here and talk about private enterprise and so forth. This bank, as the hon. member for Durban (Berea) (Mr. Sullivan) said, is not a money-making concern. It is much more profitable for the Government than for the shareholders. The trouble with the hon. member for Fauresmith is that he has so many briefs in this House that if any subject of this kind comes along, the hon. member for Fauresmith gets the brief and he has so many briefs that he cannot do justice to them all. I believe he has the ability, but when he puts up a case like the case which he put up this afternoon, one can only come to the conclusion that he did not have enough time to study his brief.

Why should the Reserve Bank make any profit at all?

My hon. friend is trying to side-track me. I want to deal with the amendment of the Opposition. The Opposition asks that this Bill be referred to a Select Committee. The hon. member for George (Mr. Werth) told us in his speech in what direction he would like this Bill to be changed. Firstly, he wants it changed as far as the directorate is concerned, so that we will fall into line with Canada and Australia.

And Denmark and the United States.

There you are; any country in the world will do; if you could get a reserve bank system in Tahiti, they would come to this Parliament and advise the Government to follow that system—any system except that of our own country. With regard to Canada, I have not the time today to go into the whole position. I believe the hon. member for George was in the House in 1920. At that time we had this great difficulty. Many people wonder today why the commercial banks hold half the stock in the Reserve Bank. It is because, before the introduction of this Act, the commercial banks in this country had the right to issue notes. They had their own bank notes.

And ad lib.

… and ad lib. It was an extraordinary position. By a stroke of the pen the Reserve Bank took away from the commercial banks the right to issue their own notes. The commercial banks naturally lost that profit. My hon. friend talks about Canada. One of the big troubles in controlling credit in Canada today is the fact that the commercial banks there—the Chartered Banks as they are called—still have the right to issue their own notes up to a limited percentage. Even after 1945 these Chartered Banks will be allowed to issue notes up to 25 per cent. on their paid up capital. Follow Canada! No, Sir, we do not want to follow Canada. Look at Australia. Would you like to have the debased pound in South Africa that you have in Australia? I do not want to say anything about Australia, she is a fellow-member of the Commonwealth of Nations. Australia has had far more financial troubles than we have had. Commission after commission has had to be sent for to put the financial house of Australia in order, and we can be thankful that we had the banking system that we had in this country. The Opposition has made out no case at all for this change in the constitution of the Board. As far as the commercial banks are concerned, we came to a compromise with the commercial banks. We were quite prepared to change the system which we arrived at if it was found that it did not work. As far as the directorate is concerned, I can only say that the system of our choice has been an absolute success during the 23 years that it has been in existence. Then the hon. member wants the Reserve Bank to act as the sole buyer and seller of gold. We have the power to do that today, and it seems rather ridiculous to introduce an amendment asking for a power which we already have. Then he wants the Reserve Bank to lay down the credit policy for the whole country and that the commercial banks should adhere to that policy. That is exactly what the Reserve Bank is doing today. The Reserve Bank today insists that the commercial banks shall deposit with them ten per cent. of their call deposit monies, plus 3 per cent. of their term deposit monies. We are very pleased to know that not only the Reserve Bank but commercial banks themselves are acting at the present time in a conservative manner. You will find that instead of their having only 10 per cent. of their deposit call money and 3 per cent. of their term deposits, they have always a higher percentage than that. So there is nothing new in this amendment. The Opposition is asking for something which we already have. The Opposition members have talked to us for a good many hours. It was very interesting talk, I must say, but it was absolutely inconclusive; it took us nowhere. The blunders, too, made by the hon. member for Fauresmith, coming from him, in this House are past belief. The hon. member’s companionship with the hon. member for George (Mr. Werth) is not doing him any good. Socially it may be good, for a more cheerful fellow since he got to know the hon. member one would not want, but he is losing that accu racy, that authoritativeness of his, and I warn him to take care because there was a time when he handled subjects in such a way that no one could do better, but he has handled this one badly. The sections of the amendment I have dealt with asked for something we have already got, and the other three fall away. We often hear that answer in this House, such as: “The answer to No. 1 is ‘Yes’ and the others fall away.” In conclusion, I want to say I believe that today the Government has absolute power over the monetary policy of this country; I believe the Government has absolute power over the credit policy and facilities of this country. That we have got.

You want it that way, then why don’t you vote for the amendment?

Hon. members of the Opposition are like the dog in the fable; they drop the bone and snatch up the shadow. The hon. member for Fauresmith (Dr. Dönges) has quoted many authorities from many books. I naturally have given expression to views here this afternoon that I cannot claim credit for as being absolutely original. In a matter of this kind one has to check up on the facts and find out from experienced people. I have made it my duty to get in touch with men who are in constant touch with the affairs of the Reserve Bank, men who are big men in our banking world today; I have also made it my business to consult with Government officials and others as to the working of this Bank, and I say that with this Bill we shall have in South Africa the best Reserve Bank, I was going to say in the world, better than Canada, better than Australia.

How about Scotland?

That is my opinion, and I commend this Bill to the House, and I ask my hon. friends opposite after they have had the showing up I have given them here this afternoon, to support it.

In the first place, I want to express my deep sympathy to the hon. member for Vasco (Mr. Mushet) in the difficult task he took upon himself. He reminded me this afternoon of someone who wants to pump a motor tyre. He pumps from early in the morning, and the more he pumps the more the wheel goes down. The hon. member was defending the banking position in South Africa, and there he has my sympathy, because it is most difficult to attempt to defend the banking system and the banking position in South Africa. The hon. member stated emphatically a number of times that he was quite convinced of it that the Government had full control of the credit of South Africa, äs I understood him. Well, since when has that been so? The hon. member must not think that we can believe him when he says that the Government has full control. Did the Government have full control when the banks of South Africa caused the downfall of the Government in 1932? Have you ever heard of a government bringing about its own downfall? I have a great deal of respect for the hon. member for Vasco but he must not hold it against me if I cannot believe the story which he told us this afternoon, namely, that the Government has full control of credit in South Africa. As the old native told the missionary: “That is a little too thick.” (Daardie leeu, ek glo horn nie.) No, the rise and fall of governments in South Africa and other countries, in many cases, were not the outcome of a change in the views of the nation, but were due to the role which was played by banking in the world and also in South Africa, If any government in South Africa had control of banking and of the capital and credit of the country, such a government would be able to fulfil the promises which it made to the people, and in that case the people would continue to support such a government. But the history of South Africa has been different. It has been shown time and again that promises that were made in all honesty and sincerity suffered shipwreck, because every time the governments tried to fulfil its promises to the people, the banks would say : “No, your policy conflicts with our interests, and we shall not allow you to do this, that or the other.” As soon as the interests of the Government conflict with the interests of the banks, especially the commercial banks, they would remind such a government that “Government is finance and finance is government.” Until such time as the Government has full control of banking in South Africa, it will never be able to carry out its promises to the people. That is why we on this side of the House have consistently urged that the Government should take full control of banking in South Africa. Otherwise it will not succeed in fulfilling its promises to the people. We have now had some degree of prosperity for a number of years. But there have also been years of scarcity. I shall tell you why there was a shortage of money from 1931 to 1933.

Tell us.

I will. The position was that the government of the day said that it was going to remain on the gold standard. They could have remained in power as long as it met with the approval of the banks and the Chamber of Mines. But at a later date the banks altered their opinion, and so that their interests would not clash with those of the big banks in England they decided to bring about a change. The government of that time said at first that it was going to adhere to the gold standard, that it was going to stand or fall by the gold standard. The present Minister of Finance as an individual, shared the Government’s view to remain on the gold standard. What happened? A circular was sent round South Africa and bank managers told their clients that they were sorry, but that they would have to curtail credit. That was the first step. Farmers could get no credit; businessmen could no longer get credit. Even at that time a certain amount of pressure was brought to bear on the Government, but it still stood firm. People began to speak of a rising. The Government stood firm. Then the well-known episode came when the late Mr. Tielman Roos left the Bench and declared that the Government should abandon the gold standard. Any one of us could have played this role after knowing that only the night before the banks had issued new instructions that the country must be drained of a further £35,000,000. We could all have played this role, knowing that it was a matter of time and that the Government had to fall. He said that the Government should abandon the gold standard. There were debates in this House and the then Government said that we could do as we pleased but it would not abandon the gold standard. They said they would rather resign. And in the end they had to yield. A complete change came about, and the Government fell. When the new Government was formed the banks came along and said, “We just want to put you right; you must learn that finance is government and government is finance. Now you can govern again.” When they wanted to bring about the fall of the Government they succeeded in doing so. They said: “We will show you who is boss in South Africa.” Because the then Government would not learn that lesson, they fell. Now the Labour Party comes along and our policy is, as it always has been, to put a stop to that. We are also introducing an amendment. This amendment differs from that of the hon. member for George (Mr. Werth) inasmuch as our amendment is clear and states what we want in concise terms. It is not a matter of “byna bewogen Christen te syn,” as in the days of Paul. We want a State Bank and not a half measure. We therefore move the following amendment—

If we apply this amendment, if we accept it in principle, the Minister will be in a position to exercise full control over the capital and credit system of South Africa, but without it the Minister will not have that power.

