Mr. Speaker, before this debate was adjourned on 30 March, I had drawn this House’s attention to the fact that in terms of results achieved in the problem areas of the economy, there had been no improvement whatsoever since the previous budget. In fact, in all important problem areas, namely the balance of payments situation as reflected by the foreign exchange reserves, inflation, growth and unemployment, there had been a marked deterioration during the year.

As with any other business, the State’s management of the economy can only be judged by results. Therefore the budget that was presented on 30 March must be judged by the effects it will have on the problem areas of the economy, problems which are all still with us.

I want to start by dealing with the general economic situation within which the budget was framed. The hon. the Minister of Finance was in effect trapped between the jaws of a vice, between two sets of irreconcilable factors. On the one side he had to provide a huge sum for defence. I have already remarked on this before the adjournment. On the same side he has to deal with a depression. Obviously he would have liked to take more positive steps to stimulate growth and to combat unemployment, though, as usual, the hon. the Minister played down the seriousness of the unemployment problem. Obviously he would have liked to have reflated so that the economy could be lifted somewhat out of its depressed state. Against the other jaw of the vice he was still confronted with an intractable balance of payments problem. Although there has been an improvement in the current account of the balance of payments, this has been largely negated by the decline in the inflow of foreign capital, as is reflected by the foreign exchange figures of the Reserve Bank. On the same side of the vice he was still confronted with a serious rate of inflation, which was not falling, but was still rising and giving every indication, on account of the spate of increases there has been in administered prices, of rising still further.

The hon. the Minister did recognize these problems in varying degrees, but what he failed to recognize is the cardinal problem with which the economy is faced, viz. the lack of confidence of investors or, to put it in more blunt language, the crisis of confidence through which the country is going. In the hon. the Minister’s speech the word “confidence” was hardly mentioned and it was certainly not mentioned in this context. There was some passing reference to the causes of the lack of confidence, but there was no analysis whatsoever of those causes.

In his speech the hon. the Minister admitted that he could no longer rely on an inflow of foreign capital. I believe all the evidence points that way, that that is at present the factual situation. I say it is purely and simply lack of confidence which is keeping capital out of this country. It is also lack of confidence which is having such an unfavourable influence on local sentiment which last year led to the huge reduction in private fixed investment in this country which amounted to something like R900 million. I take a very serious view indeed of this decline in the inflow of foreign capital. It is something which we need to help develop our vast resources, particularly our vast mineral resources, and to help develop our industries. We need it to provide a satisfactory rate of growth and to provide employment for our fast-growing population. We have not yet reached the stage where domestic savings are sufficient to do all these things. I should like to know from hon. members where we in this country would have been had it not been for the R6 000 million of capital inflow which has taken place during the past ten years and which has helped to finance something like 15% of all our fixed investment.

Apart from the need for foreign capital in order to develop our country, the present lack of inflow is having a direct bearing on our other economic problems and it is setting up a vicious circle. Without sufficient inflow of foreign capital the hon. the Minister is having to follow a deflationary policy to protect our balance of payments. The deflationary policy, in turn, is leading to more unemployment, which in turn is leading to unrest or, at the very best, to the continual threat of unrest. The threat of unrest is leading to further discouragement of the entry of foreign capital into the country.

I believe that the reasons leading to this lack of confidence and to the keeping of foreign capital out of our country are basically twofold in nature. The first set of reasons are economic ones. To restore confidence in foreign investors and in foreign banks we must first reduce the present rate of inflation, because foreign investors do not want to lend their money to a country whose currency is continually becoming worth less and less. Secondly, we must ensure that available funds are applied, as far as possible, to productive purposes which generate further investment funds. Foreign investors want to see growth and we shall only have growth if there is internal generation of funds of that nature. Thirdly, they want to see the Government restricting its own demands on the economy, i.e. its demands through taxation and its demands through the capital market. Unless these three things happen, this country will become less and less economically attractive to invest in.

In order to restore confidence we also need a disciplined management of our finances. The spending spree which took place between mid 1973 and mid 1976 caused damage to the economy and to investment confidence which is something from which we are still suffering.

The second set of reasons for this lack of confidence are the more important ones, i.e. the political reasons. Foreign investors do not believe that the Government is taking the correct steps to ensure the future stability of our country nor that it is taking the correct steps to eliminate the causes of last year’s riots in the townships and in the Coloured areas. Foreign investors do not believe that the correct steps are being taken to satisfy the justifiable aspirations of our non-White population, and in this regard I refer specifically to the urban Africans and to the Coloured people, or to ensure that these people prefer our Western way of life to any other form of living, for example, communism. How can these people, when they are denied opportunities to share in so many of the good things that we have, including sharing in the right to govern, and are treated as second-class citizens? The doubts of foreign investors are undoubtedly reinforced and confirmed by such things as the Press Bill, which was regarded as undemocratic, the eviction of squatters, which was regarded as an inhuman approach to a human problem, and the additional teeth which are being put into the Environment and Planning Act, which will result in increased unemployment. This is just to mention some of the events which have shaken the confidence of foreign investors in our economy during the present session of Parliament alone. There should be no doubt at all that it is Government policies and Government actions which are frightening foreign capital away and that it is the lack of foreign capital which is at the root of our economic problem.

It is not going to restore the confidence of foreign investors, nor will it win friends for our country in foreign lands or win friends for us in the West by merely making fringe changes to Government policy. What is needed is fundamental change. If the hon. members opposite in this House do not understand what is meant by fundamental change, then I recommend that they read, and read very carefully, the joint declaration recently made by my leader and Mr. Theo Gardener … [Interjections.] It contains the exact medicine which our country’s economy needs to heal it. [Interjections.]

Order!

I would now like to come to a more detailed examination of the structure of the budget. I think that it is generally accepted that a budget, inter alia, should be an instrument for regulating the economy. It should act as an accelerator when the economy is going too slowly and it should act as a brake when the economy is moving too fast and is getting too hot. It should help to iron out weak spots and it should help to reinforce strong points. I do not believe that the budget which was presented to this House on 30 March 1977 was in any sense such an instrument except possibly coincidentally. It was not such an instrument because the hon. the Minister started in a strait-jacket. He started between the jaws of a vice and had few options open to him. The budget that we are now discussing is primarily an exercise in finding money to pay for expenditure and it is a struggling exercise at that. This was the whole theme of the hon. the Minister’s budget speech, namely: “Where can I go next for a little more lolly?” The hon. the Minister started his budget construction by cutting the rate of increase of real expenditure by the Government, which was a step in the right direction as I mentioned before the adjournment. But when you examine how the cuts in expenditure were made, you will find that in the main they are, firstly, cuts in capital expenditure which are mostly in the nature of postponements of expenditure rather than real reductions in expenditure. Secondly, they are reductions in subsidies, particularly subsidies affecting food. These reductions were for some unknown reason not even mentioned in the hon. the Minister’s speech. In effect they amount to additional taxes because they are going to lead to higher food prices, such as for bread. They are going to hit the poor sections of the population hardest. Thirdly, the reduction was effected by withholding salary increases for the civil servants. Fourthly, it was effected by an illusory saving under the Customs and Excise Vote because of changed methods of reimbursing neighbouring States with their share of that revenue.

Mr. Speaker, I would have been much happier if this budget had reflected real decreases in administrative expenses, in the running expenses, of the State and if it in fact had reflected a reduction in the scale of operations of the State. I am sure that that could have been done without any hardship to the civil service or any retrenchment in the civil service. I believe that it could have been done merely by not refilling some vacancies in the civil service as they occurred. This is what the private sector is having to do. It is having to reduce its staff. I think that it is high time that the State followed suit in this connection. I think that one can be excused if one is somewhat sceptical as to whether the hon. the Minister is going to be able to keep his actual expenditure anywhere near his budgeted expenditure. Before the adjournment I referred to his record of last year, a record of which he can hardly be proud, when the final expenditure for the year was more than R500 million more than he provided for in his budget speech. I find it difficult to believe that we are not going to have a similar experience this year. Can the civil servants, for instance, be expected to endure yet another year of high and rising inflation without some form of relief?

Mr. Speaker, having set the level of expenditure, the hon. the Minister set out to find sources of finance to pay for it without having to rely too heavily on deficit financing. It is because the existing level of direct taxation is so high, it is because the Government is not able to rely on obtaining any fresh foreign capital and it is because the hon. the Minister appears to be unwilling to test the domestic market on too large a scale, that he has had to rely on seeking altogether new sources of finance. It is a reflection of the crisis of confidence to which I have already referred that he has had to resort to compulsion in borrowing from financial institutions, banks and building societies instead of going into the market voluntarily for his requirements.

Mr. Speaker, I believe that the tax measures in this budget may succeed in one direction and that is that they may succeed in improving the current account of the balance of payments. Any measure such as increased sales taxes, an import surcharge, increased excise duties or the unannounced reduction in food subsidies, any measure which robs the public of spending power as these measure do, helps the current account of the balance of payments because it leaves less available to spend on imports. I believe also that the import surcharge, which is so broad and so drastic that it is almost in the nature of a devaluation of the rand, will also help the current account of the balance of payments by making imports so much more expensive that the demand for them will be reduced.

What, however, is the cost in other directions of these measures? When one takes them in conjunction with the increased excise duty on petrol which was announced in January, with the several increases in the price of electricity announced by Escom and with the increased rail tariffs contained in the Railway budget last month it is clear that we are certainly going to see the price level pushed up, and pushed up very substantially, and that another hard twist is going to be given to the spiral of inflation.

Economic purists may say that because the budget reduces demand it is deflationary in nature. I do not believe that economic purism of that kind has any application in South Africa at present. I believe that if prices increase—the budget will certainly result in that—costs also increase and it becomes a vicious circle throughout the economy. If electricity charges are increased, that leads to higher rail charges which in turn leads to higher coal prices which in turn lead to higher electricity costs and so the vicious circle goes on and on. I do not believe that this circle gets broken through deflationary measures unless those deflationary measures are so severe that they virtually bring the economy to a standstill. The only way in which to break this vicious circle is through increased productivity and one does not get increased productivity easily, if at all, without capital, which brings me back again to the question of the crisis in confidence.

To assess the effect of the budget on the next problem area, that of growth and unemployment, I think one has to balance on the one side the slight stimulus the budget will give through for instance the R43 million extra to be voted to the National Housing Fund, which, I may say, is more than counterbalanced by the commandeering of R120 million from the building societies …

Not at all.

On the same side one also has the stimulus to local industry of the 15% import surcharge, which, obviously, is going to encourage people to buy local rather than imported products; but against these two stimulants the budget takes such large sums of disposable income from the people that it must have a depressing effect. Equally important, I think, is the effect the compulsory raiding of capital from the pension funds and institutions is going to have on growth. Diversion of capital on this scale from the private sector where it could be put to productive use to the less productive public sector must retard growth.

In my judgment, therefore, on balance this budget comes down heavily against growth. It will intensify the depression. It will cause more unemployment, with all that means in terms of danger and unrest.

Mr. Speaker, there is one final point which I should like to make. There has been a great deal of talk so far this session in regard to the inroads which the Government is making into the private enterprise system. Obviously if communism is going to be successfully combated, both internally and externally, we must have a flourishing private enterprise system and all sections of the population must be able to participate in the benefits of that private enterprise system. For that to happen, we must get away from measures which deliberately and compulsorily transfer resources on a large scale from the private sector to the public sector. I therefore condemn, and condemn in the strongest possible terms, the measures to force the financial institutions, the banks and the building societies, to invest in Government loans. Apart from the fact that these measures represent indirect taxation of such people as future pensioners and are therefore discriminatory in nature, I would go so far as to say that the Government has now gone to such lengths in grabbing the assets of the pension funds and the long-term insurers that it is not a long step for them to take to nationalize the industry. This, Mr. Speaker, and I hope he will listen, is no example for the Minister to be setting in the quest for a private enterprise system. Not even the Labour Government in the United Kingdom resorts to raiding the assets of the pension funds or long-term insurance institutions, much as it tends to nationalize other industries. Even the Labour Government in the UK sets its face against doing what this Government is now doing on a larger scale. I say that if the public sector needs capital, and I believe that it has to trim its capital requirements, it must go into the market and pay the market price for its capital. If it does not do that our capital resources in this country get hopelessly misallocated.

To summarize the budget, I would say that there are certain good features about it. There is, for instance, a cut in the rate of increase in real Government expenditure. But as I have indicated, I do not think that that reduction is sufficient and am sceptical whether it is going to be adhered to. The budget has placed emphasis on the need to improve the balance of payment situation and it should do so through the current account of the balance of payments and I hope it will be assisted by a sustained good price for gold. However, it has failed to take steps to improve the capital account of the balance of payments. It does recognize that direct taxation has reached, and probably passed the limits of productivity. It does give modest increases to social and military pensioners and it does—I welcome this—introduce an imaginative defence saving bond scheme. Sir, all these good points about this budget are points which we on this side of the House have been pressing the Government to take for many a long moon.

But I do not believe that this budget is going to solve the country’s economic problems. I say that because, in the first instance, the Government has failed to recognize the key position in our economic problems occupied by the crises of confidence. More important even, the Government does not recognize that the prime causes of this lack of confidence are political and not economic. Secondly, I say this because it carries the country one big step further down the slippery slope towards socialism, and thirdly, because it will intensify the depression and add to unemployment with all the attendant hardships and dangers. Fourthly, I say this because it will give a sharp twist to the spiral of costs and prices.

I therefore move an amendment to the motion now before the House, as follows—

1. (1) to alleviate the crisis of confidence in our economy;
2. (2) to entrench private enterprise as the rallying point for all races against the threat of communism;
3. (3) to encourage economic growth and provide employment for all sections of the population; and
4. (4) to arrest the continual steep increase in the cost of living, which is causing widespread hardship and lower living standards.”.

Finally, I would say in short that while the hon. the Minister may have done a professional operation on the patient’s heart, he has ignored the fact that the patient is also suffering—and suffering more dangerously—from cancer. I said at the outset that the Government must be judged by results, and much as I would like to see better results from this budget than the dismal ones achieved last year, my analysis points in exactly the opposite direction. I have little faith that this budget will do the trick unless the major political changes which I have indicated, are instituted.

Mr. Speaker, I really hope the hon. member for Constantia is not going to cause a crisis in his party again with his “fundamental change” speech. That hon. member and I, and other hon. members, accompanied the hon. the Minister of Economic Affairs on a short parliamentary tour during the recess. I was under the impression that, to a certain extent, the hon. the Minister of Economic Affairs nationalized—if I may use that term—our thinking.

Brain-wash!

I got the impression that the hon. member for Constantia was almost willing to make a speech at a party rally in my constituency. [Interjections.] To tell the truth, the hon. member had already begun to insist that we call him “Dawid” and not “David”. [Interjections.] Consequently I am sorry that he found himself back again in political ignorance and impotence so soon afterwards. It might be due to a measure of political wilfulness.

