Mr. Speaker, by your leave I want to make a brief statement. The Secretary General’s report to the Security Council of the UN on developments in regard to South West Africa, is expected to become available today. It was preceded by communications made to us when the report was still in draft form, as well as by discussions with the representatives of the five Western powers. From the report, as well as from the other communications as reported to us, it has become clear that a very serious situation has arisen with regard to the implementation of the settlement plan. Obviously there are serious deviations on certain decisive aspects of the plan concerning, inter alia, the provision to monitor Swapo bases. There is no assurance that effective provision will be made for the monitoring of Swapo bases beyond the borders of South West Africa.

Even more disquieting is a new attempt to establish Swapo bases inside South West Africa, where groups of them, moreover with the assistance of their arms, will be settled. In the accepted plan there is no such provision at all. We also know of other outrageous and unacceptable Swapo demands. Although these demands, as far as we have ascertained, will not be spelt out in the report, one can read between the lines that they have not been abandoned.

This House will understand that the South African Government, in these circumstances, will have to consult with the Constituent Assembly of South West Africa. This will be done as soon as possible, preferably during the present week. After that has been done I shall inform this House further.

Mr. Speaker, I move—

The proviso to section 4(1) of the Exchequer and Audit Act, 1975, provides that until such time as the annual Appropriation Act has been passed, Parliament may by a Part Appropriation Act, appropriate out of the State Revenue Fund a sum of money necessary for a part of the financial requirements of the State.

The Act provides further that the Part Appropriation Act shall cease to have effect on the commencement of the Appropriation Act, and that issues already made under the Part Appropriation Act shall be deemed to be issues made under that Appropriation Act. For the rest section 4(2) of the Exchequer and Audit Act provides that moneys appropriated by a Part Appropriation Act may only be utilized for services in respect of which expenditure was authorized by Appropriation Act during the immediately preceding financial year, or in respect of which some other authorization by Act of Parliament exists.

As hon. members consequently know, the amount of R3 040 million, which is now being requested in the Part Appropriation Bill, is essentially an aggregate advance on the Appropriation Bill which I shall soon introduce in this House, in order to continue to finance the existing programmes of the State for approximately four months, while the Appropriation Bill is being considered by Parliament. As is customary, I shall review the state of the economy when I present my Budget Speech. However, there are a few aspects of our economy which I should like to comment on at this early stage.

I want to begin by referring to the recent decision by the Government to free the rand from the US dollar and to make it an independent market-related monetary unit. This ensued from the Government’s acceptance of the interim report on exchange rates of the Commission of Inquiry into the Monetary System and Monetary Policy, under the chairmanship of Dr. G. de Kock, and it is a pleasure for me to convey my very sincere congratulations to the commission of which he was the chairman on what I regard as an excellent piece of work. With the introduction of this new exchange rate system we are placing South Africa in the category of countries with currencies whose exchange rates are primarily determined by supply and demand on the foreign exchange market, that is, determined by the country’s own economic situation and balance of payments and not by the weal and woe of another country’s currency. Virtually all the more developed countries fall into this category. The countries which still remain pegged to the US dollar today, even if it is “variable dollar pegging”, are for the most part the underdeveloped countries of the Third World.

We are living in a world of floating exchange rates. In recent years the rand has floated with the US dollar. In future, as soon as the new system has been fully implemented, the rand will move independently. We are therefore breaking away from “dollar pegging” and are accepting, in the same way as Germany, Switzerland, Japan, the United Kingdom, Canada and many other developed countries, a system of “managed floating”.

In conjunction with this we have decided to develop the old “securities rand” into the new “financial rand”. The old securities rand could only be used by non-residents to purchase listed securities in South Africa. The new financial rand may also be used by non-residents to make other capital investments in South Africa. As in the past there will consequently be two exchange rates: The rate for the ordinary rand or—as it will in future be known—the “commercial rand”, and the exchange rate for the “financial rand”— previously known as the “securities rand”. The rate for financial rand is usually at a discount to the rate for commercial rand. Consequently, by henceforth allowing the non-resident to use the relatively cheaper financial rand for investment in certain other kinds of assets in South Africa as well, and not only in listed securities, we are giving him a strong incentive to invest in South Africa. This is particularly the case since he will be able to take out his dividends at the exchange rate for commercial rand. He will also be able to repatriate his capital at any time at the financial rand rate if he so wishes, without this diminishing our reserves. These new arrangements will considerably enhance the profitability of certain kinds of foreign investment in South Africa and we expect that they will contribute to an acceleration of our economic growth rate. We also envisage allowing residents, at a later stage, to cause capital to move more freely through the financial rand market, with the approval of exchange control.

The Government accepted the recommendation by the commission that, in South Africa’s special circumstances, relatively stringent exchange control should continue to be maintained, provisionally at least, in spite of the attendant disadvantages. But the Government also accepts as ultimate goal the abolition of exchange control over non-residents and, as far as possible, the relaxation and simplification of exchange control over residents.

The present adjustments in the arrangements in respect of the financial rand should therefore be seen as a transitional measure and a further step towards the long-term objective, viz. a unitary market-related exchange rate for the rand.

We have also effected important improvements in the forward exchange market in South Africa, which may ultimately save the taxpayer a considerable amount of money. In addition private enterprises in South Africa are also being provided with forward exchange cover in respect of their foreign loans, which was not previously the case. At the same time the restrictions on internal loans raised by foreign controlled companies in South Africa are being more flexibly applied.

I believe that one of the main reasons why the new exchange rate system has met with such a favourable reception is that it is correctly viewed and accepted as part of our policy of economic growth with financial discipline, with the emphasis on private initiative and economic freedom. It is rightly perceived as progress and as positive action which demonstrates confidence in the South African economy.

The new exchange rate system has also paved the way for further positive steps to promote economic growth in South Africa. Of these we have already seen some examples, inter alia, the earlier repayment of loan levies on companies, the reduction by the Reserve Bank of its bank rate, and the continuation of the downward tendency in interest rates in general. It was possible for these developments to occur because the new exchange rate arrangements reduced the danger of switching by importers from expensive foreign to cheaper domestic sources of finance as a result of interest rate differentials.

In the nature of the case, the new exchange rate system cannot by itself solve our economic problems. It can never serve as a substitute for sound fiscal and monetary policies and financial discipline, but, as we are now experiencing, it does provide the authorities with more independence in the formulation and implementation of their domestic economic policy. In the present circumstances, this means that we can now apply a more co-ordinated and effective policy of economic growth without sacrificing financial discipline.

As recommended by the commission and accepted by the Government, the institution of the new exchange rate system is taking the form of a gradual process. I am pleased to be able to inform this House that good progress is being made with those parts of the new system which have already been implemented. As we anticipated, there was initially a degree of uncertainty in the foreign exchange market as to precisely how the new system works. At the outset some of the banks also competed so actively in the market that the margins between their buying and selling rates declined to abnormally low levels. Although this was of course to the advantage of the country’s business enterprises and the general public, it resulted in an excessive reduction in the exchange profits of the banks and consequently created problems for them. However, these problems are rapidly being ironed out and the margins are already returning to more acceptable levels. In general the new arrangements had fewer teething troubles during the first few weeks than we expected.

Although the new system therefore got off to a good start, representations have been made to me to clear up some uncertainties concerning the implementation by the Reserve Bank of the Government’s new exchange rate policy. I therefore wish to make a few matters very clear:

1. The new exchange rate system adopted by the Government is not one of “variable dollar pegging”. The rand will no longer float with the dollar in terms of other currencies. The new system is one of managed floating of an independent rand in South Africa’s own foreign exchange market, under Reserve Bank surveillance.

The fact that the Reserve Bank has for the time being continued to quote predetermined fixed buying and selling rates for dollars, which have been changed twice during recent weeks, has merely been a temporary transitional arrangement. From tomorrow, 27 February, we shall proceed to allow the value of the rand to be determined by supply and demand on the foreign exchange market. The Reserve Bank will still be acting in the market, on a continual basis, as a buyer and seller of dollars, and will thereby not only eliminate unnecessary exchange rate fluctuations but in reality also exercise control over the movements of the rand/dollar rate. The system which the commission recommended and which the Government accepted is, after all, one of managed floating and not one of free floating. But the rand will then be standing on its own legs and finding its own level under Reserve Bank management on the South African foreign exchange market. The indications are that the rand/dollar rate will not at this stage deviate much from its present level.

A system of variable dollar pegging has serious disadvantages, particularly for a country such as South Africa in its present situation. Under such a system any unfavourable economic or political developments which bring about a deficit on the balance of payments will immediately be reflected in net reserve declines. There is no doubt that under such a system speculation against the rand could reach considerable proportions whenever the rand/dollar rate is considered by the market to be unrealistic. Such a development would also place greater pressure on exchange control, which simply would not be able to restrain the capital outflow effectively enough. This could also force us to accord priority in our policy to the protection of our reserves, rather than to economic growth or anti-inflationary action.

Under a system of managed floating, on the other hand, the reserves need not absorb the full effect of an unfavourable balance of payments development—the exchange rate could also be allowed to vary if the authorities so decided. This facilitates reserve management by the Reserve Bank and protects our reserves for better subsequent utilization in case of difficult times.

This system also discourages speculation and normally eliminates large devaluations. This is because a mobile and realistic market-related exchange rate confronts the speculator with a “two-way risk”. At the same time it reduces the pressure on exchange control. The result is that we can apply a more independent and effective domestic economic policy than under a system of variable dollar pegging.

2. We shall proceed as rapidly as possible to channel the foreign exchange receipts from Kruger rand sales—and perhaps later at least a portion of the exchange receipts from diamond sales as well—directly to the banks, instead of in a roundabout way via the Reserve Bank as at present. There are good reasons why this step is in the interests of the country as a whole. The fact that such a large part of South Africa’s total foreign exchange receipts was in the past channelled to the Reserve Bank, created a structural skewness and imbalance in the South African foreign exchange market and made the Reserve Bank a large net seller of dollars to the foreign exchange dealers. As long as this imbalance continues to exist, it will be difficult to develop a proper foreign exchange market in South Africa, and it will not be possible for a realistic exchange rate for the rand to be determined by supply and demand on the market. Such a state of affairs will, in turn, make it difficult for the Reserve Bank to apply a meaningful intervention policy in the foreign exchange market.

A further reason why it is desirable to reduce the imbalance in the foreign exchange market outside the Reserve Bank is to compensate the banks partially, by means of a larger volume of profitable transactions outside the Reserve Bank, for the substantial decline in their foreign exchange profits to which I have already referred.

In this regard I wish to pay the banks a compliment. The new exchange rate system, although clearly in the interests of South Africa as a whole, does create certain problems for the banks. New techniques have to be acquired, new arrangements have to be worked out and, as I have mentioned, the banks’ foreign exchange profit margins have been narrowed by the fierce competition on the foreign exchange market. Nevertheless the banks are prepared to co-operate in order to make a success of the new system. I wish to give them the assurance that any problems which might remain in the present transitional process will receive the sympathetic attention of the authorities. We shall accommodate the banks wherever we can and, in close cooperation with them, develop the new system step by step to the advantage of South Africa.

For the new system to work properly it is, of course, necessary that there should be no monopolistic exploitation by either large final buyers, or sellers of exchange, or large banks. The commission went into these matters in some depth in paragraphs 174 to 178 of its interim report. It is a fact that there are certain large banks in South Africa which have a large relative share of the country’s foreign exchange business. It is also true that South Africa has certain large semi-monopolistic exporters, such as the goldmines and the diamond producers. It would therefore be naïve of the Government not to take into account the possibility of monopolistic exploitation of these positions of power in the market. After thorough investigation, however, the Government has reached the conclusion that it can handle any problem which might arise in this regard, and that we should not allow the fear of such malpractices to stand in the way of freeing the rand from the dollar and introducing the new exchange rate system in the interests of the country as a whole.

The ability of large exporters and banks to misuse their influence in the foreign exchange market is restricted by both natural market factors as well as the exchange control regulations. Thus, for example, exporters are required to repatriate their export proceeds within a prescribed period after receipt. At present this period is in most cases seven days. In selling their foreign exchange receipts for rands, large exporters will therefore not be in a position to “play the market” to any significant extent. It would also not be in their own interests to offload substantial amounts of foreign exchange on the market at any given time without taking economic factors into account, or to try to sell all their foreign exchange to any single authorized foreign exchange dealer. On the contrary, they would have a strong incentive to maximize the rand proceeds of their foreign receipts by prudently spreading their foreign exchange sales over the period permitted by exchange control, and by engaging in transactions with different banks on a competitive and impersonal basis.

The ability of large banks to misuse their market influence will also be restricted by the limits which are being imposed on their “positions” in foreign exchange, and with which they will have to comply at the close of each business day. Apart from the effect of these limits, it would in any event be in conflict with normal sound banking practice to accept the substantial exchange rate risks involved in large open positions. Naturally the Reserve Bank will also be in a position to alleviate any special foreign exchange shortages or other problems which individual banks might experience, and to counter any behaviour by market participants which threatens to undermine the impersonal and competitive nature of the market.

I believe that all parties involved will cooperate in developing the new system in the right spirit. If necessary, however, the Treasury, the Reserve Bank, the Registrar of Financial Institutions and other Government departments have the necessary powers to act against any undesirable monopolistic practices which might be found to exist on the new foreign exchange market.

For these reasons the Government is convinced that, in accordance with the commission’s recommendations, the necessary measures can be adopted to eliminate any misuse of market power by any large participant in the foreign exchange market. The problem of possible misuse of semi-monopolistic market influence is, of course, not confined to the foreign exchange market. It also applies to the banking system as a whole and indeed to other sectors of our economy as well. The Government can and will, however, take effective action against such malpractices wherever they might arise, in the foreign exchange market as well.

†3. The decisions taken by the Government in regard to the new financial rand will be implemented as rapidly as possible. For the time being, only non-residents may use the new financial rand and, for the time being, it is also necessary for them to obtain Reserve Bank approval for financial rand investments in South Africa other than in quoted securities. As soon as is practicable, however, we shall endeavour to simplify the operation of the financial rand mechanism and to reduce the “red tape”—and I use the term for want of a better phrase—involved as far as possible in order not to discourage foreign investors. We shall, in due course, also give serious consideration to permitting residents to move funds in and out of the country through the financial rand market with the approval of exchange control. In this manner we hope to make progress towards the creation of a reasonably free market for the financial rand as an intermediate stage in the process of moving to our eventual objective of a unitary exchange rate for the rand.

My main purpose in making these various points is to emphasize that the Government is not going to drag its feet in implementing the new exchange rate policy. We are determined not to lose momentum. In instituting the new system we have chosen the cautious and gradual approach with a view to minimizing teething troubles and attaining a more orderly transition from the old to the new. This does not mean, however, that we are going to implement the new system in a hesitant or timid manner, or in bits and pieces. On the contrary, the Government has made up its mind and has taken the necessary decisions.

The new exchange rate policy has been accepted and announced, the eventual objective has been clearly spelled out and we shall now press ahead towards that aim with determination and all due speed and, I may add, with the full co-operation of the Reserve Bank.

I now wish to turn briefly to a quite different matter. During the 1978 session of Parliament, legislation was passed which empowered the Government to act as reinsurer of last resort in respect of insurance against loss of, or damage to, movable and immovable property caused by persons intending, through violent action, to influence or disrupt the existing political, social or economic order.

It was explained at the time that on account of the nature of the risk involved, insurers normally could not provide indemnity against it and that an investigation in other countries had shown that cover against damage of this nature could only be provided satisfactorily with the assistance of the State.

It was considered desirable that insurance of this nature should as far as possible be left in the hands of the private sector. A special arrangement has consequently been devised whereby the insurance cover will be provided by an insurance company established especially for this purpose. Short-term insurers participating in the scheme will reinsure part of the risks, whilst the Government will act as reinsurer of last resort. This is a unique arrangement in that cover of this nature is made possible through co-operation between the Government and the private sector.

The special insurance company has recently been incorporated and registered in terms of the Companies Act under the name “South African Special Risks Insurance Association (Incorporated Association not for Gain)”. The association has also been registered as an insurer under the Insurance Act. A reinsurance agreement has been entered into between the Government and the association and such an agreement will also be entered into between the association and other registered short-term insurers.