Does this amendment mean that there will no longer be private banks?

If our amendment is accepted it will mean that the commercial banks will automatically disappear, because the functions that are now carried out by the commercial banks will be performed by the State Bank, and if the State Bank comes into operation it will automatically have to take over the whole machinery. Let me add that this will not mean a decrease in bank activities, but rather an increase, because the business will automatically increase. Let us now come back to a few specific points. The Minister of Finance was good enough some time ago to quote someone from New Zealand, I think Mr. Nash, who is alleged to have stated that he had reverted to the old conservative view in connection with banking. But we cannot make it sufficiently clear to the public what the function of banking is, because to my great surprise I find that many members of this House do not yet understand the function of banking. When I talk about banking, I do not mean to suggest that I am an authority on banking, but I do understand the principle of banking. In contrast to what the Minister quoted, let me also quote from someone whom he will, I think, at once acknowledge as an authority on banking, and whom I want to quote for the information of those who think that banks are only institutions whère a lot of money is collected. I want to quote what Mr. Reginald McKenna, chairman of the Midlands Bank, said on the 25th January, 1944. Hon. members and the Minister will agree that he is a person who is acknowledged throughout the world as an expert in the sphere of banking, and that he knows how capital is created and credit issued. Because the Minister of Finance paid us the compliment the other day of quoting Mr. Nash, I want to quote someone who apparently shares his views, who adopts this conservative attitude. He stated—

Then he goes on to say—

Hon. members must listen to that: “They who control the credit of the nation direct the policy of the Government.” Is it necessary to advance further arguments to show that the banks have the salvation and welfare of a nation in the hollow of their hands? I do not think it is necessary to advance further arguments to show why the banks should be under the control of the Government. Here you have the words not of a socialist, not from Russia, but of the President of the Midlands Bank in England, one of the biggest banks in the world. He says that the banks have the destinies of the nation in the hollow of their hands, that they control governments. But the hon. member for Vasco defends this old antiquated banking system. I am sorry the hon. member is not here, because I would have liked to ask him who is the cause of the depressions we have from time to time. When the bank cannot have its way with the Government, it causes a scarcity of money, and once it has had its way it opens its coffers, as it did after 1932, when the then Government had been taught a lesson by the banks. Then one could get loans left and right, as much as one wanted. There we agree with Mr. McKenna that the people who control the credit of the country, have the welfare of the nation and the destiny of the Government in their hands. We say therefore that it is essential that the Government should be all-powerful, because the welfare of the country must be in the hands of the Government and not in the hands of private banks. If the Government has no control over credit, it is subject to the whims and wishes of the banks. I go on to quote Mr. R. G. Hartley, Assistant-General of the Treasury, who stated on the 22nd March, 1933—

We are now involved in a three-cornered fight. The Minister of Finance wants to maintain the old system under which he and the country have already suffered very severely, and the hon. member for Vasco tries to defend it. The Nationalist Party comes forward with an amendment which comes very near a State Bank, but they do not want to go the whole way, and I just want to tell them that if they do not want to go the whole way and advocate a State Bank they will, in the future, be opposed as much as the Labour Party has been opposed and they will share our lot, the lot of anyone who takes upon himself the task of explaining the functions of banking and who points out how the banks in South Africa cause depressions and scarcity of money, how they throttle industries and make farmers bankrupt. No one else is responsible for that but the commercial banks of South Africa who are the cause of 90 per cent. of the insolvencies amongst farmers and businesses. If you take upon yourself the life task of pointing out to the people that it is the banks of South Africa who make the people bankrupt, you will be boycotted by the banks; your voice will be smothered by the newspapers which are under the financial pressure of the banks. I want to admit that there are difficulties which we will have to take into account. The Minister of Finance may say, as he has done in the past, that the Labour Party says that if we create a State Bank, everything will be in order, that then it will rain and everyone will have employment. That is not the case. We have practical proposals which must be carried out when a State Bank is called into being and when our banking is nationalised. Under our proposals the bank will exist for the people, and it will not be a few individuals who will control the banking system. We will no longer be dependent on the men who sit behind the scenes and dominate the Government, as Mr. McKenna said. We will have a bank which will be used for the people in every respect. We therefore suggest that the Reserve Bank should be converted into a general State bank, so that where loans are required in the future all advances will be made from the State bank, and so that there will be no need for the Government to go to private money-lenders for loans. Today the position is that when the Government wants to raise a loan it has to rely on private banks. If the private banks are prepared to lend money to the Government, they do so. The hon. member for Vasco stated that South Africa’s credit stood high. But it is not only a question of our credit standing high; the position is that the banks decide whether or not you are going to get a loan. The banks want the Government to follow a policy which will enable them, under the cloak of “interest” to make a number of farmers bankrupt and to make a number of businessmen bankrupt at least every seven years so that they can make huge profits. They want to be in a position, under the cloak of “interest rates,” to call up bonds which they issue at one-third and later be able to put them on to the market at a higher price, and in that way make a profit of 250 per cent. every seven years. We are fully aware of the practical difficulties which will have to be contented with. I do not want my words to be twisted, and I have therefore written down what steps we want to take, because we know that as soon as these steps are taken many of the rich people in this country will want to run away with their money and all their possessions. Not because their money is not safe here, but because they will want to create a scarcity of money, and in that way incite the people. In order to prevent that we want to take the following step: We want to prevent the right people from fleeing from this country, and the Government will therefore have to prohibit the sending of money, of capital, out of this country without the explicit permission of the Government. The Government must also have the right to attach all assets which are held overseas by Union subjects, and must be in a position in such cases to compensate those people on the basis of the South African rate of exchange.

Where would they flee?

We know that there are birds of passage in Johannesburg who live in South Africa only as long as it suits them. As soon as they can find some other country where they can flourish to a greater extent they leave South Africa. They drift from one country to another. They have no fatherland. They would leave South Africa if they thought that they could fare better elsewhere. The Minister must prevent these people from clearing out of South Africa and taking their money with them. Then it is necessary for us to control all foreign trade, export trade and import trade, so that the country will know precisely what goes out and what comes in. Then the country would be in a position to know what it has to import for the requirements of the people, so that nothing will be imported which can be produced in our country; on the other hand we would also know what is produced in this country in greater quantities than we can consume. Gold, for example, could be exported if we knew precisely how much should be exported. For that reason we also propose that the Government should exercise control over imports and exports and foreign rates of exchange which can be manipulated by persons who live in the Union. There may be manipulations by persons in this country who may be operating on behalf of overseas businesses and big business men overseas. Then I come to a point which always gives the Minister of Finance cause for concern, and which gives members of the Nationalist Party cause for concern, and that is the bogy of so-called inflation. I do not believe that there is such a thing as inflation, but there, too, we want to suggest a remedy. Our anti-inflationary measure is, in the first place, as I have already said, that the Government should have full control in connection with foreign transactions, that it should have control over imports and exports and institute price control in respect of all goods as well as services, including, where necessary and if necessary, the subsidisation of consumers’ goods and the imposition of taxes in this connection. Here is our remedy. If, for example, it is felt that there is too much money in the country, and that it will lead to inflation it can be combatted in this way. I do not believe that there is inflation at the moment, but there is a shortage of consumers’ goods, and because there is such a great demand for those goods which are available, prices have risen; but that is not inflation. But where necessary prices must be controlled. There have been shortages occasionally, partly owing to the provision which had to be made for convoys which passed through. The Labour Party’s remedy is that if it is feared that there is too much money in the country, and that it will cause inflation, the consumers’ goods in this country must be increased. If we increase those goods we are actually increasing the standard of living of the people.

Manufacture more consumers’ goods?