In his speech the hon. member touched upon various aspects which I shall deal with in the course of my speech. What I found really strange was that he said in his very first accusations against the Government (Hansard, 30 March, col. 4702)—

That was last year’s budget—

The hon. member levelled other accusations as well, accusations which he repeated today. However, the hon. member stopped at that point, and did not tell the rest of the story. If the hon. member had wanted to tell us the whole story in this regard and had wanted to sketch the true state of affairs, he should have gone further. He should not have presented only the sombre side of the picture to this House and the public, but should also have said that the deficit on the current account which was R2 108 million in the second quarter of last year, had decreased in the third quarter to R1 070 million. This is a decrease of 50%, or of 7,5% of the gross national product to 3,7%. The hon. member should also have said that the deficit on the current account, according to seasonally adjusted annual figures, was R2 405 million in the first quarter which had decreased to R693 million by the fourth quarter—a decrease of 8,9% to 2,3% of the GNP. The hon. member should also have said that our exports had risen from R4 122 million in the first quarter to R5 277 million in the third quarter, i.e. an increase of 25%. The hon. member should also have said that our imports had dropped from more than R7 711 million to R7 132 million—11% less than 1975—and that they would drop even further. If the hon. member had borne all these aspects in mind, he would have been able to present the picture to this House in its correct perspective. He did not do so. I want to remind him that there is a legal concept in South Africa which requires one, when giving evidence, to speak the truth, the whole truth and nothing but the truth. Measured against that criterion, the hon. member did not present us with the correct perspective or the correct picture. But I do want to agree with him in one respect—and this is the only respect in which he was correct—and that is that the fiscal authorities have a very unenviable task. They have to contend with a classic fiscal situation, with anomalies which they had to reconcile and with an increase in expenditure, inter alia on defence, while on the other hand there was a slump in revenue, a slow-down in the economy and diminished activity and while there was other revenue we did not have, inter alia non-recurring capital sources such as our drawings from the IMF and the import deposits which were terminated. In addition there was an inertia in respect of internal investments. We are in agreement on this score, except that it is not the case—as the hon. member for Constantia alleged—that there is no longer any confidence in South Africa. Surely he knows that there is total inertia in regard to capital in the world today.

All in all, I think the hon. the Minister presented a brilliant budget. I do not think it can be surpassed as far as its success, equilibrium, objectivity and ingenuity is concerned. He was able to reconcile the irreconcilable. I want to propose that we erect a monument to this hon. Minister, right here in Cape Town. I also want to propose that we remove this ugly statue of General Smuts in the Gardens and erect in its place a statue of the hon. the Minister of Finance … [Interjections.] … and now that Mr. Browne, the Secretary for Finance, is retiring, I want to suggest that we erect a statue of him there, too. I also want to suggest that the inscription on the statues should read as follows: “In honour of Owen Horwood and Gerald Browne, economists both, but brilliant men. God works wonders now and then.”

The budget was condemned by the hon. member for Constantia in a negative way. He said the he could find little good in it. However, let us establish what the Opposition has had to say about the Budget according to Press reports. They—particularly the hon. member for Constantia—speak of “The failure of the Government to relieve any of our fundamental problems;” “Plundering the assets of the financial institutions;” “State socialist budget” and “A very unimaginative budget.” How do the people of South Africa outside this House regard the budget, people who will have to deal with this budget every day of their lives in this coming year? I can quote dozens and dozens of examples, but I am only going to quote a few. The Citizen of 31 March said—

The Sunday Times said—and if the Sunday Times goes this far, there must be something in it—

Mr. Ruben Plumridge of the Chamber of Mines, said—

What did Johan Cloete, who has a position with Barclays Bank and who is an economist of stature in South Africa, have to say? He said—

What did Dr. Wassenaar, the man who is so eagerly quoted by the Opposition, have to say? He said—

Hear, hear!

Hon. members may well say “hear, hear”, for they are constantly quoting this person. If Dr. Wassenaar can praise the Government’s budget in this respect, it must surely be as close to perfect as one can hope to find. Let us also see what the most sensitive body in South Africa has to say about the budget. I am referring to the Johannesburg Stock Exchange. The day after the budget, i.e. 31 March, the Exchange— according to the Daily Dispatch under the headline “Budget lifts spirits on Hollard Street,” had the following to say—

The Cape Times, under the headline “Market rises on budget relief,” had the following to say about it—

That is what is being said in the outside world about the budget. Having listened now to the hon. member for Constantia, and having still to listen to the speakers who are going to speak after him, if we compare their versions with the opinions of the best economists and businessmen in South Africa on the budget, we have to ask ourselves whom we should really believe. Should we accept the verdict of the hon. member for Constantia, the main speaker of a dying UP, the burial of which he may perhaps have to conduct within a month, or should we listen to what the rest of South Africa has to say? [Interjections.] The hon. member for Constantia was critical of the fact that foreign loans are not entering the country. But surely it cannot be a sin to mobilize our own capital resources within reasonable limits, as we are in fact doing. I do not think it is a sin to make an appeal to our financial institutions in this regard. I do not think they will be unreasonable. I do not think it can be considered an impairment of their liquidity. In this regard I want to quote once again what Mr. Cloete of Barclays Bank had to say—

If we read this in conjunction with what the Reserve Bank had to say in its latest report, we see that in fact few banks are still operating at their ceilings. I quote from the report—

Most banks are in fact able to make this contribution by way of liquidity. We know that foreign loans are tight. However, let us not be obsessed with the mortalities we have had in this country. Let us not think that we find ourselves in an impossible situation, not only as far as the financial institutions are concerned, but the private sector as well. If we examine the operating profits of the major companies for this year, we find the following: Anglo-American showed a profit before tax of R108 million as against a profit of R106 million last year; Safmarine showed a profit of R11,2 million as against R10,7 million the previous year—an increase of 11%; the profit of General Mining was R107 million, and of De Beers R308 million, as against R220 million the previous year—an increase of 40%; the profit of S.A. Manganese Amcor was R54 million as against R38 million last year. Moreover, one should consider the money market. When the Johannesburg City Council asked for an amount of R25 million, the loan was over-subscribed, for it received R40 million. This is remarkable and is perhaps attributable to the fact that the NP is now represented on the management committee of the city council. [Interjections.]

There is no tendency towards socialism on the part of the Government. The prescribed requirements in respect of assets are indeed still far higher in other countries than in South Africa.

Since the hon. member also referred to socialism and the public sector, I want to say a few words about our State Corporations. My own view in this regard is that the State Corporations have brought about astronomical development in South Africa and that the corporations have indeed been responsible for the creation of the necessary infrastructure. Therefore it came as a bit of a shock to me when I read in Rapport last week that our top economists, as they put it, had alleged that two new harbours of R1 500 million that had just been completed, were serving no useful purpose, for there was no overseas contracts for ore exports, that the entire ferrous metal industry was allegedly in great danger and that South Africa, the world’s fourth largest exporter of ore, was unable to compete with countries such as Brazil and Australia. Sir, this is not in fact true. Let us have clarity in this regard.

I think the achievements of a corporation such as Iscor have been phenomenal. In the few months it has been exporting ore from Saldanha, it has already earned more than R50 million and has already obtained contracts extending over a period of 7 to 12 years for the export of 130 million tons of ore in an amount of R1 780 million. If one considers the conveyance of coal from Broodsnyersplaas, one finds one train after another being loaded with coal for conveyance to Richards Bay. Consequently it is correct that we should ensure that a part of this budget is channelized in this direction.

I think the Progress displayed even greater temerity in their view of the budget, because they called it a “siege economy budget allowing for little economic growth, escalating inflation and mounting unemployment”, according to a report in the Cape Times. This is a real Dr. Jekyll and Mr. Hyde mentality because they look at the matter as it suits them. I think it is a shameless attempt at political scavenging. The refrain throughout was that there should be a curtailment of Government spending. This was said throughout. However, they know that it would be unwise to stimulate the economy at this juncture. They know that the general consensus is that it cannot be done now. They know what the present position in America is, and that if one were now to introduce an anti-cyclical budget, it could cause one to end up in a very difficult and impossible situation. They know that it would be conducive to and would even promote unemployment in the short term. They know that until we stimulate the economy, there cannot be full employment. They do not want to say this, however, because they want the best of both worlds. They will criticize the stimulating measures as inflationary and the deflationary measures as measures which are counter-productive to growth. They will be the first to lay off workers if they have to work below their capacity because it would mean that they would not be able to buy race horses, as happened recently. This is all part of the economic onslaught on South Africa. This is the kind of mentality of a Zac de Beer, who said—

This was according to the Rand Daily Mail. I also know that the hon. member for Yeoville is very sensitive about that. I know it because he asked a question in that regard.

You must speak the whole truth.

It is the whole truth. The company of which the hon. Dr. Zac de Beer is an executive director makes a profit of R108 million in one year, and this profit is made in South Africa with South African labour and money, and then it uses R20 million of that profit to cover its losses in Zaire.

[Inaudible.]

Yes, the hon. member need not pull a face. One need only read the Anglo American statements for this year and one will find that that R20 million which Anglo American is spending to cover its losses in Zaire, is only a few million rands less than the entire amount which Zaire receives from the United States in the form of aid. This is the amount from South Africa which is being spent there, and then these people still have the temerity to tell us: “It is not safe for private enterprise to invest in South Africa.”

Mr. Speaker, I say that this budget is an imaginative policy package. The real increase in State spending for 1976-’77 was 6%, while the real decrease for 1977-’78 was 4%. In 1976-’77 bank credit was in excess of R700 million, while this year it will be in the region of R300 million. This budget strengthens our balance of payments and stimulates internal manufacture and productivity, as well as our exports. This budget will stimulate foreign confidence. It is a pleasure to support such a budget. We do not need any computer predictions to guarantee the success of the various measures. We cannot give way to the temptation of a temporary stimulation for economic gain and the, in the long term, be saddled with the detrimental consequences of having done so.

Mr. Speaker, this budget indeed testifies to a Government that has the courage and the faith to do what is right because it has the confidence of its people. That is why it is able to do so. An Opposition that no longer enjoys any confidence among the public and which cannot even put up a candidate against the NP in the middle of Johannesburg any more— Westdene is the latest example—-definitely cannot do this. The NP, on the other hand, has the support of its people and that is why it can do this, because it is the correct thing to do. The Progress are the people who know that they are no longer able to defeat the NP at the polls, and therefore they are now seeking other methods. They are seeking methods of anarchy and revolution in this country.

Mr. Speaker, on a point of order: Is it parliamentary to refer to hon. members of this House as people seeking a process for revolution and anarchy?

Order! The hon. member must withdraw that.

I withdraw it, Mr. Speaker. I want to quote what the hon. member for Durban North said in the Daily Dispatch of East London—

He went on to say—

What are they trying to say here? What else are they trying to say here but that other methods should be adopted which will stir up relations between Black and White in South Africa? What does the Sunday Times have to say in this regard? I quote—

With reference to the increased railway rates the following was then said—

So it continues. What are they doing there? Surely they are mobilizing Black and White against the Government of South Africa.

If that should happen, I want to say that they are the people who are trying to achieve these results. They are the people who, on political grounds, are trying to make common cause with others to take action against the National Party and the Government. But if problems arise, they are the people who will flee the country. That is as certain as can be. I want to read what was stated in a survey which appeared in Rapport. I quote—

In spite of their policy, it is stated in the report—this is a survey carried out by Market and Opinion Surveys—

I want to allege that, once they have bedevilled us in this country, they will leave.

Mr. Speaker, the ending of the speech of the hon. member for Ermelo was quite fascinating. It is very interesting to go back into the history of South Africa, because if one does so, one finds that at the time when some of us found it necessary to defend our country, others were looking for excuses not do so. [Interjections.] When the time comes, I wonder whether those people will not find other excuses and leave it to the same people to see that South Africa is defended. The hon. member for Ermelo must just remember that. Let him tell us what he has actually done to defend South Africa and what he will do in a moment of crisis.

The most remarkable thing was the sychophantic exhibition by the hon. member for Ermelo, an exhibition which I think has not had its equal in this House. I always thought that it was the nickname of the hon. member for Constantia that he was the undertaker of the House. But here we have the monumental mason of this House. Avbob No. 2 sits over there. He is the monumental mason, the creator of tombstones, the creator of inscriptions. If he wants an inscription for his Government’s policy in respect of the problems we now have to try to solve in South Africa in the economic field, it will be: “I have spent, I have had to pay and now I have to repent.” That is the message of this budget; that is what goes on.

The hon. member for Ermelo got up and spoke very proudly about the fact that when one gives evidence one has to tell the truth, the whole truth and nothing but the truth. For example, he quoted an economist, Dr. Cloete, and of course the whole truth is what he forgot to read. In the statement that Dr. Cloete made, he said first of all that he did not think that certain of the measures would have much effect. Secondly, he said that he thought the effect would be that the upswing, when it came, would be much shorter. Referring to those “chaps” sitting on those benches, he said—

The hon. member said you must tell the truth, the whole truth and nothing but the truth, but he carefully forgot to read the part of the statement which was adverse to his own Government. That is the truth. Then we get the same story when he speaks about there not being money available overseas. I have taken the trouble to bring here one of the recent issues of the English Financial Times in which there is an analysis done of the Eurobond market. What is remarkable is that the rates are being decreased because there is such a demand to borrow. In fact, I can quote specific examples from this issue of the 4th, but I shall not burden hon. members with the whole of it. There are people who are increasing the size of their issues because there is such a demand for money. There is a list of current Eurobond issues which are being issued and South Africa’s name is not there. Why is South Africa’s name not there.? It is not there because of the NP and not because of South Africa. It is the NP that has created this situation.

If one goes back to this budget specifically, one has to ask three questions. The first is: What will the consequence of this budget be for South Africa? The second is: Why do we find ourselves in this continuing economic recession? The third question is: Are there not better alternatives that can be used as remedies for South Africa to rescue us from the present dilemma than those which the hon. the Minister is seeking to apply? The consequences of this budget are here for all of us to see. First of all, there will be no per capita growth this year. There will be higher unemployment, there will be a further reduction in living standards, there will be higher inflation, not only because of this budget, but also by reason of such Government action as the increase in railway tariffs and the increases in Government administrative expenditure. There will be a further erosion of the savings of our people, of the savings of the community. There will be higher prices for staple products such as bread and maize with the removal of food subsidies—and I must say it somewhat astounded me that one of the hon. members on that side of the House found it necessary to rush into Press and say that he welcomed it. I think it was the hon. member for Bethal.