The association and the S.A. Insurance Association, which will act as the association’s manager, are at present engaged in finalizing the formalities which must be completed before the association can commence business. It is anticipated that the association will be in a position to offer insurance cover as from 1 April 1979.

The shareholders of the association will be confined to registered short-term insurers and the local representative of Lloyd’s of London, and these parties will act as the association’s representatives for the purposes of issuing policies, collection of premiums and the handling of claims. Persons desiring to obtain insurance cover from the association should consequently get in touch with short-term insurers or the agents for underwriters of Lloyd’s who handle their short-term insurance. The association is non-profit-making and its administration and commission expenses will be strictly controlled. What it amounts to, Mr. Speaker, is that in the first instance the premium income will be used to set up a fund out of which losses will be compensated. If at any time there is insufficient money in the fund to meet claims, the Insurance Association will itself make a further amount available. If that is still insufficient—if so it would mean that the losses would have to be very substantial—the Government can be called upon as the final reinsurer.

In conclusion, I wish to comment briefly on the state of the South African economy and on present official economic policy. Since I hope to deal with these matters more fully in my budget speech next month, I shall confine myself on this occasion to a few main observations.

The world economy did not fare particularly well during 1978, and the prospects for 1979 are not particularly encouraging either. In many countries, including the United States, the rate of real economic growth will probably be lower in 1979 than in 1978, whereas the rate of inflation will almost certainly be higher, partly owing to the recent further increase in fuel prices. Yet the overall economic situation and prospects in South Africa are at present fairly significantly better than they were a year ago.

1978 was a year of economic upswing in South Africa, characterized by increases in production, employment and general economic activity. Moreover, the indications are that this cyclical upward movement will continue during this year. Nevertheless, it must be recognized that the present upswing has not yet developed adequate momentum. After showing virtually no increase in 1977, the real gross domestic product, according to preliminary estimates, increased by about 2½% in 1978.

I confidently expect the real growth rate to increase further in 1979, despite the likelihood that agriculture’s contribution to the gross domestic product will decline, perhaps significantly, and notwithstanding the retarding effect bound to be exerted by the recently announced increases in fuel prices. However, as matters stand at present, the growth rate in 1979 is still not likely to be as high as it could and should be.

Against this background it remains the policy of the Government to encourage private investment and consumption with a view to stimulating sound economic growth. To this end various steps have already been taken, and now that the new exchange rate policy is being implemented, the door has been opened for further expansionary measures.

One of the main reasons why the Government is now in a position to apply a more determined growth policy, is the remarkable performance of the balance of payments on current account in 1978. The final figures will probably show that the current account registered a record surplus in 1978 of between R1 000 million and R1 500 million. The increase in the gold price during 1978 was, of course, one of the reasons for this exceptionally large surplus. There were, however, also other important reasons, such as the appreciable further increase in other exports and the fact that the Government’s policy of financial discipline succeeded in moderating the unavoidable increase in imports associated with an economic upswing. There was again a substantial net outflow of capital during 1978, including large repayments of foreign loans and a certain amount of “switching” by importers from foreign to domestic sources of credit. But owing to the large current surplus, the net official gold and other foreign reserves showed a strong upward tendency in 1978.

As a result of all these developments, particularly the success of the official policy of what I call financial discipline, South Africa’s credit rating overseas improved still further. One clear indication of this is the manner in which the Government recently succeeded in raising new foreign loans amounting to $250 million from a number of leading foreign banks. The proceeds of these new loans will be used predominantly for the provision of housing and education to lower income groups and for the creation of new employment opportunities in under-developed areas in accordance with the Government’s decentralization policy.

The prospects for the balance of payments during 1979 are decidedly favourable. The further increase in fuel prices will, of course, have an adverse effect on the economy in many ways, but its effect on the balance of payments as such will be at least partially offset by the higher gold price. As the rate of growth accelerates, imports of capital goods and raw materials should show a sharp increase, so that the current surplus will probably decline. At the same time, however, the capital account of the balance of payments should improve, so that the overall balance of payments should remain sound.

I referred a moment ago to the consequence of the increase in fuel prices and I would like to state my own view very firmly and that is that I believe that the Government had absolutely no alternative but to make that increase. Inflation remains a serious problem, particularly now that the petrol price has been increased once again. From December 1977 to December 1978 the consumer price index in South Africa increased by just over 11%. There is still little evidence of demand inflation, but other factors are obviously exerting an upward pressure on costs.

Taking everything into account, including our new exchange rate system, I believe that, with appropriate fiscal and monetary policies, the South African economy should perform substantially better in 1979 than in 1978.

Mr. Speaker, I think I should perhaps at the beginning react to the statement the hon. the Prime Minister made about South West Africa. But as the situation is obviously so delicate, I shall not go beyond saying at this stage that one hopes that there will be a continuation of talks and that there will be a continuation of negotiations with honour rather than a breakdown in that situation. I believe it might well be in the interest of us all if nothing further was said by me about that matter at this stage. I therefore propose to leave that issue there.

I now come to the speech made by the hon. the Minister of Finance and want to say to him right at the outset that I am quite sure that the public of South Africa will express, with me, a sense of disappointment that he has not used this opportunity to announce some of the stimulatory measures which we believe the economy of the Republic needs at this moment in time. This “little budget” debate could have been used as an opportunity to put the economy back on a real growth path.

There are a number of matters arising out of his speech to which I should like to react briefly before proceeding with the main gravamen of what I should like to say today.

The first of these is the question of the riot and the political risk insurance to which he referred. As far as we in these benches are concerned, I want to say that we have asked for it So, we welcome it and support it. However, I think the hon. the Minister should react to some of the problems which appear not to have been answered, or should perhaps give some explanation in regard to this matter. Firstly, why was it decided that this particular company—because that is what it is, a company which is incorporated not for gain—should itself handle the insurance and should not be the re-insurer, with the ultimate re-insurer the State, so that private enterprise as such would directly do this business? Why was that particular decision made? Secondly, would the hon. the Minister indicate to the House how the administrative costs and the involvement of the private insurers is going to be dealt with in this situation, and how the issue is going to function? I think it does need a little bit more explanation than the hon. the Minister has already given us.

Then the hon. the Minister devoted a considerable portion of his address to the interim report of the De Kock Commission. There is no doubt that the publication of this interim report constitutes an important financial event in the Republic. But one must say that the significance of that event has to some extent been watered down by the hon. the Minister’s statement which he made when he made the report public, because while the Government has accepted the main principles in the report, the recommendations have not all been implemented, nor are they likely to be implemented in the immediate future. To some extent this is understandable, and in the light of the political conditions and the conflicts in approach which certain of the Government’s advisers appear to adopt on the issues of stimulation or of conservative control, but one thing is very certain, and it becomes more certain after the hon. the Minister’s words today, namely that those who believe that exchange controls are likely to disappear as a result of this report, will be gravely disappointed. While conditions, particularly political conditions, remain as they are, it is highly unlikely that exchange control will be abolished for non-residents, and almost certainly will not be abolished for residents. Even the minor recommendations to permit the residents to operate in a limited fashion with financial rands, have not been accepted at this stage. There is still the question of what is to happen in the future in regard to those, and it is therefore clear that exchange control is here to stay, certainly for the foreseeable future. This despite the fact that the commission says—

There are some other findings on which the hon. the Minister touched and some on which he did not and on some of these I should like to comment. It should now be clear that whatever arguments are advanced to the contrary, the devaluation of the rand has had meaningful effects on living costs, and what is equally clear is that the depreciation of our currency has caused a redistribution of wealth and income. And the hon. the Minister is a great one against the distribution of wealth and income!

Rubbish!

If that hon. member says “Rubbish”, then he must say that also to the commission, because I am now quoting virtually verbatim from the report of the commission. It may be said that in many cases it has resulted in some of the rich getting richer and it has had an influence, and a harmful influence, on fixed income earners, e.g. the pensioners, who have been made poorer by these and other actions causing inflation. I venture to submit to the hon. the Minister that the State, if it considers these actions to have been in the public interest, now has an obligation to compensate, in a form of tax relief and increased pensions, those who have lost as a result of these actions.

The second point I should like to make is that the abolition of a fixed link to the dollar is naturally welcomed by us in these benches. As the hon. the Minister knows, I have persistently pestered him for this. However, it should be pointed out that a managed float is no panacea for all the balance of payments problems of this country, despite the fact that changes in the exchange rate can help to maintain the equilibrium in the balance of payments. Managed floating is not a complete answer. The state of the economy, particularly the rate of inflation, and political events will still determine the health or ill of the balance of payments situation.

Are you only finding that out now?

Thirdly, the economic policy objectives in past budgets have often given a high priority to the defence of the balance of payments situation, based on the dollar exchange rate. The commission points out that the pegging system gave domestic policy objectives, such as an adequate economic growth and high employment, lower policy priorities, something which events now show to have been unnecessary and should not have happened. This is more than regrettable, therefore, and the delay, and often the stubbornness in persisting with the fixed dollar pegging, seems to have been at heavy cost to the South African economy. A very interesting illustration of the problem and the cost to the South African economy is given by the commission in the light of the events in 1975, which resulted in a 7,9% devaluation. I quote from the commission’s report—

In other words, the mishandling of the economy by the Government is proved from the very words of the commission’s report.

Another situation which has been allowed to drag is the forward cover policy adopted by the Government. According to the commission’s report this resulted in losses of R1 046 million during a period of six years up to March 1978. In addition to losses still to be borne by the Government in respect of public corporation and municipality loans, these losses in respect of loans in German marks and Swiss francs is estimated by the commission at hundreds of millions of rand. When, in 1977, we debated the Reserve Bank Amendment Act, which created a foreign exchange adjustment and forward exchange adjustment account, the book profit on revaluing the reserves in so far as gold was concerned was to be used to cover the losses. The hon. the Minister then said that I was being too pessimistic and that he could see no possibility that the loss on forward exchange could extinguish the profit on revaluation. The figure then given by the hon. the Minister, up to 30 March 1977, of R916 million did not include the potential loss.

However, what is now his view in the light of the commission’s report? Has the loss impact extinguished the profit on the revaluation of the gold reserve, even bearing in mind the movement of the gold price at that time? I believe the hon. the Minister is required to give the House an answer, during this debate, on whether the profits from the revaluation of the gold reserves have been lost as a result of this act of mismanagement in keeping this fixed basis of forward cover. What is even more significant is that a situation was allowed to develop where public bodies were borrowing in hard currencies, and were doing so deliberately, because they could get lower interest rates to repay and because they knew that the cost of forward cover was identical whether they were borrowing in Swiss francs or in American dollars. Now, that is something for which the hon. the Minister has to account to this House.

The next point that the hon. the Minister dealt with was the financial rand. Whereas the wider use of the financial rand is welcomed, I believe for one that it does not go far enough. The present system of control and the restrictions permitted by the type of equity investment, appear to restrict the efficacy of this mechanism. In our view all equity investments should be available for the financial rand. That would mean a lot of the administrative procedures would fall away. The use of the financial rand does not result in more capital being brought into South Africa. It is purely designed to promote new investments. I believe that a mechanism could be evolved whereby the Reserve Bank could create financial rand or foreign exchange, and in that way improve the state of the reserve. I should ask the hon. the Minister to consider this.

Unfortunately the political situation is unlikely to result in a substantial demand for industrial development in South Africa, even though it is being offered at a discount. However, one hopes that it can be marketed correctly so that it can at least produce some rewards for South Africa. Then the hon. the Minister said, and he said it again today, that the S.A. Reserve Bank will be more flexible in regard to local borrowings by foreign companies willing to expand.

I believe that in view of the present state of liquidity and the need for expansion, those restrictions can now either be lifted in their entirety or a new formula can be presented that will serve as encouragement for industrial expansion. Merely to say that one will be more flexible and that it will be left to the discretion of the S.A. Reserve Bank, creates an uncertain situation which, with respect, is not desirable for expansion by foreign-controlled companies.

South Africa has only a short while ago come out of the longest recessionary period since the 1930s. But the upward trend in the business cycle is already filtering and the hon. the Minister himself concedes that it is not moving as fast as he would like it to be. There is still a considerable unutilized capacity in industry. Unfortunately, the maize crop is going to affect our foreign exchange earnings and the recessionary conditions in the economy of some of our trading partners are likely to affect our mineral exports. The oil shock is also now a major setback for our economy.

Therefore, when the hon. the Minister of Finance plans his budget, he must exercise the options correctly. We believe that a major stimulatory package should be presented in the forthcoming budget. We do not just want the odd gesture from the hon. the Minister; we do not just want a patchwork situation, but a carefully balanced and positive growth package which is going to restore confidence and create incentives in South Africa. I venture to suggest some of the ingredients of that package. Personally, it should include tax relief and a review of the present taxation system. We should also look at the income thresholds, at the starting rates and the rebates.

The taxation system, in its present form, is inequitable, stifles incentives and retards growth. Tax relief must be extended equitably. The oil increase is hitting the entire community, and because of this I want to put it to the hon. the Minister that the benefits of the increased gold price should be shared by all and not only by a privileged few. Therefore, tax concessions should be received by every individual taxpayer.

Sir, I have already stated how the pensioner has had to pay a tremendous price for past devaluation and the inflation which has resulted from it. Therefore tax relief must be given to the pensioners and it must be done in two ways: Firstly, by increasing the amount of the free income permitted in terms of the means test and, secondly, by increasing the pension as such. There should be an encouragement to pensioners to work. If the Government persists in maintaining a means test it should at least raise the level of the free income which is permitted. Furthermore, having turned saver, the person who saves for his old age, into the mug of the financial game—because he is the one who has to pay the price—we believe that a tax-free investment medium should be created for the aged—say the over 55’s—to protect them against falling interest rates. Why must those who saved for their old age be the suckers in the economic system where their living standards continuously drop, when they themselves are the ones who have saved for their old age and do not want to be a burden on the State?

The time should also now come for relief to the lower-income groups against the impact of the general sales tax. Either that tax should be abolished on basic essentials, or if this is administratively difficult, the subsidies on such essentials as bread and mealie-meal should be increased. Here I have a powerful ally in my argument to the hon. the Minister. Dr. Simon Brand, the economic adviser to the hon. the Prime Minister, has supported the concept and has said the following—

I venture to suggest to the hon. the Minister that at present it is an economic desirability and a politically justified action to give these subsidies in order to assist those in the lower income group in South Africa.

I also believe the hon. the Minister should look at the old sales tax. I believe it should be abolished in its entirety, as should also be the import surcharge. Perhaps the most important issue is the fact that we have repeatedly asked in the House that incentives be given to industry to create new jobs. These could be of the same nature—as I have said to the hon. the Minister before—as investment allowances for plant and machinery. Regional incentives need to be given and not merely where the Government’s decentralization programme applies, but also where there are large concentrations of unemployed people who create potential social and political problems. In the same way one needs to give incentives to industries which are created or expanded specifically to produce import substitutes.

The hon. the Minister of the Interior has recently made a statement in regard to Public Service salaries. We should like to suggest to the hon. the Minister that in dealing with these salaries, the State needs to look at the priorities. The police and Defence Force salary scales should be structured in a manner so as to make service in these forces attractive in relative financial terms. This, in our view, is a priority. The budget should also contain expenditure directed to demonstrate, in concrete form, that salary gaps are going to be further closed and, equally important, that unequal expenditure between the various race groups in spheres such as education, will be eliminated. The hon. the Minister should show that he is on that road, because it is important for South Africa to demonstrate its movement away from discrimination.

In regard to the banking sector, I think it is quite clear that the liquid asset ratios, which in more difficult times were tightened, should be reviewed and, in the same way, where lending limits were imposed, in this state of the economy, it is not logical that they should continue. The incentive schemes for export need restructuring and additional immediate assistance should be given to selected export industries. Until now the hon. the Minister has tried to prod the economy with relatively small incentives at intervals. What is needed now, however, is a package that will really jolt the economy into action and which will see a surge of confidence. There are major reasons why we need this. For instance, there is an immediate need to restore consumer confidence as there is an inadequate level of consumer confidence, a confidence which has been badly jolted by the fuel price increases. Any revival in the economy will have to be accompanied by a substantial increase in consumer confidence, and this cannot come about unless there is a major stimulatory package. There also cannot be artificial stimulation. If private consumption expenditure is to increase, there must be more money in the hands of the consumer. This can best be done by tax concessions and by pension increases. Salary increases for the Public Service—which, in any case, will have to take account of priorities—can be kept within more reasonable bounds if there are simultaneous tax concessions. What is really required, is an increase in the disposable incomes, which in some cases have actually declined in recent years.