Manufacture goods of every description which are required for consumption in this country. Unfortunately we have this position today with our private banking system and with the capitalistic system which we have, that nothing in our country and in the whole world is manufactured unless a profit can be made on the manufacture of those goods. I do not blame any private undertaking today if it produces for gain, because that is the system. Before any private undertaking produces food, clothing, shoes, rifles, picks and spades, it must have the assurance that there is a profit attached to the manufacture of those goods. Even though the demand for those articles is great, if there is no profit attached to their manufacture, private enterprise is not interested. That is what we have under the capitalistic system. The first question which is asked is whether any profit is attached to the manufacture of those articles? Is it necessary to advance further arguments to prove that this profit motive period has seen its day? Hon. members will agree with me that there are many goods which we require in South Africa, and which can be manufactured here, but the manufacture of those goods does not yield an enormous profit, with the result that private enterprise is completely uninterested; because the main consideration, the driving force and the motive of private enterprise under this system is the profit motive and not the extent of the public’s need. Here the Labour Party says that when it is felt that there is too much money in the country, steps must be taken to see that more goods are manufactured in the country. There are still many things which can be manufactured, and I could go on to point out how much greater South Africa’s consumption could be in the form of clothing or food and other commodities not to enable people to live in luxury, but to attain a proper acceptable standard of living. I say, therefore, that there is still a great mass of goods which can be manufactured in our country, and that is the remedy of the Labour Party against inflation. Increase the manufacture of consumers’ goods in this country. You may reply: Yes, but you cannot do that in war-time. But if the Government is prepared to apply that policy after the war, we on this side would be satisfied.

Does your leader support this amendment?

He shares my views. There is no question of a difference of opinion between us in connection with this matter.

Why does he not introduce it as a Government measure?

The hon. member has only been in this House a few days, and he ought to know better than to put such a question. The Minister of Finance is afaid that the inflation bogy will present a threat after the war. Here he has the remedy against inflation. See to it that the consumers’ goods are increased and then increased again, and then you need not be afraid of too much money. That is our remedy to combat so-called inflation after the war, and not necessarily during the war. Then there is another problem with which the Minister of Finance is faced, and that is the repayment of the State debt. If there is one difficulty in connection with which this House will still be forced to give effect to the suggestions of the Labour Party, it is in connection with this question of our State debt and its redemption.

[Inaudible.]

My beard may be white before that happens, but the hon. member’s outlook will be black. If this war lasts another few years this House will be compelled to pay attention to this policy, and not to all the other favourite schemes, none of which will help. America and England, if this war lasts another five years, will be able to continue with the capitalistic banking systems in those countries, and they will have to change their system. That is why the Labour Party advocates that the present interior State debt should be paid as soon as possible. The money for that purpose will come either from revenue or from non-interest bearing advances from the State bank, or from immediate taxation, which we my find it necessary to impose. We must be practical. The burning question will be: What is our immediate interest as a nation? To increase our consumers’ goods or to decrease them? It may on occasions be necessary to allow the people to save and to encourage them to accumulate savings. We therefore propose to allow those savings to be paid in, just as we now deposit savings with savings banks or the post office savings bank. But that money must never bear more than a mere nominal rate of interest. As soon as you start to repay those savings plus the interest, you eventually get back to the position in which we are today, namely, that the biggest moneylender will lend a little more to the Government and even the smallest moneylender will lend his money to the Government, and grow from the smallest to the biggest monetary power in this country. We must not make that possible for anyone, and we say therefore that the money must be borrowed only at a nominal rate of interest. We now come to another very important question, which is another of the Minister’s difficulties, and I just want to say this in passing because, Mr. Speaker, you will not allow me to enlarge on it. I refer to the question of taxation. We say that an equitable and simple system of taxation must be introduced, and not the involved system which we have at present. We want a simplified income tax system with a sliding scale, according to the income of the person. Then we come to another important point where the Labour Party also wants to apply its policy, namely, the question of industrial development. Under the present banking system in South Africa the banks are not in the least concerned with industrial development. On the contrary, their policy is that there must not be industrial development. That is their attitude today, that they want only one industry in this country, and that is mining, which is under the control of the Chamber of Mines. They co-operate, and together, they are always strong enough to do with the Government as they please.

Especially with the assistance of the Labour Party.

We also want to establish an industrial corporation, but not in such a way that the corporation will have to rely on borrowed money from private moneylenders. We want a corporation with money which comes direct from a State bank because what has been the result of the system which has been followed in the past? Today we have an Industrial Development Corporation. It borrowed money from a fund which we established. Experiments are made with State money, where private enterprise refuses to experiment with an industry. But as soon as such an undertaking is profitable, the moneylenders and speculators are prepared to carry on with it. They then say that the experiment is successful; it has been shown that there is a profit attached to the undertaking; they are then prepared to buy shares and we allow them to do so.

According to law the State cannot prevent that.

But it does not do so.

Then the trouble is that we have the wrong Government.

If it is a State undertaking, if the State carries out the experiment with its money and starts the experiment, I cannot see why it cannot thereafter remain an undertaking which is exclusively in the hands of the State. Why was private enterprise given an opportunity to buy shares in Iscor? If there is an opening then the object of that opening must surely have been to give private enterprise an opportunity of buying shares. I referred to this matter some years ago, and at that time hon. members did not agree with me. I pointed out that Iscor was deliberately working at a loss. Men were imported from overseas in order to work in Iscor, so that the industry would work at a loss and get a bad name.

But the State invested a great deal of money in Iscor.

Yes, I know that. I am dealing with another aspect of the matter. I say that Iscor deliberately worked at a loss. There was a reason for it. Later these people were told that they had to work at a profit. They started to work at a profit, and then private moneylenders, members of the public, came forward and bought shares. The shares are higher today than they have ever been previously, and hon. members know that.

That is due to the war.

It is due to the war, and let me tell my hon. friend that not only in that case but also in the case of other industries which have come into existence as the result of the war, that policy was followed. At the beginning the money of the Corporation was used, and private moneylenders did not want to invest their money in that undertaking. But as soon as there was evidence that that undertaking was a success, the people came forward. After the State had used its money to undertake this experiment, the money-lenders were preprepared to buy shares and to invest their money and to flourish. Our attitude is that when the State has made a success of such an undertaking, it should remain 100 per cent. in the hands of the State. If, in the first instance, the State made a success of the undertaking, it can continue to do so in the further stages; it can then conduct it successfully in the further stages of development. The hon. member for Hospital (Mr. Barlow) interrupted me and said I should include the gold mines and that then everything would have been included. No, everything would not have been included. I say, however, that all key industries ought to be nationalised because only then, when the profit motive has been removed and the industry has only one object, namely, the object of producing for consumption by the public, we would be able to obviate many of the difficulties with which the Minister is faced at the present time.

Does that also apply in the case of farming?

It applies to everything.

The farmers will not like it.

They will not. In the present circumstances I do not blame them. But let me add this. The Labour Party does not say that it is necessary to kill the small industrialists, because they can fit in with the organisation which the State must have in the economic life of this country. The majority of farmers are small industrialists. They need not be nationalised because they have never used their weight in order to bring about the downfall of the Government to the disadvantage of the people.

What about the smaller banks?

We are dealing here with the big organisations which have become evils in this country, which have a very detrimental effect on the people and on the policy of the Government, which have had and still have that detrimental effect. We are not concerned with the small man who is not dangerous. We start with the banks, the root of everything. I cannot see what sense there is in taking a man’s farm, or in taking a small business. The crux of the argument is that hon. members on the other side, like the hon. member for Vasco (Mr. Mushet), are advocating an old system which has seen its day, which cannot be maintained. We have therefore moved this amendment in order to point out that the crux of national welfare, as I have indicated from the evidence of men who know what they are talking about, centres on the banking of this country, and for that reason we do not see the necessity of including the small farmer or the small industrialist, because they can fit into our system very well. I therefore move the amendment which I have read.