Then we have the situation that there is an inadequate availability of funds in this budget for the removal of discrimination, which we believe is necessary for a political solution in South Africa. Then, of course, as has already been debated at some length, there is a greater diversion of funds from the private sector to the public sector. Those are the immediate things which will come from this budget.

There are even more far-reaching effects. We need to look at those, and to do that we ask the second question. Why are we in this recession and how do we get out of it? Are we going to continue to be fed the platitudes such as the hon. member for Ermelo sought to feed us today, namely that these problems are cyclical, that the recession in the economies of the major trading partners is one of the major causes, that there is a general shortage of capital overseas—as I have sought to demonstrate is not the case— and that the turning point will come in six months’ time? They say six months, but then it is in another six months’ time and then it is in another six months’ time. All of this is being used to mollify the public and I believe that the authorities do not appear to be getting to grips with the real problem. The revival of the economies of our trading partners and the availability of more money in the Euromarkets is not going to solve our problems. The truth is that we in South Africa are now in a different bail-game. We are in a different ball-game where our best players are not even being allowed into the team when there is a need for that kind of team in this new game, when the bat that is being used in this new ball-game is not even designed for this game in which we have to play and where the ball that is thrown at us can explode if it is not correctly played. The troubles of South Africa will not disappear with the change in cyclical conditions. We only have to look at Africa. We only have to look at the presence of the Cuban forces who are available as a roving army in order to undermine non-communist regimés in Africa. We have to look at the visits of Podgorny and Castro to Africa. We have to look at the situation of the inability to solve the Rhodesian question and the non-acceptability of the Turnhalle solution to even some of the Western States. All of these are facts we have to look at in the reality of the situation and all of these point to long-term defence commitments, long-term effects on our manpower and major economic implications for South Africa as a whole. We need to look at the hardening attitudes of Western Governments, and the non-availability of foreign capital. These are long-term situations. They are not short-term situations which will disappear overnight. The internal situation in South Africa is such that it gives people grounds for concern. We have a no-growth economy, rising unemployment, and non-availability of adequate funds to meet rising expectations. This is not a cyclical situation. This is a structural situation, a structural defect in our economy. The structural problems, whether we like them or not, are political. In the absence of political solutions the economic problems will not be satisfactorily solved. Without solving the economic problems, political problems are almost insoluble.

We can look at the priorities for South Africa, and I do not believe that there is a difference of opinion on these priorities. Firstly, I believe, there is a necessity to maintain stability. This, I believe, is vital to all our people. It is vital, not only to attract short and medium-term overseas capital, but it is vital also to persuade overseas concerns who are here, not only to maintain their presence, but perhaps to expand it here. It is vital too for confidence in business generally. However, above all, it is vital for the survival of the community as a whole. Stability is certainly not an issue in this House. Secondly, there should be a programme of political change to maintain such stability, not change to satisfy demands which are insatiable, but reasonable requirements of the moderate South African, of the reasonable Western power, as understood by non-communist politicians in the West and by the business communities of Europe, of the Americas, of Oceania and of Japan. These two requisites—stability and the need for political change to achieve that stability—I believe, are acceptable to all responsible South Africans. People may differ on the means of how to achieve these objects, but I believe that the objects are the same in each case.

Let us look then at the new ball game that we have to play. The ever-increasing defence expenditure is a reality. A defence budget which has already multiplied by almost 500% in six years will have to continue to increase in the years to come. If defence expenditure is to be increased, there will have to be cut-backs in order to make the money available. Must one then not ask the question whether this will not affect equally other services which must be cut back, services which are equally necessary and desirable with a view to guaranteeing the security of the community? Emotionally and nationally defence expenditure is, of course, desired by all of us in the interests of our survival. However, in economic terms defence expenditure is unproductive and in fact inflationary. An example of what happens to an economy when an abnormal percentage of its national budget is spent on defence, is there for all to see. Perhaps the best example is Israel.

We all know what the inflation situation is in that country, and what the living standards are there. The tragedy is that with this kind of situation, as has been demonstrated in Israel, inflation is not only increased and living standards lowered, but a form of national poverty is created in order to survive. We must also look at the fact that one cannot rely on foreign capital to meet the deficit on the current account of the balance of payments in the future. What is the result? On this occasion we reduce imports, not merely in order to raise revenue, but because of the current account of the balance of payments. That means that we are kept in a state of recession. This is why the economy is not being stimulated so that the absence of foreign loan capital to meet the deficit on current account can in fact be met. This is not, I regret to say, a temporary phenomenon. In the absence of major changes in gold and other commodity prices, this is likely to be a long-term situation. When we bear in mind that only about 25% of our imports are in respect of consumer goods, the restrictions on the imports quite clearly affect the expansion of our industries and the creation of new jobs.

Looking at this new ball game, it is quite clear that we are going to have periods of lower growth for some time to come. The true measure of a nation’s wealth lies in its gross national product and its relationship to the growth in the population. In South Africa we have a population growth of about 3% per annum. Our gross domestic product last year increased according to official statistics by 1,4%, giving us a negative gross domestic product of minus 1,2%. It means that as individuals, on the basis of the gross domestic product, we are all on an average poorer than we were a year ago. On the gross national product, which is the true measure of a nation’s wealth, the position is much worse because there is a per capita negative situation of approximately minus 3,5%. This means that the average person is now 3,5% poorer than he was 12 months ago. There are also other statistics that we must look at. In the year 1974-’75 our public debt grew at a rate of R1,9 million per day. In 1975-’76 it increased by R4,9 million per day. In other words, every single day that South Africa existed last year we got into debt to the tune of almost another R5 million. Our external debt went from R524 million to R1 005 million; it almost doubled. The truth is we had to borrow in order to survive economically.

If we look at the consumer price index, we note that the index went from 88,2 in 1966 to 173 in 1976. In other words, within 10 years the rand became worth 50 cents in purchasing power; it lost half its purchasing power in that period. Even more startling is if we compare incomes with inflation and taxation. These indices will show that if the average income of Whites alone—I am only taking the income of Whites as it has increased over a six-year period—it adapted by the rate of inflation and if we apply to it the taxation which has had to be paid, the real disposable income of the average South African has dropped over a period of six years. That means that over six years, instead of the living standards of the White South Africans rising, instead of them being better off as they continuously have been told in every budget by the Government, the average South African has, in fact become worse off. The higher the income has been, the worse the position has been. One economist has worked out that if you earned R10 000 six years ago, your purchasing power would now be 10% less, taking into account the average increase in salaries that there has been. The truth is that it is not only inflation that has taken its toll but that taxation has also taken an ever-increasing share. The truth is that living standards have dropped under this Government and have dropped under the tenure of this Minister. Unfortunately the truth is that living standards will continue to drop further if the present policies are pursued.

What is the answer? I would like to quote what was said by a man whose name is perhaps not that well known in South Africa. His name is Walther Rathenau, a German politician who was in office at the end of the First World war and also for a while after the war. Seeing what was happening in Germany in 1917, he wrote a book in which he said the following—

How true are those words for South Africa today. When they were uttered, those words met with approval neither from the right of German politics, nor from the left of German politics. They saw in this man, who eventually became Foreign Minister under the Weimar Republic, an opstacle to their totalitarian aspirations and so he died at the hands of an assassin, his message unheaded, with disastrous consequences for Germany, first with inflation, then with Hitler and then with the war.

I regret to say that we are on the brink of a similar disaster, which, if not avoided, can have consequences, which, if really thought about, would give sleepless nights to the whole of South Africa. It is, however, not too late. And I am not a pessimist. There is still time. We need this stability and we can get it. We need orderly and controlled change to ensure survival. We need to cease bluffing ourselves economically, to take a realistic look at the future and to cease living with dreams of grandiose schemes built on the quicksand of borrowed foreign money which may no longer be available in the future.

We need to re-assess the manpower position. More than 200 000 people will need new jobs every year and those jobs have to be created. Yet we have at the moment an under-utilization of existing productive capacity and increasing unemployment. We need to re-assess our ability to finance capital-hungry projects in the light of our new position and we need to concentrate on labour-intensive activities. Domestic savings will have to be mobilized to an increased extent and utilized to the best national advantage. The whole vast bureaucracy of Government needs to be reviewed to determine whether we can afford the continuous increase of Government expenditure, both fixed and consumption expenditure. I do not believe, however, that this is a task which should be approached on a party political basis. The planning of our economy for survival is not a matter in which petty politics should play a part. I believe that White, Black, Afrikaans-speaking, English-speaking, Government and Opposition, should all participate. They are all required to participate. All of those, except those who strive for anarchy and chaos as instruments for the pursuit of their policies, should be able to agree that the economic well-being of our people is common cause, even while political objectives and directions may differ completely. Without economic strength, no one except the anarchist and the communist can in fact succeed in South Africa.

When I say that we must work together on this, I do not call for political mergers or coalitions. Philosophical differences are too wide and policies differ far too widely. Do we differ substantially economically, either in objective philosophy or policy? I believe that we do not. I believe that the businessman and the industrialist, the worker and his leader, do not really differ in respect of the economic objectives, philosophies and directions of South Africa. They are all in favour of free enterprise and they all oppose exploitation. They all have common objectives. When we talk about the threat of State socialism, I believe that so far as South Africa is concerned, free enterprise is going to be under attack from two directions.

On the one hand there is the threat of increasing State socialism and on the other hand we have the far more dangerous threat of Black proletarian socialism which people in South Africa appear to be ignoring at the moment. I believe that the talents of the businessman, the worker and the leadership outside of Parliament need to be utilized. Politicians do not necessarily have all the answers even though some of them pretend sometimes and others pretend most of the time to have the answers. Certainly politicians do not have a monopoly of economic and financial talent in South Africa. What South Africa therefore needs—I stress the words—is an economic coalition, a getting together to plan and to implement policies and strategies for the economic strength and survival of South Africa. My appeal goes out to the hon. the Prime Minister to take the initiative, because only he can take this initiative. He seeks to unify the people and he can do so on economic issues even though politically our people may be divided. I do not believe that there should be or that there are obstacles to unity in the economic field. The talents of our people, whether in or out of Parliament, can be brought together for the common good. Our own influence in the Opposition benches, with business, with industry, with overseas institutions, with moderate politicians overseas and with the Black community is not without significance. A start could be made during this session of Parliament and I believe the hon. the Prime Minister should take the initiative on this issue during this session of Parliament by appointing a parliamentary committee for the economy in order to formulate the plans and, if necessary, the legislation, for a broader economic coalition for the survival of South Africa.

To turn to some of the more specific budget proposals, the tax on imports which has been imposed is causing some degree of confusion particularly because of the exclusion of certain items as a result of the General Agreement on Tariffs, which has caused abnormalities and illogicalities. In so far as the export industry is concerned, very serious problems exist, because it appears that the effect of what the hon. the Minister seeks to do, is to remove the rebate on imported articles which are destined for export once again. I hope the hon. the Minister will give an assurance at the end of this debate, if not earlier, that the intention is not to deprive exporters of this rebate in respect of goods which they need for manufacture in South Africa. The effect this is going to have on the consumer is not only the 15% which the hon. the Minister mentioned and not only the R400 million which he anticipates raising from this. If we add to this the profits of the importers, the profits of the distributors, and the cost of financing, the consumer is not likely to pay 15% more, but at least 30% more. Instead of R400 million being taken from the consumer, some R800 million will probably be taken from the consumer with all the inflationary consequences.

I should like again to mention briefly the food subsidies because I think the hon. the Minister owes the House an explanation as to why he did not deem it necessary to draw attention to the issue during his budget speech. In regard to the higher prescribed asset requirements I should like to draw the hon. the Minister’s attention to the fact that this makes pension funds far less inflation proof. In fact, it means that the ordinary pensioner is now putting 55% of his money almost directly into gilt-edged stocks. This is an enforced lending and it again increases the Government’s share of the economy. The Government’s share of the economy as well as its share of the GDP, for example, continues to increase. Last year’s figures indicate that private business increased its contribution to the GDP by 10,73%. The general Government public corporations and the Railways increased their contribution to the GDP by 14,12%, which means that the contribution of the public sector to the GDP grew 31,59% more than the growth of the private sector. If that is not encroaching of the State to a greater extent than we have ever had, I do not know what it is.

In regard to the subject of defence bonds, we originally suggested defence bonds and we still support and welcome them in their modified form at the present moment. The whole argument about the legality or illegality of the issue is, to my mind, irrelevant. If Parliament wants to approve of a defence bond with a premium content, it becomes law and that is it. In our view it should become law and it should be approved. The hon. the Minister should not allow himself to be subjected to influences, because if he does allow this to happen, it will have very serious repercussions in South Africa, particularly in so far as the Defence Force is concerned.

What is significant is that this was actually the idea of the Defence Force. The people in the Defence Force suggested it. Not only that, but I think it is almost unique in the history of the world that an army applies its mind to the question of the raising of the money for defence as has been done in South Africa. I want to pay a tribute to the Defence Force for taking that approach on this subject, and in particular to Gen. Webster, who has taken a lead in this. I think South Africa should say thank you to these men. I do not believe that this academic argument which is going on at the moment should be allowed to continue. I think it is an insult to the Defence Force and the people who have taken this initiative. Some of the people should follow the example of applying their minds to the question of raising money for defence as these people have done. They have to carry the guns and now have to raise money to be able to carry them. That is an example that some of the people who criticize may well bear in mind.

I would like to touch upon Black and White taxation. I regret that we have not had the report of this committee. There is continued discrimination against Black people in the lower-income group. They pay a higher taxation than Whites. I believe that that is iniquitous and must be done away with at the earliest opportunity.

Lastly, I would briefly like to indicate some of the other things that should be done. We believe that it is wrong to assume that the only way to fight inflation is with recession. The hon. the Minister should have stimulated labour-intensive, export-orientated businesses and he should have given an allowance for the use of additional labour in the same way as an initial allowance or investment allowances are given for machinery. That would have been a positive step. As far as housing is concerned, we believe that it is undesirable that the State becomes the main agent for housing. One will find more and more of the middle class having to use State housing. There should be encouragement for flat building by, for example, granting depreciation allowances because the returns given to owners are unrealistic and one cannot increase rents because the tenants cannot afford to pay. We have not done enough to attract overseas capital, and I believe we should create a tax haven situation in South Africa. There should be no withholding tax for five years on new equity issues for approved public companies in order to attract this kind of capital. There should also be a tax concession for foreign controlled companies who do not have to pay UPT if they do not declare dividends, in the form, for example, of a 10% credit on company tax if they keep their money in South Africa instead of paying dividends which go out of the country. [Time expired.]

Mr. Speaker, the hon. member for Yeoville is quite an amazing man. He always champions the rights of the so-called lesser privileged people. He professes to be one of the big liberals in this House.

I never said that I am a liberal.

It is quite amazing that these champions of the underprivileged and the liberals are sometimes the most intolerable people that one can imagine.