Unemployment is, as the hon. the Minister should know, a real threat to South Africa’s stability. If the average growth rate of the past three years continues, South Africa will reap the whirlwind on this issue in a relatively short time. The population has been growing faster than the real gross domestic product, thereby causing a decline in real per capita income.

The cost of living is increasing faster than salaries and wages. We find that the demands of the so-called non-productive aspects of the public sector of the economy will continue to increase, and therefore the resources of the public sector must be strengthened. The level of domestic fixed investments is too low to meet the pending challenge. If the hon. the Minister therefore had to make a choice between stimulating the economy through the public sector or by injecting money into the private sector for a consumer-orientated revival, we would have him choose the latter course as it would benefit the country more, and we therefore appeal to the hon. the Minister to follow that course. The economy needs a push now and we hope when the hon. the Minister replies to this debate, he will even then announce some measures in order to bring about that stimulation.

I want to return to the question of unemployment which I touched on earlier. There is no doubt that South Africa has many threats to its future, e.g. foreign aggression, boycotts, sanctions and terrorism. In my respectful view the threats to South Africa’s stability and future from these are, however, no greater than the threats through massive unemployment. Unemployment is not of course unique to any particular country. Recessionary periods in any country see vast numbers of unemployed, often as a result of deliberate economic policy to fight inflation and to solve balance of payment problems. The social and political effects of unemployment are cushioned in most Western countries by substantial unemployment benefits and other social services, the equivalent of which is not available in similar measure to all the sections of the population in our country. In South Africa unemployment is not a phenomenon which is unique to one section of the population. Recent years saw an increase in White unemployment, a trend which was reversed in 1978 with a mild revival of the economy. Unemployment problems, however, exist in the White community, and special problems need special attention. I want to give hon. members an example. Where people over the age of 50 who are able to work and who are skilled in particularly the managerial and administrative sections lose their jobs, it is a tragedy to see the difficulties this type of person have to again find a job. But White unemployment is kept at a very low level due to the demand for skilled manpower of which the White section of the community is the main supplier. As against that Black unemployment falls under a different category. Estimates of the extent of Black unemployment vary greatly. The reliability of Government statistics has been challenged. Whether the figure is, as some academics believe, two million or two and a quarter million, or whether it is the official figure provided by the Department of Statistics, namely half a million, the problem is extremely serious. I propose to demonstrate this problem, the seriousness of it, by taking the most conservative figures, the figures which emanate from the Department of Statistics. The estimated Black population of the Republic is 16,2 million. Of these only 5,22 million are economically active. The other 10,99 million are not economically active. These figures include the Black States, the homelands, which are not independent, but do not include the Transkei and Bophuthatswana with a population of approximately 3,3 million. The Government figures therefore exclude the commuters, for example those who travel from Bophuthatswana into the Republic. In absolute terms the figures of the unemployed therefore, if they include the independent homelands, would be very much higher than the Government’s figures.

The definition of an unemployed person, as one who worked for less than five hours during the preceding seven days and attempted to find work, excludes many who in social terms must be regarded as underemployed as the earnings for five hours’ work per week would normally be quite inadequate for any minimum living standard. To this should be added the many thousands with inadequate incomes who are unable to adequately support themselves, and can therefore be regarded as under-employed. The most startling figures are those in respect of the younger section of the labour force. The latest figures published in January of this year reflect the position as of July 1978.

Of the total number of unemployed Blacks, 17,2% were in the age group 16 to 19 years whilst 41,3% were in the age group 20 to 29 years. If one considers only males, the figure in the age group 16 to 19 years was 20,1%, and in the age group 20 to 29 years the figure was 38,9%. These startling figures must, however, still be seen as relating only to those individuals who are economically active. They therefore do not include scholars, students or those who do not want to work or who have not, in the previous month, attempted to find work or who have done casual work, as I indicated earlier. The absolute figures of unemployed, according to academics such as Prof. Van der Merwe of Pretoria, are very much higher. These figures are average for the whole country, so in certain areas the unemployment percentages may be lower whilst in sensitive areas they may be higher. Unemployment is most serious for the young work-seeker.

When one looks at the statistics, one sees even further problems. There is the fact that we are not training people correctly, the fact that the training colleges are not being fully utilized, in fact a whole series of problems. Above all, how can we afford to have such vast numbers of young Blacks unemployed in South Africa, young unemployed individuals who in fact create, or who embody the potential for creating, the biggest of problems for South Africa? The 1976 riots demonstrated that fact, and I believe that unless South Africa takes urgent steps to rectify these problems, it is sitting on a volcano, and that volcano will erupt. Therefore Government action is urgently necessary to deal with unemployment.

To highlight these aspects and other aspects, which my hon. colleagues will discuss, I wish to move the following amendment—

1. (a) that the correct economic priorities for South Africa are established;
2. (b) the economic welfare and advancement of all South Africa’s people;
3. (c) that South Africa returns to a rate of economic growth sufficient to combat the present and anticipated unemployment;
4. (d) that internal stability is maintained while changes in South Africa are effected;
5. (e) that the credibility of the institutions of government is restored; and
6. (f) that true national unity embracing all South Africans is achieved.”.

In moving this, I want to highlight the fact that nothing needs more urgent action, in the budget that is to come, than the question of Black unemployment in South Africa. If the hon. the Minister does not get to grips with that problem, let me tell him that Whites in South Africa will not be able to sleep at night unless Blacks have work during the day.

Mr. Speaker, in the first place I want to congratulate the hon. the Minister on the part appropriation he introduced today, not so much on the motivation for the amount which must be spent, but on the fact that the Government accepted the recommendations of the De Kock Commission. I should also like to associate myself with the hon. the Minister’s congratulations to the commission on the work they have done. I shall probably enlarge on that later, but I think I can say on this occasion, without fear of contradiction, that a commission has seldom, if ever, produced a piece of work of this magnitude which was received with so much unanimity by economists and industrial economists in South Africa, and even abroad, as this report of the De Kock Commission. In the second place it has particular significance for South Africa. Notwithstanding the fact that economic problems and even recessions still exist throughout the world today and that uncertainty exists about the monetary values of certain States, we could show the whole world with this report that South Africa is capable of accepting recommendations which place its currency above suspicion and place it in the same category as the currencies of the most developed countries in the world, and that South Africa is capable of moving away from the milieu of currency linking, or value linking—call it what you like—which today still characterizes most of the countries of the Third World. South Africa has, therefore, freed itself from this situation at a very important stage in its history. In these times, which are accepted throughout the world as one of the most difficult economic periods the whole world has yet experienced, South Africa could do this. There are reasons for this. One of these is that the hon. the Minister of Finance has been following an exceptional approach recently to the handling of the South African economy, an approach which has inspired tremendous confidence in the economy of South Africa.

Having said that, I want to add immediately that the implementing of the recommendations of the De Kock Commission are as essential as the recommendations as such. It will be of no use if these recommendations, which have afforded us worldwide recognition and good publicity, simply remain black on white. This side of the House is in earnest in wishing the De Kock Commission’s recommendations to be implemented. It would be a pity if some parties involved in the implementation of these recommendations were to drag their feet in this process. We should find it a pity if there were such parties. Against the background of the good reception of the report and the success we have achieved with the recommendations which have already been implemented, we cannot afford to drag our feet with regard to the implementation of the other recommendations. I think that the hon. member for Yeoville is very happy with certain recommendations in the report and for that reason I also believe that he will assist us on this side of the House if some people should drag their feet I believe that in that case he will at least give his moral support.

I now want to turn to the hon. member for Yeoville. I do not think it is necessary to dwell on the hon. member’s speech this afternoon. In the first place I want to say that I can agree with quite a few of the matters which he raised this afternoon and which I should also like to discuss. Unfortunately there are also a few matters on which I cannot agree with the hon. member. He will allow me the privilege of disagreeing with him, perhaps radically. There are a few statements of the hon. member which, in my opinion, we need not even discuss, because the hon. member only made those statements for political consumption with a view to Swellendam. This we can accept.

I first want to refer to the last point made by the hon. member. Obviously that was the matter which he regarded as the most serious, viz., unemployment To a certain extent I agree with the hon. member. We regard unemployment in just as serious a light. We are in complete agreement and we have no swords to cross with the hon. member in this regard. However, I think that one must be reasonable and examine what this side of the House, the Government, has done to cope with the unemployment situation.

Unemployment as we experience it in South Africa is not a South African phenomenon as such, but a worldwide phenomenon. The difference between the percentage of Black and White unemployed within a given geographic unit in South Africa does not reflect a typically South African situation either. We would do well, for example, to examine the situation in the USA. In the USA there has been an improvement in the unemployment situation. In the case of the Whites in the USA, the unemployment situation has improved in the sense that there has been a drop from approximately 8% to 5% in the unemployment figure, and in the case of non-Whites there has been a drop from 13,7% to 12,8%. There is still a difference between the percentages of White and non-White unemployed, even in a country like the USA.

The question of unemployment in South Africa must, however, be seen against the background of other aspects of the South African economy as well. In the first place I believe that we shall have to take into account that particularly in respect of the Black people in South Africa, this country offers a considerable number of job opportunities to people from other Black States, for example Black people from Lesotho, Swaziland, Botswana and even as far as Malawi and Zambia, etc. For arguments sake we can accept that at least 0,5 million Black people from beyond the borders of South Africa work in South Africa every day.

300 000.

The figure may be 300 000 as far as the mines are concerned, but we must take into consideration, for example, the situation of Lesotho citizens involved in agriculture, etc. If we now want to be realistic—I know the hon. members will not concede this to me— we must also consider the Black citizens of Transkei and Bophuthatswana who are working in South Africa, people whom I want to classify at this stage as the citizens of other States who are working here. I do not want these Black labourers—they are guest labourers from other States—simply to be excluded from the economy of South Africa. We have always used the labour of these people, and we have used it well. These people have taken money back to their States and spent it there, something which has benefited us as well, because the economy of those States has also been built up in that way. Finding ourselves in this economic situation, and finding moreover, as a result of circumstances beyond South Africa’s control, that we are saddled with a steadily growing number of unemployed Blacks in our midst, we shall rather have to consider applying the slogan “charity begins at home” and first accommodate our own Blacks before we can accommodate others.

The hon. member discussed the disturbing percentage of unemployed between the ages of 16 years and 19 years. I wish to draw the hon. member’s attention to the fact that we have just accepted the principle of compulsory education in South Africa. If those persons between the ages of 16 and 19 years are unemployed, it is matter which we will have to attend to, in the sense that we must ask ourselves whether these people should not return to school to qualify themselves better rather than merely being unemployed with the training they have undergone. In recent years the Government, through the Department of Education and Training, has spent a great deal of funds on the training of Blacks in this country. I believe that the solution to this unemployment problem in South Africa does not merely lie in our attempting to provide these people with work. That is not necessarily the solution. If work is provided today to a man who has passed Std. IV or Std. V, it does not necessarily mean that that man will still be employed in ten years’ time. We must realize that the degree of training of the South African worker is the only guarantee that he will not necessarily become unemployed in the future. The standard of his education will determine whether a worker is capable of keeping pace with the economic development and the concomitant requirements for scholastic training.

Unemployment in South Africa is not a simple concept. There is also another aspect, and whether we want to know it or not, we have to say it to one another. The hon. member for Yeoville has just given a definition of an unemployed person in South Africa. It is a person who has worked for less than five hours during the preceding seven days.

That is not my definition.

Oh, that is a Prog!

I am not saying this is the hon. member’s definition; I am saying he mentioned the definition. I actually want to agree with the hon. the Minister, because according to that definition there are a number of the members of the PFP who are absolutely unemployed. I do not want to say that I agree with the definition; I am only saying that it is the hon. member’s definition. However, one thing is certain, and that is that we in South Africa must also be realistic in respect of this aspect. This does not only pertain to the Black people of this country; this pertains to all population groups of this country.

Then the question arises: What is the percentage of work-dodgers among the people who are today classified as unemployed? After all, we must realize that there are people in South Africa who absolutely refuse to work. I speak from experience when I say the following, and I am not referring now to people who do not want to work. We are also dealing with people whose understanding is such that when they have worked and accumulated enough money, for example, to be able to buy enough food for the rest of the year, they simply stop working. Then they are no longer interested in working for the rest of the year. These things must also be borne in mind when we are discussing unemployment.

I want to come back to a different aspect to which the hon. member for Yeoville referred. He stated that he had expected the hon. the Minister of Finance to indicate more specifically to us today what incentives he had provided to stimulate South Africa’s economy. I want to state categorically today that South Africa has passed the stage of constantly asking the Government to announce and introduce incentives in order to stimulate the economy. What about the private sector? Must it always come only from one side?

I now want to indicate to the House what the Government has done over the past 18 months to stimulate the economy. I do not want to dwell on the matter. In the first place I want to point out that the hon. the Minister reviewed the situation and in November 1977 poured an additional R250 million into the economy for purposes of housing. Since we have a housing shortage, we therefore poured the funds into the right sector. In January 1978, salary increases amounting to R250 million were announced. Surely that is an injection for the economy. In July last year, a further amount of R180 million was poured into the economy by means of the repayment of loan levies levied on individuals. Then a further R160 million was poured into the economy by means of the repayment of loan levies on companies. What is more, in February of this year loan levies were repaid which in reality were only due to be repaid in 1980 and 1981. Many tax concession were made, in 1978 as well, when we put into operation the general sales tax. If we have to take everything into consideration today, we see that R1 040 million was poured into the economy by the Government during this period.

Now the question arises whether the private sector reacted accordingly. It is always argued that there is no point in the Government giving the economy this type of injection, because the private sector does not have confidence in the economy. If there is one single substantiation for the confidence which exists in the South African economy, it is—and this is my viewpoint—the reception accorded the interim report of the De Kock Commission. It is then that the question arises why the private sector is still so reluctant to contribute its share in this regard. This is a question we shall have to examine very seriously. To put it in simple language, the table has been laid for the upswing in the economy. There has already been an upswing, and we also know that we are expected to have a growth rate of at least 214% to 3% this year. The upswing has already started. However, we are not getting that real momentum in the upswing.

As I have already said, the hon. member for Yeoville referred to a number of aspects to which it is not really necessary to react. We want to stimulate the economy. We want to put the recommendations of the De Kock Commission into operation. We want to ensure that we derive the benefit of the higher gold price. We want to ensure that we benefit from the general sales tax which came into operation last year. All the hon. member for Yeoville talks about is a lot of tax concessions which must be made now. Where, however, is the Government to acquire the money to make those tax concessions? Of course that is very easy. I want to point that out in order to prevent a wrong impression being gained. The hon. member for Yeoville almost got back to his old slogan of a year ago, viz. that of “taxing the poor”. The hon. member simply made a lot of popular statements as far as the tax situation is concerned. It is very pleasant to receive publicity for something like that. However, it is a different matter when the work must be done in order to allow the machinery in this country to function.

I am convinced that the Government’s record, as far as the pensioners in South Africa are concerned, is unblemished. [Interjections.] The Government’s record with regard to the care of pensioners is unblemished.

Hennie, you ought to be ashamed of yourself! [Interjections.]

No, it is not at all necessary for me to be ashamed of myself. I do not want to say with regard to a single pensioner that we are completely satisfied that they are receiving enough. Nobody is saying that they are receiving enough. Nor, however, do we want to say to the pensioners that they ought to receive as much as the hon. member for Yeoville wants to propose. After all, we must be realistic when wanting to make promises to these people. I think it is a tremendous injustice to hold out prospects to the pensioners and to make promises to them, knowing that one will never be able to honour them. If I may be so bold as to give any assurance, I want to make the statement that the Government will ensure that pensioners will receive their fair share when it is possible for the country’s economy to bear this burden.