I second the amendment. The natural reaction of myself to this debate is that of a small boy who has been watching the conjurer and is very mystified but later on is given a peep behind the scenes, and a lot of his mystification falls away: I realise that high finance is not everyone’s meat. But I have been emboldened to second this amendment because in my reading I find that while high finance may not be everyone’s meat, from the expert point of view it seems to me that there is a sufficiently wide difference of opinion among those experts to give the layman—if. I may so describe myself—courage to proceed in the matter. Now, I want to refer to the Bill and I want to point out that as far as I can see clause 8 is the clause which tells the Bank what it can do, and clause 9 is the one which tells the Bank what it cannot do. What it cannot do is very important. It cannot encroach on the right of commercial banks to do the business it ought to do and of course if the Reserve Bank cannot encroach on the preserves of the commercial bank, then whatever virtue attaches to the Reserve Bank, because of the fact that it has on it the Government nominees, it is rather crippling to find that the commercial banks can go on exploiting and creating and destroying credit as much as they please. The picture is that of a father and mother getting together to refurnish the home—the Government and the Reserve Bank are the father and the mother—they have five naughty little boys and as fast as they refurnish the little boys knock the furniture about. That seems to be the picture. Of course, the Government wants to do the right thing here. The Government wants to use the Reserve Bank to furnish the house as nicely as possible, but the little boys have different ideas, and in their naughty boyish way they set out to wreck all father and mother have done. That is the position and that has been the experience which we have had of so-called semicontrol of the commercial banks. Now, to turn to the Bill. In clause 10 it says, “The Bank shall have the sole right to issue bank notes in the Union,” and then it says—

Obviously if the Bank is the only institution which shall issue bank notes, it is fatuous to think that any value can be attached to subsection (2) which talks about the denomination and material of the notes of the bank. I cannot see the people who control the issue of bank notes differing on the mere question of material or denomination. The result of this arrangement is that we get not the idea of co-operation but rather the idea of connivance, and that we get the impression that private enterprise will call the tune and the Treasury will pay the piper when the time comes to pay—which is proved when we come to another clause, and this clause deals with the question of the ability of the Bank to meet its obligations. I am now dealing with clause 11: “Notes to be legal tender.” And it says here—

And then I come to sub-section (2) which says this—

Now, what does that mean? It means, when it comes to paying the piper, that is when the bank is up against the position which it itself must have contributed to, in that it could not arrange the finances of the country as to render itself solvent—in that particular position it says to the Governor-General: “We can not pay gold against notes, will you please issue a Proclamation,” and the Governor-General will oblige. And he will tell the people who are hoping to get gold that the Government is very sorry but the Reserve Bank cannot pay gold. And that is the end of it. And not only is that done, but it can be done indefinitely. This Reserve Bank which is based on all the knowledge which we are assured resides in the people who know most about banking—this bank which has all the backing as its foundation is so afraid of being called upon to meet its obligations that it has to have all these provisions. There is another provision here—

That is sub-section (4) of section 17. That means that they are not even compelled to hold the amount of gold prescribed which is only 30 per cent. of their liability, if the Government so agrees. And that position can go on and on. Now, what does the ordinary man in the street think of what is called “sound finance” if this kind of thing can be reaffirmed in a Bill brought before this House for its agreement? In order to lend colour to the fact that the ordinary man in the street should be interested I want to quote again from the “Capitalist” and he, in discussing the tribulations which have overtaken the banking system, says this—

If those were my words, if I was standing up in this House to deal with high finance, and if I were to say those things, hon. members might be excused for saying: “He may not know what he is talking about.” But these are the words of a capitalist, these are the words of a banker, these are the words of the Chairman of one of the greatest insurance companies in Great Britain.

How do you know he was right?

What was his name?

The name was Vickers. I have the book here. Well, so much for the legitimate right of the ordinary person, the man in the street, to think that he can know something about what we call high finance, and that he is entitled, because ne can bring commonsense to bear on the subject, to make some contribution. Now, there is another quotation which I want to read which deals with the Gold Standard. We have heard this afternoon various expressions of opinion about the Gold Standard. We have heard it said that the Gold Standard will carry on because America and Great Britain, and even Russia, have agreed that the Gold Standard is necessary for the carrying on of our economic system. I am not going to prophesy. I am not going to say that I know better than the person who said that, but I am going to question very much, in view of the whole history of what has taken place in Russia, that Russia will bother her head at all about the Gold Standard. But this is what Mr. Vickers says about the Gold Standard—

And then he goes on—

In August, 1944, when the public very foolishly thought that gold money was preferable to paper money and actually did demand gold for notes in considerable numbers, the Joint Stock Banks, like Brer Rabbit, lay low, and referred clients demanding gold to the Bank of England. A run on the Bank of England followed; and when a paltry ten millions or so of golden sovereigns had been handed over the counter in exchange for notes the whole money system collapsed and there followed a double Bank Holiday and a moratorium; and we went off the Gold Standard and could not draw our own money unless we could “satisfy” the bank officials.

Now, Sir, the same thing must happen in the case of your Reserve Bank when a crisis arises, and if our Minister of Finance imagines for one moment that he or anybody else can save a bank that exploits the credit of the people and is not based on the credit of the nation, if he imagines that kind of bank can go on and meet a crisis and overcome it, then of course he gives the lie to his own commonsense and intelligence. I want to say that the only bank that can do that is the bank which does not exploit the credit of the people, but the bank behind which is the credit of the people, and that bank, Mr. Speaker, is the bank that we have in mind when we speak of a State Bank. Such a bank would have interest in seeing that the credit of the nation is healthy, because that credit would be based upon every man who is able to work getting a job of work. That is the basis on which our State Bank will function, and that is the basis which is insisted upon in Russia, that every person who can work is given a job of work to do. This man goes on to say—

He says—

That is what he says about sound finance. We know that the Bank of England, which is so sound, the old lady of Threadneedle Street on whom you can put your bottom dollar, has been bankrupt at least seven times. That is to say, she denied people the right to draw from her the money they had put into her vaults. That has happened no less than seven times. If in our small country, at least a small people such as we are, our bank drew its sustenance not from some idea of making a profit but from the idea of providing for the people of this country a job of work in circumstances in which they could perform that work, then even in South Africa we could have a financial system that is unassailable, because we could choose, Mr. Speaker, at any time what we would buy from outside South Africa and we could say at any time to what end we would turn our efforts. That is the point. Supposing one of our industrialists today wants an extension of his business and wants a certain amount of credit. He goes to the bank and he gets a very suspicious look. Immediately the question is asked, “What security have you got,” and despite the fact that he may have been carrying on his business for twenty, thirty or fifty years the manager will say, “Is that all the security you have got, are you sure you have not got a little more?” The whole atmosphere is this, that although the man is perfectly honest in his desire to extend his business, although he has a perfectly good business brain and organisation he finds the unwillingness of the bank manager is able to block him. No, Sir, it seems to me obvious that no honestly-intentioned man would receive that kind of treatment from the bank we are thinking about. It would be to the interest of the bank to see to it that every honest endeavour to make real progress could get all the credit wanted, and the bank would not bother about whether it was going to make 4 per cent., 10 per cent. or 16 per cent., it would only be concerned to know that in extending credit another job of work was being born into this country. That is the point. The bank manager does not care, unless of course he thinks out of his natural groove he does not care a tinker’s cuss for a job of work that is born; if he did he would be practising revolutionary ideas against his shareholders. What he cares about is how much profit he is going to get from the loan. One more quotation in connection with international loans. The author says this—

Is that sound finance, if we are talking in terms of money; £4,500,000,000 have vanished into thin air. If we are talking in terms of money that seems incredible, and that is just the point, because when it suits us we talk in terms of money, and when it suits us we talk in terms of credit. The British banks apparently faced the lost of £4,500,000,000 with equanimity. That must have been because the banks commitments were safeguarded in some way that I confess I am not able to elucidate, but the obvious fact is that there must have been a loss of something far different from money. If I lost a £5 note out of my pocket the loss to me is £5, but I am sure these people did not lose the £4,500,000,000 in that sense. It is obvious to us that we have the brains and ability to run any kind of bank, and I want to say that is not the obstacle; but I also want to say that the Minister has from time to time laughed off criticism of his various financial measures but if the Minister of Finance does not wake up from his dream of self-satisfaction and complacency he will find himself one day with something on his plate that he will not be able to laugh off. Those people who are denied access to a job of work, and there is nothing more dearly desired by the people of this world, if these people are denied access to a job of work, in their agony of mind owing to their not being able to face the position there will be an upsurge that the Minister of Finance, or whoever succeeds him, will have to face, and he will then have something on his plate that he will not be able to laugh off.