Intolerable or intolerant?

They are indeed very intolerant. I refer to the period during the late fourties and early fifties when I was chairman of the Afrikaanse Studentebond at Wits University. This hon. member, this champion of champions, was then a member of the SRC. In fact, I think he was the chairman. Do you know, Sir, that during that period the Afrikaanse Studentebond was never allowed on the campus of this university? That was during the time when this hon. member was a member of the SRC. I leave that there and will refer to certain matters raised by the hon. member during the course of my speech on financial questions.

Mr. Speaker, we are living in a world where it has become commonplace to assume that Governments can manipulate economies in an unlimited way through monetary and fiscal measures by way of the annual budgets. This is true only to a limited extent. The soundness of an economy in a free enterprise society depends largely on the quality of its people. Apart from the merits of the soundness of business, one also finds a very strong emotional factor which can determine economic tendencies. It is common knowledge that even the Stock Exchange often reacts more strongly to emotional than to true economic factors. The Government has very little control over emotional situations, especially where the Opposition is concerned. Furthermore, the Government has only a relative control over the economic tendencies of the private sector. The Government has from time to time re-emphasized its faith in the role played by private enterprise in this country. After all, private enterprise constitutes the basic economic life. It is the source from which the Government derives its income in a free society like the one we have in South Africa. The budget before us must therefore not only be seen as a tool by which the State collects its income, but also as a tool to manipulate certain adverse economic tendencies, within reasonable limits. This must be done without interfering in the initiative of the individual and of private enterprise, and only to a limited extent, because the State has only relative control over the economy.

Let us therefore look at the measures which the hon. the Minister of Finance has taken to achieve this objective. We must first of all look at State expenditure. We are a developing country and it is certainly not easy to cut down on State expenditure in view of the terrific demand on the State to provide an infrastructure and services, especially social services. These services cannot be readily supplied by private enterprise. It must in the circumstances be seen as a phenomenal achievement on the part of the hon. the Minister of Finance to have kept State expenditure relatively low, in spite of the terrific burden of a considerably increased defence budget. Not taking the defence budget into account, State expenditure has increased by only 5,1%. Taking the inflation rate, which stands at double figures, spending has in actual terms been decreased. However, it is still imperative that during the ensuing year Government departments should make a special effort to not overshoot the mark set by their respective appropriations. In the past it has at times happened that appropriations were overshot by up to 16%. In the present circumstances this would not be justified. Except for the drawing of R148 million from the Stabilization Account, a process which is regarded as being of an inflationary nature, the money supply has very wisely been kept low. In point of fact this drawing is the only aspect of the budget which may be regarded as inflationary. Although the 15% import surcharge is said to be inflationary, it is certainly not so. It will give great impetus to our own industrial development. In any case, the net new money is the only determining factor as far as inflationary spending is concerned, and not shifts in spending patterns.

Government spending, in absolute terms, has indeed been reduced. This in point of fact enhances the scope of the free enterprise system to which we are committed and which we recently so vigorously re-emphasized in the House by way of a motion. However, I must warn that, although it is indeed very necessary at the moment that Government spending be curbed to the maximum for the sake of controlling inflation and limiting the money supply, the Government also has a responsibility because, once the balance of payments has been stabilized and inflation is contained within reasonable limits, the Government is obliged to create growth for the purpose of providing job opportunities and for the general upliftment of the living standards in South Africa. The whole issue is therefore in a very delicate balance, a balance which, indeed, the hon. the Minister of Finance has so admirably achieved in this budget. The limiting of the money supply is therefore not the only consideration. Nor is inflation the only consideration. In any case, we must always bear in mind that the present inflation in South Africa, also has some other very important etiologies in view of the fact that we are also dealing here with a cost-push factor of considerable extent. The incentive will now be created for industry to reduce expenditure, especially with regard to the handling and disposal of imported goods. They will have to curb expenditure as far as this is concerned. Furthermore, the excessive unused capacity in industry will have to be utilized. In that regard I do not agree with the hon. member for Yeoville, or the hon. member for Constantia, who also mentioned it, that the only way to get higher productivity is by providing more capital. We have in South Africa considerable unused capacity in industry.

Who said that?

I beg your pardon: It was the hon. member for Constantia who said that. In fact, it would place our industry in a better competing position and I am sure they would be able to offer goods to the public at lower prices if they were to do this. The budget is a challenge to the private sector to show what can be done to reaffirm its place in the economy of a free enterprise society such as we have. We must face this challenge together if we seriously want to get South Africa through this economic trough.

Sir, the hon. member for Constantia stated that he was concerned about the lack of confidence in South Africa, especially the lack of foreign confidence in South Africa. Does he not realize that one of the main reasons for the lack of confidence—if there is a real lack of confidence overseas—concerns political considerations? What do they want? They will only be satisfied with a majority Government in South Africa and a Black majority Government at that. But the Government is not prepared to give in to the Western World on that score. They want majority rule in this country; that is the only thing that will satisfy them. I ask the hon. member for Yeoville: Is he prepared to give in on that? The inflow of foreign capital into this country is still considerable and I do not believe that confidence is really shaken to the extent suggested this afternoon. It has been said that our savings have been tapped by the Government on an unprecedented scale. This may be true to a certain extent, but in the present world political climate we shall have to learn to create our own capital for our security in the future. In any case, we could not have continued to be so reliant on foreign capital as we have been in the past. This makes us extremely vulnerable to economic and political pressures. In any event, the world capital market is in short supply. Although the hon. member for Yeoville has denied it, I have evidence here from the president of Armco, a very big steel company in Middletown, USA. When he visited Newcastle recently he told me that they were unable to raise the amount of capital they required for further developments, not even in America. In any event, the world capital market is subject to considerable demands in view of the economic growth rate which has been increased in the recent past. We shall simply have to meet most of the capital requirements ourselves. We cannot carry on as we have in the past. It was also mentioned this afternoon that as far as the corporations were concerned—Escom was mentioned— tariffs were increased considerably during the last year. These measures were taken for the simple reason to create our own capital, because it has become most essential in this country for us to survive.

I also wish to sound a word of warning to the Western World. They must no longer take South Africa for granted. We cannot go on indefinitely to ignore the hostility of certain Western countries in spite of the fact that we are the bastion in Africa against communism and that we were traditionally pro-Western. Have we not suffered enough insults in spite of all the good we do to uplift the people in this country by spending more than double the amount of money that the United Nations have spent over many years in over 40 countries? The less fortunate people in South Africa are being well looked after by this Government and by this budget. We may have to look to the East as we are looking to Africa, where we belong. We may have to look again to certain communist countries, and if it becomes a matter of our survival we shall have to do that. The Western World should not take us for granted any longer. We are fighting for our survival. The time has come that we should seriously consider sending trade commissions to certain communist and socialist countries of the world. In point of fact. I have good reason to believe that we have already made contact in that direction to a limited extent. As it is, we are trading with Mozambique. We have the use of Maputo harbour and we draw electricity from Cabora Bassa and South West Africa draws electricity from Calueque. I say we must not only become less dependent on the Western World, but as far as our capital and trade requirements are concerned, we must, if necessary, forcibly create our own capital. We can do so. Our economy is basically strong enough to do just that. The Western World must also not ignore the fact that in South Africa we have vast resources of basic materials, in materials which are not readily available from sources other than the Soviet Union. I am referring to basic minerals, without even taking into account the fact that we are the biggest supplier of gold and that we shall be supplying more than 30% of enriched uranium in the world in the near future. The vast inherent wealth of our country should also be politically exploited.

I am no pessimist. I foresee a great political and economic future for our country, if that was what the hon. member for Constantia meant when he questioned our confidence in the future. This budget exhibits a vision of faith in the future. With restraint during difficult economic conditions, with optimism and the belief that we will overcome our present difficulties, we have nothing to fear. The present economic recession can be overcome, provided we shake off the atmosphere of gloom which is so evident this afternoon on the part of the Opposition. This is an attitude which is absolutely lethal to our economy and to the future of our country. We believe in the future of this country. The Secretary for Finance was recently reported as saying that the present budget was the most difficult during the 17 years of his being in his present office. He, however, gives credit to the hon. the Minister of Finance for managing so ruthlessly to curb State expenditure and spending and for making it possible without undue increases in taxation. This is a good budget, a budget which creates confidence.

Mr. Speaker, the hon. member for Newcastle said private enterprise was being accepted by the Government. He has also expressed the desire that we should not remain so entirely dependent on our Western contacts and that, in his own words, the Government should negotiate with Eastern communist countries and other supplying countries.

I believe that we should see the budget speech of the hon. the Minister of Finance against the background of the hon. the Prime Minister’s new year’s address to the nation, an address in which he indicated most sombrely that South Africa today stands alone, without overseas friends and without promises of support by the powerful Western nations. We should see the budget address by the hon. the Minister of Finance against the fact that the détente endeavours of the hon. the Prime Minister have now failed completely … [Interjections.] … and that the hon. the Prime Minister’s give-me-six-months-only-speech is now one of history which is rapidly forgotten. Then, I believe, we must see the budget of the hon. the Minister of Finance against the background of the present deep recession which South Africa is experiencing. I also believe we must realize that in South Africa today there is intense economic distress. We only have to look at the motor industry which has gone into a deep recession and to recall that in the year 1960 the motor industry was built up—during the years of confidence—by this Government as being the catalyst which was to bring about economic growth and prosperity in our country. Today there is unemployment; there is over-capacity; sales are falling and people themselves can no longer afford to invest in a motorcar.

There is recession also in the building industry, where tens of thousands of construction and building workers are unemployed. That is indeed a frightening concept. There is recession in the construction industry itself. There is recession in the property industry. The banks themselves have come under pressure and we are really experiencing conditions in which many South Africans are sharing an increasing concern. But above all, we must recognize that astride Southern Africa, from the Indian Ocean in the east to the Atlantic Ocean, there is the colossus of Russian communism with the little Sir Echo of the Cuban presence throwing its shadow across, not only our economic, but also our political lives. We must realize that today our sea routes are threatened while an American general, Gen. Zumwalt, has indicated that we must accept that we cannot rely on American protection and that we must accept the fact that we cannot defend our own sea board and sea routes. We see in South Africa not a sense of gloom, but a sense of realism. We on this side of the House may show gloom in that we cannot understand the inability of the Government to react to the realities of today’s economic life, but in South Africa there is a growing sense of utter and complete isolation and a growing sense that we are moving like in a Greek tragedy into a situation of confrontation to which there is no solution. We do not want to be pessimists, but when our own Army Chiefs of Staff have indicated that we must put our country on a total war strategy and must mobilize our economy on a total strategy basis, then we query the levity with which the budget presented by the hon. the Minister of Finance is being regarded on the benches opposite. It is perhaps a pity that this debate should have been shelved during the parliamentary Easter recess while almost every pseudo and professional expert has passed comment on the budget in the Press and in all economic, commercial and industrial spheres. But one thing remains patently clear. While the hon. the Minister may well have produced a professional budget, a budget in which he must have been ably assisted by the Secretary for Finance, and although it may be a competent budget, it is nevertheless a budget of a Minister who has run into an economic cul-de-sac. The hon. the Minister’s options were closed, and the only options open to the Government today are political options.

If you would allow me, Sir, I would also like to have the opportunity of paying tribute to the Secretary for Finance. He too was at my school and my college and we went through the same economic tuition together. However, I must say one thing; he has always showed an excellent sense of timing. I believe that his decision to retire from his high office has been timed to perfection. I would hate to be in the shoes of his successor in preparing the next budget when we have on record in Hansard that the hon. the Minister realizes that he can no longer increase income tax to higher levels because it may then become counter-productive and that he has instead to resort the defence bonds of the type suggested and to other measures of milking the private sector in order to raise funds. As regards the last two years the hon. the Minister of Finance cannot be said to have been a fortunate Minister, and if the country looks to successful and lucky Ministers as it looks in time of war to successful and lucky generals, then there is no doubt that the hon. the Minister is in for a thin time, because in the years that lie ahead he will have to squeeze the barrel, and here we come against the hard fact, that we are a country whose troups are on our borders defending our country’s security while we have no certainty of internal security and internal harmony. I believe the hon. the Minister was amiss in not having told the country more about the pressures that we are facing. We must except that a country must be economically strong if it is to be strong in its own defence and if it is to be politically strong. In fact, if we are to preserve our way of living in Southern Africa, we must be economically strong. At this moment in time, when economic strength is a priority, we are economically in our worst position since the 1929 depression. So we face a drive for funds in order to equip our men at the front with the necessary arms and ammunition so vital to our security, at a time when our economy has gone into a recession and is showing no growth whatsoever.

In the Economic Development Plan of the Prime Minister, which covers the years 1974 to 1979, we note that the office of the Economic Adviser to the Prime Minister arrived at the conclusion that there has been a rate of growth of 6,4% per annum over the period 1973 to 1979, which amounts to a continuation of the rate of 5,5% with 1969 as the base year. The Economic Advisory Council has recommended that this rate be set as a target for growth rate for the period 1974 to 1979 and also that the Government accepts the recommendations of the council and, as in the past, will endeavour to the best of its ability to create a climate which will be necessary for this target growth rate.

In the past two years our rate has been so low that if we are to maintain an average growth rate over any successive period of five years, the position is almost intolerable, particularly at a time when we have some 100 000 Africans entering the labour market and when even the White initiative which has entered the homelands is creating an opportunity of jobs for only some 9 000 Blacks per annum at a total job opportunity cost of some R10 000 per individual per annum. One then realizes that our economy is really only just ticking over and that whatever we do, unless we can get on top of inflation and re-inspire the private sector to get into top gear, we shall face nothing but economic disaster in the years that lie ahead.

This brings me to the topic mentioned by my hon. friend, the member for Newcastle, when he proudly stated that the Government had restated its upholding of and belief in private initiative and in a free, competitive economy. That debate is a matter of past history and is on record in Hansard. I want, however, to refer to no less an authority than Prof. Robert Tusenius of the business school of the department of economics of the University of Stellenbosch, who has questioned the extent to which we as White South Africans are really operating on the basis of a private initiative and free enterprise economy.

He went further than that. He did not only question it, but also said that we cannot.

Prof. Robert Tusenius has indicated that our premises are false, for the simple reason that in this country we have some 25 million people of whom eight million are potentially viable economic units. What we ignore is the fact that in the homelands and in the case of the urban African we must never overlook the fact that there is no such thing as a private homeland economy. There is no such thing as a private Transkeian or KwaZulu economy. The economy of the black homelands and the economy of the urban native are entirely integrated into the economy of South Africa as a whole. There is in fact only one economy in this southern sub-continent of ours and that is the South African economy.