In the words of Dr. Brand, the hon. member said that the general sales tax ought to be lowered on certain foodstuffs …

No.

Well, at least that a larger subsidy be granted in respect of certain foods.

Subsidy, yes.

I am prepared to go along with the hon. member to a certain extent, because with regard to food I want to make an appeal from this side of the House to the hon. the Minister. A few years ago, when South Africa’s mining industry was faced with a very serious situation as a result of the fact that the production costs of the mines had risen so high that some mines had to close down, which in turn created potential unemployment and simply left capital unproductive, the Government granted a subsidy to the marginal mines. I think that the subsidy was justifiable, because in conjunction with the increase in the gold price, that subsidy gained for us an amount which amounted to approximately R400 million in the current financial year. Therefore, with the granting of that subsidy, the Government made a very good investment, because if it had not been granted, the mines concerned would not have been able to produce profitably as a result of cost increases and factors beyond their control.

I want to make an appeal to the hon. the Minister and request the hon. members opposite to join me in making this an appeal: Let us apply the same principle to our food producers in South Africa. [Interjections.] If there is a group of people in South Africa today who find themselves in exactly the same circumstances as those in which the marginal mines were at that time, it is the food producing part of our population. A subsidy to enable these people to continue with the production of food, will prove to be just as good a subsidy in future as those that the mines received at that time. We cannot afford that South Africa relinquish its place as the largest food producer in Africa. Therefore, I want to ask the hon. members opposite to co-operate with us, because it was their people that benefited from the subsidy granted to the mines. [Interjections.] Well, perhaps it was not the hon. member for Yeoville’s people, but it was certainly the people of the hon. member for Parktown. [Interjections.] I do not mean it negatively, because we also recovered a few cents from that in tax.

But I support your plea.

The hon. members must not only say that they support my plea; they must stand up and ask for it out loud. I want to hear that they are supporting me.

I want to go on to refer to something else concerning which feelings have also been running high. The hon. member for Yeoville referred to this and a part of the English-language Press in particular has been giving it a great deal of publicity lately. It concerns the salaries of police officers and members of the Defence Force. The hon. member for Yeoville told the hon. the Minister that should a salary adjustment be made, special exceptions should be made for the members of the Defence Force and police officials so that they can receive better adjustments than the rest of the Public Service. As I see it, I must agree with what I have read in the newspapers: The hon. the Minister of the Interior and Immigration is not merely considering an adjustment, but there will be various adjustments for the various categories of employees of the State.

As far as this is concerned, I should like to support the hon. member. As far as I am concerned, it is, in fact, the police who should be accorded top priority in the question of salary adjustments. When I say this, I am saying it with all the responsibility at my disposal, but then at the same time I want to add that it is not only the Defence Force and the police who should be regarded as a special cog in the Government machinery of South Africa. The focus is perhaps on them at the moment, and it may be that they are suffering most at the moment, but the most important cogs which must function well, are those cogs that must ensure that the economy of South Africa earns money with which we can, in fact, pay these people. The officials holding such posts and ensuring that the economy of South Africa progresses, are just as entitled to special treatment as any other officials. At the same time I want to issue the warning that we must be careful …

What about the two of us?

We really could place the hon. the Minister of Finance and the hon. the Minister of Economic Affairs on a completely different scale as far as the salary adjustments for members of Parliament are concerned.

However, we must also be careful not to create the impression that we regard certain cogs in our Government machinery as inferior. It may be a smaller cog, but it may perform a greater task than a larger cog may appear to perform.

The appeal by the hon. member for sales tax to be abolished and his request that income tax be reduced, etc., has in my opinion, with due respect to the hon. member, come too late. Surely that is publicity seeking. The hon. Minister announced last year that this was the aim of the taxation system which was instituted last year. Surely there is no point in getting pious all of a sudden and making pleas in this regard after the hon. the Minister has revealed the purpose of the taxation system. Surely this is old news—it is nothing new. I hope the Press will also realize that this hon. member has come forward and made a lot of old requests, requests so old that they have long beards reminiscent of the Ayatollah. The hon. Minister informed us of this as long ago as last week, and therefore it is nothing new. I do not think there is any point in conducting a debate with the hon. member. He may enjoy it if he wants to, because it is his privilege, but I just want to assure him that we on this side of the House are not enjoying it, because we are inclined to let sleeping dogs lie and do not rehash old issues. We like to do new things, as we heard today in the hon. the Minister’s speech.

I want to conclude by saying that if this part appropriation is a foretaste of what we can expect from the main budget, then a fine future awaits South Africa. [Time expired.]

Mr. Speaker, the hon. member who has just sat down forgot one important aspect in referring to the promises of reduced taxation. He forgot that there is a big difference between what the Government promises and what it eventually does. [Interjections.]

However, I quite agree with the standpoint adopted concerning the salaries of our Police Force and our Defence Force. I want to say something more about this, however, and that is that this problem will never be completely solved as long as our security forces, who act in a completely different capacity, remain under the control of the Public Service Commission. They will have to be freed from the control of the Public Service Commission eventually, so that we may at last remunerate those forces on a satisfactory and realistic basis.

The hon. member made two surprising statements. In the first place he alleged that the Government’s record with regard to pensioners was beyond reproach. [Interjections.] Has the hon. member forgotten when last the Government raised the means test? It was in 1972. The means test was raised seven years ago, while the annual inflation rate has been more than 10%. [Interjections.] Every year, they keep back the increase in the pensions of the pensioners until October, while others get it at the beginning of the year or in April. This shows disrespect towards the pensioner. The hon. member ought to visit my constituency to see how the people there live and struggle. [Interjections.] The Government has a disgraceful record. A Government which has access to the amount of money to which this Government has access ought to be ashamed of the way it is treating the pensioners of South Africa. The hon. the Minister of Transport refuses even to consider granting increases to the Railway pensioners because, he says, he only pays the present servants a bonus. That is the Government’s attitude towards pensioners. [Interjections.] We shall come back to this at a later stage.

†Mr. Speaker, I do not want to spend the limited and precious time at my disposal on following the financial debate in detail. I agree with much of what the hon. member for Yeoville said. The hon. the Minister’s speech was virtually a repetition of his Press statements and his Press conference on the report of the De Kock Commission. He has given us no new information, nothing of any value, except the starting date, and then repeated what he has said before. The hon. the Minister has very carefully avoided talking of the over-taxation which South Africans have suffered. The hon. member for Schweizer-Reneke says that there is no over-taxation— and this at a time when the economy of South Africa desperately needs stimulation. The much heralded recovery that the hon. member talked about will remain a myth in the mind of the hon. the Minister until there is a radical reduction of tax and a major injection of money into our economy. Only then will we remove the shackles on growth in South Africa. In the meantime the public is punch-drunk as a result of blow after blow by the Government. Just when general sales tax was becoming stabilized, now comes the new blow of the fuel tax. This fuel levy …

It is not a tax.

Mr. Speaker, I do not care if the hon. member wants to quibble over words. It is being paid by the long-suffering motoring public of South Africa. I accept that special steps must be taken, but I want to make the point that while money is pouring into the Government’s coffers, the standards of living of the people are being mercilously mercilessly depressed—not for the few elite of course, like Connie’s super-de-luxe jet set living it up on the taxpayers’ money, not for those who have had access to the tens of millions that were wasted at a time when the country was in a deep depression. I am talking of those struggling to exist, to raise children, to clothe them, to educate them and to maintain decent standards. Those are the people who have been forgotten by the Government A colleague of mine will deal with this aspect in greater detail.

I want to look at the Government for whose continued administration this money is being asked. I want to look at the “binnegoed”—the guts—of the political situation which we are being asked to fund. One has to look at it against the world situation and South Africa’s own situation. If one looks at the situation in the world today—China and Vietnam engaged in war; tensions between China and Russia; Iran’s collapse and its consequences, particularly in regard to the world balance of power; the United States of America’s equivocal attitude to communism and its switch from Taiwan to Peking; the United Kingdom and its treatment of Rhodesia, turning its back on the Black-White settlement—then we see a sombre picture indeed. If one looks at this picture, one sees it as part of the backdrop against which South Africa must gauge the operation of this Government. Like the hon. member for Yeoville, I do not intend to deal with South West Africa. That is a delicate situation, one which I do not think should be debated across the floor of the House. However, I do want to say that this side of the House approves of and supports the tone and emphasis of what can be read between the lines of the Prime Minister’s statement, because I believe—and I warned about this long ago—that we should be wary of any Swapo attempt to double-cross South Africa.

Let us, however, now look at the internal situation. We have a fuel crisis—not of our own making, I agree, but it does exist. We also have a stagnant economy and continuing inflation. There are, however, re-awakened hopes in the minds of moderate Blacks—and this is, or should be, one of the bright spots— that things are going to change. Weighed against this, however, there is an intensified militancy amongst the Black Power groups and the extremists, and all this at a time when the credibility in the Government itself has been shaken. It is against this background that I want to assess the political scene at the moment, to look at where this Government is going.

Let me start with something that nobody can dispute. I refer to the fact that the Verwoerdian vision has gone. The master plan has gone, and it has gone for ever! Nobody disputes that. There is not even a Government member who disputes it. The Government itself is seeking alternatives, looking for a new road to travel. The Government itself has come with a new constitutional plan to get away from the Westminster pattern. If one looks at that new plan, however, one sees that it is made up of cribbed bits from the old United Party race federation plan with other bits tagged on here and there. It has failed, however, to take over the essentials for making any plan of that nature work. In the light of the fact that the Government has announced that it has put the plan back into cold storage and is now in the process of rewriting it, I want to look at the state of play, at the progress that is alleged to have been made. I am sorry the hon. the Prime Minister is not here. I want to sympathize with him.

He is occupied with other duties.

I know and I appreciate that. I do want to sympathize with him, however. I want to repay the compliment he paid me earlier this year by saying that I believe he is very sincerely seeking a solution. He inherited this situation, however, and with it he inherited many problems. He did, however, also inherit much sympathy, even from the wicked English-language Press, which gave him a welcome such as I have not seen given to any of the last three Prime Ministers. Not only did he have goodwill behind him, but also tremendous and wide-spread relief over what the alternative to his premiership could have been. He therefore had, I believe, the finest opportunity in the last 20 years of doing a really great job for South Africa. The public was right for change. Public opinion polls showed this, and he was, with everyone waiting for him to act! He stood, in fact, with an open goal-mouth in front of him and with the ball at his feet.

Then you tripped him.

He started by making encouraging noises, noises which everybody welcomed. He had the country behind him. He promised clean Government and he promised a new deal, and the people waited to see what would happen.

Let us, however, look at what has actually happened after five months. I am sorry to have to say that the hon. the Prime Minister fluffed it With the ball at his feet, he stood flat-footed, looked over his shoulder and hesitated. He lost the ball, he threw away his chance. Now the goal-mouth is no longer open. It is packed not by his political opponents, but by his own team who now stand between him and his scoring the goal South Africa so desperately needs.

If I may change the metaphor …

You are offside, Vause.

I know that talking about any game that has to do with balls is a very sensitive business at the moment. That is why I am changing my metaphor. When you are dealing with a Government that is all at sea, perhaps a maritime touch might be better. As I see it, the Government is like a leaking ship anchored in a backwater and suddenly hit by a storm. The captain wants to move the ship out, but he cannot move the anchor. He is not sure where he wants to go, but he knows he has to pull up anchor and move. He knows he has to get the ship away before it is wrecked. However, the anchor is rusted fast. The hon. the Prime Minister’s anchor is the leader of his party in the Transvaal and his followers. The hon. the Prime Minister cannot shift that anchor or lift it. The time has come where there is only one way for him to move his ship, and that is by cutting the anchor and letting it drop. There is no other way in which he can move the ship; there is no other way in which that party can solve the problems of South Africa. If the hon. the Prime Minister fails to do this, I want to say to those who are waiting and watching and hoping that the ship of State of South Africa will in fact get moving before it is wrecked: Jump off before the waters get too rough; jump off the ship before you are wrecked with it. Some have already been washed off the deck by the waves, and others will follow. I will show that there are other ships and, in fact, one particular ship standing by to pick them up. [Interjections.] No, I am afraid that I am not referring to the official Opposition. There is another ship standing by and they can swim across now before it is too late.

Let us look at the chance there is of what I have asked for, i.e. movement and progress, happening. I have said this is a Government in decline and events are proving me correct Let me prove this with words that have come from the mouth of the present Prime Minister himself only two months ago, on 7 December. I carefully quote the words he used in the House then (Hansard, 7 December 1978, col. 17)—

After he took over! I quote further—

This when South Africa faced all the challenges and dangers I have outlined; this against the background of a world in a mess, the background of South Africa facing vital problems. Against that background our own Prime Minister admitted that his Government became paralysed and that stagnation set in in his administration.

That is out of context.

He was referring to the position last year. My point is that, whereas he was then referring to the position last year, I maintain it applies equally at this moment. The Government members think that because there are 135 of them, everything is fine.

Only 133 now.

I stand corrected. It was 134 and this week it has come down to 133. I do not know what the position is going to be next week. I do not know who is going to be “pikked” out next week, but somebody will.

I say this is a Government in decline. I shall give three reasons why I believe this to be so. No longer has the Government a clear, identified objective, a goal or ultimate plan of its own. It has taken policy decisions piecemeal and on an ad hoc basis, often in different directions, and many of those decisions do not carry the support of a large section of its own supporters.

The second reason is that this once mighty, monolithic and unbreakable party is being eaten away from within, as once the equally mighty United Party was destroyed from within. I have lived and suffered through it So I can recognize the symptoms: oversensitivity, the rush to be loyal and to support motions of full confidence and to pledge one’s undying loyalty. [Interjections.] Friends who are no longer in my party will confirm what happens when a party starts to be destroyed from within. [Interjections.] There were some who did not have any confidence in anything, least of all in themselves. However, let us look at the present situation. Despite the fact that already rumblings had started about the then defunct Department of Information, 74 votes were cast for Dr. Connie Mulder, who was head of that department, 74 votes when the Prime Minister was elected. Those 74 hon. members still sit in this House, 74 hon. members who sincerely voted for someone else. [Interjections.] I want to show hon. members what has to be taken into account when judging whether the NP, this Government, can continue to govern effectively. There was next a blatant reshuffle of the Cabinet before the election of the new party leader in the Transvaal. Then the man who was deliberately overlooked in that Cabinet reshuffle, was elected by the Transvaal members as a deliberate slap in the face to the hon. the Prime Minister. And even though he is the leader of the strongest province and even though there is an obvious vacancy waiting and crying out to be created for him, he has still not been appointed to the Cabinet. [Interjections.] If anyone has watched the performance of the hon. the Minister of Justice lately, he will realize that there should be a vacancy opening up presently. There is the opportunity.

I want to say that the elastic unity of the governing party is stretched to breaking point. This results in the elevation of non-events, of nothings, of “onder-onsies” into a political crisis. If a joke and a letter of criticism can be elevated into a political crisis and can lead to the resignation of a member of Parliament, then I say that that party has reached breaking point. Nobody knows who the next person is going to be who is going to lose his control over his own frustrations, because when frustration reaches a certain point, there is nothing that can prevent its breaking out in one way or another.

However, there is still a third reason. The hon. the Prime Minister fluffed the Information scandal completely. He hoped that a long investigation would result in its “going away”.

*In this connection one could also think of the Land Bank loans, of the Agliotti affair, of the Faros affair and of other things which have happened. The hon. the Prime Minister forgot one important difference, however, and that is that the Land Bank loans were paid back, that Ministers resigned, that the Agliotti and the Faros affairs were dealt with in an open court and the guilty persons were fined and sent to gaol. It was the duty of the hon. the Prime Minister to lance and to clean this boil, no matter how difficult it would be and no matter what it cost. Then it would have been cured. But in this way I am afraid it will not be cured.

You are putting up a poor show today.