With your permission I should like to begin my remarks with my epilogue. In view of the tremendous development of the central banking system, its functions and technique since 1930 and even since 1920, and also in view of the fact that this Bill seeks to perpetuate the private character of the central bank and furthermore in view of the control of credit under the provisions of this Bill being, in my opinion, not sufficient and because the necessary provisions for such control should be embodied in this Bill, and in view of the fact that the Bill does not make provision for one of the most important functions of central banking, viz., clearance, I want to ask the Minister earnestly that only the right of note issue of the South African Reserve Bank be perpetuated during the present session, and to have the other matters investigated by a commission to be appointed by him, which can go thoroughly into these matters. I realise of course that in view of the lapsing of the right of issue next year we cannot expect the Minister to drop this Bill altogether, but with all respect I want to point to the inherent difficulties of efficient central banking legislation and the definition of the functions of a central bank and the supervision which should be exercised, and for those reasons an investigation is essential. I do not for one moment want to imply that the officials and the Minister have not gone into the matter, but in view of the experience I have gained of these things during the last few years, I feel that the matter should have had much more attention, so that we may put on our statute book a proper Act in regard to our central banking system, a measure of which South Africa will derive the benefit in many years to come. I do not want to be so logical as the hon. member for Vasco (Mr. Mushet), who said that as in his opinion the Reserve Bank has functioned reasonably well, it is perfect in every respect. I was pleased to notice from the newspapers that the Minister appreciates the services which the Reserve Bank has given, as well as the services rendered to South Africa by the president of the Reserve Bank. None of us can dream of going back to the period before 1920. Thereafter life became very complicated and the people began to realise the necessity of a central banking system, and therefore nobody in South Africa will deny the necessity for a Reserve Bank. We all feel that the Reserve Bank has fulfilled a necessary function in our banking system and that it did well in that respect. I also express my appreciation for the great services rendered by the Reserve Bank to South Africa in spite of the weaknesses in the composition of its management and in its function as the central bank. I specially want to mention that we appreciate the work done by its present president in connection with the central bank, especially during the days of worry and uncertainty. I believe that the Reserve Bank rendered exceptional services especially during the years between 1929 and 1932 when the Bank no doubt prevented a panic and perpetuated the confidence in our monetary system. At the same time, however, I want to say that in my opinion the critics of the Reserve Bank are still entitled to receive at some future date explanations for a few things whatever the importance of this Bill may be. The first one of these is that I am not sure that the Reserve Bank, although still in its infancy then, correctly advised the Government at the time when the National Bank went to nought. In the second place I am not sure that the Reserve Bank acted fairly towards South Africa in regard to the devaluation of our pound in comparison with foreign exchange. It is of course impossible for the Reserve Bank to follow a policy which is in conflict with the policy of the Government. The Reserve Bank cannot do that. I shall come back to that in a few moments. I feel, however, that it was and still is one of the acute economic, monetary problems whether it was fair that South Africa with its gold reserves and its financial power should have allowed to let its pound fall to the extent to which it did fall. I furthermore find it difficult to appreciate why the note circulation should have risen so enormously during the past year. I do not want to criticise, but this gives cause for anxiety that somewhere something is lacking, either in the hoarding of notes or by an unsound relation having arisen between commercial transactions and the circulation of bank notes since the beginning of the war. I wish to refer to 1940. On 9th January, 1940, the note circulation amounted to £19,800,000. I do not want to quote the figures for all the other years, but on 5th January, 1944, that is four years later, the circulation was £51,022,000. Of course it has decreased since then so that on 21st March of this year the circulation stood at £47,730,000. I noticed that the president of the Reserve Bank in his latest speech said that he suspected that notes were being hoarded. This is possible, but in spite of that there seems to be a tremendous increase in the notes in circulation and I think that this deserves serious attention. I now come to a second aspect I want to emphasise and that is that the restrictions on the Reserve Bank as such are actually rooted in its historical background and as it was bound thereby, or rather as that was the form given to it, and because since then an evolution has taken place in regard to central banking systems, the time has arrived to take the position into review. The central bank in South Africa happened by coincidence to be the first reply to the state of emergency which was felt to exist at the time of the international financial conference at Brussels in 1920. The South African Government, and I again want to couple to this the name of the present president of the Reserve Bank, was the first to react to the decisions of the international conference. I refer to the president of the Reserve Bank on account of his efforts to have a central bank for South Africa brought into being. It was the South African Government who was the first to act on the decisions of the international conference. So far so good. But at the same time there was at that time no precedent which a small country like South Africa could follow and in consequence our Reserve Bank was actually based on the example of the Bank of England. The position of the Bank of England is however inherently different. The Bank of England has behind it a tradition of ages, but as we did not have that tradition in South Africa, it was not correct to follow that example without any more ado. As I said the Reserve Bank of South Africa was the first reply to the discussions of the worîd conference at Brussels. Since then no less than 25 other central banks in larger and smaller countries have come into being. The aims have, however, changed very materially since then because the relation of the State towards industry and society has changed inherently. As the relation of the State in regard to the economic position becomes closer and it is compelled to interfere in the economic life of the country, so the demands on the central bank to be available for the services which the Government has to supply to the people, becomes greater. I want to be brief on this point and in the short time at my disposal I just want to deal with a few points. In 1920 the point of view was taken up that one’s central bank should not be coupled to the Government as it would otherwise lose its independence of opinion. Since then the world has come to the conclusion that it is not the bond between the bank and the Government which is of importance but rather the relationship of the Government towards the bank. The question may be asked whether the Government intends the bank to be the eventual test, the measure of reässurement for our economic life, and whether the Government is prepared to give the bank freedom, but it does not follow from this that the bank loses its value because the State appoints its management. Since that time the position has changed considerably and we can no longer maintain at present that the form which was chosen in 1920 is still applicable today. I do not have sufficient time today to go into that question, but I want to refer briefly to the direction which has been followed in the United State since 1940, where the general opinion has been changed in such a way that in the United States which has the largest population of any country bar one, and which is a highly developed and civilised country, the State has assumed direct responsibility for the central banking system. The head of the State, the President of the United States of America, has been given the authority to appoint the Federal Reserve Board, and the head of the State is therefore indirectly responsible for the control of the central banking system of the United States of America. In the world outside that idea has taken root and has been developed and the central banking system of today has thereby acquired some of the outstanding characteristics. The first one is that a large number of the central banks of the world have already become State banks in the sense that the Government controls the capital. As far as more than 20 central banks are concerned, they all fall under the control of the State either by the State having put up the capital or by the State having a controlling share in the appointment of members of the management. The position is that the whole of North America has now already State control over its central banks: Canada by means of its State bank, the United States through the Federal Reserve Board, and Mexico through the State’s share in the capital. As far as South America is concerned, one finds there too quite a number of nations where the State controls the central banking system. Practically the whole of Europe has State control over the central banking system except in a few small countries. Russia has had its state bank since 1860 but since then conservative France has also gone over to a certain measure of State control and today only a small minority of the management of the Bank of France is elected by private shareholders. Holland, Belgium and a few of the small Baltic States as well as a few nations in Southern Europe still have an uncontrolled central banking system, i.e. a central banking system which is not controlled by the State. One thus comes to the conclusion that five-sixths of the world has a central banking system controlled by the governments of the relative states concerned. I would like to urge the Minister to give consideration to the amendment proposed by this side of the House on account of these arguments. I consider that the present Bill definitely further perpetuates the private character which is out of time with the developments which have taken place since 1920 when our Reserve Bank was established. The whole policy of the central banking system in the world is based on State control and it is a sound policy as the world today recognises that the State should interfere much more with the economic life of the population. In many cases the State itself establishes industries in its country and these are responsible for large works and the government has taken a hand in regard to the possibilities of expansion in the field of industry. In view of those facts I feel that there are a few important defects in the existing Bill. First of all the private character has been retained as appears from the composition of the directorate. In the case of the capital, that is still being subscribed by private shareholders. No provision is being made for the issue of capital to the State. For that reason the bank is retaining its private character. The management has been composed in such a way that the Government appoints five out of the eleven members, which also proves its private character. In the third place there is this stipulation, a very important one, that the policy or any decision by the directorate will be taken on a majority vote. I think that this is an acknowledgment, together with the composition of the directorate, that this bank retains the character of a private bank only. Then there is the provision to which the hon. member for Fauresmith (Dr. Dönges) has already referred and by which a particularly strange principle has been incorporated in the Reserve Bank Bill by providing for the limitation of the voting power of private companies controlled by co-ordinated managements. I believe that this is tantamount to an admission on the part of the Minister and his department that they realise the danger. If there should be disobedience on the part of the institution, the Minister must go to court instead of his office being able to enforce the policy which he considers to be in the best interests of the bank or in the best interests of the country. I feel that the central bank is retaining its character as a prviate bank owing to the characteristics which have been incorporated in the Bill, but this particular characteristic is too dangerous for proper control by the central bank. As has been quite rightly remarked before, it is significant that credit in South Africa is largely supplied by overseas banks which in the last instance are of coure responsible to their own managements and that the Reserve Bank is not able to actually lay down the credit policy of those banks. This surely is an unsound policy. I do not want to cast a reflection on the policy followed by the banks in the past. There may be a difference of opinion as to that policy, but the fact remains that the Reserve Bank with its limited capital as compared to the mighty capital of overseas banks, and with its private management, is not in a position to control credit, except by what is called “moral persuasion.” I readily admit that it may have worked reasonably well in the past but neither the Government nor the Minister can be assured that this state of affairs will continue in the future. The position that has been created here is that the overseas banks are the principal suppliers of credit in South Africa and that they may at a certain moment decide on a dangerous policy, and without casting any reflection on the banks, I do want to say that this is a matter which cannot be left as it is now. The State ought to exercise control over the credit system as a whole. It is moreover in conflict with sound principles that private banks should be responsible for the supply of credit. I want to urge that the Government take into revision this aspect of the central bank and that it give this bank in accordance with its development during the past 24 years, more the character of a State controlled central institution. I do not attach any significance to its capital being State capital or only partly State capital and for the rest private capital. It is not absolutely essential that a Reserve Bank should have State capital only. What is, however, important to me is this: The State must be responsible for the policy of the central bank. Now I should like to say a few words in connection with other matters. I feel that one of the important functions of central banking which is not being exercised today by the present central bank is nevertheless an important one. I mentioned the fact that one of the natural functions of the central bank is to be the clearing house of your commercial banks. That is one of its well-known functions; in general eight or nine functions are ascribed to the central bank of which this settlement of accounts or clearance is the obvious duty of the central bank. This is an evolution in commercial banking which is not yet a hundred years old, but during the last twenty years it has gone so far that some people have felt that this must be one of the compulsory functions of the central bank, viz., to assist in the clearance between banks and to accept this as a compulsory function. I should like to quote a few remarks from the book by Dr. De Kock on “Central Banking,” in which he, as he sees the problem, suggests the only sound manner in which this function of central clearing should be a function of the central bank—