When we ask ourselves whether we who believe in a free enterprise and a free competitive system have allowed the African the benefits of our free competitive enterprise, we come to a sudden stop. Does the House realize that we shall never have less Africans living in the urban centres than we have today? Does the House realize that by the year 1980 their purchasing power will be R5 000 million as against a purchasing power of the Europeans, Indians and Coloureds in the region of R10 000 million and that by the year 1990 the purchasing power of the Africans will be R20 000 million and the purchasing power of the White sector R20 000 million? There is no person who has less economic freedom than the urban Africans, because of the regulations and of the statutory laws which we as Whites have written into our Constitution and into our legal system, so that the urban African and his counterpart in the homelands has no economic freedom of movement, no economic freedom to acquire property, capital or capital goods without bumping up against the State restrictions. What this country is facing is an alternate between Marxism and the Western way of living. We concede that for the Whites in South Africa the Western way of living and the Western way of free enterprise has been the complete answer. If we have regard for the future of our children and for their children and if we have regard for the safety of our own future, we must realize that we are playing with figures which are tremendously worrying. If we are going to double our population by the year 2000 the Whites will be dramatically outnumbered. One thing is certain, i.e. that in future politics there will be sharing of power and that we shall never again speak as White South Africans about the destiny of the total South Africa with any extend of security. We have run into opposition from our friends in the Western world, and we should not suggest that the Americans are interfering into our affairs, or that our German business friends are desirous of interfering with our national affairs, or the French, the Danes, the Dutch or the British. We have been told by our closest trading partners that we have no hope of securing further assistance from the Western world unless we radically change our political approach towards our country’s problems.

Again it boils down to the concept, the image of apartheid. We in this country know what our problems are and people who are living amongst us know what our problems are. However, one thing we do not recognize is the fact that the world expects us not to make cosmetic changes, but to change our economy so that the apartheid concept of statutory discrimination against sectors of our people on the grounds of colour and race alone, are completely eliminated, not merely cosmetically or in the sense of petty apartheid, but in the economic sense. Prof. Tusenius has indicated that the moment of truth has come, and we have no reason to disabuse ourselves of his economic prowess. He has indicated that the time has come for us to remove apartheid measures and discriminatory measures from the Statute Book and that we should back up Ambassador Pik Botha in his declaration to the United Nations.

We are in a phase today where we are all ready to accept change. We have seen in the city of Cape Town during recent days that we can live together as a South African people and that we do not have to be so entirely colour conscious that we have to throw up our hands in horror at the concept of a White working alongside a non-White. We have seen that on our borders the men who are defending us are becoming a terribly thin White line across Black Africa, and if we are going to give the economic support to our men on the borders, we have to realize that the militarily available White South Africans, our sons and our daughters, cannot be expected to hold the line of our entire border very much longer. We have seen that there is an acute shortage of labour, and yet only recently we saw that the director of the Association of Chambers of Commerce has said that it is perhaps fortunate, in this period of unemployment, that the hon. the Minister of Defence is contemplating extending the period of service for White lads to two years. This is a tragic admission that the economy has reached such a stage that we can no longer give profitable occupation to our White youths.

I remember only too well that in a debate on a previous budget the hon. the Prime Minister indicated that in South Africa every person who wanted to work would find a job. The unemployment which is hitting the economy at the moment, can be ascribed largely to our own inability to make the optimum use of the available capital resources and manpower. It is significant to note that in Israel, a country which is in a beleaguered economic situation comparable with our own, a 70% increase in economic productivity was achieved between the years 1966 to 1975. In industry the output per worker increased by 80% and in agriculture, by a remarkable 140%. This was done at a time when our economy was moving into stagnation.

A message that perhaps will offer hope to the hon. the Minister of Finance in the year that lies ahead, is that the economic cake in South Africa could be so much larger. The mood of the people is changing and they are insisting that it becomes larger. No longer are Whites prepared to become economically poorer by 1%, 2% or 3% per annum when they realize that they do not have to get poorer. No longer are the Coloureds and Africans content to remain poor in a country which is so richly endowed with all that we need in order to be the strong economic country, which we should be with our resources of iron ore, minerals, diamonds and precious metals such as gold. The hon. the Minister of Finance must recognize that if in future he is to avoid running into an economic cul-de-sac, he must at all costs move, with the Cabinet, towards economic change which we are ready for. He has shown an adaptability to innovation for which I congratulate him. We have seen his concept of defence bonds, what has been termed a lottery. I would like to put the record straight for those persons who are concerned with what a lottery is, because this is, in fact, a lottery. I commend the hon. the Prime Minister and his Cabinet in having gone along with the hon. the Minister of Defence in accepting it. The English Oxford Dictionary defines a lottery very simple as “an arrangement for the distribution of prizes by chance amongst purchasers of tickets”. There is not one word here about whether one stands to lose all or gain all. Then in a mood of levity it goes on to say—

Therefore we are all involved in lotteries, whether we like it or not.

I think you are a lottery in the UP.

That is a winner.

Coming closer to the budget’s recommendations, I want to ask the hon. the Minister of Finance in his reply to go a little bit more deeply into his new concept of a varied sales tax. I do this merely academically. I say immediately that we on this side of the House go along with the variations introduced. I must say in all honesty that we are not supported by the S.A. Federated Chamber of Industries. However, if we go back to the year in which the sales tax were originally introduced as an indirect tax, the hon. the Minister will recall that it was at the recommendation of the Franzsen Commission, who looked at the various forms of taxes which were being introduced in European countries, countries who felt the need to acquire larger funds in order to finance increasing Government activity. At that time he decided that the most economic tax would be the tax that we know now. Now he has a committee within his department, a committee that has decided in its wisdom against our suggestion that married women should not be taxed on the basis they are taxed now. The same committee has made the recommendation that we should alter this tax to become a universal turnover tax.

I want to ask the hon. the Minister whether he is prepared to make the argument upon which these recommendations are based available to this House, as he did in the case of the recommendations concerning the taxation of married women. I want to ask him further whether, at the time of making this second change, he did not think that he should go the whole road and move to the value-added tax. It is not that we are asking for it, but I want to refer the House to a most revealing article on this matter. An economic specialist of the University of Cape Town, Trevor Thomas, wrote a most revealing and informative article on this under the title: “The value-added tax and the cost of change”. He shows that it was the French who first discovered this tax and implemented it. Eventually all European countries had, to their cost, gone through the three stages and finally landed up with the value-added tax as being the most logical ultimate solution. I would ask the hon. the Minister to give to this House some idea of the cost to the Treasury of the change-over to the new form of taxation and also how much the bureaucratic machine would be added to by way of staff. He will admit that the points at which tax will now be collected will be at least four times the number of points at which they are collected at the moment. This has been an argument of the Association of Chambers of Commerce, namely that you will have higher costs and greater bureaucracy. We wonder whether in the final analysis we will not be left not only with the new turnover tax, but also with some facets of the original tax in special instances, so that we will have in fact duplicate taxation.

To sum up I want to say that I support entirely the amendment of the hon. member for Constantia. I believe those who are really concerned about the economic future of this country and about our political and military security will realize that at this moment in time it does not matter where we sit in this House. This is not a matter of Sap against Nat, but a matter of the survival of the White man in South Africa. We have to take the situation of our economy into far greater account. If we are to survive we will have to make the necessary adaptations to the political machine, adaptations which will allow the economic machine freedom of movement and freedom to develop into the sort of machine that will bring prosperity to all South Africans regardless of race, colour or creed.

Mr. Speaker, after I had listened to the hon. member for Cape Town Gardens and, earlier this afternoon, to the hon. member for Constantia, it became very clear to me that the Opposition was grasping at a straw, the straw of apartheid being the great scapegoat for everything that is wrong in this country. The hon. member for Cape Town Gardens said that we were fragmenting the economy of South Africa and not viewing it as a whole. He tried to imply that we were not looking after the Black and the Brown peoples of South Africa. This is surely not true. Surely the fact of the matter is that no other Government in the world has done as much for the under-developed, be it in the past or in the present, as this particular Government has. This is, after all, an irrefutable fact, one which the Opposition cannot escape.

But I shall tell you what the Opposition is doing. The Opposition realize—they have realized it too late, however—that they can never bring this Government to a fall, or hardly even embarrass it, via the normal political avenues. Now are they seizing upon a difficult economic situation and trying to score political points from it. Sir, I was a little concerned to read in the latest edition of the Suid-Afrika Stigting Nuus—

This newspaper went on to report as follows—

I wonder whether or not this report is correct. Who are these “friends in South Africa” who now want to use American companies to put pressure on the Government in the economic field and by so doing to bring the NP and the Government to a fall? I believe that if the hon. members opposite chose to be honest, they could tell us who these so-called friends were.

It is Waddell.

I believe they are able to tell us who these friends are, and I trust that one of them will soon tell us in his speech who these friends are.

To my mind the motive in the preparation of the budget we are at present discussing—in this regard I differ completely from the hon. member for Constantia—was very clearly not merely one of finding the income necessary for financing the State’s expenditure. That was what the hon. member for Constantia said, but I differ with him on that score. It was very clear to me that the hon. the Minister’s motive was to prepare a budget that would take account of the country’s economic conditions. Furthermore, his motive was to draft a budget that would suit the unique composition of the South African national economy. That was his motive and for that reason I want to say that it is a very good budget, for it complies with this demand. There is no country like South Africa. It is a country committed to determining its own future and to developing a unique political policy which will work in this country to the benefit of all its people. This unique policy cannot be copied elsewhere. It has to be developed here, by the people of this country, into an object of pride for every South African. Likewise, South Africa demands a unique economic policy as a consequence of the unique circumstances in this country. What should such a policy look like? One could certainly attach many conditions to such a policy, but in my opinion, such a policy would in the first place have to be founded on the proven economic principles of the free capitalist system. Hon. members will not differ with me on that point. Furthermore, such a unique policy for this country must provide for a balance between the role of the State and that of the private sector. Hon. members will not differ with me on that point either. Moreover such a unique policy must allow the factors of production to move and be brought together freely, so that we can produce. In such a policy materials, capital, labour, enterprise, must be able to co-operate freely. Then, in the national interest, such a policy must provide for resources to be controlled and allocated in the best way. This is very important. In addition, the policy must guarantee social security for every member of the population. The country’s military preparedness must be developed to the maximum. As far as possible, South Africa must be made independent of foreign capital.

The budget the hon. the Minister has introduced, and which we are now discussing, is one which complies with these requirements. It is a patriotic budget and I believe it is for this very reason that it has been so well received by the public. The hon. member for Ermelo quoted many newspaper reports this afternoon in which this budget is praised. Not one of the members opposite has yet stood up and been able to demonstrate to us the negative side. In fact, they are in the distressing position that the Press does not even want to play along with them this time. It was a good budget because it was a patriotic budget. It has been accepted as a patriotic budget. It is a long time since there was so little criticism of a budget as there has been of this one. In no organization can great things happen without great effort. This was certainly true in this case as well. For that reason, I think the Minister and his department deserve the gratitude of all of us and of the country. This budget could become the beginning of a unique economic structure, if it is accepted with patriotism. Personal gain must be tempered by an attitude of: What is in the interest of South Africa? Many years ago. Lord Keynes said—

That is the trouble with the Opposition. The way they think about South Africa is maladjusted. Their thinking is maladjusted and that is why they are sitting in those benches today. One is grateful for the large measure of responsibility amongst many of our leading businessmen and our economists in the private sector. In a speech made in June last year, Mr. R. S. Lawrence, president of the South African Chamber of Mines, said—and this is a patriotic view—

He went on to say—and the hon. member for Johannesburg North would do well to listen carefully—

This is indeed a responsible view. It is much more responsible than the view manifested here today by hon. members on the opposite side of the House. He went on to express his appreciation—I am referring to the chairman of the Chamber of Mines—to the hon. the Minister, in saying—

Mr. Speaker, this was an extremely responsible statement. The Afrikaanse Handels-instituut is also fully aware of the problems the Government has to contend with, as well as of the way things are being dealt with by the Government, and especially by the hon. the Minister of Finance. No one is trying to deny that South Africa has monetary problems. However, to allege that the political policy of the Government alone is responsible for this is, to say the least, completely absurd. It is just as far-fetched to think that a change in the political order in South Africa would solve the country’s economic problems. On the contrary, anything like that could aggravate them. Or at least that is how I see it. The present economic problems are completely analogous to the problems the West as a whole is experiencing. The greatest dilemma is that probably for the first time in history, we, as well as the West, are experiencing the simultaneous occurrence of phenomena that normally appear in the upswing phase of a business cycle and phenomena that are normally present in the downswing phase of a business cycle. This is the problem we have to contend with. It is not only we who have to contend with that problem, however. The whole Western world is wrestling with the same problem.

This situation is what makes remedial measures so extremely difficult. That is why one must have a special understanding of the budget introduced by the hon. the Minister of Finance this year. Measures normally encountered in a downswing phase of a business cycle—measures to combat the tendency to save and to develop investment opportunities, for example—would, in the present situation, promote those undesirable symptoms, such as inflation, which belong in the upswing phase of the business cycle. The best solution would be the one that was pointed out in such a striking way by Mr. Albert Marais, president of the AHI. He said—

This is, to a large extent, what we need in our economy. Specifically, we must allow the system to sweat out certain undesirable symptoms.

Without being pessimistic or alarmist, I nevertheless want to state that certain things still have to occur in the South African economy before we can expect a real upswing. This is true. Certain things will have to happen. I am of the opinion that we are suffering from an inflation fighting psychosis as a result of which the strength of consumer resistance in South Africa is being weakened. This is a terribly important thing. The variety of consumers as we find them in South Africa, expect their incomes to be adjusted from time to time to compensate for rising prices, or inflation, so that the so-called pressure of inflation may be staved off. It is a psychological situation that exists among the consumers and this is important because it creates problems. It is something we shall have to get out of our system. This inflation fighting psychosis exists in our agricultural sector as well. To a large extent, our agriculturalists have a tendency to accept price increases quite resignedly. Why? Because in the case of controlled products such as wheat—and I believe it is the same in the case of maize—there is a controlled price with which the farmer’s cost structure is bound up. Consequently, the farmer does not worry so much about the price of fertilizer, for example, and he does not build up a resistance in this regard, because he will be compensated for cost increases in the price he subsequently obtains for his produce.

More or less. [Interjections.]

No consumer resistance is built up, as ought to happen. This weak consumer resistance works back cumulatively to the suppliers and manufacturers of production instruments, lowers the elasticity of demand and inevitably results in lower productivity and unnecessarily high prices. This tendency is something we shall have to get out of our system sooner or later.

Another very important symptom in our economic system is the question of low productivity. We have a tremendous potential for increasing productivity. If one looks at the statistics of the National Institute for Productivity, one sees that the motor repair industry had a productivity improvement potential of 55% in 1975, the clothing industry one of 51%, and the furniture industry on of 56%.