No, but I am hurting a little. I understand that the hon. the Prime Minister even went so far as to warn his caucus that he would call an election if matters did not come to an end. I just want to give him some advice: That would serve no purpose. It would not solve anything for him, for if he were to do that, the leader of the NP in the Transvaal would have control of nomination in the Transvaal. Then we would see who would disappear, whose supporters would disappear. That is the reason why we cannot get replies to fundamental matters, matters affecting the basic philosophy of the Government itself. I want to seek clarity about at least one of those matters this afternoon.

†I am referring to what happened last week in regard to an issue which is at the very heart of Nationalist thinking, i.e. the issue of the urban Black in South Africa. The hon. the Minister of Health said in this House last week that in his opinion there would always be Black South African citizens. This is in direct conflict with the view of the former Prime Minister, Mr. Vorster, and in direct conflict with the former Minister of Plural Relations, Dr. Mulder. I quoted Dr. Mulder’s actual words and am not going to repeat the quotation now. The hon. the Minister of Health said that he gave his Hansard to the hon. the Prime Minister. What was the reply? South Africa is now entitled to know who is right and what is the policy of the Government Does it or does it not accept that there will always be Black South Africans? If it accepts that there will be Black South Africans, then the whole basis of its approach to the constitutional issue disappears, because then those Black South Africans must be accommodated in their constitutional plan, in their plan for three Parliaments. This House and South Africa is entitled to get an answer on this issue because this affects the whole political debate and the whole future of the constitutional development of South Africa. Neither the Prime Minister nor the Minister of Plural Relations are here. This makes things difficult, but I have put the question on record and I shall continue doing so, and so will my party, until we get an answer from the hon. the Prime Minister. We have also found the hon. the Prime Minister apparently talking of confederation in direct conflict with his predecessor, who, loudly and clearly in Parliament in 1978, as reported in Hansard, col. 4521, rejected federation or confederation categorically. Pres. Mangope says that he is discussing a confederation, a form of South African union, with the hon. the Prime Minister. South Africa is entitled to know where the Government stands. Are they taking over NRP policy? Have they accepted confederation? Have they accepted permanent Black South African citizens? Have they seen the light, or are they bluffing the people of South Africa? They cannot have it both ways. They cannot say to Whites that there will be no Black South Africans and that they will not get involved in a confederation while they build up other hopes among the Black people themselves which they do not in fact intend to implement.

There are other uncertainties, but I do not have the time to deal with them this afternoon. I believe nothing the Government can do can ever cure the illness, the sickness in Government as it exists today. We have set a target, the target of a great confederation of States in Southern Africa. In that confederation there will be a federation of communities sharing the common geographic area of this country. [Interjections.] Mr. Speaker, you see, as soon as one puts forward a positive policy, one has everybody squealing. They are afraid to talk positive policy. They are afraid of it because they are not prepared to debate it [Interjections.]

Order!

We have outlined the four essential requirements to make this work. The PFP have chosen their own policy. I am not going to debate it, because there is no time for that today. They talk of an open integrated society with a federation of majorities from each state. The NRP has chosen its own policy and we believe in it. We have pegged out our territory. I believe the answer for South Africa does not lie in patchwork repairs to the present Government, but in a new Government of national reconciliation. Therefore I move the following further amendment—

1. (a) has allowed its policy-making to degenerate into uncoordinated ad hoc attempts to resolve fundamental problems in isolation, in particular that of the future of urban Blacks;
2. (b) through reckless over-taxation and wasteful expenditure, including high living by a privileged few, has failed to lighten the crushing burden on the people at a time when they were suffering the worst depression in 45 years.”.

Mr. Speaker, the hon. member for Durban Point gave quite a remarkable display here today. It was remarkable in the sense that he, who may be compared to the captain of a small fishing boat, stood on the bridge of his vessel and tried to give advice to the commander of a big cruiser going past.

He is only paddling a canoe!

Yes, and your old cruiser is well and truly stuck in the mud! [Interjections.]

Cruisers do not get stuck in the mud. Of course it is true that the best helmsman is always ashore. However, the hon. member for Durban Point must realize that if the hon. the Prime Minister was not such an able captain he would not be the leader of 134 hon. members in this House. Perhaps if the hon. member for Durban Point was a more able leader he might have had a bigger following in this House.

We care about quality, not quantity!

It is quite amazing that right at the outset of this debate the hon. member for Durban Point kept well clear of the financial aspects. He might as well know that the political matters he touched on, the questions he put to the hon. the Prime Minister, will be replied to. The hon. member touched on a few matters that also displayed a lack of knowledge. The hon. member referred to the pension situation. I think it is outrageous that the hon. member for Durban Point should maintain that there have been no adjustments of pensions. Surely we know that pensions are being adjusted continually.

I was referring to the means test.

Nevertheless I want to agree with the hon. member in that the present inflationary situation in the world is indeed a tragedy for the pensioner. That is so. We cannot get away from this. South Africa is faced with a situation in which people have made ample provision for their retirement. Due to inflation their investments are eroded and they find it difficult to make ends meet on that amount for which they have made provision. Unfortunately this is so. However, this is not a situation which occurs in South Africa alone; it is a worldwide problem.

The hon. member for Durban Point also began by saying that we are living in extraordinary circumstances. That is true. We are living at a time of extraordinary international tension. The USA has effected a change of course in its foreign policy with regard to China and Russia, and this raises certain very important questions, such as: Will the USA succeed in containing Russian imperialism, and what will be the outcome of the growing Chinese hostility towards Russia? How is the Vietnamese conflict going to develop? All these and many other questions create uncertainty and lack of confidence. Seen together with the deteriorating world energy crisis, this must necessarily give rise to a downward trend in the world economy. This is to be expected. According to all the data at the disposal, there are few prospects for an improvement of trading conditions among our trading partners. Each is saddled with his own problems in regard to increasing unemployment, inflation, surpluses, unutilized production capacity, etc. Exchange rates are floating, and the dollar, on which the world economy has for years pinned its hopes as an international money standard, is still unstable and is becoming more so.

Against this troubled background the South African economy must be viewed, assessed and planned. This is truly no easy task because we have an open economy which is very directly influenced by international events and trends. We want an open economy. However, if one strives to achieve this, one must also accept that the international trends and events will have a significant effect on one.

However, we also have the South African problem of which account must be taken in the determining of our priorities. The top priority is undoubtedly the protection of the RSA and its neighbouring States against encroachment by Russian imperialism and Marxism. In conjunction with this, of course, there is the reconciliation of the ideals and endeavours of the peoples of Southern Africa with regard to each other and the maintenance of a state of peace, order and development. We may differ with each other as to how such a situation may and must be maintained; within the parties, too, we shall be able to differ in that regard. Consequently we do not begrudge the Opposition the right to criticize the Government, as long as its criticism is fair and it does not level its criticism in such a way as to harm South Africa.

An obligation rests on the Opposition in this House. They may not allow their resentment against the NP to affect their ideas and loyalties regarding South Africa. Therefore they must not attempt to destroy the Government and the NP at the cost of South Africa. They must also be prepared to accord recognition to the very positive steps taken by this Government in recent years to the benefit of South Africa and its people.

I want to come back to the financial debate. I made the statement that the top priority was the protection and development of South Africa. Unfortunately this ideal cannot be achieved without a stable Government and a vigorous economy. Unfortunately the hon. member for Yeoville is not present at the moment but he will agree with me on this score. Indeed, last year in this same debate he raised these very matters and said (Hansard, Vol. 72, col. 917)—

By “political fall” the hon. member probably meant that the Government was going to fall, because an Opposition cannot fall. Only a Government can fall.

They cannot fall any further.

The hon. member for Yeoville went on to state what the consequences of such a fall would be—

According to the hon. member for Yeoville this would be the case if the Government were to fall, and in this regard I agree with him entirely. That is what would happen. I am pleased that the hon. member for Yeoville said this last year and I hope he stands by his words. I hope that this hon. member will also convince the rest of his party that South Africa and Southern Africa cannot afford the possibility of the Government falling.

In the endeavour to bring about a vigorous South African economy, economic and financial discipline are, to me, of the greatest importance, particularly against the background of the international conditions and prospects to which I referred earlier. I have the highest appreciation for a system of free competition because one does not wish to impose unnecessary disciplinary measures on the commercial world. Nor would one like to burden the economy with more rules and regulations than is absolutely necessary. I have great appreciation for the way in which the people subject themselves to the disciplinary financial measures which the Government, and the hon. the Minister of Finance in particular, have introduced, to the benefit of South Africa. Our public has a good record of obedience, if I may refer to it in such terms. It is true that there are certain fields in which they infringe the measures, and the hon. the Minister of Economic Affairs can attest to the fact that the public is not always obedient when he requests them to conserve fuel. There is, therefore, a difficulty, because the public does not display the necessary self-discipline in this regard. In general, however, we are a well-disciplined people. I also have great appreciation for the self-discipline displayed by various sectors such as mining, agriculture, the manufacturing industry and the service sector.

This resulted in the economy recovering to some extent in 1978 and the gross domestic product growing by more than 2,5% over the year. The ideal set by the hon. the Minister of Finance at the beginning of 1978, viz. moderate growth, has largely been achieved. The confidence of consumers in the economy has increased and consumer spending has grown by 4,7% as against the 1977 figure. In spite of this the hon. member for Durban Point maintains that our people are having a very hard time of it and that their financial situation is deteriorating. Private fixed investment has shown a negative growth rate but this must be seen in the light of the moderate surplus in production capacity which occurred in the boom years and which still exists. However, to the extent that supply levels drop as the result of a greater inclination to buy among the public and to the extent that manufacturers have to supplement these supplies, production will be stimulated and the surplus production capacities may disappear. This could lead to a revival of fixed investment.

The most important fly in the ointment at the moment, of course, is the substantial increase in fuel prices which will have a very widespread effect on the economy. This will necessarily have a negative effect on any growth. However, it is not the fault of the Government that chaos prevails in the international oil market. We had nothing to do with the events in Iran. One must be sensible and patriotic enough to accept and adjust to something of this nature when it is inflicted on one. It would be pointless for us to blame each other for this and try to score political points. That would not solve the problems. It is in this very respect that one should discipline oneself.

I still think that it is possible to convert the present difficulties—more expensive fuel— into an opportunity. The spadework has already been done. The announcement last week by the hon. the Minister of Economic Affairs with regard to the expansion and doubling of Sasol 2 to the value of more than R3 000 million, creates an opportunity for fixed investment not only by the public sector but also by the private sector.

On the basis of experience gained in the building of Sasol 1 and 2, more than 50% of the amount I have mentioned will be spent domestically. This will serve as a stimulus for the South African economy. Employment opportunities will be created since construction of this nature is labour-intensive during the construction stage. South Africa’s determination to be as self-sufficient as possible in its energy requirements will also be noted abroad, and I believe that this, too, will serve to inspire confidence, and consequently investment in South Africa will be promoted. However, this House, too, must project a spirit of optimism.

In this regard I wish to convey a sincere word of thanks to the hon. the Minister of Finance for his unfailingly optimistic view of the South African economy. His optimism and confidence are really heartening. In my opinion this has already done a great deal of good domestically and abroad. Unfortunately one cannot say this of the Opposition parties, particularly the official Opposition. From them one only gets consistently negative statements and prophecies of doom. Their newspapers do the same.

It is just bols. [Interjections.]

There is a growing tourist industry in our country. I often ask myself what image these tourists must form of us if they read the English Press every day and have to read every day how South Africa is undermined in those newspapers by the Opposition.

Reference has been made to the dilemma of dearer fuel. In this regard I want to make an appeal to the mass transport media not to increase their tariffs immediately. I believe that owing to these higher fuel prices our people will tend to make more use of mass transport. To me it is logical that if we can now succeed in keeping tariffs within reasonable bounds, there may be a general turn about and a new approach to mass transport. This would be to the very great benefit of the country. However, the mass transport tariffs must be competitive for this to occur. I think that this could be done and I consequently request the mass transport media and our private contractors not to attempt to recover their expenses immediately by allowing tariffs to increase. An increased turnover and increased transport is a better methods of covering the costs.

There are so many positive aspects which could be emphasized. There are so many opportunities in South Africa waiting to be utilized. I should like to dwell on a few of the plus factors. As against last year the revenue of the State has increased by 23%. The success of the general sales tax was largely responsible for this but it was also as a result of the improved trading figures of companies. The gold industry is experiencing the advantages of the higher gold price and this is of course reflected in the revenue of the State. A further plus factor is the fact that the Government was able to effect a net repayment of foreign loans amounting to R150 million. The hon. the Minister referred to this in his speech. A third plus factor is the fact that the average real remuneration of Black and Brown workers showed a steady upward trend during 1978, whereas the real remuneration of White workers dropped. This is a clear sign that the Government’s policy relating to the wages of Black and Brown people is succeeding. However the hon. member for Durban Point states that people’s standards of living are constantly dropping. I do not know where he gets that information from. My information is that the real income of Brown and Black workers in this country is increasing.

What about the Whites? What about the pensioners?

When looking at this specific aspect, one should perhaps sound a warning against a too rapid rise in the wages of Black people and Brown people in particular. I shall indicate why I am concerned about this. There is a trend that when employers have to pay higher wages they always look for ways of reducing staff. The possibilities of mechanization in order to eliminate workers, are investigated. One does of course want everyone to be well remunerated, but to me it is more important to employ 10 workers at 75% of the maximum wage than to employ five workers at the maximum wage while five are unemployed. Consequently I regard it as very important to progress with great care in this regard, particularly in these times of unemployment. The hon. member for Schweizer-Reneke referred to the charges of unemployment and this is not only a South African problem. I read this morning that the West European economy is saddled with six million unemployed, and they do not have our kind of problems.

There is a further plus factor which we may consider. During the first nine months of 1978, 19% more new motor cars were sold in this country. The turnover of factory production has increased by 4,5%, gold mine production by 1,5% and the production of other mining sectors by 2%.

A very important plus factor was of course the acceptance of the recommendations in the report of the De Kock Commission, to which the hon. the Minister referred in his Second Reading speech. This report reflects a very important positive spirit in the sense that the South African economy has achieved a degree of maturity which makes it possible for an independent rand to come into being. Is that a sign of weak government, if an economy develops and matures in such a way that a commission can recommend that its monetary unit be made independent? I should like to congratulate the commission under the chairmanship of Dr. De Kock on a very sound piece of work. Apart from the promotional value for the Government, it is also of great academic value, and every student of the economy ought to study it. One need only look at the content and the heading of the chapters to realize that the commission really gave full attention to all aspects of the question of exchange rates. I believe that their recommendations were intended to serve the best interests of South Africa. The acceptance by the Government of the recommendations of the commission once again attests to the fact that the Government is prepared to listen to authoritative opinion. The Government is not autocratic: it is prepared to listen to authoritative opinion, and particularly the opinion of the private sector.

I believe that the basic long-term recommendation of the commission, viz. that “a market-determined flexible exchange rate for an independent rand, subject to Reserve Bank management but with only limited exchange control” be instituted, is absolutely timely. I believe that this is a very timely recommendation which, moreover, has been accepted by the Government at a very convenient juncture. In the present international situation it is simply impossible for us to continue to be linked to the unstable dollar, either on a fixed basis or even on a variable basis. In the past there have been sound reasons for linking the rand to the dollar. However, the commission itself states that the fact that changes in South Africa’s balance of payments’ position tend to be reflected immediately from the level of the overseas reserves held by the Reserve Bank and not in the changes in the exchange rate quoted by the bank, has become such a major deficiency in this system of linking that it is very timely that we should move away from the system at this stage.

To be able to utilize the advantages of possible appreciation or depreciation of the rand—and there are cases where it is advantageous for the State to depreciate or appreciate—the commission recommended that the rand should also not be linked to a fixed basket of monetary units. Last year the hon. member for Yeoville proposed that the rand be linked to a fixed basket of monetary units. In its report the commission advances very sound reasons why this should not be done. One of those reasons is that the Government must have the flexibility to devalue or revalue when necessary in order to derive the benefit. Because we in South Africa have been compelled to impose a certain discipline on the economy, the commission was also unable to recommend free floating, but rather a controlled floating with limited exchange control. On page 21 of the report, paragraph 143, one reads—

I think that has already been quoted this afternoon, but I want to quote it again. The paragraph continues—

What does this mean in effect? It means that the commission would never have made the recommendation they did if they did not have absolute confidence in the Government, because to implement these recommendations one requires a stable Government, a Government which knows where it wants to go. The Government has maintained financial discipline in the past. It has shown that it is capable of doing so and that is why I believe the commission had no hesitation in making these recommendations.