It was an instruction to banking—

This natural function of a central bank is therefore compulsory by law in the countries mentioned. The American system actually goes still further but not as the result of legislation. Under the reserve system the twelve federal reserve banks function as central clearing banks for their respective areas. They act free of charge as clearing banks for all the commercial banks in their vicinity. I feel that in view of the present development of banking in South Africa this is one of the inevitable services which the central bank in South Africa should also accept to perform. If you take into consideration the enormous amount of money which is daily paid out by means of cheques in the various parts of our far-flung country, and the difficulties accompanying the clearing of those cheques, and if you further take into consideration that it is a matter of private agreement whether your bank is to be admitted to such a clearance system or not, then you will realise that this may be to the detriment of the country as a whole, that it may dangerously prejudice the funds of the parties concerned, and that dangerous influences may be the result of the non-existence of the obligation of the central bank to provide clearing services. This should be one of the essential functions of a central bank. An organism should be created so that as soon as a commercial bank complies with the demands of the Banking Act, all registered commercial banks can co-operate or agree to enter into a clearance agreement to the advantage of the banks mutually and of the saving of capital and to the benefit of the country as a whole. Today I do not want to make use of this opportunity to tell the House of the experience which one small bank in South Africa had. I just want to say that, from the experience I have had, it is an untenable position that a bank born on our national soil should be subjected to attempts by oversea banks to obstruct it as much as possible in the performance of its services to the public. This is a serious matter and it should receive the attention of the government today. I do not want to abuse this opportunity, but I want to state definitely that this is generally unsound that one national bank should be subject to attempts by foreign banks to make its existence impossible. I do admit that the position has improved very much, and I want to reiterate that I do not at this moment lay a charge against the other banks but I feel that this is a matter for which the State should make provision, viz. that where a central bank is brought into being to facilitate the banking system, it should be an instruction to the central bank to see that every registered commercial bank can take part in such a mutual clearance agreement. No private commercial bank can develop if no co-operation exists between banks. At this moment I only want to urge the principle that the Bill should make provision for the functioning of the central bank as a clearing house. It should lie in its power to establish an association of commercial banks and that those associated commercial banks should then be able to come to a clearing agreement on a basis which satisfies the central bank. I do not know whether the Minister is aware of it, but before the Select Committee which two years ago investigated the working of the Banking Act, I referred to the particulars of the system in vogue in Canada, where every new bank has the right of admission to that association, and where that association is empowered to enter in clearing agreements. Nobody can prevent a bank registered in Canada to become a member of the association. It has that right. Section 7(1) of the relative Act reads—

Section 7(2) then continues—

Here we have a sound principle. If the Minister insists on the passing of his Bill during the present session without further investigation, then I should like him to make provision for similar powers being given to the central bank. Let it be a duty of the Reserve Bank, let the Reserve Bank determine the conditions with which every commercial bank must comply for clearing facilities. In the past we tried to find out what objection could be raised against the commercial banks co-operating in order to improve their services in this country. We could not elicit any reply; the position remains a secret. We offered to give securities. Finally I want to express our thanks to the management of the Reserve Bank which owing to the steps it took created a considerable improvement in the co-operation between banks. As this improvement is due to the action taken by the president of the Reserve Bank I reckon that it is one of the natural functions of the Reserve Bank to see that these services are given readily to all commercial banks. I am grateful for this opportunity of having been able to ask the Minister once more to put the Reserve Bank in a position to satisfy the demands of our times.

We have two amendments before the House. Firstly there is the one moved by the hon. member for Krugersdorp (Mr. van den Berg) which, as usual, asks for the establishment of a State Bank. I am one of those who have in the past believed in the principle of a State Bank and I would today support the principle of a State Bank provided that the conditions under which it can be carried out existed. But what my hon. friend forgets is that the mere establishment of a State Bank under present conditions, unless you have a complete socialised state—and South Africa is not ripe for that—is of no value whatever because it depends entirely on the administration. You can have your banks run by the State but if the State believes in administering those banks on the present basis of economics, then the mere establishment of those banks is of no value, and I can do no better than quote from a book of Strachey, “The Banks for the People.” He is one of the outstanding economists of the present day. Referring to the establishment of State Banks, he stated that—

And that is actually the position today. You may call your bank a State Bank, but if the administration of it is based on ordinary present-day economics, then there is no value in coming along with an amendment of that kind, and I hope that hon. members on that side will see that under present conditions there is no point in pressing a theory, because after all what is important are the facts. I hope therefore that the hon. member will withdraw the amendment. In support of what I have just said, may I remind the House of our experience in connection with the Industrial Development Corporation. We were all in favour of the establishment of an Industrial Development Corporation in this country, a corporation which was calculated to take the part of an industrial bank in this country and to do everything that can possibly be done for the development of industry; and we find today that this Industrial Development Corporation whose function and object it is to develop industries in South Africa, invests a very large amount of its capital—capital which is provided by the Government—in underwriting shares of the Imperial Cold Storage in South Africa. There is an illustration how fatuous it is to talk about principles and theories unless you have some practical measure of control. No, Sir, I believe that it is essential, that it is necessary, to be prepared for the coming industrial developments and for the changes that are bound to take place when this war is over, and it will become necessary for us to see that an adequate amount of credit is available for the industrial development of South Africa, and in applying that credit we should have a system of priorities by which those industries whose development is likely to be of greater advantage to the State shall have priority over applications from people who are merely going to speculate. That is something that should be dealt with by a Central Investment Board, and even a Board of that kind, unless it is administered along certain proper lines, would be of very little use, and I would suggest to the Minister in anticipation of the changes that are bound to take place that one of the points that should be submitted to the Planning Council which is engaged in planning in various directions, should be an investigation into the whole problem of credit and the control of credit in South Africa. Then we have an amendment by the Opposition. The hon. member for Vasco (Mr. Mushet) has already dealt with the main points of that amendment very effectively. But as I listened to the speeches of hon. members on the other side, and as I listened to the very eloquent speech which was made here this afternoon by the hon. member for Durban (Berea) (Mr. Sullivan), it seemed to me that in a nutshell the arguments advanced by hon. members of the Opposition were not against the provisions of this Bill but in favour of clarifying some of the points which they say are not sufficiently clear and which they say do not give the bank and the Government sufficient power. They said they wanted to be satisfied that the Government shall have a majority on the Board, not because the Board of Directors has done anything which they can point to as being inimical to South Africa but because they think it will be safer for the future if the Government has a majority on that Board. One realisies that the directors on the Board, outside the five to be nominated by the Government, represent a variety of interests. There is very little likelihood of those six directors who represent a variety of interests being able to override the policy and the view of the directors who represent the Government of the bank. I do think the Minister, for the purpose of avoiding such criticism, however unimportant it may be from a factual point of view, might consider the advisability of amending the clause by providing for six Government representatives and five representatives of private interests.