In this regard, we, and particularly the consumer public, will have to learn the difference between price and value. In other words, we shall have to learn the difference between what we can pay and what we can afford. Time does not permit me to do so, but I could mention even more phenomena that we have to debar from our economy. We shall have to do this in a patriotic spirit, however. We shall have to do so with the attitude that there are certain things that are more important than others. We must not begin to suffer from a pessimistic psychosis. The indications are that we have a fine economic future. If one only looks at this short report which appeared in Rapport last Sunday, in which it was said that prosperity was on the way and in which the estimated statistics of the Institute for Econometrics of the University of Pretoria were tabled, and if one reads the excellent arguments that were advanced, one feels that we need not be pessimistic and that we may go ahead.

Mr. Speaker, I have listened intently to the hon. member for Malmesbury. He has informed us that this budget produced by the hon. the Minister possesses various contradictory qualities. He said—and I agree with him—that the budget was unique because it was designed to deal with a unique situation peculiar to South Africa. The hon. member cannot, however, get away by saying at the same time, when he refers to some of the other weaknesses in the economic situation and some of the factors with which the hon. the Minister was unable to deal, that these are part of a typical situation applicable to the entire world. So, on the one hand we are dealing with a unique situation peculiar only to South Africa, while on the other hand, when we deal with other things which are perhaps incurable or typical of our time, we are dealing with a typical budget and a situation which is typical of the whole world and for which we cannot be blamed. The situation can thus be unique and typical or general at one and the same time. The same is true of our state of health. We are told that our economy is in a very sound state of health. The hon. member for Malmesbury is convinced of it. He then went on in the most patriotic manner and said that for us to criticize was unpatriotic, but that for him to criticize is patriotic. He spoke about the various “siekteverskynsels” in our economy. We are healthy, but we are suffering from a terrible fever; we are in extremely good shape, but we have to sweat out the “siekteverskynsels” in our system. Broadly speaking, the budget is all things to all who wish to make of it what suits them best. We leave the hon. member for Malmesbury with his concept of the budget.

At the outset I said that the hon. the Minister has in fact had to deal with a very special kind of situation and I think that tribute has rightly been paid to him and his department for a skilful exercise in extricating themselves from what in fact was an extraordinarily difficult situation. If one looks at the general trends of the economy and the finances of South Africa, one finds a number of things occurring which are really indicative of a very sorrowful state of affairs. The real GDP of South Africa rose by only 1,4% in 1976. For a country with the commitments, increasing obligations and defence difficulties which it has, an increase of only 1,4% in the real GDP is near disastrous. When we look at the gross national product, taking into account the foreign commitments as well, we find that we have had a negative growth rate in the real national product for the second consecutive year. If we look at our real GDP per capita, which is really the most realistic measure one can apply if one wants to determine whether a country and its people are going up or down and whether they are getting richer or poorer, we find that in South Africa we went down by 1,2% in 1976. If we go on like this, we will be well on our way to joining the Third World. This is a country in which one used to look to the future with boundless optimism. Because of our natural resources and the promise for the future we believed that we could not only maintain a high standard of prosperity in this country, but that we would also increasingly be able to meet the rising expectations of that part of our population which has not yet enjoyed the high standards of living to which all South Africans aspire.

We do not get any hand-outs or aid like the Third World. We do without it.

That is perfectly true, but we should be in a position to hand out our own aid and to make our own progress without the kind of hand-outs to which the hon. the Minister refers. In the course of this year we have had a decrease of R633 million in the net inflow of long-term foreign capital. There has been an increase of R435 million in the net outflow of short-term capital and there has been a massive decline of R900 million in private fixed investment. There has been a serious decline in South Africa’s reserves. I do not know what the latest figures are, but a week or so ago I think the reserve figure was less than R700 million. This is an alarming situation and it becomes even more alarming when we look at our net reserve position. In the last place one must also state in all fairness that despite our hopes and despite the contributions and the efforts made by the private sector and by the Government there has been no really convincing evidence of an improvement in the anti-inflation situation. We saw a slight improvement towards the end of last year, and we were buoyed up with hope that at last a break-through was beginning. The first two months of this year, however, have tended to disillusion us. It appears that we have not yet got the problem licked. Therefore by and large I say to the hon. the Minister that he has earned praise only for a virtuoso performance in holding the budget together in extremely difficult circumstances. It is rather like a man riding a bicycle on a high wire. The audience applauds because he does not fall into the safety net. We continue to face a situation which demands more than mere virtuosity. We have to get down to the basics of the problem; we have to find a remedy for the very serious situation in which South Africa finds itself in this time.

Let us first consider the economic effects of this budget. The hon. the Minister set himself fairly limited targets in so far as the economic consequences of his budget are concerned. It is fair to say that by virtue of severe pruning, severe efforts, encouragement of exports and pruning of imports we have certainly effected an improvement in the balance of payments position on current account. This must be seen as a credit in our finances. It has, however, been achieved by fiscal and monetary policies which, though beneficial in the respects which I have mentioned, have had other adverse effects for which we shall still have to pay. We shall have to pay in the future because we have achieved this improvement in our balance of payments position on current account by a hold-back in consumer spending. A hold-back in consumer spending will seek its own compensation in the future. People are prepared to hold back when conditions are difficult, but there are certain satisfactions which they seek and certain satisfactions to which they feel their work and productivity entitle them and they will be looking for an opportunity as soon as possible to satisfy those deferred pleasures which have been put aside for the time being. At the present time South Africa suffers from a situation of very low inventories. When one is in fact trying to redress a balance of payments situation, one can refrain from restocking one’s inventories and one can run one’s inventories down, but the time comes when one has to restock one’s inventories, at higher prices. Therefore while one achieves a temporary advantage during hard times, it does not at all mean that by running down one’s inventories one has solved the problem because one will have to restock and one will have to meet the cost of that on the balance of payments account. We have run into a period of low investment which once again is something for which we shall have to pay in the future. We have suffered from a deferred development of the superstructure. We have praised the hon. the Minister for holding back on some of the capital expenditure which was contemplated.

However, the cost will of course have to be met in the future because deferred infrastructure will have its effects on our future productivity. All these things will build up an unsatisfied demand for imports and our ability to export will be reduced. Therefore, while a temporary advantage has been achieved, we cannot count this as a remedy which will resolve the problem for the future. One cannot improve one’s balance of payments merely by applying restrictive policies. Sooner or later one has to meet the future costs of those restrictive policies. One gets nothing for nothing in this business of balancing one’s balance of trade. One can only achieve lasting benefit by greater efficiency and greater effort and by the creation of conditions in which these can best be achieved. The defects in the balance of payments can of course be read very clearly on the Capital Account. When we look at our Capital Account we see the grievous damage that is being done to our economy. This kind of damage, the cessation of imports of capital, is one which cannot be remedied, in any event not directly, by fiscal or monetary measures. These things depend on another kind of climate and on another kind of situation. Our ability to restore the capital market in South Africa depends on confidence and the image we present to the external investor. I will come back to the question of our external Capital Account.

As far as the combating of inflation is concerned—and this is one of the hon. the Minister’s objectives—the figures are not yet convincing. One says this with regret because we have constantly over the years drawn attention to the highly erosive effects of inflation on our economy. It is therefore a matter for great regret that despite the genuine efforts made by the Government, we have not yet succeeded in solving this problem. We have used restrictions on credit and we have held back wage increases. All these things may have been expected to create a lower demand. We would have expected that the consumer price index in the first months of 1977 would have confirmed the hopeful trends towards the end of the previous year. Unfortunately it did not do so, which seems to indicate to me that, for the time being anyway, we cannot assume that this serious problem has been solved.

Let us look briefly at the budgetary effects of the measures introduced by the hon. the Minister. We find that there was a deficit in the 1976-’77 budget amounting to R1 544 million on revenue as against expenditure and this had to be financed in various ways. This was done in part by the borrowing of R576 million in foreign loans. That was last year. That kind of remedy is no longer available to us in the current year. It is this which fills us with a certain feeling of gloom and pessimism as to the manner in which we will succeed in holding the line on the increasing demands on our budgetary resources in the present year and the year that will follow. When one looks at the loan figures one finds that the amount which will be borrowed from normal sources amounts to something like R1 000 million. At the same time our commitments in the repayment of loans amount to something like R990 million. In other words, the mounting foreign indebtedness of the Government in the borrowing of money from abroad at high rates of interest in difficult market conditions is such that the cost of servicing and redeeming these loans is reaching the order of R1 000 million per annum. This weighs very heavily on the economy of the country and it weighs very heavily on the hon. the Minister of Finance, who has got to construct a budget, knowing that he has this built-in disability before he starts.

The hon. the Minister has referred to the need to take bold, strong measures. The first of these was a reduction in State expenditure. As I have already stated, I believe that the hon. the Minister deserves credit, for it is clear that he has cut back drastically into the contemplated departmental programmes of his colleagues. Furthermore, in respect of the cutting back of State expenditure, we must commend his statement in regard to public corporations. His strong discouragement of the tendency of public corporations to go overseas for loans from dubious sources on loan conditions which need the most strict examination in order to carry out projects which in some cases really need most careful re-examination, is to be commended.

We welcome the appointment of an interdepartmental committee to look into the nature of some of the expenditure by the State corporations, and in particular the allocation of priorities as between State corporations, each of which appears to be bent on its own empire-building projects. They go abroad, seeking independently to procure the money with which to develop their own empires. I have in mind, as a particular example, Iscor. Over the years I personally have been extremely critical of what I regarded as the inopportune development of the Sishen-Saldanha scheme. Another option was available. It would have been very much cheaper and it was favoured by the main overseas customers of our iron ore. The capital costs would have been far lower than in the case of Saldanha, and while I am in favour of the development of Saldanha when its turn comes and South Africa can afford it and the need is sufficient, we could have met that particular need for the export of iron ore more quickly, more efficiently, more cheaply and with a far smaller capital burden having to be placed on the country. This information has been refused to us in Parliament on various occasions, but the information officer of Iscor has now indicated what contracts have actually been signed by Iscor for the export of ore to foreign buyers. The quantities are exactly of the order which we predicted. The amount of iron ore being exported will be of the order of about 10 million tons per year. We knew three years ago that this was the size of the available market for iron ore. The export of iron ore by Iscor to overseas countries and overseas buyers is now approaching the order of about 10 million tons. The revenue, the foreign earnings from these exports, will be of the order of R100 million per year. That figure, the export earnings, will continue at roughly that level for the next seven or eight years. That level of export earnings, R100 million per year, is roughly equivalent to the cost of borrowing the money, the capital, that was necessary to finance this scheme. It is true that not all the money for the Sishen-Saldanha scheme was borrowed abroad, but the money which was obtained locally nevertheless had to be replaced by foreign borrowings. You do not get anything for nothing in this world. When you make use of a local source, if there is an insufficient quantity in total, it has got to be replaced from outside. So the cost really amounts to the cost of foreign loans to the South African economy as a whole. I believe that not only in this present year, but in succeeding years, the amount of foreign currency earned by this scheme will be roughly equivalent to the cost of servicing the loans that were needed to put this scheme into operation. This is a most extraordinary kind of business. If this had been our only alternative or possibility, then one might have been able to live with it, but all through the piece we knew there was a better, cheaper and a preferred alternative. This is the kind of disorder allocation of priorities to which we refer. We therefore welcome the hon. the Minister’s statement that there will in fact be a stricter allocation of priorities and a stricter examination of the kind of project to which I have referred.

Another object which the hon. the Minister had in mind was that in the special circumstances which now prevail in South Africa, he wished to divert a greater part of the country’s capital resources to the public sector.

We have constantly set our face against the diversion of the capital resources, particularly the private capital resources of this country, to the public sector. This is a form of socialization which the Government denies in principle but constantly applies in practice. The hon. the Minister has pointed out by way of qualification that in the special circumstances which now prevail he has had to do this. But it seems that over the years special circumstances have always prevailed and have always compelled us in the direction of greater socialism and away from the better direction of broader private enterprise. I agree with Assocom in their comments on this. The hon. member for Malmesbury was prolific with quotations. Let me in turn quote this responsible organization. According to a report I have here—

Staggered is Assocom and staggered are we. I quote further—

The third objective of the hon. the Minister was that it was desirable to make it more attractive for the public to invest savings directly with the State. This, again, is presumably in respect of the unique situation in which we find ourselves. We have in South Africa at the moment what is known as a reverse yield gap. It is more profitable now to invest money with the State than it is to buy shares on the Stock Exchange. We have reached the situation now where money is in fact being diverted away from the private investment market and where it is easier for people to put their money in Government stocks and to feed the State capital account rather than to employ their money freely on the development of private industry in this country. This reverse yield gap may be very satisfactory to the State at a time when it is in fact having to raise large sums of money, but the consequences, the effects of this, will yet be felt.

I shall come in a moment to the hon. the Minister’s views on the cyclical trend, viz. the upward trend in the trade cycle. When one talks of an upward trend in the trade cycle, when one counts on that trend, when one expects it to take place in the near future, one has to bear certain things in mind: One has to bear in mind whether investment is going to the right places in order to ensure that, when the circumstances are propitious, there will in fact be an upward trend in the trade cycle.

The hon. the Minister has also referred to the revenue duty of 15% on imports. It is true that the hon. the Minister has attempted as far as possible to ensure that his budget will not be an inflationary budget, or at least, that it will not add to the inflationary trend. I believe that this measure can however be singled out as one which is indeed inflationary. However, I believe that its impact will be less wide than might be anticipated.

Sir, I should like to return now to the balance of payments on capital account. Both the hon. member for Constantia and I in the course of my speech have emphasized the disastrous nature of the decline in foreign investments. The decline in our balance of trade on capital account is bad enough. It is bad enough that on current account we have been able to reduce only partially the large gap which exists. On capital account it is worse. However, when we look at the net figures on capital account, we find that the situation really is approaching disastrous proportions. The problem is fundamentally a political one. One cannot build up a capital deficiency of this nature through economic measures—not in the special circumstances in which South Africa is placed at the present time. I believe we have to go to fundamentals. I believe we have to look into the mind of the foreign investor to discover why he no longer regards the high returns available in South Africa as being adequate to justify the provision of loans to South Africa and to encourage private investment in South Africa. We should nevertheless look at the possibilities. The climate is bad.