We are already beginning to reap the benefits of the new system. Twice already the rand/dollar rate has been adjusted slightly upwards to our benefit. Importers and exporters are already experiencing the advantages of the financial implications of the recommendations. I have before me a Hill Samuel report indicating the benefits that importers and exporters are already deriving from the financial implications of this report Strengthening of the rand remains an important priority. The rand can only be made strong if the South African economy develops in such a way that a favourable balance of payments can be maintained. South Africa must sell more than it buys. South Africa must not lean too heavily on gold, because that is dangerous. Inflation must be combated, because inflation steals growth. Inflation undermines the capacity to compete at international level and has a detrimental effect on exports and our balance of payments. In order to combat inflation we must bring about higher productivity, not only in the labour sector, but also in the management sector. Indeed, it is the duty of every manager in this country to ensure that he maintains maximum production in his enterprise.

We are experiencing problems, but I am full of confidence that we shall be able to surmount all our problems with the right attitude, the right spirit of optimism and hard work.

Mr. Speaker, my time is limited, so the hon. member for Malmesbury will understand if I do not react directly to his argument. Of course, I shall deal with a number of matters mentioned by the hon. member, such as the questions of gold, pensioners, Sasol 2 and the report of the De Kock Commission, etc.

We naturally welcome the fact that our economy has shown an improvement. This could herald the golden years for South Africa’s economy and all its people, provided that everyone puts his shoulder to the wheel. The Government must stimulate the economy and encourage industrialists and dealers to expand. If necessary, more concessions must be made. It is of the utmost importance that our growth rate should be such as to enable us to create jobs for all the people who want to work. As I see the matter, the educational level of all our children would then be much higher and the earnings of all South Africans could also increase. There are people, however, who have laid the foundations of this fine country by the sweat of their brow, but who simply cannot live on their income. In this connection I am referring in particular to the pensioners. I want to make a plea for the hon. the Minister to do justice to these people who are having such a very hard time.

†This time last year, when the hon. the Minister was dealing with the then part appropriation, the gold price was more than $170 per fine ounce. Now the gold price has passed the $240 to $250 per fine ounce mark. This means an additional amount of approximately R1 400 million extra income for South Africa. Obviously the hon. the Minister cannot spend as though the gold price will remain constant at that level. It would be wise for him to exercise a degree of caution. However, together with the income from the general sales tax and exports, the hon. the Minister will be able to boost the economy when he presents his main budget. In a world developing at a fast rate, South Africa must become self-sufficient in all fields as a matter of urgency. All our people must be motivated to work harder and to produce more.

Last year, when the hon. the Minister told us that he was making an additional R250 million available for housing, we welcomed it Whilst money is plentiful, the Government and the private sector must do everything in their power to eliminate the housing backlog. This afternoon the hon. the Minister said that he borrowed an additional R250 million abroad to be spent on things like housing. I should like him to give us an indication of what additional funds over and above the normal funds he will make available for housing this year. Last year he made available R250 million and said that it would be spent over a period of 30 months. I think that today he should be able to indicate to us what is left of that R250 million. The bulk of the money which will be spent on housing will provide homes for people who will be tenants of those houses. It may be commendable that all our people are housed, but we must not create a nation of lessees. It is of vital importance that lessees be converted into home-owners. A home-owner has a stake in the future of South Africa. A lessee has naturally also a stake, but a house-owner has his foundations firmly entrenched, enabling him to stand shoulder to shoulder with all other home-owners in difficult times. The Government, the Urban Foundation and private enterprise must initiate a crash programme—in which the Government should take the lead—to eliminate the backlog of housing.

I should like to tell the hon. the Minister what the Urban Foundation had to say about the housing situation in the Eastern Cape, a situation which has reached critical proportions. They said—

In the circumstances we should like an assurance from the hon. the Minister that he will ask the Treasury to look very sympathetically at any requests from a Government department or any other agency that deals with housing in the Port Elizabeth-Uitenhage area. The money is now available and the building of houses can proceed at a much faster rate. The building of houses is an investment in the future of South Africa.

From what did the hon. member quote?

I quoted from the report of the Urban Foundation in the Eastern Cape. Economically, educationally and politically every South African must be entitled to advance to the best of his or her ability. The improved quality of life of the have-nots in South Africa is essential if we are to withstand the onslaughts from without and from within.

I should now like to deal very briefly with the report of the De Kock Commission and I should like the hon. the Minister to clarify certain matters for me. I know he went to great lengths to clarify matters in his speech introducing the Second Reading of the Bill, but as I understand it, some of the recommendations of the De Kock Commission were acceptable to the Government in the longer term and others were acceptable in the shorter term. Then I saw Press reports the Sunday before last about the Reserve Bank not implementing the recommendations as expeditiously as could be anticipated. I should therefore like to hear something about that from the hon. the Minister of Finance. I should like him to clarify this matter for us. We in these benches would like to congratulate Dr. De Kock on the work that went into his commission’s report. The new financial rand should act as a strong inducement to foreign investors to buy assets at a discount in South Africa. I should like to ask the hon. the Minister whether his department is having a special campaign of any sort overseas to encourage foreign investors and to inform them of the position, or is he merely replying on the news media to pass the information on?

Over the years we have sold our life-blood, namely gold, at a very cheap price. In the past year South Africa has received approximately R4 000 million from the sale of gold. Surely if we were to establish a gold processing industry we would have the opportunity of creating more work for many of our people and would probably double our income from gold. There again the hon. the Minister may correct me if I am wrong and tell me what the revenue figures would be if we started a gold-processing industry. Whatever gold we do not require for our own industrial use could be sold. Once it is known that South Africa will not be selling as many gold bars as before, that very fact would obviously push the gold price up. Our raw materials must be exported in a semis form which will earn us far more than the raw materials themselves do. Even though South Africa earns a great deal of money from raw materials, these should be converted into a semis form and many more of them should be processed in South Africa. This would lead to far greater industrial growth in South Africa. South Africa, its homelands, the independent states and the rest of Africa can be the best areas for foreign investments, provided the States of Africa can provide the stability that foreign investors require. South Africa has shown that it has the stability, and it has been tried and tested by foreign investors who have enjoyed unprecedented growth in their capital and have earned large dividends on the money which they invested in South Africa.

The people of the West want the quality of life improved in South Africa and in the rest of Africa. If they are sincere in wanting this, they should show that they are prepared to assist. Nobody is asking for charity from the West. For loans from the West we pay the interest that is required, and on maturity we repay the loans. The foreign investors who invest in selected projects in South Africa have received exceptionally good returns on their money. South Africa must take the lead in forming an African economic community in Africa, one like the EEC in Europe. We should and can be the dynamo of Africa. The West must be convinced that a prosperous Africa will eliminate Marxist imperialism. South Africa can and will generate funds for our own infrastructure. However, if we are to expand to the maximum of our capacity, and if we are to play a part in the rest of Africa, the West also has a duty and a responsibility in that regard. South Africa can be sold overseas, but only if South Africans stand together and speak with one voice to allow our country the maximum development. I can understand that there are differences about how South African problems should be solved, but surely on the question of foreign investment there should be no dispute amongst any South Africans about presenting the case for South Africa. All the different leaders of South Africa should assist in a vast effort to encourage foreign investment in South Africa. A leader truly interested in the welfare of his people would be only too happy to play a part in this very vital task.

I come now to another matter. The building industry is going through a difficult time. According to a meeting of the Witwatersrand Masterbuilders’ Association about 100 000 people in the building industry in South Africa have lost their jobs. They are builders, architects, quantity surveyors, consulting engineers and a host of other people in that industry who are standing with their backs to the wall. One would like to see the Government proceed with building projects on a priority basis and appoint panels of professional firms instead of one firm per project. It will cost the country no more in professional fees, but would allow many more professional people to share in the fees that are available. There is talk of more houses being built in the next 20 years than have been built during the past 300 years. There is also talk of other vast building projects. As such we must ensure that the building industry in South Africa survives and that it becomes strong and healthy. We must ensure that we sustain the building industry and those professional people.

There are many professional people who have had to leave the building industry for other business fields because of the building slump. They could no longer make ends meet. In certain parts of the world, as the hon. the Minister knows well, bond instalments are tax-deductible. If this could be introduced here it could ensure that the consumers in South Africa have far more money to spend than they have at the moment As I understand it the hon. the Minister wants to stimulate consumer spending. If he allowed bond instalments to be tax-deductible, this could be one way of putting more money in the hands of the consumer to spend. I am sure the hon. the Minister would like to see the economy stimulated by the consumer as well.

With the increase in the price of fuel, I believe, the hon. the Minister should look very carefully into the possibility of granting concessions to the motor industry. Port Elizabeth is dependent on the motor industry and allied industries to the tune of approximately 50% to 60%. We understand that the money must be raised, but the motor industry has to bear the brunt. The hon. the Minister can, for example, do away with sales duty in the motor industry and allow that industry other tax incentives.

Industrial expansion is absolutely vital in other spheres as well, and the hon. the Minister must consider a range of incentives to encourage existing industry to expand, as well as to allow new industries to develop in South Africa. Unemployment can only be contained and reduced if sufficient job opportunities are available to job seekers. In this regard the hon. the Minister has to pull all economic and financial stops to ensure that our growth rate keeps pace with the job seekers.

I should like to deal very briefly with pensioners, as one of my colleagues will also do. There are pensioners who cannot make ends meet no matter what economies they practise. It is humanly impossible for them to survive on what they receive. I should like to see that the hon. the Minister’s budget increases pensions so much that he will earn the title of the poor man’s friend of the year. [Interjections.]

A very good case has been made out for subsidies to be paid on essential foods. I hope the hon. the Minister will give his assistance in that regard as well. I am sure the hon. the Minister for Social Welfare and Pensions will join me in this plea. South Africa is going through a stage in its existence in which extraordinary calls are made on our armed forces and on our police. They are being called upon to make sacrifices, which they very willingly make. They often have to work under tremendous strain and pressure and often run the risk of losing either life or limb or both. Their families naturally suffer with them in all the sacrifices they have to make. It is expensive to train those men, especially those who remain in the Permanent Force. That is why it is with a sense of alarm that we saw in answer to a question that 3 377 men joined the Police Force in 1978, while 2 172 men purchased their discharge. These figures should be analysed, because I am convinced that the bulk of the people are leaving because of insufficient pay. To train 2 172 men must cost an enormous amount of money and it is a most disturbing feature that people who dedicate themselves to a difficult life, become disillusioned so very soon. We must undertake an in-depth investigation into the reasons for their leaving and then take the appropriate steps.

The hon. the Minister of Justice has recently announced that further assistance would be forthcoming. That is welcomed, but it is not enough. We have no doubt that the reasons are mostly financial. We want to ask the hon. the Minister of Finance why he does not adopt a more realistic attitude. The hon. the Minister of Finance has a responsibility to see that his budget provides sufficient money to ensure that the policemen of South Africa are adequately rewarded for the most arduous task they perform during the most trying times.

The SAP has always held the view that the Army, Navy, Air Force and Police Force should be free from the limitations of the Public Service Commission. In this way, these men and women, who are working under great stress and strain, can be assured that their efforts will be recognized in the best way possible.

The hon. the Minister of Economic Affairs has announced the extension of the Sasol scheme which envisages an expenditure of approximately R3 200 million. Besides being an act of faith for the future, this project is also an absolute necessity in view of the problems of the oil world at present. This project must also on completion result in the saving of foreign exchange running into hundreds of millions of rand a year. We welcome the fact that private enterprise is going to be invited to participate through shares being offered. It is also important that the public be given an opportunity of participating in what may turn out to be one of our greatest undertakings.

The hon. the Minister has a wonderful opportunity and he has the money available to ensure greater economic stability. The Government must now take the lead which private enterprise must follow. From what I said earlier it is obvious that we are not satisfied with the treatment meted out to certain sectors or with the Government’s handling of certain facets of the economy.

There is one other matter I would like to raise. I want to direct a special appeal that major electrification schemes, such as those for Soweto in Johannesburg and New Brighton in Port Elizabeth, be gone ahead with as a matter of extreme urgency. In the circumstances I would like to move the following further amendment—

1. (1) to place South Africa on a sound economic basis;
2. (2) to assist in solving our energy problems by providing financial and tax incentives to promote investment in energy-saving facilities;
3. (3) to make substantially more funds available to assist the building industry and those dependent upon it;
4. (4) to adjust the means test and to pay pensioners sufficient to enable them to meet the ever rising cost of living;
5. (5) to free the Army, Navy, Air Force and Police from the salary limitations of the Public Service Commission; and
6. (6) to investigate the feasibility of establishing industries to ensure that South Africa will reduce its exports of raw materials.”.

Mr. Speaker, the hon. member for Walmer put certain questions to the hon. the Minister, questions relating chiefly to local housing, the motor industry and the interim report of the De Kock Commission. I believe that when the hon. the Minister delivers his reply he will reply to the questions in full.

During the Third Reading debate of the Appropriation Bill on 6 June 1978, the hon. member for Yeoville came to light with the following amazing statement (Hansard, Vol. 74, col. 8607)—

The hon. member then continues to expound the ideology in greater depth. What this amounts to is that the future of South Africa, according to the hon. member, can be saved with the aid of the ideological basis which he defines as social democracy. He then sets the following three requirements: In the first place, in the political sphere, democracy must be furthered as against tyranny. Secondly, in the economic sphere the system of enterprise should be promoted as against communism. Thirdly, in the sociological sphere there must be equal opportunities and protection for all.

Before going on to analyse these requirements, I must admit that one of the most remarkable statements the hon. member for Yeoville has ever made in this House is that he believes that South Africa’s cause has an ideological basis. Has that not been one of the most important charges levelled at the Government over the years? For example, the former hon. member for Cape Town Gardens, Mr. Van Hoogstraten, put it as follows on 4 February 1977 (Hansard, Vol. 66, col. 777)—

He refers here to the rules of free enterprise—

Do you still stand by that?

Now the hon. member for Yeoville comes along and also advocates an ideological basis. There is probably little fault to be found with the setting of democracy against tyranny except that in the African set-up—and we are and form part of Africa—there are few signs of successful democracies, let alone the Westminster system of government. For South Africa, with its rich diversity of peoples, cultures, languages, beliefs, etc. it is obvious that this absolute form of democracy does not offer solutions to our problems. In the light of a population structure of which such a large component, approximately 68%, may be regarded as consisting of people of the Third World and of which the cultural groups are often contrasted on the basis Western/non-Western, this in my opinion amounts to an over-simplification of the problem.

It is particularly in the phrasing of the economic side of the concept of “social democracy” that he displays logical contradictions on the one hand and a utopian vision on the other. He clearly associates himself with the idea of the free entrepreneur, the old liberal economic philosophy which is based on the point of departure of mutual competition, or, more accurately stated, “survival of the fittest”. According to him there is an automatic force in the economy in that the individual, in seeking to further his own selfish interest, at the same time furthers the common interest, in other words the interests of the community. It is this very liberal philosophy with which the PFP and the economic interests and forces behind the PFP are so closely associated. Did the hon. member for East London North not reply on 6 June 1978 to an interjection by the hon. member for Yeoville to the effect that he was a 19th century capitalist by saying (Hansard, Vol. 74, col. 8625)—

Who would know better than the hon. member for East London North? Moreover, the Opposition kicked up a tremendous fuss about Dr. Wassenaar’s book and condemned virtually all interference in the economy by the State. The then member for Cape Town Gardens had the following to say in this connection (Hansard, Vol. 77, col. 778)—

He goes on to say—

He concludes by saying—

In the same debate the then member for Randburg, Mr. Enthoven, who was a Prog member, said (col. 792)—

He went on to say (col. 793)—

This is also the idea of the old liberal philosophy of “that government is best which governs least”. Therefore, in spite of the economic philosophy underlying the PFP, particularly in regard to State interference as I have now proved beyond doubt by quotations from Hansard, the hon. member for Yeoville comes along and advocates full employment, equal education facilities, equal pensions, protection from exploitation and protection of equality in bargaining power. This is protection which surely cannot be provided by anyone but the State. Therefore, when for the sake of political opportunism it suits the PFP, they condemn State interference, but when they are advocating equality in many spheres, and even its protection—which is in any event a utopian view—then State interference suits them very well.