Six jobs for pals.

I have already suggested that I am not so sure that they do not follow the policy we want, but at present we have five Government nominees and the suggestion I make is that there might be a sixth director nominated by the Government in order to do away with the criticism that the Government has not got a majority on the Board. Then the other main point of criticism is also a matter of clarification. It was used by the hon. member for Durban (Berea) as well as by hon. members of the Opposition, and that was the question of the sole right of buying gold to be vested in the bank. As a matter of fact, as has already been said by the hon. member for Vasco that position applies at the present moment. That position was created in 1933 when South Africa went off the Gold Standard and Mr. Havenga, the then Minister of Finance, had to make provision to give effect to our departure from gold, and to obviate speculation at the time, he provided in the Act of 1933 for certain powers and regulations which enabled the bank to become the sole purchaser of gold in this country.

Are those regulations intra vires the Act?

So far the position is this, that since 1933 when Mr. Havenga made provision for that in the Act of 1933, in order to bring about that state of affairs, no one has challenged the position.

If those regulations are intra vires why is it necessary to have that power in the emergency regulations? Why not a regulation under Section 9?

The point I am making is that from 1933 until the emergency regulation was issued that power was exercised, and it was never challenged. It may be that when the emergency regulations were issued, there was some difference of opinion as to the effect of those regulations. There again I say that the relevant section of the Act dealing with that position has specifically been allowed to stand. Hon. members will notice that that particular section and Section 8 of that Act remain in force.

But that does not validate the regulations.

My hon. friend says that it does not validate the regulations. My answer to that is that the position has not been challenged at any time, and I am not aware of the fact that either the Law Advisers or other legal advisers have in any way challenged the validity of this provision. If hon. members are nervous about it, there again I want to say that it is a matter where for the sake of clarification the Minister might in Committee consider the advisability of re-introducing that clause in clearer language so as to satisfy hon. members on the other side. But outside of that, there has been no criticism of the Bill at all.

What about the criticism in regard to the constitution of the Board of Governors?

I have already dealt with the constitution of the board. The hon. member for Durban (Berea) also mentioned this question of the return to the Gold Standard—and perhaps at this stage I might refer to it. The fact is that one of the leading economists of the Soviet Union has been actively advocating a return to the Gold Standard because it is to the advantage of the Soviet which is a very big gold producing country, so as to see that its gold has an adequate market and a market with an adequate price. But I think that the article to which the hon. member for Durban (Berea) referred and the proposals which are at present under consideration by Great Britain and by the United States, and with which the Soviet is being kept in touch, do not, as I understand them, propose the re-establishment of the Gold Standard for the various democratic countries, but those proposals deal essentially with the principle of utilising gold as a medium for international settlements. And that is something which everyone will be in favour of.

They talk about newly mined gold.

It can only be intended for international settlement. But if we are to consider the question of a return to the gold standard, I for my part am opposed to it, because it was detrimental to South Africa in the days of the Pact Government and I think even today it would be detrimental to return to the gold standard, and I think it should be a matter of very thorough further enquiry and investigation. But that does not affect the Bill now before the House. The fact which hon. members opposite overlook is the tremendous progress which has been made since 1920. I was a member of the Select Committee in 1920 which dealt with the question of the embargo on the export of specie, and at the time, arising out of the report of the Select Committee—Col. Creswell and I were dissentients—provision was made for the establishment of the Reserve Bank. We were opposed to that for two very clear reasons. In the first place the object of the Reserve Bank was that it was to be a Bankers’ Bank at the time, and in addition provision was made by which the whole capital of the bank had to be subscribed by the private banks of this country. It was compulsory for them and they were to have a certain number of directors on the Board. It was to be a Bankers’ Bank to facilitate the carrying on of business. But gradually change after change took place, and it is worth while recalling the fact that in 1930, when South Africa was faced with the serious depression which culminated as a result of our staying on gold, Mr. Havenga felt that provision had to be made to face the depression into which we had entered, and he then introduced another Bill and having received a very important report from Dr. Kemmerer and Dr. Vissering who were among the greatest experts on the subject. He introduced the 1930 Bill under which provision was made to enable the Bank to carry on business and the principle was then laid down by which it was held that by the Bank having the sole right of issue of notes, by the Bank having the right to fix the rate of interest, the possibility of inflation would be prevented; and by the Reserve Bank being able to enter into business transactions that would have the effect of the Reserve Bank having a check on private banks. In this Bill we have gone so far that instead of the Banks being compelled to put up the capital of the Reserve Bank, there is no longer such compulsion. Private interests are encouraged to put up such money. Instead of the banks having their representatives on the Reserve Bank Directorate there is provision by which no one can be a director who is a banker, or is connected with banking business. And there is further provision by which the Reserve Bank is able to do a much wider class of business than was the case in 1920 or 1930. The Reserve Bank is now authorised to do a very considerable amount of private business. The provisions laid down in clause 8 of this Bill virtually mean that the Reserve Bank is in competition with the private banks to a considerable extent, and the items which are excluded constitute only a very small proportion of the business done in South Africa.

That’s no good.

The point I am making is that there is a tremendous difference between the position taken up in 1920 and the position taken up in the Bill now before the House, and I say that the progress made has led us to a state of affairs where in effect this Bill provides for the bank not only to be a Reserve Bank, but a bank to look after the credit interest and the general business of the country. It is a State Bank linked up with the Treasury, enabling the Treasury to have a certain amount of control wherever that may be necessary. The commercial banks are checked firstly by the provision of the sole issue of notes being in the hands of the Reserve Bank, and secondly by the Reserve Bank having the sole right to fix the rates of interest. And the Reserve Bank by having the very wide powers given to it, of not only carrying on business with the Govenment but with local authorities, of discounting bills and so on, has the power to carry on a sufficient amount of business to be able to check and compete with the private banks and thereby to curtail the powers of the private banks. They have the right to establish branches wherever they want. They can deal with the local authorities, and they can take away a tremendous amount of the business of private banks. They can restrict the business of the commercial banks in such a way that they will be only too glad to issue credit at the lowest possible rates. And if they do not want to do it the Reserve Bank having the right to establish branches can virtually squeeze them out. We must do these things gradually. I am a believer in that. I think we shall eventually come to the stage when we shall have no private banks at all. When that will come I don’t know. But the establishment of a State Bank will be of little advantage until we can have all the business done by the State and managed by the State, and in the meantime we want the Reserve Bank to be carried on in the interest of the community.