I believe that the hon. the Minister would be well advised to consider, or at least to investigate, a further possibility. For example, would it not be worth re-examining the whole question of the blocked rand? I would agree that in the present political and economic climate we cannot expose our economy to the withdrawal of large amounts of foreign capital now invested in South Africa, but in the next year or two we face the bleak prospect of probably getting no investment money from abroad at all. Would it not be a possibility worth examining that in respect of new investments—not historic investments, but new investments in South Africa—the money coming from abroad should in fact not be blocked, but should have the encouragement of being able to come in and leave at the desire of the investor? This sounds like here say because we have been going on with the blocked rand account for so long, but if we have to choose between having no investment at all or the possibility of investment by people who would place their money and possibly withdraw it, at least we would have the benefit of a greater degree of investment, albeit not necessarily stable investment, where in fact we might not have had any at all. I believe that this is a possibility which in the present circumstances, with the present shortage of foreign capital, the present drying-up of foreign investment, should be examined. I repeat that this applies not to historic investments which already exist—I do not believe the economy could stand it—but certainly to new investments if those are the only conditions by which new investments can be attracted to South Africa.

I come now to the question of the hon. the Minister’s cyclical expectations. Basically I suppose one could say that the hon. the Minister’s difficulties arise from our defence commitments. Had it not been for our very high defence commitments the budget would not have been quite such a difficult one to put together. I think all of us in this House agree that the strength of our defence, the potential for defence in South Africa, the ability to put together a strong defence, depends essentially upon the strength of our economy. A defence capacity can in the medium to long term be no stronger than the capacity of the economy itself. One might over a very short term put together a defence capacity greater than the economy. By concentrating one’s resources at a particular point of time, one can achieve a defence capability greater than is actually reflected or supported by the economy. But over the medium to long term this is not possible, because these things have got to be paid for. They have to be paid for in manpower, in resources and in hard cash. Where the hon. the Minister then faces this problem with no real let-up in his defence commitments, I do not believe that anyone can see an immediate prospect, or a prospect within the next number of years, of our being able to reduce our defence commitment. It is far more likely in the prevailing circumstances and the prevailing economic climate that our defence commitments will escalate. How are we to meet these rising costs? I believe that the hon. the Minister, if he is looking for a cyclical phenomenon, may well be disappointed. He has pointed out in his speech that the expected upturn is already delayed. For various reasons there has been a time lag. [Time expired.]

Mr. Speaker, I have been listening very attentively to the hon. member for Von Brandis—with some difficulty, I must add. I also listened very attentively to the hon. member for Malmesbury. Let us imagine for a moment that they are two doctors examining a sick patient, and that this sick patient is the South African economy. The hon. member for Malmesbury said the patient was healthy, but was somewhat feverish. A fever is caused by many things. One may overeat or eat the wrong things, and in that case one will run a fever. The hon. doctor for Malmesbury found the patient to be healthy and told him: “My good friend, this is what is wrong with you. You must sweat out that fever. Then you will recover and be strong once again.” I also listened to the hon. doctor for Von Brandis and he mentioned a whole series of ailments from which the poor patient was suffering. He diagnosed one disease after the other. He told the patient: “My good friend, these are all the diseases from which you are suffering. You are definitely going to die” [Interjections.] However, the hon. the Minister of Finance was dealing with the same patient in drawing up the budget. The hon. member for Von Brandis praised the thorough way in which the specialist, the hon. the Minister of Finance, was keeping alive the patient who was temporarily unwell, and was keeping him in a condition which was allowing him to do his job. This is the difference between that side of the House and this side. The experts are on this side. The quacks are on that side. That is the difference. [Interjections.]

The hon. member for Von Brandis referred to Saldanha and made a fuss about it. It does not surprise me that it was only the third speaker on the Opposition side who eventually came to Saldanha. The hon. member for Constantia and the hon. member for Cape Town Gardens had the privilege of paying Saldanha a visit in person to see what was really happening there. I do not think that they, if they want to be honest, can criticize the Saldanha Bay scheme because the majesty and the comprehensiveness of the scheme, the thoroughness of the whole scheme, impressed us one and all, including the Opposition. That is why the criticism came from the hon. member for Von Brandis, a person who has not yet seen the scheme himself. However, I believe that he will also go and look at it one day and that he will believe then. The hon. member also predicted that the export of ore would not exceed the mark of R10 million a year within the next seven or eight years. I hope the hon. member will remain in this House long enough to swallow his words. This will probably still happen within the foreseeable future.

Mr. Speaker, other hon. members mentioned confidence. I should just like to read a paragraph or so from an editorial which was published in the Pretoria newspaper Hoofstad. The heading is “Vertroue in die Toekoms.” It reads as follows—

Therefore if one tests that statement against the realities and on the basis of the estimates as recorded in the White Book, and, on the other hand, if one takes the cognizance of the sources from which revenue is derived— examines the sources of revenue—one notices that the tax on income is expected to yield R4 182 million. Now let us see where this comes from. Personal tax will account for an amount of R2 006 million. Company tax, excluding the mining industry, will provide R1 651 million. The gold mines will make a contribution of R424 million, other mines R65 million, diamond mines R40 million, while interest on overdue taxes will amount to R6 million. Therefore we see that direct tax comes from various sources. The spread is even, as is mentioned in the aforementioned editorial in Hoofstad.

If we look at customs and excise, we find that cigarettes and cigarette tobacco will provide R234,2 million. I think the hon. the Minister is hitting us smokers rather hard. Spirits will provide an amount of R225,2 million. I think the hon. the Minister ought treat these two things alike. Petrol and petroleum products are expected to yield an amount of R194,65 million, while the tax on beer will amount to R157,4 million and that on wine to R28,6 million.

Is that too little?

The hon. member for Worcester asks whether the latter tax should be higher. The tax on pipe tobacco and cigars will amount to R21,41 million, and the tax on motor cars to R17,1 million, while the tax on mineral water will amount to R11,18 million. I could continue in this vein. Therefore, Hoofstad is quite correct in saying that everyone ought to make his contribution. Therefore when one criticizes the Government of the day, criticism should not be levelled at what has happened this year. One must take note of where these things come from. One must consider the entire past or a part of it. If we take a look at the gross domestic product and compare the position at the end of 1976 with that at the end of 1966—this is a period of ten years—we find that the contributions made by agriculture, forestry and fishing came to 7,5% in 1976, as against a contribution of 10,3% in 1966. Therefore there was a decrease of approximately 2%. This decrease is possibly due to climatological conditions. In 1976 the mining and quarrying industries made a contribution of 12,5% and in 1966 the figure was the same. The manufacturing industry made a contribution of 24,8% in 1976 as against a contribution of 23,1% in 1966. In other words, there was an increase in the contribution of factories to the gross domestic product. The electricity, gas and water industries made a contribution of 2,8% in 1976 and of 2,4% in 1966. We know that very heavy demands are being made, on Escom in particular, as regards the supply of power, and specifically as a result of the increasing activities, especially the refining of metals, something which makes heavy demands on power consumption. The contribution of the construction industry—i.e. the contractors— to the gross domestic product, was 4,6% in 1976, while it was only 4% in 1966. Hon. members will agree with me that 1966 was a particularly good year. When we look at the wholesale and retail trade and at the catering and accommodation industries, we find that there was a slight decrease of 1% in their contribution. In 1966 it was 14,4% and in 1976 13,4%. The contribution of transport, storage and communication was 9,2% in 1976 and 10 years before it was 9,3%. Financing, insurance, real estate and business services contributed 13,9% in 1976 and 11,6% in 1966. Community, social and personal services contributed 1,8% last year, while ten years previously the contribution was 1,8%. It can be seen that, over a period of 10 years, the percentage contributed by each sector to the gross domestic product, has changed very little. This is the kind of stability to which the hon. members of the Opposition referred and of which they simply dream. This is the kind of stability which the National Government has provided over the past ten years.

Opposition members also complained about the increasing activities of the State. The general government’s contribution to the gross domestic product was 10,3% in 1976 and 8,9% in 1966. Over a period of ten years this contribution increased not even by 2%. The increase is due to the heavy demands made on the public sector to create all sorts of infrastructures for these very business undertakings, so that they may be able to make their contribution. When we look at the contribution of the business undertakings, we see that it was 86,3% in 1976 as against a contribution of 87,6% in 1966. This is a decrease of only 0,7%.

One also heard about the confidence which there should be. I want to give a few examples of confidence. These come from my own constituency and although I do not want to mention any names, I have the evidence in this regard. I want to refer to three businesses in my constituency. One of them is actually a person whom I visit regularly and this year he had only one complaint about the Government. I must say that this particular friend of mine is kosher. He said he had only one complaint against steps taken by Government, and that was that he would like to go to a cinema on a Sunday. Apart from this he was unable to find fault with anything else, and he is a very big investor and financier in South Africa. He also said that a time of depression, like the present, was the very time when we must invest, because if we invested at the present time, we could make bigger profits later on because we were buying bargains at the present time. This is the time to invest. He has the confidence to invest. Another entrepreneur erected a factory of R4,5 million in less than a year. The financing for this as well as for some heavy equipment which they had to buy at approximately R1 million, was obtained from Britain. The terms of payment was a deposit of 10% with the balance being payable over a period of five years at a rate of interest of 6%. These people, however, have confidence in their country and they can also convey the confidence to foreign investors.

Firm number two made major extensions to its factory. They purchased heavy machinery in Germany. The terms of payment were a deposit of 10% and the balance payable over a period of three years at a rate of interest of 8%. These people, however, are not prophets of doom. They have utmost faith in their economic, as well as the political prosperity and progress and the future of South Africa. That is why these people are able to enter into contracts much to their own advantage as well as to that of South Africa. They reflect confidence in their country.

I can mention other entrepreneurs who, at this present difficult stage, in this bad economic situation, earned $2 million in foreign capital in America over the past year by exporting steel products. This is not raw steel, but manufactured steel products which they could sell competitively in America, in Texas of all places. However, these are people who have a positive approach, who tackle the matter positively and have the greatest confidence in their country. We need that type of entrepreneur in South Africa above all.

What do we unfortunately find in the ranks of the Opposition? We hear a dirge about the problems of South Africa. We hear from each one of them how sick the economy of South Africa is and that South Africa has no political future. As one hon. member said, if we did not share power, South Africa would be done for in any event. If we were to send the whole Opposition abroad in order to raise capital for investment in South Africa, I wonder whether they would come back with a single cent, because, after all, they have no confidence in South Africa. The reason for this is that they have no confidence in themselves, because since 1948, when this waggon of ours first became a motor-car and then a jet aircraft piloted by the National Government in the best, finest way, their old jalopy of that time has become a donkey cart. Now the donkey is dead, and this is why no constructive criticism of the budget is forthcoming from their side. It does not surprise me that the South African electorate has gradually been rejecting them more and more at the ballot-box. This will happen to them again in the future. They say that the hon. the Minister of Finance is hoping for miracles, but they are the ones who are hoping for miracles. However, I do not think there is any miracle in the world which can save that Opposition. We have an exception in this small Opposition which has just seen the light of day.

Mr. Speaker, it is particularly pleasant for me to be able to speak immediately after the hon. member who has just resumed his seat. It was also very pleasant to listen to what the various speakers of the Opposition had to say in regard to the budget. It was not only interesting to listen to them in this debate but it was also interesting to be able to follow what they had to say in recent years in budget debates. This afternoon I want to quote a few statements which they made in the past in regard to problems and the budget as they see it, and the solutions which they have to offer.

To get things into perspective, it is also necessary for us to examine them. In the past the Opposition in South Africa has often said that we should outgrow our problems. They see our salvation in the fact that South Africa should have an immoderate and rapid growth and thereby solve the problems with which it is confronted. At one time they compared us with Japan and wanted us to maintain a growth rate of 10% a year. At that stage it was not remotely possible, but that was the solution which the UP as opposition put forward. They claimed for themselves the title of those belonging to the growth school, and said that we on the Government side belonged to the damping school. They alleged that we wanted to put a damper on the South African economy.

[Inaudible.]

The hon. member for Yeoville says that we have actually done it and that he believes in a growth school and he wants the country to outgrow its problems …

I still believe that.

The hon. member still believes it. The Opposition take strong exception to our bending the economy to give effect to our ideology. We are always being accused that we want to behind the economy too far. It has been suggested that we should rather bend our ideology to suit the economy of South Africa.

[Inaudible.]

The hon. member for Yeoville is sitting there mumbling all the while I am speaking. The hon. member has had a chance to speak. It seems to me the hon. member would like a second chance, because he is seemingly dissatisfied with what he said in the past. We are accused of not making the correct use of the labour potential of South Africa and of not allowing a man to sell his labour on the best market. These are some of the accusations which come from the ranks of the Opposition. Later the State was accused of spending too much money. This was at a time when South Africa’s economy was such that in the interests of further growth and development we had to expand the country’s infrastructure so that we could be prepared for further growth. That was when the accusation was made that the State was spending too much money.

You went about it rather crudely.

The hon. member for Maitland says that we went about it rather crudely, but I shall come back to that statement later. [Interjections.] It seems that the hon. member for Pinelands does not believe me, and to satisfy him I shall discuss the matter immediately. There was a stage when we had to do certain things and could not neglect to do others. There were certain expenses involved in certain items by means of which we had to establish an infrastructure in the country. If we had waited at that time, they would have cost far more today. That is why we established an infrastructure in the country at that time. It was still relatively cheap then, and we knew it would cost far more later because of the rise in costs.

The State is also accused of interfering with private enterprise. And so over the years there have been many accusations, and today we still have accusations against this side of the House in regard to our handling of the economy of South Africa. I said on a previous occasion in a budget debate that it is very easy for the Opposition, under the regime of a strong NP Government which has brought stability to the country and which has developed the country as no other previous government, to come forward year after year with ad hoc accusations against the Government in connection with what it has done to develop South Africa. It is very easy to make accusations of this nature which have no substance and which are not in accord with the actual facts and the realities of the situation in South Africa. If there is one thing which the NP Government has shown consistently over the years it is that it has a fixed pattern in terms of which it acts, that is has a policy in regard to its economy, that it has a policy in regard to human relations, that it has a policy in respect of all long term matters which it wants to implement, and when one has to do with matters of importance, one cannot rule the country from day to day by means of ad hoc decisions.

They wanted the White Paper in regard to the Coloureds the day after the report had been tabled. But this is not a matter the Government was prepared to give a final decision on within 24 hours. One cannot just make decisions without proper consultation in regard to this very important report which submitted 178 important recommendations. The recommendations were made by a commission consisting of various people and it is impossible for one to give such decisions within 24 hours. I think the Government acted responsibly. There is the White Paper. There was first a provisional one and today the detailed White Paper has been tabled. The hon. members can look at this White Paper and then they can attack and criticize the Government. That is how the Government operates. We consider a matter properly, and then we put our standpoint on it, in black and white, as we have done, and then the Opposition can react.

I want to mention a few matters here which were raised in the Press. One of our critics. Dr. Wassenaar, according to the Press, said that inflation was our worst enemy and that the budget was not inflationary. As opposed to that, the standpoint of the hon. member for Yeoville is that the budget is inflationary.

Do you agree with that?