According to the hon. member, social democracy would in the first place mean full employment. This is also a concept formulated by the founder of liberal philosophy, Adam Smith. Today, however, it is general knowledge that full employment is merely a theoretical concept. Moreover, the free market mechanism alone will not ensure full employment, and the State, too, must restrict unemployment to a minimum by stimulation of the economy. Indeed, that is what the hon. member requested in today’s debate. Social democracy would mean that people would be cared for when age and illness led to an incapacity to look after themselves.

This idea of the hon. member’s also contrasts with that of his party. This concept virtually amounts to that of a welfare State. It is something which the PFP surely does not wish to advocate. In a capitalist system, provision for this is largely the responsibility of the individual himself and the State must only step in in extraordinary cases. This idea of equality is taken to extremes when the hon. member maintains that there must be movement between the capitalist, viz. the possessor of capital, and the worker. Is that not synonomous with the egalitarian ideal of Marxism? Is a redistribution of wealth not the old acknowledged slogan of the official Opposition? Social democracy is a pure form of socialism. What is happening in Europe today? What is happening in Britain today under a Labour Government? Private initiative and incentives are being stifled. Where social democracy steps in, the trade unions reign supreme. Hon. members saw that last night on television. The entire British economy is paralysed by go-slow strikes. Is it not ironic that in a civilized country like Britain, which is a comprehensive welfare State, grief-stricken people are not able to bury their dead? The lives of helpless people and people who are seriously ill are threatened by strikes. The entrances of hospitals are blocked so that ambulances cannot respond to emergency calls. Even schools have to close. However, the hon. member states that this system should be set against that of Marxism. However, in practice, if one looks at the countries which practice various forms of social democracy, one reaches the conclusion that precisely the opposite trends are being revealed there.

I should now like to quote what Mr. Stephen Mulholland said in the Sunday Times of 11 February 1979—

I stress—

However, the hon. member really takes the cake when he argues that a just system of merit will give rise to political solutions, as if equalization in the economy would at once eliminate all the other difficulties, for example the cultural, religious, numerical and other factors. Drawing people into the economic stream on this basis will certainly not automatically bring about a political solution. It would really be naïve, within the complexity of the South African question, to leave the solution of the political question to the economy.

In conclusion, therefore, it must be said that the hon. member is advocating for South Africa an economic system which does not correspond with the points of departure of his own party nor with those of the economic interests and forces behind his party. Clear evidence of this is the fact that none of these ideas are contained in the new fundamental principles of the PFP as expounded in the December edition of Deurbraak or in the “South African Bill of Rights” of the hon. member for Bezuidenhout. It is also a typical example of the problem of the PFP that they want to put forward utopian solutions to South Africa’s problems which can be contained in fine-sounding slogans. I could mention the following, inter alia; Full and equal citizen rights for all South Africans; an open community; equal opportunities; free movement; the rule of law; and, last but not least…

Mr. Speaker, on a point of order: Is the hon. member entitled to anticipate a matter which is on the Order Paper and still have to be debated? [Interjections.] I refer to the motion on the Order Paper by the hon. member for Bezuidenhout.

Order! I do not think the hon. member is discussing the item on the Order Paper relating to a Bill of Rights.

Mr. Speaker, I think that the hon. member is merely getting hurt. That is why he reacts in that way. The final slogan to which I wanted to refer before being interrupted was that of social democracy. What, however, do they wish to achieve thereby? They want to try and create an impression. However, if the slogans are analysed critically they are found to be merely hollow-sounding words with little practical value. What is very important is that elements contained in them promote those very things which we must combat.

Over-simplifications, simplistic solutions and fine-sounding slogans, at which the hon. member for Yeoville is a past master, will get us nowhere.

Mr. Speaker, the hon. member for Smithfield devoted most of his speech to a critical appraisal of the hon. member for Yeoville. The fact that he devoted most of his speech to him, is proof of the admiration he has for him. It seems to me that he reads and analyses the Hansard of the hon. member for Yeoville regularly. When I looked up Hansard of 1978 a while ago, I noted that the hon. member for Smithfield expressed his admiration for the hon. member for Yeoville last year as well, because most of his speech in 1978 was also devoted to the hon. member for Yeoville. Mr. Speaker, forgive me if I do not take that controversy any further. I want to speak about something else which in my opinion is very important, i.e. the growth rate in South Africa.

†Mr. Speaker, I make no apology for speaking about the growth rate in South Africa because I have this in common with the report on the 1968-’71 economic development programme, a report I am about to discuss, which is very largely devoted to the question of growth. I should like briefly to examine some of the growth trends in the South African economy.

You are going back a bit in history.

No, I meant to say 1978-’81. I am trying to go forward. I want to compare the growth trends with the expected population growth rate and the consequent demand for economic employment. I also want to identify the reasons for our failure to maintain economic growth at a sufficient rate to accommodate the demands of our people. In doing this, I shall rely on statistics from the Bureau of Statistics, the Reserve Bank’s Quarterly Bulletin and die statistics in the economic development programme.

The Economic Advisory Committee of the Prime Minister makes it clear that the economic development programme is not a forecast but a study of potential growth. When it examines the potential for South Africa, it comes to the conclusion that in the period being studied, viz. 1978-’81, the maximum potential realizable is 5%, i.e. a 5% per annum growth of the gross domestic product. It goes on to point out that that rate of 5% is also the minimum at which we can accommodate the requirements and, particularly, the employment requirements of our people. It points out that, in spite of the fact that 5% is the maximum we can expect and the least we can do with, our growth rate in the period 1978-’81 is in fact not going to be achieved, but that at best we will achieve a growth rate of 3% over that period.

Assuming that a growth rate of 5% could be achieved, there would be a small percentage drop in unemployment but at the same time, due to the expanding population, an absolute increase in the actual number of unemployed from 492 000 in 1975 to 552 000 in 1981. That would be the position if we were to have a growth rate of 5%, which we are not going to achieve. Taking the average figures from 1978 onwards and using the figure which the hon. the Minister, I think correctly, mentioned in the House this afternoon of 2½% for 1979 …

2½% for 1978.

… 2½% for 1978 and a little higher for 1979, if we can achieve a 3% average for the period under discussion, we shall be doing moderately well. The employment pattern relates directly to the gross domestic product. In the economic development programme it is calculated that, if in respect of the economically available population, i.e. the people who can work, the growth rate is 2,7% and this is matched by an equal rate of employment so that everybody who comes onto the market is employed; and if it is further assumed that the per capita gross domestic product can be increased to 2,2% per year, then multiplying out the factors of 2,7 and 2,2, one sees that the gross domestic product can grow by 4,96% per annum.

It requires these two assumptions to achieve something approaching 5%. Let us examine this proposition. Can we achieve either of these things? We will certainly not be able to do so. The population growth rate of economically active people will be 2,7%. This seems to be a fairly certain projection. However, more questionable is whether we can raise our productivity level from 1,9% to 2% per annum. Firstly, in the economic development programme it is assumed that there will be a net immigration of 30 000 Whites per annum—that is one of the bases from which they operate—and that the number of contract labourers from adjoining or adjacent Black territories would decrease at an average rate of 5% per annum.

There is a second proposition. It is assumed that because of this and other factors, the gross domestic product per worker will grow from the low rate of 1,9% for the period 1970 to 1975, to an average of 2,2% per worker for the period 1976 to 1981. But in fact the gross domestic product per worker in the period 1976 up to today, halfway through the cycle of the period 1976 to 1981, has remained virtually static.

The two assumptions to which I have just referred, are clearly not valid. Far from achieving a net gain of 30 000 immigrants per annum, our immigration rate is virtually zero. Even if the number of Black contract labourers from the Black neighbouring States could be reduced by 5% per annum—an assumption in the programme—the consequent poverty in those States—which fall within the same customs and monetary area as the rest of South Africa—would not be disposed of by political separation or by the statistical device of excluding these figures from our own economic returns. The politics may possibly be divisible, but not the economics.

Our economy urgently needs productive stimulation. Skilled workers are becoming scarcer in relation to our needs while unskilled workers are becoming increasingly unemployed. For every White immigrant and his family who will no longer arrive, our urgent economic growth requires one or more skilled Black workers—inevitably accompanied by their families—to make good the deficit on immigration.

Let us look at what is actually happening in South Africa. As an example I want to refer to the important manufacturing sector, to the projected employment figures for 1981 in the superior grades of the manufacturing sector. In this respect I am referring to professional people, managerial staff, foremen, supervisors, artisans and apprentices, i.e. the future skilled people. Whites will constitute 19,5% of the manufacturing sector and will occupy 56% of the superior grades in that sector. Coloureds will constitute 16,7% of that sector and will occupy up to 9,8% of the superior grades, including artisans, apprentices, etc. Asians will constitute 5,4% of the workers in that sector and will occupy 9,9% of the superior grades in that sector. Blacks will constitute 58,4% of that sector and will occupy 2,3% of the superior grades in that sector.

These figures need examination. They are familiar in the South African context, but we have to look at their meaning. Based on figures from the Bureau of Statistics, the FCI gives as the reason for the under-utilization of South Africa’s production capacity, the following: shortage of raw materials, 6%; shortage of labour, 4%; and insufficient demand, 86%. Insufficient demand therefore is the cause for the under-utilization of our capacity. Why do we have this underutilization of capacity? One reason I can suggest is that if 58,4% of the manufacturing sector is supplied by Black people and only 2,3% of them are in the higher paid occupations in that sector, how can South Africa develop a sufficiently strong domestic demand? How can there be disposable income for those people to create a growth impulse which will lead to a strong internal economy? The thing is inherent; it is structural; it is built into the system. The economic development programme—which provided these figures—concludes mildly, and I quote—

These analyses were made before the recent events in Iran and the failure of our contractual oil supply. Our transport sector, and thus our whole economy must now face petroleum shortages, higher prices, cuts in production and a massive shift in capital investment to local energy resources. In fact, our priorities must undergo fundamental change. Economics, more than ever, must govern the pace and the style of political change in South Africa. The drastic adjustments of which the economic development programme speaks are doubly urgent now and we can no longer tolerate the slow slide into net negative growth, unemployment, under-utilization of human resources and the direction of capital in terms of political aims before economic essentials. I want to give a rather striking example. I believe that if land consolidation, which has its merits, means the replacement of productive resources—capital and labour, skills and capital—by unproductive resources, then land consolidation is quite simply economic sabotage. We must survive, we have got to survive and grow economically. All of us—everyone in this country—before we speak of survival in political terms or the survival of separate identities, must realize that we shall grow poor separately if we do not work more productively together. This is the meaning of the economic development programme measured in terms of current figures and current statistics.

We need a new order of priorities; we need an end to complacency and a radical review of the real elements of our survival. We need a political commitment. I believe in an open five to 10 year contractual programme of reform, an open public commitment that can command the confidence of both of our own people—Whites, Black and Brown—and of the rulers and investors of the Western countries with whom we associate. We need a national convention of all our people to work out such a charter of our common needs and our common aspirations. With such a document firmly agreed and firmly intended, we would have a negotiable instrument of credit which we could use to draw foreign support and capital, in advance, for our future needs.

These conclusions are not mine alone, nor my party’s alone. They are clear and mandatory to anyone who seriously studies the trends and statistics of the Government’s own financial publications. All who wish to find these answers need only to look, to read and to think. Each five-year cycle of the economic development programme now accumulates a growing backlog of deficiencies, a growing backlog of unfulfilled essentials. Miracles grow less and less likely as we fall behind the programme. The radical options can no longer be deferred to some other time or to some other place. If the choices are not made now it will soon be too late. When we come to this House to conduct a financial or economic debate it is not sufficient merely to look at the statistics or at the trends, merely to suggest economic remedies for economic ills, without considering the deep implications these have for our country.

I believe that the economic development programme is a guide to our own future, a guide to our own deficiencies, a warning to us all and an alarm signal throughout, in that it shows what minimum is attainable by South Africa, what can be done in certain conditions. It clarifies those conditions. It tells us what must be done if we want to achieve these things. However, it bears the grim lesson, right in the heart of it all, that we are not achieving the minimum, that we are not going far enough. We are not busy with the filings we need to do in order to ensure South Africa’s survival. We are falling behind each year, and the more we fall behind the less likely are we to catch up.

The price to be paid will be paid in human terms. It will be paid in political terms. When I say to this House that this economic debate is more than an economic debate, that it is also a political debate, I believe that this is so because South Africa has reached the stage— compounded by such things as file energy crisis—in which we can no longer separate our political aspirations, our political ideas, from the realities of the economic scene.

Mr. Speaker, like a refrain throughout the entire debate we have heard from the Opposition this afternoon that the Government should stimulate the economy in such a way that there will be sufficient employment opportunities for all our people. The hon. member for Constantia raised a few new factors. He said that to make this possible, more emphasis will have to be placed on the endeavour to provide better schooling for the Black labour force. Like a refrain throughout the entire debate we have heard the story that the Government should see to the creation of employment opportunities for all our people. Perhaps the only exception was the hon. member for Durban Point. He took such a delight in what he hoped was the disintegration of the NP that it almost seemed as if he foresaw the possibility that he might come to power one of these days. Unfortunately the hon. member for Durban Point is not present at the moment. I should have liked to tell him that he has already stood at the grave of the old United Party and that it would not amaze me if he stands by the grave of yet another political party in his lifetime. Long before the NP has totally disintegrated—as he suggests—he will stand by the grave of another party.

The two speakers of the official Opposition and the speaker of the SAP said a great deal to the effect that the Government must see to it that employment opportunities are provided for all our people. However, there is one factor which they all fail to bear in mind. The hon. member for Constantia said that the targets of our economic development programme are far from being achieved because we need a growth rate of at least 5% to provide work for all our people, whereas we are achieving a mere 3%. However, there are two remarks I want to make in connection with the statements of hon. members opposite. The first is that it is not the exclusive duty and function of the Government to see to employment opportunities. Our entrepreneurs must also lend a hand. They will do so, too. The Government is doing a tremendous amount to create and stimulate the necessary employment opportunities.

However, there is a further factor to which hon. members of the Opposition, with their sickly sense of distorted humanism, never referred. It is the following. If we are only able to achieve a 3% increase in our economic activities, then there is another method whereby we can ensure that employment opportunities exist for all our people. This is an aspect they never touch on. I refer to the aspect of proper family planning. If we take note of the fact that the birth rate for Whites showed a drop of 26,9% between 1960 and 1976 whereas in contrast, the drop in population growth among Blacks was a mere 8,4%, we realize immediately that this is an important factor. If the growth rate among the Black population were to reveal the same tendency as that of the White population, it would not be necessary for us to maintain a growth rate of 5% in order to create employment opportunities for all our people. This is a factor which is totally ignored by hon. members opposite. They do absolutely nothing about it. Without doing that we can never create employment opportunities for all our people. We cannot simply have an uncontrolled rate of increase in a certain part of the population and then expect the Whites, who are a minority, to continue to ensure that the product of that uncontrolled increase should always be given employment opportunities.