Apart from the other functions of the Reserve Bank, the bank, inter alia, has to deal, to a great extent, with our foreign trade. In that connection it is also concerned with the rate of exchange in so far as it affects us in South Africa, and before I say a few words on this Bill, I shall be glad if, in his reply, the Minister will throw a little light on this one matter for our information and for the information of the country. As the Minister knows, all sorts of plans are being made by the big powers of the world to obtain stability in foreign trade, and also as far as rates of exchange are concerned. Various plans have been worked out, and during the past few days we have heard of a new plan, namely, to create a fund of something like £2,000,000,000 in order to effect stability in the rate of exchange and trade conditions as between the various countries. The question which arises is what rôle will be played by gold in this connection— and here the Reserve Bank enters into the picture. Will it strengthen our position as a gold producing country, or will it weaken our position? Will it extend the demand for gold, or will it limit the demand? I do not want to enlarge on this. I put this to the Minister because there are people who are concerned about this matter, also as far as the future of our gold industry is concerned, and I hope the Minister will reply to that and throw a little light on this matter for the information of the country. As far as South Africa’s position in connection with banking is concerned, we all know that our position is completely different to the position of big countries like America and England, for example it differs in this respect, that we are completely under the control of foreign banks as far as our trade is concerned, internal as well as external, apart from the Reserve Bank. The influence of the banks in this country, and which might be called domestic banks, is still so insignificant that we can say with certainty that our whole internal economic life is under the control of two overseas banks, the Standard Bank and Barclays Bank. I say, therefore, that our position is completely different from the position of big countries like America. That is true also with regard to the necessity for greater or lesser control of the Reserve Bank or the Central Bank. Here we have two overseas banks, and for all practical purposes they have full control of our economic life as far as the provision of credit for our internal trade is concerned. It is interesting to note a few financial aspects of this matter. The capital of the Standard Bank is £10,000,000, but of that amount only £2,500,000 represents deposits. They have a reserve fund of £3,000,000. If we therefore take their deposited capital and their reserve fund, it amounts to something like £5,500,000 of their own capital which they use. The capital of Barclays Bank is £7,000,000— £6,975,000 to be exact. Of that, £4,975,000 represents deposits. And notwithstanding this comparatively small amount, they have complete control of the entire credit facilities of South Africa and of the greatest portion of our economic and industrial life. The reserve of Barclays Bank is £2,100,000. If we take the deposited capital and reserves of the two banks, we arrive at a total of £12,575,000— say £13,000,000. Notwithstanding this restricted capital of their own which they have at their disposal, we find that in 1914 the Standard Bank had the control of deposit moneys of the general public and of the Government to the extent of £78,000,000, and Barclays Bank to the extent of £120,000,000— a total of £200,000,000 in round figures. That is money which was deposited with them and which they had at their disposal to advance to clients and to lend out, and in that way to create credit or, if necessary, to restrict credit. They had £13,000,000 of their own, and they had £200,000,000 belonging to the public, to oil and to lend power to the economic life of South Africa, to create credit or to do exactly the opposite, namely to restrict credit. We notice, therefore that those banks possess an enormous power which they can use to the advantage or disadvantage of South Africa. Now I would like to compare with that figure the total amount of deposits which they received in this year, namely, £373,000,000. During these few years of the war, without adding a single penny of their own, they increased the deposits by nearly £200,000,000. At the beginning of this war the deposits stood at £200,000,000 in round figures. On the 31st March of this year the deposits amounted to £400,000,000 in round figures. That is the public’s money, which they used for their own purposes. That is a tremendous power to place in the hands of two overseas banks. The only means we have at our disposal of exercising control is the Reserve Bank. There is no other means. For that very reason it is of the utmost importance that the power of the Reserve Bank, or rather the power of the State to exercise control should be practically unlimited, or otherwise it means, as was the case before the Reserve Bank was created, that South Africa’s whole economic life will simply be placed in the hands of overseas banks, and we will be completely powerless in their hands. It has been very evident on a few occasions that those overseas banks do not always act in the interests of South Africa, but that they look after the inerests of their bosses overseas. The example was mentioned as to what happened after the Second War of Independence. We need only recall how they acted when the Government of this country struggled to maintain the gold standard. With this tremendous power which they had in their hands, these two banks played a great part in compelling the Government to change its financial policy. The methods which they used are well known and we need not enlarge on that aspect. It has happened in the past, and it may be done again in the future, in order to retard South Africa’s industrial development to the extent which they deem to be in the interests of the oversees shareholders or bosses of those banks. We have no industrial bank in South Africa. Apart from the assistance which is given by certain institutions, our whole industrial development is dependent on the provision of credit by these two big commercial banks, and South Africa’s development is determined by the amount of credit they make available. If they do not consider it in the interests of their overseas bosses to make credit available, if they do not want to support the industrial development of this country, they simply do not do so. There again they have a tremendous power in their hands which they can use for good or evil. It is as unsound a state of affairs as we can picture to place the development of a young country like South Africa in the hands of people who are not citizens of our country, and who are not interested in the development of South Africa but in the development of other countries. Take a bank like Barclays Bank. Barclays Bank of South Africa is only a branch of a huge banking institution which operates in Great Britain and in the rest of the British Empire. The Standard Bank also operates very largely in London. I say that it is necessary, therefore, to give greater power to the Government of this country, as far as the Reserve Bank is concerned, than it has had up to the present, and here Í refer mainly to the directors. The hon. member for George (Mr. Werth) and the hon. member for Fauresmith (Dr. Dönges) put this aspect of the matter very clearly. I need not repeat it, and I only want to say that in our opinion it is an extremely unsound state of affairs that the Government should not be in a position to lay down the policy of the Reserve Bank. It has the power to appoint only five out of the eleven directors, and it has not got a majority vote in the Reserve Bank. When we bear in mind the claims which have been put forward, namely, that South Africa should develop industrially, if we take into account the fact that a new development has taken place in South Africa in the industrial sphere during the past five or ten years, that during that time the Government interfered more and more with the financial life of the State and will do so in the future; that it is exercising more and more control to maintain a balance between the various spheres of our economic life, it is very clear that although the Government may not have felt the need in the past to have powers of this nature—to control the provision of credit, to mention only one example—there is a good need for the State to have that power in the future, and for the Government to have more and more powers of this nature in its own hands, or otherwise it may lead to a collapse in times of crises, if the banks act in conflict with the requirements of the country, and the Government of the country is unable to act because it has not got the power to control and to lay down the policy of the other banks through the Reserve Banks. In our opinion it is therefore of the utmost importance that the Government should take into its own hands the power of fixing this policy, and it can only do that if it so amends this Bill that the Government will appoint, if not all, then at any rate the majority of directors. When we look at the list of shareholders of the bank, as the hon. member for Fauresmith has already remarked, we find the remarkable position that the majority or all of the shareholders of the Reserve Bank may be foreigners. There is no provision in this Bill which prescribes that the shareholders shall be Union citizens. The only provision in this Bill is that they must be domiciled in the Union. It says that shareholders who are not domiciled in the Union will not be entitled to vote at a meeting of shareholders. Only shareholders who are domiciled here are allowed to vote at a meeting of shareholders. I should like to ask the Minister what his reason is for using the word “domiciled”. That is a term which cannot always be defined easily, and in regard to which the court frequently experiences difficulty. Our point is that in this clause all these powers are given to people who are not citizens of the Union, but who are shareholders of the Reserve Bank. Who is going to determine when a person is domiciled in South Africa? Is this a case where one will have to go to court? Must the court say who is domiciled here and who is not domiciled here? It is not a question of residing here, because there is a considerable difference between residing in a country and being domiciled in a country. In this connection I want to draw the Minister’s attention to the fact that so far as the directors are concerned, domicilium is not necessary. As I have already remarked in connection with Clause 3, it is merely a question of a person residing in the Union of South Africa and not being domiciled here. He can be a director. In other words, a director may live in South Africa temporarily, leave the country and then return, without being able to prove domicilium. In order to acquire domicilium, he must not only reside here permanently but it must also be his intention to make this country his permanent home. I should like to know from the Minister why this distinction is being made between the qualifications of a director and those of a shareholder. In the one case domicilium is necessary, and in the other case he is only required to reside here. I want to come back to the qualifications of the directors. The requirements, as far as directors are concerned, are much more stringent than the requirements which are laid down in connection with the shareholders. Clause 3 (6) provides that—

1. (a) if he is not a Union national or does not reside in the Union.

In other words, it is possible that the directors of the Reserve Bank who have to guard South Africa’s interests need not be Union citizens. The word “or” is used here. If he resides here, he may be a director of the bank without being a Union citizen. What is the Minister’s reason for creating this remarkable state of affairs in the law that the Reserve Bank may be under the control of directors who are not citizens of this country? Has the Minister any reason for that? May I draw his attention to the fact that in the existing Act of 1920 it is laid down that a director must be a British subject, or that he must be a Union subject.

Which section are you discussing now?

I am referring to section 9 (2) of Act No. 31 of 1920. In that section it is laid down that the person must be a British subject and that he must be resident in the Union. Now the Minister provides that he must be a Union citizen— that is an improvement—or that he must reside in the Union. Does the Minister appreciate the difference? What is the reason? The difference amounts to this, that in terms of this Bill it will now be possible for every one of the directors of the bank to be foreigners and not Union citizens. That is an extremely unsound state of affairs in view of the tremendous service which the Reserve Bank can be to the whole economic and industrial life of the country, and for that reason I hope that the Minister will realise that it is necessary to amend this Bill in accordance with the amendment which was moved by the hon. member for George.

I move— That the debate be now adjourned.

I second.

Agreed to.

Debate adjourned; to be resumed on 25th April.