No, I do not agree with that, and Dr. Wassenaar does not agree with it either. Dr. Wassenaar said, secondly, when speaking at a seminar of the National Development and Management Foundation, that it was time South Africa took its medicine. I agree with him wholeheartedly on that point, although I do not agree with him on many other points. I think it is true that South Africa is at the stage where it must take the medicine which is good for it. I think that the Government, through the steps taken in the budget in the interests of South Africa, may perhaps be going to give us medicine which may not be so palatable but medicine which will eventually be the solution to our problems. Hon. members on the other side always want to have their cake and eat it. They look only for the easy solutions. It is very easy to sit in the ranks of the Opposition and suggest solutions for which one has to accept no responsibility and to expect other people of discernment and with a knowledge of the situation, and who have a realistic approach to matters, to accept these instant solutions of theirs without question. Dr. Wassenaar says further that the budget is so austere that it will restore the confidence of overseas’ bankers in the country’s ability to discipline itself on a financial level.

Mr. Speaker, you and hon. members on both sides of the House are aware that we were able to obtain a large amount from the International Monetary Fund last year. This was an achievement for South Africa because that money is not just doled out right and left. A thorough investigation of the country’s financial position is made and then, on the basis of the management of the country, a decision is taken as to whether it is entitled to a loan. South Africa passed that test with flying colours. Here we have someone who recently criticized us saying that the budget will create confidence abroad because it will show one and all that we have the ability to put our financial affairs in order.

What does he say about the price of bread?

The hon. member can go and read what he had to say about the price of bread. [Interjections.]

Order! There is a circle of hon. members around the hon. member who are making too many interjections.

Yes, Mr. Speaker, it is like a choir, but the notes are false. If one wants to be honest in regard to South Africa, oneself and one’s party, the first question one must ask oneself is …

What about the Opposition?

Yes, the Opposition as well! One must ask oneself why South Africa is in the position of having to provide for such a large deficit. We have here what is in fact a classic fiscal situation, because we are living in a phase or period in which our income is growing more slowly than our expenditure. That is our problem in the first place. The reason for this is that we are faced with changing circumstances in the world. We must take account of the fact that the world has been in a recession since 1973. During the past decade in this country we have not experienced the circumstances of 1932 and 1933. We experienced a situation in which we could show a reasonably large annual growth rate, where money was plentiful and where we all enjoyed the advantages which flowed from this. However, today we have a changed world situation where there is a world recession. The sooner our people realize this the better it will be for all of us. The sooner the Opposition realizes this the better it will be for them. As a result of the recession we are experiencing lower economic activity domestically. We were confronted with the fact that the price of gold dropped, that we had to pay much more for oil and that we had enormous expenditure in regard to defence. These matters had nothing to do with the policy of the NP. The hon. member for Yeoville said just now that confidence in South Africa had been shaken as a result of the policy of the NP.

That is correct.

That is not correct. If that were so, I make so bold as to say that the world and the shapers of world opinion are suffering from delayed action, because the NP has been carrying out this policy for the past 30 years. Then I would ask: What about other countries who are also in a situation of recession? So that is a statement which is not true. The hon. member should be ashamed of himself making such a statement.

Another very important factor is that we in Southern Africa are faced with a political situation in which our enemies, those people not well-disposed towards us, were of the opinion that after Mozambique and Angola had fallen, Rhodesia, South West Africa and eventually South Africa would be dealt with. They simply want to draw a line and suggest that the logical outcome will be that South Africa like some of our neighbours will also be a victim. Those of us who support the Government, we who have built up this country over the past 30 years with the greatest confidence, love and respect, know that that is not so. We believe that we have a calling and a function to fulfil in regard to all who live with us, the non-Whites and the Opposition included, in spite of the fact that very often they “try for Black” or “try for Brown” …

Other people are trying for White.

Yes, sometimes they try for White, too, most of the time they try for Black.

*We have confidence in South Africa and in the future of our country. If one examines the Opposition’s arguments, one realizes what the situation would have been in South Africa if we had had a Government not oriented as is the NP Government. Then we would perhaps have had a government which would have taken ad hoc decisions and whose members would have fallen over one another in times of difficulty. Those of us sitting on the Government side have confidence in the future. We want a correct evaluation of the causes which gave rise to the recession situation, the problems with which we have to cope in that regard—it is not a crisis as the Opposition suggests—and we want to take the correct steps to solve the problem.

Last year we had certain non-recurring revenue, of which R331 million represented drawings from the IMF. That, of course, we will not have again this year. We also had other revenue last year, e.g. deposits on imports. That is also not recurring and we shall not have that again this year, because it has been abolished. The normal adjustments which one could have made would not have provided anything like what is necessary. Therefore we had to adopt other measures. We did not hesitate to cut State spending to the bone. I want to challenge the Opposition. The budget is before them and everything is set out in detail. I want to challenge them to point to one single item there on which money should not be spent. They must tell us what money must not be spent. We have appealed to financial institutions and public corporations to make their contributions as well. Those of us who know what it means to draw up a budget and everything it entails, know that all these public corporations companies which on a non-profit basis but not on a basis of loss, have to provide certain services to South Africa, have also had to cut back on their published programmes. We are appreciative of the fact that in the interests of South Africa and in the interests of responsible operating they have cut these programmes to see us through. The Defence bonds will attract a considerable amount of money from the private sector, and it is quite correct that we should do this. It is not inflationary. Where we have imposed a certain levy on certain import commodities which do not fall under GATT, I want to say that in this regard as well we have acted most responsibly because by this means we have tried to provide for the need of our people. The hon. member for Yeoville said just now hat we are not giving the necessary stimulus, as he put it, to labour intensive export organizations. How could one give a better stimulus than by imposing a levy on certain export commodities on which we have the right to impose a levy? I am not speaking of commodities covered by GATT. By imposing the levy, one gives domestic industries the opportunity to provide …

But the levy is on imports.

Yes, on imports.

But you said exports.

Well, then I was mistaken. The levy is on imports so that one gives one’s domestic industries the opportunity to supply those needs. I think the hon. member must revise his whole outlook in this connection.

If I have to give a definition of this budget, I would say that it was the result of an in-depth study. It bears witness to a knowledge of the actual situation not only in South Africa but also with regard to world events and in our immediate vicinity in Africa, in so far as these might have an influence on us. This in-depth study and knowledge is expressed in economic terms which one can describe as rigid and conservative, but not so rigid that it will stunt or wreck future economic growth. It should rather be regarded as a stable foundation which we are laying to stimulate growth and encourage it when the time is ripe and when South Africa can afford it.

Mr. Speaker, the hon. members for Germiston and Heilbron have both touched on a number of aspects which have been common to the debate so far. The hon. member for Germiston has said we must have confidence for the future and that everyone must be prepared to pay the price to ensure that. It is not our intention in these benches to say that we are averse to paying the price for the future, but what we should like to be convinced of—I shall touch on it in the course of my speech—is that we are getting the best future we can possibly have, a future which may very well be different from that which is offered by the hon. members who sit on the Government benches. The hon. member for Heilbron said that Dr. Wassenaar said that this budget is not inflationary. It is interesting to see that Dr. Wassenaar is now quoted after writing in the Sunday Press last week. There is, of course, no argument about the fact that in a technical sense this budget is not inflationary. It is not inflationary in the sense that the Government is using the printing press to create money. However, in practice and in effect the likely implications of this budget are that the rate of inflation is going to rise. That is what is likely to happen in practice as opposed to the theory.

The hon. member for Heilbron also touched on the question of restoring confidence overseas and he mentioned the difficulties in regard to the expenditure on oil and defence, all of which I intend to deal with in the course of my speech.

The hon. the Minister of Finance had no easy task when he introduced this budget. That said, it is essential to look at the predicament in which this Government has placed him. It is essential to look at the causes of that predicament and, more particularly, at the main thrust and the direction which this budget is signalling for the future. I think that no sensible person will deny that the immediate economic outlook for our country is dark and forbidding, but what is of crucial importance is the answer to the question whether any light can be seen at the end of the tunnel or whether the Government is simply heading for a sort of economic Götterdämmerung, which is the alternative. That is the key to our future economic prosperity. The Government takes the line that times are abnormal and that we have no choice. Phrases such as “no option” and “in the circumstances” have already been widely used. That is quite simply rubbish. When the Government says that, it is in effect saying that one’s hands are tied behind one’s back so that one cannot use them when one has to. Alternatively, it is like willingly and voluntarily tying one’s legs together and then saying that one cannot run. This Government does have a clear choice open to it. It always has had that choice open to it and it has that choice open to it now. That choice is to take the necessary action both now and in the future to turn to account the vast potential wealth of our country for the benefit of all. Let there be no mistake about it: In this budget the Government has chosen quite deliberately not to do so on political grounds. Until that is changed, everybody in South Africa will continue to suffer a substantially lower standard of living than we might otherwise have enjoyed. It is also true that the deterioration in the state of the nation is not going to stop at economics, but will affect every facet of life here in South Africa.

The hon. the Minister has mainly five problems to deal with, viz. the balance of payments; the lack of foreign confidence and approval and therefore the lack of foreign capital; inflation; a rate of growth, if any, below the margin of safety; and unemployment. The hon. the Minister and the Government have chosen to put the overriding emphasis on the first of those five problems to the extent that they are prepared to sacrifice the other four to that end. To put it in American parlance, it is one strike and four misses.

To understand how we have been brought by this Government to such a pass, it is essential to look at and understand the balance of payments figures for 1976. The statistical survey we are given together with the budget speech sets out that we had a deficit on current account in the balance of payments of R1 515 million. From that one has to subtract a long-term inflow of R1 113 million. One then gets what is described as the basic balance which was an outflow of R402 million. To that one has to add the shortfall or the outflow of short-term capital of R654 million. I say “short-term capital” because it is not related to the reserves. This gives the change in net gold and foreign exchange reserves of this country for 1976 as a minus figure of R1 056 million. That is before taking account of compensatory borrowing, S.D.R. allocations and the gold swop.

It does not matter which way one looks at those figures, it does not matter whether one looks at the net capital inflow or the basic balance, the fact of the matter is that the situation deteriorated tremendously last year. The negative change of R1 056 million in the net gold and other foreign exchange reserves is, of course, self-explanatory, but one must remember that those reserves include a gold component of the order of about 12,69 million ounces as valued at the official price of R29,95 or just below R30 per ounce. If one takes that figure as at 31 December last year and one assumes a realistic gold price of, say, $130—although $10 either way would make very little difference to the conclusion—one would add of the order of a billion rand to our reserves and one would convert the net reserves from a negative figure to a positive figure of approximately half a billion rand. Taking the gold reserves of 12,69 million ounces at a realistic price related to the market level, that has to be contrasted with the position in 1973 when South Africa had reserves in excess of R1 billion, taking the gold value at the official price. To look at it another way: In 1973 our reserves, conservatively valued, the gold elements at the official price, was sufficient to cover the import bill for three months. Now, even with the gold price at $130 per ounce, the reserves are not sufficient to cover the import bill for one month. That is simply how bad it is. That is how bare the cupboard has become.

Of course, the answer lies in the expenditure by the Government in general and particularly on defence—a subject to which I shall come back—and on oil. We are therefore now faced with the situation that the hopes of the Government appear to be pinned on reducing the deficit on current account to a minimum or even a small—in the context— surplus by an increase in volume and price of our metal and mineral exports, particularly gold and agricultural produce. Neither of those is within our control and the latter is in addition subject to the vagaries of the weather. Because of the level of the reserves to which I have referred, and the fact that the Government has exhausted that alternative so that it has no cushion to fall back on— because the cupboard is bare—the Government has seen fit to simply set the private sector up as the next sacrificial lamb upon the alter of Nationalist policy. Let there be no mistake about this, this has been done; it has simply done it by rape, namely, the transfer of no less than R1,32 billion from the private to the public sector in one hit, made up of R500 million from the insurance and pension funds, R240 million from the building societies and banks, R160 million from national defence bonds and R400 million from the 15% surcharge on imports. These amounts total R1,32 billion, the extent of the transfer from the private to the public sector. With regard to the last-mentioned amount, namely, the 15% surcharge on imports, this is obviously likely to increase prices, and by more than 15%, as there are percentage margins involved as they work through the system.

In addition, the Government has also imposed severe and onerous restrictions on the lending by banks to the private sector. I do not believe that there is doubt on either side of this House about the fact that the private sector is the more productive and therefore, in view of the treatment meted out to the private sector, there is absolutely no cause to see any light in the gloom emanating from that source; indeed, quite the reverse. What are we faced with? The immediate outlook is that we will sink deeper into the vicious cycle in which we find ourselves and where quite simply we can expect higher inflation, increased unemployment and growth, if any, below the margin of safety. I have already said that the surcharge on imports is certainly going to be inflationary in effect by increasing prices. 15% on about R2 700 million of our imports—the way I would assume it would be calculated, certainly working back from the R400 million— is equivalent to about a 4% devaluation when spread over the total value of our imports, and naturally it has no equivalent value in rand terms for our exports. As I have said, in practice it will be much more as it works through the system and the various parties try to maintain their margins. That comes on top of the never-ending stream of price increases approved by the Government. These increases have become so many that their number is now legion. In this respect I am thinking particularly of the effect of the Railway budget, of the increased duties imposed on 7 March on liquor and tobacco and now the reduced subsidies on food, because the hon. the Minister of Agriculture—who is not here—has said that the price of bread, maize and maize products would have to be increased, and probably the price of butter as well.

The hon. the Minister will know that the consumer price index rose by 1,6% in February. That is a simple figure; it is not seasonally adjusted, but it nevertheless represents an annual rate in excess of 19%, and it is therefore no wonder that Dr. McCrystal has confessed that the voluntary programme to fight inflation was a failure. All of this before the dam of pent-up wage demands starts to break. It is therefore not surprising that we anticipate that the rate of inflation is going to rise. The rate of inflation is already unacceptably high, and, indeed, one estimate has already been made that it will now climb up to 17%. It does not have to go that far to make a mockery of the Government’s second short-term objective, which, as set out in the budget statement, is to counteract inflation.

In so far as unemployment is concerned, the situation is nothing short of catastrophic. Various estimates have been made by Prof. Van der Merwe of the Pretoria University and by a researcher for the Prime Minister’s Economic Advisory Council. They have estimated that the figure for unemployed in South Africa—and this was about a month ago—was between 1 million and 1,8 million people and that that figure was steadily rising. Therefore when the hon. the Minister says in his budget speech—

and further (col. 4652)—

it is an understatement of monumental proportions. After all, it was this Government which proudly announced that the target for the EDP over the period 1974-’79 was no less than 6,4% in real terms, and even if that had been achieved, there would still be unemployment of the order of 314 000 Black South Africans. As against that, and to put it into a factual context, the actual growth in real terms for our country during the last three years has been 7,1%, 2,1% and 1,4%.