Until the official Opposition and the other Opposition parties in this House perceive this fact and assist in the solution of these problems we surely cannot expect of the Government simply to continue to provide. As hon. members on the Government side have indicated very clearly in this debate, the Government has done a tremendous amount to stimulate the economy. Hon. members opposite contradict themselves, however. Indeed, the proposed amendment by the hon. member for Yeoville attests to this. I take it, of course, that the wording of the amendment is not his own but that of his party. I quote from the hon. member’s proposed amendment—

1. (b) The economic welfare and advancement of all South Africa’s people;
2. (c) that South Africa returns to a rate of economic growth sufficient to combat the present and anticipated unemployment…

That is exactly what I have been referring to. These things cannot be achieved merely by stimulating the economy. On the other hand it must also be seen to that there is not an uncontrolled increase among a certain part of the population. However, let us forget about that now. We can just take a brief look at the effect of paragraph (c)—

It is very easy for a Government to stimulate the economy to such an extent that employment opportunities are created for one’s people. What does this entail, however? It is self-destructive, since the method of stimulating the economy so that employment opportunities can be created for everyone, is to increase the money supply and credit so that entrepreneurs should have the necessary capital to create further employment opportunities. To the extent that this is done, however—to the extent that tax concessions are made and all these things are done to increase capital, one is very rapidly depreciating the value of the monetary unit. Indeed, the hon. member for Yeoville spelled it out very clearly that it is our elderly people, our pensioners, that are particularly hard hit by a high rate of inflation: However, to be able to achieve what that hon. member and other hon. members of the Opposition require, namely an increase in the money supply by the methods I have indicated, the inflation rate must necessarily be pushed up and the value of the monetary unit reduced.

This phenomenon is not confined to South Africa. Far from it. The hon. member for Yeoville referred to devaluation which supposedly reduced the value of our monetary unit. However, I have with me the official figures of the IMF as processed by the economists of CITIBANK. They show clearly that if one allocates an index of 100 cents to 1967, then during the period of 10 years from 1967 to 1977, the rand’s index has dropped to 47 cents. Therefore the value of the rand dropped from 100 cents in 1967 to a mere 47 cents ten years later. The hon. member for Yeoville will immediately say: “See, there you have it. How can our poor and retired people come out on their money and how can they still lead a decent life?”

I have said that this is a phenomenon which is not confined to South Africa. I could quote a few examples of the position in other countries. It is true that the index of the USA has dropped less than South Africa’s index, from 100 to 55, but in Australia, which is more comparable with South Africa …

Mention the figure with regard to Germany.

I shall tell the hon. member what happened in Germany. In Germany, the index of 100 dropped to 62. In the meantime, however, West Germany has had two revaluations. There are only about five countries in the world where this devaluation has been greater than in South Africa. [Interjections.] Let me give the hon. member a few more examples. In Australia the drop was from 100 to 44 and in Japan it was from 100 to 41, viz. substantially lower than in South Africa.

And Paraguay?

In New Zealand—perhaps that is a more comparable country—tire figure has dropped from 100 to 39 as against South Africa’s 47. I could continue mentioning such examples. In developing countries like Brazil the index of 100 in 1977 has dropped to a mere 10. There are three other countries viz. Chili, Uruguay and the Argentine, where the figure of 100 in 1967 is not even one in 1977. Can hon. members see now that we have always been in the best of company? Consequently other methods must be sought and implemented to counter this problem, but I shall refer to this matter again a little later in my speech.

It is generally accepted that over the past financial year the State has gathered a substantially larger amount of revenue than it budgeted for. The hon. member for Malmesbury mentioned the figure of 23% and I do not want to mention a specific figure but everyone accepts that the State has collected substantially more than it budgeted for. The most important source is probably the higher gold price, but that is not the only source.

Consequently I can congratulate the Government, the former Minister of Finance and the present Minister of Finance on their policy of subsidizing the marginal goldmines to enable them to continue producing, because the moment they stop producing they fill with water and it costs a vast sum to get them going again. Consequently, in my opinion, it was a very sound Government policy to subsidize those marginal goldmines to enable them to continue producing until the gold price rose again. Now that the gold price has risen so considerably, the Government, and South Africa as a whole, are reaping the fruits of this sound policy. Moreover, the moderate recovery in the economy has also contributed towards increasing State revenue. The State having received so much more, people are now queuing before the door of the hon. the Minister of Finance with their requests, and each maintains that his request has greater merit than that of the next man. The hon. the Minister of Finance is now being pressurized to give a hearing to all these requests.

During the previous major economic revival, from 1967 to the first half of 1969, the Government, including those of us sitting on this side of the House, learnt our lesson not to go on a so-called spending spree when large amounts of revenue were received by the State. Moreover, the Government will definitely not do so now, because since the hon. the Minister of Finance took over the department he has announced a financial policy of stimulation with strict discipline. It is a rule of life with him, viz. stimulation of the economy with strict discipline. I want to congratulate him on it, because look at the benefits it entails for South Africa. Nor do I believe that he and the Government as a whole will permit a spending spree; he will determine his priorities correctly, because now more than ever before is the time to get our priorities right. The hon. member for Yeoville also referred to that, but he gave no indication of what he meant thereby. He gave no examples of such priorities. He merely said that the Government should now get its priorities right.

In all humility I wish to furnish a few examples of these priorities. First and foremost is undoubtedly the necessity for major expenditure in order to deal with file oil crisis. I offer no apology for the fact that very heavy expenditure will be incurred, expenditure which must be financed from file greater revenue which has accrued to the State over the past year and will perhaps again accrue to it in the next financial year to deal with this oil crisis. Dealing with this oil crisis is surely priority No. 1. And then, too, there is another priority which I regard as vital, and that is that we must now settle, once and for all, the purchase of land in terms of the provisions of the Bantu Trust and Land Act of 1936 to bring about better and more meaningful consolidation of the Black States. The longer this is delayed, the more expensive it will be. Let us get finished with it for once and for all so that we can go on to consolidate meaningfully in a different way. Thus far, and until the promises in terms of the Act of 1936 concerned have been honoured, this means that the State purchases land from individual owners and gives it to the Blacks as a present. It is not merely a case of us simply not being able to afford it, but also that it is not good for the people who receive it, because if ever there was a case where the saying “easy come, easy go” applies, it is this. I myself have seen what has become of the extremely productive land in various homelands, land purchased from White farmers and given to the Black States as a gift. Easy come, easy go. That is why I say that we must now get finished with the purchase of this land before it becomes too expensive. After that we can bring about meaningful consolidation on a different basis, by exchange or by purchases by the Black States. I agree entirely with the hon. the Prime Minister that more meaningful consolidation must be investigated. But it must be on a basis different to what hon. members opposite expect, viz. that the White Government must purchase all the land from White farmers and give it to the Black States as a gift. We cannot afford this, nor is it good for the Black States themselves.

Once these two vast and important priorities have been dealt with, the hon. the Minister of Finance can argue that there is no money left for other projects. I take it that there are projects that are already in the planning stage and that will now have to wait because these two vast projects will consume so much capital that not much will remain for other projects.

Mr. Speaker, may I, as a Western Cape man, bring another project to the attention of the hon. the Minister of Finance, one which is of the greatest importance to us in the Western Cape. We are grateful that the hon. the Minister of Economic Affairs has announced that a diesel factory is to be built at Atlantis. To the extent that the private sector grants more assistance in regard to the financing of the expansion of Sasol 2—as announced by the Government—and to the extent that they contribute towards the development of the diesel factory at Atlantis, there will perhaps be money over to continue with the project on which the Government decided two or three years ago, but which was then postponed, viz. the semis factory at Saldanha. This linked up with the diesel factory at Atlantis, because where is the steel for the diesel factory to come from? If it has to come from the north of the country at a high rail tariff, the diesel engines will necessarily cost more than do the diesel engines that we import at present. If we were to continue with this semis factory project at Saldanha and eventually develop it into a full-fledged steel factory, the steel for the diesel factory and many others that will be established in that area, particularly those near the coast, so that the products may also be used for export—could further stimulate the economy of the Western Cape, which is fairly stagnant at the moment. The hon. member for Moorreesburg will elaborate further on this theme.

I want to deal with the fourth priority on the priority list of the hon. the Minister of Finance, viz. that large group of people, the pensioners. Here I include not only the social pensioners and the civil pensioners but also those people who live off their own savings, those people who have their own pension funds, and the rentiers. This fourth priority on the list has many supporters. As previous speakers on this side have said in the course of the debate, the Government has a clean record as regards its handling of pensioners. Hon. members on the other side of the House shook their heads and denied it, but not one of them could prove it with chapter and verse. I am going to prove how clean the record of the Government really is in regard to the pensioners. In the ten years from 1967 to 1977 the value index of the rand dropped from 100 to 47. Over the same period the social pensions increased from R31 per month to R79 per month, an increase of 155%. How, then, can hon. members say that as far as this is concerned the Government does not have a clean record? Are hon. members stupid or merely wilful when they make such statements? [Interjections.] I take it that it is out of ignorance. Hon. members of the Opposition do not look at the figures and their memories are very short as well. They no longer remember what the figures were in 1967. In 1967 it was R31 per month. [Interjections.] I do not even want to talk about 1948. Then the amount was R10 per month. Under the old UP policy there was not even one increase, but I do not want to blame the official Opposition for that now because the party that was responsible for that was buried a long time ago. In the last five years—I do not even refer to the last 10 years—civil pensions have been supplemented by 53% from the State coffers.

I now want to leave aside the issue of pensioners, and confine myself to those people who live off their own savings, the people who look after themselves. If we do not look after them we shall destroy the sense of thrift among our people. If someone has looked after himself and provided for his old age and, on retirement, has to find that he is worse off than a person who has not made such provision, what incentive is there for him and for those who have not yet reached that stage, to continue to save? For that reason I want to make another plea for this fourth man standing before the door of the hon. the Minister of Finance, viz. the man who provides for himself, the man who has his own pension scheme or lives off his interest. While interest rates were high these people could still get by to a certain extent and live reasonably well, but over the past five months—not five years—interest rates on fixed investments have dropped by an average of 1,5%, with the result that the income of the man who has provided for himself is now 1,5% less titan it was five months ago. He cannot supplement this by means of additional contributions to his pension funds as in the case with civil pension funds where the State supplements it. What is the poor man to do then? There is only one way in which the hon. the Minister of Finance can accommodate these people, and that is by way of a tax rebate. [Time expired.]

Mr. Speaker, last year during his budget speech the hon. the Minister of Finance stated, inter alia (Hansard, 29 March, 1978, col. 3357)—

Furthermore he stated—

In the course of my speech I want to deal with these two aspects—in the first place the limitations and, in the second place, financial discipline.

My aim on this occasion is not back-scratching or rolling out the red carpet. However, without beating about the bush I want to state that the measure of success which has recently been achieved in the field of finance, would not have been possible but for the dedication and the positive guidance of the hon. the Minister of Finance. I want to state categorically that he has succeeded in a responsible way in taking the lead in this regard with the assistance of his capable officials.

Like the rest of the world, particularly the Western world, South Africa has been navigating in troubled economic waters and we believe that this voyage has not yet been completed. There has been a high inflation rate, an inadequate growth rate and, at one stage, a shortage of foreign capital and investments. The hon. member for Parktown is unfortunately not present, but I want to remind him of his words last year, when he stated: “It is not safe for private enterprise to invest in South Africa.”

Oh dear!

The hon. member should not react in that way. This remark by the hon. member for Parktown was harmful to South Africa. One can only wonder what has happened in the meantime to warrant his having a different opinion—or is that still his opinion? Has his confidence in South Africa at least been restored by this time or does he still feel concerned about the flow of capital to South Africa and about the negotiating of foreign loans amounting to R250 million, which was negotiated recently? We on this side of the House wish to thank the hon. the Minister for the confidence he has instilled in the South African economy.

Financial discipline has borne its fruits. The irresponsible playing at Father Christmas reflected in the speech of the hon. member for Yeoville today, is course for concern. It is easy to give, to promise increases and to make an appeal for certain benefits. Any hon. member in this House can make an irresponsible promise. The question is whether a quid pro quo can be given in a responsible way in order to carry out those promises. Without accepting the responsibility of providing a quid pro quo, such promises cannot be made.

Now that the fruits of the levying of the general sales tax are being reaped, the hon. member for Yeoville wants to use them to dish out presents. Last year he strongly condemned this indirect way of collecting taxes. This is what he stated (Hansard, 3 April 1978, col. 3706)—

He was referring here to the general sales tax. According to the hon. member it was, therefore, not the right time to implement this sales tax. I want to state categorically: If we had listened to the official Opposition last year and not taken these steps, what would the position of our Exchequer have been? Would the hon. member for Yeoville in that case still have been able to make such reckless promises as he did this afternoon? Now he is taking advantage of the effect the tax has had on the Exchequer, but he should actually tell the voter that he would not have had the income he has now if it had not been for the implementation of this general sales tax.

I think it is also necessary that we recognize certain facts. I should particularly like to bring these facts to the attention of the dealer. I am afraid that a price psychosis, as I want to call it, has developed among South Africans. At this point, therefore, I want to turn to the dealer in particular. If one makes a brief study of the figures with regard to the consumer price index, one finds them a matter for concern. I want to join the hon. member for Malmesbury in making an appeal for an open economy. I think it is essential and that it will be a good thing if it can be established. However, if one examines the increase in the prices of consumer goods, particularly ordinary household items such as food, one asks oneself whether price increases have not surpassed all reasonable limits. I shall attempt to prove this. Is a trend not developing for automatic and natural price increases to be built into our retail goods? The consumer is being conditioned by the fact that prices will simply continue to increase, sometimes without certain factors being present to justify such an increase. Price increases have already become a habit in our household.

Last June the general sales tax was implemented. It would obviously have an influence on the prices at the point of sale. Everyone expected and foresaw this. Everyone expected that prices would increase, and accepted in all fairness that they would increase by at least 4%, or even a little more. However, if one examines the available statistics, the picture is not such a pretty one. I just want to quote statistics in respect of recent food prices.

Taking the available figures of the Department of Statistics, one finds that since the base year 1970, when the index was 100, we have had a constant increase of prices fluctuating between 18 to 22 points above those of the previous year. For the years 1974-’75 the increase was 153,1 to 174,4, in other words an increase of 21,3. For the years 1976-’77 the increase was from 189,4 to 207,5, in other words an increase of 18,1. If one examines the months January 1978 and January 1979, one finds an increase of 21,9. If one examines the figures for March during the corresponding years, one finds an increase of 22,9. During July, however, one finds a drop as a result of consumer resistance. This was of course built in, because the general sales tax was implemented during that month. The figure for that month, therefore, is not a true reflection of the consumer price index. During July the increase was 13,9. After that we arrived at the problem which I want to spell out here. During August 1978 the index figure was 212,2 and during August 1979 it was 242,2, an increase of 30 in that case. During September the following year, it was 211,8 for 1978 and for September 1979, 246,4, an increase of 34,6. I want to assert that as the information for the other months becomes available, the same tendency will continue.

Not only do the dealer and the manufacturer have a responsibility towards the consumer, they also have a responsibility towards South Africa. Therefore, I want to appeal to organized commerce and organized industry, to effect the essential price increases with greater responsibility and caution and not to abuse the increase in prices of inputs in order to impose a higher price.

I want to come back to what the hon. member for Yeoville said. As far back as 1976, (Hansard, col. 4572), he stated the following—

In col. 4573 he went on to say—

He then concluded and reached the following conclusion (Hansard, cols. 4573, 4574)—

He went on to say—

It was Yeoville’s prophet of doom who made these statement in 1976. Now I want to challenge him to tell us whether the statement that the hon. the Minister had not read the economic tendencies correctly, is true. I want to tell him at once that he acted totally recklessly and irresponsibly when making this statement.

The De Kock Commission is my proof.

Is the hon. member still questioning the bona fides of the hon. the Minister? Is he still questioning the economic patriotism and optimism and the confidence which the hon. the Minister, the Government and this side of the House have in South Africa? South Africa is on the road of economic growth and stability, and irresponsible and reckless mistrust on the part of the official Opposition will not force us from our course.

Financial discipline with sound growth will remain the aim of the Government. The demands facing South Africa on the road ahead, will be exacting and far-ranging. South Africa will have to prepare itself to make many sacrifices. Luxuries and reckless spending will have to be put aside, and for that reason I reject the political opportunism of the hon. member for Yeoville in playing Father Christmas here today.

We shall have to continue caring for the aged in a responsible way. We know that we are experiencing hard times in our economy. We know that they are having a hard time of it; we have not forgotten them. The hon. member for Paarl spelt out very clearly to us what has been done for the aged by the Government, and I am not going to repeat it. We on this side of the House wish to give the aged the assurance that the Government, as in the past, will also care for them in the future. We on this side of the House want to give the hon. the Minister the assurance that we are aware of the problems with which the Government has to deal and we shall assist in coping with them.